CAPSTONE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to present the semi-annual report for Capstone Growth Fund,
Inc.for the period ended April 30, 1999.
ECONOMIC OVERVIEW
Economic growth continues to be strong. The primary source of growth in the U.S.
economy is the consumer. Capital expenditures by corporations continue to grow
at a positive rate but not as strong as we have seen in recent years, while the
export sector continues to languish due to the strong dollar. After dipping
briefly last fall in the wake of the slide in the stock market, consumer
confidence rebounded back above the 130 level. Within the confidence survey, 48%
of the respondents described jobs as "plentiful." Retail sales were brisk
through the first two months of 1999, rising 1.0% in January and 0.9% in
February. Some of the strength in retail sales can be attributed to the IRS,
many early taxpayers received a larger refund this year as a consequence of the
new $400 per child tax credit. Many consumers also received their refunds
earlier as the number of electronic filings was running 23% ahead of last year.
The most recent employment report was "mixed"; only 46,000 new jobs were created
in March (well below the pace of recent months), but the unemployment rate
dropped to 4.2% (the lowest level since February of 1970). One bit of bad news
for consumers was the rise in oil prices as OPEC reached an agreement to cut
production by 2.1 million barrels per day. Oil prices are now up 55% from the
mid-December lows.
While we usually refer to the much broader S&P 500 Index when we try to assess
the market's performance, much has been written recently about the move in the
Dow Jones Industrial Average above the 10,000 mark. A historical look at the
move through 1,000 may provide an important lesson for investors who have grown
accustomed to a market that seems to "bust through milestones" with such ease.
In February of 1966 the Dow came within 5 points of the 1,000 level; it finally
broke through the 1,000 level for the first time 81 months later in November of
1972. During the ten-year period of 1973-1982 there were five years in which the
Dow never closed above 1,000. It was not until December 16th of 1982 that the
Dow closed below 1,000 for the last time, just over ten years from the time that
it first crossed that barrier. We recount this historical lesson not to issue a
warning that equities are overvalued in the current environment, but rather to
remind investors that long-term expectations should incorporate the possibility
of less stellar returns over the investment horizon.
EQUITY MARKET OVERVIEW
Looking into the remainder of 1999, we continue to be cautiously optimistic that
the year will be one of positive returns, but nothing approaching the over 30%
annualized compound return for the four years ended 1998. While the environment
for equities for the foreseeable future remains positive, it is less positive
than in prior years. Valuation, the earnings outlook, the course of interest
rates, the possibility that inflation has bottomed out, and a recrudescence of
armed conflict in Europe, all point to a less ebullient market than we have seen
in recent years.
Of all the factors mentioned, the one to which we believe investors should pay
the greatest attention is inflation. Those of us (such as your portfolio
manager) who are old enough to remember when the Wall Street Journal was
published in one section, or worse yet, when the family bought its first
television set (ours was a Motorola), have a real appreciation of price
stability and fear of inflation. Table I below indicates how inflation can
deliver a double hit to equity investors. The most obvious one is that it
reduces the purchasing power of any gains that the investor might enjoy. Over
the past 50 years, the best example of this worst case is the decade of the 70's
when the return before inflation of 3.2% was swamped by a 6.7% inflation rate,
resulting in a negative real return for the decade of 3.5%. In addition,
inflation and the policy adjustments required to fight it introduces uncertainty
into the investment decision which results in lower actual returns. As
illustrated on Table I, an inflation rate which is low but moving up is
associated with lower annualized returns, while an inflation rate that is high
and moving down is associated with higher annualized returns.
For now, signs of inflation are hard to find with some indicators of more rapid
inflation offset by others showing the opposite.
<PAGE>
CAPSTONE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
Table I
Annualized Annualized
S&P 500 Inflation Real
Decade Return Rate Return
------- --------------------------------------------
1950's 20.1% 1.9% 18.2%
1960's 10.0 2.1 7.9
1970's 3.2 6.7 -3.5
1980's 16.3 5.9 10.4
1990's 19.2 3.1 16.1
If you have any questions please feel free to contact us at (800) 262-6631. We
thank you for your continued support.
Sincerely,
- ------------------------------
Dan Watson,
President and Portfolio Manager
This publication must be accompanied or preceded by a current prospectus for
Capstone Growth Fund, Inc.
<PAGE>
CAPSTONE GROWTH FUND, INC.
PORTFOLIO OF INVESTMENTS - April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Value Percentage of
COMMON STOCKS (99.68%) Shares (Note 1-A) Net Assets
----------------------------------------------
<S> <C> <C> <C>
COMMERCIAL SERVICES (1.48%)
McGraw Hill Company, Incorporated 11,760 $ 649,740 0.77%
Viacom Class B 14,760 603,315 0.71%
---------- ------
1,253,055 1.48%
CONSUMER DURABLES (1.91%)
Ford Motor Company 13,350 853,566 1.01%
General Motors Corporation 8,570 762,194 0.90%
---------- ------
1,615,760 1.91%
CONSUMER NON-DURABLES (5.54%)
Anheuser Busch Cos., Incorporated 7,300 533,812 0.63%
Colgate 5,300 542,919 0.64%
General Mills Incorporated 7,070 516,994 0.61%
Philip Morris Cos., Incorporated 22,900 802,931 0.95%
Proctor & Gamble Company 12,890 1,209,243 1.43%
Quaker Oats Company 8,060 520,374 0.62%
Wm. Wrigley Jr. Company 6,260 555,184 0.66%
---------- ------
4,681,457 5.54%
CONSUMER SERVICES (4.02%)
Gannett Co., Incorporated 10,510 744,239 0.88%
McDonalds Corporation 24,100 1,021,238 1.21%
Mediaone Group Inc. 7,350 599,484 0.71%
Time Warner, Inc. 14,720 1,030,400 1.22%
---------- ------
3,395,361 4.02%
ELECTRONIC TECHNOLOGY (11.06%)
Cisco Systems (a) 13,502 1,540,072 1.82%
Dell Computer Corporation 20,820 857,524 1.01%
Hewlett-Packard Company 12,550 989,881 1.17%
Intel Corporation 26,740 1,636,154 1.93%
International Business Machines 7,720 1,614,927 1.91%
Lucent Technology 23,120 1,390,090 1.64%
Motorola, Incorporated 9,410 753,976 0.89%
Texas Instruments, Inc. 5,740 586,197 0.69%
---------- ------
9,368,821 11.06%
<PAGE>
CAPSTONE GROWTH FUND, INC.
PORTFOLIO OF INVESTMENTS - April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------------------------------------------------
Market
Value Percentage of
Shares (Note 1-A) Net Assets
ENERGY MINERALS (7.99%)
ALCOA 15,420 $ 959,895 1.14%
Coastal Corporation 17,340 663,255 0.78%
Columbia Energy Group 12,030 578,192 0.68%
Dupont De Nemours & Company 16,020 1,131,412 1.34%
Mobil Corporation 20,120 2,107,570 2.49%
J.P. Morgan & Company 5,790 780,203 0.92%
Oneok, Incorporated 19,260 538,076 0.64%
---------- -----
6,758,603 7.99%
FINANCE (17.48%)
American Express Corporation 6,580 859,924 1.02%
American International Group 10,155 1,192,578 1.41%
Associates First Capital Class A 10,500 465,281 0.55%
BB & T Corporation 23,000 918,563 1.09%
Bank One Corporation 12,544 740,096 0.88%
Chase Manhattan Corporation 9,940 822,535 0.97%
Citigroup, Inc. 23,815 1,792,079 2.12%
Comerica Incorporated 7,635 496,752 0.59%
Federal Home Loan Mortgage Corporation 10,350 649,462 0.77%
Federal National Mortgage Association 11,160 791,663 0.94%
First Union Corporation 11,260 623,522 0.74%
Fleet Financial Group Incorporated 14,180 610,626 0.72%
Jefferson Pilot Company 8,290 558,539 0.66%
Keycorp 13,960 431,888 0.51%
MBIA Incorporated 10,740 722,265 0.85%
Merrill Lynch & Company, Incorporated 4,500 377,719 0.45%
Morgan Stanley, Dean Witter & Company 7,120 706,215 0.84%
Schwab Charles Cp New 3,360 368,760 0.44%
State Street Corp 5,330 466,375 0.55%
Transamerica Corporation 6,690 476,663 0.56%
Wells Fargo & Company 15,900 686,681 0.82%
---------- ------
14,758,186 17.48%
HEALTH TECHNOLOGY (11.39%)
Abbott Labs 19,220 930,969 1.10%
American Home Products Corporation 15,440 941,840 1.11%
Amgen, Incorporated 6,990 429,448 0.51%
Bristol-Myers Squibb Company 17,540 1,114,886 1.32%
Johnson & Johnson 12,530 1,221,675 1.44%
Lilly Eli & Company 10,020 737,722 0.87%
Medtronic, Incorporated 6,210 446,732 0.53%
Merck & Company 19,760 1,388,140 1.64%
Pfizer, Incorporated 9,990 1,149,474 1.36%
Schering-Plough Corporation 15,420 744,979 0.88%
Warner Lambert Company 7,840 532,630 0.63%
---------- ------
9,638,495 11.39%
<PAGE>
CAPSTONE GROWTH FUND, INC.
PORTFOLIO OF INVESTMENTS - April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------------------------------------------------
Market
Value Percentage of
Shares (Note 1-A) Net Assets
PRODUCER MANUFACTURING (11.29%)
Allied Signal Inc. 8,790 $ 516,413 0.61%
Boeing Company 12,990 527,719 0.62%
Emerson Electric Company 11,550 744,975 0.88%
FMC Corporation 10,920 709,800 0.84%
General Electric Company 24,760 2,612,180 3.09%
Honeywell, Incorporated 5,070 480,383 0.57%
Kimberly-Clark Corporation 11,820 724,714 0.86%
Ppg Industries, Incorporated 11,560 750,677 0.89%
Raytheon Company 7,570 531,793 0.63%
Tyco International 9,550 775,937 0.92%
Weyerhaeuser Company 9,148 614,059 0.73%
Xerox Corporation 9,320 547,550 0.65%
---------- -----
9,536,200 11.29%
RETAIL TRADE (5.73%)
Dayton Hudson Corporation 8,950 602,447 0.71%
Gap, Incorporated 8,525 567,445 0.67%
Home Depot, Incorporated 15,750 944,016 1.12%
May Department Stores Co. 12,390 493,277 0.58%
Sears, Roebuck & Company 9,620 442,520 0.52%
Wal-Mart Stores, Incorporated 39,160 1,801,360 2.13%
---------- ------
4,851,065 5.73%
TECHNOLOGY SERVICES (8.77%)
America Online, Incorporated 8,360 1,193,390 1.41%
EMC Corporation 5,200 566,475 0.67%
First Data Corporation 15,340 650,991 0.77%
Microsoft Corporation 40,120 3,262,257 3.86%
Oracle Corporation 18,810 509,046 0.60%
Sun Microsystems, Incorporated 8,400 502,425 0.59%
United Technologies Corporation 5,060 733,067 0.87%
---------- ------
7,417,651 8.77%
TRANSPORTATION (0.79%)
Burlington North/Santa Fe 18,240 668,040 0.79%
<PAGE>
CAPSTONE GROWTH FUND, INC.
PORTFOLIO OF INVESTMENTS - April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------------------------------------------------
Market
Value Percentage of
Shares (Note 1-A) Net Assets
UTILITIES (12.23%)
AT&T Corporation 25,680 $ 1,296,840 1.53%
Airtouch Communications, Incorporated (a) 7,300 681,637 0.81%
Ameritech Corporation 10,180 696,694 0.82%
Bell Atlantic Corporation 17,840 1,028,030 1.22%
Bellsouth Corporation 19,320 864,570 1.02%
Duke Power 13,180 738,080 0.87%
Enron Corporation 11,950 899,238 1.06%
GTE Corporation 10,150 679,416 0.80%
MCI Worldcom, Incorporated 14,640 1,203,225 1.42%
Northern Telecom Ltd. 10,080 699,930 0.83%
SBC Communications, Incorporated 16,380 917,280 1.08%
Sprint Corporation (Fon Group) 6,300 646,144 0.77%
---------- ------
10,351,084 12.23%
TOTAL COMMON STOCK (Cost $58,418,366) 84,293,778 99.68%
Par Value
CASH EQUIVALENTS (0.02%)
Aim Prime Money Market (Cost $14,986) $14,986 14,986 0.02%
---------- ------
TOTAL INVESTMENTS (Cost $58,433,352) 84,308,764 99.70%
OTHER ASSETS, LESS LIABILITIES 255,560 0.30%
---------- -------
NET ASSETS $84,564,324 100.00%
========== =======
</TABLE>
(a) Non-income producing security
See Accompanying Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
CAPSTONE GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments in securities at market value (identified cost $58,433,352)(Note 1A) $ 84,308,764
Cash 346,045
Receivable for capital stock sold 106
Dividends receivable 66,580
Interest receivable 60
Prepaid expenses 1,158
-------------
Total Assets 84,722,713
-------------
LIABILITIES:
Payable for capital stock redeemed 4,748
Accrued expenses 153,641
-------------
Total Liabilities 158,389
-------------
NET ASSETS $ 84,564,324
=============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE:
($84,564,324 / 4,784,683 shares outstanding of $.001 par value, 200,000,000 shares authorized) $ 17.67
=============
SOURCE OF NET ASSETS:
Paid in capital $ 56,301,612
Undistributed net investment income 31,230
Accumulated net realized gain on investments 2,356,070
Net unrealized appreciation of securities 25,875,412
-------------
$ 84,564,324
=============
See Accompanying Notes to Financial Statements
<PAGE>
CAPSTONE GROWTH FUND, INC.
STATEMENT OF OPERATIONS For The Six Months Ended April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividend income $ 519,018
Interest income 1,227
------------
Total Investment Income 520,245
Expenses:
Advisory fees (Note 2) 274,769
Distribution fees (Note 2) 98,990
Transfer agent fees 21,665
Reports and notices to stockholders 28,277
Audit fees 17,284
Legal fees 1,543
Directors' fees and expenses 12,174
Custodian fees 8,147
Fund accounting fees 14,776
Registration and filing fees 7,708
Miscellaneous 6,997
------------
Total Expenses 492,330
Less: Custodian fees paid indirectly (2,984)
------------
Net Expenses 489,346
Net Investment Income 30,899
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from security transactions 2,356,065
Unrealized appreciation of investments:
Beginning of period 12,482,151
End of period 25,875,412
------------
Net change in unrealized appreciation of investments 13,393,261
------------
Net realized and unrealized gain on investments 15,749,326
------------
Net increase in net assets resulting from operations $15,780,225
============
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAPSTONE GROWTH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
April 30, 1999 October 31, 1998
-------------- ----------------
(Unaudited)
<S> <C> <C>
OPERATIONS:
Net investment income $ 30,899 $ 594,295
Net realized gain on investments 2,356,065 3,124,664
Net change in unrealized appreciation of investments 13,393,261 6,584,430
------------ ------------
Net increase in net assets resulting from operations 15,780,225 10,303,389
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (580,198) (672,743)
Net realized gain on investments (3,107,229) (15,329,188)
------------ ------------
Net decrease in net assets reulting from distributions (3,687,427) (16,001,931)
CAPITAL SHARE TRANSACTIONS:
Increase in net assets resulting from capital share transactions (Note3) 932,104 7,629,195
------------ ------------
Total increase in net assets 13,024,902 1,930,653
NET ASSETS:
Beginning of period 71,539,422 69,608,769
------------ ------------
End of period (including undistributed net investment income of
$31,230 and $580,529 respectively) $84,564,324 $71,539,422
============ ============
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Note 1 - Significant Accounting Policies
Capstone Growth Fund, Inc. (the "Fund"), is registered under the Investment
Company Act of 1940 (the "Act"), as a diversified open-end management investment
company. The Fund's investment objective is to seek long-term capital
appreciation by primarily investing in common stocks. The following is a summary
of significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
A) Valuation of Securities - The Fund's investments in securities are carried at
market value. Securities listed on an exchange or quoted on a national market
system are valued at the last sales price. Other securities are quoted at the
mean between the most recent bid and asked prices. Short-term obligations are
valued at amortized cost.
B) Federal Income Taxes - No provision has been made for Federal income taxes on
net income or capital gains, since it is the policy of the Fund to continue to
comply with the special provisions of the Internal Revenue Code applicable to
investment companies and to make sufficient distributions of income and capital
gains to relieve it from all, or substantially all, such taxes.
C) Cash Equivalents - Funds on deposit in money market mutual fund accounts are
considered to be a cash equivalent.
D) Futures Contracts - Initial margin deposits required upon entering into
futures contracts are made by depositing cash, as collateral, for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contract are
recognized as unrealized gains or losses by "marking to market" on a daily basis
to reflect the market value of the contract at the end of each day's trading.
Variation margin payments are made or received, depending upon whether
unrealized gains or losses are incurred. When the contract is closed the Fund
records a realized gain or loss equal to the difference between the proceeds
from (or cost of) the closing transaction and the Fund's basis in the contract.
<PAGE>
CAPSTONE GROWTH FUND, INC.
The Fund may purchase or sell stock index futures contracts only as a hedge
against changes in the value of securities held in the Fund's portfolio or which
it intends to purchase and where the transactions are economically appropriate
to the reduction of the risks inherent in the ongoing management of the Fund.
Futures contracts involve credit and market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The contract amounts of
these futures contracts reflect the extent of the Fund's exposure to off-balance
sheet risk. The Fund's credit risk is minimized by entering only into futures
contracts which are traded on national futures exchanges and for which there
appears to be a liquid secondary market. The Fund assumes the market risk which
arises from any changes in securities values.
E) Use of Estimates - The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expense during the reporting period. Actual results could differ
from those estimates.
F) Other - The Fund distributes its net investment income and net realized gains
annually. Security transactions are accounted for on the date the securities are
purchased or sold. Cost is determined, and gains and losses are based, on the
identified cost basis for both financial statement and Federal income tax
purposes. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Discounts and premiums on bonds purchased are amortized over
the life of the bonds. Interest income and estimated expenses are accrued daily.
Note 2 - Investment Advisory Fees, Administrative Fees and Other Transactions
with Affiliates
The Fund retains Capstone Asset Management Company ("CAMCO") as its
Investment Adviser. Under the Investment Advisory Agreement (the "Agreement"),
the Adviser is paid a monthly fee based on the average net assets at the annual
rate of .75% on the first $50 million and .60% on the next $150 million.
Capstone Asset Planning Company ("CAPCO") serves as Distributor of the
Fund's shares. CAPCO is an affiliate of the Adviser, and both are wholly-owned
subsidiaries of Capstone Financial Services, Inc. ("CFS").
The Fund has adopted a Service and Distribution Plan (the "Plan") pursuant
to Rule 12b-1 under the Act whereby Fund assets are used to reimburse CAPCO for
costs and expenses incurred with the distribution and marketing of shares of the
Fund and servicing of Fund shareholders. Distribution and marketing expenses
include, among other things, printing of prospectuses, advertising literature,
and costs of personnel involved with the promotion and distribution of the
Fund's shares. Under the Plan, the Fund pays CAPCO an amount computed at an
annual rate of up to 0.25% of the Fund's average net assets (including
reinvested dividends paid with respect to those assets). Of this amount, CAPCO
may reallocate to securities dealers (which may include CAPCO itself) and other
financial institutions and organizations (collectively, "Service Organizations")
amounts based on the Fund's average net assets owned by stockholders for whom
the Service Organizations have a servicing relationship. The Plan permits CAPCO
to carry forward for a maximum of twelve months distribution expenses covered by
the Plan for which CAPCO has not yet received reimbursement. For the six months
ended April 30, 1999, the Fund paid $98,990 in 12b-1 fees. Of this amount
approximately 3.0% was paid to Service Organizations other than CAPCO.
The Fund's Custodian provided credits during the period in the amount of
$2,984 against custodian charges based on the uninvested cash balances of the
Fund.
Certain officers and directors of the Fund who are also officers and
directors of the Adviser, the Distributor or CFS, received no compensation from
the Fund. During the six months ended April 30, 1999, directors of the Fund who
are not "interested persons" received directors' fees of $3,000.
<PAGE>
CAPSTONE GROWTH FUND, INC.
Note 3 - Capital Stock
At April 30, 1999 there were 4,784,683 shares outstanding. Transactions in
capital stock were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1999 October 31, 1998
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 293,105 $4,900,132 471,488 $ 7,234,565
Shares issued to shareholders in reinvestment
of distributions 201,768 3,127,404 1,008,093 13,951,999
-------- ----------- ---------- -----------
494,873 8,027,536 1,479,581 21,186,564
Shares redeemed (423,491) (7,095,432) (920,777) (13,557,369)
-------- ----------- ---------- -----------
Net Increase 71,382 $ 932,104 558,804 $ 7,629,195
======== =========== ========== ===========
</TABLE>
Note 4 - Purchases and Sales of Securities
Purchases and sales of securities other than U.S. Government securities and
short-term investments aggregated $36,290,952 and $39,175,000 respectively. At
April 30, 1999, the cost of investments for Federal income tax purposes was
$58,433,352. Accumulated net unrealized appreciation on investments was
$25,875,412 consisting of $26,474,512 gross unrealized appreciation and $599,100
gross unrealized depreciation.
<PAGE>
CAPSTONE GROWTH FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following table sets forth the per share operating performance data for a
share of capital stock outstanding, total return, ratios to average net assets
and other supplemental data for each year indicated.
<TABLE>
<CAPTION>
Six
Months
Ended
April 30, Years Ended October 31,
- ------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Per Share Data
Net asset value at beginning of period............... $15.18 $16.76 $15.56 $13.82 $13.23 $14.43
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income........................... 0.01 0.12 0.16 0.22 0.17 0.11
Net realized and unrealized gain (loss)......... 3.26 2.11 3.55 2.31 1.93 (0.23)
------ ------ ------ ------ ------ ------
Total from investment operations................ 3.27 2.23 3.71 2.53 2.10 (0.12)
------ ------ ------ ------ ------ ------
Less distributions from:
Net investment income........................... (0.12) (0.16) (0.22) (0.06) (0.16) (0.13)
Net realized gains.............................. (0.66) (3.65) (2.29) (0.73) (1.35) (0.95)
------ ------ ------ ------ ------ ------
Total distributions............................. (0.78) (3.81) (2.51) (0.79) (1.51) (1.08)
------ ------ ------ ------ ------ ------
Net asset value at end of period..................... $17.67 $15.18 $16.76 $15.56 $13.82 $13.23
====== ====== ====== ====== ====== ======
Total Return (%)(1).................................. 22.30% 15.51% 26.91% 19.27% 17.04% (0.67)%
====== ====== ====== ====== ====== ======
Ratios/Supplemental Data
Net assets at end of period (in thousands)........... $84,564 $71,539 $69,609 $60,230 $85,324 $80,941
Ratio of total expenses to average net assets........ 1.24%(2) 1.27% 1.25% 1.29% 1.31% 1.28%
Ratio of net investment income to average net assets. 0.08%(2) 0.81% 0.99% 1.31% 1.21% 0.78%
Portfolio turnover rate.............................. 46% 93% 229% 173% 119% 12%
</TABLE>
(1) Calculated without sales charge. Sales charge eliminated on August 21, 1995.
(2) Annualized.
See Accompanying Notes to Financial Statements
<PAGE>
CAPSTONE GROWTH FUND, INC.
5847 San Felipe, Suite 4100
Houston, Texas 77057
1-800-262-6631
SEMIANNUAL REPORT TO SHAREHOLDERS
April 30, 1999
- --------------------------------------------------------------------------------
DIRECTORS OFFICERS
- ----------- -----------
Edward L. Jaroski Dan E. Watson
President
James F. Leary
Edward L. Jaroski
John R. Parker Executive Vice President
Bernard J. Vaughan Linda G. Giuffre
Secretary/Treasurer
- --------------------------------------------------------------------------------
INVESTMENT ADVISER & ADMINISTRATOR TRANSFER AGENT
----------------------------------- ----------------
Capstone Asset Management Company First Data Investor Services Group, Inc.
5847 San Felipe 3200 Horizon Drive
Suite 4100 P.O. Box 61503
Houston, TX 77057 King of Prussia, PA 19406-0903
1-800-845-2340
DISTRIBUTOR CUSTODIAN
------------ -----------
Capstone Asset Planning Company Fifth Third Bank
5847 San Felipe, Suite 4100 Fifth Third Center
Houston, TX 77057 38 Fountain Square Plaza
1-800-262-6631 Cincinnati, OH 45263
AUDITORS
----------
Briggs, Bunting & Dougherty, LLP
Two Logan Square, Suite 2121
Philadelphia, PA 19103-4901
<PAGE>
Semiannual Report
April 30, 1999
CAPSTONE
GROWTH
FUND, INC.
A Member Of
THE CAPSTONE GROUP
of Mutual Funds
THE CAPSTONE GROUP
OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
EQUITY
O CAPSTONE GROWTH FUND, INC.
FIXED INCOME
O CAPSTONE GOVERNMENT INCOME FUND
INTERNATIONAL/GLOBAL
O CAPSTONE JAPAN FUND
O CAPSTONE NEW ZEALAND FUND
For more complete information about the Capstone Funds
including charges and expenses, contact the Distributor at
the address below to receive additional prospectuses.
Please read it carefully before you invest or send money.
This publication must be accompanied or preceded by a
current prospectus for Capstone Growth Fund, Inc.
CAPSTONE ASSET PLANNING COMPANY
5847 San Felipe, Suite 4100
Houston, Texas 77057
1-800-262-6631
CAPSTONE GROWTH FUND, INC.
5847 SAN FELIPE, SUITE 4100
HOUSTON, TX 77057
