<PAGE>
1
CAPSTONE NIKKO JAPAN FUND
- --------------------------------------------------------------------------------
JAPANESE MARKET OUTLOOK
GENERAL ECONOMY
The Japanese Gross Domestic Product ("GDP") is estimated to have increased by
2.7% in real terms for fiscal year ("FY") 1996. Major driving forces for the
expansion were private consumption for durable goods and capital investment of
export-oriented companies backed by the depreciation of the yen. For FY 1997, we
expect real GDP to grow by 1.4%. We think that this depreciation of growth is
rather temporary, because it is mainly attributed to the tax increase
implemented from April 1997. After the effect is absorbed, we expect that the
economy will continue on a moderate expansion because capital investment is in a
cyclical recovery phase and exports will increase as the yen will stay at the
relatively low level compared to last year. Bank of Japan will maintain the
super-low interest rate for the first half of FY 1997, although its stance will
gradually change in the second half of the fiscal year. Regarding corporate
earnings, the recurring profit of all industries increased by 12% in FY 1996 and
the profit is expected to increase by 9% in FY 1997, which is the four-year
consecutive profit growth. We forecast that the low-yen merit, companies'
streamlining efforts and telecommunication-related demand will support the
profit growth for this fiscal year.
STOCK MARKET
The Japanese stock market experienced a sharp decline from December 1996 to
January 1997. Excessive pessimism regarding financial institutions' bad loan
problem and the slowdown of the economy due to the consumption tax rate hike
were the main reasons for the decline. In such a bearish mood, so-called
"two-tier" market progressed, where only a small number of export- oriented
blue-chips gained ground. However, after April 1997, the market has been
steadily rebounding because the Japanese government has announced concrete
measures for the bad loan problem and the slowdown of the economy had already
been discounted in the market. As the market turned bullish, excessive bias on
blue-chips is being moderated. From a supply-demand side, domestic pension funds
are steadily increasing their investment in the stock market after the
deregulation, which has become the major driving force of the market. For the
June-September period, we expect that the Nikkei Stock Average will advance to
the 21000 level due to purchases by pension funds and foreign investors. For the
second half of FY 1997 (September-March 1998), we expect the Nikkei Average to
advance to the 22000 yen level, backed by corporate earnings growth that results
from the rebound of consumption and capital investment.
PERFORMANCE
During the six-month period ended April 1997, adjusting for the dividend paid in
January, the Fund was down by 16.42% while TOPIX* declined by 17.4% in US dollar
terms. TOPIX has posted a decline of 7.1% in Japanese yen terms, which was
accelerated by the depreciation of the Japanese yen against the US dollar.
According to the performance attribution analysis by the BARRA/Nikko Model,
positive exposure to "Value/Price" (stress on fundamentally undervalued issues),
an underweighting on the "City Banks" sector and "Specific Asset Selection" were
the best contributing factors for the Fund's outperformance over TOPIX. In other
words, picking up the fundamentally healthy stocks in the risk-sensitive market
contributed to the performance.
/s/YOICHI KUWATA
- -------------------------------
Yoichi Kuwata
Portfolio Manager
__________
* TOPIX is an unmanaged index including all the stocks currently listed in
the Tokyo Stock Exchange First Section (over 90% of all equity securities
traded on the Tokyo Stock Exchange) weighted by market capitalization.
Index returns are calculated monthly and assume reinvestment of dividends.
Unlike Fund returns, TOPIX returns do not reflect the deduction of any fees
or expenses.
THIS PUBLICATION MUST BE ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS FOR
CAPSTONE NIKKO JAPAN FUND
<PAGE>
2
CAPSTONE NIKKO JAPAN FUND
PORTFOLIO OF INVESTMENTS - APRIL 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Value Percentage of
COMMON STOCKS - 93.20% Shares (Note 1-A) Net Assets
- ---------------------- ------ ---------- -------------
<S> <C> <C> <C>
AUTO PARTS (1.49%)
NGK Spark Plug Company ......... 4,000 $ 40,032 1.49%
AUTO/VIDEO EQUIPMENT (4.19%)
Sony Corp. ..................... 1,000 72,813 2.71
Victor Corp. ................... 4,000 39,716 1.48
-------- ----
112,529 4.19
BANKING (2.38%)
Industrial Bank of Japan ....... 2,000 21,277 0.79
Mitsubishi Trust Bank .......... 4,000 42,868 1.59
-------- ----
64,145 2.38
CHEMICALS (4.58%)
Daicel Chemical Industries ..... 10,000 37,667 1.40
Dainippon Ink .................. 12,000 44,917 1.67
Konica Corporation ............. 7,000 40,544 1.51
-------- ----
123,128 4.58
COMMUNICATIONS EQUIPMENT (7.70%)
Fujitsu , Ltd. ................. 4,000 41,608 1.55
Kokusai Corporation ............ 3,000 44,444 1.65
Matsushita Electric Works ...... 3,000 47,991 1.78
NEC Corporation ................ 6,000 73,286 2.72
-------- ----
207,329 7.70
CONSUMER ELECTRONICS (2.17%)
Alps Electric Co., Ltd ......... 5,000 58,314 2.17
FOOD & BEVERAGE (5.78%)
Asahi Chemical ................. 8,000 46,651 1.73
Kandenko Co.,Ltd ............... 300 2,329 0.09
Kuraray Co., Ltd. .............. 4,000 35,303 1.31
Sapporo Breweries .............. 6,000 42,033 1.56
Taisei Corp. ................... 8,000 29,314 1.09
-------- ----
155,630 5.78
INDUSTRIAL MACHINERY (6.70%)
Makita Corp. ................... 3,000 41,135 1.53
Matsushita Refrigeration ....... 5,000 26,084 0.97
Sumitomo Heavy Industries ...... 12,000 37,920 1.41
Tadano ......................... 6,000 41,371 1.54
Toshiba Corp. .................. 6,000 33,664 1.25
-------- ----
180,174 6.70
IRON/STEEL (2.01%)
NKK Corp ....................... 25,000 53,980 2.01
</TABLE>
<PAGE>
3
CAPSTONE NIKKO JAPAN FUND
PORTFOLIO OF INVESTMENTS - APRIL 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Value Percentage of
Shares (Note 1-A) Net Assets
------ ---------- -------------
<S> <C> <C> <C>
MASS-SALES STORES & FOOD SERVICES (2.57%)
Life Corporation ......................... 6,000 $ 39,716 1.48%
PARCO .................................... 4,000 29,283 1.09
-------- -----
68,999 2.57
METAL - DIVERSIFIED (1.39%)
Mitsubishi Materials ..................... 10,000 37,352 1.39
MISCELLANEOUS ELECTRICAL PRODUCTS (15.54%)
Anritsu Corporation ...................... 5,000 58,708 2.18
Fanuc, Ltd. .............................. 1,500 51,182 1.90
Ishikawajima-Hirima Hvy. Ind ............. 15,000 55,910 2.08
Matsushita Electric Works ................ 5,000 50,827 1.89
Mitsubishi Heavy Ind ..................... 11,000 72,640 2.70
Nippon Chemi-Con Corporation ............. 6,000 28,747 1.07
Nitto Denko Corporation .................. 4,000 57,998 2.16
Yokogawa Electric ........................ 6,000 42,033 1.56
-------- -----
418,045 15.54
MISCELLANEOUS FINANCING (3.07%)
Nomura Securities Co., Ltd. .............. 3,000 33,570 1.25
Tokio Marine & Fire ...................... 5,000 48,857 1.82
-------- -----
82,427 3.07
MOTOR VEHICLES (5.81%)
Fuji Heavy Industries .................... 14,000 69,835 2.60
Mitsubishi Motor Corp. ................... 7,000 48,542 1.80
Shinmaywa Ind ............................ 6,000 37,872 1.41
-------- -----
156,249 5.81
PETROLEUM PRODUCTS (1.40%)
Nippon Oil Co., Ltd. ..................... 8,000 37,699 1.40
PHARMACEUTICALS (4.70%)
Takeda Chemicals Inc. .................... 2,000 46,178 1.72
Tanabe Seiyaku Co., Ltd. ................. 5,000 37,510 1.39
Yamanouchi Pharmaceuticals ............... 2,000 42,711 1.59
-------- -----
126,399 4.70
PHOTO EQUIPMENT (2.84%)
Fuji Photo Film .......................... 2,000 76,438 2.84
PRECISION MACHINERY (3.34%)
NIFCO .................................... 4,400 42,301 1.57
Shimadzu Corp. ........................... 10,000 47,675 1.77
-------- -----
89,976 3.34
</TABLE>
<PAGE>
4
CAPSTONE NIKKO JAPAN FUND
PORTFOLIO OF INVESTMENTS - APRIL 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Value Percentage of
Shares (Note 1-A) Net Assets
------ ---------- ------------
<S> <C> <C> <C>
REAL ESTATE (3.67%)
Sumitomo Realty Development ............. 8,000 $ 56,801 2.11%
Tokyo Corp. ............................. 8,000 41,986 1.56
---------- ------
98,787 3.67
RETAIL STORES & FOOD SERVICES (5.33%)
Best Denki .............................. 4,000 35,934 1.34
Royal Co., Ltd. ......................... 4,000 71,552 2.66
Seiyo Food Systems, Incorporated ........ 5,000 35,855 1.33
---------- ------
143,341 5.33
SERVICES (1.53%)
Intec ................................... 4,000 41,292 1.53
WIRE & CABLES (5.01%)
Furukawa Electric ....................... 14,000 67,187 2.49
Sumitomo Electric Inc. .................. 5,000 67,770 2.52
---------- ------
134,957 5.01
TOTAL INVESTMENTS (Cost $2,759,785) 2,507,222 93.20
OTHER ASSETS, LESS LIABILITIES ..... 183,057 6.80
---------- ------
NET ASSETS ......................... $2,690,279 100.00%
========== ======
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
5
CAPSTONE NIKKO JAPAN FUND
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C>
Investments in securities at market (identified cost $2,759,785)(Note 1-A) ...................... $ 2,507,222
Cash ............................................................................................ 206,085
Foreign currency holdings - Yen account, at market (Note 1-B) ................................... 5,205
Receivables:
Dividends...........................................................................$ 9,810
Trust shares sold................................................................... 73,304 83,114
--------
Due from affiliates ............................................................................. 1,191
-----------
Total Assets ........................................................................... 2,802,817
-----------
LIABILITIES:
Payable for Trust shares redeemed ............................................................... 80,961
Accrued expenses ................................................................................ 31,577
-----------
Total Liabilities ...................................................................... 112,538
-----------
NET ASSETS: .............................................................................................. $ 2,690,279
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE:
($2,690,279/475,758 shares of beneficial interest outstanding) .............................. $ 5.65
===========
SOURCE OF NET ASSETS:
Paid in capital ................................................................................. $ 6,220,526
Undistributed deficit in net investment income .................................................. (38,370)
Accumulated net realized loss on investments and currency transactions .......................... (3,235,703)
Net unrealized depreciation on investments and foreign currencies ............................... (256,174)
-----------
$ 2,690,279
===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
6
CAPSTONE NIKKO JAPAN FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C> <C>
Income:
Dividends (net of foreign taxes withheld of $1,885) ......................................... $ 10,684
---------
Expenses:
Advisory fees (Note 2) ......................................................... $ 5,200
Administration services (Note 2) ............................................... 14,600
Transfer agent fees ............................................................ 22,236
Professional fees .............................................................. 8,633
Filing and registration fees ................................................... 4,227
Custodian fees ................................................................. 6,615
Miscellaneous .................................................................. 1,693
Distribution fees (Note 2) ..................................................... 3,277
Trustees' fees and expenses .................................................... 2,557
---------
Total Expenses .......................................................................... 69,038
Less reimbursements from:
Adviser (Note 2) ........................................................... 5,200
Administrator (Note 2) ..................................................... 2,600 7,800
--------- ---------
Net Expenses .......................................................................... 61,238
---------
Net Investment Loss ......................................................................... (50,554)
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: (Note 4)
Net realized loss from security transactions ................................................. (313,436)
Realized gain on foreign currency transactions ............................................... 12,184
---------
Net realized loss ................................................................................ (301,252)
Net change in unrealized depreciation of investments, forward currency contracts and foreign currencies ... (120,542)
---------
Net realized and unrealized loss on investments, forward currency contracts and foreign currencies (421,794)
---------
Net decrease in net assets resulting from operations ........................................ $(472,348)
=========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
7
CAPSTONE NIKKO JAPAN FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
April 30, 1997 Fiscal Year Ended
(Unaudited) October 31, 1996
---------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment loss ..................................................... $ (50,554) $ (85,184)
Net realized gain (loss) on investments and foreign currency transactions (301,252) 101,948
Net change in unrealized depreciation of investments, forward
currency contracts, and foreign currencies ............................ (120,542) (29,017)
----------- -----------
Net decrease in net assets resulting from operations ............... (472,348) (12,253)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................................................... 0 (24,587)
TRUST SHARE TRANSACTIONS:
Increase in net assets resulting from Trust share
transactions (Note 3) ................................................. 187,781 103,784
----------- -----------
Net increase (decrease) in net assets ............................. (284,567) 66,944
NET ASSETS:
Beginning of period ..................................................... 2,974,846 2,907,902
----------- -----------
End of period (including net investment deficit of $38,370 and
$0 respectively) .................................................... $ 2,690,279 $ 2,974,846
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - APRIL 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Capstone Nikko Japan Fund (the "Fund"), is one of two series of beneficial
interest of Capstone International Series Trust (the "Trust") which is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
a diversified, open-end management investment company. The Fund's investment
objective is to seek an average annual total return from a portfolio of shares
in Japanese companies which exceeds the average annual total return of the First
Section of the Tokyo Stock Exchange as measured by the Tokyo Stock Price Index.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
A) SECURITY VALUATION - Portfolio securities which are traded on Japanese
securities exchanges are valued at the last sales price on the valuation date
or, if there is no recent last sales price available, at the last current bid
quotation. A security which is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market for
such security or contract. All other equity securities not so traded are valued
at the last current bid quotation on the valuation date. In the absence of any
applicable price, securities will be valued at a fair value as determined in
good faith in accordance with procedures established by the trustees.
<PAGE>
8
CAPSTONE NIKKO JAPAN FUND
B) CURRENCY TRANSLATION - For purposes of determining the Fund's net asset
value, all assets and liabilities initially expressed in foreign currency values
are converted into U.S. dollar values at the prevailing market rate at 14:00 GMT
on each U.S. business day, as established by the Board of Trustees. The cost of
securities is determined by using historical exchange rates. Income and expenses
are translated at approximate rates prevailing when accrued or incurred. The
Fund does not isolate that portion of gains and losses on investments which is
due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains and losses from investments. Net realized and
unrealized gain (loss) from foreign currency transactions includes gains and
losses between trade and settlement dates on securities transactions, gains and
losses arising from sales of foreign currency, and gains and losses between the
ex and payment dates on dividends and foreign withholding taxes.
C) ACCOUNTING FOR INVESTMENTS - Security transactions are accounted for on the
trade date. Realized gains and losses on security transactions are determined
based on the identified cost method. Dividend income and other distributions are
recorded on the ex-dividend date. Interest income and expenses are accrued
daily.
D) FEDERAL INCOME TAXES - No provision for Federal income taxes has been made
since it is the Fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and realized capital gains in excess of any
capital loss carryovers to its shareholders. At April 30, 1997 the Fund had
capital loss carryovers of $2,908,068, of which $1,413,422 expires in 1999 and
$1,494,646 expires in 2000. Under the United States-Japan tax treaty, Japan
imposes a withholding tax of 15% on dividends received. There is currently no
Japanese tax on capital gains.
E) DISTRIBUTIONS TO SHAREHOLDERS - The Fund distributes its net investment
income, if any, and net realized gains (net of any capital loss carryovers)
annually. Distributions to shareholders are recorded by the Fund on the
ex-dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for foreign currency transactions and net operating losses.
F) 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.
NOTE 2 - INVESTMENT ADVISORY FEES, AND OTHER TRANSACTIONS WITH AFFILIATES
The Investment Adviser, Nikko Capital Management (USA), Inc., is paid a
fee, calculated daily and paid quarterly, equal to an annual rate of 0.40% of
the average net assets of the Fund. The Administrator, Capstone Asset Management
Company, is paid a fee, calculated daily and paid quarterly, equal to an annual
rate of 0.20% of the Fund's average daily net assets. The Administrator is also
paid a monthly fee of $2,000 representing the cost of certain accounting and
bookkeeping services. This fee, which amounted to $12,000 for the six months
ended April 30, 1997, is not subject to the expense limitation discussed below.
The Adviser and Administrator have agreed to reduce their fees if the
ordinary business expenses of the Fund exceed any expense limitation applicable
to the Fund pursuant to the laws or regulations of any state. Such reimbursement
shall be shared by the Adviser and the Administrator ratably in proportion to
the fees received by them from the Fund, except that reimbursement shall not
exceed the amount paid to the Adviser and Administrator, respectively. The most
restrictive limitation presently applicable to the Fund is equal to the sum of
2.5% of the first $30 million of the Fund's average net assets, 2.0% of the next
$70 million of the Fund's average net assets and 1.5% of the Fund's average net
assets in excess of $100 million. For the six months ended April 30, 1997, the
Adviser and the Administrator reimbursed the Fund $5,200 and $2,600,
respectively.
Capstone Asset Planning Company ("CAPCO") serves as Distributor and
Underwriter to the Fund. Effective August 21, 1995, the 4.75% front end sales
load applicable to sales for Fund shares was eliminated. CAPCO is an affiliate
of the Administrator, 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 the Fund shareholders. Distribution and marketing expenses
include, among other things, printing of prospectuses,
<PAGE>
9
CAPSTONE NIKKO JAPAN FUND
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, 1997, the Fund paid $3,277 in
12b-1 fees, of which approximately 12% was paid to Service Organizations other
than CAPCO.
Certain officers and trustees of the Trust and the Fund, who are also
officers and directors of the Adviser, the Administrator, CAPCO or CFS, received
no compensation from the Trust. During the six months ended April 30, 1997,
trustees of the Trust who are not "interested persons" received trustees' fees
of $1,250.
NOTE 3 -TRUST SHARES
Transactions in Trust shares were as follows:
<TABLE>
<CAPTION>
For the Six Months Ended
April 30, 1997 Fiscal Year Ended
(Unaudited) October 31, 1996
------------------------ ------------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold .................................... 126,803 $ 718,883 199,045 $ 1,474,183
Shares issued to shareholders in reinvestment of
dividends .................................... 0 0 3,133 22,966
------- ----------- ------- -----------
126,803 718,883 202,178 1,497,149
Shares redeemed ................................ (91,404) (531,102) (191,828) (1,393,365)
------- ----------- ------- -----------
Net increase .............................. 35,399 $ 187,781 10,350 $ 103,784
======= =========== ======= ===========
</TABLE>
NOTE 4 - SECURITIES TRANSACTIONS
Purchases and sales of securities, other than U.S. Government obligations,
aggregated $674,410 and $630,720 respectively for the six months ended April 30,
1997. At April 30, 1997, the cost of investments for Federal income tax purposes
was $2,759,785. Accumulated net unrealized depreciation on investments was
$252,563 consisting of $172,688 gross unrealized appreciation and $425,251 gross
unrealized depreciation.
<PAGE>
10
CAPSTONE NIKKO JAPAN FUND
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 period indicated.
<TABLE>
<CAPTION>
Six Months Ended
April 30, 1997 Year Ended October 31,
---------------- ----------------------------------------
(Unaudited) 1996 1995 1994 1993 1992
----------- ---- ---- ---- ---- ----
PER SHARE DATA
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period ........................ $ 6.76 $ 6.76 $ 8.03 $ 6.99 $ 4.89 $ 7.46
Income from investment operations:
Net investment loss ....................................... (.08) (.19) (.21) (.21) (.20) (.23)
Net realized and unrealized gain (loss) on
investments ........................................... (1.03) .25 (1.06) 1.25 2.30 (2.34)
------ ------ ------ ------ ------ ------
Total from investment operations .......................... (1.11) .06 (1.27) 1.04 2.10 (2.57)
Less dividends from:
Net investment income ..................................... .00 .06 .00 .00 .00 .00
------ ------ ------ ------ ------ ------
Net asset value at end of period .............................. $ 5.65 $ 6.76 $ 6.76 $ 8.03 $ 6.99 $ 4.89
====== ====== ====== ====== ====== ======
TOTAL RETURN(1) .............................................. (16.42)% .75% (15.82)% 14.88% 42.74% (34.45)%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (in thousands) .................... $2,690 $2,975 $2,908 $3,484 $3,096 $2,130
Ratios to average net assets:
Expenses................................................... 4.71%(3) 3.30% 3.61% 3.25% 4.26% 4.38%
Net investment loss........................................ (3.89)%(3) (2.59)% (2.93)% (2.62)% (3.54)% (3.42)%
Ratio to average net assets, prior to reimbursement of
expenses:
Expenses................................................... 5.31%(3) 3.90% 4.21% 3.85% 4.86% 4.98%
Net investment loss........................................ (4.49)%(3) (3.19)% (3.53)% (3.22)% (4.14)% (4.02)%
Portfolio turnover rate ....................................... 24% 47% 27% 57% 42% 112%
Average commission rate (per share of security)(2) ............ $ 0.00 $ 0.0864 N/A N/A N/A N/A
</TABLE>
(1) Calculated without sales charge. Sales charges eliminated on August 21,
1995.
(2) Average commission rate (per share of security) as required by amended
disclosure requirements effective September 1, 1995.
(3) Annualized.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
11
CAPSTONE NIKKO JAPAN FUND
5847 San Felipe, Suite 4100
Houston, Texas 77057
1-800-262-6631
SEMI-ANNUAL REPORT TO SHAREHOLDERS
APRIL 30, 1997
- --------------------------------------------------------------------------------
TRUSTEES OFFICERS
-------- --------
Edward L. Jaroski Edward L. Jaroski
President-Capstone International Series Trust
Eugene W. Potter, Jr. Stanley Kirtman
President-Capstone Nikko Japan Fund
Bernard J. Vaughan Linda G. Giuffre
Treasurer
Iris R. Clay
Secretary
Norma R. Ybarbo
Assistant Secretary
- --------------------------------------------------------------------------------
INVESTMENT ADVISER TRANSFER AGENT
------------------ --------------
Nikko Capital Management (U.S.A.), Inc. FPS Services, Inc.
489 Fifth Avenue 3200 Horizon Drive
6th Floor P.O. Box 61503
New York, NY 10017 King of Prussia, PA 19406-0903
1-800-845-2340
ADMINISTRATOR CUSTODIAN
------------- ---------
Capstone Asset Management Company The Bank of Tokyo Trust Company
5847 San Felipe, Suite 4100 100 Broadway, 4th Floor
Houston, TX 77057 New York, NY 10005
1-800-262-6631
UNDERWRITER
-----------
Capstone Asset Planning Company
5847 San Felipe, Suite 4100
Houston, TX 77057
1-800-262-6631
