CAPSTONE NEW ZEALAND FUND (CNZLX)
- --------------------------------------------------------------------------------
Dear Shareholders:
We are pleased to present this annual report on the Capstone New Zealand Fund
(the "Fund") for the fiscal year ended October 31, 1999. The Fund's net asset
value ("NAV") at October 31, 1999 was US $9.27 per share compared to US $7.73 at
the end of our October 31, 1998 fiscal year, an increase of approximately 20%.
In addition, a dividend of $.034 was paid January 6, 1999.
FUND'S COMPARATIVE PERFORMANCE
The Fund's strategy continues to concentrate on a diversified portfolio of
medium-sized stocks not readily available to individual US investors. The most
relevant index to compare the Fund's performance is the New Zealand Small
Company Index* ("NZSCI") that measures the performance of small to medium cap
stocks of the New Zealand market. During the fiscal year ended October 31, 1999,
the NZSCI increased by approximately 37% in New Zealand dollars or approximately
33% in United States dollars. For the same period, the Fund's total return was
approximately 20% in United States dollars. In analyzing comparisons of
performance to the NZSCI, the reader should remember an index does not reflect
currency conversions, cash positions, brokerage costs or administrative or
management fees incurred by the fund or individual investor.
LINE CHART:
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
CAPSTONE NEW ZEALAND FUND AND THE NZSCI
Past performance is not predictive of future results.
NEW ZEALAND FUND NZSCI NZSCI (US $)
10000 10000 10000
10/31/92 9750 15334 14608
10/31/93 11610 22902 23023
10/31/94 10750 20936 23406
10/31/95 12064 20001 20680
10/31/96 14480 24141 30980
10/31/97 12966 24370 31968
10/31/98 9092 19312 18545
10/31/99 10945 26466 24611
AVERAGE ANNUAL TOTAL RETURNS
as of 10/31/99
1 Year 5 Year Inception
20.38% 0.36% 1.15%
NEW ZEALAND MARKET OVERVIEW
We commented in the April 30, 1999 semi-annual report that the New Zealand
economy appeared to be on the road to an expected period of substantial growth
because of an improving current account deficit, increased consumer and business
confidence and no indication of inflation. This still appears to be the overall
case and we believe that the economy is in the midst of a long term expansion
phase. However, the Gross Domestic Product ("GDP") for the June 1999 quarter was
disappointing as was the current account deficit result for the same period
causing us to believe that the expansion will encounter a few bumps along the
way.
GDP for the June 1999 quarter contracted 0.3%, which was considerably worse than
what was expected by the consensus. As a consequence, the New Zealand dollar
("NZD") weakened and equity investors became cautious. The impact of an ongoing
drought and the end of the recovery from the slump in the exports to Asia are
the primary reasons for the poor GDP result. However, the weaker NZD is good
news for exporters and we believe that exports will be the driving force behind
the economic expansion. There is nothing in the data that suggests the economic
recovery is near its end and most experts are estimating a 3.0% average growth
per annum the next three years. In fact, Treasurer Bill English stated that "the
economy has recovered from last year's recession and is set for solid growth."
Our view of a positive economic trend remains unchanged.
<PAGE>
CAPSTONE NEW ZEALAND FUND (CNZLX)
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The current account deficit still remains the primary focus of the investment
community. The latest result ending June 1999 was 6.3% of GDP, which was below
the consensus forecast. However, many experts believe that the deficit will
climb to over 7.0% of GDP in the relatively near future. These estimates confirm
the fact that New Zealand is vulnerable to any external shock such as rising
global interest rates or New Zealand's increasing external debt. In order for
the deficit to turn around, an improvement in the merchandise trade balance
(which is when imports exceed exports) is necessary. Because of the weaker
currency, we are anticipate that the trade balance will turn the corner the
middle of next year and this should help to lower the current account deficit
which in turn should lower the risk premium on New Zealand assets.
Although there has been a downward adjustment to estimated GDP growth and an
increasing current account deficit in the short-term, we are still optimistic
that the New Zealand economy should be strong over the next several quarters. We
feel that we have positioned the portfolio to participate in that growth by
investing in companies that should benefit from a weaker currency such as the
transportation sector.
NEW ZEALAND POLITICS
A general election was held November 27, 1999 and there was a change in
government (National/ACT coalition) from a center-right to a center-left
(Labor/Alliance coalition). The possible effects from the new government could
be:
1) Slightly higher interest rates because of increased government
spending,
2) Less volatility in the exchange/interest rates because the
government will require the Reserve Bank to use more instruments
to implement monetary policy, and
3) Benefits for exporters because of government assistance.
THE PORTFOLIO
The Fund is widely diversified by industry sector. At October 31, 1999, the
percentages of equity investments of the Fund by major industry categories were
as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Port Operations 14.0% Investment Companies 2.8%
Transportation 11.9% Utilities (Electric) 5.4%
Insurance 4.9% Environmental Control 9.1%
Miscellaneous 7.2% Real Estate 2.3%
Media 12.0% Stock & Station Services 4.0%
Electrical Manufacturing 4.5% Oil & Gas 2.0%
Horticultural Supplier 7.2% Vehicle Distributor 1.1%
Retail 3.0% Forestry 3.3%
Tourist Services 2.4%
</TABLE>
Should you have any questions, please feel free to contact us and we thank you
for your continued support.
Sincerely,
/s/ Robert W. Scharar /s/ W. Lance Hall
- ------------------------------ ------------------------------
Robert W. Scharar W. Lance Hall
President and Portfolio Manager Assistant Portfolio Manager
*The New Zealand Small Company Index is composed of approximately 100 equity
securities, excluding those in the New Zealand Stock Exchange-40 Index,
weighted by their full market capitalization.
<PAGE>
<TABLE>
<CAPTION>
CAPSTONE NEW ZEALAND FUND
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1999
- ----------------------------------------------------------------------------------------------------------------------
MARKET % OF
VALUE NET
COMMON STOCKS - (88.51%) SHARES (NOTE 1-A) ASSETS
------ ---------- ------
<S> <C> <C> <C>
BROADCAST MEDIA - (9.54%)
Radioworks New Zealand, Limited 117,952 $ 414,966 9.54%
ELECTRICAL/APPLIANCE MANUFACTURING - (4.05%)
Fisher & Paykel Industries 58,030 176,249 4.05%
ENVIRONMENTAL CONTROL - (8.25%)
Waste Management NZ, Limited 177,154 358,701 8.25%
FINANCE - (3.44%)
Australia Webs Index Series 5,000 50,313 1.17%
Montana Group Nz, Limited 92,000 98,729 2.27%
--------- ------
149,042 3.44%
HORTICULTURE SUPPLIER - (6.53%)
Fruitfed Supplies, Limited 449,000 284,105 6.53%
INSURANCE - (4.48%)
Metlifecare, Limited 192,500 194,887 4.48%
INVESTMENT COMPANIES - (2.51%)
Hellaby Holdings, Limited 61,640 55,228 1.27%
Westpac Investments, Limited (a) 13,889 53,784 1.24%
--------- ------
109,012 2.51%
LUMBER & WOOD PRODUCTS - (3.03%))
Evergreen Forest, Limited (a) 500,000 131,612 3.03%
MANUFACTURING - (0.37%)
Steel & Tube Holdings, Limited 20,000 16,198 0.37%
MANUFACTURING DISTRIBUTION - (1.02%)
Scott Technologies, Limited 36,697 44,582 1.02%
<PAGE>
<CAPTION>
CAPSTONE NEW ZEALAND FUND
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1999
- ----------------------------------------------------------------------------------------------------------------------
MARKET % OF
VALUE NET
SHARES (NOTE 1-A) ASSETS
------ ---------- ------
<S> <C> <C> <C>
MEDIA - (1.40%)
Independent Newspapers, Limited 15,000 $ 60,744 1.40%
OIL & GAS - (1.79%)
New Zealand Refining Co., Limited 13,647 77,716 1.79%
PORT OPERATIONS - (12.71%)
Lyttleton Port Co., Limited 276,250 209,757 4.83%
Northland Port Corporation 302,300 191,280 4.40%
South Port New Zealand, Limited 336,500 151,599 3.48%
--------- ------
552,636 12.71%
REAL ESTATE - (2.11%)
Capital Properties New Zealand Limited (a) 50,000 12,655 0.29%
Kiwi Income Property Trust 140,000 79,372 1.82%
--------- ------
92,027 2.11%
RETAIL - DEPARTMENT STORES - (2.69%)
Arthur Barnett, Limited 210,300 117,099 2.69%
STOCK & STATION SERVICES - (3.68%)
Williams & Keattle, Limited 153,500 160,066 3.68%
TECHNOLOGY SERVICES - (0.74%)
Advantage Group, Limited (a) 25,000 32,017 0.74%
TEXTILES - MANUFACTURING - (0.98%)
Donaghy's, Limited 58,715 42,799 0.98%
TOURIST SERVICES - (2.20%)
Tourism Holdings, Limited 66,666 95,840 2.20%
<PAGE>
<CAPTION>
CAPSTONE NEW ZEALAND FUND
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1999
- ----------------------------------------------------------------------------------------------------------------------
MARKET % OF
VALUE NET
SHARES (NOTE 1-A) ASSETS
------ ---------- ------
<S> <C> <C> <C>
TRANSPORTATION - (10.78%)
Air New Zealand, Limited - Class B 112,600 $ 166,435 3.83%
Auckland International Airport, Limited 50,000 69,350 1.59%
Mainfreight, Limited 241,250 195,393 4.49%
Owens Group, Limited 56,500 38,038 0.87%
--------- ------
469,216 10.78%
UTILITIES - ELECTRIC - (5.19%)
Infrastructure & Utilities Corporation, Limited 294,729 214,836 4.94%
Infrastructure & Utilities Corporation, Limited Warrants 55,972 11,050 0.25%
--------- ------
225,886 5.19%
VEHICLE DISTRIBUTOR - (1.02%)
The Colonial Motor Co., Limited 33,010 44,280 1.02%
TOTAL COMMON STOCK (Cost $4,572,515) 3,849,680 88.51%
BONDS (2.56%) PAR VALUE
Evergreen Forest, zero coupon, due 3/19/09 $45,000 22,779 0.52%
Infrastructure & Utility Bond, 6.90% due 3/31/04 55,972 39,666 0.91%
State Bank of South Australia, 9.00%, due 7/30/02 94,000 48,890 1.13%
--------- ------
TOTAL BONDS (Cost $117,637) 111,335 2.56%
TOTAL INVESTMENTS (Cost $4,690,152) 3,961,015 91.07%
OTHER ASSETS, LESS LIABILITIES 388,385 8.93%
---------- -------
NET ASSETS $4,349,400 100.00%
========== =======
(a) Non-income producing security
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAPSTONE NEW ZEALAND FUND
STATEMENT OF ASSETS AND LIABILITIES - OCTOBER 31, 1999
- ----------------------------------------------------------------------------------------------------------------------
ASSETS:
<S> <C>
Investments in securities at market value (identified cost $4,690,152) (Note 1A) $ 3,961,015
Cash 3,116
Foreign currency, at value (identified cost $382,128) (Note 1B) 377,846
Receivable for securities sold 60,380
Dividends receivable 8,477
Interest receivable 1,271
Receivable for capital stock sold 41,223
-------------
Total Assets 4,453,328
-------------
LIABILITIES:
Payable for capital stock redeemed 48,181
Accrued expenses 55,747
-------------
Total Liabilities 103,928
-------------
NET ASSETS $ 4,349,400
=============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE:
($4,349,400 / 468,982 shares of beneficial interest outstanding) $ 9.27
=============
SOURCE OF NET ASSETS:
Paid in capital $ 5,305,299
Accumulated net realized loss on investments (244,413)
Undistributed net investment income 22,234
Net unrealized depreciation on securities and foreign currencies (733,720)
-------------
$ 4,349,400
=============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
CAPSTONE NEW ZEALAND FUND
STATEMENT OF OPERATIONS FOR YEAR ENDED OCTOBER 31, 1999
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividend income $ 238,164
Interest income 23,888
-----------
Total Investment Income 262,052
Expenses: (Note 2)
Advisory fees $ 35,350
Distribution fees 11,783
Administrative services 11,783
Transfer agent fees 27,153
Reports and notices to stockholders 14,312
Audit fees 10,500
Legal fees 13,225
Directors' fees and expenses 6,095
Custodian fees 2,160
Fund accounting fees 45,413
Registration and filing fees 13,350
Miscellaneous 3,779
----------
Total Expenses 194,903
-----------
Net Investment Income 67,149
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from security transactions 131,325
Net realized loss on conversion of foreign currencies to U.S. Dollars (25,078)
Unrealized depreciation of investments:
Beginning of period (1,431,240)
End of period (733,720)
----------
Net change in unrealized depreciation of investments 697,520
-----------
Net realized and unrealized gain on investments 803,767
-----------
Net increase in net assets resulting from operations $ 870,916
===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAPSTONE NEW ZEALAND FUND
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1999 OCTOBER 31, 1998
------------------------------------------
OPERATIONS:
<S> <C> <C>
Net investment income $ 67,149 $ 77,631
Net realized gain on investments 106,247 (441,386)
Net change in unrealized depreciation of investments, forward
currency contracts and foreign currencies 697,520 (1,572,789)
----------- -----------
Net increase (decrease) in net assets resulting from operations 870,916 (1,936,544)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (19,837) (108,946)
CAPITAL SHARE TRANSACTIONS:
Decrease in net assets resulting from capital
share transactions (Note 3) (995,944) (304,273)
----------- -----------
Total increase (decrease) in net assets (144,865) (2,349,763)
NET ASSETS
Beginning of period 4,494,265 6,844,028
----------- -----------
End of year (including undistributed net investment
income of $22,234 and $0, respectively) $4,349,400 $4,494,265
=========== ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - OCTOBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Capstone New Zealand 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 current income by
investing in equity securities, debt securities, and securities convertible into
common stock of New Zealand issuers. 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 securities
exchanges are valued at the last sales price on that exchange prior to the
relevant closing 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. Fixed income securities are valued using
market quotations or pricing services. 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 NEW ZEALAND 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) FEDERAL INCOME TAXES - No provision has been made for Federal income taxes
since it is the policy of the Fund to continue to comply with the special
provisions of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income and realized capital
gains, to relieve it from all, or substantially all, such taxes. At October 31,
1999, the Fund had a capital loss carryforward of $244,413 which expires in
2006. Under the United States-New Zealand tax treaty, New Zealand imposes a
withholding tax on dividends (15%) and interest (10%) received by the Fund.
There is currently no New Zealand tax on capital gains.
E) DISTRIBUTIONS TO SHAREHOLDERS - The Fund distributes its net investment
income, if any, and net realized gains (net of any capital loss carryovers)
annually. 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 capital loss carryovers.
F) USE OF ESTIMATES - The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expense during the reporting period. Actual results could differ
from those estimates.
NOTE 2 - INVESTMENT ADVISORY FEES, 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%.
The Administrator, Capstone Asset Management Company, is paid a fee,
calculated daily and paid monthly, equal to an annual rate of .25% 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 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 year ended
October 31, 1999, the Fund paid $11,783 in 12b-1 fees. Of this amount
approximately 10.9% 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 year ended October 31, 1999, directors of
the Fund who are not "interested persons" received directors' fees of $6,095.
<PAGE>
CAPSTONE NEW ZEALAND FUND
NOTE 3 - CAPITAL STOCK
At October 31, 1999 there were 468,982 shares outstanding. Transactions in
capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1999 OCTOBER 31, 1998
---------------- ----------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold 436,155 $ 3,998,312 368,702 $ 2,861,378
Shares issued to shareholders in reinvestment of
distributions 1,506 13,454 9,459 92,030
------- ----------- ------- -----------
437,661 4,011,766 378,161 2,953,408
Shares redeemed (549,711) (5,007,710) (405,271) (3,257,681)
------- ----------- ------- -----------
Net Decrease (112,050) $ (995,944) (27,110) $ (304,273)
======= =========== ======= ===========
</TABLE>
NOTE 4 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities other than U.S. Government obligations
aggregated $363,917 and $1,860,490 respectively. At October 31, 1999, the cost
of investments for Federal income tax purposes was $4,690,152. Accumulated net
unrealized depreciation on investments was $729,137 consisting of $577,777 gross
unrealized appreciation and $1,306,914 gross unrealized depreciation.
<PAGE>
CAPSTONE NEW ZEALAND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following table sets forth the per share operating performance data for a
share of capital stock outstanding, total return, ratios to average net assets
and other supplemental data for each period indicated.
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
--------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
PER SHARE DATA
- --------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 7.73 $11.25 $12.73 $11.12 $10.44
------ ------ ------ ------ ------
Income from investment operations:
Net investment income 0.13 0.14 0.24 0.19 0.31
Net realized and unrealized gain (loss) 1.44 (3.46) (1.55) 1.93 0.90
------ ------ ------ ------ ------
Total from investment operations 1.57 (3.32) (1.31) 2.12 1.21
------ ------ ------ ------ ------
Less distributions from:
Net investment income (0.03) (0.20) (0.17) (0.29) (0.21)
Net realized gain on investments -- -- -- (0.22) (0.32)
------ ------ ------ ------ ------
(0.03) (0.20) (0.17) (0.51) (0.53)
Net asset value at end of period $ 9.27 $ 7.73 $11.25 $12.73 $11.12
====== ====== ====== ====== ======
TOTAL RETURN (%) (1) 20.38% (29.88)% (10.46)% 20.03% 12.22%
- ------------ ====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets at end of year (in thousands) $4,349 $4,494 $6,844 $8,258 $3,494
Ratio of total expenses to average net assets 4.14% 4.37% 2.89% 3.63% 4.77%
Ratio of total expenses to average net assets, before
reimbursement and waiver of expenses N/A N/A 2.50% 2.72% 2.52%
Ratio of net investment income to average net assets 1.42% 1.51% 1.65% 2.32% 3.06%
Portfolio turnover rate 8% 25% 24% 38% 38%
</TABLE>
(1) Calculated without sales charge. Sales charge eliminated on August 21, 1995.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
CAPSTONE NEW ZEALAND FUND
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
Capstone International Series Trust
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of Capstone New Zealand Fund (a series of Capstone
International Series Trust), as of October 31, 1999, the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the three years in the period then ended. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights for each of
the two years in the period ended October 31, 1996 were audited by other
auditors whose report dated November 18, 1996, expressed an unqualified opinion
on the financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1999 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Capstone New Zealand Fund as of October 31, 1999, and the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the three years in the period then ended in conformity with generally accepted
accounting principles.
BRIGGS, BUNTING & DOUGHERTY, LLP
Philadelphia, Pennsylvania
November 19, 1999
<PAGE>
CAPSTONE NEW ZEALAND FUND
5847 SAN FELIPE, SUITE 4100
HOUSTON, TEXAS 77057
1-800-262-6631
ANNUAL REPORT TO SHAREHOLDERS
OCTOBER 31, 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
New Zealand Fund
Bernard J. Vaughan Linda G. Giuffre
Secretary/Treasurer
- --------------------------------------------------------------------------------
INVESTMENT ADVISER TRANSFER AGENT
FCA Corp PFPC Inc.
5847 San Felipe 3200 Horizon Drive
Suite 850 P.O. Box 61503
Houston, TX 77057 King of Prussia, PA 19406-0903
1-713-781-7193 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>
CAPSTONE NEW ZEALAND FUND
5847 SAN FELIPE, SUITE 4100
HOUSTON, TX 77057
ANNUAL REPORT
OCTOBER 31, 1999
CAPSTONE
NEW ZEALAND
FUND
CAPSTONE PYRAMID LOGO
A Member Of
THE CAPSTONE GROUP
of Mutual Funds
CAPSTONE PYRAMID LOGO
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 New Zealand Fund
CAPSTONE ASSET PLANNING COMPANY
5847 SAN FELIPE, SUITE 4100
HOUSTON, TEXAS 77057
1-800-262-6631
