<PAGE> 1
CAPSTONE NEW ZEALAND FUND
Seeking long-term capital appreciation and current income through
investments in New Zealand securities.
FEBRUARY 26, 1999
PROSPECTUS
THE SECURITIES AND EXCHANGE COMMISSION DOES NOT APPROVE OR DISAPPROVE THE
INFORMATION IN THIS PROSPECTUS, AND DOES NOT DETERMINE WHETHER THIS INFORMATION
IS ACCURATE OR COMPLETE. IT IS A CRIMINAL OFFENSE TO STATE OTHERWISE.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
The Fund.................................................... 3
Fee Table................................................... 7
Management.................................................. 8
Buying and Selling Fund Shares.............................. 9
Dividends, Distributions and Taxes.......................... 13
Financial Highlights........................................ 15
How to Get More Information................................. 16
</TABLE>
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THE FUND
THE FUND'S INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
The Fund seeks to provide long-term capital appreciation and current
income. It invests primarily in equity securities, including common and
preferred stock and securities convertible into common stock, and debt
securities of New Zealand Issuers and securities denominated in New Zealand
dollars. New Zealand Issuers include: issuers that are organized under New
Zealand law; issuers that are listed on the New Zealand Stock Exchange; issuers
that derive 50% or more of their total revenue from goods and/or services
produced or sold in New Zealand, and New Zealand central and local government
entities. In addition to buying these securities directly, the Fund may invest
in sponsored and unsponsored American Depository Receipts (ADRs) related to
these securities. Under normal market conditions, at least 65% of the Fund's
total assets will be invested in the foregoing securities. The Fund's debt
securities may include government obligations as well as obligations of
companies that have an outstanding debt issue rated at least A by Standard &
Poor's Corporation ("S&P"), S&P -- Australian Ratings ("S&P Australian"), or
Moody's Investors Service ("Moody's"), or in obligations deemed of comparable
quality by the investment adviser. If these securities are downgraded, the
adviser has the discretion to hold or sell them.
In selecting investments for the Fund, the investment adviser looks
primarily at characteristics of the issuer, seeking those with adequate cash
flow, reasonable price/earnings ratios and current dividend payments. In
determining the appropriate distribution of the Fund's portfolio among debt,
equity and particular issuers, the adviser considers such macroeconomic factors
as prospects for relative economic growth, inflation trends, government
policies, currency relationship trends and the range of investment opportunities
available in the New Zealand market. Portfolio securities that no longer rank
favorably in terms of these factors are considered for sale.
The Fund also has authority to invest in money market instruments of U.S.
or New Zealand Issuers. It may invest in instruments issued or backed by U.S. or
New Zealand banks or savings institutions having, at the time of investment, at
least $1 billion in total assets. The Fund may invest up to 5% of its assets in
interest-bearing savings deposits of commercial or savings banks. For temporary
defensive purposes under unusual market conditions, the Fund may invest in these
instruments without limit, which can cause the Fund to fail to meet its
investment objective during such periods and lose benefits when the market
begins to improve. The Fund may invest in commercial paper rated at least A-2 by
S&P or S&P Australian, or P-2 by Moody's. The Fund may also lend its portfolio
securities. These loans will be fully collateralized at all times. The Fund may,
but is not obligated to, enter into forward foreign currency exchange contracts
to hedge against fluctuations in exchange rates between the U.S. and New Zealand
dollar. The Fund has authority, which it does not presently intend to use, to
enter into repurchase agreements and to use futures and options to hedge its
portfolio.
The Fund's most recent annual/semiannual report contains information on
the Fund's recent investment strategies, as discussed above, and securities
holdings. (See back cover.)
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THE NEW ZEALAND ECONOMY AND SECURITIES MARKET
New Zealand has a mixed free-market economy with sizeable agricultural,
service and manufacturing sectors. Its gross domestic product for the year ended
June, 1997 was approximately NZ $97 billion (US $57 billion). New Zealand is
strongly trade-oriented, with significant exports to and imports from Australia,
Japan, the United Kingdom and the United States.
The New Zealand securities market is small relative to those of the U.S.
and many European and Asian countries. Trading of corporate and government
securities in New Zealand is centralized in the New Zealand Stock Exchange
(NZSE), which currently quotes securities of 226 issuers. As of December 31,
1998, the aggregate market capitalization of these issuers was approximately NZ
$49 billion (US $25.9 billion), with the six largest companies accounting for
approximately 54% of that amount.
PRINCIPAL RISKS
Investing in securities of New Zealand Issuers involve certain risks that
are different from investments in U.S. issuers. The New Zealand market is small
and certain issuers may have percentage restrictions on foreign ownership,
limiting the Fund's investment and diversification opportunities. The Fund may
not be able to participate in rights offerings that are not registered for sale
to a U.S. investor. Securities in this market are also generally less liquid and
have greater price fluctuation than is typical in the U.S. for securities of
comparable issuers. Transactions in New Zealand securities involve higher costs
and typically take longer to settle than in the U.S., making it more difficult
for the Fund to liquidate positions and causing delays in the Fund's receipt of
dividend and interest payments. There are also risks due to differences between
the U.S. and New Zealand in terms of tax policies, the level of regulation,
accounting standards, as well as from fluctuations in currency values. Further,
there may be more limited information about New Zealand issuers, and there is
the possibility of negative governmental actions, and of political and social
unrest.
The Fund may purchase securities on a "when-issued" basis and may purchase
or sell securities on a "forward commitment" basis. These transactions, which
involve a commitment by the Fund to purchase or sell particular securities with
payment and delivery taking place at a future date (perhaps one or two months
later), permit the Fund to lock in a price or yield on a security it owns or
intends to purchase, regardless of future changes in interest rates. When-issued
and forward commitment transactions involve the risk, however, that the price or
yield obtained in a transaction may be less favorable than the price or yield
available in the market when the securities delivery takes place. The Fund's
when-issued purchases and forward commitments are not expected to exceed 25% of
the value of its total assets absent unusual market conditions. The Fund does
not intend to engage in when-issued purchases and forward commitments for
speculative purposes but only in furtherance of its objectives.
Investments in stocks of any type involve risk because stock prices have
no guaranteed value. Stock prices may fluctuate -- at times dramatically -- in
response to various factors, including market conditions, political and other
events, and developments affecting the particular issuer or its industry or
geographic segment. Despite these risks, stocks have historically tended to
out-perform other types of securities over the longer term.
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Investments in fixed income securities also entail risk. The values of
these securities will tend to fluctuate inversely with changes in interest
rates. Changes in the financial strength of the issuer, or its creditworthiness,
can also affect the value of the securities it issues. Convertible and preferred
stocks, which have some characteristics of both stock and fixed income
securities, also entail, to some extent, the risks of each.
ADRs are dollar-denominated depository receipts that, typically, are
issued by a United States bank or trust company and represent the deposit with
that bank or trust company of a security of a foreign issuer. ADRs are publicly
traded on exchanges or over-the-counter in the United States. Although ADRs
provide a convenient means to invest in non-U.S. securities, these investments
involve risks generally similar to investment directly in foreign securities.
ADRs may, or may not, be sponsored by the issuer. There are certain risks and
costs associated with investments in unsponsored ADR programs. Because the
issuer is not involved in establishing the program (such programs are often
initiated by broker-dealers), the underlying agreement for payment and service
is between the depository and the shareholders. Expenses related to the
issuance, cancellation and transfer of the ADRs, as well as costs of custody and
dividend payment services may be passed in whole or in part through to
shareholders. The availability of regular reports regarding the issuer is also
less certain.
The Fund's investments will fluctuate in price. This means that Fund share
prices will go up and down, and you can lose money. Because of its emphasis on
securities of New Zealand issuers, the Fund should be considered a vehicle for
diversification and not as a balanced investment program.
PAST PERFORMANCE
The following two tables illustrate the Fund's past performance. The first
table provides some indication of the risks of investing in the Fund by showing
how the Fund's returns have varied from year to year. The second shows how the
Fund has performed on a cumulative basis since its inception in comparison to
the New Zealand Small Company Index ("NZSCI") which is an index composed of
approximately 100 equity securities of New Zealand Issuers that are not included
in the New Zealand Stock Exchange-40 ("NZSE-40"), an index of the largest market
capitalization of New Zealand Issuers. The NYSE-40 is dominated by a few large
issuers. The Fund's diversification requirements prevent it from duplicating the
weighting in the NZSE-40, so Fund management believes NZSCI both better reflects
the performance of the New Zealand stock market and is a more appropriate basis
for evaluating the performance of the Fund. Each table assumes that dividends
and distributions paid by the Fund have been reinvested in additional
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Fund shares. You should remember that past performance does not necessarily
indicate how the Fund will perform in the future.
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98
[GRAPH]
<TABLE>
<CAPTION>
Year-by-year total return
as of 12/31 each year (%)
- ------------------------- -----
<S> <C>
1988 .........................................
1989 .........................................
1990 .........................................
1991 .........................................
1992 ......................................... 2.80
1993 ......................................... 13.99
1994 ......................................... (8.35)
1995 ......................................... 11.84
1996 ......................................... 26.36
1997 ......................................... (23.16)
1998 ......................................... (9.30)
</TABLE>
Best Quarter Q4 '98 +34.61%
Worst Quarter: Q4 '97 -20.13%
<TABLE>
<CAPTION>
INCEPTION
1 YEAR 5 YEARS (11/25/91)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund (9.34)% (2.03)% 0.80%
NZSCI 1.95% (0.37)% 12.95%
</TABLE>
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FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses you will pay if you invest in
the Fund. As you can see, the Fund has no fees that are charged directly to
shareholders. Shareholders do, however, bear indirectly a portion of the Fund's
annual operating expenses.
FEE TABLE
<TABLE>
<S> <C>
SHAREHOLDER FEES (fees paid directly from your investment)
Maximum front-end sales charge None
Maximum deferred sales charge None
Maximum sales charge on reinvested dividends and
distributions None
Redemption fee None
Exchange fee None
Maximum account fee None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from
Fund assets)
Investment Advisory Fees 0.75%
Distribution (12b-1) Fees* 0.25%
Other Expenses** 3.37%
Total Annual Fund Operating Expenses 4.37%
</TABLE>
* The Fund has adopted a Rule 12b-1 Plan that permits it to pay up to 0.25%
of its average net assets each year for distribution costs. These fees are
an ongoing charge to the Fund and therefore are an indirect expense to you.
Over time these fees may cost you more than other types of sales charge.
** "Other expenses" include such expenses as custody, transfer agent, legal,
accounting and registration fees.
EXAMPLE
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment returns 5% each year, and that the
Fund's operating expenses remain at a constant percentage. Because these
assumptions may vary from your actual experience, your actual return and
expenses may be different.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------
<S> <C> <C> <C>
$438 $1,323 $2,220 $4,510
</TABLE>
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MANAGEMENT
THE ADVISER
The Fund's investment adviser is FCA Corp. FCA is a fee-based financial
planning and investment counseling firm located at 5847 San Felipe, Suite 850,
Houston, Texas 77057. FCA and predecessors have been in business since 1975. FCA
acts as investment adviser to Capstone New Zealand Fund, as well as to several
entities focusing on real estate-related investments.
FCA manages the Fund's portfolio investments and places orders for Fund
transactions. For its services, it receives advisory fees from the Fund which
are based on the Fund's net assets. For its fiscal year ended October 31, 1998,
the Fund paid FCA fees equal to $38,680 of the Fund's average net assets.
PORTFOLIO MANAGER
Robert W. Scharar, President of FCA, has served as the Fund's portfolio
manager since 1997. Mr. Scharar co-founded the predecessor to FCA, and formed
FCA in 1983. He received a AA from Polk Community College, a BSBA in Accounting
from the University of Florida, an MBA and JD from Northeastern University, and
a LLM in Taxation from Boston University Law School. He is a member of the
Florida and Massachusetts Bars and is a member of the Florida Institute of
Certified Public Accountants. He has been an accounting professor at Bentley and
Nichols Colleges, was an officer of United States Trust Company (Boston), and
was a tax specialist at Coopers & Lybrand. Mr. Scharar is a contributing author
to the Clark Boardman Callaghan's publication, "Estate and Personal Financial
Planning." His directorships include the American Association of Attorney-CPA's,
First Commonwealth Mortgage Trust, United Investors Realty Trust and
Southwestern Property Trust.
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BUYING AND SELLING FUND SHARES
Share Price: The purchase and redemption price of Fund shares is
the Fund's net asset value (NAV) per share determined
after your order is received. NAV is generally
calculated as of the close of regular trading on the
New York Stock Exchange, generally 4:00 p.m. Eastern
time, and reflects the Fund's aggregate assets less
its liabilities. The Fund's exchange-traded
investments are valued at their market value at that
time in their primary market (certain derivatives are
priced at 4:15 Eastern time). If market value
quotations are not readily available for an
investment, the investment will be valued at fair
value as determined in good faith by the Fund's Board
of Directors. Prices for debt securities may be
obtained from pricing services, except that
short-term debt securities are valued at amortized
cost. Assets or liabilities denominated in foreign
currencies are translated into U.S. dollars at the
prevailing market rates at 17:00 Greenwich Mean Time
on each day NAV is calculated. NAV is not calculated,
and the Fund will not sell or redeem its shares, on
days the New York Stock Exchange is closed, although
the NZSE may be open on those days. Thus, the value
of the Fund's shares may change on days when
shareholders may not be able to purchase or redeem
shares. Further, NAV may be calculated on certain
days on which the NZSE is closed for holidays or
other reasons.
Minimum Investment: The minimum initial investment in the Fund is $200,
except that there is no minimum for continuous
investment plans. There is no minimum for subsequent
investments. (For telephone purchases, see below.)
Share Certificates: The Fund will not issue share certificates unless you
make a written request to the Transfer Agent. (The
Transfer Agent's address is provided below.)
Telephone Transactions: In your Investment Application, you may authorize the
Fund to accept redemption and exchange orders by
phone. You will be liable for any fraudulent order as
long as the Fund has taken reasonable steps to assure
that the order was proper. Also note that during
unusual market conditions, you may experience delays
in placing telephone orders. (See "Purchasing Fund
Shares and Redeeming Fund Shares.")
Frequent Transactions: The Fund reserves the right to limit additional
purchase and exchange transactions by any investor
who makes frequent purchases, redemptions or
exchanges that the Adviser believes might harm the
Fund. In general, more than one transaction per month
may be viewed as excessive.
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PURCHASING FUND SHARES
You may use any of the following methods to purchase Fund shares.
Through Authorized Dealers - You may place your order through any
dealer authorized to take orders for the Fund. If the order is
transmitted to the Fund by 4:00 p.m. Central time, it will be
priced at the NAV per share determined on that day. Otherwise,
later orders will receive the NAV per share next determined. It is
the dealer's responsibility to transmit orders timely.
Through the Distributor - You may place orders directly with the
Fund's distributor by mailing a completed Investment Application
with a check or other negotiable bank draft (payable to Capstone
New Zealand Fund) to the Transfer Agent.
The Transfer Agent's address is:
Capstone New Zealand Fund
c/o First Data Investor Services Group, Inc.
P.O. Box 61503
211 South Gulph Road
King of Prussia, Pennsylvania 19406-3101
(Remember to make your check for at least any applicable minimum
noted above.)
INVESTING BY WIRE
You may purchase shares by wire if you have an account with a commercial
bank that is a member of the Federal Reserve System. You should be aware that
your bank may charge a fee for this service.
For an initial investment by wire, you must first call 1-800-845-2340 to
be assigned a Fund account number. Ask your bank to wire the amount of your
investment to:
United Missouri Bank KC NA, ABA #10-10-00695
For: First Data Investor Services Group, Inc.
Account #98-7037-0719;
Further credit Capstone New Zealand Fund
Note that the wire must include: your name and address, your Fund account
number, and your social security or tax identification number. You must follow
up your wire with a completed Investment Application. This application is
contained in the Fund's prospectus. Mail the application to the Transfer Agent's
address (see above, under "Distributor").
For a subsequent investment by wire, ask your bank to wire funds to the
United Missouri Bank address noted above. The wire must include your name and
your Fund account number.
TELEPHONE INVESTMENT
After you have opened your account, you may make additional investments by
telephone if you completed the "Telephone Purchase Authorization" section of
your Investment Application.
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You may place a telephone order by calling the Transfer Agent at
1-800-845-2340.
The minimum for a telephone purchase is $1,000, and the maximum is five
times the NAV of your Fund shares on the day before your telephone order. (You
may not include the value of shares for which you have been issued
certificates.) Your order will be priced at the NAV next determined after your
call. Payment for your order must be received within 3 business days. Mail your
payment to the Transfer Agent's address (see "Distributor," above). If your
payment is not received within 3 business days, you will be liable for any
losses caused by your purchase.
PRE-AUTHORIZED INVESTMENT
You may arrange to make regular monthly investments of at least $25
through automatic deductions from your checking account by completing the
Pre-Authorized Payment section of the Investment Application.
REDEEMING FUND SHARES
You may redeem your Fund shares at any time by writing to the Transfer
Agent's address. The Fund does not charge any fee for redemptions. If you
request the redemption proceeds to be sent to your address of record, you
generally will not need a signature guarantee. A signature guarantee will be
required if:
o you were issued certificates for the shares you are redeeming;
o you want the proceeds to be mailed to a different address or to be
paid to someone other than the record owner;
o you want to transfer ownership of the shares.
Signature guarantee: A signature guarantee can be provided by most banks,
broker-dealers and savings associations, as well as by some credit unions.
Any certificates for shares you are redeeming must accompany your
redemption request. You will generally receive a check for your redemption
amount within a week.
EXPEDITED REDEMPTION
Through an authorized dealer: You may request a redemption through any
broker-dealer authorized to take orders for the Fund. The broker-dealer will
place the redemption order by telephone or telegraph directly with the Fund's
distributor and your share price will be based on the NAV next determined after
the distributor receives the order. The distributor does not charge for this
service, but the broker-dealer may charge a fee. You will generally receive your
proceeds within a week.
Telephone redemption: You may order a redemption by calling the Transfer
Agent at 1-800-845-2340 if:
o your redemption will be at least $1,000;
o no share certificates were issued for the shares you are redeeming;
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o your Investment Application authorized expedited telephone
redemption and designated a bank or broker-dealer to receive the
proceeds.
The proceeds will be mailed or wired to the designated bank or
broker-dealer on the next business day after your redemption order is received.
There is no fee charged by the Fund for this service, although a fee may be
imposed in the future. The Fund may also decide to modify or not to offer this
service. In this case, the Fund will attempt to provide reasonable prior notice
to shareholders.
SYSTEMATIC WITHDRAWAL
You may arrange for periodic withdrawals of $50 or more if you invest at
least $5,000 in the Fund. Under this arrangement, you must elect to have all
your dividends and distributions reinvested in shares of the Fund. Your
withdrawals under this plan may be monthly, quarterly, semi-annual or annual.
Payments under this plan are made by redeeming your Fund shares. The
payments do not represent a yield from the Fund and may be a return of your
capital, thus depleting your investment. Payments under this plan will terminate
when all your shares have been redeemed. The number of payments you receive will
depend on the size of your investment, the amount and frequency of payments, and
the yield and share price of the Fund, which can be expected to fluctuate.
You may terminate your plan at any time by writing to the Transfer Agent.
You continue to have the right to redeem your shares at any time. The cost of
the plan is borne by the Fund and there is no direct charge to you.
REDEMPTION IN KIND
If you place a redemption order for more than $1 million, the Fund
reserves the right to pay the proceeds in portfolio securities of the Fund,
rather than in cash to the extent consistent with applicable legal requirements.
In that case, you will bear any brokerage costs imposed when you sell those
securities.
REDEMPTION SUSPENSIONS OR DELAYS
Although you may normally redeem your shares at any time, redemptions may
not be permitted at times when the New York Stock Exchange is closed for unusual
circumstances, or when the Securities and Exchange Commission allows redemptions
to be suspended.
If you recently purchased the shares by check, the Fund may withhold the
proceeds of your redemption order until it has reasonable assurance that the
purchase check will be collected, which may take up to 15 days from the date of
purchase.
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EXCHANGING FUND SHARES
You may exchange your Fund shares for shares of another Capstone fund at a
price based on their respective NAVs. There is no sales charge or other fee. We
will send you the prospectus of the fund into which you are exchanging and we
urge you to read it. If you have certificates for the shares you are exchanging,
your order cannot be processed until you have endorsed them for transfer and
delivered them to the Transfer Agent.
You may place an exchange order in two ways:
o you may mail your exchange order to the Transfer Agent's address.
o you may place your order by telephone if you authorized telephone
exchanges on your Investment Application. Telephone exchange orders
may be placed from 9:30 a.m. to 4:00 p.m. Eastern time, on any
business day.
Exchanges into a fund can be made only if that fund is eligible for sale
in your state. The Fund may terminate or amend the exchange privilege at any
time with 60 days' notice to shareholders.
Remember that your exchange is a sale of your shares. Tax consequences are
described under "Dividends, Distributions and Taxes."
TAX-DEFERRED RETIREMENT PLANS
Fund shares may be used for virtually all types of tax-deferred retirement
plans, including traditional, Roth and Education IRAs and Simplified Employee
Pension Plans. For more information, call 1-800-262-6631.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund expects to pay dividends from its net income and distributions
from its net realized capital gains at least annually, generally in November.
Normally, income dividends and capital gains distributions on your Fund shares
will be paid in additional shares of the Fund, with no sales charge. However, on
your Investment Application, you may elect one of the following other options:
Option 1 To have income dividends paid in cash and capital gains
distributions paid in additional Fund shares.
Option 2 To have both income dividends and capital gains distributions
paid to you in cash.
There is no sales charge or other fee for either option. If you select
Option 1 or Option 2 and the checks sent to you cannot be delivered or remain
uncashed for six months, the aggregate amount of those checks will be invested
in additional Fund shares for your account at the then current NAV, and all your
future dividends and distributions will be paid in Fund shares.
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TAX TREATMENT OF DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS
You will generally be subject to federal income tax each year on dividend
and distribution payments, as well as on any gain realized when you sell
(redeem) or exchange your Fund shares. If you hold Fund shares through a
tax-deferred account (such as a retirement plan), you generally will not owe tax
until you receive a distribution from the account
The Fund will let you know each year which amounts of your dividend and
distribution payments are to be taxed as ordinary income and which are treated
as long-term capital gain. The tax treatment of these amounts does not depend on
how long you have held your Fund shares or on whether you receive payments in
cash or additional shares.
The tax treatment of any gain or loss you realize when you sell or
exchange Fund shares will depend on how long you held the shares.
You should consult your tax adviser about any special circumstances that
could affect the federal, state and local tax treatment of your Fund
distributions and transactions.
MASSACHUSETTS BUSINESS TRUST
The Fund is a series of Capstone International Series Trust ("Trust"), a
Massachusetts business trust. Because of uncertainty regarding whether
shareholders of a Massachusetts business trust might, under certain
circumstances, be held liable as partners for obligations of the trust, the
Trust's Declaration of Trust specifically provides that the Fund, to the extent
of its assets, will repay any amount assessed against a shareholder by virtue of
being a Fund shareholder.
YEAR 2000 RISKS
Computer users around the world are faced with the dilemma of the Year
2000 issue, which stems from the use of two digits in most computer systems to
designate the year. When the year advances from 1999 to 2000, many computers
will not recognize "00" as the Year 2000. This issue could potentially affect
every aspect of computer-related activity, on an individual and corporate level.
The Funds could be adversely impacted if the computer systems used by the
Adviser and Administrator and other service providers have not been converted to
meet the requirements of the new century. The Funds' Adviser and Administrator
have evaluated their own internal systems and expect them to be fully capable to
handle the change of millennium. The Adviser and Administrator are working with
the providers of the software they use to address the Year 2000 issue, and are
monitoring on an ongoing basis the progress of the Funds' other service
providers to convert their systems to comply with the requirements of Year 2000.
The Adviser and Administrator currently have no reason to believe that these
service providers will not be fully and timely compliant. However, investors
should be aware that there can be no assurance that all systems will be
successfully converted prior to January 1, 2000, in which case it would become
necessary for the Funds to enter into agreements with new service providers or
to make other arrangements.
With respect to securities in which the Fund invests, Year 2000 compliance
is considered as part of the fundamental review of issuers held by the Fund or
being considered for investment, to the extent information is available.
However, such information can be difficult to obtain regarding non-U.S. issuers.
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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>
YEARS ENDED OCTOBER 31,
----------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of year............... $ 11.25 $ 12.73 $11.12 $10.44 $11.61
------- ------- ------ ------ ------
Income from investment operations:
Net investment income............................ 0.14 0.24 0.19 0.31 0.16
Net realized and unrealized gain (loss).......... (3.46) (1.55) 1.93 0.90 (1.00)
------- ------- ------ ------ ------
Total from investment operations................. (3.32) (1.31) 2.12 1.21 (0.84)
Less distributions from:
Net investment income............................ (0.20) (0.17) (0.29) (0.21) (0.06)
Net realized and unrealized gain (loss).......... -- -- (0.22) (0.32) (0.27)
------- ------- ------ ------ ------
(0.20) (0.17) (0.51) (0.53) (0.33)
Net asset value at end of year..................... $ 7.73 $ 11.25 $12.73 $11.12 $10.44
======= ======= ====== ====== ======
TOTAL RETURN (%)(1)................................ (29.88)% (10.46)% 20.03% 12.22% (7.40)%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of year (in thousands)........... $ 4,494 $ 6,844 $8,258 $3,494 $3,014
Ratio of total expenses to average net assets...... 4.37% 2.89% 3.63% 4.77% 4.40%
Ratio of total expenses to average net assets
before reimbursement and waiver of expenses...... N/A 2.50% 2.72% 2.52% 2.50%
Ratio of net investment income to average net
assets........................................... 1.51% 1.65% 2.32% 3.06% 1.55%
Portfolio turnover rate............................ 25% 24% 38% 38% 40%
</TABLE>
- ---------------
1 Calculated without sales charge. Sales charge eliminated on August 21, 1995.
15
<PAGE> 16
HOW TO GET MORE INFORMATION
Further information about the Fund is contained in:
o the Statement of Additional Information (SAI). The SAI contains
more detail about some of the matters discussed in the Prospectus.
The SAI is incorporated into the Prospectus by reference.
o Annual and Semi-Annual Reports about the Fund describe its
performance and list its portfolio securities. They also include a
letter from Fund management describing the Fund's strategies and
discussing market conditions and trends and their implications for
the Fund.
You may obtain free copies of the SAI or reports, or other information
about the Fund or your account, by calling 1-800-262-6631.
You may also get copies of the SAI, reports and other information directly
the Securities and Exchange Commission (SEC) by:
o visiting the SEC's public reference room. (Call 1-800-SEC-0330 for
information.)
o sending a written request, plus a duplicating fee, to the SEC's
Public Reference Section, Washington, D.C. 20549-6009.
o visiting the SEC's website -- http://www.sec.gov.
The Fund's Investment Company Act File Number with the SEC is: 811-4665.
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