[Logo]SCHRODERS
Schroder
Emerging Markets Fund
Institutional Portfolio
ANNUAL REPORT
OCTOBER 31, 1998
Schroder Capital Funds (Delaware)
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (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 investment objective of the Fund is to seek long-term capital appreciation
through direct or indirect investment in equity and debt securities of issuers
domiciled or doing business in emerging market countries in regions such as
Southeast Asia, Latin America, and Eastern and Southern Europe.
INVESTMENT ADVISER
Schroder Capital Management International Inc. (the "Investment Adviser") is a
wholly owned indirect subsidiary of Schroders plc, the London Stock Exchange
listed holding company parent of an investment banking and investment management
group of companies (the "Schroder Group") that dates its origins to 1804. The
investment management operations of the Schroder Group are located in 20
countries worldwide including 15 offices in emerging markets. The Schroder Group
has been managing international investment portfolios since the early years of
this century. 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 of which approximately $5.2
billion was invested in dedicated emerging markets mandates.
December 22, 1998
Dear Shareholder:
We are pleased to present the annual report for the Schroder Emerging Markets
Fund Institutional Portfolio 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 difficulties in these
markets, including the U.S., will hurt corporate profits growth.
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (FUND)
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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 it is unlikely to return them to levels
reached 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 Emerging Markets Fund Institutional
Portfolio.
Sincerely,
/s/ Mark J. Smith
Mark J. Smith
Chairman
2
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (FUND)
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MANAGEMENT DISCUSSION & ANALYSIS (AS OF OCTOBER 31, 1998) (UNAUDITED)
PERFORMANCE
The Schroder Emerging Markets Fund Institutional Portfolio Investor Shares
returned -29.64% and Advisor Shares returned -29.81% (not including the
deduction of the purchase and redemption fee of 0.50%) during its fiscal year
ended October 31, 1998. Including the purchase and redemption fees, the Fund's
returns for the year ended October 31, 1998 would have been -30.34% for Investor
Shares and -30.51% for Advisor Shares. Its benchmark, the unmanaged Morgan
Stanley Capital International Emerging Markets Free ex-Malaysia Index returned
- -28.39%.
The performance of the Fund benefited from strong country selection, including
an overweighting in Korea and European countries and an underweighting in those
countries most severely affected by the Asian crisis, notably Russia and Latin
America. The unusually high levels of cash over the fiscal period also benefited
the Fund. Stock selection generally detracted from the Fund's performance. The
Fund concentrates on high quality companies with good long-term growth
prospects. These companies were not favored by investors over the past fiscal
year due to high levels of market volatility and an increased emphasis on
liquidity.
MARKET BACKGROUND
The rolling crisis in emerging markets, which began with the devaluation of the
Thai baht in mid-1997, has since spread to the rest of Asia, Russia, Latin
America and most recently Brazil. What began as a local concern gradually became
global, with investors becoming increasingly risk averse. Capital was withdrawn,
international lending and borrowing declined and many economies in the region
are either weak or shrinking.
In the past fiscal year, Greece and Portugal were least affected by the
turbulence as their economies were supported by falling inflation and low
interest rates. Both countries also benefited from their forthcoming
participation in EMU. Russia suffered dramatically, its stock market falling
almost 90% over the period. The crisis in Russia impacted other countries in
Eastern Europe, resulting in a decline in investor sentiment. Latin America's
current account balances came under pressure as a result of falling commodity
prices and this was exacerbated by a downturn in capital flows.
INVESTMENT POLICY
Our bottom-up stock selection process leads us to actively seek companies with
solid fundamentals and strong earnings potential. During the fiscal period, we
adopted a defensive stance, due to our concerns about fundamental deterioration
across the emerging market region. We kept unusually high cash balances, as many
emerging markets were driven by liquidity concerns over the period, and we
hedged part of the Portfolio's Hong Kong dollar and Brazilian real exposure.
However, given our bottom-up method of selecting companies, we believe that as
stability returns to these markets, these long-term fundamentals will once again
drive share prices.
As we ended the fiscal year, our largest holding in Asia was Korea. The Korean
government moved towards implementing critical reforms, including removing
barriers to foreign investors, providing capital funding for smaller companies
and introducing various measures to restructure its banks.
OUTLOOK
Our outlook for emerging markets remains cautious, as we believe that economic
growth in the asset class will remain weak next year due to high interest rates
and weak export markets.
3
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (FUND)
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We continue to favor Asia and have recently increased our weighting in this
region moving to a neutral position. Going forward, our key position in Latin
America is our underweighting in Brazil, as it is still burdened by a huge
budget deficit. We remain overweight in China: its government is increasing
spending in the infrastructure sector which is where our stocks are positioned
and, although the Chinese economy has slowed, it is not in decline. We also
remain overweight in Portugal and eastern Europe where economic growth currently
remains strong. We continue to favor Hungary and Poland: valuations in these
countries are extremely attractive and we anticipate that both markets will be
driven by the favorable economic conditions in western Europe, especially given
that their trade with Russia is relatively small.
THE VIEWS EXPRESSED IN THIS REPORT WERE THOSE OF THE FUND'S PORTFOLIO MANAGER AS
OF OCTOBER 31, 1998, 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
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (FUND)
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INVESTMENT ADVISER'S REPORT-COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
The following information compares a change in value of a $10,000 investment in
the Investor Shares of the Fund with the performance of the Morgan Stanley
Capital International ("MSCI") Emerging Markets Free ("EMF") Index and the MSCI
EMF ex-Malaysia Index since inception date of March 31, 1985. The MSCI EMF Index
is an unmanaged market capitalization index of companies representative of the
market structure of 26 emerging countries in Europe, Latin America, and the
Pacific Basin. The Index reflects actual buyable opportunities for the
non-domestic investor by taking into acccount local market restrictions on share
ownership by foreigners. The MSCI EMF ex-Malaysia Index is a benchmark used by
the Fund's Investment Adivser which includes all countries in the MSCI EMF
Index, excluding investments in Malaysia, which may be considered a developed
market. The Index excludes the effect of any expenses, which have been deducted
from the Fund's return. Total return and principal value of an investment in the
fund will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost. Total return for the Fund assumes
reinvestment of dividends and distributions and reflects the deduction of the
purchase and redemption fee of 0.50% respectively, imposed by the Fund. The line
graph shown below presents performance for Investor Shares only. Advisor Shares
have higher expenses and, therefore, have lower performance than Investor
Shares. PAST PERFORMANCE CANNOT PREDICT NOR GUARANTEE FUTURE RESULTS.
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO VS MSCI EMF INDEX AND
MSCI EMF EX-MALAYSIA INDEX
INVESTMENT VALUE ON 10/31/98
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Schroder Emerging Markets Fund Institutional Portfolio-Investor Shares $7,777
Schroder Emerging Markets Fund Institutional Portfolio-Advisor Shares $7,792
MSCI EMF Index $7,095
MSCI EMF ex-Malaysia Index $7,987
AVERAGE ANNUAL TOTAL RETURN ON 10/31/98
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SINCE
1 YEAR INCEPTION
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Schroder Emerging Markets Fund Institutional Portfolio-
Investor Shares -30.34% -6.85%(a)
Schroder Emerging Markets Fund Institutional Portfolio-
Advisor Shares -30.51% -6.84%(b)
[EDGAR REPRESENTATION OF GRAPH CHART]
DATE FUND INDEX
03/31/95 10,000.00 10,000.00 10,000.00
04/30/95 10,268.40 10,449.00 10,570.03
05/31/95 10,875.35 11,004.89 11,007.66
06/30/95 10,905.20 11,037.90 11,087.82
07/31/95 11,213.65 11,285.15 11,338.58
08/31/95 10,885.30 11,018.82 11,150.36
09/30/95 10,945.00 10,967.03 11,128.87
10/31/95 10,576.85 10,547.00 10,740.09
11/30/95 10,367.90 10,359.26 10,507.26
12/31/95 10,694.26 10,819.21 10,944.37
01/31/96 11,830.46 11,588.26 11,797.75
02/29/96 11,541.43 11,404.01 11,488.85
03/31/96 11,551.40 11,492.83 11,445.14
04/30/96 12,009.86 11,952.35 11,871.83
05/31/96 12,199.23 11,898.98 11,908.69
06/30/96 12,069.66 11,973.28 11,988.76
07/31/96 11,312.19 11,155.03 11,150.25
08/31/96 11,521.50 11,440.56 11,366.57
09/30/96 11,571.33 11,539.67 11,447.74
10/31/96 11,023.16 11,231.91 11,042.20
11/30/96 11,192.59 11,420.11 11,175.43
12/31/96 11,541.82 11,471.76 11,214.13
01/31/97 12,250.09 12,254.25 12,096.08
02/28/97 12,728.92 12,779.04 12,611.87
03/31/97 12,499.48 12,443.34 12,351.00
04/30/97 12,738.90 12,465.32 12,629.41
05/31/97 13,237.68 12,822.08 13,006.53
06/30/97 14,015.78 13,508.28 13,868.33
07/31/97 14,325.02 13,709.93 14,300.76
08/31/97 12,798.75 11,966.03 12,799.49
09/30/97 13,257.63 12,297.58 13,281.99
10/31/97 11,053.01 10,279.55 11,154.26
11/30/97 10,753.74 9,904.45 10,908.67
12/31/97 10,939.97 10,143.13 11,192.08
01/31/98 10,239.33 9,347.60 10,338.25
02/28/98 10,970.00 10,323.30 11,167.72
03/31/98 11,410.40 10,771.29 11,717.65
04/30/98 11,460.44 10,653.99 11,724.07
05/31/98 9,899.02 9,194.40 10,146.49
06/30/98 8,978.18 8,229.90 9,157.78
07/31/98 9,368.54 8,490.84 9,514.31
08/31/98 6,736.14 6,036.14 6,757.92
09/30/98 7,006.38 6,419.04 7,225.88
10/31/98 7,777.09 7,094.97 7,987.15
The Schroder Emerging Markets Fund Institutional Portfolio's Investor
Shares average annual total return as of the calendar quarter ended September
30, 1998, for the 1 year and since inception periods, was -47.15% and -9.52%,
respectively. As of that same date, the Fund's Advisor Shares average annual
total return for the 1 year and since inception periods was -47.24% and -22.42%,
respectively.
(a) Inception date of Investor shares is March 31, 1995.
(b) Performance of Advisor Shares includes information for the Fund's Investor
Shares for periods prior to the inception date for Advisor Shares (November
21, 1996). Such performance has been recalculated to reflect the actual
fees and expenses attributable to Advisor Shares.
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5
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (FUND)
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PORTFOLIO CHARACTERISTICS AS OF OCTOBER 31, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
COUNTRY WEIGHTINGS INVESTMENT BY INDUSTRY
COUNTRY % OF NET ASSETS INDUSTRY % OF NET ASSETS
- --------------------------------------------------------- ---------------------------------------------------
Mexico 11.02% Services 24.62%
Brazil 9.57% Finance 17.00%
South Africa 9.54% Energy 12.95%
Korea, Republic of 9.13% Capital Equipment 12.36%
India 6.94% Multi-Industry 8.05%
Taiwan 6.82% Materials 7.00%
Israel 4.85% Consumer Non-Durables 6.66%
Portugal 3.93% Consumer Durables 4.23%
Argentina 3.11% Cash & Other Net Assets* 7.13%
Greece 3.06% ----------
China/Hong Kong 3.03% 100.00%
Chile 3.01% ==========
Hungary 2.86%
Turkey 2.40%
Poland 2.08%
Philippines 1.91%
Thailand 1.66% TOP TEN HOLDINGS
Egypt 1.22% SECURITY % OF NET ASSETS
Peru 1.21% --------------------------------------------------------------
Czech Republic 1.17% Telefonos de Mexico SA ADR (Mex) 3.73%
Russia 0.93% Samsung Electronics (Kor) 2.82%
Mauritius 0.66% Telecomunicacoes de Sao Paulo
Botswana 0.59% SA - Telesp (Bz) 2.48%
Indonesia 0.59% Taiwan Semiconductor
Croatia 0.48% Manufacturing Co. (Twn) 1.73%
Venezuela 0.42% Fomento Economico Mexicano SA
Zimbabwe 0.38% de CV (Mex) 1.44%
Malaysia 0.20% YPF Sociedad Anonima ADR (Arg) 1.24%
Pakistan 0.10% LG Electronics (Kor) 1.19%
Cash & Other Net Assets* 7.13% Centrais Electricas Brasileiras SA
--------- Eletrobros (Bz) 1.15%
100.00% Korea Electric Power Corp. (Kor) 1.15%
========= Cifra SA (Mex) 1.14%
---------
Total 18.07%
=========
</TABLE>
* Includes U.S. Treasury bills and foreign currency.
6
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (FUND)
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STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments (Notes 1 and 2):
Investment in Schroder Emerging Markets Fund Institutional
Portfolio (the "Portfolio") $ 132,008,241
Receivable from administrator (Note 3) 5,155
Organization costs, net of amortization (Note 2) 8,533
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Total Assets 132,021,929
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LIABILITIES:
Payable to administrator (Note 3) 15,691
Payable to subadministrator (Note 3) 5,227
Accrued expenses and other liabilities 65,944
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Total Liabilities 86,862
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Net Assets $ 131,935,067
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COMPONENTS OF NET ASSETS:
Paid-in capital $ 209,607,201
Undistributed net investment income (loss) 898,098
Accumulated net realized gain (loss) on investments and
foreign currency transactions (50,450,291)
Net unrealized appreciation (depreciation) on investments and
foreign currency transactions (28,119,941)
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Net Assets $ 131,935,067
===================
NET ASSETS BY CLASS
Investor Class $ 111,462,901
Advisor Class 20,472,166
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Net Assets $ 131,935,067
===================
SHARES OF BENEFICIAL INTEREST
Investor Class 14,347,436
Advisor Class 2,627,257
NET ASSET VALUE, OFFERING, AND REDEMPTION PRICE PER SHARE (NOTE 5)
Investor Class $ 7.77
Advisor Class $ 7.79
The accompanying notes are an integral part of the financial statements.
7
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (FUND)
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STATEMENT OF OPERATIONS
FOR THE
YEAR ENDED
OCTOBER 31, 1998
--------------------
NET INVESTMENT INCOME ALLOCATED FROM THE PORTFOLIO:
Dividend income (net of foreign withholding taxes of $346,943) $ 3,648,832
Interest income 696,549
Net expenses (2,081,219)
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Net Investment Income Allocated from the Portfolio 2,264,162
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EXPENSES:
Administration (Note 3) 88,082
Subadministration (Note 3) 88,082
Transfer agency - Investor Shares (Note 3) 19,137
Transfer agency - Advisor Shares (Note 3) 22,812
Shareholder services - Advisor Shares (Note 3) 59,867
Accounting (Note 3) 12,000
Legal 22,124
Audit 19,428
Registration 22,229
Printing 2,294
Trustees 9,814
Amortization of organization costs (Note 2) 6,000
Miscellaneous 17,670
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Total Expenses 389,539
Fees waived and expenses reimbursed (Note 4) (16,606)
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Net Expenses 372,933
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NET INVESTMENT INCOME 1,891,229
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NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS ALLOCATED FROM THE PORTFOLIO:
Net realized gain (loss) on investments (33,049,200)
Net realized gain (loss) on foreign currency transactions (808,409)
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Net realized gain (loss) on investments and foreign
currency transactions (33,857,609)
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Net change in unrealized appreciation (depreciation) on investments (30,030,106)
Net change in unrealized appreciation (depreciation) on foreign
currency transactions (7,037)
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Net change in unrealized appreciation (depreciation) on
investments and foreign currency transactions (30,037,143)
--------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS ALLOCATED FROM THE PORTFOLIO (63,894,752)
--------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (62,003,523)
====================
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (FUND)
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STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<S> <C> <C>
For the Year Ended October 31,
-------------------------------------------
1998 1997
-------------------- --------------------
NET ASSETS, BEGINNING OF PERIOD $ 204,715,762 $ 167,570,050
-------------------- --------------------
OPERATIONS:
Net investment income 1,891,229 1,084,832
Net realized gain (loss) on investments and foreign currency transactions (33,857,609) (4,692,069)
Net change in unrealized appreciation (depreciation) on investments
and foreign currency transactions (30,037,143) 242,848
-------------------- --------------------
Net increase (decrease) in net assets resulting from operations (62,003,523) (3,364,389)
-------------------- --------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income - Investor Shares (596,860) (150,511)
Net investment income - Advisor Shares (26,384) (10,884)
-------------------- --------------------
Total distributions to shareholders (623,244) (161,395)
-------------------- --------------------
CAPITAL SHARE TRANSACTIONS: (NOTE 5)
Sale of shares - Investor Class * 32,111,369 38,703,940
Sale of shares - Advisor Class * 6,379,884 28,015,324
Reinvestment of distributions - Investor Class 355,423 87,690
Reinvestment of distributions - Advisor Class 26,384 10,884
Redemption of shares - Investor Class * (46,569,811) (26,043,240)
Redemption of shares - Advisor Class * (2,457,177) (103,102)
-------------------- --------------------
Net increase (decrease) from capital share transactions (10,153,928) 40,671,496
-------------------- --------------------
Net increase (decrease) in net assets (72,780,695) 37,145,712
-------------------- --------------------
NET ASSETS, END OF PERIOD (INCLUDING LINE A) $ 131,935,067 $ 204,715,762
==================== ====================
(A) Undistributed net investment income $ 898,098 $ 431,813
==================== ====================
SHARE TRANSACTIONS
Sale of shares - Investor Class 2,945,917 3,082,070
Sale of shares - Advisor Class 663,007 2,284,352
Reinvestment of distributions in shares - Investor Class 32,460 7,929
Reinvestment of distributions in shares - Advisor Class 2,414 979
Redemption of shares - Investor Class (4,830,885) (2,043,429)
Redemption of shares - Advisor Class (314,314) (9,181)
-------------------- --------------------
Net increase (decrease) in shares (1,501,401) 3,322,720
==================== ====================
</TABLE>
- ------------------------------
* Includes purchase and redemption fees (Note 5).
The accompanying notes are an integral part of the financial statements.
9
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (FUND)
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FINANCIAL HIGHLIGHTS - INVESTOR SHARES
Selected per share data and ratios for an Investor Share outstanding throughout
each period:
<TABLE>
<S> <C> <C> <C> <C>
For the
Year Ended For the
October 31, Period Ended
-------------------------------------------------- October 31,
1998 1997 1996 1995 (a)
--------------- -------------- --------------- -------------
Net Asset Value, Beginning of Period $11.08 $11.06 $10.63 $10.00
Investment Operations -------------- -------------- --------------- -------------
Net Investment Income 0.12 (b) 0.06 (b) 0.02 (b) 0.02
Net Realized and Unrealized Gain (Loss) on Investments (3.39) (0.03) 0.43 0.61
-------------- -------------- --------------- -------------
Total from Investment Operations (3.27) 0.03 0.45 0.63
-------------- -------------- --------------- -------------
Distributions from Net Investment Income (0.04) (0.01) (0.02) -
-------------- -------------- --------------- -------------
Net Asset Value, End of Period $7.77 $11.08 $11.06 $10.63
============== ============== =============== =============
Total Return (c)(d) (29.64)% 0.27% 4.22% 6.30%
Ratio/Supplementary Data:
Net Assets at End of Period (in thousands) $111,463 $179,436 $167,570 $18,423
Ratios to Average Net Assets:
Expenses including reimbursement/waiver of fees 1.36% (b) 1.41% (b) 1.60% (b) 1.58% (e)
Expenses excluding reimbursement/waiver of fees 1.64% (b) 1.62% (b) 1.71% (b) 2.45% (e)
Net investment income including
reimbursement/waiver of fees 1.11% (b) 0.51% (b) 0.36% (b) 0.46% (e)
Portfolio Turnover Rate (f) 67% 43% 103% 44%
</TABLE>
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(a) The Fund commenced operations on March 31, 1995, and converted to Core and
Gateway(R) on November 1, 1995 (See Note 1).
(b) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(c) Total return calculation does not include the purchase or redemption fee of
0.50%, respectively.
(d) Total returns would have been lower had certain expenses not been reduced
during the periods shown (See Note 4).
(e) Annualized.
(f) The rate after October 31, 1995, represents the turnover of the underlying
Portfolio.
The accompanying notes are an integral part of the financial statements.
10
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (FUND)
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FINANCIAL HIGHLIGHTS - ADVISOR SHARES
Selected per share data and ratios for an Advisor Share outstanding throughout
each period:
<TABLE>
<S> <C> <C>
For the For the
Year Ended Period Ended
October 31, October 31,
1998 1997 (a)
-------------- -----------------
Net Asset Value, Beginning of Period $11.11 $11.28
-------------- -----------------
Investment Operations
Net Investment Income (b) 0.08 0.03
Net Realized and Unrealized Gain (Loss) on Investments (3.39) (0.19)
-------------- -----------------
Total from Investment Operations (3.31) (0.16)
-------------- -----------------
Distributions from Net Investment Income (0.01) (0.01)
-------------- -----------------
Net Asset Value, End of Period $7.79 $11.11
============== =================
Total Return (c)(d) (29.81)% (1.42)%
Ratio/Supplementary Data:
Net Assets at End of Period (in thousands) $20,472 $25,280
Ratios to Average Net Assets:
Expenses including reimbursement/waiver of fees (b) 1.61% 1.66% (e)
Expenses excluding reimbursement/waiver of fees (b) 1.97% 2.03% (e)
Net investment income including reimbursement/waiver of fees (b) 0.82% 0.27% (e)
Portfolio Turnover Rate (f) 67% 43%
</TABLE>
- ---------------------------------------------------
(a) Advisor Class shares were first issued on November 21, 1996.
(b) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(c) Total return calculations do not include the purchase or redemption fee of
0.50%, respectively.
(d) Total returns would have been lower had certain expenses not been reduced
during the periods shown. (See Note 4)
(e) Annualized.
(f) Rate represents the turnover of the underlying Portfolio.
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (FUND)
- --------------------------------------------------------------------------------
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 Emerging Markets Fund Institutional Portfolio (the "Fund"), a
non-diversified portfolio that commenced operations on March 31, 1995. 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 of its investable assets in Schroder Emerging Markets Fund Institutional
Portfolio (the "Portfolio"), a separate non-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 ("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 17 to 38 in this report and should be read in conjunction with
the Fund's financial statements. As of October 31, 1998, the Fund owns
approximately 72% of the interests in the Portfolio and may be deemed under
certain circumstances, for purposes of the Act, to control the Portfolio.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally
accepted accounting principles, which require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increase and decrease in net assets from
operations during the fiscal period. Actual 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 are discussed in the Notes to the
Financial Statements of the Portfolio.
INVESTMENT INCOME AND EXPENSES
The Trust records daily its pro rata share of the Portfolios' income,
expenses and realized and unrealized gain and loss. In addition, the Fund incurs
its own expenses.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends and capital gain distributions, if any, are distributed to
shareholders at least annually and are recorded on the ex-dividend date.
Distributions are based on amounts calculated in accordance with applicable
federal income tax regulations, which may differ from generally accepted
accounting principles. These differences are due primarily to differing
treatments of income and gain on various investment securities held by the Fund,
timing differences and differing characterizations of distributions made by the
Fund.
12
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (FUND)
- --------------------------------------------------------------------------------
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 its funds. Expenses that are directly attributable to more than one
fund are allocated among the respective funds in proportion to each fund's net
assets. Expenses that are directly attributable to a class are allocated to that
class.
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 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 is Schroder Fund Advisors Inc. ("Schroder Advisors")
and the subadministrator is Forum Administrative Services, LLC ("FAdS"). For its
services, Schroder Advisors is entitled to receive compensation at an annual
rate, payable monthly, of 0.05% 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 AND SERVICE ORGANIZATIONS
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.
13
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (FUND)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
NOTE 4. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES
Schroder Advisors voluntarily waived a portion of its fee and assumed
certain expenses of the Fund so that its expenses chargeable to Investor Shares
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 1.45% and 1.70%,
respectively, of the average daily net assets attributable to Investor Shares
and Advisor Shares, respectively. SCMI, 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 and FSS waived fees of $1,091 and $10,000,
respectively. Schroder Advisors also reimbursed expenses in the amount of
$5,515.
NOTE 5. PURCHASE AND REDEMPTION FEES
Purchases and redemptions of Fund shares are subjected to a transaction
fee of 0.50% of the amount invested and the net asset value redeemed,
respectively. These charges are designed to cover the transaction costs the
Portfolio incurs (either directly or indirectly) as a result of the Fund's
investment in or redemption of Fund shares. These charges, which are not sales
charges, are assessed by the Fund and paid to the Portfolio, not Schroder
Advisors or any other entity. The purchase and redemption fees are included in
the Statements of Changes in Net Assets shares sold and shares redeemed amounts,
respectively, and are included as part of Paid-in Capital in the Statement of
Assets and Liabilities. The purchase and redemption fee for each class are as
follows:
<TABLE>
<S> <C> <C> <C> |<C>
Investor Shares Advisor Shares
---------------------- ---------------------------
For the Periods Ended Purchase Redemption Purchase Redemption
--------------------- -------- ---------- -------- ----------
October 31, 1998 $162,923 $ 232,843 $ 30,610 $ 10,778
October 31, 1997 192,175 130,890 140,252 566
</TABLE>
NOTE 6. FEDERAL INCOME TAXES
As of October 31, 1998, the Fund has capital loss carryovers available to
offset future capital gains as follows:
Carryovers expire on October 31, 2003............................ $ 159,533
Carryovers expire on October 31, 2004............................ 6,451,242
Carryovers expire on October 31, 2005............................ 6,622,458
Carryovers expire on October 31, 2006............................ 35,755,622
NOTE 7. BENEFICIAL INTEREST
For the period ended October 31, 1998, there were three shareholders,
otherwise unaffiliated with the Fund, each owning more than 10% of the Fund's
net assets totaling 73%.
14
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (FUND)
- --------------------------------------------------------------------------------
SPECIAL 1998 TAX INFORMATION (UNAUDITED)
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
current tax laws, the foreign income and foreign tax per share (for a share
outstanding October 31, 1998) is as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Country Dividends Foreign Tax Country Dividends Foreign Tax
-------- --------- ----------- ------- --------- -----------
Argentina $0.0085 - Mauritius 0.0019 -
Botswana 0.0029 - Mexico 0.0165 -
Brazil 0.0636 0.0103 Pakistan 0.0102 -
Chile 0.0079 - Peru 0.0001 -
China 0.0012 - Philippines 0.0013 0.0005
Czech Republic 0.0025 0.0006 Poland 0.0040 0.0009
Greece 0.0029 - Portugal 0.0084 0.0023
Hong Kong 0.0029 - Slovak Republic 0.0002 -
Hungary 0.0014 - South Africa 0.0222 -
India 0.0127 - Taiwan 0.0018 -
Indonesia 0.0008 0.0002 Thailand 0.0001 -
Israel 0.0093 0.0026 Turkey - -
South Korea 0.0032 0.0010 United States 0.0243 0.0016
Malaysia 0.0009 0.0003 Venezuela 0.0026 -
Zimbabwe 0.0006 0.0001
--------- ---------
Total $0.2149 $0.0204
========= =========
</TABLE>
The pass through of foreign tax credit will affect only those shareholders of
the Fund who are holders on the dividend record date in December 1998.
Accordingly, shareholders will receive more detailed information along with
their form 1099-DIV in January 1999.
15
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (FUND)
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Schroder Capital Funds (Delaware) and Shareholders of
Schroder Emerging Markets Fund Institutional Portfolio:
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 Emerging Markets Fund Institutional Portfolio (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.
Boston, Massachusetts PricewaterhouseCoopers LLP
December 22, 1998
16
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1998
<TABLE>
<S> <C> <C>
STOCKS AND RIGHTS - 92.8%
SHARES VALUE US$
------ ---------
ARGENTINA - 3.1%
COMMON STOCK
218,100 Astra Cia Argentina De Petroleo SA
Energy $ 258,526
14,200 Disco SA ADR(a)
Services 208,563
165,114 Perez Companc SA
Multi-Industry 809,301
48,000 Quilmes Industrial SA ADR
Consumer Non-Durable 441,000
93,900 Telecom Argentina Stet - France Telecom SA
Telecommunications 604,897
237,400 Telefonica de Argentina SA
Telecommunications 795,529
8,300 Telefonica de Argentina SA ADR
Telecommunications 274,419
78,900 YPF Sociedad Anonima ADR
Energy 2,283,169
---------------------
5,675,404
---------------------
BOTSWANA - 0.6%
COMMON STOCK
848,000 Sechaba Breweries Ltd. (c)
Services 1,087,977
---------------------
BRAZIL - 9.6%
COMMON STOCK
9,500 Aracruz Celulose SA ADR
Materials 79,563
99,200,000 Centrais Eletricas Brasileiras SA - Eletrobras(a)
Energy 2,103,915
4,500,000 Companhia Cimento Portland Itau(a)
Basic Materials 603,571
45,279,490 Companhia Energetica de Minas Gerais - CEMIG
Services 880,614
93,000 Companhia Paranaense de Energia-Copel ADR
Energy 720,750
15,440,000 Companhia Paulista de Forca e Luz - CPFL(a)
Energy 1,307,268
17
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1998
SHARES VALUE US$
-------- -----------
BRAZIL (CONCLUDED)
PREFERRED STOCK
19,000,000 Banco Nacional SA(a)(b)
Finance $ -
38,749,000 Centrais Eletricas Brasileiras SA - Eletrobras
Energy 890,035
1,834,000 Companhia Cervejaria Brahma
Services 860,961
108,300 Companhia Vale do Rio Doce
Materials 1,634,169
47,200 Companhia Vale do Rio Doce B shares(a)(b)
Materials -
759,000 Itausa-Investimentos Itau SA
Multi-Industry 407,209
8,954,000 Petroleo Brasileiro SA - Petrobras
Energy 1,125,912
45,566,000 Tele Centro Sul Participacoes SA(a)
Telecommunications 420,174
27,410,062 Telecomunicacoes de Sao Paulo SA - Telesp
Telecommunications 4,549,578
3,664,858 Telecomunicacoes do Parana SA-Telepar
Telecommunications 614,445
14,907,062 Telesp Celular SA(a)
Telecommunications 724,796
200,130 Usinas Siderurgicas de Minas Gerais SA - USIMINAS
Capital Equipment 629,129
---------------------
17,552,089
---------------------
CHILE - 3.0%
COMMON STOCK
23,500 Administradora de Fondos de Pensiones Provida SA ADR
Materials 333,406
46,300 Banco Santander Chile ADR
Finance 428,275
62,200 Chilectra SA ADR
Energy 1,223,648
27,700 Compania Cervecerias Unidas SA ADR
Services 498,600
57,225 Compania de Telecomunicaciones de Chile SA ADR
Telecommunications 1,255,373
24,400 Distribucion y Servicio D&S SA ADR
Retail 317,200
18
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1998
SHARES VALUE US$
-------- -----------
CHILE (CONCLUDED)
COMMON STOCK
3,000 Embotelladora Andina SA
Consumer Non-Durables $ 35,250
33,341 Gener SA ADR
Energy 537,624
48,500 Quinenco SA ADR
Multi-Industry 351,625
17,200 Sociedad Quimica y Minera de Chile SA ADR
Materials 571,900
---------------------
5,552,901
---------------------
CHINA, PEOPLES REPUBLIC OF - 0.9%
COMMON STOCK
1,742,000 Beijing Datang Power Generation Co. Ltd. H
Energy 539,751
48,400 Huaneng Power International, Inc. ADR(a)
Energy 665,500
1,163,000 Qingling Motors Co.
Services 214,709
1,328,000 Zhehuang Expressway Co., Ltd.
Services 260,601
---------------------
1,680,561
---------------------
CROATIA - 0.5%
COMMON STOCK
60,060 Pliva DD GDR
Consumer Goods 884,384
---------------------
CZECH REPUBLIC - 1.2%
COMMON STOCK
103,866 SPT Telecom AS(a)
Energy 1,572,501
2,430 Tabak AS
Consumer Goods 569,730
---------------------
2,142,231
---------------------
19
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1998
SHARES VALUE US$
-------- -----------
EGYPT - 1.2%
COMMON STOCK
158,600 Commercial International Bank GDR
Finance $ 1,248,975
23,060 EFG-Hermes Holding, SAE(a)
Finance 265,190
33,820 Oriental Weavers Co.
Consumer Durables 728,680
---------------------
2,242,845
---------------------
GREECE - 3.1%
COMMON STOCK
14,150 Alpha Credit Bank
Finance 1,130,677
39,010 Hellenic Bottling Co. SA
Consumer Goods 949,210
52,673 Hellenic Telecommunication Organization SA (OTE)
Services 1,197,476
5,710 Lambrakis Media Group(a)
Publishing 70,990
12,266 National Bank of Greece SA
Finance 1,742,846
19,890 STET Hellas Telecommunications SA ADR(a)
Services 522,113
---------------------
---------------------
5,613,312
---------------------
HONG KONG - 2.1%
COMMON STOCK
358,000 Cheung Kong Infrastructure Holdings
Capital Equipment 910,506
2,660,000 China Resources Beijing Land
Finance 712,580
133,000 China Resources Enterprise Ltd.
Multi-Industry 177,716
641,000 China Telecom (Hong Kong) Ltd.(a)
Services 1,204,078
1,256,000 Cosco Pacific Ltd.
Services 616,179
302,000 Ng Fung Hong Ltd.
Services 267,074
---------------------
3,888,133
---------------------
20
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1998
SHARES VALUE US$
-------- -----------
HUNGARY - 2.9%
COMMON STOCK
32,190 Gedeon Richter RT GDR
Consumer Goods $ 1,078,365
52,198 Matav RT ADR(a)
Services 1,402,821
67,450 MOL Magyar Olaj - es Gazipari RT GDR
Energy 1,536,174
33,480 OTP Bank RT GDR
Finance 1,211,139
319 Pannonplast RT
Materials 9,854
---------------------
5,238,353
---------------------
INDIA - 6.9%
COMMON STOCK
16,000 Associated Cement Co. Ltd.
Materials 347,885
16,000 BSES Ltd.
Energy 56,508
90,000 Bajaj Auto Ltd.(a)
Capital Equipment 1,176,556
190,500 Bharat Heavy Electricals Ltd.
Capital Equipment 1,063,610
192,000 Bharat Petroleum Corp. Ltd.
Energy 1,156,293
290,300 Great Eastern Shipping Co.
Multi-Industry 138,780
39,000 Hindustan Lever Ltd.
Multi-Industry 1,475,892
98,700 Hindustan Petroleum Corp. Ltd.
Energy 620,271
113,992 ITC Ltd.
Consumer Goods 1,891,847
1,700 Indian Hotels Co. Ltd.
Services 16,435
440,000 Mahanagar Telephone Nigam Ltd.
Telecommunications 1,900,904
2,000 Mahindra & Mahindra Ltd.(a)
Capital Equipment 6,945
21
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1998
SHARES VALUE US$
-------- -----------
INDIA (CONCLUDED)
COMMON STOCK
67,000 Ranbaxy Laboratories Ltd.
Consumer Goods $ 789,677
320,500 Reliance Industries Ltd.
Materials 832,673
197,000 State Bank of India
Finance 725,981
30,300 Videsh Sanchar Nigam Ltd.
Telecommunications 525,759
---------------------
12,726,016
---------------------
INDONESIA - 0.6%
COMMON STOCK
49,000 Gulf Indonesia Resources Ltd.(a)
Energy 483,875
183,000 PT Gudang Garam Tbk
Capital Equipment 164,945
352,500 PT Indosat ADR
Telecommunications 380,339
221,000 PT Telekomunikasi Indonesia
Telecommunications 54,524
---------------------
1,083,683
---------------------
ISRAEL - 4.9%
COMMON STOCK
440,600 Bank Hapoalim Ltd.
Finance 793,902
945,030 Bank Leumi Le-Israel
Finance 1,203,677
497,080 Bezeq Israeli Telecommunication Corp., Ltd.
Services 1,424,245
78,900 Blue Square-Israel Ltd.
Services 1,015,838
59,210 ECI Telecommunications Ltd.
Capital Equipment 1,961,331
211,000 Supersol Ltd.
Consumer Non-Durables 543,415
49,470 Teva Pharmaceutical Industries Ltd. ADR
Consumer Goods 1,950,973
---------------------
8,893,381
---------------------
22
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1998
SHARES VALUE US$
-------- -----------
KOREA, REPUBLIC OF - 9.1%
COMMON STOCK
204,000 Daewoo Heavy Industries
Finance $ 766,859
191,307 Kookmin Bank GDR(a)
Finance 690,147
118,010 Korea Electric Power Corp.
Energy 2,101,796
246,490 LG Electronics
Capital Equipment 2,185,692
8,000 LG Information and Communication Ltd.
Capital Equipment 183,712
28,000 Pohang Iron & Steel Co. Ltd. (b)
Materials 1,587,739
1,712 SK Telecom Co. Ltd. (b)
Telecommunications 1,209,817
30,396 Samsung Display Devices Co.
Capital Equipment 1,140,317
126,504 Samsung Electronics Co.
Capital Equipment 5,177,282
204,622 Samsung Heavy Industries(a)
Capital Equipment 1,147,592
149,000 Shinhan Bank(a)
Finance 510,421
Rights
27,643 Shinhan Bank
Finance -
---------------------
16,701,374
---------------------
MALAYSIA - 0.2%
COMMON STOCK
86,000 Resorts World Berhad (b)(c)
Services 51,316
186,000 Tanjong plc (b)(c)
Other 124,687
244,000 Tenaga Nasional Berhad (b)(c)
Energy 193,226
---------------------
---------------------
369,229
---------------------
Mauritius - 0.7%
Common Stock
1,753,000 State Bank of Mauritius Ltd.(a)
Finance 1,217,052
---------------------
23
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1998
SHARES VALUE US$
-------- -----------
MEXICO - 11.0%
COMMON STOCK
271,300 ARA SA de CV(a)
Capital Equipment $ 546,743
752,931 Cemex SA de CV
Materials 1,766,536
1,557,300 Cifra SA de CV - Series C(a)
Services 2,033,796
2 Cifra SA de CV - Series V(a)
Services 3
895,000 Controladora Comercial Mexicana SA de CV
Services 565,857
1,046,000 Fomento Economico Mexicano SA de CV
Services 2,634,969
286,400 Grupo Carso SA de CV
Multi-Industry 987,420
416,800 Grupo Financiero Banamex Accival SA de CV(a)
Services 419,159
527,194 Grupo Industrial Bimbo SA de CV
Retail 895,782
267,000 Grupo Industrial Saltillo SA de CV
Multi-Industry 604,019
23,700 Grupo Televisa SA GDR(a)
Services 642,863
35,000 Industrias Penoles SA
Materials 107,185
332,500 Kimberly-Clark de Mexico SA de CV
Services 952,562
652,000 Sistema Argos SA - Series B
Consumer Non-Durables 644,097
129,500 Telefonos de Mexico SA ADR
Telecommunications 6,839,218
67,100 Tubos de Acero de Mexico SA ADR
Materials 570,350
---------------------
20,210,559
---------------------
PAKISTAN - 0.1%
COMMON STOCK
6,000 Pakistan Telecommunications Corp.
Services 192,000
---------------------
24
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1998
SHARES VALUE US$
-------- -----------
PERU - 1.2%
COMMON STOCK
866,000 Banco Continental
Finance $ 451,619
39,000 Compania de Minas Buenaventura SA ADR
Materials 477,750
98,700 Telefonica del Peru SA ADR
Telecommunications 1,283,100
---------------------
2,212,469
---------------------
PHILIPPINES - 1.9%
COMMON STOCK
1,698,000 Ayala Corp.
Multi-Industry 431,351
2,128,012 Ayala Land Inc.
Finance 646,070
1,140,000 La Tondena Distillers Inc.(a)
Consumer Non-Durables 663,960
398,280 Manila Electric Co. "B" Shares
Energy 1,174,640
24,540 Philippine Long Distance Telephone Co.
Telecommunications 586,910
---------------------
3,502,931
---------------------
POLAND - 2.1%
COMMON STOCK
7,850 Bank Przemyslowo-Handlowy SA
Finance 508,083
53,336 Bank Rozwoju Eksportu SA
Finance 1,114,585
208,330 Bydgoska Fabryka Kabli SA(a)
Capital Equipment 671,174
77,500 Elektrim Spolka Akcyjna SA
Capital Equipment 922,244
43,260 Gorazdze SA
Materials 351,564
38,850 Krosno SA
Materials 163,501
4,000 Softbank SA GDR
Finance 91,800
-------------------
3,822,951
---------------------
25
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1998
SHARES VALUE US$
-------- -----------
PORTUGAL - 3.9%
COMMON STOCK
28,750 Banco Espirito Santo e Comercial de Lisboa SA
Finance $ 850,171
32,550 Compania de Seguros Mundial Confianca SA(a)
Finance 882,010
39,120 Jeronimo Martins SGPS SA
Retail 1,696,060
32,640 Portugal Telecom SA
Telecommunications 1,547,785
61,450 Semapa - Sociedade de Investimento e Gestao SGPS SA
Materials 1,199,969
5,650 Telecel-Comunicacaoes Pessoais SA
Energy 1,041,735
---------------------
7,217,730
---------------------
RUSSIA - 0.9%
COMMON STOCK
47,021 Gazprom ADR
Energy 436,120
30,695 Lukoil Holding ADR
Energy 477,031
252,500 Surgutneftegaz ADR
Energy 512,550
88,650 Unified Energy Systems GDR(a)
Energy 272,856
---------------------
1,698,557
---------------------
SLOVAK REPUBLIC - 0.0%
COMMON STOCK
5,876 Nafta Gbely AS (b) (c)
Services 68,682
---------------------
SOUTH AFRICA - 9.5%
COMMON STOCK
263,800 ASBA Group Ltd.
Finance 1,434,258
57,800 Anglo American Corp. of South Africa Ltd.
Materials 1,881,400
42,900 Anglo American Industrial Corp. Ltd.
Multi-Industry 687,495
26
<PAGE>
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1998
SHARES VALUE US$
-------- -----------
SOUTH AFRICA (CONCLUDED)
COMMON STOCK
428,221 Barlow Ltd.
Multi-Industry $ 2,022,863
85,000 Dorbyl Ltd.
Capital Equipment 229,554
152,708 Ellerine Holdings Ltd.
Services 416,491
125,100 Fedsure Holdings Ltd.
Finance 1,237,664
803,250 First Rand Ltd.
Finance 1,039,537
258,084 LA Retail Stores Ltd.
Consumer Non-Durables 312,840
955,000 Malbak Ltd.
Multi-Industry 417,083
1,235,300 Metro Cash and Carry Ltd.
Services 836,775
341,000 Nampak Ltd.
Services 635,219
220,800 Rembrandt Group Ltd.
Finance 1,468,117
267,000 Sappi Ltd.(a)
Materials 1,332,668
238,000 Sasol Ltd.
Energy 1,164,587
86,660 South African Breweries Ltd.
Services 1,680,739
153,733 South African Druggists Ltd.
Consumer Goods 705,662
--------------------
17,502,952
---------------------
TAIWAN - 6.8%
COMMON STOCK
60,000 Asustek Computer Inc.(a)
Multi-Industry 443,581
1,402,254 Bank Sinopac(a)
Finance 598,255
260,000 Cathay Life Insurance Co.
Services 917,041
27
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1998
SHARES VALUE US$
-------- -----------
TAIWAN (CONCLUDED)
COMMON STOCK
1,360,000 China Steel Corp.
Materials $ 921,662
416,500 D-Link Corp.(a)
Capital Equipment 917,342
479,000 Delpha Construction Co., Ltd.
Finance 507,579
472,000 Nan Ya Plastics Corp.(a)
Materials 596,123
436,000 Nien Hsing Textile Corp., Ltd.(a)
Materials 893,137
409,800 Phoenixtec Power Co., Ltd.(a)
Capital Equipment 864,714
158,500 ROC Taiwan Fund
Finance 1,050,063
860,192 Siliconware Precision Industries Co.(a)
Capital Equipment 1,593,985
1,574,300 Taiwan Semiconductor Manufacturing Co.(a)
Capital Equipment 3,176,425
---------------------
12,479,907
---------------------
THAILAND - 1.7%
COMMON STOCK
100,000 Advanced Info Service Public Co., Ltd.
Services 734,816
381,000 Electricity Generating Public Co. Ltd.(a)
Energy 1,005,800
135,000 PTT Exploration and Production Public Co. Ltd.(a)
Materials 1,300,624
---------------------
3,041,240
---------------------
TURKEY - 2.4%
COMMON STOCK
29,750,175 Akbank TAS
Finance 439,027
70,669,570 Dogan Yayin Holding(a)
Finance 441,690
31,564,800 Haci Omer Sabanci Holding AS
Finance 476,766
28
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1998
SHARES VALUE US$
-------- -----------
TURKEY (CONCLUDED)
COMMON STOCK
1,750,640 Migros Turk TAS
Services $ 1,489,278
27,163,344 Northern Electric Telekomunikasyon AS (a)
Energy 603,637
4,436,110 Vestel Elektronik Sanayi ve Ticaret AS(a)
Consumer Non-Durables 361,979
51,774,150 Yapi ve Kredi Bankasi AS
Finance 583,926
---------------------
4,396,303
---------------------
VENEZUELA - 0.4%
COMMON STOCK
2,679,675 C.A. La Electricidad de Caracas
Energy 767,229
---------------------
ZIMBABWE - 0.3%
COMMON STOCK
13,500,000 Econet Wireless Holdings(a) (c)
Services 369,564
153,000 Meikles Africa Ltd.(a)
Materials 80,325
635,000 NMBZ Holdings Ltd.(a)
Finance 238,125
---------------------
---------------------
688,014
---------------------
Total Stock and Rights (cost $208,523,586) 170,350,449
---------------------
Short-Term Investments - 4.6%
Treasury Bills - 4.6%
8,400,000 U.S. Government, 4.69% yield, due 12/3/98
(cost $8,366,075) 8,374,100
---------------------
Total Investments - 97.4% (cost $216,889,661) 178,724,549
Other Assets Less Liabilities - 2.6% 4,807,522
---------------------
Total Net Assets - 100% $ 183,532,071
=====================
</TABLE>
29
<PAGE>
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1998
<TABLE>
<CAPTION>
FORWARD FOREIGN CURRENCY CONTRACTS
CONTRACTS TO SELL
<S> <C> <C> <C> <C>
UNREALIZED
CONTRACT UNDERLYING FACE APPRECIATION/
DATE CURRENCY UNITS AMOUNT OF VALUE (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------
11/30/98 BRL 7,100,000 $ 5,814,900 $ (189,155)
12/15/98 PLZ 2,763,050 790,950 (60,950)
1/19/99 BRL 1,889,664 1,489,055 (9,055)
2/22/99 HKD 23,800,000 3,056,634 (89,053)
===========================================
$ 11,151,539 $ (348,213)
- ------------------------------ ===========================================
</TABLE>
CURRENCY ABBREVIATIONS
BRL - Brazilian cruzeiro
HKD - Hong Kong dollar
PLZ - Polish zloty
(a) Non-income producing security.
(b) Valued pursuant to methodology approved by the Board of Trustees.
(c) Illiquid securities.
ADR - American Depository Receipts
GDR - Global Depository Receipts
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments (Note 2)
Investments at cost $ 216,889,661
Net unrealized appreciation (depreciation) (38,165,112)
-------------------
Total Investments at value 178,724,549
Cash 3,674,275
Foreign currency (cost $1,370,676) 1,380,178
Receivable for investments sold 924,262
Receivable for dividends and interest 571,357
Organization costs, net of amortization (Note 2) 4,947
-------------------
Total Assets 185,279,568
-------------------
LIABILITIES:
Payable for forward foreign currency contracts 348,213
Payable for investments purchased 1,133,727
Payable to investment adviser (Note 3) 106,360
Payable to administrator (Note 3) 7,256
Payable to subadministrator (Note 3) 14,511
Accrued expenses and other liabilities 137,430
-------------------
Total Liabilities 1,747,497
-------------------
Net Assets $ 183,532,071
===================
</TABLE>
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the
Year Ended
October 31, 1998
--------------------
INVESTMENT INCOME:
Dividend income (net of foreign withholding taxes of $472,240) $ 4,966,590
Interest income 944,616
--------------------
Total Investment Income 5,911,206
--------------------
EXPENSES:
Investment advisory ( Note 3) 2,389,875
Administration (Note 3) 119,494
Subadministration (Note 3) 238,987
Interest holder recordkeeping (Note 3) 12,218
Custody 526,594
Accounting (Note 3) 72,000
Audit 37,663
Legal 40,323
Trustees 13,132
Pricing Services 22,762
Amortization of organization costs (Note 2) 2,474
Miscellaneous 20,959
--------------------
Total Expenses 3,496,481
Fees waived (Note 6) (673,304)
--------------------
Net Expenses 2,823,177
--------------------
NET INVESTMENT INCOME 3,088,029
--------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain (loss) on investments (47,677,573)
Net realized gain (loss) on foreign currency transactions (1,096,392)
--------------------
Net realized gain (loss) on investments and foreign currency
transactions (48,773,965)
--------------------
Net change in unrealized appreciation (depreciation) on investments (37,110,767)
Net change in unrealized appreciation (depreciation) on foreign currency
transactions transactions (9,579)
--------------------
Net change in unrealized appreciation (depreciation) on
investments and foreign currency transactions (37,120,346)
--------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS (85,894,311)
--------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (82,806,282)
====================
</TABLE>
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended October 31,
-------------------------------------------
1998 1997
-------------------- --------------------
NET ASSETS, BEGINNING OF PERIOD $ 259,075,892 $ 167,549,528
-------------------- --------------------
OPERATIONS:
Net investment income 3,088,029 1,770,513
Net realized gain (loss) on investments and foreign currency transactions (48,773,965) (10,263,960)
Net change in unrealized appreciation (depreciation) on investments
and foreign currency transactions (37,120,346) (2,810,514)
-------------------- --------------------
Net increase (decrease) in net assets resulting from operations (82,806,282) (11,303,961)
-------------------- --------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST (A):
Contributions 53,226,007 129,110,600
Withdrawals (45,963,546) (26,280,275)
-------------------- --------------------
Net increase in net assets from transactions
from investors' beneficial interest 7,262,461 102,830,325
-------------------- --------------------
Net increase (decrease) in net assets (75,543,821) 91,526,364
-------------------- --------------------
NET ASSETS, END OF PERIOD $ 183,532,071 $ 259,075,892
==================== ====================
</TABLE>
(A) Includes purchase and redemption fees (Note 7).
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Portfolio performance for the following periods:
<S> <C> <C> <C>
For the Year Ended October 31,
-----------------------------------------------
1998 1997 1996
- ------------------------------------------------------------------------- ------------- ------------- -------------
Ratio to Average Net Assets:
Expenses including waiver of fees 1.18% 1.22% 1.45%
Expenses excluding waiver of fees 1.46% 1.43% 1.51%
Net investment income including waiver of fees 1.29% 0.69% 0.52%
Portfolio Turnover Rate 67% 43% 103%
</TABLE>
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
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
(the "Act"), currently has eight investment portfolios. Included in this report
is the Schroder Emerging Markets Fund Institutional Portfolio (the "Portfolio"),
a non-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. Purchases and redemptions
are subject to a transaction fee of 0.50% payable to the Portfolio to reimburse
transaction costs incurred with respect to the Portfolio's purchase or sale of
portfolio investments.
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 last sale price on the
preceding trading day or 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. 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 the current market
price, then marked to market to recognize any gain or loss on the transaction.
Prices used for valuation may be provided by independent pricing services. Other
securities and assets for which market quotations are not readily available are
generally 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 held a position in eight fair valued securities with an aggregate
market value of $3,235,467 representing 1.8% of the Portfolio's net assets.
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, including
amortization of premium or accretion of discount, is recorded as earned.
Identified cost of investments sold is used to determine realized gain and loss
for both financial statement and federal income tax purposes. Foreign dividend
and interest income amounts and realized capital gain and loss are converted to
U.S. dollar equivalents using foreign exchange rates in effect 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.
35
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Portfolio may enter into forward contracts to purchase or sell
foreign currencies . 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.
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 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. Pursuant to an Investment Advisory Agreement, SCMI is entitled to
receive an annual fee, payable monthly, of 1.00% 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 is Forum Administrative Services,
LLC ("FAdS"). For its services, Schroder Advisors and FAdS are entitled to
receive compensation at annual rates, payable monthly, of 0.05% and 0.10%,
respectively, of the average daily net assets of the Portfolio.
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 serves as the Portfolio's transfer agent
and is entitled to receive 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 investments) for the period ended October 31,
1998, aggregated $164,038,926 and $146,676,744, respectively.
36
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
For federal income tax purposes, the tax basis of investment securities
owned as of October 31, 1998 was $218,447,475 and the net unrealized
depreciation of investment securities was $39,722,926. The aggregate gross
unrealized appreciation for all securities in which there was an excess of
market value over tax cost was $19,551,600, and the aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost over
market value was $59,274,526.
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 in 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 has undertaken to waive a portion of its fees in order
to limit fees paid for the Portfolio's investment advisory services to 0.85% of
its average daily net assets. This fee waiver cannot be withdrawn except by a
majority vote of the Trustees of the Trust who are not affiliated persons (as
defined in the Act) of the Trust. Effective May 5, 1997, SCMI voluntarily waived
a portion of its advisory fee so that the Portfolio's total expenses would not
exceed 1.18% of the Portfolio's average daily net assets. SCMI, Schroder
Advisors, FAdS and FAcS may waive voluntarily all or a portion of their fees
from time to time. SCMI waived fees of $673,304 for the year ended October 31,
1998.
NOTE 7. PURCHASE AND REDEMPTION FEE
Purchases and redemptions of interest in the Portfolio are subject to a
transaction charge of 0.50% of the net asset value of the interests purchased or
redeemed. This charge is designed to cover the transaction costs incurred by the
Portfolio (either directly or indirectly) as a result of purchases or
redemptions of interests in the Portfolio, including brokerage commissions in
acquiring or selling portfolio securities; currency transactions costs; interest
recordkeeper costs; and to protect the interests of other interestholders. These
charges, which are not sales charges, are paid to the Portfolio, not SCMI, FAdS
or any other entity. The purchase and redemption fees for the period ended
October 31, 1998 were $264,981 and $229,818, respectively. The purchase and
redemption fees are included in the Statement of Changes in Net Assets
contributions and withdrawal amounts, respectively, and are included in the
Investors' Capital in the Statement of Assets and Liabilities.
NOTE 8. CONCENTRATION OF RISK
The Portfolio's investments in countries with limited or developing
capital markets may involve greater risks than investments in more developed
markets and the prices of such investments may be volatile. The consequences of
political, social or economic events in these markets may have disruptive
effects on the market prices of the Portfolio's investments.
37
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Schroder Capital Funds and Investors of Schroder Emerging
Markets Fund Institutional Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Schroder Emerging Markets Fund
Institutional Portfolio (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.
Boston, Massachusetts PricewaterhouseCoopers LLP
December 22, 1998
38
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<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, NY 10019
ADMINISTRATOR & DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue, 34th Floor
New York, NY 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, ME 04101
COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110-2624
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
One Post Office Square
Boston, MA 02109
This report is for the information of the shareholders of the Schroder Emerging
Markets Fund Institutional Portfolo. 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.
