CAPSTONE JAPAN FUND
- --------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to present this semi-annual report on the Capstone Japan Fund for
the six months ended April 30, 1999. The Fund's net asset value ("NAV") at April
30, 1999 was US $5.43 per share compared to US $4.55 per share on October 31,
1998.
FUND'S COMPARATIVE PERFORMANCE
The Fund's strategy is 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 Receipts1 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
TOPIX2 that comprises all the stocks currently listed on the first section of
the Tokyo Stock Exchange. During the six months ended April 30, 1999, the TOPIX
increased by 29% in Japanese yen and by 25% in $US. For the same period, the
Fund's total US dollar return was 19%. In analyzing comparisons of performance
to the TOPIX, the reader should remember an index does not reflect any cash
positions, brokerage costs or administrative or management fees incurred by the
Fund or individual investor. The yen/dollar exchange rate was 119.40 yen/$ on
April 30, 1999 versus 115.75 yen/$ on October 31, 1998.
JAPAN MARKET OVERVIEW
Just months ago Japan seemed like a big gamble. The Japanese economy was a
permanent recession. The optimists turned out to have been right. The Nikkei
popular index was up sharply through April as investors taking a fresh look at
Japan were widespread. Most investors are significantly underweight Japan.
There's also been a big change of mood in Kasumigaseki, the area of Tokyo that
houses most central government ministries. Last year the government was refusing
to admit the need for macroeconomic policy change, even though the economy was
in trouble. Now, many of the policy changes that foreign investors sought are
being implemented. The changes include a switch from a restrictive to an
expansionist fiscal policy and a tough new approach to banks by the newly
established Financial Supervisory Agency. On the monetary front, short-term
interest rates fell close to zero in early March as the Bank of Japan pumped in
massive amounts of extra liquidity. The effect was to weaken the yen and give
the Japanese market a big boost. A series of changes in the commercial code
promises to end decades of murky accounting by Japanese companies. For
corporations there are signs that a continuing credit squeeze by capital-hungry
banks is forcing companies to do the unthinkable - lay off workers who were
hired on lifetime employment contracts or even sell off previously sacrosanct
operations to foreign investors. Remember, the Nikkei is still not close to
where it was at the end of 1995. The thing to grasp about Japan today is that
change is happening to the old industrial establishment, allowing new sectors to
grow, which is what makes the country worth investing in.
OVERVIEW OF THE JAPANESE ECONOMY
Recent economic trends in Japan reveal that the level of personal consumption
remains low due to sluggish income, although its downward tendency is leveling
off. Housing construction stays at a low level. Investment in plant and
equipment keeps decreasing while small and medium-sized firms are markedly
shrinking investment, large firms, especially in the manufacturing sector, are
also reducing investments. With such a weakness in final demand, industrial
production is at a low level. On the other hand, inventory adjustment has
proceeded. The employment situation has remained severe and the unemployment
ratio increased to an unprecedented high level. All in all, the economy is still
in a very severe situation. And so, the Government will strongly promote
policies including those in the "Emergency Economic Package." In the scenario
for revitalization of the Japanese economy, it is necessary for the government
to proceed with the structural reforms to strengthen the supply side so as to
realize a 21st century type society.3
MEASURES FOR THE 21ST CENTURY
The government will proceed with its "Leading 21st Century Projects," Strategic
Plan to double the size of Living Space designed to give a more affordable and
abundant lifestyle, and the "Industrial Revitalization Plan" aimed at creation
of new businesses.
<PAGE>
CAPSTONE JAPAN FUND
- --------------------------------------------------------------------------------
BUILDING A SMALL GOVERNMENT AND A COMPETITION-ORIENTED SOCIETY
Administrative reforms, with the aim of transition to a new system in January
2001, will reorganize government central ministries and agencies functions
through reassessment of work and outsourcing to independent public corporations.
The Government will also steadily reform the financial system and construct a
free and fair financial system comparable to those residing in New York and
London. To facilitate labor mobility, the government will reassess regulations
on job placement services, worker dispatching services and promote projects of
job skills development.
EMPHASIS ON THE PERSPECTIVE OF SOCIAL LIFE AND CONSTRUCTION OF EFFICIENT SAFETY
NET
It is vital to build a system that can be trusted by people and managed stably
in the future. The government will advance structural reforms of the social
welfare system such as pension scheme and medical services by streamlining and
rationalizing the system.
CONSTRUCTIVE SUPPORTS FOR ASIAN COUNTRIES
The government will assist the economic recovery of the Asian countries.
We believe the opportunities for being rewarded by investing in the Japanese
stock market have begun to be realized and that a dollar average approach by
investor's is worthy of serious consideration.
If you have any questions, please feel free to contact us. We thank you for your
continued support.
Sincerely,
/s/ Robert w. Scharar
- ------------------------------
Robert W. Scharar
President and Portfolio Manager
(1) There are over 160 Japanese ADR stocks that are estimated to be about 25%
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.
(2) 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 reflect deduction of any fees or
expenses.
(3) According to Economic Planning Agency Government of Japan, January 1999
"The Japanese Economy Recent Trends and Outlook".
THIS PUBLICATION MUST BE ACCOMPANIED OR PRECEDED BY A CURRENT
PROSPECTUS FOR CAPSTONE JAPAN FUND (CNJFX).
<PAGE>
CAPSTONE JAPAN FUND
PORTFOLIO OF INVESTMENTS - APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET % OF
VALUE NET
COMMON STOCKS (101.18%) SHARES (NOTE 1-A) ASSETS
--------------------------------------------
<S> <C> <C> <C>
AUTOMOTIVE (5.67%)
Bridgestone Coproration - ADR 550 $ 147,452 4.24%
Keihin Seiki Corporation 4,000 49,763 1.43%
--------- -----
197,215 5.67%
BANKING (1.26%)
Mitsubishi Trust & Banking Corporation 4,000 43,899 1.26%
CONSTRUCTION (5.49%)
Daiwa House Industry Co., Limited - ADR 1,600 191,017 5.49%
COMMUNICATIONS EQUIPMENT (12.62%)
Cannon Inc-ADR 5,500 133,375 3.83%
Fujitsu, Limited - ADR 1,600 137,062 3.94%
NEC Corporation - ADR 2,850 168,863 4.85%
--------- -----
439,300 12.62%
CONSUMER ELECTRONICS (5.23%)
Alps Electric Co., Limited 6,000 101,789 2.93%
Softbank Corporation 600 79,872 2.30%
--------- -----
181,661 5.23%
FOOD & BEVERAGE (15.72%)
Ajinomoto, Incorporated 1,200 138,839 3.99%
Kirin Brewery Company Limited-ADR 900 100,013 2.87%
Sanyo Coca-Cola Bottling 13,000 308,214 8.86%
--------- -----
547,066 15.72%
INDICES (7.38%)
Salomon Nikkei 225 Index 10,000 93,750 2.69%
World Equity Benchmark Series - Japan Index Series 13,600 163,200 4.69%
--------- -----
256,950 7.38%
MACHINERY (5.37%)
Minebea Co., Limited - ADR 5,500 106,442 3.06%
Kurita Water Industries 5,000 80,425 2.31%
--------- -----
186,867 5.37%
<PAGE>
CAPSTONE JAPAN FUND
PORTFOLIO OF INVESTMENTS - APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<CAPTION>
MARKET % OF
VALUE NET
SHARES (NOTE 1-A) ASSETS
--------------------------------------------
<S> <C> <C> <C>
MISCELLANEOUS FINANCING (4.63%)
Nomura Securities Co., Limited 3,000 $ 32,371 0.93%
Tokio Marine & Fire Insurance Co. 8,000 93,227 2.68%
Tokio Marine & Fire Insurance Co. - ADR 600 35,475 1.02%
--------- -----
161,073 4.63%
PHARMACEUTICALS (12.76%)
Banyu Pharmaceuticals Co., Limited - ADR 300 110,589 3.18%
Eisai Co., Limited - ADR 7,400 138,563 3.98%
Sankyo Co., Limited 1,000 20,986 0.60%
Takeda Chemical Industries 4,000 173,920 5.00%
--------- -----
444,058 12.76%
PRODUCER MANUFACTURING (5.96%)
Nippon Steel Corporation 63,000 141,448 4.07%
Sumitomo Rubber Industries 10,000 65,765 1.89%
--------- -----
207,213 5.96%
RETAIL (8.44%)
Nu Skin Asia Pacific Incorporated 8,000 148,500 4.27%
Seven-Eleven Japan Co., Limited - ADR 1,700 145,131 4.17%
--------- -----
293,631 8.44%
TELECOMMUNICATIONS (4.09%)
Nippon Telegraph & Telephone Corporation - ADR 2,600 142,350 4.09%
TRANSPORT EQUIPMENT (4.81%)
Yamato Transport Company Limited 10,000 167,302 4.81%
WIRES & CABLES (1.75%)
Sumitomo Electric Industries 5,000 60,528 1.75%
TOTAL COMMON STOCKS (Cost $3,138,991) 3,520,130 101.18%
<PAGE>
CAPSTONE JAPAN FUND
PORTFOLIO OF INVESTMENTS - APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<CAPTION>
MARKET % OF
VALUE NET
PAR VALUE (NOTE 1-A) ASSETS
--------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS (4.33%)
Merrill Lynch & Co., Variable rate, 01/31/2000
(Cost $140,932) $139,000 $ 150,815 4.33%
CASH EQUIVALENTS (12.60%)
Fifth Third Bank Repurchase Agreement, 5/3/1999
(Cost $438,279) 438,279 438,279 12.60%
--------- ------
TOTAL INVESTMENTS (Cost $3,718,202) 4,109,224 118.11%
OTHER ASSETS, LESS LIABILITIES (630,126) (18.11%)
--------- ------
NET ASSETS $3,479,098 100.00%
========= ======
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
CAPSTONE JAPAN FUND
STATEMENT OF ASSETS AND LIABILITIES - APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities at market value (identified cost $3,718,202) (Note 1A) $ 4,109,224
Interest and dividends receivable 2,731
Due from advisor (Note 2) 5,061
Prepaid expenses 3,443
-------------
Total Assets 4,120,459
-------------
LIABILITIES:
Foreign currency overdraft, at value (identified cost $599,824) 611,379
Accrued expenses 29,982
-------------
Total Liabilities 641,361
-------------
NET ASSETS $ 3,479,098
=============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE:
($3,479,098 / 640,817 shares of beneficial interest outstanding) $ 5.43
=============
SOURCE OF NET ASSETS:
Paid in capital $ 6,659,874
Accumulated net realized loss on investments (3,560,259)
Net unrealized appreciation on securities and foreign currencies 379,483
-------------
$ 3,479,098
=============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
CAPSTONE JAPAN FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividend income (net of foreign taxes withheld of $295) $ 45,754
Interest income 2,694
---------
Total Investment Income 48,448
---------
Expenses: (Note 2)
Advisory fees $ 11,387
Distribution fees 3,796
Administrative services 3,037
Transfer agent fees 12,805
Reports and notices to stockholders 23,628
Audit fees 5,097
Legal fees 874
Directors' fees and expenses 2,102
Fund accounting fees 15,858
Registration and filing fees 1,455
Overdraft fees 59,725
Miscellaneous 552
----------
Total Expenses 140,316
Less: Advisory fees waived (11,387)
Expenses reimbursed by Investment Advisor (697) (12,084)
---------- ---------
Net Expenses 128,232
---------
Net Investment Loss (79,784)
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss from security transactions (20,836)
Net realized gain on option contracts written 11,602
Net realized gain on conversion of foreign currencies to U.S. Dollars 36,754
Unrealized appreciation (depreciation) of investments, foreign currencies
and forward currency contracts:
Beginning of period (217,909)
End of period 379,483
----------
Net change in unrealized depreciation of investments, foreign currencies
and forward currency contracts 597,392
---------
Net realized and unrealized gain on investments 624,912
---------
Net increase in net assets resulting from operations $545,128
=========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
CAPSTONE JAPAN FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1999 OCTOBER 31, 1998
------------------------------------------
(UNAUDITED)
<S> <C> <C>
OPERATIONS:
Net investment loss $ (79,784) $ (41,478)
Net realized gain (loss) on investments 27,520 (263,434)
Net change in unrealized depreciation of investments, forward
currency contracts and foreign currencies 597,392 19,224
----------- -----------
Net increase (decrease) in net assets resulting from operations 545,128 (285,688)
CAPITAL SHARE TRANSACTIONS:
Increase in net assets resulting from
capital share transactions (Note 3) 330,077 987,630
----------- -----------
Total increase in net assets 875,205 701,942
NET ASSETS
Beginning of period 2,603,893 1,901,951
----------- -----------
End of period $3,479,098 $2,603,893
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - APRIL 30, 1999 (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.
<PAGE>
CAPSTONE JAPAN FUND
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.
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 October 31, 1998, the Fund had capital loss
carryovers of $3,587,779 of which $1,413,422 expires in 2000, $1,494,646 expires
in 2001, $434,729 expires in 2005 and $244,982 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%. For the period
November 1, 1998 through April 30, 1999, $11,387 in advisory fees were waived by
FCA.
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.
<PAGE>
CAPSTONE JAPAN FUND
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 pays CAPCO an amount computed at an
annual rate of up to 0.25% of the Fund's average net assets (including
reinvested dividends paid with respect to those assets). Of this amount, CAPCO
may reallocate to securities dealers (which may include CAPCO itself) and other
financial institutions and organizations (collectively, "Service Organizations")
amounts based on the Fund's average net assets owned by stockholders for whom
the Service Organizations have a servicing relationship. The Plan permits CAPCO
to carry forward for a maximum of twelve months distribution expenses covered by
the Plan for which CAPCO has not yet received reimbursement. For the six months
ended April 30, 1999, the Fund paid $3,796 in 12b-1 fees. Of this amount
approximately 3% 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, 1999,
directors of the Fund who are not "interested persons" received directors' fees
of $1,500.
NOTE 3 - CAPITAL STOCK
At April 30, 1999 there were 640,817 shares outstanding. Transactions in
capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1999 OCTOBER 31, 1998
------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------- ------------------------
<S> <C> <C> <C> <C>
Shares sold 311,142 $ 1,551,299 536,185 $ 2,510,425
Shares issued to shareholders in reinvestment
of distributions -- -- -- --
-------- ----------- -------- -------------
311,142 1,551,299 536,185 2,510,425
Shares redeemed (242,613) (1,221,222) (328,905) (1,522,795)
-------- ----------- -------- -------------
Net increase (decrease) 68,529 $ 330,077 207,280 $ 987,630
======== =========== ======== =============
</TABLE>
NOTE 4 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities other than U.S. Government obligations
aggregated $922,770 and $385,790 respectively. At April 30, 1999, the cost of
investments for Federal income tax purposes was $3,718,202. Accumulated net
unrealized appreciation on investments was $391,022 consisting of $471,090 gross
unrealized appreciation and $80,068 gross unrealized depreciation.
<PAGE>
CAPSTONE JAPAN FUND
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.
There were not outstanding call options written by the Fund as of April 30,
1999.
Written option activity for the six months ended April 30, 1999 was as
follows:
NUMBER OF AMOUNT OF
OPTIONS PREMIUM
Options outstanding at October 31, 1998 32 $11,602
Options written -- --
Options closed -- --
Options expired (32) (11,602)
--- -------
Options outstanding at April 30, 1999 -- $ --
=== =======
<PAGE>
CAPSTONE JAPAN FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following table sets forth the per share operating performance data for a
share of captial stock outstanding, total return, ratios to average net assets
and other supplemental data for each period indicated.
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
APRIL 30, YEARS ENDED OCTOBER 31,
- ----------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period $ 4.55 $ 5.21 $ 6.76 $ 6.76 $ 8.03 $ 6.99
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment loss (0.13) (0.07) (0.28) (0.19) (0.21) (0.21)
Net realized and unrealized gain (loss) 1.01 (0.59) (1.27) 0.25 (1.06) 1.25
------ ------ ------ ------ ------ ------
Total from investment operations 0.88 (0.66) (1.55) 0.06 (1.27) 1.04
------ ------ ------ ------ ------ ------
Less distributions from:
Net investment income -- -- -- (0.06) -- --
------ ------ ------ ------ ------ ------
Net asset value at end of period $ 5.43 $ 4.55 $ 5.21 $ 6.76 $ 6.76 $ 8.03
====== ====== ====== ====== ====== ======
TOTAL RETURN (%)(1) 19.34% (12.67)% (22.93)% 0.75% (15.82)% 14.88%
- ------------ ====== ====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (in thousands) $3,479 $2,604 $1,902 $2,975 $2,908 $3,484
Ratio of total expenses to average net assets 8.31%(2) 2.50% 4.55% 3.30% 3.61% 3.25%
Ratio of net investment loss to average net assets (5.17)%(2) (1.87)% (3.87)% (2.59)% (2.93)% (2.62)%
Ratio of total expenses to average net assets, before
reimbursements and waivers of expenses 9.09%(2) 6.32% 5.46% 3.90% 4.21% 3.85%
Ratio of net investment loss to average net assets,
before reimbursements and waivers of expenses (5.95)%(2) (5.67)% (4.78)% (3.19)% (3.53)% (3.22)%
Portfolio turnover rate 13% 35% 73% 47% 27% 57%
</TABLE>
(1) Calculated without sales charge. Sales charge eliminated on August 21,
1995.
(2) Annualized.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
CAPSTONE JAPAN FUND
5847 SAN FELIPE, SUITE 4100
HOUSTON, TEXAS 77057
1-800-262-6631
SEMIANNUAL REPORT TO SHAREHOLDERS
APRIL 30, 1999
- --------------------------------------------------------------------------------
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
Secretary/Treasurer
- --------------------------------------------------------------------------------
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
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, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CAPSTONE
JAPAN FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capstone Pyramid logo
A Member Of
THE CAPSTONE GROUP
of Mutual Funds
- --------------------------------------------------------------------------------
THE CAPSTONE
GROUP
Capstone Pyramid logo OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EQUITY
O CAPSTONE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FIXED INCOME
O CAPSTONE GOVERNMENT INCOME FUND
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INTERNATIONAL/GLOBAL
O CAPSTONE JAPAN FUND
O CAPSTONE NEW ZEALAND FUND
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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
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CAPSTONE JAPAN FUND
5847 SAN FELIPE SUITE 4100
HOUSTON, TX 77057
