As filed with the Securities and Exchange Commission on February 29, 2000
REGISTRATION NO. 33-6867
INVESTMENT COMPANY ACT FILE NO. 811-4665
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
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Pre-Effective Amendment No. _____ / /
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Post-Effective Amendment No. 33 / X /
and/or
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
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Amendment No. / X /
Capstone International Series Trust
On behalf of its series, Capstone Japan Fund
(Exact Name of Registrant as Specified in Charter)
5847 San Felipe, Suite 4100,
Houston, Texas 77057 (Address of Principal Executive
Offices) (Zip Code)
Registrant's Telephone Number, Including Area
Code (713) 260-9000
Allan S. Mostoff, Esq.,
Dechert Price & Rhoads
1775 Eye Street, N.W., 11th Floor,
Washington, DC 20006
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
/ X / immediately upon filing pursuant to paragraph (b).
/ / on ________________ pursuant to paragraph (b).
/ / 60 days after filing pursuant to paragraph (a)(i).
/ / on (date) pursuant to paragraph (a)(i).
/ / 75 days after filing pursuant to paragraph (a)(ii).
/ / on ________________ pursuant to paragraph (a)(ii) of Rule 485
<PAGE>
CAPSTONE JAPAN FUND
A Series of Capstone International Series Trust
Seeking long-term capital appreciation and current income through
investments in Japanese securities.
Prospectus
February 29, 2000
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>
TABLE OF CONTENTS
PAGE
THE FUND..........................................................
FEE TABLE.........................................................
MANAGEMENT........................................................
BUYING AND SELLING FUND SHARES....................................
DIVIDENDS, DISTRIBUTIONS AND TAXES................................
FINANCIAL HIGHLIGHTS..............................................
HOW TO GET MORE INFORMATION.......................................
<PAGE>
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 securities listed on the Tokyo Stock Exchange or other
recognized Japanese trading market and in securities of issuers that are
organized under the laws of Japan, that have at least 50% of their assets in
Japan or that derive at least 50% of their earnings or profits from goods
produced or sold, investments made, or services performed in Japan (Japanese
Issuers). The Fund may also invest in debt securities of Japanese Issuers, or
that are payable in yen or whose interest rate is linked to changes in a
recognized index of Japanese market performance to the performance of the
Japanese market or economy. In addition to buying these securities directly, the
Fund may invest in sponsored and unsponsored American Depository Receipts (ADRs)
related to these securities. (See "Principal Risks.") 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 must be rated at least BBB by
Standard & Poor's Corporation (S&P) or Baa by Moody's Investors Service or
deemed of comparable quality by the investment adviser. If these securities are
downgraded, the adviser has the discretion to hold or sell them.
The Adviser selects investments in issuers that it believes will benefit from
changes in the Japanese economy or will respond well in global markets. Issuers
are also evaluated in terms of fundamental factors such as ratios of price to
earnings and price to cash flow, book value and dividend yield. Similar factors
will be used to determine when a security held by the Fund should be considered
for sale.
The Fund also has authority to invest in U.S. securities, including money market
instruments (such as U.S. Treasury bills, repurchase agreements, commercial
paper and bankers' acceptances) and other debt securities such as U.S.
Government securities and corporate debt obligations. It may invest in
certificates of deposit of domestic and foreign branches of U.S. banks. For
temporary defensive purposes, during periods of unusual market conditions when
the Adviser believes the Fund's principal investments might be significantly
adversely affected, the Fund may invest in these instruments without limit,
which can prevent the Fund from pursuing its investment objective during those
periods and cause the Fund to lose benefits when the market begins to improve.
The Fund may also use futures and options to hedge its portfolio, and it may
hedge its foreign securities purchases with forward foreign currency exchange
contracts. The Fund has authority to lend its portfolio securities. These loans
will be fully collateralized at all times.
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.)
Principal Risks
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.
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.
Investing in securities of Japanese Issuers involve certain risks that are
different from investments in U.S. issuers. The Japanese economy has experienced
an economic slowdown in recent years and there can be no assurance about whether
and when it will recover. Moreover, attempts to restructure certain aspects of
the economy, although designed to help, are uncertain in their effects.
Investments in foreign securities involve higher costs. There are also risks due
to differences in securities markets in other countries, in tax policies, in the
level of regulation and in accounting standards, as well as from fluctuations in
currency values. Further, there is often more limited information about foreign
issuers, and there is the possibility of negative governmental actions, and of
political and social unrest.
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 hedging activities, although they are designed to help offset
negative movements in the markets for the Fund's investments, will not always be
successful. Moreover, they can also cause the Fund to lose money or fail to get
the benefit of a gain. Among other things, these negative effects can occur if
the market moves in a direction that the Fund's investment adviser does not
expect or if the Fund cannot close out its position in a hedging instrument.
The Fund's investments will fluctuate in price. This means that Fund share
prices will go up and down, and you can lose money. From time to time, the
Fund's performance may be better or worse than funds with similar investment
policies. Its performance is also likely to differ from that of funds that use
different strategies for selecting stocks. Because the Fund normaly invests
primarily in securities of Japanese Issuers, it should be viewed as 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 an investment 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, beginning with its
first full calendar year, in comparison to the TOPIX Index which is a broad
measure of performance of the Japanese securities market. Each table assumes
that dividends and distributions paid by the Fund have been reinvested at net
asset value in additional Fund shares. You should remember that past performance
does not necessarily indicate how the Fund will perform in the future.
[Bar Chart to be inserted showing the following data:]
Year-by-year total return as of 12/31 each year (%).
12/31/90 (37.01%)
12/31/91 0.29%
12/31/92 (28.88%)
12/31/93 25.31%
12/31/94 24.27%
12/31/95 (3.21%)
12/31/96 (16.10%)
12/31/97 (24.55%)
12/31/98 6.68%
12/31/99 58.59%
Best Quarter - 4th Quarter 1998 25.32%
Worst Quarter - 1st Quarter 1990 (29.90%)
Average Annual Total Return as of 12/31/99
1 Year 5 Years Inception (7/10/89)
------ ------- --------------------
Fund 58.59% 0.72% (2.05%)
TOPIX 61.72% 2.08% (3.37%)
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
Shareholder Fees (fee paid directly from your investment)
Maximum front-end sales charge None
Maximum deferred sales charge None
Maximum sales charge on reinvested None
dividends and distributions
Redemption fee None
Exchange 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** 3.61%
Total Annual Fund Operating Expenses 4.61%
* 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.
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
$628 $1,387 $2,320 $4,684
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, 1999
the Fund paid FCA fees equal to 0.75% of the Fund's average net assets.
Portfolio Manager
Robert W. Scharar, President of FCA Corp., has served as the Fund's portfolio
manager since 1997. Mr. Scharar co-founded the predecessor to FCA Corp. in
1975. He received an 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 Florida Certified Public Accountant. 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 United Dominion Realty Trust.
Kate Haixing Yan, Assistant Portfolio Manager for the fund and Senior Accountant
for FCA Corp. Ms. Yan received a BA in Business Administration/Accounting from
the University of Washington in 1994. Ms. Yan joined FCA in March 1997.
Ms. Yan's previous position was an Accounting Associate with James River
Corporation from April 1994 through March 1997. Ms. Yan is a Certified Public
Accountant.
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 foreign exchanges 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 foreign exchanges on which
the Fund's portfolio securities are
primarily traded are closed for
holidays or other reasons.
Minimum Investment: The minimum initial investment in
the Fund is $200, with the exception
of continuous investment plans. There
is no minimum for subsequent
investments, with the exception of
continuous investment plans. (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.
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 Japan Fund) to the Transfer Agent.
The Transfer Agent's address is:
Capstone Japan Fund
c/o PFPC, 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: PFPC, Inc.
Account #98-7037-0719;
Further credit Capstone Japan 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.
You may place a telephone order by calling the Transfer Agent at
1-800-845-2340.
The minimum for a telephone purchase is $1000, 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 $1000;
o no share certificates were issued for the shares you are
redeeming;
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 $5000 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.
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.
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.
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>
YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995
<S> <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
------ ------ ------ ------ ------
Income from investment operations:
Net investment loss (0.21) (0.07) (0.28) (0.19) (0.21)
Net realized and unrealized gain (loss) 2.54 (0.59) (1.27) 0.25 (1.06)
------ ------ ------ ------ ------
Total from investment operations 2.33 (0.66) (1.55) 0.06 (1.27)
------ ------ ------ ------ ------
Less distributions from:
Net investment income -- -- -- (0.06) --
------ ------ ------ ------ ------
Net asset value at end of period $ 6.88 $ 4.55 $ 5.21 $ 6.76 $ 6.76
====== ====== ====== ====== ======
TOTAL RETURN (%) (1) 51.21% (12.67)% (22.93)% 0.75% (15.82)%
====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (in thousands) $5,305 $2,604 $1,902 $2,975 $2,908
Ratio of total expenses to average net assets 4.61% 2.50% 4.55% 3.30% 3.61%
Ratio of net investment loss to average net assets (3.94)% (1.87)% (3.87)% (2.59)% (2.93)%
Ratio of total expenses to average net assets,
before reimbursements and waivers of expenses 4.61% 6.32% 5.46% 3.90% 4.21%
Ratio of net investment loss to average net assets,
before reimbursements and waivers of expenses (3.94)% (5.67)% (4.78)% (3.19)% (3.53)%
Portfolio turnover rate 17% 35% 73% 47% 27%
- ----------------
<FN>
(1) Calculated without sales charge. Sales charge eliminated on August 21, 1995.
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
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 1-202-942-8040
for information.)
o sending a written request, plus a duplicating fee, to the SEC's
Public Reference Section, Washington, D.C. 20549-0102, or by e-mail
request to: [email protected]
o visiting the SEC's website - http://www.sec.gov
The Fund's Investment Company Act File Number with the SEC is: 811-4665.
<PAGE>
CAPSTONE JAPAN FUND
(Formerly Capstone Nikko Japan Fund)
A Fund of
Capstone International Series Trust
STATEMENT OF ADDITIONAL INFORMATION
February 29, 2000
This Statement of Additional Information is not a Prospectus but contains
information in addition to and more detailed than that set forth in the
Prospectus and should be read in conjunction with the Prospectus dated
February 29, 2000. A Prospectus may be obtained without charge by contacting
Capstone Asset Planning Company, by phone at (800) 262-6631 or by writing to
it at 5847 San Felipe, Suite 4100, Houston, Texas 77057.
The report of Independent Accountants and financial statements of the Fund
included in its Annual Report for the period ended October 31, 1999 ("Annual
Report") is incorporated herein by reference to such Report. Copies of such
Annual Report are available without charge upon request by writing to the Fund
at 5847 San Felipe, Suite 4100, Houston, Texas 77057 or by calling toll free
1-800-262-6631.
The financial statements in the Annual Report incorporated by reference
into this Statement of Additional Information have been audited by Briggs,
Bunting & Dougherty, LLP, independent accountants, and have been so included and
incorporated by reference in reliance upon the report of said firm, which report
is given upon their authority as experts in auditing and accounting.
<PAGE>
TABLE OF CONTENTS
Page
General Information........................................................
Investment Practices and Restrictions......................................
Risk Factors...............................................................
Performance Information....................................................
Trustees and Executive Officers............................................
Investment Advisory Agreement..............................................
Administration Agreement...................................................
Distributor................................................................
Portfolio Transactions and Brokerage.......................................
Determination of Net Asset Value...........................................
How to Buy and Redeem Shares...............................................
Taxes......................................................................
Control Persons and Principal Holders of Securities........................
Other Information..........................................................
Financial Statements.......................................................
<PAGE>
GENERAL INFORMATION
Capstone Japan Fund (the "Fund") is a series (or fund) of Capstone
International Series Trust (the "Trust"). Prior to September 2, 1997, the Fund's
name was Capstone Nikko Japan Fund. The Trust currently has one other series,
Capstone New Zealand Fund, which invests in securities of New Zealand issuers.
The Trust may create additional series in the future, but each series will be
treated as a separate mutual fund. The Trust was organized as a business trust
in Massachusetts on May 9, 1986 and commenced business shortly thereafter. It is
an open end diversified management investment company under the Investment
Company Act of 1940. The Fund is a member of a group of investment companies
sponsored by Capstone Asset Management Company (the "Administrator"), which also
provides administrative services to the Fund.
INVESTMENT PRACTICES AND RESTRICTIONS
The Fund has authority to invest in U.S. securities, including money
market instruments such as U.S. Treasury bills, repurchase agreements,
commercial paper, certificates of deposit issued by domestic and foreign
branches of U.S. banks, bankers' acceptances and other debt securities, such as
U.S. Government obligations and corporate debt instruments. For temporary
defensive purposes, such investments may be made without limit, when the Adviser
deems such investments to be advisable in light of economic or market
conditions.
Repurchase Agreements. The Fund may enter into repurchase agreements with
U.S. government securities dealers recognized by the Federal Reserve Board, with
member banks of the Federal Reserve System or with such other brokers or dealers
that meet the credit guidelines of the Trust's Board of Trustees. In a
repurchase agreement, the Fund buys a security from a seller that has agreed to
repurchase the same security at a mutually agreed upon date and price. The
Fund's resale price will be in excess of the purchase price, reflecting an
agreed upon interest rate. This interest rate is effective for the period of
time the Fund is invested in the agreement and is not related to the coupon rate
on the underlying security. Repurchase agreements may also be viewed as a fully
collateralized loan of money by the Fund to the seller. The period of these
repurchase agreements will usually be short, from overnight to one week, and at
no time will the Fund invest in repurchase agreements for more than one year.
The Fund will always receive as collateral securities whose market value
including accrued interest is, and during the entire term of the agreement
remains, at least equal to 100% of the dollar amount invested by the Fund in
each agreement, and the Fund will make payment for such securities only upon
physical delivery or upon evidence of book entry transfer to the account of the
Custodian. If the seller defaults, the Fund might incur a loss if the value of
the collateral securing the repurchase agreement declines and might incur
disposition costs in connection with liquidating the collateral. In addition, if
bankruptcy proceedings are commenced with respect to the seller of a security
which is the subject of a repurchase agreement, realization upon the collateral
by the Fund may be delayed or limited. The Adviser seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
obligors under repurchase agreements, in accordance with the credit guidelines
of the Trust's Board of Trustees.
Foreign Currency Transactions. The Fund may, to a limited extent, deal in
forward foreign exchange between the currencies of the United States and Japan
as a hedge against possible variations in the foreign exchange rates between
these currencies. This is accomplished through contractual agreements to
purchase or sell a specified currency at a specified future date (up to one
year) and price set at the time of the contract. The Fund's dealings in forward
foreign exchange contracts are limited to hedging involving either specific
transactions or portfolio positions. Transaction hedging is the purchase or sale
of forward foreign currency with respect to specific receivables or payables of
the Fund accruing in connection with the purchase and sale of its portfolio
securities, the sale and redemption of shares of the Fund or the payment of
dividends and distributions by the Fund. Position hedging is the sale of forward
foreign currency with respect to portfolio security positions denominated or
quoted in such foreign currency. The Fund will not enter into or maintain a
position in those contracts if their consummation would obligate the Fund to
deliver an amount of foreign currency greater than the value of the Fund's
assets denominated or quoted in, or currency convertible into, such currency.
When the Fund enters into a position hedging transaction, its custodian
bank places cash or liquid securities in a separate account of the Fund in an
amount equal to the value of the Fund's total assets committed to the
consummation of the forward contract. The amount of the securities placed in the
separate account are adjusted to maintain the value of those securities equal to
the Fund's commitment under the contract.
Hedging against a decline in the value of a currency by means of forward
currency contracts, options on currencies, currency futures contracts and
options on currency futures contracts (see below and "Investment Objectives and
Policies" in the Prospectus) does not eliminate fluctuations in the value of the
Fund's portfolio securities or prevent losses. Such transactions also preclude
the opportunity for gain if the value of the currency moves in an unanticipated
manner. Moreover, it may not be possible for the Fund to hedge against a change
which is generally anticipated, since appropriate transactions might not then be
available.
The cost of engaging in foreign currency transactions by the Fund varies
with such factors as the currencies involved, the length of the contract period
and the market conditions then prevailing. Transactions in foreign currency
exchange usually are conducted on a principal basis, so no fees or commissions
are involved.
Loans of Portfolio Securities. The Fund has authority to lend its
portfolio securities provided: (1) the loan is secured continuously by
collateral consisting of U.S. Government securities or cash or cash equivalents
adjusted daily to make a market value at least equal to the current market value
of the securities loaned; (2) the Fund may at any time call the loan and regain
the securities loaned; (3) the Fund will receive any interest or dividends paid
on the loaned securities; and (4) the aggregate market value of securities
loaned will not at any time exceed 10% of the total assets of the Fund. In
addition, it is anticipated that the Fund may share with the borrower some of
the income received on the collateral for the loan or that it will be paid a
premium for the loan. In determining whether to lend securities, the Adviser
considers all relevant factors and circumstances including the creditworthiness
of the borrower.
Futures Transactions. The Fund may enter into futures contracts on U.S.
and foreign debt securities ("interest-rate futures"), on stock indices and on
currencies of countries in which the Fund conducts its investment activities.
Interest rate and currency futures contracts create an obligation to purchase or
sell specified amounts of debt securities or currency on a specified future
date. Although these contracts generally call for making or taking delivery of
the underlying securities or currency, the contracts are in most cases closed
out before the maturity date by entering into an offsetting transaction which
may result in a profit or loss.
Securities index futures contracts are contracts to buy or sell units of a
particular index of securities at a specified future date for an amount equal to
the difference between the original contract purchase price and the price at the
time the contract is closed out, which may be at maturity or through an earlier
offsetting transaction.
The purchase or sale of a futures contract involves no sale price or
premium, unlike the purchase of a security or option. Instead, an amount of cash
or securities acceptable to the broker and the relevant contract market,
generally about 5% of the contract amount, must be deposited with the broker as
"initial margin." This "initial margin" represents a "good faith" deposit
assuring the performance of both the purchaser and the seller under the futures
contract. Subsequent "variation margin" payments must be made daily to and by
the broker to reflect variations in the price of the futures contract. When the
contract is settled or closed out by an offsetting transaction, a final
determination is made of variation margin due to or from the broker. A nominal
commission is also paid on each completed sale transaction.
Options Transactions. The Fund may purchase or write put or call options
on futures contracts, individual securities, currencies or stock indices to
hedge against fluctuations in securities prices and currency exchange rates and
to adjust its risk exposure relative to the Benchmark. See "Investment Objective
and Policies" in the Prospectus.
The Fund may purchase options on exchanges and in over-the-counter markets
to the extent the value of such options owned by the Fund does not exceed 5% of
its net assets. The Fund may write put options and covered call options on
exchanges and in the over-the-counter markets. A call option gives the purchaser
the right, until the option expires, to purchase the underlying futures
contract, security or currency at the exercise price or, in the case of a stock
index option, to receive a specified amount. A put option gives the purchaser
the right, until the option expires, to sell the underlying futures contract,
security or currency at the exercise price or, in the case of a stock index
option, to pay a specified amount.
When the Fund writes an option, it receives a premium which it retains
whether or not the option is exercised. By writing a call option, the Fund
becomes obligated, either for a certain period or on a certain date, to sell the
underlying futures contract, security or currency to the purchaser at the
exercise price (or to pay a specified price with respect to an index option) if
the option is exercised. At the time or during the period when the option may be
exercised, the Fund risks losing any gain in the value of the underlying futures
contract, security or currency or stock index over the exercise price. By
writing a put option, the Fund becomes obligated either for a certain period or
on a certain date, to purchase the underlying futures contract, security or
currency at the exercise price, or to pay the specified price in connection with
an index option, if the option is exercised. The Fund might, therefore, be
obligated to purchase or make a payment for more than the current market price
of the particular futures contract, security, currency or index option.
The Fund writes only "covered" options on securities and currencies. This
means that so long as the Fund is obligated as the writer of a call option on a
security or currency, it will own an equivalent amount of the underlying
security, currency or liquid securities denominated, quoted in or currently
convertible into such currency. The Fund will be considered "covered" with
respect to a put option it writes if, so long as it is obligated as the writer
of a put option, it deposits and maintains with its custodian in a segregated
account an amount of the underlying securities, currency or liquid securities
denominated, quoted in or currently convertible into such currency having a
value equal to or greater than the exercise price of the option. There is no
limitation on the amount of call options the Fund may write. However, the Fund
may write covered put options on currencies only to the extent that cover for
such options does not exceed 25% of the Fund's net assets.
The writer of an option that wishes to terminate an obligation may in some
cases be able to effect a "closing purchase transaction." This is accomplished
by buying an option of the same series as the option previously written. The
effect of the purchase is that the writer's position will be cancelled by the
clearing corporation. However, a writer may not effect a closing purchase
transaction after being notified of the exercise of an option. Likewise, an
investor who is the holder of an option may liquidate a position by effecting a
"closing sale transaction." This is accomplished by selling an option of the
same series as the option previously purchased. There is no guarantee that
either a closing purchase or a closing sale transaction can be effected.
The Fund will realize a profit from a closing transaction if the price of
the transaction is less than the premium received from writing the option or is
more than the premium paid to purchase the option; the Fund will realize a loss
from a closing transaction if the price of the transaction is more than the
premium paid to purchase the option. Because increases in the market price of a
call option will generally reflect increases in the value of the underlying
security, futures contract, index option or currency, any loss in closing out a
call option is likely to be offset in whole or in part by appreciation of the
underlying collateral owned by the Fund.
Investment Restrictions. The Trust has adopted with respect to the Fund
the following "fundamental" restrictions which, along with its investment
objective, cannot be changed without approval by the holders of a majority of
the shares of beneficial interest in the Fund ("Fund shares"). Such majority is
defined by the Investment Company Act of 1940 as the lesser of (i) 67% or more
of the Fund shares present in person or by proxy at a meeting, if the holders of
more than 50% of the outstanding voting securities are present or represented by
proxy; or (ii) more than 50% of the outstanding voting securities. The Fund may
not:
1. With respect to 75% of its total assets, invest more than 5% of the
value of such assets in the securities of any one issuer or purchase
more than 10% of the voting securities of any one issuer (except for
investments in securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities).
2. Invest 25% or more of its total assets (taken at market value at
the time of each investment) in the securities of issuers in any
particular industry or in securities issued or guaranteed by the
Japanese government or its agencies or instrumentalities provided
that this restriction shall not prevent the Fund from purchasing the
securities of any issuer pursuant to the exercise of rights
distributed to the Fund by the issuer, except that no such
purchase may be made if as a result the Fund would no longer be a
diversified investment company as defined in the Investment Company
Act of 1940.
3. Borrow amounts in excess of 10% of its total assets taken at cost
(not including the amount borrowed) and then only for temporary or
emergency purposes.
4. Issue senior securities except as appropriate to evidence permitted
borrowing (for the purpose of this restriction, forward foreign
currency exchange contracts and collateral arrangements with respect
to such contracts are not deemed to be senior securities).
5. Underwrite securities issued by other persons except to the extent
that the purchase of portfolio securities and their later
disposition may be deemed to be underwriting.
6. Purchase or sell real estate except that the Fund may invest in
securities secured by real estate or interests therein or securities
issued by companies which invest in real estate or interests
therein.
7. Purchase or sell commodities or commodity contracts (for purposes of
this restriction, interest-rate, index and currency futures
contracts, options on such contracts and on stock indices and
currencies, and forward foreign currency exchange contracts are not
deemed to be commodities or commodity contracts).
8. Make loans to other persons except that the Fund may (i) lend its
portfolio securities in accordance with applicable legal
requirements, (ii) enter into repurchase agreements and (iii)
purchase debt obligations in accordance with its investment
objective and policies.
With respect to restriction 8, above, the Fund has no present intention of
lending its portfolio securities.
The Fund has adopted the following additional restrictions which are not
fundamental and which may be changed without stockholder approval, to the extent
permitted by applicable law, regulation or regulatory policy. The Fund may not:
a. With respect to 25% of its total assets, invest more than 5% of the
value of such assets in the securities of any one issuer, or
purchase more than 10% of the voting securities of any one issuer
(except for investments in securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities)1
b. Make short sales of securities, maintain short positions or purchase
securities on margin, except for short-term credits as are necessary
for the clearance of transactions and in connection with
transactions involving forward foreign currency exchange contracts,
futures contracts and related options;
c. Invest more than 5% of its total assets in securities of unseasoned
issuers which, including their predecessors, have been in operation
for less than three years (except obligations issued or guaranteed
by the U.S. Government, the Japanese government or their agencies or
instrumentalities) and equity securities which are not readily
marketable;
d. Enter into a repurchase agreement not terminable within seven days
if the total of such agreements would be more than 5% of the value
of the Fund's total assets;
e. Invest in securities of other investment companies (other than in
connection with a merger, consolidation, reorganization or
acquisition of assets) except to the extent permitted by the
Investment Company Act of 1940 and related rules and regulatory
interpretation;
f. Purchase put or call options if, as a result thereof, the value of
put and call options owned by the Fund would exceed 5% of the Fund's
net assets;
g. Purchase warrants of any issuer if, as a result more than 2% of the
value of the total assets of the Fund would be invested in warrants
which are not listed on the New York Stock Exchange or the American
Stock Exchange, or more than 5% of the value of the total assets of
the Fund would be invested in warrants. Warrants acquired by the
Fund in units or attached to securities may be deemed to be without
value;
h. Purchase or retain for the Fund the securities of any issuer if
those officers and trustees of the Trust, or directors and officers
of its investment adviser, who individually own more than 1/2 of 1%
of the outstanding securities of such issuer, together own more than
5% of such outstanding securities;
i. Purchase from or sell to any of the officers and trustees of the
Trust, its investment adviser, its principal underwriter or the
officers and directors of its investment adviser or principal
underwriter, portfolio securities of the Fund;
j. Invest in oil, gas or other mineral exploration or development
companies (although it may purchase securities of issuers which own,
sponsor or invest in such interests);
k. Pledge, mortgage or hypothecate its assets, except that to secure
permitted borrowings it may pledge securities having a value at the
time of the pledge of not more than 15% of the Fund's total assets
taken at cost. (For purposes of this restriction, collateral
arrangements with respect to permitted options and futures
transaction and forward foreign exchange contracts are not deemed to
involve a pledge of assets.);
l. Purchase any securities subject to legal or contractual restrictions
on the resale thereof, or purchase securities which are not readily
marketable including securities of foreign issuers which are not
listed on a recognized domestic or foreign securities exchange, or
enter into repurchase agreements which are not terminable within
seven days if such purchase or entering into a repurchase agreement
would cause more than 10% of the value of the total assets (or 15%
of net assets) of the Fund to be invested in such securities and
such repurchase agreements, except that the Fund may not invest more
than 5% of the value of its total assets in repurchase agreements
which are not terminable within seven days;
m. Purchase additional securities if its borrowings exceed 5% of its
total assets.
______________
1 With respect to the remaining 75% of the value of the Fund's total assets,
this limitation is fundamental and therefore cannot be changed without the
approval of a majority of the Fund shares. See restriction number 1,
supra.
The portfolio securities of the Fund may be turned over whenever necessary
or appropriate in the opinion of the Fund's management to seek the achievement
of the basic objective of the Fund. The turnover rate of the Fund's portfolio
was 17% for the fiscal year ended October 31, 1999.
RISK FACTORS
United States persons investing in securities of Japanese issuers should
be aware of certain information about Japan and international investment which
can make this type of investing different from investments in securities of
United States issuer's.
The Japanese economy has experienced difficulties, although there have
been positive signs due to certain economic stimulus measures taken by the
Japanese government and low-interest rates.
The Adviser believes that structural reformation is necessary in order for
Japan to break out of this uncertain economy, i.e., government support for
troubled banks, overall deregulation of industry and society, improving labor
and productivity through corporate restructuring, and shifting or industrial
priorities toward promising new fields. What we have seen lately is ether
realization or significant progress on all these aspects. The government has
been announcing a series of deregulation measures since late 1996, including the
"Big-Bang" of financial markets. For the resolution of the bad-loan problem
experienced by Japanese banks, public purchase of collateral land is being
implemented. Banks are also making progress in writing off significant portions
of their non-performing portfolios.
Japan's stock price level have been generally low in terms of dividend
yield relative to bond yield, price to book value per share and other valuation
measures. This under-valuation may be attributable to: (1) concern over economic
slowdown due to the rise of the consumption tax rate and the decrease of public
works; (2) the financial institutions' bad loan problem; and (3) uncertainty of
deregulation and restructuring. The Adviser is cautiously optimistic that these
issues will be resolved in due course.
Various other factors involved in international investing generally may
affect the Fund's performance either favorably or unfavorably. These include
fluctuations in currency exchange rates; possible imposition of, or changes in,
exchange controls; costs of currency conversion; non-negotiable brokerage
commissions (which may result in higher commissions); less publicly available
information; different accounting standards; less liquidity and greater market
volatility; difficulties of enforcing obligations in other countries;
differences in the nature and quality of securities regulation; differences in
taxation (which may include withholding taxes on income earned on Fund
securities and transfer tax on sales proceeds); war; expropriation; political or
social unrest; diplomatic developments; and natural disasters.
The Fund's management will attempt to be alert to these factors and to act
to mitigate any unfavorable consequences to extent practicable, but there can be
no assurance its efforts will be successful or that protective action will be
feasible.
The operating expense ratio of the Fund can be expected to be higher than
that of an investment company investing exclusively in securities of United
States issuers since the expenses of the Fund (such on Japan, the Fund should be
considered as a vehicle for diversification of investments and not as a balanced
investment program.
PERFORMANCE INFORMATION
The Fund may from time to time include figures indicating the Fund's total
return or average annual total return in advertisements or reports to
stockholders or prospective investors. Average annual total return and total
return figures represent the increase (or decrease) in the value of an
investment in the Fund over a specified period. Both calculations assume that
all income dividends and capital gains distributions during the period are
reinvested at net asset value in additional Fund shares. Quotations of the
average annual total return reflect the deduction of a proportional share of
Fund expenses on an annual basis. The results, which are annualized, represent
an average annual compounded rate of return on a hypothetical investment in the
Fund over a period of 1, 5 and 10 years ending on the most recent calendar
quarter (but not for a period greater than the life of the Fund), calculated
pursuant to the following formula:
P (1 + T)n= ERV
where P = a hypothetical initial payment of $1,000,
T = the average annual total return,
n = the number of years, and
ERV = the ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period.
For the one year period ended October 31, 1999, the Fund's average annual
total return was 51.21%. For the five year period ended October 31, 1999 and
the period July 10, 1989 (commencement of operations) to October 31, 1999, the
Fund's average annual total return was (2.90)% and (3.33)%, respectively.
Quotations of total return, which are not annualized, represent historical
earnings and asset value fluctuations. Total return is based on past performance
and is not a guarantee of future results. For the one year and five year periods
ended October 31, 1999 and the period July 10, 1989 to October 31, 1999 the
Fund's total return was 51.21%, (13.68)%, and (29.40)%, respectively.
Performance information for the Fund may be compared, in reports and
promotional literature, to: (i) the Morgan Stanley Capital International Index;
(ii) the Tokyo Stock Exchange; (iii) the Standard & Poor's 500 Stock Price Index
("S&P 500 Index"), the Dow Jones Industrial Average ("DJIA"), or other
appropriate unmanaged indices of performance of various types of investments, so
that investors may compare the Fund's results with those of indices widely
regarded by investors as representative of the securities markets in general;
(iv) other groups of mutual funds tracked by Lipper Analytical Services, a
widely used independent research firm which ranks mutual funds by overall
performance, investment objectives, and assets, or tracked by other services,
companies, publications, or persons who rank mutual funds on overall performance
or other criteria; (v) the Consumer Price Index (a measure of inflation) to
assess the real rate of return from an investment in the Fund; and (vi) a
universe of money managers with similar country allocation and performance
objectives. Unmanaged indices may assume the reinvestment of dividends, but
generally do not reflect deductions for administrative and management costs and
expenses.
Performance information for the Fund reflects only the performance of a
hypothetical investment in the Fund during the particular time period on which
the calculations are based. Performance information should be considered in
light of the Fund's investment objectives and policies, the types and quality of
the Fund's portfolio investments, market conditions during the particular time
period and operating expenses. Such information should not be considered as a
representation of the Fund's future performance.
TRUSTEES AND EXECUTIVE OFFICERS
The trustees provide overall supervision of the affairs of the Trust. The
trustees and executive officers of the Trust and their principal occupations
during the past five years are listed below. Certain persons named as trustees
also serve in similar capacities for other mutual funds sponsored by the
Distributor as indicated below.
*EDWARD L. JAROSKI (53), Trustee and President of the Trust. 5847 San
Felipe, Suite 4100, Houston, Texas 77057. Chairman of the Board and
Director of the Administrator since 1992; President and Director of
Capstone Asset Planning Company and Capstone Financial Services, Inc.
since 1987; Director and officer of other Capstone Funds.
JAMES F. LEARY (69), Trustee. 2006 Peakwood Dr., Garland, Texas 75044.
Managing Director of Benefit Capital South West, Inc. ( financial
services). Director: other Capstone Funds; Associated Materials, Inc.
(tire cord, siding and industrial cable manufacturer); MESBIC Ventures,
Inc. (minority enterprise small business investment company); Quest
Products Corp. (consumer products); Prospect Street High Income Fund
(closed end mutual fund).
JOHN R. PARKER (53), Trustee. 541 Shaw Hill, Stowe, Vermont 05672.
Consultant and private investor (since 1990); Director of Nova Natural
Resources (oil, gas, minerals); Director of other Capstone Funds; formerly
Senior Vice President of McRae Capital Management, Inc. (1991-1995); and
registered representative of Rickel & Associates (1988-1991).
BERNARD J. VAUGHAN (71), Trustee. 113 Bryn Mawr Avenue, Bala Cynwyd,
Pennsylvania 19004. Director of other Capstone Funds; formerly Vice
President of Fidelity Bank (1979-1993).
ROBERT W. SCHARAR (51), President of the Fund. 5847 San Felipe, Suite 850,
Houston, Texas 77057. President and Director of FCA Corp since 1983.
LINDA G. GIUFFRE (38), Secretary/Treasurer. 5847 San Felipe, Suite 4100,
Houston, Texas 77057. Vice President, Compliance of Capstone Financial
Services, Capstone Asset Management Company and Capstone Asset Planning
Company (since November 1999), Vice President and Treasurer (1996-1999) of
Capstone Financial Services, Inc.; Secretary/Treasurer (1998-1999) of
Capstone Asset Planning Company; Vice President (1996-1998) of Capstone
Asset Management Company and Capstone Asset Planning Company; Treasurer
(1990-1996) and Secretary (1994-1996) of Capstone Financial Services, Inc.
and Capstone Asset Management Company; Treasurer (1990-1996) and Secretary
(1995-1996) of Capstone Asset Planning Company; officer of other Capstone
Funds.
- --------------
* Trustee who is an interested person as defined in the Investment
Company Act of 1940.
The trustees and officers of the Trust as a group own less than one
percent of the outstanding Fund shares. The independent trustees also received
compensation for serving as directors of other investment companies sponsored by
the Administrator.
The trustees and officers of the Fund as a group own less than one percent
of the outstanding shares of the Fund. Each independent Trustee s erves as a
director or trustee on the Board of four other registered investment companies
comprising the Capstone Complex of Mutual Funds. The independent Directors/
Trustees are entitled to $2,000 per meeting attended and are paid an annual
retainer of $6,000. In addition, each independent Director/Trustee is paid $500
per committee for serving on four (4) committees. The Lead Director is paid an
additional $2,000 for serving the complex. All fees received by the Directors/
Trustees are allocated among the funds based on net assets. The Directors/
Trustees and officers of the Capstone Funds are also reimbursed for expenses
incurred in attending meetings of the Boards of Directors/Trustees. For the
fiscal year ended October 31, 1999, the Fund paid or accrued for the account of
its officers and trustees, as a group for services and expenses in all
capacities, a total of $3,746.
The following table represents the compensation received by the independent
Directors/Trustees during fiscal 1999 from the Capstone Funds complex.
<TABLE>
Compensation Table
Aggregate Pension or Total Compensation
Compensation Retirement Benefits Estimated Annual From Registrant and
From Accrued As Part of Benefits Upon Fund Complex Paid
Name of Person, Position Registrant* Fund Expenses Retirement to Directors (4)
<S> <C> <C> <C> <C>
James F. Leary, Trustee $ 861 $0 $0 $18,250 (1)(2)(3)
John R. Parker, Trustee $1,111 $0 $0 $19,500 (1)(2)(3)
Bernard J. Vaughan, Trustee $1,111 $0 $0 $19,500 (1)(2)(3)
- ---------------------
<FN>
* Company does not pay deferred compensation.
(1) Trustee of Capstone International Series Trust - Capstone New Zealand Fund
(2) Director of Capstone Growth Fund, Inc. and Capstone Fixed Income Series, Inc.
(3) Trustee of Capstone Social Ethics and Religious Values Fund
(4) Fund Complex includes 10 funds.
</FN>
</TABLE>
INVESTMENT ADVISORY AGREEMENT
On August 22, 1997 the Fund's shareholders approved a new Investment
Advisory Agreement between Capstone International Series Trust, on behalf of the
Fund, and FCA Corp ("FCA"). This action was in response to the resignation of
the Fund's previous investment adviser, Nikko Capital Management (USA), Inc.
("Nikko"). The new agreement became effective on August 25, 1997.
Pursuant to the investment advisory agreement, FCA (the "Adviser") manages
the investment of the Fund's assets and places orders for the purchase and sale
of its portfolio securities. The Adviser is responsible for obtaining and
evaluating economic, statistical, and financial data and for formulating and
implementing investment programs in furtherance of the Fund's investment
objectives and policies.
The Advisory Agreement also provides that the Adviser shall not be liable
to the Fund for any actions or omissions in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of the Adviser's obligations
or duties under the Advisory Agreement.
The Advisory Agreement was last approved by the Board of Trustees on May
3, 1999 and may be continued from year to year if specifically approved at
least annually (a) by the Board of Trustees of the Trust or by vote of a
majority of the Fund's shares and (b) by the affirmative vote of a majority of
the trustees who are not parties to the agreement or interested persons of any
such party by votes cast in person at a meeting called for such purpose. The
Advisory Agreement provides that it shall terminate automatically if assigned
and that it may be terminated without penalty by either party on 60 days'
written notice.
During the fiscal years ended October 31, 1997 and 1998, the Fund accrued
investment advisory fees to Nikko in the amount of $12,039 and $16,611, all
of which were waived pursuant to legal and voluntary expense limitations. Fees
to FCA for fiscal year ended October 31, 1999 were $27,893.
ADMINISTRATION AGREEMENT
Under an agreement ("Administration Agreement") between the Trust and
Capstone Asset Management Company (the "Administrator"), the Administrator
supervises all aspects of the Fund's operations other than the management of its
investments. As part of these services, it oversees the performance of
administrative and professional services to the Fund by others; provides office
facilities; prepares reports to stockholders and the Securities and Exchange
commission; and provides personnel for supervisory, administrative and clerical
functions. Except as noted below, the costs of these services are borne by the
Administrator. For the Administrator's services, the Fund will pay to the
Administrator a fee, calculated daily and payable quarterly, equal to an annual
rate of 0.20% of the Fund's average net assets. For the fiscal year ended
October 31, 1999 the Fund paid administrative fees in the amount of $7,604.
The Fund bears the cost of its accounting services, performed by The Fifth
Third Bank, which includes maintaining its financial books and records and
calculating its daily net asset value. The Fund also pays transfer agency fees,
custodian fees, legal and auditing fees, the costs of printing reports to
stockholders and the Securities and Exchange Commission, fees under the Service
and Distribution Plan (see "Distributor") and all other ordinary expenses not
specifically borne by the Administrator.
DISTRIBUTOR
Capstone Asset Planning Company (the "Distributor"), 5847 San Felipe,
Suite 4100, Houston, Texas 77057, acts as the principal underwriter of the Fund
shares pursuant to an agreement with the Trust (the "Distribution Agreement").
The Distributor has the exclusive right to distribute Fund shares in a
continuous offering through affiliated and unaffiliated dealers. The
Distributor's obligation is an agency or "best efforts" arrangement under which
the Distributor is required to take and pay for only such Fund shares as may be
sold to the public. The Distributor is not obligated to sell any stated number
of shares. The Distributor bears the cost of printing (but not typesetting)
prospectuses used in connection with this offering and the cost and expense of
supplemental sales literature, promotion and advertising. Effective August 21,
1995, the front end sales load applicable to sales of the Fund's shares was
eliminated. Prior to August 21, 1995, sales of Fund shares were subject to a
sales charge equal to a percentage of the net asset value of the shares to be
purchased. The sales charge was paid to the Distributor, who reallowed a portion
of the sales charge to broker-dealers who had an agreement with the Distributor
to participate in the offering of Fund shares.
The Distribution Agreement is renewable from year to year if approved (a)
by the Fund's Board of Trustees or by a vote of a majority of the Fund's
outstanding voting securities and (b) by the affirmative vote of a majority of
trustees who are not parties to the Distribution Agreement or interested persons
of any party, by votes cast in person at a meeting called for such purpose. The
Distribution Agreement provides that it will terminate if assigned, and that it
may be terminated without penalty by either party on 60 days' written notice.
The Distributor receives no discounts or commissions, redemption or repurchase
fees or brokerage commissions from the Fund. It does receive payments, as
described below, under the Fund's Service and Distribution Plan.
The Fund adopted, effective September 1, 1992, a Service and Distribution
Plan (the "Plan") pursuant to Rule 12b-1 of the Investment Company Act of 1940
which permits the Fund to reimburse the Distributor for certain expenses in
connection with the distribution of its shares and provision of certain services
to stockholders. See "Fee Table" in the Prospectus. As required by Rule 12b-1,
the Fund's Plan and related agreements were approved by a vote of the Fund's
Board of Trustees, and by a vote of the trustees who are not "interested
persons" of the Fund as defined under the 1940 Act and have no direct or
indirect interest in the operation of the Plan or any agreements related to the
Plan (the "Plan Trustees"), and by the Fund's stockholders at a Special Meeting
of Stockholders held August 10, 1992.
As required by Rule 12b-1, the directors will review quarterly reports
prepared by the Distributor on the amounts expended and the purposes for the
expenditures. The amounts paid to the Distributor and reallowed by the
Distributor to other Service Organizations during the past three fiscal years
were as follows:
Fiscal Year Total 12b-1 Amount Retained Amount Paid to Other
Ended Fees Paid by CAPCO Service Organizations
10/99 $ 9,612 $ 9,391 $221
10/98 $ 5,536 $ 5,121 $415
10/97 $ 6,630 $ 5,901 $729
The Plan and related agreements may be terminated at any time by a vote of
the Plan Trustees or by vote of a majority of the Fund's outstanding voting
securities. As required by Rule 12b-1, selection and nomination of disinterested
trustees for the Fund is committed to the discretion of the trustees who are not
"interested persons" as defined under the 1940 Act.
Any change in the Plan that would materially increase the distribution
expenses of the Fund requires stockholder approval, but otherwise, the Plan may
be amended by the trustees, including a majority of the Plan Trustees.
The Plan will continue in effect for successive one year periods provided
that such continuance is specifically approved by a majority of the trustees,
including a majority of the Plan Trustees. Continuance of the Plan was last
approved by a majority of trustees and Plan Trustees on May 3, 1999. In
compliance with the Rule, the trustees, in connection with both the adoption and
continuance of the Plan, requested and evaluated information they thought
necessary to make an informed determination of whether the Plan and related
agreements should be implemented, and concluded, in the exercise of reasonable
business judgment and in light of their fiduciary duties, that there is a
reasonable likelihood that the Plan and related agreements will benefit the Fund
and its stockholders.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is responsible for decisions to buy and sell securities for
the Fund and for the placement of its portfolio business and the negotiation of
the commissions paid on such transactions. In over-the-counter transactions,
orders are placed directly with a principal market maker unless it is believed
that a better price and execution can be obtained by using a broker. Except to
the extent that the Fund may pay higher brokerage commissions for brokerage and
research services (as described below) on a portion of its transactions executed
on securities exchanges, the Adviser seeks the best security price at the most
favorable commission rate. In selecting dealers and in negotiating commissions,
the Adviser considers the firm's reliability, the quality of its execution
services on a continuing basis and its financial condition. When more than one
firm are believed to meet these criteria, preference may be given to firms which
also provide research services to the Fund or the Adviser. Subject to the Fund's
overall brokerage policies, the Adviser may effect securities transactions
through Capstone Asset Planning Company and TradeStar Investments, Inc.,
broker-dealer affiliates of the Administrator.
Section 28(e) of the Securities Exchange Act of 1934 ("Section 28(e)")
permits an investment adviser, under certain circumstances, to cause an account
to pay a broker or dealer who supplies brokerage and research services a
commission for effecting a securities transaction in excess of the amount of
commission another broker or dealer would have charged for effecting the
transaction. Brokerage and research services include (a) furnishing advice as to
the value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities, (b) furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy, and the performance
of accounts, and (c) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement and custody).
Pursuant to provisions of the Advisory Agreement, the Trust's Board of
Trustees has authorized the Adviser to cause the Fund to incur brokerage
commissions in an amount higher than the lowest available rate in return for
brokerage and research services which provide lawful and appropriate assistance
to the Adviser in carrying out its investment-decision making responsibilities.
The Adviser is of the opinion that the continued receipt of supplemental
investment research services from dealers is essential to its provision of high
quality portfolio management services to the Fund. The Adviser undertakes that
such higher commissions will not be paid by the Fund unless (a) the Adviser
determines in good faith that the amount is reasonable in relation to the
services in terms of the particular transaction or in terms of the Adviser's
overall responsibilities with respect to the accounts as to which it exercises
investment discretion, (b) such payment is made in compliance with the
provisions of Section 28(e) and other applicable state and Federal laws and
regulations, and (c) in the opinion of the Adviser, the total commissions paid
by the Fund are reasonable in relation to the expected benefits to the Fund over
the long term. The investment advisory fee paid by the Fund under the Advisory
Agreement is not reduced as a result of the Adviser's receipt of research
services.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking best execution and such other
policies as the Board of Trustees may determine, the Adviser may consider sales
of Fund shares as a factor in the selection of dealers to execute portfolio
transactions for the Fund.
The Adviser places portfolio transactions for other advisory accounts.
Research services furnished by firms through which the Fund effects its
securities transactions may be used by the Adviser in servicing all of its
accounts; not all of such services may be used by the Adviser in connection with
the Fund. In the opinion of the Adviser, the benefits from research services to
each of the accounts (including the Fund) managed by the Adviser cannot be
measured separately. Because the volume and nature of the trading activities of
the accounts are not uniform, the amount of commissions in excess of the lowest
available rate paid by each account for brokerage and research services will
vary. However, in the opinion of the Adviser, such costs to the Fund will not be
disproportionate to the benefits received by the Fund on a continuing basis.
The Adviser seeks to allocate portfolio transactions equitably whenever
concurrent decisions are made to purchase or sell securities by the Fund and
another advisory account. In some cases, this procedure could have an adverse
effect on the price or the amount of securities available to the Fund. In making
such allocations among the Fund and other advisory accounts, the main factors
considered by the Adviser are the respective investment objectives, the relative
size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held, and opinions of the persons responsible for recommending the
investment.
Fixed commissions are charged on the securities exchanges in Japan. Such
fixed commissions are generally higher than negotiated commissions on comparable
United States transactions. Brokerage commissions paid by the Fund on portfolio
transactions for the fiscal year ended October 31, 1999 totaled $5,305 (0.14% of
the average net assets of the Fund), none of which was paid to affiliated
broker-dealers. There were no securities transactions effected through brokers
who furnished the Fund with statistical, research and advisory information. The
Fund also executed trades in the amount of $528,739 in which a "mark up" (the
dealer's profit) was included in the price of the securities.
During the fiscal years ended October 31, 1998 and 1997, the Fund paid
$9,722 and $8,932, respectively, in brokerage commissions on portfolio trades,
all of which was paid to The Nikko Securities Co. International, Inc.
DETERMINATION OF NET ASSET VALUE
The Fund's net asset value is computed daily, Monday through Friday, as of
the close of regular trading on the New York Stock Exchange, which is currently
4:00 p.m. Eastern time. The Fund's net asset value will not be computed on the
following holidays: New Year's Day, Martin Luther King's Birthday, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. The Fund will in some cases value its portfolio securities as
of days on which non-U.S. exchanges on which its portfolio securities are
principally traded are closed for holidays or other reasons. At such times, the
Fund will follow such procedures as the trustees have determined to be
reasonable.
The Fund's net asset value per share is computed by dividing the value of
the securities held by the Fund plus any cash or other assets (including any
accrued expenses) by the total number of Fund shares outstanding at such time.
To avoid large fluctuations in the computed net asset value, accrued expenses
will be charged against the Fund on a daily basis, i.e. 1/360 of the annual
amount due by the Fund each year.
Any assets or liabilities initially expressed in terms of foreign
currencies are translated into U.S. dollars at the prevailing market rates at
17:00 Greenwich Mean Time on each U.S. business day.
Portfolio securities and futures contracts which are traded on a
securities exchange are valued at the last sale price on that exchange prior to
the relevant closing or, if there is no recent last sale price available, at the
last current bid quotation. A security or futures contract which is listed or
traded on more than one exchange is valued at the quotation on the exchange
determined to be the primary market for such security or contract. All other
equity securities and futures contracts not so traded are valued at the last
current bid quotation prior to the relevant securities exchange closing. Fixed
income securities are valued using market quotations or pricing services. In the
absence of an applicable price, securities and futures contracts will be valued
at a fair value as determined in good faith by the trustees or in accordance
with procedures established by the trustees.
HOW TO BUY AND REDEEM SHARES
Shares of the Fund are sold in a continuous offering without a sales
charge and may be purchased on any business day through authorized dealers,
including Capstone Asset Planning Company. Certain broker-dealers assist their
clients in the purchase of shares from the Distributor and charge a fee for this
service in addition to the Fund's public offering price.
After an order is received by the Distributor, shares will be credited to
a stockholder's account at the net asset value next computed after an order is
received. See "Determination of Net Asset Value". Initial purchases must be at
least $200; however, this requirement may be waived by the Distributor for plans
involving continuing investments. There is no minimum for subsequent purchases
of shares. No stock certificates representing shares purchased will be issued
except upon written request to the Fund's Transfer Agent. The Fund's management
reserves the right to reject any purchase order if, in its opinion, it is in the
Fund's best interest to do so. See "Buying and Selling Fund Shares" in the
Prospectus.
Generally, stockholders may require the Fund to redeem their shares by
sending a written request, signed by the record owner(s), to Capstone Japan
Fund, c/o PFPC, Inc., P.O. Box 61503, 211 South Gulph Road, King of Prussia,
Pennsylvania 19406-3101. In addition, certain expedited redemption methods are
available. See "Buying and Selling Fund Shares" in the Prospectus.
TAXES
The following summary describes some of the more significant U.S. Federal
income tax consequences applicable to investors in the Fund based on existing
Federal tax law. New tax laws may be enacted which may affect the tax
consequences of an investment in the Fund. The following discussion is
necessarily general, and prospective investors are urged to consult their own
tax advisers with respect to the particular tax consequences to the investor of
an investment in the Fund.
The Fund intends to qualify annually and elect to be treated as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). Qualification and election to be taxed as a
regulated investment company involves no supervision of management or investment
policies or practices by any government agency. To qualify as a regulated
investment company the Fund must, with respect to each taxable year, distribute
to stockholders at least 90% of its investment company taxable income (which
includes, among other items, dividends, interest, certain foreign currency gains
and losses and the excess of net short-term capital gains over net long-term
capital losses) and meet certain diversification of assets, source of income,
and other requirements of the Code.
As a regulated investment company, the Fund generally will not be subject
to Federal income tax on its investment company taxable income and net capital
gains (net long-term capital gains in excess of net short-term capital losses),
if any, that it distributes to stockholders. The Fund intends to distribute to
its stockholders, at least annually, substantially all of its investment company
taxable income and net capital gains. Amounts not distributed on a timely basis
in accordance with a calendar year distribution requirement are subject to a
nondeductible 4% excise tax. To prevent imposition of the tax, the Fund must
distribute during each calendar year an amount equal to the sum of: (1) at least
98% of its ordinary income (not taking into account any capital gains or losses)
for the calendar year, (2) at least 98% of its capital gains in excess of its
capital losses for the twelve-month period ending on October 31 of the calendar
year (reduced by certain net operating losses, as prescribed by the Code), and
(3) all ordinary income and capital gains from previous years that were not
distributed during such years. A distribution will be treated as paid on
December 31 of the calendar year if it is declared by the Fund in October,
November or December of that year to stockholders on a record date in such a
month and paid by the Fund during January of the following calendar year. Such
distributions will be taxable to stockholders in the calendar year in which the
distributions are declared, rather than the calendar year in which the
distributions are received. To prevent application of the excise tax, the Fund
intends to make its distributions in accordance with the calendar year
distribution requirement.
The Fund may invest in stocks of foreign companies that are classified
under the Code as passive foreign investment companies ("PFICs"). In general, a
foreign company is classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross income is
investment-type income. Under the PFIC rules, an "excess distribution" received
with respect to PFIC stock is treated as having been realized ratably over the
period during which the Fund held the PFIC stock. The Fund itself will be
subject to tax on the portion, if any, of the excess distribution that is
allocated to the Fund's holding period in prior taxable years (and an interest
factor will be added to the tax, as if the tax had actually been payable in such
prior taxable years) even though the Fund distributes the corresponding income
to stockholders. Excess distributions include any gain from the sale of PFIC
stock as well as certain distributions from a PFIC. All excess distributions are
taxable as ordinary income.
The Fund may be able to elect alternative tax treatment with respect to
PFIC stock. Under an election that currently may be available, the Fund
generally would be required to include in its gross income its share of the
earnings of a PFIC on a current basis, regardless of whether any distributions
are received from the PFIC. If this election is made, the special rules,
discussed above, relating to the taxation of excess distributions, would not
apply. Alternatively, another election would involve marking-to-market the
Fund's PFIC shares at the end of each taxable year, with the result that
unrealized gains would be treated as though they were realized and reported as
ordinary income. Any mark-to-market losses and any loss from an actual
disposition of PFIC shares would be deductible as ordinary losses to the extent
of any net mark-to-market gains included in income in prior years.
Because the application of the PFIC rules may affect, among other things,
the character of gains, the amount of gain or loss and the timing of the
recognition of income with respect to PFIC stock, as well as subject the Fund
itself to tax on certain income from PFIC stock, the amount that must be
distributed to stockholders and which will be taxed to stockholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not invest in PFIC stock.
If the Fund retains net capital gains for reinvestment, although it has no
plans to do so, the Fund may elect to treat such amounts as having been
distributed to its stockholders. As a result, the stockholders would be subject
to tax on undistributed capital gains, would be able to claim their
proportionate share of the Federal income taxes paid by the Fund on such gains
as a credit against their own Federal income tax liabilities, and would be
entitled to an increase in their basis in the Fund shares.
Distributions. Dividends paid out of the Fund's investment company taxable
income, whether received in cash or reinvested in Fund shares, will be taxable
to a stockholder as ordinary income. The excess of net long-term capital gains
over the short-term capital losses realized, properly designated and distributed
by the Fund, whether paid in cash or reinvested in Fund shares, will generally
be taxable to shareholders as long-term capital gain. Net capital gains from
assets held for one year or less will be taxed as ordinary income. Distributions
will be subject to these capital gain rates regardless of how long a stockholder
has held Fund shares.
Dividends received by corporate stockholders may qualify for the dividends
received deduction to the extent the Fund designates its dividends as derived
from dividends from domestic corporations. The amount designated by the Fund as
so qualifying cannot exceed the aggregate amount of dividends received by the
Fund from domestic corporations for the taxable year. Since the Fund's income
may not consist exclusively of dividends eligible for the corporate dividends
received deduction, its distributions of investment company taxable income
likewise may not be eligible, in whole or in part, for that deduction. The
alternative minimum tax applicable to corporations may reduce the benefits of
the dividends received deductions. The dividends received deduction may be
further reduced if the shares of the Fund are debt-financed or are deemed to
have been held less than 46 days.
All distributions are taxable to the stockholder whether reinvested in
additional shares of the Fund or received in cash. Stockholders receiving
distributions in the form of additional shares will have a cost basis for
Federal income tax purposes in each share received equal to the net asset value
of a share of the Fund on the reinvestment date. Stockholders will be notified
annually as to the Federal tax status of distributions paid to them by the Fund.
Distributions by the Fund reduce the net asset value of the Fund shares.
Should a distribution reduce the net asset value below a stockholder's cost
basis, such distribution nevertheless would be taxable to the stockholder as
ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a distribution by the Fund. The price of shares
purchased at that time includes the amount of the forthcoming distribution, but
the distribution will generally be taxable to them.
Hedging and Other Transactions. Certain options, futures contracts and
forward foreign currency contracts are "section 1256 contracts." Any gains or
losses on section 1256 contracts generally are considered 60% long-term and 40%
short-term capital gains or losses ("60/40"); however, foreign currency gains or
losses (as discussed below) arising from certain section 1256 contracts may be
treated as ordinary income or loss. Also, section 1256 contracts held by the
Fund at the end of each taxable year are "marked-to-market" with the result that
unrealized gains or losses are treated as though they were realized and the
resulting gain or loss is generally treated as 60/40 gain or loss.
Generally, the hedging transactions undertaken by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may affect the
character of gains (or losses) realized by the Fund. In addition, losses
realized by the Fund on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which such losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to the Fund of hedging transactions are not
entirely clear. The hedging transactions may increase the amount of short-term
capital gain realized by the Fund, which is taxed as ordinary income when
distributed to stockholders.
The Fund may make one or more of the elections available under the Code
which are applicable to straddles. If the Fund makes any of the elections, the
amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections may
operate to defer the recognition of losses and/or accelerate the recognition of
gains or losses from the affected straddle positions.
Because application of the straddle rules may affect the character of
gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to stockholders, and which will be taxed to stockholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not engage in such hedging transactions.
Foreign Currency Gains and Losses. Under the Code, gains or losses
attributable to fluctuations in foreign currency exchange rates which occur
between the time the Fund accrues interest or other receivables or accrues
expenses or other liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on the disposition of
debt securities denominated in a foreign currency and on the disposition of
certain options, futures and forward contracts, gains or losses attributable to
fluctuations in the value of foreign currency between the date of acquisition of
the security or contract and the date of disposition also are treated as
ordinary gain or loss. These gains or losses, referred to under the Code as
"section 988" gains or losses, may increase or decrease the amount of the Fund's
investment company taxable income to be distributed to its stockholders as
ordinary income.
Disposition of Shares. Upon a taxable disposition (by redemption,
repurchase, sale or exchange) of Fund shares, a stockholder may realize a
taxable gain or loss, depending upon his basis in his shares. That gain or loss
will be a capital gain or loss if the shares are capital assets in the
stockholder's hands, and generally will be long-term or short-term depending
upon the stockholder's holding period for the shares. Any loss realized by a
stockholder on a disposition of Fund shares held by the stockholder for six
months or less will be treated as a long-term capital loss to the extent of any
distributions of capital gain dividends received by the stockholder with respect
to such shares. Any loss realized on a disposition will be disallowed to the
extent the shares disposed of are replaced (whether by reinvestment of
distributions or otherwise) within a period of 61 days beginning 30 days before
and ending 30 days after the date of disposition of the shares. In such a case,
the basis of the shares acquired will be adjusted to reflect the disallowed
loss.
Under certain circumstances, the sales charge incurred in acquiring shares
of the Fund may not be taken into account in determining the gain or loss on the
disposition of those shares. This rule applies where shares of the Fund are
exchanged within 90 days after the date they were purchased and new shares of a
Capstone Fund or another regulated investment company are acquired without a
sales charge or at a reduced sales charge. In that case, the gain or loss
recognized on the exchange will be determined by excluding from the tax basis of
the shares exchanged all or a portion of the sales charge incurred in acquiring
those shares. This exclusion applies to the extent that the otherwise applicable
sales charge with respect to the newly acquired shares is reduced as a result of
having incurred a sales charge initially. The portion of the sales charge
affected by this rule will be treated as a sales charge for the new shares.
Certain of the debt securities acquired by the Fund may be treated as debt
securities that were originally issued at a discount. Original issue discount
can generally be defined as the difference between the price at which a security
was issued and its stated redemption price at maturity. Although no cash income
is actually received by the Fund, original issue discount on a taxable debt
security earned in a given year generally is treated for Federal income tax
purposes as interest and, therefore, such income would be subject to the
distribution requirements of the Code.
Backup Withholding. The Fund may be required to withhold Federal income
tax at the rate of 31% of all taxable distributions from the Fund and of gross
proceeds from the redemption of Fund shares payable to stockholders who fail to
provide the Fund with their correct taxpayer identification number or to make
required certifications, or who have been notified by the Internal Revenue
Service that they are subject to backup withholding. Corporate stockholders and
certain other stockholders specified in the Code generally are exempt from
backup withholding. Backup withholding is not an additional tax. Any amounts
withheld may be credited against the stockholder's U.S. Federal income tax
liability.
Foreign Taxes. Income received by the Fund from sources within foreign
countries may be subject to withholding and other taxes imposed by such
countries. Tax conventions between certain countries and the United States may
reduce or eliminate these taxes. Under the current income tax treaty between the
United States and Japan, the withholding tax imposed by Japan on dividends from
Japanese sources is generally 15% (although a 10% rate may be applicable in some
circumstances) and the withholding tax on interest from Japanese sources is
generally 10%. Japan also imposes a tax on the transfer of securities. It is
impossible to determine in advance the amount of foreign taxes that will be
imposed on the Fund.
If more than 50% of the value of the Fund's total assets at the close of
its taxable year consists of securities of foreign corporations, the Fund will
be eligible and intends to elect to "pass-through" to the Fund's stockholders
the amount of foreign income and similar taxes paid by the Fund. Pursuant to
this election, a stockholder will be required to include in gross income (in
addition to taxable dividends actually received) his pro rata share of the
foreign income and similar taxes paid by the Fund, and generally will be
entitled either to deduct (as an itemized deduction) his pro rata share of such
foreign taxes in computing his taxable income or to use it (subject to
limitations) as a foreign tax credit against his U.S. Federal income tax
liability. No deduction for foreign taxes may be claimed by a stockholder who
does not itemize deductions. Each stockholder will be notified within 60 days
after the close of the Fund's taxable year whether the foreign taxes paid by the
Fund will "pass-through" for that year and, if so, such notification will
designate (a) the stockholder's portion of the foreign taxes paid to foreign
countries and (b) the portion of the dividend which represents income derived
from sources outside the U.S.
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the stockholder's U.S. Federal income tax attributable to his
total foreign source taxable income. For this purpose, if the pass-through
election is made, the source of the Fund's income flows through to its
stockholders. With respect to the Fund, gains from the sale of securities will
be treated as derived from U.S. sources and certain currency fluctuation gains,
including fluctuation gains from foreign currency denominated debt securities,
receivables and payables, will be treated as derived from U.S. sources. The
limitation on the foreign tax credit is applied separately to foreign source
passive income, such as dividends received from the Fund. Stockholders may be
unable to claim a credit for the full amount of their proportionate share of
foreign taxes paid by the Fund. In addition, the foreign tax credit may offset
only 90% of the alternative minimum tax (prior to reduction for the "regular"
tax liability for the year) imposed on corporations and individuals. In
addition, foreign taxes may not be deducted by a stockholder that is an
individual in computing alternative minimum taxable income.
The foregoing is only a general description of the foreign tax credit
under current law. Because application of the credit depends on the particular
circumstances of each stockholder, stockholders are advised to consult their own
tax advisers.
Foreign Stockholders - U.S. Federal Income Taxation. U.S. Federal income
taxation of a stockholder who, as to the United States, is a non-resident alien
individual, a foreign trust or estate, a foreign corporation, or a foreign
partnership (a "foreign stockholder"), depends on whether the income from the
Fund is "effectively connected" with a U.S. trade or business carried on by such
stockholder, as discussed generally below. Special U.S. Federal income tax rules
that differ from those described below may apply to foreign persons who invest
in the Fund. For example, the tax consequences to a foreign stockholder entitled
to claim the benefits of an applicable tax treaty may be different from those
described below. Foreign stockholders are advised to consult their own tax
advisers with respect to the particular tax consequences to them of an
investment in the Fund.
Foreign Stockholders - Income Not Effectively Connected. If the income
from the Fund is not effectively connected with a U.S. trade or business carried
on by the stockholder, distributions of investment company taxable income
generally will be subject to a U.S. Federal withholding tax of 30% (or lower
treaty rate) on the gross amount of the distribution. Foreign stockholders may
also be subject to the U.S. Federal withholding tax on the income resulting from
any election by the Fund to treat foreign taxes paid by it as paid by its
stockholders, but foreign stockholders will not be able to claim a credit or
deduction for the foreign taxes treated as having been paid by them.
Capital gains realized directly by foreign stockholders upon the sale of
Fund shares and distributions of net capital gains, as well as amounts retained
by the Fund which are designated as undistributed capital gains, generally will
not be subject to U.S. Federal income tax unless the foreign stockholder is a
non-resident alien individual and is physically present in the United States for
more than 182 days during the taxable year. However, this rule only applies in
exceptional cases because any individual present in the United States for more
than 182 days during the taxable year generally is treated as a resident for
U.S. Federal income tax purposes and is taxable on his worldwide income at the
graduated rates applicable to U.S. citizens, rather than the 30% U.S. Federal
withholding tax. In the case of certain foreign stockholders, the Fund may be
required to withhold U.S. Federal income tax at a rate of 31% of distributions
of net capital gains and of the gross proceeds from a redemption of Fund shares
unless the stockholder furnishes the Fund with certifications regarding the
stockholder's foreign status. See "Backup Withholding."
Foreign Stockholders - Income Effectively Connected. If the income from
the Fund is effectively connected with a U.S. trade or business carried on by a
foreign stockholder, then all distributions and any gains realized upon the
disposition of Fund shares will be subject to U.S. Federal income tax at the
graduated rates applicable to U.S. citizens and domestic corporations. Foreign
stockholders may also be subject to the branch profits tax.
Foreign Stockholders - Estate Tax. Foreign individuals generally are
subject to U.S. Federal estate tax on their U.S. situs property, such as
shares of the Fund, that they own at the time of their death. Certain
credits against such tax and relief under applicable tax treaties may be
available.
Other Taxation. Distributions and redemption proceeds with respect to the
Fund also may be subject to additional state, local and foreign taxes, depending
upon each stockholder's particular situation. Stockholders are advised to
consult their tax advisers with respect to the particular tax consequences to
them of an investment in the Fund.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth information concerning such persons which,
to the knowledge of the Fund's Board of Trustees, owned, of record, more than
five percent of the Fund's shares as of February 16, 2000:
Name and Address Percent of Ownership
Smith Barney Shearson 36.60%
333 W. 34th Street, 7th Floor
New York, NY 10001-2402
SMC Pneumatics, Inc. 14.13%
3011 N. Franklin Rd.
Indianapolis, IN 46226-6308
Charles Schwab & Company, Inc. 13.95%
Special Custody Account for Benefit
of its Customers
101 Montgomery Street
San Francisco, CA 94104-4122
James H. Shimberg 5.60%
611 W. Bay St.
Tampa, FL 33606-2703
FINANCIAL INFORMATION
The Report of Independent Certified Public Accountants and financial
statements of the Fund included in its Annual Report to shareholders for the
fiscal year ended October 31, 1999 are incorporated herein by reference to such
Annual Report. Copies of the Fund's Annual and Semi-Annual Reports may be
obtained without charge by calling 1-800-262-6631.
OTHER INFORMATION
Custody of Assets. All securities owned by the Fund and cash from the sale
of securities in the Fund's investment portfolio are held by Fifth Third Bank,
as custodian, 38 Fountain Square, Cincinnati, Ohio 45263.
Stockholder Reports. Semi-annual reports are furnished to
stockholders, and annually the financial statements in such reports are
audited by the Fund's independent accountants.
Independent Accountants. Briggs, Bunting & Dougherty, LLP, Two Logan
Square, Suite 2121, Philadelphia, PA 19103-4901, the independent accountants for
the Fund, performs annual audits of the Fund's financial statements.
Legal Counsel. Dechert Price & Rhoads, 1775 Eye Street, N.W., Washington,
DC 20006, is legal counsel to the Fund.
Transfer and Shareholder Servicing Agent. The Fund's transfer and
shareholder servicing agent is PFPC, Inc., 211 South Gulph Road, P.O. Box 61503,
King of Prussia, Pennsylvania 19406-3101.
<PAGE>
CAPSTONE INTERNATIONAL SERIES TRUST
CAPSTONE JAPAN FUND
OTHER INFORMATION
(PART C TO REGISTRATION STATEMENT NO. 33-6867)
Item 23. Exhibits
Exhibits not incorporated by reference to a prior filing are designated
by an asterisk; all exhibits not so designated are incorporated hereby by
reference to a prior filing as indicated.
(a) Copy of Declaration of Trust as amended and
restated September 29, 1986; Exhibit 1 to
Pre-Effective Amendment No. 1 to Registration
No. 33-6867.
(a)(1) Proposed form of Written Instrument of the
Trustees Amending Name of the Trust; Exhibit
1(a) to Post-Effective Amendment No. 2 to
Registration No. 33-6867.
(a)(2) Amendment and Restatement to the Declaration of
Trust dated September 19, 1991 to establish and
designate a separate series, New Zealand Fund;
Exhibit 1(b) to Post-Effective Amendment No. 9 to
Registration No. 33-6867.
(b)(1) Copy of By-Laws; Exhibit 2 to Pre-Effective
Amendment No. 1 to Registration No. 33-6867.
(b)(2) Copy of Amendment to By-Laws dated July 24,
1989; Exhibit 2(b) to Post-Effective Amendment
No. 5 to Registration No. 33-6867.
( c) None.
(d)(1) Proposed form of Investment Advisory Agreement
between Capstone International Series Trust, on
behalf of New Zealand Fund, and FCA Corp;
Exhibit 5(e) to Post-Effective Amendment No. 9
to Registration No. 33-6867.
(d)(2) Copy of Investment Advisory Agreement between
Capstone International Series Trust, on behalf
of Capstone Japan Fund, and FCA Corp. Filed
with Post-Effective Amendment No. 28 to
Registration Statement No. 33-6867.
(e)(1) Proposed form of General Distribution Agreement
between Capstone International Series Trust, on
behalf of New Zealand Fund, and Capstone Asset
Planning Company; Exhibit 6(e) to Post-Effective
Amendment No. 18 to Registration No. 33-6867.
(e)(2) Copy of General Distribution Agreement dated
August 10, 1992 between Capstone International
Series Trust, on behalf of Capstone Nikko Japan
Fund, and Capstone Asset Planning Company;
Exhibit 6(g) to Post-Effective Amendment No. 18
to Registration Statement No. 33-6867.
(f) None.
(g) Copy of Custodian Agreement between Capstone
International Series Trust and Fifth Third
Bank. Filed with Post-Effective Amendment No.
28 to Registration No. 33-6867.
(h)(1) Copy of Administration Agreement between Capstone
International Series Trust, on behalf of Nikko
Japan Tilt Fund, and Capstone Asset Management
Company dated April 24, 1989; Exhibit 9(a)(3) to
Post-Effective Amendment No. 3 to Registration No.
33-6867.
(h)(2) Copy form of Administration Agreement between
Capstone International Series Trust, on behalf
of New Zealand Fund, and Capstone Asset
Management Company; Exhibit 9(a)(5) to
Post-Effective Amendment No. 9 to Registration
No. 33-6867.
(h)(3) Copy of Agency Agreement between Investors
International Series Trust and Capstone
Financial Services, Inc. dated October 2, 1987;
Exhibit 9(b)(2) to Post-Effective Amendment No.
1 to Registration No. 33-6867.
(h)(4) Copy of Shareholder Services Agreement between
Capstone International Series Trust and
Fund/Plan Services, Inc. dated February 1,
1991; Exhibit 9(b)(3) to Post-Effective
Amendment No. 7 to Registration No. 33-6867.
*(i) Opinion of Dechert Price & Rhoads.
(j)(1) Consent of Briggs, Bunting & Dougherty, LLP,
Independent Certified Public Accountants filed
herewith.
(j)(2) Powers of Attorney of Messrs. James F. Leary,
John R. Parker and Bernard J. Vaughan.
(k) None.
(l) None.
(m) Form of Service and Distribution Plan. Filed
with Post-Effective Amendment No. 28 to
Registration No. 33-6867.
(n) N/A
Item 24. Persons Controlled by or under Common Control with Registrant
Registrant does not control and is not under common control with any
person.
Indemnification
Item 25. The Declaration of Trust of the Registrant includes the following:
Section 4.3. Mandatory Indemnification.
(a) Subject to the exceptions and limitations contained in
paragraph (b) below:
(i) every person who is, or has been, a Trustee or
officer of the Trust shall be indemnified by
the Trust to the fullest extent permitted by
law against all liability and against all
expenses reasonably incurred or paid by him in
connection with any claim, action, suit or
proceeding in which he becomes involved as a
party or otherwise by virtue of his being or
having been a Trustee or officer and against
amounts paid or incurred by him in the
settlement thereof;
(ii) the words "claim", "action", "suit", or
"proceeding" shall apply to all claims,
actions, suits or proceedings (civil, criminal,
or other, including appeals), actual or
threatened; and the words "liability" and
"expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid
in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Trustee
or officer:
(i) against any liability to the Trust or the
Shareholders by reason of a final adjudication by
the court or other body before which the
proceeding was brought that he engaged in willful
misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the
conduct of his office;
(ii) with respect to any matter as to which he shall
have been finally adjudicated not to have acted in
good faith in the reasonable belief that his
action was in the best interest of the Trust;
(iii) in the event of a settlement or other
disposition not involving a final adjudication
as provided in paragraph (b)(i) resulting in a
payment by a Trustee or officer, unless there
has been a determination that such Trustee or
officer did not engage in willful misfeasance,
bad faith, gross negligence or reckless
disregard of the duties involved in the conduct
of his office:
(A) By the court or other body approving the
settlement or other disposition; or
(B) based upon a review of readily available
facts (as opposed to a full trial-type
inquiry) by (1) vote of a majority of the
Disinterested Trustees acting on the
matter (provided that a majority of the
Disinterested Trustees then in office act
on the matter) or (2) written opinion of
independent legal counsel.
(c) The rights of indemnification herein provided may be
insured against by policies maintained by the Trust,
shall be severable, shall not affect any other rights to
which any Trustee or officer may now or hereafter be
entitled, shall continue as to a person who has ceased
to be such Trustee or officer and shall inure to the
benefit of the heirs, executors, administrators and
assigns of such a person. Nothing contained herein
shall affect any rights to indemnification to which
personnel of the Trust other than Trustees and officers
may be entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to
any claim, action, suit or proceeding of the character
described in paragraph (a) of this Section 4.3 may be
advanced by the Trust prior to final disposition thereof
upon receipt of an undertaking by or on behalf of the
recipient to repay such amount if it is ultimately
determined that he is not entitled to indemnification
under this Section 4.3, provided that either:
(i) such undertaking is secured by a surety bond or
some other appropriate security provided by the
recipient, or the Trust shall be insured
against losses arising out of any such
advances; or (ii)a majority of the
Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested
Trustees act on the matter) or an independent
legal counsel in a written opinion shall
determine, based upon a review of readily
available facts (as opposed to a full
trial-type inquiry), that there is reason to
believe that the recipient ultimately will be
found entitled to indemnification.
As used in this Section 4.3, a "Disinterested Trustee" is
one who is not (i) an "Interested Person" of the Trust
(including anyone who has been exempted from being an
"Interested Person" by any rule, regulation or order of the
Commission), or (ii) involved in the claim, action, suit or
proceeding."
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised by the Securities and Exchange Commission that, in
the opinion of the Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether or not such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
To the extent that the Declaration of Trust, By-Laws or any other
instrument pursuant to which the Registrant is organized or administered
indemnify any trustee or officer of the Registrant, or that any contract or
agreement indemnifies any person who undertakes to act as investment advisor or
principal underwriter to the Registrant, any such provision protecting or
purporting to protect such persons against any liability to the Registrant or
its security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence, in the performance of his duties,
or by reason of his reckless disregard of his duties pursuant to the conduct of
his office or obligations pursuant to such contract or agreement, will be
interpreted and enforced in a manner consistent with the provisions of Sections
17(h) and (i) of the Investment Company Act of 1940, as amended, and Release No.
IC-11330 issued thereunder.
Item 26. Business and Other Connections of Investment Adviser
FCA Corp, the Registrant's investment adviser, serves as investment
adviser to Capstone New Zealand Fund and to pension and profit sharing plans,
educational institutions, charitable institutions, individuals and corporations.
Set forth below is a list of each officer and director of the
Registrant's investment adviser, indicating each business, profession, vocation
or employment of a substantial nature in which each such person has been engaged
for the past two years, for his own account or in the capacity of director,
officer, partner or trustee.
Other Substantial
Position with Business, Profession,
Name Investment Adviser Vocation or Employment
___________________ __________________ ______________________
Robert W. Scharar President and Director Senior Financial Planner
of FCA Corp
Bill S. Murski Senior Vice President & Senior Financial Planner
Secretary and Director of FCA Corp.
Robert P. Messer Chief Operating Officer & --
Treasurer
John T. Manaras Director Vice President and
Assistant General
Counsel for Nortel
Networks
Edward P. Srsic Director Vice President, Sales for
Louis Raphael, apparel
manufacturer
Maxie Patterson Director Executive Director of
Houston Fireman's Relief
and Retirement Fund
Item 27. Principal Underwriters
(a) The principal underwriter of the Registrant, Capstone Asset
Planning Company, also acts as principal underwriter for Capstone Government
Income Fund, Capstone Growth Fund, Inc. and Capstone New Zealand Fund.
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
Dan E. Watson Chairman of the Board --
and Director
Edward L. Jaroski President and Director Trustee and President of
the Trust
Linda G. Giuffre Vice President, Compliance Secretary/Treasurer
Leticia N. Jaroski Secretary --
Carla Homer Treasurer --
- -------------
* 5847 San Felipe, Suite 4100, Houston, Texas 77057
Item 28. Location of Accounts and Records
Capstone Asset Management Company, the administrator to the
Registrant, 5847 San Felipe, Suite 4100, Houston, TX 77057; FCA Corp., the
investment adviser of Capstone Japan Fund, 5847 San Felipe, Suite 850, Houston,
TX 77057; Fifth Third Bank, the custodian of the Registrant, 38 Fountain Square,
Cincinnati, Ohio 45263, and PFPC, Inc., P.O. Box 61503, 211 South Gulph Road,
King of Prussia, Pennsylvania 19406-3101, maintain physical possession of each
account, book or other document required to be maintained by Section 31(a) of
Investment Company Act of 1940 and the rules promulgated thereunder.
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant represents that this
Post-Effective Amendment meets all the requirements for effectiveness pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement or Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, and State of
Texas on the 29th day of February, 2000.
CAPSTONE INTERNATIONAL SERIES TRUST
CAPSTONE JAPAN FUND
Registrant
By: /s/EDWARD L. JAROSKI
Edward L. Jaroski, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
/s/EDWARD L. JAROSKI President and Trustee February 29, 2000
Edward L. Jaroski (Principal Executive
Officer)
/s/LINDA G. GIUFFRE Secretary/Treasurer February 29, 2000
Linda G. Giuffre (Principal Financial &
Accounting Officer)
JAMES F. LEARY* Trustee February 29, 2000
James F. Leary
JOHN R. PARKER* Trustee February 29, 2000
John R. Parker
BERNARD J. VAUGHAN* Trustee February 29, 2000
Bernard J. Vaughan
* By: /s/EDWARD L. JAROSKI
Edward L. Jaroski, Attorney-In-Fact
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports dated November 19, 1999, accompanying the October 31,
1999 financial statements of Capstone Japan Fund and Capstone New Zealand Fund,
each a series of shares of Capstone International Series Trust, which are
incorporated by reference in Part B of the Post-Effective Amendment to this
Registration Statement and Prospectus. We consent to the use of the
aforementioned reports in the Registration Statement and Prospectus.
BRIGGS, BUNTING & DOUGHERTY, LLP
Philadelphia, Pennsylvania
February 24, 2000
