CAPSTONE JAPAN FUND
- --------------------------------------------------------------------------------
Dear Shareholder,
We are pleased to present this semi-annual report on the Capstone Japan Fund for
the six-month period ended April 30, 1998. The Fund's net asset value ("NAV") on
April 30, 1998 was US $4.79 per share compared to US $5.21 at the end of our
October 31, 1997 fiscal year.
FUND'S COMPARATIVE PERFORMANCE
The Fund's adviser continues its strategy to seek a diversified portfolio of
stocks of mostly larger-cap companies that provide current income through
dividends, trade at comparatively low price/earnings multiples, have a below
average price-to-book ratio, and/or have potential for long-term capital
appreciation. This includes a focus on American Depository Receipts* because
they can provide an efficient currency exchange management for a US dollar fund
and greater liquidity.
The most relevant index against which to compare the Fund's performance is the
TOPIX(1) that comprises all the stocks currently listed on the first section of
the Tokyo Stock Exchange. During the six months ended April 30, 1998, the TOPIX
decreased by 4.24% in Japanese yen and by 13.23% in US dollar terms. For the
same period, the Fund's total US dollar return was -8.06%. In analyzing
comparisons of performance to the TOPIX, the reader should remember an index
does not reflect any cash positions, brokerage costs or administrative or
management fees incurred by the Fund or individual investor.
JAPAN MARKET OVERVIEW
For fiscal year ended March 1998, Japan's real GDP fell for the first time in
twenty-three years, continuing its economic decline. The market was negatively
impacted by deflationary trends, weak domestic demand, high unemployment, and
low overall confidence in the government's economic plans.
Despite the adverse macroeconomic conditions, there are signs of changes. As
part of its largest economic stimulus package ever, the Japanese government has
made several announcements on fiscal spending that included more than twelve
trillion yen (over ninety billion dollars) for general and regional projects ten
trillion in real spending. The market seems uncertain as to when the effects of
these record-breaking changes will actually be felt. Another concern is what
will be done to restructure both the financial system and fiscal policy. As a
result of the failure of several major financial institutions, thirty trillion
yen in public funds has been earmarked to bolster the financial system. The use
of this money has been slow to date, but its impact should be clearer later this
year. The government has proven itself open to fiscal policy change through a
special tax cut of two trillion yen in November, 1997 and through its
discussions of permanent tax cuts and consideration of reduction of the
corporate tax rate.
The general consensus of most market analysts is that the government will ease
monetary policy, though not until after the July Upper House elections.
Pressures from international sources are also beginning to help change Japanese
economic policy as the still weakening yen has deepened the trade deficit. The
major banks will probably engage in the unwinding of cross shareholdings at a
greater pace. The effects of this increase in stock supply should be offset at
least somewhat by a growing number of companies considering share buybacks,
which in turn should strengthen their market value. Domestic demand will likely
improve later this year as a result of the stimulus package's government
spending. Japanese stocks, relative to both the US and other developed markets,
still appear greatly undervalued in terms of price-to-book ratios.* We believe
that the coming year will offer considerable investment opportunities as the
globally oriented, strong, quality companies restructure and take advantage of
the weak yen and inefficient competitors.
<PAGE>
CAPSTONE JAPAN FUND
- --------------------------------------------------------------------------------
THE PORTFOLIO
The Fund is widely diversified by industry sector. At April 30, 1998 the
percentages of equity investments of the Fund by major industry categories
were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Communications Equipment 13.30% Food & Beverage 4.21%
Pharmaceuticals 10.09% Communications 3.68%
Automotive 9.39% Chemicals 3.06%
Miscellaneous Financing 6.84% Wires & Cables 2.60%
Construction 5.65% Banking 2.49%
Machinery 5.37% Consumer Electronics 2.28%
Retail 4.97% Semiconductors 1.86%
Telecommunications 4.93% Real Estate 1.68%
Indices 4.86% Transport Equipment 1.19%
Audio/Video Equipment 4.81%
</TABLE>
If you have any questions please feel free to contact us. We thank you for your
continued support.
Sincerely,
/s/ Robert W. Scharar /s/ Kimberly Haley-Coleman
- ----------------------------- ------------------------------
Robert W. Scharar Kimberly Haley-Coleman
President Assistant Portfolio Manager
*There are over 150 Japanese ADR stocks that are estimated to be about 23% of
the Japanese market capitalization. An ADR (American Depository Receipt) share
is a certificate representing ownership of foreign stocks, which are traded on
stock exchanges in the United States.
(1)The average price-to-book ratio in Japan is 1.9 versus the world average of
3.0 (Smith Barney's Global Investment Outlook, April, 1998).
THIS PUBLICATION MUST BE ACCOMPANIED OR PRECEDED
BY A CURRENT PROSPECTUS FOR CAPSTONE JAPAN FUND.
<PAGE>
<TABLE>
<CAPTION>
CAPSTONE JAPAN FUND
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------
MARKET VALUE PERCENTAGE OF
COMMON STOCKS (93.26%) SHARES (NOTE 1-A) NET ASSETS
-------------------------------------------------
<S> <C> <C> <C>
AUTOMOTIVE (9.39%)
Bridgestone Corporation - ADR 400 $ 91,425 3.99%
Honda Motor Co., Limited - ADR # 1,700 123,781 5.40%
--------- ------
215,206 9.39%
AUDIO/VIDEO EQUIPMENT (4.81%)
SONY Corporation - ADR # 1,300 110,419 4.81%
BANKING (2.49%)
Mitsubishi Trust & Banking Corporation 4,000 38,144 1.66%
Mitsubishi Trust & Banking Corporation - ADR 200 19,072 0.83%
--------- ------
57,216 2.49%
CONSTRUCTION (5.65%)
Daiwa House Industry Co., Limited - ADR 1,600 129,569 5.65%
CHEMICALS (3.06%)
Asahi Chemical Industry Co., Limited 20,000 70,234 3.06%
COMMUNICATIONS (3.68%)
Kyocera Corporation - ADR 800 84,400 3.68%
COMMUNICATIONS EQUIPMENT (13.30%)
Fujitsu, Limited 2,000 23,386 1.02%
Fujitsu, Limited - ADR 1,600 93,544 4.08%
Kokusai Corporation 3,000 25,543 1.11%
Matsushita Electric Works 5,000 45,031 1.96%
NEC Corporation - ADR 2,100 117,600 5.13%
--------- ------
305,104 13.30%
CONSUMER ELECTRONICS (2.28%)
Alps Electric Co., Limited 5,000 52,221 2.28%
FOOD & BEVERAGE (4.21%)
Ajinomoto, Incorporated 1,200 96,541 4.21%
INDICES (4.86%)
World Equity Benchmark Series - Japan Index Series 10,800 111,375 4.86%
MACHINERY (5.37%)
Minebea Co., Limited - ADR 5,500 123,212 5.37%
<PAGE>
<CAPTION>
CAPSTONE JAPAN FUND
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET VALUE PERCENTAGE OF
SHARES (NOTE 1-A) NET ASSETS
<S> <C> <C> <C>
MISCELLANEOUS FINANCING (6.84%)
Nomura Securities Co., Limited 3,000 $ 36,668 1.60%
Tokio Marine & Fire Insurance Co. 8,000 87,187 3.80%
Tokio Marine & Fire Insurance Co. - ADR 600 33,075 1.44%
--------- ------
156,930 6.84%
PHARMACEUTICALS (10.09%)
Badyu Pharmaceuticals Co., Limited - ADR 300 77,652 3.39%
Eisai Co., Limited - ADR 7,400 106,410 4.64%
Sankyo Co., Limited 1,900 47,166 2.06%
--------- ------
231,228 10.09%
REAL ESTATE (1.68%)
Sumitomo Realty Development Co., Limited 8,000 38,447 1.68%
RETAIL (4.97%)
Seven-Eleven Japan Co., Limited - ADR 1,700 113,865 4.97%
SEMICONDUCTORS (1.86%)
Sumitomo Sitix Corporation 3,000 42,685 1.86%
TELECOMMUNICATIONS (4.93%)
Nippon Telegraph & Telephone Corporation - ADR 2,600 113,100 4.93%
TRANSPORT EQUIPMENT (1.19%)
Nippon Cable System 4,000 27,276 1.19%
WIRES & CABLES (2.60%)
Sumitomo Electric Industries 5,000 59,676 2.60%
TOTAL COMMON STOCKS (Cost $2,400,038) 2,138,704 93.26%
<PAGE>
<CAPTION>
CAPSTONE JAPAN FUND
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
SHARES OR MARKET VALUE PERCENTAGE OF
PAR VALUE (NOTE 1-A) NET ASSETS
<S> <C> <C> <C>
CORPORATE BONDS (3.76%)
Merrill Lynch & Co., Variable rate, 01/31/2000 (Cost $85,309) $84,000 $ 86,100 3.76%
CASH EQUIVALENTS (4.22%)
Fifth Third Bank Repurchase Agreement, dated 4/30/98, 5.06%, due 5/01/98,
repurchase price $96,867 (Collateralized by Federal National Mortgage
Association Notes, 6.50%, due 2/01/13, market value $98,969, including accrued
interest) (Cost $96,853) 96,853 4.22%
TOTAL INVESTMENTS (Cost $2,582,200) 2,321,657 101.24%
OTHER ASSETS, LESS LIABILITIES (28,390) -1.24%
---------- -------
NET ASSETS $2,293,267 100.00%
========== =======
# Call options have been written by the Fund against these positions. (Note 5)
</TABLE>
<PAGE>
<TABLE>
CAPSTONE JAPAN FUND
STATEMENT OF ASSET AND LIABILITIES - APRIL 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<CAPTION>
<S> <C>
ASSETS:
Investments in securities at market value (identified cost $2,582,200) (Note 1A) $ 2,321,657
Foreign currency holdings - Japanese Yen account, at market (Note 1B) 10,142
Receivable for capital stock sold 100
Dividends receivable 2,991
Interest receivable 14
Due from advisor (Note 2) 52,055
-------------
Total Assets 2,386,959
-------------
LIABILITIES:
Payable for capital stock redeemed 39,627
Covered call options written, at value (premiums received $15,017 (Notes 1 and 5) 13,950
Accrued expenses 40,115
-------------
Total Liabilities 93,692
-------------
NET ASSETS $ 2,293,267
=============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE:
($2,293,267 / 478,625 shares of beneficial interest outstanding) $ 4.79
=============
SOURCE OF NET ASSETS:
Paid in capital $ 6,048,605
Accumulated net investment deficit (19,277)
Accumulated net realized loss on investments (3,476,196)
Net unrealized depreciation on securities and foreign currencies (259,865)
-------------
$ 2,293,267
=============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
<TABLE>
CAPSTONE JAPAN FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividend income $ 3,546
Interest income 2,996
---------
Total Investment Income 6,542
Expenses: (Note 2)
Advisory fees 7,770
Distribution fees 2,590
Administrative services 2,383
Transfer agent fees 19,170
Reports and notices to stockholders 4,829
Audit fees 8,221
Legal fees 2,797
Directors' fees and expenses 1,823
Custodian fees 6,997
Fund accounting fees 22,737
Registration and filing fees 4,653
Miscellaneous 1,674
----------
Total Expenses 85,644
Less: Advisory fees waived (7,770)
Expenses reimbursable by Investment Advisor (52,055) (59,825)
---------- ---------
Net Expenses 25,819
---------
Net Investment Loss (19,277)
---------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss from security transactions (146,823)
Net realized gain on option contracts written 23,060
Net realized loss on conversion of foreign currencies to U.S. Dollars (9,637)
Unrealized depreciation of investments, foreign currencies and forward currency contracts:
Beginning of period $ (237,133)
End of period (259,865)
----------
Net change in unrealized depreciation of investments, foreign currencies
and forward currency contracts (22,732)
---------
Net realized and unrealized loss on investments (156,132)
---------
Net decrease in net assets resulting from operations $(175,409)
=========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
<TABLE>
CAPSTONE JAPAN FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
------------------------------------------
(UNAUDITED)
<S> <C> <C>
OPERATIONS:
Net investment loss $ (19,277) $ (102,679)
Net realized loss on investments (133,400) (364,093)
Net change in unrealized depreciation of investments, forward
currency contracts and foreign currencies (22,732) (101,501)
----------- -----------
Net decrease in net assets resulting from operations (175,409) (568,273)
CAPITAL SHARE TRANSACTIONS:
Increase (decrease) in net assets resulting from capital
share transactions (Note 3) 566,725 (504,622)
----------- -----------
Total increase (decrease) in net assets 391,316 (1,072,895)
NET ASSETS:
Beginning of period 1,901,951 2,974,846
----------- -----------
End of period (including accumulated net investment deficit of
$(19,277) and $0, respectively) $2,293,267 $1,901,951
=========== ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - APRIL 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Capstone Japan Fund, formerly 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 (the
"Act"), as a diversified open-end management investment company. The Fund's
investment objective is to seek long-term capital appreciation and income using
a research oriented approach. 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 - Portfolio securities which are traded on Japanese
securities exchanges are valued at the last sales price 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. All other
equity securities not so traded are valued at the last current bid quotation. 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
Board of Trustees.
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 is
translated at approximate rates prevailing when accrued. 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 the market prices
of the investments. Such fluctuations are included with the net realized and
unrealized gains and losses from investments.
C) ACCOUNTING FOR INVESTMENTS - Security transactions are accounted for on the
trade date. Realized gains and losses on security transactions 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.
<PAGE>
CAPSTONE JAPAN FUND
D) OPTION ACCOUNTING PRINCIPLES - When the Fund sells an option, an amount equal
to the premium received by the Fund is recorded as a liability. The amount of
the liability is marked-to-market to reflect the current market value of the
options written. The current market value of a traded option is the last sale
price and options not traded that day are valued at the prevailing quoted bid
price. When an option expires on its stipulated expiration date or the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or loss,
if the cost of a closing purchase transaction exceeds the premium received when
the option was sold) without regard to any unrealized gain or loss on the
underlying security, and the liability related to such option is extinguished.
If a call option is exercised, the premium is added to the proceeds from the
sale of the underlying security in determining whether the Fund has a realized
gain or loss.
E) FORWARD CURRENCY CONTRACTS - Forward currency transaction are undertaken to
hedge against possible variations in the foreign exchange rates between the
United States Dollar and the Japanese Yen. A forward currency contract is an
agreement between two parties to buy or sell a currency at a set price on a
future date. Forward contracts are marked-to-market daily and the change in the
market value is recorded by the Fund as an unrealized gain or loss. When a
contract is closed, the Fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed. The Fund could be exposed to risk if the
counterparties are unable to meet the terms of the contracts or if the value of
the currency changes unfavorably.
F) 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 distribute all of its taxable income and realized
capital gains, in excess of any capital loss carryovers, to relieve it from all,
or substantially all, such taxes. At April 30, 1998, the Fund had capital loss
carryovers of $3,476,196 of which $1,413,422 expires in 1999, $1,494,646 expires
in 2000, $434,729 expires in 2005 and $133,399 expires in 2006. Under the United
States-Japan tax treaty, Japan imposes a withholding tax of 15% on the dividends
received by the Fund. There is currently no Japanese tax on capital gains.
G) DISTRIBUTIONS TO SHAREHOLDERS - The Fund distributes its net investment
income, if any, and net realized gains (net of any capital loss carryovers)
annually. 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.
H) 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, ADMINISTRATIVE FEES AND OTHER TRANSACTIONS
WITH AFFILIATES
The Fund retains FCA Corp, ("FCA") 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% and the adviser
has undertaken to cap the Fund's expenses at 2.5% until October 31, 1998. For
the period November 1, 1997 through April 30, 1998, $7,770 in advisory fees were
waived by FCA and FCA has agreed to reimburse the Fund $52,055 for excess
expenses for the November 1st through April 30th period. Such reimbursement will
be made as the Fund pays the related expenses.
The Administrator, Capstone Asset Management Company, is paid a fee,
calculated daily and paid monthly, equal to an annual rate of .20% of the Fund's
average daily net assets.
Capstone Asset Planning Company ("CAPCO") serves as Distributor of the
Fund's shares. 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 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
<PAGE>
CAPSTONE JAPAN 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, 1998, the Fund paid
$2,590 in 12b-1 fees. Of this amount approximately 5.0% was paid to Service
Organizations other than CAPCO.
Certain officers and directors of the Fund who are also officers and
directors of the Adviser, the Administrator, Distributor or CFS, received no
compensation from the Fund. During the six months ended April 30, 1998,
directors of the Fund who are not "interested persons" received directors' fees
of $2,750.
NOTE 3 - CAPITAL STOCK
<TABLE>
<CAPTION>
At April 30, 1998 there were 478,625 shares outstanding. Transactions in
capital stock were as follows:
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 273,730 $1,337,899 395,272 $2,281,972
Shares issued to shareholders in reinvestment
of distributions -- -- -- --
-------- ----------- ------- -----------
273,730 1,337,899 395,272 2,281,972
Shares redeemed (160,113) ( 771,174) (470,624) (2,786,594)
-------- ----------- ------- -----------
Net increase (decrease) 113,617 $ 566,725 (75,352) $ (504,622)
======== =========== ======= ===========
</TABLE>
NOTE 4 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities other than U.S. Government obligations
aggregated $960,529 and $468,914 respectively. At April 30, 1998, the cost of
investments for Federal income tax purposes was $2,582,200. Accumulated net
unrealized depreciation on investments was $260,543 consisting of $41,755 gross
unrealized appreciation and $302,298 gross unrealized depreciation.
NOTE 5 - OPTIONS WRITTEN BY THE FUND
A call option gives the holder the right to buy the underlying stock from
the writer (the Fund) at a specified price within a fixed period of time.
Therefore, the securities held by the Fund against which options are written may
not be traded and are held in escrow by the custodian.
The following table sets forth the outstanding call options written by the Fund
as of April 30, 1998.
<TABLE>
<CAPTION>
UNREALIZED
PREMIUM MARKET APPRECIATION
CALL OPTIONS ON RECEIVED VALUE (DEPRECIATION)
<S> <C> <C> <C>
1,600 shs Honda Corp-ADR @ 75 exp October 1998 $ 5,640 $ 5,700 $ (60)
1,100 shs Sony Corp-ADR @ 85 exp October 1998 9,377 8,250 1,127
------- ------- ------
$15,017 $13,950 $1,067
======= ======= ======
</TABLE>
<PAGE>
CAPSTONE JAPAN FUND
The aggregate market value at April 30, 1998 of securities subject to call
options is $209,961 or approximately 9% of net assets. Written option activity
for the six months ended April 30, 1998 was as follows:
<TABLE>
<CAPTION>
NUMBER OF AMOUNT OF
OPTIONS PREMIUM
<S> <C> <C>
Options outstanding at October 31, 1997 27 $23,060
Options written 27 15,017
Options expired prior to exercise (27) (23,060)
---- --------
Options outstanding at April 30, 1998 27 $15,017
==== ========
</TABLE>
<PAGE>
<TABLE>
CAPSTONE 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 year indicated.
SIX
MONTHS
ENDED
APRIL 30, YEARS ENDED OCTOBER 31,
--------------------------------------------------
1998 1997 1996 1995 1994 1993
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period............... $ 5.21 $ 6.76 $ 6.76 $ 8.03 $ 6.99 $ 4.89
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment loss............................. (0.04) (0.28) (0.19) (0.21) (0.21) (0.20)
Net realized and unrealized gain (loss)......... (0.38) (1.27) 0.25 (1.06) 1.25 2.30
------ ------ ------ ------ ------ ------
Total from investment operations................ (0.42) (1.55) 0.06 (1.27) 1.04 2.10
------ ------ ------ ------ ------ ------
Less distributions from:
Net investment income........................... -- -- (0.06) -- -- --
------ ------ ------ ------ ------ ------
Net asset value at end of period..................... $4.79 $5.21 $6.76 $6.76 $8.03 $6.99
====== ====== ====== ====== ====== ======
TOTAL RETURN (%) (1)................................. (8.06)% (22.93)% 0.75% (15.82)% 14.88% 42.74%
====== ====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (in thousands)........... $2,293 $1,902 $2,975 $2,908 $3,484 $3,096
Ratio of total expenses to average net assets........ 2.49%(2) 4.55% 3.30% 3.61% 3.25% 4.26%
Ratio of net investment income to average net assets. (1.86)%(2) (3.87)% (2.59)% (2.93)% (2.62)% (3.54)%
Ratio of total expenses to average net assets, before
reimbursements and waivers of expenses.......... 8.26%(2) 5.46% 3.90% 4.21% 3.85% 4.86%
Ratio of net investment income to average
net assets, before reimbursements and
waivers of expenses............................. (7.63)%(2) (4.78)% (3.19)% (3.53)% (3.22)% (4.14)%
Portfolio turnover rate.............................. 25% 73% 47% 27% 57% 42%
Average commission rate (per share of security)...... $ 0.0717 $ 0.0371 $ 0.0864
(1) Calculated without sales charge. Sales charge eliminated on August 21, 1995.
(2) Annualized
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
CAPSTONE JAPAN FUND
5847 SAN FELIPE, SUITE 4100
HOUSTON, TEXAS 77057
1-800-262-6631
SEMIANNUAL REPORT TO SHAREHOLDERS
APRIL 30, 1998
- --------------------------------------------------------------------------------
TRUSTEES OFFICERS
Edward L. Jaroski Edward L. Jaroski
President-Capstone International Series Trust
James F. Leary
Robert W. Scharar
John R. Parker President-Capstone Japan Fund
Bernard J. Vaughan Linda G. Giuffre
Treasurer
Iris R. Clay
Secretary
- --------------------------------------------------------------------------------
INVESTMENT ADVISER TRANSFER AGENT
FCA Corp. First Data Investor Services Group, Inc.
5847 San Felipe 3200 Horizon Drive
Suite 850 P.O. Box 61503
Houston, TX 77057 King of Prussia, PA 19406-0903
1-800-845-2340
ADMINISTRATOR CUSTODIAN
Capstone Asset Management 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
DISTRIBUTOR AUDITORS
Capstone Asset Planning Company Briggs, Bunting & Dougherty, LLP
5847 San Felipe, Suite 4100 Two Logan Square, Suite 2121
Houston, TX 77057 Philadelphia, PA 19103-4901
1-800-262-6631
<PAGE>
SEMIANNUAL REPORT
APRIL 30, 1998
CAPSTONE
JAPAN FUND
Graphic of: Pyramid
A Member Of
THE CAPSTONE GROUP
of Mutual Funds
Graphic of: Pyramid
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 Japan Fund
CAPSTONE ASSET PLANNING COMPANY
5847 SAN FELIPE, SUITE 4100
HOUSTON, TEXAS 77057
1-800-262-6631
CAPSTONE JAPAN FUND
5847 SAN FELIPE, SUITE 4100
HOUSTON, TX 77057
