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Schroder International Fund
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Two Portland Square, Portland, Maine 04101
General Information (207) 822-6500
Account Information (800) 344-8332
Fund Literature (800) 290-9826
Fax (207) 879-6050
INVESTMENT OBJECTIVE
The Fund's investment objective is long-term capital appreciation through
investment in securities markets outside the United States.
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 management
operations of the Schroder Group are located in 20 countries worldwide. As of
June 30, 1998, the Schroder Group had over $195 billion in assets under
management. As of September 30, 1998, the Investment Adviser, together with its
U.K. affiliate, Schroder Capital Management International Ltd., had
approximately $24 billion under management.
December 22, 1998
Dear Shareholder:
We are pleased to present the annual report for the Schroder International
Fund for the fiscal year ended October 31, 1998. This past fiscal year saw
markedly divergent performance among the world's markets, as well as
considerable volatility of performance within certain individual markets. A
common theme was investors' rising level of risk aversion in response to
economic and financial shocks, including Russian debt default, hedge fund and
banking losses and increased devaluation risk in some emerging markets. In
general, in the first half of the fiscal year, economic problems appeared
largely contained within Asia and parts of the broader emerging markets
universe. In the last fiscal quarter, European and American markets--which
previously had behaved as if insulated from the difficulties--experienced some
volatility.
Looking forward, we expect global growth to be slower in 1999 than it was
in 1998, as the contagion from emerging markets continues to weigh on demand in
developed markets. We believe that this will trim, but not eradicate, growth in
continental Europe. Growth is likely to be more adversely affected in the U.S.
and the U.K. which are at more mature stages of their economic cycles, while
Latin America could be one of the regions where growth is likely to slow most
sharply next year. Within Asia, which experienced a very sharp contraction in
1998, we believe that activity may be stabilizing, but further structural
reforms, especially within the banking sector, are needed to sustain a
significant recovery. Deflation is likely to appear a bigger risk than inflation
in several major economies, notably Japan. While it appears unlikely that the
world as a whole is facing a deflationary spiral, the absence of inflationary
pressure is likely to support bond markets and lead to interest rate cuts in
many markets. Correspondingly, however, we believe that the widespread inability
of companies to raise prices in many markets including the U.S. will hurt
corporate profits growth.
On a more positive note, monetary authorities like the Federal Reserve and
its global counterparts appear to be stepping in to forestall future problems by
being quick to lower interest rates and issuing public statements that
acknowledge the need to address international pressure points before they become
major problems. A growing number of companies, including many in Asia, are
increasing their emphasis on shareholder value. This should help to ease
investors' anxieties and to trim the risk premiums that have risen in many
markets, although we believe that
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Schroder International Fund
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it is unlikely to return them to levels earlier in the fiscal year. We expect
further uncertainty and volatility in the year ahead. Nevertheless, we believe
that compelling values exist in many emerging and Asian equity markets after
this year's correction, and many high quality stocks have been sold
indiscriminately. Similarly, although valuations in European and U.S. markets
are not as universally undervalued, there are very attractive opportunities in
areas with strong fundamental prospects that have received less attention in
this year's flight to liquidity. Schroders' investment approach stresses the
rewards of identifying high quality franchises with sustainable growth prospects
at attractive valuations. The present environment presents great scope for our
extensive global research network to identify such opportunities for the
long-term benefit of our investors.
Thank you for your interest in the Schroder International Fund.
Sincerely,
/s/ M.J. Smith
--------------
Mark J. Smith
Chairman
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Schroder International Fund
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MANAGEMENT DISCUSSION AND ANALYSIS (As of October 31, 1998)
PERFORMANCE
For the fiscal year ending October 31, 1998, Schroder International Fund
Investor Shares gained 3.82% and Advisor Shares gained 3.53%, while the Fund's
benchmark, the MSCI EAFE Index, rose 9.64%.
Country allocation contributed positively to the Fund's performance
throughout the year, specifically our underweighting Asian markets, including
Malaysia, Hong Kong and Japan. Our minimal weighting in emerging markets also
benefited the Fund in relation to the competition. Currency management added
value in the first half of the year, but eroded during the sudden yen surge
against the U.S. dollar in October. Stock selection in Japan was a consistent
source of added value as, in the midst of a difficult economic environment, we
avoided banks and emphasized quality companies with good earnings visibility.
Our main weakness over the period was stock selection in Continental
Europe, partly due to our underweighting of cyclical companies and an allocation
to small capitalization stocks. In the U.K. the strength of the pound hurt our
industrial holdings.
MARKET BACKGROUND
While Europe was in a bull market, a bear market was operating in the
Pacific, as currency and interest rate volatility pushed the Asian economies
into serious recession. The intervention of the Hong Kong government in their
own stock market in August was a watershed event, as was Malaysia's imposition
of capital controls in September. Japanese equities fell by 14% over the fiscal
year, as banking problems festered and a severe economic downturn hurt corporate
profitability.
Emerging markets in general plunged by 33% over the fiscal year, as the
Asian turmoil spread to Latin America and Eastern Europe, highlighted by the
spectacular collapse of the Russian equity market in August. These shock waves
started to hit the developed western markets hard in the third quarter. However,
the period closed positively as dramatic rate cuts by the U.S. Federal Reserve
in October stopped a developing credit contraction and led to a spike upwards in
equities globally.
INVESTMENT POLICY
Given that emerging market equities are vulnerable to capital outflows that
result from investors' diminished appetite for risk, we were underweight in
these markets--our only exposure was Korea whose economy we believe has
bottomed--and were overweight in the developed markets. Specifically, we were
overweight in the U.K. because its central bank has the largest scope for
interest rate reductions among the developed economies. We were also overweight
in Continental Europe as, after being hard hit this summer, it offers more
reasonable value. In the remainder of Asia, we avoided Hong Kong's government
intervention, Malaysia's capital controls, and Australia's economy, which was
affected by the Asian recession, and focused modestly on Singapore.
OUTLOOK
We will continue to emphasize quality companies with good earnings
visibility. Going forward, we favor telecommunications, food retailing, oils and
capital goods stocks, with a preference for large cap stocks due to their higher
liquidity and perceived security. We anticipate remaining underweight in
financials, in Japan and Asia, and, increasingly in western markets, as economic
vulnerability is transmitted through the global banking system.
The U.S. rate cuts in the autumn were well timed to stabilize financial
markets, prevent credit contraction and avoid systematic risk. However, even
though the major governments and the IMF are focused on stopping the Asian and
Russian contagion from forcing a devaluation in Brazil and creating instability
in Latin America, the contagion from the smaller economies has begun to affect
the major developed economies.
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Schroder International Fund
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We believe that growth will lag in the west in 1999 despite rate cuts, as
capital spending and exports to the east slow. We also believe that certain
Asian economies have still not hit bottom, and a recovery will be sluggish due
to a substantial debt overhang. The inability of companies to raise their prices
and the drop in demand generally are squeezing corporate profits harshly. On a
positive note, we anticipate that new governments in Europe will be keen to keep
economic activity buoyant.
The views expressed in this report were those of the Fund's portfolio
managers as of October 31, 1998, 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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4
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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
Investor Shares of the Fund with the performance of the Morgan Stanley Capital
International Europe, Australia, Asia, Far East Index (the "MSCI EAFE") over
10 years beginning October 31, 1988. The MSCI EAFE is a market weighted index
composed of companies representative of the market structure of 20 developed
market countries in Europe, Australia, Asia and the Far East, and reflects
dividends reinvested net of unrecoverable withholding tax. The Fund's return
reflects deduction of applicable fees and expenses; the MSCI EAFE return does
not reflect deduction of any fees and expenses. 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. Advisor Shares
have higher expenses and, therefore, have lower performance than Investor
Shares. Past performance cannot predict or guarantee future results.
Schroder International Fund v s MSCI EAFE Index
Investment Value on 10/31/98
----------------------------
Schroder International Fund--Investor Shares $22,432
Schroder International Fund--Advisor Shares $22,404
MSCI EAFE Index $16,684
Average Annual Total Return on 10/31/98 1 Year 5 Years 10 Years
--------------------------------------- ------ ------- --------
Schroder International Fund--Investor Shares 3.82% 7.48% 8.41%
Schroder International Fund--Advisor Shares(a) 3.53% 7.45% 8.40%
[GRAPH OMITTED]
(a) Performance of Advisor Shares includes information for the Fund's Investor
Shares for periods prior to the commencement of operations for Advisor
Shares (January 21, 1998). Such performance has been recalculated to reflect
the actual fees and expenses attributable to Advisor Shares.
The Schroder International Fund's Investor Shares average annual total return
for the 1, 5, and 10 year periods ended December 31, 1998, was 13.52%, 7.49%,
and 8.55%, respectively. The Schroder International Fund's Advisor Shares
average annual total return for the 1, 5, and 10 year periods ended
December 31, 1998, was 13.48%, 7.51%, and 8.56%, respectively.
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Schroder International Fund
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PORTFOLIO CHARACTERISTICS AS OF OCTOBER 31, 1998 (UNAUDITED)
COUNTRY WEIGHTINGS
COUNTRY % OF NET ASSETS
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United Kingdom 17.7%
Japan 14.5%
France 12.6%
Switzerland 8.1%
Netherlands 6.9%
Germany 4.7%
Italy 4.0%
Spain 3.2%
Belgium 2.3%
Denmark 1.5%
Korea 1.0%
Sweden 1.0%
Singapore 1.0%
Portugal 0.4%
Cash and Other Net Assets 21.1%
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Total 100.0%
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INVESTMENT BY INDUSTRY
INDUSTRY % OF NET ASSETS
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Services 22.6%
Capital Equipment 10.5%
Energy 9.1%
Consumer Non-Durables 8.9%
Finance 8.1%
Multi-Industry 8.0%
Consumer Durables 7.2%
Materials 4.5%
Cash and Other Net Assets 21.1%
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Total 100.0%
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TOP TEN HOLDINGS
SECURITY % OF NET ASSETS
- ----------------------------------------------------------
Novartis (Sz) 4.2%
Endesa SA (Sp) 2.7%
Suez Lyonnaise des Eaux (Fr) 2.3%
Vivendi (Fr) 2.2%
Mannesmann AG (Ger) 2.2%
Heineken NV (Neth) 2.1%
Banca di Roma (It) 2.0%
Groupe Danone (Fr) 1.7%
Roche Holding AG (Sz) 1.6%
Cable & Wireless plc (U.K.) 1.6%
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Total 22.6%
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Schroder International Fund
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STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments (Notes 1 and 2):
Investment in International Equity Fund (the "Portfolio") $129,897,537
Receivable for Fund shares sold 200,718
------------
Total Assets 130,098,255
------------
LIABILITIES:
Payable for Fund shares redeemed 79,223
Payable to administrator (Note 3) 13,527
Payable to subadministrator (Note 3) 5,275
Accrued expenses and other liabilities 45,456
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Total Liabilities 143,481
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Net Assets $129,954,774
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COMPONENTS OF NET ASSETS:
Paid-in capital $ 95,145,090
Undistributed net investment income 2,713,544
Accumulated net realized gain on investments and foreign currency
transactions 20,609,317
Net unrealized appreciation on investments and foreign currency
transactions 11,486,823
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Net Assets $129,954,774
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NET ASSETS BY CLASS:
Investor Class $129,954,682
Advisor Class 92(a)
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Net Assets $129,954,774
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SHARES OF BENEFICIAL INTEREST:
Investor Class 7,598,050
Advisor Class 5(a)
NET ASSET VALUE, OFFERING, AND REDEMPTION PRICE PER SHARE:
Investor Class $ 17.10
Advisor Class $ 17.01
</TABLE>
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(a) Actual net assets and shares of Advisor Class at October 31, 1998, were
$92.33 and 5.429, respectively.
The accompanying notes are an integral part of the financial statements.
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Schroder International Fund
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STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year
Ended
October 31, 1998
----------------
<S> <C>
NET INVESTMENT INCOME ALLOCATED FROM THE PORTFOLIO:
Dividend income (net of foreign withholding taxes of $397,146) $ 2,471,624
Interest income 1,108,281
Net expenses (1,260,654)
------------
Net Investment Income Allocated from the Portfolio 2,319,251
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EXPENSES:
Administration (Note 3) 252,203
Subadministration (Note 3) 84,067
Transfer agency (Note 3)
Investor Shares 51,122
Advisor Shares 13,191
Shareholder Services--Advisor Shares (Note 3) 2
Accounting (Note 3) 12,000
Legal 16,716
Audit 19,043
Registration 32,277
Printing 26,819
Trustees 9,079
Miscellaneous 16,542
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Total Expenses 533,061
Fees waived and expenses reimbursed (Note 4) (129,339)
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Net Expenses 403,722
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NET INVESTMENT INCOME 1,915,529
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NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
ALLOCATED FROM THE PORTFOLIO:
Net realized gain on investments 22,849,809
Net realized gain on foreign currency transactions 880,813
------------
Net realized gain on investments and foreign currency
transactions 23,730,622
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Net change in unrealized appreciation (depreciation) on investments (15,848,129)
Net change in unrealized appreciation (depreciation) on foreign currency
transactions (74,227)
------------
Net change in unrealized appreciation (depreciation) on
investments and foreign currency transactions (15,922,356)
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NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
ALLOCATED FROM THE PORTFOLIO 7,808,266
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 9,723,795
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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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,
------------------------------
1998 1997
------------------------------
<S> <C> <C>
NET ASSETS, BEGINNING OF PERIOD $191,219,133 $202,735,202
------------ ------------
OPERATIONS:
Net investment income 1,915,529 1,318,131
Net realized gain on investments and foreign currency transactions 23,730,622 17,315,084
Net change in unrealized appreciation (depreciation) on investments
and foreign currency transactions (15,922,356) (3,581,079)
------------ ------------
Net increase in net assets resulting from operations 9,723,795 15,052,136
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Investor Class (3,140,556) (4,570,768)
Net realized gain on investments--Investor Class (15,603,343) (26,130,027)
------------ ------------
Total distributions to shareholders (18,743,899) (30,700,795)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares--Investor Class 61,200,571 67,836,994
Sale of shares--Advisor Class 3,600 --
Reinvestment of distributions--Investor Class 12,794,795 17,731,934
Redemption of shares--Investor Class (126,239,223) (81,436,338)
Redemption of shares--Advisor Class (3,998) --
------------ ------------
Net increase (decrease) from capital share transactions (52,244,255) 4,132,590
------------ ------------
Net increase (decrease) in net assets (61,264,359) (11,516,069)
------------ ------------
NET ASSETS, END OF PERIOD (INCLUDING LINE A) $129,954,774 $191,219,133
------------ ------------
------------ ------------
(A) Undistributed net investment income $ 2,713,544 $ 2,915,643
------------ ------------
------------ ------------
SHARE TRANSACTIONS:
Sale of shares--Investor Class 3,452,665 3,607,984
Sale of shares--Advisor Class 210 --
Reinvestment of distributions in shares--Investor Class 788,008 1,033,932
Redemption of shares--Investor Class (7,053,415) (4,365,136)
Redemption of shares--Advisor Class (205) --
------------ ------------
Net increase (decrease) in shares (2,812,737) 276,780
------------ ------------
------------ ------------
</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--INVESTOR SHARES
Selected per share data and ratios for an Investor share outstanding
throughout each period:
<TABLE>
<CAPTION>
For the Year Ended October 31,
-----------------------------------------------------------
1998 1997 1996 (a) 1995 1994
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<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 18.37 $ 20.01 $ 20.91 $ 23.17 $ 20.38
-------- -------- --------- -------- --------
Investment Operations
Net Investment Income 0.23(b) 0.14(b) 0.15(b) 0.46 0.18
Net Realized and Unrealized Gain (Loss)
on Investments 0.34 1.31 1.74 (0.18) 2.69
-------- -------- --------- -------- --------
Total from Investment Operations 0.57 1.45 1.89 0.28 2.87
-------- -------- --------- -------- --------
Distributions From
Net Investment Income (0.29) (0.46) (0.47) -- (0.08)
Net Realized Gain on Investments (1.55) (2.63) (2.32) (2.54) --
-------- -------- --------- -------- --------
Total Distributions (1.84) (3.09) (2.79) (2.54) (0.08)
-------- -------- --------- -------- --------
Net Asset Value, End of Period $ 17.10 $ 18.37 $ 20.01 $ 20.91 $ 23.17
-------- -------- --------- -------- --------
-------- -------- --------- -------- --------
Total Return (c) 3.82% 8.33% 10.05% 2.08% 14.10%
Ratio/Supplementary Data:
Net Assets at End of Period (in
thousands) $129,955 $191,219 $ 202,735 $212,330 $500,504
Ratios to Average Net Assets:
Expenses including reimbursement/waiver
of fees 0.99%(b) 0.99%(b) 0.99%(b) 0.91% 0.90%
Expenses excluding reimbursement/waiver
of fees 1.08%(b) 1.06%(b) 1.04%(b) N/A N/A
Net investment income including
reimbursement/waiver of fees 1.14%(b) 0.67%(b) 0.86%(b) 0.99% 0.94%
Portfolio Turnover Rate (d) 53% 36% 56% 61% 25%
</TABLE>
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(a) On November 1, 1995, the Fund converted to Core and
Gateway(Registered) (See Note 1).
(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) The rate after October 31, 1995 represents the turnover of the underlying
Portfolio.
The accompanying notes are an integral part of the financial statements.
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Schroder International Fund
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FINANCIAL HIGHLIGHTS--ADVISOR SHARES
Selected per share data and ratios for an Advisor share outstanding
throughout the period:
<TABLE>
<CAPTION>
For the
Period Ended
October 31, 1998 (a)
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<S> <C>
Net Asset Value, Beginning of Period $ 16.35
--------
Investment Operations
Net Investment Income (b) 0.21 (g)
Net Realized and Unrealized Gain (Loss) on Investments 0.45
--------
Total from Investment Operations 0.66
--------
Net Asset Value, End of Period $ 17.01
--------
--------
Total Return (c) 4.04%
Ratio/Supplementary Data:
Net Assets at End of Period (in thousands) $ -- (e)
Ratios to Average Net Assets:
Expenses including reimbursement/waiver of fees (b) 1.24%
Expenses excluding reimbursement/waiver of fees (b) -- (f)
Net investment income including reimbursement/waiver of fees (b) 1.38%
Portfolio Turnover Rate (d) 53%
</TABLE>
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(a) Advisor Class shares were first issued on January 21, 1998.
(b) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(c) Total return, which is not annualized, would have been lower had certain
expenses not been reduced during the period shown (See Note 4).
(d) Rate represents the turnover of the underlying Portfolio.
(e) Net assets at end of period were less than one thousand dollars.
(f) Amount is not meaningful due to short period of operations and small asset
level.
(g) Based on average share method.
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 ten 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, 1998, both Investor Shares and Advisor Shares had
been issued.
MASTER-FEEDER ARRANGEMENT
The Fund currently seeks to achieve its investment objective by
investing all its investable assets in International Equity Fund (the
"Portfolio"), a separate diversified 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 16 to 27 in this report and should be read in conjunction with the
Fund's financial statements. As of October 31, 1998, the Fund owns
approximately 84.3% of the interests in the Portfolio, and is deemed, 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 amounts 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 is 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
incurs 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
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 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 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 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. Expenses directly attributable to a class are
allocated to that class.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES WITH AFFILIATES
INVESTMENT ADVISER
The Fund currently invests all 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
The Administrator of the Fund is Schroder Fund Advisors Inc. ("Schroder
Advisors") and the Subadministrator of the Fund is Forum Administrative
Services, LLC ("FAdS"). 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 Fund. For its services, FAdS is entitled to
receive compensation at an annual rate, payable monthly, of 0.05% of the
average daily net assets of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
The transfer agent and dividend disbursing agent for the Fund is Forum
Shareholder Services, LLC ("FSS"). FSS is paid a transfer agent fee in the
amount of $12,000 per class, per year, plus certain other fees and expenses.
SHAREHOLDER SERVICE PLAN
The Trust has adopted a Shareholder Service Plan ("the Plan") for
Advisor Shares under which Schroder Advisors, or other shareholder servicing
organizations, provide administrative support services to shareholders of the
Fund's Advisor Shares. For providing for, or arranging for, the provision of
these shareholder services, Schroder Advisors receives compensation monthly
at an annual rate of up to 0.25% of the average daily net assets of the Fund
attributable to its Advisor Shares. Schroder Advisors may pay shareholder
servicing organizations for these services at an annual rate of up to 0.25%.
OTHER SERVICE PROVIDERS
Forum Accounting Services, LLC ("FAcS") is the Fund's fund accountant.
For its services to the Fund, FAcS is entitled to receive from the Fund a fee
of $12,000 per year.
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Schroder International Fund
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NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
NOTE 4. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES
Schroder Advisors voluntarily waived a portion of its fees and assumed
certain expenses of the Fund so that its total expense, chargeable to
Investor and Advisor shares, including indirect expenses borne by the Fund as
a result of investing in the Portfolio, would not exceed an annual rate of
0.99% and 1.24%, respectively, of the Fund's average daily net assets
attributable to Investor and Advisor shares, respectively. FAdS, FSS and FAcS
may waive voluntarily all or a portion of their fees, from time to time. For
the year ended October 31, 1998, Schroder Advisors waived and reimbursed fees
of $97,857 and $12,480, respectively. For the year ended October 31, 1998,
FSS waived fees of $19,002.
- ---------------------------------------------
SUPPLEMENTAL INFORMATION (UNAUDITED)
SPECIAL 1998 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, 1998. In
accordance with the current tax laws, the foreign income and foreign tax per
share (for a share outstanding October 31, 1998) is as follows:
<TABLE>
<CAPTION>
COUNTRY DIVIDENDS FOREIGN TAX COUNTRY DIVIDENDS FOREIGN TAX
- --------------- --------- ----------- --------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Austria $0.0025 $ 0.0003 Malaysia $0.0013 $ 0.0002
Australia 0.0154 0.0006 Netherlands 0.0358 0.0036
Belgium 0.0066 0.0010 Portugal 0.0106 0.0020
Denmark 0.0010 0.0002 Singapore 0.0082 0.0021
France 0.0014 0.0014 Spain 0.0153 0.0024
Germany 0.0210 0.0022 Sweden 0.0118 0.0017
Indonesia 0.0004 -- Switzerland 0.0243 0.0043
Italy 0.0039 0.0007 United Kingdom 0.1298 0.0222
Japan 0.0306 0.0050 United States 0.0037 0.0013
Korea 0.0007 0.0001 ------- ---------
Total $0.3243 $ 0.0513
------- ---------
------- ---------
</TABLE>
The dividend pass through of foreign tax credit will affect only those
shareholders of the Fund who are holders on the dividend record date in
December 1998. Accordingly, shareholders will receive more detailed
information along with their form 1099-DIV in January 1999.
DISTRIBUTIONS
During the fiscal year ended October 31, 1998, the Fund distributed
$15,029,045 in long term capital gain to shareholders.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Fund
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Schroder Capital Funds (Delaware) and Shareholders of
Schroder International Fund:
In our opinion, the accompanying statement of assets and liabilities 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 International Fund (a separately managed portfolio of Schroder
Capital Funds (Delaware)) at October 31, 1998, 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 provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 22, 1998
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1998
<TABLE>
<CAPTION>
STOCKS AND WARRANTS - 78.9%
SHARES VALUE US$
- --------- ------------
<S> <C> <C>
BELGIUM - 2.3%
COMMON STOCK
2,840 B.M.T. NV
Materials $ 577,827
8,690 Electrafina SA
Energy 1,124,442
9,470 Grupo Bruxelles Lambert SA
Multi-Industry 1,757,657
------------
3,459,926
------------
DENMARK - 1.5%
COMMON STOCK
34,710 International Service System
A/S
Services 2,343,072
------------
FRANCE - 12.6%
COMMON STOCK
7,050 Accor SA
Services 1,480,565
4,610 Air Liquide
Multi-Industry 771,527
3,940 Bouygues SA
Services 794,821
9,070 Canal Plus
Services 2,200,212
20,330 Elf Aquitaine SA
Energy 2,352,425
30,034 France Telecom SA
Services 2,094,365
9,970 Groupe Danone
Consumer Non-Durables 2,635,629
20,100 Suez Lyonnaise des Eaux
Multi-Industry 3,599,039
14,869 Vivendi
Multi-Industry 3,395,555
WARRANTS
14,156 Vivendi
Multi-Industry 28,914
------------
19,353,052
------------
GERMANY - 4.7%
COMMON STOCK
34,640 Bayer AG
Materials 1,407,603
23,820 Hoechst AG
Materials 995,257
34,030 Mannesmann AG
Capital Equipment 3,349,167
25,415 VEBA AG
Multi-Industry 1,419,446
------------
7,171,473
------------
<CAPTION>
STOCKS AND WARRANTS - 78.9%
SHARES VALUE US$
- --------- ------------
<S> <C> <C>
ITALY - 4.0%
COMMON STOCK
1,803,880 Banca di Roma (a)
Finance $ 3,149,245
84,000 ENI SpA
Energy 499,938
28,000 Italgas SpA
Energy 128,275
320,175 Telecom Italia SpA
Energy 2,316,000
------------
6,093,458
------------
JAPAN - 14.5%
COMMON STOCK
106,000 Amada Metrecs Co. Ltd.
Capital Equipment 436,639
61,000 Arcland Sakamoto
Services 376,910
94,000 Asahi Bank Ltd.
Finance 314,607
54,000 Bridgestone Corp.
Materials 1,188,657
31,600 Credit Saison Co. Ltd.
Finance 744,397
60,000 Dai-Dan Co. Ltd.
Capital Equipment 361,463
257,000 Dai-Tokyo Fire and Marine
Insurance Co. Ltd.
Finance 849,120
92,000 Daiwa House Industry Co. Ltd.
Capital Equipment 1,038,219
168 East Japan Railway Co.
Services 996,237
34,000 Fuji Photo Film Co.
Capital Equipment 1,245,897
29,000 Glory Ltd.
Capital Equipment 350,907
149,000 Hanshin Electric Railway Co.
Ltd.
Services 471,833
161,000 Hitachi Ltd.
Capital Equipment 819,324
8,000 Ito-Yokado Co. Ltd.
Services 466,847
92,000 Japan Airport Terminal Co.
Ltd.
Services 488,713
70,000 Matsushita Electric Industrial
Co. Ltd.
Consumer Durables 1,027,835
18,000 Meiko Shokai
Capital Equipment 270,325
73,000 Mitsubishi Corp.
Services 386,530
150,000 Mitsui & Co. Ltd.
Multi-Industry 800,676
</TABLE>
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE US$
- --------- ------------
<S> <C> <C>
JAPAN (CONCLUDED)
53,000 Mitsui Fudosan Co. Ltd.
Finance $ 352,040
22,000 Murata Manufacturing Co. Ltd.
Capital Equipment 741,977
26,000 Nagaileben Co. Ltd.
Consumer Durables 450,713
43,000 Nomura Securities Co. Ltd.
Finance 324,733
13 NTT Mobile Communication
Network, Inc.
Services 469,679
159,000 Oji Paper Co. Ltd.
Materials 648,136
56,000 Omron Corp.
Services 547,858
85,000 Showa Shell Sekiyu
Energy 544,897
7,000 SMC Corp.
Capital Equipment 528,034
13,000 Sony Corp.
Capital Equipment 825,563
41,000 Takeda Chemical Industries
Consumer Durables 1,333,516
10,200 Toho Co. Ltd.
Services 1,277,117
42,000 Tokio Marine & Fire Insurance
Co. Ltd.
Finance 477,574
79,000 Toppan Printing Co. Ltd.
Services 810,159
17,000 Toyota Motor Corp.
Capital Equipment 408,491
------------
22,375,623
------------
KOREA, REPUBLIC OF - 1.0%
COMMON STOCK
42,000 Daewoo Heavy Industries
Capital Equipment 157,883
32,000 Korea Electric Power Corp.
Energy 569,930
52,000 LG Electronics
Capital Equipment 461,098
9 SK Telecom Co. Ltd.
Services 6,360
9,859 Samsung Electronics Co.
Capital Equipment 403,488
------------
1,598,759
------------
NETHERLANDS - 6.9%
COMMON STOCK
74,900 Elsevier NV
Services 1,054,704
60,995 Heineken NV
Consumer Non-Durables 3,249,464
<CAPTION>
SHARES VALUE US$
- --------- ------------
<S> <C> <C>
NETHERLANDS (CONCLUDED)
70,718 Koninklijke Ahold NV
Consumer Non-Durables $ 2,351,335
33,503 Oce NV
Capital Equipment 1,087,049
13,990 Philips Electronics NV
Capital Equipment 744,555
81,000 TNT Post Group NV
Services 2,168,442
------------
10,655,549
------------
PORTUGAL - 0.4%
COMMON STOCK
33,925 Semapa--Sociedade de
Investimento e Gestao SGPS
SA
Materials 662,473
------------
SINGAPORE - 1.0%
COMMON STOCK
157,000 City Developments Ltd.
Finance 568,910
93,975 Development Bank of Singapore
Ltd.
Finance 588,715
45,896 Singapore Press Holdings Ltd.
Services 397,449
------------
1,555,074
------------
SPAIN - 3.2%
COMMON STOCK
30,840 Centros Comerciales Pryca SA
Services 682,950
166,466 Endesa SA
Energy 4,187,726
------------
4,870,676
------------
SWEDEN - 1.0%
COMMON STOCK
23,350 Atlas Copco AB
Capital Equipment 542,162
46,365 Telefonaktiebolaget LM
Ericsson "B" Shares
Services 1,043,923
------------
1,586,085
------------
SWITZERLAND - 8.1%
COMMON STOCK
620 Nestle SA
Consumer Non-Durables 1,318,662
3,553 Novartis
Consumer Durables 6,402,275
215 Roche Holding AG
Consumer Non-Durables 2,508,677
8,390 UBS AG
Finance 2,301,813
------------
12,531,427
------------
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE US$
- --------- ------------
<S> <C> <C>
UNITED KINGDOM - 17.7%
COMMON STOCK
189,530 Airtours plc
Services $ 1,063,349
96,150 Allied Domecq plc
Consumer Non-Durables 885,656
187,060 ASDA Group plc
Services 504,382
24,180 Barclays plc
Finance 521,180
160,229 Blue Circle Industries plc
Materials 874,806
118,320 British Airways plc
Services 860,005
51,010 British American Tobacco plc
Services 460,892
91,270 British Energy plc
Energy 892,676
119,720 British Land Co. plc
Finance 962,412
187,350 British Sky Broadcasting Group
plc
Services 1,528,043
222,140 Cable & Wireless plc
Services 2,492,610
47,368 COLT Telecom Group plc (a)
Services 618,775
53,520 De La Rue plc
Services 155,290
141,260 Electrocomponents plc
Consumer Durables 932,112
113,640 EMI Group plc
Consumer Non-Durables 674,208
88,093 Enterprise Oil plc
Energy 601,942
80,290 Great Universal Stores plc
Services 863,275
46,330 Johnson Matthey plc
Capital Equipment 261,484
297,710 LASMO plc
Energy 847,608
53,796 Lloyds TSB Group plc
Finance 664,454
259,740 LucasVarity plc
Capital Equipment 887,405
101,150 Marks & Spencer plc
Services 749,604
<CAPTION>
SHARES VALUE US$
- --------- ------------
<S> <C> <C>
UNITED KINGDOM (CONCLUDED)
288,310 MFI Furniture Group plc
Services $ 178,655
553,190 Pilkington plc
Materials 620,729
55,370 Reuters Group plc
Finance 570,299
319,960 Rolls-Royce plc
Capital Equipment 1,181,564
351,620 David S. Smith Holdings plc
Services 736,099
194,505 Tesco plc
Services 548,888
84,120 Tibbett and Britten Group plc
Services 426,165
61,561 United News & Media plc
Services 681,491
34,520 United Utilities plc
Services 505,283
147,854 Vodafone Group plc
Services 1,980,961
93,683 Williams plc
Multi-Industry 584,833
23,170 Zeneca Group plc
Consumer Durables 890,169
------------
27,207,304
------------
Total Stocks and Warrants
(cost $107,107,374) 121,463,951
CERTIFICATES OF DEPOSIT - 8.4%
3,000,000 Barclays plc, 5.18%, 11/16/98 3,000,000
3,000,000 Halifax plc, 5.25%, 11/16/98 3,000,000
4,000,000 Nationwide BS, 5.11%, 11/23/98 4,000,000
3,000,000 RBS, 5.23%, 11/16/98 3,000,000
------------
Total Certificates of Deposit
(cost $13,000,000) 13,000,000
------------
Total Investments - 87.3%
(cost $120,107,374) 134,463,951
Other Assets Less
Liabilities - 12.7% 19,553,411
------------
Total Net Assets - 100.0% $154,017,362
------------
------------
</TABLE>
- ------------------
(a) Non-income producing security.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED)
AS OF OCTOBER 31, 1998
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS
CONTRACTS TO SELL
<TABLE>
<CAPTION>
UNDERLYING FACE UNREALIZED
CONTRACT DATE CURRENCY UNITS AMOUNT OF VALUE APPRECIATION/(DEPRECIATION)
- -------------- -------------- ------------- ---------------- ---------------------------
<S> <C> <C> <C> <C>
12/17/98 British Pound 5,827,000 $ 9,740,995 $ 31,384
12/18/98 Japanese Yen 1,300,000,000 11,273,600 (1,535,043)
------------ -----------
$ 21,014,595 $(1,503,659)
------------ -----------
------------ -----------
<CAPTION>
OFFSETTING CONTRACTS
UNDERLYING FACE
AMOUNT OF
CONTRACT DATE CURRENCY UNITS VALUE
- -------------- ---------------------- --------- ----------------
<S> <C> <C> <C>
11/20/98 Australian Dollar-sell 2,492,000 $ 1,500,059
11/20/98 Australian Dollar-buy 2,492,000 (1,479,400)
------------
Net receivable (see Note 2) $ 20,659
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments (Note 2):
Investments at cost $120,107,374
Net unrealized appreciation 14,356,577
------------
Total Investments at value 134,463,951
Cash 23,587,449
Net receivable for forward foreign currency contracts 20,659
Receivable for dividends and interest 280,062
Receivable for tax reclaims 247,860
Receivable for shares sold 112,155
Organization costs, net of amortization (Note 2) 4,947
------------
Total Assets 158,717,083
------------
LIABILITIES:
Payable for forward foreign currency contracts 1,503,659
Payable for investments purchased 3,047,447
Payable to investment adviser (Note 3) 54,654
Payable to administrator (Note 3) 9,438
Payable to subadministrator (Note 3) 9,438
Accrued expenses and other liabilities 75,085
------------
Total Liabilities 4,699,721
------------
Net Assets $154,017,362
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year
Ended
October 31, 1998
----------------
<S> <C>
INVESTMENT INCOME:
Dividend income (net of foreign withholding taxes of $456,485) $ 2,840,917
Interest income 1,277,699
------------
Total Investment Income 4,118,616
------------
EXPENSES:
Investment advisory (Note 3) 868,163
Administration (Note 3) 144,694
Subadministration (Note 3) 144,694
Interest holder recordkeeping (Note 3) 12,226
Custody 130,519
Accounting (Note 3) 72,000
Legal 33,836
Audit 33,086
Amortization of organization costs (Note 2) 2,473
Trustees 10,231
Pricing 20,532
Miscellaneous 17,979
------------
Total Expenses 1,490,433
Fees waived (Note 6) (43,861)
------------
Net Expenses 1,446,572
------------
NET INVESTMENT INCOME 2,672,044
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments 21,343,584
Net realized gain on foreign currency transactions 865,264
------------
Net realized gain on investments and foreign currency
transactions 22,208,848
------------
Net change in unrealized appreciation (depreciation) on investments (13,000,680)
Net change in unrealized appreciation (depreciation) on foreign currency
transactions (1,479,930)
------------
Net change in unrealized appreciation (depreciation) on
investments and foreign currency transactions (14,480,610)
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS 7,728,238
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 10,400,282
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year Ended October 31,
----------------------------------
1998 1997
-------------- ----------------
<S> <C> <C>
NET ASSETS, BEGINNING OF PERIOD $ 211,683,857 $202,743,299
-------------- ------------
OPERATIONS:
Net investment income 2,672,044 1,793,152
Net realized gain on investments and foreign currency transactions 22,208,848 17,268,916
Net change in unrealized appreciation (depreciation) on investments
and foreign currency transactions (14,480,610) (3,584,475)
-------------- ------------
Net increase in net assets resulting from operations 10,400,282 15,477,593
-------------- ------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Contributions 43,502,940 70,336,827
Withdrawals (111,569,717) (76,873,862)
-------------- ------------
Net increase (decrease) in net assets from transactions in
investors' beneficial interest (68,066,777) (6,537,035)
-------------- ------------
Net increase (decrease) in net assets (57,666,495) 8,940,558
-------------- ------------
NET ASSETS, END OF PERIOD $ 154,017,362 $211,683,857
-------------- ------------
-------------- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
22
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Portfolio performance for the following periods:
<TABLE>
<CAPTION>
For the Year Ended October 31,
-------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ratio to Average Net Assets:
Expenses including waiver of fees 0.75% 0.75% 0.75%
Expenses excluding waiver of fees 0.77% 0.77% 0.77%
Net investment income including waiver of fees 1.39% 0.90% 1.10%
Portfolio Turnover Rate 53% 36% 56%
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
23
<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 eight investment portfolios. Included in this report is
the International Equity Fund (the "Portfolio"), a diversified portfolio that
commenced operations on November 1, 1995. Under its 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 amounts 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 mean of the
closing bid and ask ("mid-market price"), or, if none, the last sale prices
on the preceding trading day. 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. Short-term
investments having a maturity of 60 days or less, generally are valued at
amortized cost, which approximates market value. Prices used for valuations
may be provided by independent pricing services. Other securities and assets
for which market quotations are not readily available are valued at fair
value as determined in good faith using methods approved by Schroder Core's
Board of Trustees. As of October 31, 1998, the Portfolio did not hold a
position in 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.
The Portfolio may enter into forward contracts to purchase or sell
foreign currencies to protect the U.S. dollar value of the underlying
portfolio 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
- --------------------------------------------------------------------------------
24
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
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 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 WITH AFFILIATES
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
The Administrator of the Portfolio is Schroder Fund Advisors Inc.
("Schroder Advisors") and the Subadministrator of the Portfolio is Forum
Administrative Services, LLC ("FAdS"). Pursuant to their agreements, Schroder
Advisors and FAdS provide certain management and administrative services to
the Portfolio. For their services, Schroder Advisors and FAdS are each
entitled to receive an annual fee, payable monthly, of 0.075% of the
Portfolio's average daily net assets, subject to an annual minimum of $25,000
payable to FAdS for subadministration services.
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 amounts based upon the number
and types of portfolio transactions. FAcS also provides interest holder
recordkeeping services to the Portfolio, 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.
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,
1998, aggregated $82,527,406 and $143,914,661, respectively.
- --------------------------------------------------------------------------------
25
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
For federal income tax purposes, the tax basis of investment securities
owned as of October 31, 1998, was $120,299,162, and the net unrealized
appreciation of investment securities was $14,164,789. The aggregate gross
unrealized appreciation for all securities in which there was an excess of
market value over tax cost was $29,011,297, and the aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over market value was $14,846,508.
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 (except for gain and loss on
certain contributed securities, which for tax purposes have been allocated to
the partner who contributed such securities) regardless of whether such
interest, dividends or gain have been distributed by the Portfolio.
NOTE 6. WAIVER OF FEES
SCMI voluntarily 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, FAdS and FAcS may waive voluntarily all
or a portion of their fees from time to time. For the year ended October 31,
1998, SCMI waived fees of $43,861.
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26
<PAGE>
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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:
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 International Equity Fund (a
separate portfolio of Schroder Capital Funds) at October 31, 1998, 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
Portfolio'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 October 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 22, 1998
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27
<PAGE>
TRUSTEES
David N. Dinkins
Peter E. Guernsey
Sharon L. Haugh
John I. Howell
Peter S. Knight
William L. Means
Clarence F. Michalis
Hermann C. Schwab
Mark J. Smith
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 Shareholder Services, LLC
Two Portland Square
Portland, Maine 04101
COUNSEL
Ropes & Gray
One International Place
Boston, Massachusetts 02110
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
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.
[SCHRODERS LOGO]
Schroder
International
Fund
ANNUAL REPORT
October 31, 1998
Schroder Capital Funds (Delaware)
