<PAGE>
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Schroder U.S. Smaller Companies Fund
- --------------------------------------------------------------------------------
Account Information (800) 344-8332
Fund Literature (800) 290-9826
INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term capital appreciation.
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. 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.
January 18, 1999
Dear Shareholder:
For most of the six months ended November 30, 1998, U.S. financial markets
proved quite resilient to economic shocks elsewhere in the world and, towards
the end of the period, to weaker corporate profits at home. While the markets
were not immune to these problems, especially in October, their immediate impact
was short-lived and, at the end of the six months stock markets showed positive
returns. During this period, quality and liquidity were increasingly prized and,
for most of the six months, smaller cap stocks--which are generally perceived as
less liquid and more volatile than larger cap stocks--underperformed their
larger counterparts.
The U.S. economy delivered a solid performance in the latter half of 1998,
with real gross domestic product (GDP) growing by an estimated 4% in spite of
global financial turmoil. For a while, capital market activity ground to a halt
and yield spreads widened sharply, raising fears of a global recession. The
Federal Reserve responded by successively cutting interest rates, and both large
and small cap stocks rallied following this move.
Looking ahead, we anticipate that U.S. economic growth will slow in the
coming year. Corporate profits are being squeezed and corporations are beginning
to reduce costs aggressively. We believe that consumer and capital spending,
which have been the two main engines of U.S. growth in 1998, will expand far
more slowly in 1999. We are anticipating a slowdown in real GDP growth in 1999.
We expect inflation rates will remain broadly unchanged compared to those of
1998 and that corporate profits will decline during 1999, while we believe that
interest rates are likely to continue to fall.
On a brighter note, markets have been encouraged by moves by the Federal
Reserve and its global counterparts to offset pressures by lowering interest
rates. Although there are clearly challenges ahead, lower interest rates in the
U.S. would help soften the impact of weaker earnings in the domestic equity
market. Moreover, the commitment of much of corporate America to control costs
and allocate capital more efficiently is still high and we believe that there
remain many interesting investment opportunities in the small-cap area of the
market.
Ira Unschuld resumed portfolio management in September 1998 of the
portfolio in which Schroder U.S. Smaller Companies Fund invests. Mr. Unschuld
had previously been a co-manager from the Fund's inception until March 1997.
Thank you for your interest in the Schroder U.S. Smaller Companies Fund.
Sincerely,
/s/ M.J. Smith
- --------------
Mark J. Smith
President
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<PAGE>
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Schroder U.S. Smaller Companies Fund
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MANAGEMENT DISCUSSION AND ANALYSIS (As of November 30, 1998) (Unaudited)
PERFORMANCE
For the six month period ended November 30, 1998, the Schroder U.S. Smaller
Companies Fund Investor Shares returned -15.45% and Advisor Shares returned
- -15.49%. Its benchmark, the Russell 2000 Index, returned -12.35% over the same
period.
MARKET BACKGROUND
The U.S. equity markets experienced some volatility in the six months ended
November 30, 1998. After a strong start to the period, the markets peaked in
mid-July, then underwent a marked sell off. This correction in the U.S. equity
markets hit smaller companies particularly hard. Fears of recession, concerns
about the stability of the U.S. financial markets and continued turmoil in the
emerging markets caused a "flight to quality" as investors looked for a
relatively safe place to invest. Between July 6 and October 9, small cap
companies represented by the Russell 2000 Index fell 23.6%, while the large cap
universe represented by the S&P 500 Index fell by 9.9% over the same period.
Following the U.S. Federal Reserve's short-term interest rate cut on October 15,
both small and large cap stocks rallied, with small-cap stocks significantly
outperforming their larger counterparts.
PORTFOLIO REVIEW
During the past six months, we maintained our discipline of investing in
growing and profitable companies that trade at reasonable valuations. Throughout
the fiscal period, we were overweight in consumer companies, such as retailers,
restaurants and food companies. While consumer stocks provided strong returns in
1997 and early 1998, their recent performance has been mixed. For example, bread
producer Earthgrains performed well over the fiscal period as it benefited from
investor interest in smaller food retailers, whereas our holdings in more
economic-sensitive industries, such as lodging, textiles and furniture detracted
from performance. Energy stocks also had a negative impact on returns as
declining oil prices caused service companies such as Weatherford International,
Cooper Cameron, and BJ Services to underperform. In part, this was offset by
strong stock selection in the healthcare sector, where our emphasis on companies
with niche businesses, such as Express Scripts, PSS World Medical, and
Haemonetics, contributed positively to performance.
OUTLOOK
Looking forward, we will continue to search for companies that can grow
their earnings independently of the economic cycle. We believe that many smaller
companies offer more attractive investment opportunities than large companies
based on valuation and fast growth rates. Furthermore, it is possible to
identify companies that have little overseas exposure and are therefore less
likely to be affected by turmoil in other parts of the world. With the recent
series of interest rate cuts, we are hopeful that the U.S. will avoid recession
in 1999 but, given the economic outlook and the potential impact of Year 2000
problems, the macro-economic outlook is particularly murky. Nonetheless, the
U.S. continues to have an entrepreneurial economy and thus a growing supply of
attractive investment opportunities. Going forward, we will remain focused on
individual stock selection, focusing on underfollowed companies whose growth
prospects are not appreciated by the market and with the potential to offer
superior earnings growth.
The views expressed in this report were those of the Fund's portfolio
manager as of November 30, 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.
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2
<PAGE>
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Schroder U.S. Smaller Companies Fund
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PORTFOLIO CHARACTERISTICS AS OF NOVEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
TOP TEN HOLDINGS INVESTMENT BY INDUSTRY
SECURITY % OF NET ASSETS INDUSTRY % OF NET ASSETS
- ------------------------ --------------- ------------------------------------- ---------------
<S> <C> <C> <C>
Blythe Industries, Inc. 2.2% Consumer Cyclical 19.0%
Duff & Phelps Credit 1.8 Transportation/Services/Miscellaneous 16.0
Fossil, Inc. 1.7 Technology 13.7
Foodmaker, Inc. 1.6 Health Care 11.6
Safety Kleen Corp. 1.6 Financial 11.0
Aurora Foods, Inc. 1.6 Consumer Staples 9.1
Suiza Foods Corp. 1.6 Capital Goods/Construction 7.1
School Specialty, Inc. 1.5 Energy 3.9
EG&G, Inc. 1.5 Basic Materials 3.0
Shopko Stores 1.5 Cash & Other Net Assets 5.6
----- -----
Total 16.6% Total 100.0%
----- -----
----- -----
</TABLE>
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3
<PAGE>
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Schroder U.S. Smaller Companies Fund
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STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments (Notes 1 and 2):
Investment in Schroder U.S. Smaller Companies Portfolio (the
"Portfolio") $57,936,260
Receivable for Fund shares sold 1,352,761
Receivable from administrator (Note 4) 5,941
-----------
Total Assets 59,294,962
-----------
LIABILITIES:
Payable for Fund shares redeemed 157,916
Payable to administrator (Note 3) 16,106
Payable to subadministrator (Note 3) 3,565
Accrued expenses and other liabilities 26,066
-----------
Total Liabilities 203,653
-----------
Net Assets $59,091,309
-----------
-----------
COMPONENTS OF NET ASSETS:
Paid-in capital 61,333,422
Undistributed net investment income (loss) (140,407)
Accumulated net realized gain (loss) (5,228,848)
Net unrealized appreciation (depreciation) on investments 3,127,142
-----------
Net Assets $59,091,309
-----------
-----------
NET ASSETS BY CLASS:
Investor Class $53,036,672
Advisor Class 6,054,637
-----------
Net Assets $59,091,309
-----------
-----------
SHARES OF BENEFICIAL INTEREST:
Investor Class 4,250,920
Advisor Class 486,825
NET ASSET VALUE, OFFERING, AND REDEMPTION PRICE PER SHARE
(NET ASSETS BY CLASS DIVIDED BY SHARES OF BENEFICIAL INTEREST BY CLASS):
Investor Class $12.48
Advisor Class $12.44
</TABLE>
The accompanying notes are an integral part of the financial statements.
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4
<PAGE>
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Schroder U.S. Smaller Companies Fund
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STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
NET INVESTMENT INCOME ALLOCATED FROM
THE PORTFOLIO:
Dividend income $ 161,178
Interest income 87,204
Net expenses (227,018)
------------
Net Investment Income Allocated from the
Portfolio 21,364
------------
EXPENSES:
Administration (Note 3) 74,643
Subadministration (Note 3) 22,393
Transfer Agency (Note 3)
Investor Shares 22,810
Advisor Shares 8,799
Shareholder Services - Advisor Shares (Note 3) 5,464
Accounting (Note 3) 6,000
Legal 14,113
Audit 9,644
Registration 16,179
Trustees 2,765
Amortization of organization costs (Note 2) 816
Miscellaneous 1,086
------------
Total Expenses 184,712
Fees waived and expenses reimbursed (Note 4) (22,941)
------------
Net Expenses 161,771
------------
NET INVESTMENT INCOME (LOSS) (140,407)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ALLOCATED FROM THE
PORTFOLIOS
Net realized gain (loss) on investments sold (5,356,033)
Net change in unrealized appreciation (depreciation) on
investments (5,445,497)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ALLOCATED FROM THE
PORTFOLIOS (10,801,530)
------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $(10,941,937)
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
5
<PAGE>
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Schroder U.S. Smaller Companies Fund
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six
Months Ended
November 30, For the Year
1998 Ended
(Unaudited) May 31, 1998
-------------- ----------------
<S> <C> <C>
NET ASSETS, BEGINNING OF PERIOD $ 56,223,534 $ 26,185,077
------------ ------------
OPERATIONS:
Net investment income (loss) (140,407) (220,475)
Net realized gain (loss) on investments sold (5,356,033) 2,230,689
Net change in unrealized appreciation
(depreciation) on investments (5,445,497) 4,722,131
------------ ------------
Net increase (decrease) in net assets resulting
from operations (10,941,937) 6,732,345
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments - Investor Class -- (3,305,205)
Net realized gain on investments - Advisor Class -- (84,662)
------------ ------------
Total distributions to shareholders -- (3,389,867)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares - Investor Class 36,969,450 30,815,123
Sale of shares - Advisor Class 5,056,256 5,400,648
Reinvestment of distributions - Investor Class -- 2,814,366
Reinvestment of distributions - Advisor Class -- 27,828
Redemption of shares - Investor Class (24,976,742) (11,273,810)
Redemption of shares - Advisor Class (3,239,252) (1,088,176)
------------ ------------
Net increase (decrease) from capital share
transactions 13,809,712 26,695,979
------------ ------------
Net increase (decrease) in net assets 2,867,775 30,038,457
------------ ------------
NET ASSETS, END OF PERIOD $ 59,091,309 $ 56,223,534
(Including accumulated undistributed net ------------ ------------
investment income (loss) of $(140,407) and $0, ------------ ------------
respectively)
SHARE TRANSACTIONS:
Sale of shares - Investor Class 2,772,386 2,088,564
Sale of shares - Advisor Class 458,963 376,171
Reinvestment of distributions in shares -
Investor Class -- 206,939
Reinvestment of distributions in shares -
Advisor Class -- 2,056
Redemption of shares - Investor Class (2,022,503) (763,482)
Redemption of shares - Advisor Class (280,863) (75,600)
------------ ------------
Net increase (decrease) in shares 927,983 1,834,648
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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6
<PAGE>
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Schroder U.S. Smaller Companies Fund
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FINANCIAL HIGHLIGHTS--INVESTOR SHARES (a)
Selected per share data and ratios for an Investor Share outstanding
throughout each period:
<TABLE>
<CAPTION>
For the
Six Months Ended For the For the
November 30, Year Ended Period Ended
1998 May 31, May 31, For the Year Ended October 31,
(Unaudited) 1998 1997 (b) 1996 (b) 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 14.76 $ 13.26 $ 17.23 $ 15.14 $ 11.81 $ 10.99
-------- -------- -------- -------- ------- -------
Investment Operations
Net Investment Income (Loss) (0.03)(c) (0.06)(c) (0.02)(c) (0.06)(c) (0.04) (0.07)
Net Realized and Unrealized Gain
(Loss) on Investments (2.25) 2.82 1.88 4.10 3.78 0.97
-------- -------- -------- -------- ------- -------
Total from Investment Operations (2.28) 2.76 1.86 4.04 3.74 0.90
-------- -------- -------- -------- ------- -------
Distributions From
Net Realized Gain on Investments -- (1.26) (5.83) (1.95) (0.41) (0.08)
-------- -------- -------- -------- ------- -------
Net Asset Value, End of Period $ 12.48 $ 14.76 $ 13.26 $ 17.23 $ 15.14 $ 11.81
-------- -------- -------- -------- ------- -------
-------- -------- -------- -------- ------- -------
Total Return (d) (15.45)%(e) 21.63% 14.73%(e) 29.35% 32.84% 8.26%
Ratio/Supplementary Data
Net Assets at End of Period (in
thousands) $ 53,037 $ 51,679 $ 26,104 $13,743 $15,287 $13,324
Ratios to Average Net Assets:
Expenses including
reimbursement/waiver of fees 1.28%(c)(f) 1.37%(c) 1.49%(c)(f) 1.49%(c) 1.49% 1.45%
Expenses excluding
reimbursement/waiver of fees 1.32%(c)(f) 1.37%(c) 1.87%(c)(f) N/A N/A N/A
Net investment income (loss)
including reimbursement/waiver
of fees (0.45)%(c)(f) (0.51)%(c) (0.42)%(c)(f) (0.35)%(c) (0.30)% (0.58)%
Portfolio Turnover Rate (g) 67.12% 54.98% 34.45% 58.50% 92.68% 70.82%
</TABLE>
- ------------------
(a) On May 17, 1996, the Fund began offering two classes of shares, Investor
Shares and Advisor Shares, and all then outstanding shares of the Fund were
designated as Investor Shares.
(b) See Note 1.
(c) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(d) Total return calculations for a period of less than one year are not
annualized.
(e) Total returns would have been lower had certain expenses not been limited
during the period shown (See Note 4).
(f) Annualized.
(g) The rate after October 31, 1995 represents the portfolio turnover rate of
the Portfolio.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
7
<PAGE>
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Schroder U.S. Smaller Companies Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS--ADVISOR SHARES (a)
Selected per share data and ratios for an Advisor Share outstanding
throughout each period:
<TABLE>
<CAPTION>
For the
Six Months Ended For the For the
November 30, Year Ended Period Ended
1998 May 31, May 31,
(Unaudited) 1998 1997 (b)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 14.72 $ 13.24 $ 11.89
-------- -------- --------
Investment Operations
Net Investment Income (Loss) (c) (0.03) (0.05) (0.03)
Net Realized and Unrealized Gain (Loss)
on Investments (2.25) 2.79 1.38
-------- -------- --------
Total from Investment Operations (2.28) 2.74 1.35
-------- -------- --------
Distributions From
Net Realized Gain on Investments -- (1.26) --
-------- -------- --------
Net Asset Value, End of Period $ 12.44 $ 14.72 $ 13.24
-------- -------- --------
-------- -------- --------
Total Return (d)(e) (15.49)% 21.50% 11.35%
Ratio/Supplementary Data
Net Assets at End of Period (in thousands) $ 6,055 $ 4,544 $ 81
Ratios to Average Net Assets:
Expenses including reimbursement/waiver
of fees (c) 1.54%(f) 1.58% 1.74%(f)
Expenses excluding reimbursement/waiver
of fees (c) 2.08%(f) 3.88% 57.02%(f)
Net investment income (loss) including
reimbursement/waiver of fees (c) (0.74)%(f) (0.78)% (0.67)%(f)
Portfolio Turnover Rate (g) 67.12% 54.98% 34.45%
</TABLE>
- ------------------
(a) On May 17, 1996, the Fund began offering two classes of shares Investor
Shares and Advisor Shares, and all then outstanding shares of the Fund were
designated as Investor Shares. Advisor Class shares were first issued on
December 23, 1996.
(b) See Note 1.
(c) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(d) Total return calculations for a period of less than one year are not
annualized.
(e) Total returns would have been lower had certain expenses not been limited
during the period shown (See Note 4).
(f) Annualized.
(g) Rate represents the turnover of the underlying Portfolio.
The accompanying notes are an integral part of the financial statements.
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8
<PAGE>
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Schroder U.S. Smaller Companies Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOVEMBER 30, 1998
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 nine investment portfolios. Included in
this report is the Schroder U.S. Smaller Companies Fund (the "Fund"), which
is a diversified portfolio that commenced operations on August 6, 1993. 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, which have equal rights as to assets and voting privileges. As of
November 30, 1998, both Investor Shares and Advisor Shares had been issued.
Effective May 31, 1997, the Fund changed its fiscal year end to May 31
from October 31.
MASTER-FEEDER ARRANGEMENT
The Fund seeks to achieve its investment objective by investing all its
investable assets in Schroder U.S. Smaller Companies Portfolio (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 or loss. The Portfolio's financial statements are included
elsewhere in this report and should be read in conjunction with the Fund's
financial statements. As of November 30, 1998, the Fund owned approximately
18.3% of the interests in the Portfolio.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally
accepted accounting principles, which require management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of increase and decrease
in net assets from operations during the fiscal period. Actual results could
differ from those estimates.
The following represent significant accounting policies of the Fund:
SECURITY VALUATION
The Trust determines the net asset value per share of the Fund as of
the close of trading on the New York Stock Exchange on each Fund business
day. Valuation of securities held in the Portfolio 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 or loss. In addition, the Fund
accrues its own expenses. Investment income, realized and unrealized gains or
losses and the common expenses of the Fund are allocated as accrued on a pro
rata basis to each class of shares based on the relative net assets of each
class of shares to the total net assets of the Fund.
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9
<PAGE>
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Schroder U.S. Smaller Companies Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income and net capital gain, if any, are distributed to
shareholders at least annually and are recorded on the ex-dividend date.
Distributions are based on amounts calculated in accordance with applicable
federal income tax regulations, which may differ from generally accepted
accounting principles. These differences are due primarily to differing
treatments of income and gain on various investment securities held by the
Portfolio, timing differences and differing characterizations of
distributions made by the Fund.
FEDERAL TAXES
The Fund intends to qualify, and continue to qualify, each year as a
regulated investment company and distribute all of its taxable income. In
addition, by distributing in each calendar year substantially all its net
investment income, capital gain and certain other amounts, if any, the Fund
will not be subject to federal excise tax. Therefore, no federal income or
excise tax provision is required.
EXPENSE ALLOCATION
The Trust accounts separately for the assets and liabilities and
operation of each of its funds. Expenses that are directly attributable to
more than one fund are allocated among the respective funds in proportion to
each fund's 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 were
amortized on a straight line basis over a five year period.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
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
The administrator of the Fund 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 0.25% of the Fund's
average daily net assets. For its services, FAdS is entitled to receive an
annual fee, payable monthly, at the rate of 0.075% of the Fund's average
daily net assets.
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 fee in the amount of $12,000
per share class, per year, plus certain other charges.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
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") provides fund accounting
services to the Fund. FAcS is entitled to receive a fee of $12,000 per year.
NOTE 4. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES
In order to limit the Fund's expenses, SCMI and Schroder Advisors have
voluntarily agreed to reduce their compensation (and, if necessary, to pay
certain expenses of the Fund) to the extent that the Fund's expenses would
exceed 1.74% of the Fund's average daily net assets attributable to Advisor
Shares and 1.49% of the Fund's average daily net assets attributable to
Investor Shares. The expense limitations cannot be modified or withdrawn
except by a majority vote of the Trustees who are not affiliated persons (as
defined in the Act) of the Trust. SCMI, Schroder Advisors, FAdS, FSS and FAcS
may voluntarily waive all or a portion of their fees, from time to time. For
the six month period ended November 30, 1998, expenses reimbursed by Schroder
Advisors were $5,941, and fees waived by FSS were $17,000.
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF NOVEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK - 94.4%
SHARES VALUE
- --------- --------------
<S> <C> <C>
BASIC MATERIALS - 3.0%
125,300 Cambrex Corp. $ 3,508,400
69,800 Ferro Corp. 1,950,038
207,400 Ivex Packaging Corp. (a) 4,044,300
--------------
9,502,738
--------------
CAPITAL GOODS/
CONSTRUCTION - 7.1%
193,300 Allied Waste Industries,
Inc. (a) 3,938,488
118,200 Harsco Corp. 3,826,725
75,800 Hayes Lemmerz International,
Inc. (a) 2,387,700
188,200 Mueller Industries, Inc. (a) 4,293,313
1,492,400 Safety Kleen Corp. (a) 5,130,125
148,400 Superior Services, Inc. (a) 2,726,850
--------------
22,303,201
--------------
CONSUMER CYCLICAL - 19.0%
18,400 Action Performance Cos.,
Inc. (a) 671,600
206,700 Blyth Industries, Inc. (a) 7,014,881
92,500 CEC Entertainment, Inc. (a) 2,740,313
85,200 Department 56, Inc. (a) 2,934,075
352,000 Fairfield Communities,
Inc. (a) 3,806,000
115,700 Family Dollar Stores, Inc. 2,321,231
188,550 Fossil, Inc. (a) 5,220,478
254,000 Goody's Family Clothing, Inc. 2,857,500
164,600 Interface, Inc. 2,057,500
113,200 Just For Feet, Inc. (a) 2,561,150
207,000 Musicland Stores Corp. (a) 3,506,063
42,100 Papa Johns International,
Inc. (a) 1,765,569
262,800 Pier 1 Imports, Inc. 2,825,100
133,500 Pillowtex Corp. 4,505,625
6,200 Regis Corp. 207,700
148,300 Shopko Stores, Inc. (a) 4,782,675
195,075 Sonic Corp. (a) 3,828,347
113,000 Trans World Entertainment
Corp. (a) 2,613,125
130,700 WestPoint Stevens, Inc. (a) 3,921,000
--------------
60,139,932
--------------
CONSUMER STAPLES - 9.1%
98,000 American Italian Pasta
Co. (a) 2,474,500
256,300 Aurora Foods, Inc. (a) 5,013,869
38,600 Earthgrains Co. 1,240,025
265,800 Foodmaker, Inc. (a) 5,149,875
86,200 International Home Foods,
Inc. (a) 1,691,675
135,900 Keebler Foods Co. (a) 4,578,131
202,700 Richfood Holdings, Inc. 3,762,619
<CAPTION>
SHARES VALUE
- --------- --------------
<S> <C> <C>
CONSUMER STAPLES (CONCLUDED)
104,300 Suiza Foods Corp. (a) $ 4,941,213
--------------
28,851,907
--------------
ENERGY - 3.9%
142,200 B.J. Service Co. (a) 1,964,138
81,100 Cooper Cameron Corp. (a) 1,976,812
505,300 El Paso Electric Co. (a) 4,674,025
60,400 Hanover Compressor Co. (a) 1,366,550
133,600 Weatherford International,
Inc. (a) 2,438,200
--------------
12,419,725
--------------
FINANCIAL - 11.0%
105,500 Affiliated Managers Group,
Inc. (a) 2,828,719
149,200 AmerUs Life Holdings, Inc. 3,291,725
88,100 Bank United Corp. 3,865,388
94,775 Commercial Federal Corp. 2,173,902
64,300 Cullen/Frost Bankers, Inc. 3,448,088
111,500 Duff & Phelps Credit
Rating Co. 5,811,938
58,400 FBL Financial Group, Inc. 1,430,800
88,400 Fremont General Corp. 4,453,150
143,200 Heller Financial, Inc. 3,750,050
99,950 North Fork BanCorp, Inc. 2,105,197
54,800 Sun Communities, Inc. 1,784,425
--------------
34,943,382
--------------
HEALTH CARE - 11.6%
128,500 ADAC Laboratories (a) 3,341,000
25,000 Amerisource Health Corp. (a) 1,600,000
37,300 Beckman Coulter, Inc. 1,799,725
73,200 Express Scripts, Inc. (a) 4,026,000
109,300 HCR Manor Care, Inc. (a) 3,470,275
200,900 Haemonetics Corp. (a) 4,532,806
77,600 Henry Schein, Inc. (a) 2,754,800
116,200 Invacare Corp. 2,781,538
116,200 Ocular Sciences, Inc. (a) 2,614,500
201,000 PSS World Medical, Inc. (a) 4,170,750
91,700 Pharmaceutical Product
Development, Inc. (a) 2,624,913
121,100 Sybron International
Corp. (a) 3,012,362
--------------
36,728,669
--------------
TECHNOLOGY - 13.7%
220,300 Antec Corp. (a) 4,075,550
96,500 Boole & Babbage, Inc. (a) 3,051,813
42,500 Dallas Semiconductor Corp. 1,604,375
172,800 EG&G, Inc. 4,827,600
</TABLE>
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED)
AS OF NOVEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- --------- --------------
<S> <C> <C>
TECHNOLOGY (CONCLUDED)
128,900 Evans & Sutherland Computer
Corp. (a) $ 2,513,550
79,900 INSpire Insurance Solutions,
Inc. (a) 2,676,650
65,500 MAPICS, Inc. (a) 1,273,156
61,000 Micros Systems, Inc. (a) 1,738,500
170,900 MicroTouch Systems, Inc. (a) 2,307,150
254,900 Pairgain Technologies,
Inc. (a) 2,580,863
89,000 Policy Management Systems
Corp. (a) 4,550,125
31 Structural Dynamics Research
Corp. (a) 541
29,700 Symbol Technologies, Inc. 1,447,875
66,800 Thomas & Betts Corp. 2,893,275
138,900 Wang Laboratories, Inc. (a) 3,541,950
127,300 Zebra Technologies Corp. (a) 4,272,506
--------------
43,355,479
--------------
TRANSPORTATION/SERVICES/
MISCELLANEOUS - 16.0%
93,100 ASA Holdings, Inc. 3,159,581
111,300 Alexandria Real Estate
Equities, Inc. 3,436,388
71,300 CNF Transportation, Inc. 2,544,520
56,200 Catalina Marketing Corp. (a) 3,273,650
222,800 Catellus Development
Corp. (a) 3,133,125
82,650 Comair Holdings, Inc. 2,531,156
203,300 Group Maintenance America
Corp. (a) 2,719,140
71,600 Jacor Communications,
Inc. (a) 4,166,225
<CAPTION>
SHARES VALUE
- --------- --------------
<S> <C> <C>
TRANSPORTATION/SERVICES/
MISCELLANEOUS (CONCLUDED)
230,400 Mail-Well, Inc. (a) $ 2,980,800
160,200 Manufactured Home
Communities, Inc. 3,924,900
147,600 Mesaba Holdings, Inc. (a) 2,767,500
83,900 RemedyTemp, Inc. (a) 1,216,550
287,500 School Specialty, Inc. (a) 4,851,555
91,100 True North Communications,
Inc. 2,562,188
82,700 Valassis Communications,
Inc. (a) 3,545,760
128,200 Young & Rubicam, Inc. (a) 3,829,975
--------------
50,643,013
--------------
TOTAL COMMON STOCK
(COST $283,663,296) 298,888,046
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SHORT TERM INVESTMENTS - 6.9%
- -----------
<S> <C> <C>
$15,107,452 Dreyfus Cash Management,
5.08% (b) 15,107,452
6,643,231 Federated Prime Obligations
Fund, 4.82% (b) 6,643,231
------------
TOTAL SHORT TERM INVESTMENTS
(COST $21,750,683) 21,750,683
------------
TOTAL INVESTMENTS - 101.3%
(COST $305,413,979) 320,638,729
OTHER ASSETS LESS LIABILITIES (-1.3%) (3,963,848)
------------
TOTAL NET ASSETS - 100.0% $316,674,881
------------
------------
</TABLE>
- ------------------
(a) Non-income producing security.
(b) Interest rate shown is the 7-day yield as of November 30, 1998.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments (Note 2):
Investments at cost $305,413,979
Net unrealized appreciation (depreciation) 15,224,750
------------
Total Investments at Value 320,638,729
Cash 10,388
Receivable for dividends and interest 120,178
Receivable for investments sold 107,103
Organization costs, net of amortization (Note 2) 13,568
------------
Total Assets 320,889,966
------------
LIABILITIES:
Payable for investments purchased 3,959,211
Payable to investment adviser (Note 3) 154,161
Payable to subadministrator (Note 3) 19,270
Accrued expenses and other liabilities 82,443
------------
Total Liabilities 4,215,085
------------
Net Assets $316,674,881
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
Schroder of U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income $ 890,763
Interest income 471,276
------------
Total Investment Income 1,362,039
------------
EXPENSES:
Investment advisory (Note 3) 970,320
Subadministration (Note 3) 121,290
Interestholder recordkeeping (Note 3) 6,063
Custody 18,233
Accounting (Note 3) 25,000
Legal 28,830
Audit 29,697
Trustees 15,584
Pricing services 3,622
Amortization of organization costs (Note 2) 2,509
Miscellaneous 11,134
------------
Total Expenses 1,232,282
------------
NET INVESTMENT INCOME (LOSS) 129,757
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments sold (34,243,369)
Net change in unrealized appreciation (depreciation) on
investments (24,065,749)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (58,309,118)
------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $(58,179,361)
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS
ENDED FOR THE YEAR
NOVEMBER 30, 1998 ENDED
(UNAUDITED) MAY 31, 1998
----------------- ------------
<S> <C> <C>
NET ASSETS, BEGINNING OF PERIOD $ 355,803,421 $103,385,258
------------- ------------
OPERATIONS:
Net investment income (loss) 129,757 234,568
Net realized gain (loss) on investments (34,243,369) 6,355,034
Net change in unrealized appreciation (depreciation) on
investments (24,065,749) 28,258,572
------------- ------------
Net increase (decrease) in net assets resulting from
operations (58,179,361) 34,848,174
------------- ------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Contributions 51,966,693 228,163,060
Withdrawals (32,915,872) (10,593,071)
------------- ------------
Net transactions from investors' beneficial interest 19,050,821 217,569,989
------------- ------------
Net increase (decrease) in net assets (39,128,540) 252,418,163
------------- ------------
NET ASSETS, END OF PERIOD $ 316,674,881 $355,803,421
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Portfolio performance for the following periods:
<TABLE>
<CAPTION>
For the Six For the For the For the
Months Ended Year Ended Period Ended Period Ended
November 30, May 31, May 31, Oct 31,
1998 (Unaudited) 1998 1997 (a) 1996 (a)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Assets at End of Period (in thousands) $316,675 $355,803 $103,385 $28,929
Ratios to Average Net Assets:
Expenses including reimbursement/waiver of
fees 0.76%(b) 0.75% 0.85%(b) 0.85%(b)
Expenses excluding reimbursement/waiver of
fees -- -- 0.95%(b) 1.31%(b)
Net investment income (loss) including
reimbursement/waiver of fees 0.08%(b) 0.10% 0.22%(b) 0.50%(b)
Portfolio Turnover Rate 67.12% 54.98% 34.45% 17.30%
</TABLE>
- ------------------
(a) See Note 1.
(b) Annualized.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOVEMBER 30, 1998
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 Schroder U.S. Smaller Companies Portfolio ("Portfolio"), which is a
diversified portfolio that commenced operations on August 15, 1996. Under its
Trust Instrument, Schroder Core is authorized to issue an unlimited number of
interests without par value. Interests in the Portfolio are sold without any
sales charges in private placement transactions to qualified investors,
including open-end management investment companies.
Effective May 31, 1997, the Fund changed its fiscal year end to May 31
from October 31.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally
accepted accounting principles, which require management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of increase and decrease
in net assets from operations during the fiscal period. Actual results could
differ from those estimates.
The following represent the significant accounting policies of the
Portfolio:
INVESTMENT 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"). 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. Other securities and assets
for which market quotations are not readily available are valued at fair
value as determined in good faith using methods approved by the Schroder
Core's Board of Trustees. As of November 30, 1998, the Portfolio did not hold
a position in any fair valued securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on trade date. Dividend
income is recorded on ex-dividend date. Interest income is recorded as
earned. Identified cost of investments sold is used to determine realized
gain or loss for both financial statement and federal income tax purposes.
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
being amortized on a straight line basis over a five-year period.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
Schroder Capital Management International Inc. ("SCMI") is the
investment adviser to the Portfolio. Pursuant to an Investment Advisory
Agreement, SCMI is entitled to receive from the Portfolio an annual fee,
payable monthly, of 0.60% of the Portfolio's average daily net assets.
SUBADMINISTRATOR
On behalf of the Portfolio, Schroder Core has entered into a
Subadministration Agreement with Forum Administrative Services, LLC ("FAdS")
under which FAdS is entitled to receive from the Portfolio an annual fee,
payable monthly, of 0.075% of the Portfolio's average daily net assets.
OTHER SERVICE PROVIDERS
Forum Accounting Services, LLC ("FAcS") performs portfolio accounting
services for the Portfolio and is entitled to receive compensation for its
services in the amount of $36,000 per year, plus certain other charges, based
upon the number and types of portfolio transactions. FAcS also provides
interestholder record keeping services to the Portfolio for which it receives
$12,000 per year, plus certain other charges.
NOTE 4. PURCHASES AND SALES OF SECURITIES
The cost of securities purchased and the proceeds from sales of
securities (excluding short-term securities) for the period ended
November 30, 1998, were $223,677,635 and $198,576,930, respectively.
For federal income tax purposes, the tax basis of investment securities
owned as of November 30, 1998, was $305,413,979, and the net unrealized
appreciation of investment securities was $15,224,750. The aggregate gross
unrealized appreciation for all securities in which there was an excess of
market value over tax cost was $38,046,811, and the aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over market value was $22,822,061.
NOTE 5. FEDERAL TAXES
The Portfolio is not required to pay federal income taxes on its net
investment income and net capital gain because it is treated as a partnership
for federal income tax purposes. All interest, dividends, gain or loss of the
Portfolio is deemed to have been "passed through" to the Portfolio's
interestholders in proportion to their holdings of the Portfolio, regardless
of whether such interest, dividends or gain has been distributed by the
Portfolio.
- --------------------------------------------------------------------------------
19
<PAGE>
TRUSTEES
David W. 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 AND DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue, 34th Floor
New York, New York 10019
CUSTODIAN
Norwest Bank Minnesota, N.A.
Sixth Street and Marquette
Minneapolis, Minnesota 55479
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 U.S.
Smaller Companies Fund. Its use in connection with any offering of the Fund's
shares is authorized only in case of a concurrent or prior delivery of the
Fund's current prospectus.
[SCHRODERS LOGO]
Schroder
U.S. Smaller
Companies
Fund
SEMI-ANNUAL REPORT
November 30, 1998
Schroder Capital Funds
(Delaware)
