CAPSTONE FIXED INCOME SERIES INC, 485BPOS, 2000-04-17

CAPSTONE FIXED INCOME SERIES INC
485BPOS, 2000-04-17

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<PAGE> 1

As filed with the Securities and Exchange Commission on April 17, 2000

Registration No. 2-28174
Investment Company Act File No. 811-01597

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------------------------------

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]

Pre-Effective Amendment No. ___ [ ]

Post-Effective Amendment No. 56 [X]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]

AMENDMENT NO. ___ [X]

(Check appropriate box or boxes)

CAPSTONE CHRISTIAN VALUES FUND, INC.
(Exact Name of Registrant as Specified in Charter)

5847 San Felipe, Suite 4100, Houston, TX 77057
(Address of Principal Executive Office)

Registrant's Telephone Number: (713) 260-9000
-------------------------------------

--------------------------------
(Name and Address of Agent for Service)

Allan S. Mostoff, Esq.
Dechert Price & Rhoads
1775 Eye Street, NW
Washington, DC 20006-2401

It is proposed that this filing will become effective (check appropriate box)

[X] immediately upon filing pursuant to paragraph (b).
[ ] on ___________, 2000 pursuant to paragraph (b).
[ ] 60 days after filing pursuant to paragraph (a)(i).
[ ] 75 days after filing pursuant to paragraph (a)(ii).
[ ] on _____________, 2000 pursuant to paragraph (a)(ii) of Rule 485.

<PAGE> 2

CHRISTIAN STEWARDSHIP FUNDS

Christian Stewardship Bond Index Fund

Christian Stewardship Large Cap Equity Index Fund

Christian Stewardship Small Cap Equity Index Fund

Christian Stewardship International Index Fund

PROSPECTUS

April 17, 2000

For more complete information about the Christian Stewardship Funds,
including charges and expenses, contact the Distributor at the address below.
Please read this prospectus carefully before you invest or send money.

CAPSTONE ASSET PLANNING COMPANY
5847 SAN FELIPE, SUITE 4100
HOUSTON, TEXAS 77057
1-800-262-6631
[email protected]

The Securities and Exchange Commission has not approved or disapproved the
shares described in this prospectus or determined whether this prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.

<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----

<S> <C>
THE FUNDS: INVESTMENTS, RISKS, EXPENSES ............................ 3
ABOUT THE CHRISTIAN STEWARDSHIP FUNDS........................... 3
GENERAL INVESTMENT OBJECTIVES AND STRATEGIES.................... 3
BOND INDEX FUND................................................. 4
LARGE CAP EQUITY INDEX FUND..................................... 4
SMALL CAP EQUITY INDEX FUND..................................... 4
INTERNATIONAL INDEX FUND........................................ 5

PRINCIPAL RISKS...................................................... 6

PERFORMANCE INFORMATION.............................................. 7

FEES AND EXPENSES.................................................... 7

MANAGEMENT........................................................... 9

BUYING AND SELLING FUND SHARES....................................... 10

PURCHASING FUND SHARES............................................... 11

REDEEMING FUND SHARES................................................ 12

EXCHANGING FUND SHARES............................................... 14

DIVIDENDS, DISTRIBUTIONS AND TAXES................................... 14

HOW TO GET MORE INFORMATION.......................................... Back
Cover
</TABLE>

<PAGE> 4

THE FUNDS: INVESTMENTS, RISKS, EXPENSES
----------------------------------------

ABOUT THE CHRISTIAN STEWARDSHIP FUNDS (CSF)

The portfolios (Funds) offered by CSF and described in this prospectus are as
follows:

Fixed Income Fund
- ------------------
Christian Stewardship Bond Index Fund

Domestic Equity Funds
- ---------------------
Christian Stewardship Large Cap Equity Index Fund
Christian Stewardship Small Cap Equity Index Fund

International Fund
- -------------------
Christian Stewardship International Index Fund

Each of CSF's four Funds has different investment policies.

Fund Type -- Each Fund is an "index-type fund" -- i.e., each Fund is designed to
produce performance generally comparable to a designated index or "Benchmark"
before expenses.

Values-Based Investment Policies -- Each Fund follows certain values-based
criteria in making its investments. The Funds avoid investing in companies whose
primary business is the manufacture, operation, distribution or promotion of
abortion, alcohol, gambling, pornography, or tobacco, although some of these
companies may be indirectly represented in derivatives in which a Fund invests.

Two Classes of Shares -- Each of the Funds offers Individual shares and
Institutional shares, which differ in terms of expenses and minimum investments.
(See "Buying and Selling Fund Shares")

Adviser and Administrator -- The Funds' investment adviser and administrator is
Capstone Asset Management Company. The investment objectives and principal
investment strategies of each Fund are described below. The investment
objective(s) of a Fund may be changed without shareholder approval.

GENERAL INVESTMENT OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------

Each of the Funds seeks to match the performance of a designated index
(Benchmark) before expenses. The Adviser and Administrator will select portfolio
investments for each Fund using statistical methods designed to produce total
returns that will be comparable to the designated Benchmark. Thus, the Adviser
and Administrator will not be using traditional methods of security selection
based on analysis of market conditions and particular issuers. Additionally,
these Funds will not assume temporary defensive positions when market or other
conditions negatively affect the classes of securities reflected in their
portfolios. It should be noted that in avoiding investments that are
inconsistent with the Funds' values-based investment policies, a Fund may be
limited in its ability to match the performance of a particular Benchmark. Other
factors, such as variations in a Fund's size, the availability or unavailability
of various investment techniques, and regulatory limitations on the use of
certain techniques from time to time may also interfere with a Fund's ability to
match its Benchmark's performance. Because the Adviser and Administrator may use
a variety of techniques to pursue each Fund's investment objective, the Funds
are unlikely to hold securities identical to, or in the same proportions as,
those in any reference Benchmark. Further, each Fund must maintain some portion
of its assets in cash or short-term money market instruments and repurchase
agreements to meet redemptions and to cover other Fund expenses. To the extent
consistent with prudent management, the Adviser and Administrator will take
positions in futures contracts to gain exposure to relevant securities markets
when incoming cash cannot be immediately invested in suitable securities.

Neither the Fund, the Adviser and Administrator, nor their affiliates are in any
way sponsored by or affiliated with the firms that publish the reference
Benchmarks.

<PAGE> 5

BOND INDEX FUND
- --------------------------------------------------------------------------------

Investment Objective: Current income

Principal Investment Strategies

The Fund pursues its objective by attempting to match the price and yield
performance, before Fund expenses, of the Lehman Brothers Aggregate Bond ("LBA")
Index. The LBA Index is a broad measure of the performance of taxable bonds in
the US market, with maturities of at least one year. The Fund's portfolio will
be structured in a manner designed to provide generally comparable performance
by investing primarily in similar types of securities having a broad range of
maturities.

Under normal market conditions, at least 65% of the Fund's total assets will be
invested in bonds. The instruments in which the Fund invests may have fixed,
variable or floating rates of interest and include government, corporate,
mortgage-backed, asset-backed, and international dollar-denominated bonds. The
Fund may have small portions of its portfolio in cash or short-term money market
instruments. It may also invest in repurchase agreements with respect to
permitted portfolio investments. The Fund may purchase futures as a temporary
substitute for investment in bonds. The Fund may purchase securities on a
when-issued or forward commitment basis.

LARGE CAP EQUITY INDEX FUND
- --------------------------------------------------------------------------------

Investment Objective: Capital growth and income

Principal Investment Strategies

The Fund pursues its objective by attempting to match the price and yield
performance, before Fund expenses, of the S&P 500 Index. This index consists of
500 common stocks of large companies whose securities are widely held and have
an active trading market. Each security's weight in the index is proportional to
its market value. Thus, the most highly priced stocks included in the index will
comprise a disproportionate portion of the value of the index. The securities in
the index represent a variety of industries. Most securities in the index are
listed on the New York Stock Exchange, but NASDAQ and American Stock Exchange
securities are also represented. The Fund will seek to match the performance of
this index by investing primarily in equity securities of the type that are
included in this index. "Equity securities" include common stocks (including
SPDRs, see below), preferred stocks, and securities convertible or exchangeable
for common stock. At least 65% of the Fund's total assets will be, under normal
market conditions, invested in equity securities of issuers whose
capitalization, at the time of investment, is equal to or exceeds the minimum
capitalization of issuers in the S&P 500 Index. As of December 31, 1999, the
minimum capitalization of issuers included in that index was $361 million. The
Fund may also, however, have small portions of its portfolio in cash or
short-term money market instruments and in repurchase agreements. The Fund may
purchase futures contracts as a temporary substitute for investment in equity
securities. The Fund may invest up to 10% of its total assets in S&P Depository
Receipts ("SPDRs"). SPDRs are interests in the SPDR Trust, a unit investment
trust that seeks to provide investment results generally comparable to the price
and yield performance of the S&P 500 Index.

SMALL CAP EQUITY INDEX FUND
- --------------------------------------------------------------------------------

Investment Objective: Capital appreciation

Principal Investment Strategies

The Fund pursues its objective by attempting to match the performance before
Fund expenses, of the S&P Small Cap 600 Index. The S&P Small Cap 600 Index
consists of 600 stocks with generally smaller capitalization than those included
in the S&P 500 Index. As of December 31, 1999, issuers represented in this index

<PAGE> 6

had capitalization ranging from about $28 million to about $4.2 billion. The
Fund will seek to match the performance of this index by investing primarily in
equity securities of the type that are included in this index. At least 65% of
the Fund's total assets will, under normal market conditions, be invested in
equity securities (as defined for Large Cap Equity Index Fund, above) of issuers
whose capitalization, at the time of investment, falls within the capitalization
range of issuers in the S&P Small Cap 600 Index. It may also, however, have
small portions of its portfolio in cash or short-term money market instruments
and in repurchase agreements. The Fund may purchase futures contracts as a
temporary substitute for investment in equity securities. Like the Large Cap
Equity Index Fund, this Fund may invest up to 10% of its total assets in SPDRs.

INTERNATIONAL EQUITY INDEX FUND
- --------------------------------------------------------------------------------

Investment Objective: Capital appreciation

Principal Investment Strategies

The Fund pursues this objective by attempting to match the performance, before
Fund expenses, of the Morgan Stanley Capital International Europe, Australia,
Far East ("EAFE") Index, net of withholding taxes. The EAFE Index is based on
the share prices of more than 1,000 companies listed on the stock exchanges of
Europe, Australia, New Zealand and the Far East. Europe includes Austria,
Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway,
Spain, Sweden, Switzerland and the United Kingdom. The Far East includes Japan,
Hong Kong and Singapore/Malaysia. The Fund will seek to match the performance of
this index by investing primarily in securities with characteristics generally
comparable to those that are included in this index or whose performance is
expected to be comparable to that of the index or a portion of the index. The
Fund may invest in securities of other investment companies. Applicable law
limits investments in securities of other investment companies by the Fund and
its affiliated persons to no more than 3% of the total outstanding stock.
Further, the Fund may, in any 30-day period, redeem an amount equal to no more
than 1% of the other investment company's total outstanding securities. The Fund
will monitor its investments in other investment companies to assure compliance
with its policy to have no more than 15% of its net assets invested in illiquid
securities. The Fund's investment company investments will include shares of
other investment companies that invest in foreign securities. The Fund may
invest in World Equity Benchmark SharesSM ("WEBS"). WEBS are shares of various
Series of WEBS Index Fund, Inc., a registered open-end investment company, each
of whose Series seeks to provide investment results that correspond generally to
the price and yield performance of publicly traded securities in the aggregate
in particular markets, as represented by an index for that market compiled by
Morgan Stanley Capital International. WEBS are available for at least the
following markets: Australia, Austria, Belgium, Canada, France, Germany, Hong
Kong, Italy, Japan, Malaysia, Mexico, Netherlands, Singapore, Spain, Sweden,
Switzerland and the United Kingdom. WEBS are listed for trading on the American
Stock Exchange. The Fund's investments may be in the form of American Depositary
Receipts ("ADRs"), European Depositary Receipts ("EDRs") and similar
instruments. (See "Foreign Securities," below.) The Fund may invest in forward
foreign currency exchange contracts. It may also, however, have small portions
of its portfolio in cash or short-term money market instruments and in
repurchase agreements. The Fund may purchase futures contracts as a temporary
substitute for investment in equity securities. Under normal market conditions,
at least 65% of the Fund's assets will be invested,

<PAGE> 7

either directly or through other investment companies, in securities and other
instruments representing issuers whose headquarters or principal business
activities are in at least three countries.

PRINCIPAL RISKS

Investment in any of the Funds involves risk. There can be no assurance that a
Fund will achieve its investment objective. Additionally, there can be no
assurance that a Benchmark Fund will match the performance of its benchmark
index(es). You can lose money on your investment. When you sell your Fund
shares, they may be worth less than you paid for them. No Fund, by itself,
constitutes a balanced investment program.

Fixed Income Fund

Bond Index Fund is not a bank deposit and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or by any other government agency.

Interest Rate Risk. The value of fixed income securities fluctuates with changes
in interest rates, and if interest rates rise, the value of securities held by a
Fund will fall. If interest rates fall, a Fund must invest new funds and
proceeds of expired investments at a lower interest rate, reducing the Fund's
yield.

Credit Risk. The issuer of a fixed income security may fail to make payments of
interest and principal in a timely manner, or may default entirely. Also, when
an issuer's credit rating drops or it ceases to be rated, the value of its
securities tends to fall. These developments can cause the value of a Fund's
shares and/or its yield to decline. When a security ceases to be rated or its
rating is downgraded below the minimum required for purchase by a Fund, the
Adviser and Administrator will determine whether it is in the best interest of
Bond Index Fund to continue to hold the security, subject to a 5% limit on
below-investment grade holdings by any of these Funds.

Prepayment Risk. Investments in mortgage-related securities are subject to the
risk that the principal amount of the underlying mortgage may be prepaid prior
to the bond's scheduled maturity date. Such prepayments are more common when
interest rates decline. Prepayments cause the Fund to lose anticipated return on
its investment and expose the Fund to potentially lower rates of return upon
reinvestment of principal.

Foreign Security Risk. The Fund's investments in international
dollar-denominated bonds may involve greater costs than investments in U.S.
bonds and expose the Fund to risks associated with investing in foreign markets.
(See International Fund, below.)

Bond Index Fund may invest in securities rated BBB or Baa by Moody's or S&P.
Obligations rated BBB or Baa may have speculative characteristics and changes in
economic conditions or other circumstances may lead to a weakened capacity to
make principal and interest payments relative to higher grade bonds.

Equity Funds

Equity Risk. Equity securities have no guaranteed value and 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.

<PAGE> 8

International Fund

In addition to the risks noted below, the International Index Fund has risks
similar to those of the Equity Funds.

Foreign Security Risk. Foreign securities investments involve higher costs and
some risks that are different from its investments in U.S. securities. These
different risks come from 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.

Other Risks of the Funds

Index Risk. Because each Fund is an index-type fund, each Fund's performance is
intended to track that of the particular market its Benchmark is designed to
reflect. When the value of a Fund's index declines, the value of the Fund's
shares can also be expected to decline.

Investments in Other Investment Companies. A Fund, particularly International
Index Fund, may invest in shares of other investment companies ("funds"). A Fund
bears a proportional share of the expenses of any such other fund, which are in
addition to those of the Fund. For example, a Fund will bear a portion of the
other fund's investment advisory fees, although the fees paid by the Fund to the
Adviser and Administrator will not be proportionally reduced.

Options and Futures Risks. The risk of loss in trading futures contracts in some
strategies can be substantial, due both to the low margin deposits required and
to the extremely high degree of leverage involved in futures pricing. As a
result, a relatively small price movement in a futures contract may result in
immediate and substantial loss (as well as gain) to an investor. Because a Fund
will only engage in futures strategies for edging purposes, the Funds'
management does not believe that the Funds will be subject to the risks of
substantial loss that may be associated with futures transactions.

PERFORMANCE INFORMATION

Because the Funds have not yet been existence for a full calendar year, they do
not have performance that reflects a full calendar year of operations.

FEES AND EXPENSES

This table describes the fees and expenses you may pay if you buy and hold
shares of the Funds.

FEE TABLE

<TABLE>
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Maximum front-end sales charge None
Maximum deferred sales charge None
Maximum sales charge on reinvested dividends and distributions None
Redemption fee None
Exchange fee None
Maximum account fee None
</TABLE>

7
<PAGE> 9

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

<TABLE>
<CAPTION>
Bond Large Cap Equity
Individual Institutional Individual Institutional
<S> <C> <C> <C> <C>
Investment Advisory Fees 0.15% 0.15% 0.15% 0.15%
Distribution and Service (12b -1) Fees* 0.25% 0.05% 0.25% 0.05%
Other Expenses** 0.15% 0.15% 0.15% 0.15%
---- ---- ---- ----
Total Annual Fund Operating Expenses 0.55% 0.35% 0.55% 0.35%
</TABLE>

<TABLE>
<CAPTION>
Small Cap Equity International
Individual Institutional Individual Institutional
<S> <C> <C> <C> <C>
Investment Advisory Fees 0.15% 0.15% 0.15% 0.15%
Distribution and Service (12b -1) Fees* 0.25% 0.05% 0.25% 0.05%
Other Expenses** 0.15% 0.15% 0.15% 0.15%
---- ---- ---- ----
Total Annual Fund Operating Expenses 0.55% 0.35% 0.55% 0.35%
</TABLE>

- -------

* The Funds have adopted Rule 12b-1 plans that permit each Fund to pay
portions of the average net assets of each class of shares each year for
distribution costs. These fees are an ongoing charge to each class of
shares of the Fund and therefore are an indirect expense to you. Over time
these fees may cost you more than other types of sales charges.

** "Other Expenses", which are based on estimated amounts for the current
fiscal year, include such items as custody, transfer agent, legal,
accounting and registration fees.

<PAGE> 10

EXAMPLE

This example is intended to help you compare the cost of investing in the
Funds with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in a Fund for the periods indicated and then redeem all of
your shares at the end of those periods. The example also assumes that your
investment has a 5% return each year, and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
Individual Institutional Individual Institutional
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>

Bond Index Fund $ 56 $ 36 $176 $113
Large Cap Equity Index Fund $ 56 $ 36 $176 $113
Small Cap Equity Index Fund $ 56 $ 36 $176 $113
International Index Fund $ 56 $ 36 $176 $113
</TABLE>

MANAGEMENT

Adviser and Administrator

Capstone Asset Management Company ("CAMCO"), a wholly-owned subsidiary of
Capstone Financial Services, Inc. located at 5847 San Felipe, Suite 4100,
Houston, Texas 77057, acts as investment adviser and administrator for the
Funds. CAMCO provides investment management and administrative services to other
mutual funds, and provides investment management services to pension and
profit-sharing accounts, corporations and individuals. As of December 9, 1999,
CAMCO manages assets in excess of $2.5 billion.

For its investment advisory services, CAMCO receives fees based on the aggregate
average daily net assets of the Funds, as a group, and the resulting total fees
are pro-rated among the funds based on their relative net assets, at the
following percentage rates: 0.15% on the first $500 million, 0.125% on the next
$500 million and 0.10% of assets over $1 billion. CAMCO also receives fees from
each Fund for administrative services.

<PAGE> 11

Advisory Committee

The Funds' Board of Directors has appointed an Advisory Committee that consults
with the Board regarding the application of the Funds' values to their
investment policies, and various other philosophical, structural and operational
matters concerning the Funds. Advisory Committee members serve without fee but
are compensated for expenses of attending Fund-related meetings.

Capital Structure

The Funds are separate series of Capstone Christian Values Fund, Inc., organized
as a Maryland corporation on May 11, 1992. Overall responsibility for management
of the Funds is vested in the Board of Directors. Shareholders are entitled to
one vote for each full share held and a proportionate factional vote for any
factional shares held and will vote in the aggregate and not by series except as
otherwise expressly required by law.

BUYING AND SELLING FUND SHARES

Share Price

The purchase and redemption price for shares of each class of shares of a Fund
is the net asset value (NAV) per share of the particular class that is next
determined after your purchase or sale order is received. NAV is generally
calculated as of 4:00 p.m. Eastern time, except on days when the Federal Reserve
wire system is closed and 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. NAV of a class reflects the
aggregate assets of a Fund less the liabilities attributable to that class. For
the other Funds, exchange-traded securities are valued at their market value at
that time (certain derivatives are priced at 4:15 Eastern time). Other equity
securities are valued at the last current bid quotation prior to the valuation
time. Prices for debt securities may be obtained from independent pricing
services, except that short-term securities are valued at amortized cost. 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 Board
of Directors. For investments in securities traded on foreign exchanges that
close prior to the time at which a Fund's net asset value is determined, the
calculation of net asset value does not take place contemporaneously with the
determination of the prices of those securities. If an event were to occur after
the value of a Fund investment was so established but before the Fund's net
asset value per share is determined that is likely materially to change the
Fund's net asset value, the Fund instrument would be valued using fair value
considerations established by the Board of Directors.

Minimum Investment

Individual shares -- The minimum initial investment per Fund is $2,000, except
for continuous investment plans which have a $25 minimum. There is no minimum
for subsequent purchases, except for continuous investment plans. The minimum
telephone purchase is $1,000.

Institutional shares -- The minimum initial aggregate investment in the Funds is
$500,000, with no minimum per Fund. There is no minimum for subsequent
purchases. The minimum telephone purchase is $50,000.

<PAGE> 12

Share Certificates

The Funds will not issue certificates representing shares.

Telephone Transactions

In your investment application, you may authorize the Funds to accept orders for
additional purchases, redemptions and exchanges by phone. You will be liable for
any fraudulent order as long as the Funds have 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. In that event, you should try
one of the alternative procedures described below.

Frequent Transactions

The Funds reserve the right to limit additional purchases by any investor who
makes frequent purchases, redemptions or exchanges that the Adviser and
Administrator believes might harm the Funds. In general, more than one
purchase-sale, or exchange 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 Funds. If the order is received by the
authorized dealer by 4:00 p.m. Eastern time and transmitted to the Funds by 4:00
p.m. Central time, it will be priced at the NAV per share for the applicable
class of shares on that day. 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 Funds'
distributor by mailing a completed Investment Application with a check or other
negotiable bank draft payable to Christian Stewardship Funds, to the Funds'
Transfer Agent:

Transfer Agent's Address
------------------------
Christian Stewardship Funds
c/o Declaration Service Company
555 North Lane, Suite 6160
Conshohocken, PA 19428

Remember to make your check for at least any applicable minimum noted above.
Payment for all orders must be received by the Transfer Agent within three
business days after the order was placed or you will be liable for any losses
resulting from your purchase order. Checks from third parties will not be
accepted. Subsequent investments may be mailed to the same address.
Confirmations of each purchase and transaction in the account are sent to the
shareholder's address of record.

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. Your bank may
charge a fee for this service.

<PAGE> 13

For an initial investment by wire, you must first call 1-800-695-3208 to be
assigned a Fund account number. Ask your bank to wire the amount of your
investment to:

Fifth Third Bank NA, ABA #042000314
For: Declaration Service Company
Account # _______________________
Further Credit Christian Stewardship Funds (Insert Name of Fund
and class)

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 Funds' prospectus. Mail the application to the Transfer Agent's address (see
above).

Subsequent investments may also be made by wire at any time by following the
above procedures. 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 1-800-695-3208.

The minimum telephone purchase for Individual shares is $1,000 and the maximum
is the greater of $1,000 or five time the NAV of your shares held, for which
payment has been received, on the day preceding your order. For Institutional
shares, the minimum telephone purchase is $50,000 and the maximum is the greater
of $50,000 or five times the NAV of your shares held, for which payment has been
received, on the day preceding your order.

Your telephone purchase will be priced at the NAV next determined after your
call. Payment for your order must be received within three business days. Mail
your payment to the Transfer Agent's address (see above). If your payment is not
received within three business days, you will be liable for any losses caused by
your purchase.

Pre-Authorized Investment

If you hold or are purchasing Individual shares, you may arrange to make regular
monthly investments of at least $25 automatically from your checking account by
completing the Pre-Authorized Payment section of the Investment Application.

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.

REDEEMING FUND SHARES

You may redeem your Fund shares on any business day using one of the following
procedures:

Through Authorized Dealers -- You may request a redemption through any
broker-dealer authorized to take orders for the Fund. If you place your order
with an authorized dealer by 4:00 p.m. Eastern standard time and the order is

<PAGE> 14

transmitted to the Funds by 4:00 p.m. Central standard time, it will be priced
at the NAV per share for the applicable class of shares on that day. Later
orders will be priced at the NAV next determined. The Funds do not charge a fee
for these redemptions, but a dealer may impose a charge for this service.
Redemption proceeds will be paid within three days after the Transfer Agent
receives a redemption order in proper form.

Through the Distributor -- You may redeem your Fund shares by writing to the
Transfer Agent's address (see "Purchasing Fund Shares," above). You will
generally receive a check for your redemption amount within a week. The Funds do
not charge any fee for redemptions. If you request the 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 want the proceeds mailed to a different address or to be paid to
someone other than the record owner; or

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.

Redemption of Shares Purchased by Check -- redemptions of amounts purchased
by check may be withheld until the purchase check has cleared, which may take up
to 15 days from the purchase date.

Expedited Redemption

If you want to redeem at least $1,000 of Fund shares and have authorized
expedited redemption on the Investment Application currently on file with the
Transfer Agent, you may request that your redemption proceeds be mailed or wired
to a broker-dealer or commercial bank that you previously designated on the
Investment Application by calling the Transfer Agent at 1-800-695-3208.
Redemption proceeds will be forwarded the next day to the designated entity. You
are urged to place your redemption request early in the day to permit efficient
management of the Funds' cash reserves. The Funds do not impose a fee for this
service, but they (and their service providers) reserve the right to modify or
not to offer this service in the future. They will attempt to give shareholders
reasonable notice of any change.

Systematic Withdrawal

If you hold Individual shares, you may arrange for periodic withdrawals of $50
or more if you have invested at least $5,000 in a Fund. Your withdrawals under
this plan may be monthly, quarterly, semi-annual or annual. If you elect this
plan, you must elect to have all your dividends and distributions reinvested in
shares of the particular Fund.

Note that payments under this plan come from redemptions of your Fund shares.
The payments do not represent a yield from the Fund and may be a return of
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 your
withdrawals, and the yield and share price of the Fund, which can be expected to
fluctuate.

<PAGE> 15

You may terminate this 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 Funds and there is no direct charge to you.

Redemption in Kind

If you request a redemption in excess of $1 million, each Fund reserves the
right to pay any portion of the redemption proceeds in securities from the
Fund's portfolio rather than in cash, in accordance 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.

EXCHANGING FUND SHARES

You may exchange your shares of a Fund for shares of the same class of another
Fund at a price based on the respective NAVs of the particular class of shares
of each Fund. There is no sales charge or other fee. Please read the information
in the Funds' prospectus concerning the Fund into which you wish to exchange.
Your exchange must satisfy the applicable minimum investment and other
requirements for the class of shares of the Fund into which you wish to
exchange. The Fund into which you are exchanging must be available for sale in
your state, and the exchange privilege may be amended or terminated upon 60
days' notice to shareholders.

You may place an exchange order by:

o mailing your exchange order to the Transfer Agent's address.

o telephoning 1-800-695-3208 (only if you have authorized telephone
exchanges on the Investment Application). Telephone exchange orders
may be placed from 9:30 to 4:00 p.m. Eastern time on any business day.

Remember that your exchange involves a sale of shares, with possible tax
consequences. See "Dividends, Distributions and Taxes."

DIVIDENDS, DISTRIBUTION AND TAXES

Dividends and Distributions

Each Fund pays dividends from its net investment income and distributions from
its net realized capital gains in additional shares of the Fund, with no sales
charge. However, you may elect on the Investment Application to:

o receive income dividends in cash and capital gain distributions in
additional Fund shares; or

o receive all dividend and capital gain distributions in cash.

Each of the Funds intends to declare and pay dividends of its net investment
income, if any, quarterly. Capital gains, if any, will be paid at least
annually, generally in December.

<PAGE> 16

If you select Option 1 or Option 2 above and the U.S. Postal Service cannot
deliver your checks, or if your checks remain uncashed for six months, your
distribution checks will be reinvested in your account at the then-current net
asset value and your future dividends and distributions will be paid in Fund
shares.

Tax Treatment of Dividends, Distributions and Redemptions

If you are a taxable investor, you will generally be subject to federal income
tax each year on dividend and distribution payments you receive from the Funds,
as well as on any gain realized when you sell (redeem) or exchange shares of a
Fund. If you hold 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 Funds will let you know each year which amounts of your dividend and
distribution payments are subject to taxation as ordinary income or as long-term
capital gain. The tax treatment of capital gains distributions from a Fund 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
when you sell shares of a Fund will depend on how long you held those shares.

Some dividends paid by a Fund may be taxable in the year in which they are
declared, even if they are paid or appear on your account statement the
following year.

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.

<PAGE> 17

HOW TO GET MORE INFORMATION PROSPECTUS

Further information about the Funds April 14, 2000
is contained in:

o The Statement of Additional
Information ("SAI"). The SAI
contains more detail about some of
the matters discussed in this CHRISTIAN
Prospectus. The SAI is incor-
porated into the Prospectus by
reference.

o Annual and Semi-Annual Reports
about the Funds describe their
performance and list their port- STEWARDSHIP
folio securities. They also include
letters from Fund management
describing the Funds' strategies
and discussing market conditions FUNDS
and trends and their implications
for the Funds.

You may obtain free copies of the SAI or
reports, or other infor- mation about
the Funds or your account by calling
1-800-262-6631 or by e-mail at
[email protected].

You may also get copies of the SAI, THE SECURITIES AND EXCHANGE
reports, or other information about the COMMISSION HAS NOT APPROVED OR
Funds directly from the Securities and DISAPPROVED THE SHARES DESCRIBED
Exchange Commission ("SEC") by: IN THIS PROSPECTUS OR DETERMINED
WHETHER THIS PROSPECTUS IS
o visiting the SEC's public reference ACCURATE OR COMPLETE. ANY
room in Washington, DC. (Call REPRESEN- TATION TO THE CONTRARY
1-202-942-8090 for information.) IS A CRIMINAL OFFENSE.

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]; or

o visiting the SEC's website -
http:/www.sec.gov

The Funds' Investment Company Act File
Number with the SEC is 811-01597.

For more complete information about the
Christian Stewardship Funds, including
charges and expenses, contact the
Distributor at the address below. Please
read this prospectus carefully before
you invest or send money.

Capstone Asset Planning Company csf Christian Stewardship Funds
5847 San Felipe, Suite 4100 ----------------------------
Houston, Texas 77057 conforming market indexes
1-800-262-6631 to Christian values
[email protected]

<PAGE> 18

CHRISTIAN STEWARDSHIP FUNDS A Series of Capstone
Christian Values Fund, Inc.
STATEMENT OF ADDITIONAL INFORMATION
April 14, 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 for the Funds and should be read in conjunction with the Prospectus
dated April 14, 2000. This Statement of Additional Information is incorporated
in its entirety into the Prospectus. The 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.

TABLE OF CONTENTS

<TABLE>
<S> <C>
GENERAL INFORMATION.......................................
INVESTMENTS AND INVESTMENT STRATEGIES.....................
INVESTMENT RESTRICTIONS...................................
PERFORMANCE AND YIELD INFORMATION.........................
DIRECTORS AND EXECUTIVE OFFICERS..........................
INVESTMENT ADVISORY AGREEMENT.............................
ADVISORY COMMITTEE AND CONSULTANT.........................
ADMINISTRATION AGREEMENT..................................
DISTRIBUTOR...............................................
OTHER SERVICES............................................
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.......
PORTFOLIO TRANSACTIONS AND BROKERAGE......................
DETERMINATION OF NET ASSET VALUE..........................
HOW TO BUY AND REDEEM SHARES..............................
DIVIDENDS AND DISTRIBUTIONS...............................
TAXES.....................................................
OTHER INFORMATION.........................................
</TABLE>

<PAGE> 19

GENERAL INFORMATION

The Christian Stewardship Funds ("CSF") are series of Capstone Christian Values
Fund, Inc. ("Company") an "open-end diversified management company" registered
under the Investment Company Act of 1940 and include four series ("Funds").
Shares of each Fund have been divided into two classes, including Individual and
Institutional shares. Each class represents an interest in a Fund, but is
subject to different rights, expenses and privileges. The Company was originally
incorporated in Delaware in 1968 and commenced business shortly thereafter as an
open-end diversified management company under the Investment Company Act of
1940. On February 18, 1992, stockholders approved a plan of reorganization
pursuant to which the Company became, on May 11, 1992, a Maryland series
company, Capstone Fixed Income Series, Inc. The Company's name was changed to
its present name on March 13, 2000.

Capstone Asset Management Company (the "Adviser and Administrator") provides
investment advisory and administrative services to the Funds. The Adviser and
Administrator and Capstone Asset Planning Company (the "Distributor") are
wholly-owned subsidiaries of Capstone Financial Services, Inc.

INVESTMENTS AND INVESTMENT STRATEGIES

About Ratings

After purchase by a Fund, a security may cease to be rated or its rating may be
reduced below the minimum required for purchase by the Fund. Neither event will
require a sale of such security by the Fund, except that a Fund will not hold
below-investment grade securities totaling more than 5% of its net assets.
However, the Adviser and Administrator will consider such event in its
determination of whether a Fund should continue to hold the security. To the
extent the ratings given by Moody's Investors Service ("Moody's), Standard &
Poors Corporation ("S&P") or another nationally recognized statistical rating
organization ("NRSRO") may change as a result of changes in such organizations
or their rating systems, the Funds will attempt to use comparable ratings as
standards for investments in accordance with the investment policies contained
in the Prospectus.

The Funds may invest in debt securities rated Baa by Moody's or BBB by S&P. Such
securities may have speculative characteristics and changes in economic
conditions or other circumstances may lead to a weakened capacity to make
principal and interest payments that is the case with higher grade bonds.

Government Obligations (All Funds)

Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government are backed by the full faith and credit of the U.S. Treasury. No
assurances can be given that the U.S. government will provide financial support
to other agencies or instrumentalities, since it is not obligated to do so.
These agencies and instrumentalities are supported by:

o the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury

o the discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or

o the credit of the agency or instrumentality.

Bank Obligations (All Funds)

These obligations include negotiable certificates of deposit and bankers'
acceptances. A certificate of deposit is a short-term, interest-bearing
negotiable certificate issued by a commercial bank against funds deposited in
the bank. A bankers' acceptance is a short-term draft drawn on a commercial bank
by a borrower, usually in connection with an international commercial
transaction. The borrower is liable for payment as is the bank, which
unconditionally guarantees to pay the draft at its face amount on the maturity
date. The Funds will limit their bank investments to dollar-denominated
obligations of U.S. or foreign banks rated A or better by Moody's or S&P, that
have more than $1 billion in total assets at the time of investments and, in the
case of U.S. banks, are members of the Federal Reserve System or are examined by
the Comptroller of the Currency, or whose deposits are insured by the Federal
Deposit Insurance Corporation.

<PAGE> 20

Commercial Paper (All Funds)

Commercial paper includes short-term unsecured promissory notes issued by
domestic and foreign bank holding companies, corporations and financial
institutions and similar taxable instruments issued by government agencies and
instrumentalities. All commercial paper purchased by a Fund must have a
remaining maturity of no more than 270 days from the date of purchase by a Fund,
and must be rated at least A-1 or P-1 by an NRSRO, or deemed of comparable
quality by the Investment Adviser and Administrator. No Fund may invest more
than 5% of its total assets in commercial paper of a single issuer.

Corporate Debt Securities (All Funds)

Fund investments in these securities are limited to corporate debt securities
(corporate bonds, debentures, notes and similar corporate debt instruments) that
meet the particular Fund's quality standards. No Fund will invest in corporate
debt securities that, at the time of investment, are rated below BBB by S&P or
Baa by Moody's, or if not rated, are determined by the Adviser and Administrator
to be below such quality.

Repurchase Agreements (All Funds)

The Funds may invest in securities subject to repurchase agreements with U.S.
banks or broker-dealers. A repurchase agreement is a transaction in which the
seller of a security commits itself at the time of the sale to repurchase that
same security from the buyer at a mutually agreed-upon time and price. The
repurchase price exceeds the sale price, reflecting an agreed-upon interest rate
effective for the period the buyer owns the security subject to repurchase. The
agreed-upon rate is unrelated to the interest rate on that security. The
agreement will be fully collateralized by the underlying securities and will be
marked-to-market on a daily basis during the term of the repurchase agreement to
insure that the value of the collateral always equals or exceeds the repurchase
price. The Adviser and Administrator will enter into repurchase agreements only
with firms that present minimal credit risks as determined in accordance with
guidelines adopted by the Board of Directors. In the event of default by the
seller under the repurchase agreement, the Funds may have problems in exercising
their rights to the underlying securities and may incur costs and experience
time delays in connection with the disposition of such securities.

When-Issued and Delayed Delivery Securities (All Funds)

The Funds may purchase securities on a when issued or delayed delivery basis.
These transactions are arrangements in which the Funds purchase securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause a Fund to miss a price or yield considered
to be advantageous. Settlement dates may be a month or more after entering into
these transactions, and the market values of the securities purchased may vary
from the purchase price. Accordingly, a Fund may pay more or less than the
market value of the securities on the settlement date.

The Funds may dispose of a commitment prior to settlement if the Adviser and
Administrator deems it appropriate to do so. In addition, the Funds may enter
into transactions to sell their purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase similar
securities at later dates. The Funds may realize short-term profits or losses
upon the sale of such commitments.

<PAGE> 21

Loans of Portfolio Securities (All Funds)

The Funds may lend their portfolio securities to brokers, dealers and financial
institutions, provided: (1) the loan is secured continuously by collateral
consisting of U.S. Government securities or cash or letters of credit maintained
on a daily mark-to-market basis in an amount at least equal to the current
market value of the securities loaned; (2) the Funds may at any time call the
loan and obtain the return of the securities loaned within three business days;
and (3) the Funds will receive any interest or dividends paid on the loaned
securities.

The Funds will earn income for lending their securities because cash collateral
pursuant to these loans will be invested in short-term money market instruments.
In connection with lending securities, the Funds may pay reasonable finders,
administrative and custodial fees. Loans of securities involve a risk that the
borrower may fail to return the securities or may fail to provide additional
collateral.

Foreign Securities (All Funds)

The Funds may invest directly in both sponsored and unsponsored U.S. dollar or
foreign currency-denominated corporate securities (including preferred or
preference stock), certificates of deposit and bankers' acceptances issued by
foreign banks, U.S. dollar-denominated bonds sold in the United States ("Yankee
bonds"), other bonds denominated in U.S. dollars or other currencies and sold to
investors outside the United States ("Eurobonds"), and obligations of foreign
governments or their subdivisions, agencies and instrumentalities,
international agencies and supranational entities. There may be less information
available to a Fund concerning unsponsored securities, for which the paying
agent is located outside the United States.

The Funds may purchase foreign securities traded in the United States or in
foreign markets. The Funds may invest directly in foreign equity securities and
in securities represented by European Depositary Receipts ("EDRs"), American
Depositary Receipts ("ADRs") and similar securities. ADRs are dollar-denominated
receipts generally issued by domestic banks, which represent the deposit with
the bank of a security of a foreign issuer, and which are publicly traded on
exchanges or over-the-counter in the United States. EDRs are receipts similar to
ADRs and are issued and traded in Europe.

There are certain risks associated with investments in unsponsored ADR programs.
Because the non-U.S. company does not actively participate in the creation of
the ADR program, the underlying agreements for service and payment will be
between the depositary and the shareholders. The company issuing the stock
underlying the ADRs pays nothing to establish the unsponsored facility, as fees
for ADR issuance and cancellation are paid by brokers. Investors directly bear
the expenses associated with certificate transfer, custody and dividend payment.

In addition, in an unsponsored ADR program, there may be several depositaries
with no defined legal obligations to the non-U.S. company. The duplicate
depositaries may lead to marketplace confusion because there would be no central
source of information to buyers, sellers and intermediaries. The efficiency of
centralization gained in a sponsored program can greatly reduce the delays in
delivery of dividends and annual reports.

Since certain Funds may invest in securities denominated in currencies other
than the U.S. dollar, and since those Funds may, for various periods pending
investment for non-speculative purposes, hold funds in bank deposits or other
money market investments denominated in foreign currencies, a Fund may be

<PAGE> 22

affected favorably or unfavorably by exchange control regulations or changes in
the exchange rate between such currencies and the dollar. Changes in foreign
currency exchange rates will influence values of securities in the Fund's
portfolio, from the perspective of U.S. investors. Changes in foreign currency
exchange rates may also affect the value of dividends and interest earned, gains
and losses realized on the sale of securities, and net investment income and
gains, if any, to be distributed to shareholders by a Fund. A decline in the
value of any particular currency against the U.S. dollar will cause a decline in
the U.S. dollar value of a Fund's holdings of securities denominated in such
currency and, therefore, will cause an overall decline in the Fund's net asset
value and any net investment income and capital gains to be distributed in U.S.
dollars to shareholders. The rate of exchange between the U.S. dollar and other
currencies is generally determined by several factors, including the forces of
supply and demand in the foreign exchange markets. These forces are affected by
the international balance of payments, interest rate movements and other
economic and financial conditions, government or central bank intervention,
speculation and other factors.

On January 1, 1999, the European Monetary Union (EMU) implemented a new currency
union, the Euro. It may not be clear how financial contracts outstanding prior
to January 1, 1999 that refer to existing currencies rather than the Euro will
be treated, and there may be uncertainties regarding exchange rates and the
creation of suitable clearing and settlement payment systems for the new
currency. These or other factors, including political risks, could cause market
disruptions during the early years following introduction of the Euro, and could
adversely affect the value of securities held by the Funds.

Investments in securities of foreign issuers involve certain costs, and other
risks and considerations not typically associated with investments in U.S.
issuers. These include: differences in accounting, auditing and financial
reporting standards; generally higher commission rates on foreign portfolio
transactions; the possibility of nationalization, expropriation or confiscatory
taxation; adverse changes in investment or exchange control regulations (which
may include suspension of the ability to transfer currency from a country); and
political instability which could affect U.S. investments in foreign countries.
Additionally, foreign securities, and dividends and interest payable on those
securities, may be subject to foreign taxes, including taxes withheld from
payments on those securities. Foreign securities often trade with less frequency
and volume than domestic securities and, therefore, may exhibit greater price
volatility and less liquidity. Additional costs associated with an investment in
foreign securities may include higher custodial fees and transaction costs than
are typical of U.S. investments, as well as currency conversion costs. A Fund's
objective may be affected either favorably or unfavorably by fluctuations in the
relative rates of exchange between the currencies of different nations, by
exchange control regulations and by indigenous economic and political
developments.

Although each Fund values its assets daily in terms of U.S. dollars, the Funds
do not intend to convert any holdings of foreign currencies into U.S. dollars on
a daily basis. When effected, currency conversion involves costs in the form of
a "spread" between the foreign exchange dealer's buying and selling prices.

Forward Foreign Currency Exchange Transactions (All Funds)

Each Fund may enter into forward foreign currency exchange contracts in
connection with its investments in foreign securities that are denominated in
foreign currencies. A forward foreign currency exchange contract ("forward

<PAGE> 23

contract") is an agreement to purchase or sell a specific amount of a particular
foreign currency at a specified price on a specified future date. These
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades. Closing transactions with respect to forward contracts are
effected with the currency trader who is a party to the original forward
contract.

A Fund will enter into a forward contract only for hedging purposes, with
respect to specific anticipated portfolio transactions (including receivables
and payables) or with respect to portfolio positions denominated in a particular
currency. By entering into such a contract, the Fund hopes to protect against,
or benefit from, an anticipated change in relevant currency exchange rates. For
example, when the Fund anticipates purchasing or selling a security, or
receiving a dividend payment, it may enter into a forward contract to set the
rate at which the relevant currencies will be exchanged at the time of the
transaction. Or, if the Fund anticipates a decline in the value of a currency in
which some of its assets are denominated, it may attempt to "lock in" the
current more favorable rate by entering into a contract to sell an amount of
that currency which approximates the current value of those securities. Each
such contract involves some cost to the Fund and requires that the Fund maintain
with its custodian a segregated account of liquid assets sufficient to satisfy
its obligations under the contract. In the event that the currencies do not move
in the direction, or to the extent, or within the time frame, anticipated, the
Fund may lose some or all of the protection or benefit hoped for.

Corporate Bonds (All Funds)

Corporate bonds are issued by businesses that want to borrow money for some
purpose -- often to develop a new product or service, to expand into a new
market, or to buy another company. As with other types of bonds, the issuer
promises to repay the principal on a specific date and to make interest payments
in the meantime. The amount of interest offered depends on market conditions and
also on the financial health of the corporation issuing the bonds; a company
whose credit rating is not strong will have to offer a higher interest rate to
obtain buyers for its bonds.

Mortgage-Backed Securities (Bond Index Fund)

Mortgage-backed securities represent interests in underlying pools of mortgages.
Unlike ordinary bonds, which generally pay a fixed rate of interest at regular
intervals and then pay principal upon maturity, mortgage-backed securities pay
both interest and principal as part of their regular payments. Because the
mortgages underlying the securities can be prepaid at any time by homeowners or
corporate borrowers, mortgage-backed securities are subject to prepayment risk.
Prepayment risk is the possibility that, during periods of falling interest
rates, a homeowner will repay a higher-interest mortgage earlier than scheduled.
The Fund would then be forced to reinvest the unanticipated proceeds at lower
interest rates and would lose both the higher yield from its prior investment
and the opportunity to sell that investment at a premium. Mortgage-backed
securities are issued by a number of government agencies, including the
Government National Mortgage Association (GNMA or "Ginnie Mae"), the Federal
Home Loan Mortgage Corporation (FHLMC), and the Federal National Mortgage
Association (FNMA or "Fannie Mae"). GNMAs are guaranteed by the full faith and
credit of the U.S. government as to the timely payment of principal and
interest; mortgage securities issued by other government agencies or private

<PAGE> 24

corporations are not. Bond Index Fund may also invest to a lesser extent in
conventional mortgage securities, which are packaged by private corporations and
are not guaranteed by the U.S. government.

Eurodollar and Yankee Dollar Investments (Bond Index Fund)

The Bond Index Fund may invest in Eurodollar and Yankee Dollar instruments.
Eurodollar instruments are bonds of foreign corporate and government issuers
that pay interest and principal in U.S. dollars generally held in banks outside
the United States, primarily in Europe. Yankee Dollar instruments are U.S.
dollar denominated bonds typically issued in the U.S. by foreign governments and
their agencies and foreign banks and corporations. These Funds may invest in
Eurodollar Certificates of Deposit ("ECDs"), Eurodollar Time Deposits ("ETDs")
and Yankee Certificates of Deposit ("Yankee CDs"). ECDs are U.S.
dollar-denominated certificates of deposit issued by foreign branches of
domestic banks; ETDs are U.S. dollar-denominated deposits in a foreign branch of
a U.S. bank or in a foreign bank; and Yankee CDs are U.S. dollar-denominated
certificates of deposit issued by a U.S. branch of a foreign bank and held in
the U.S. These investments involve risks that are different from investments in
securities issued by U.S. issuers, including potential unfavorable political and
economic developments, foreign withholding or other taxes, seizure of foreign
deposits, currency controls, interest limitations or other governmental
restrictions which might affect payment of principal or interest.

Investment Companies and Investment Funds (All Funds)

Each of the Funds is permitted to invest in shares of other open-end or
closed-end investment companies, to the extent consistent with its investment
objective and policies. A Fund's investments (together with those of its
affiliated persons) in any other single investment company are limited to no
more than 3% of the outstanding shares of that other investment company.
Additionally, a Fund, in any 30-day period, may not redeem any amount in excess
of 1% of the total outstanding share of such other investment company. On issues
on which shareholders of such another investment company are asked to vote, the
Funds will vote their shares in the same proportion as the vote of all other
holders of shares of that investment company. To the extent a Fund invests a
portion of its assets in other investment companies, those assets will be
subject to the expenses of any such investment company as well as to the
expenses of the Fund itself. A Fund may not purchase shares of any affiliated
investment company except as permitted by SEC rule or order.

Restricted and Illiquid Securities (All Funds)

Each Fund may invest up to 15% of its net assets in illiquid securities.
Illiquid securities include those that are not readily marketable, repurchase
agreements maturing in more than seven days, time deposits with a notice or
demand period of more than seven days, certain OTC options, certain investment
company securities, and certain restricted securities. Based upon continuing
review of the trading markets for a specific restricted security, the security
may be determined to be eligible for resale to qualified institutional buyers
pursuant to Rule 144A under the Securities Act of 1933 and, therefore, to be
liquid. Also, certain securities deemed to be illiquid may subsequently be
determined to be liquid if they are found to satisfy relevant liquidity
requirements.

<PAGE> 25

Investments by the Funds in securities of other investment companies may be
subject to restrictions regarding redemption. In particular, the Money Market
and International Funds will invest in securities of other investment companies
in reliance on provisions of the 1940 Act that limit each Fund's redemptions to
no more than 1% of another investment company's total outstanding securities
during any period less than 30 days. To the extent a Fund owns securities of
such a company in excess of 1% of that company's total outstanding securities,
such holdings by a Fund could be deemed to be illiquid and would be subject to
the Fund's 15% limit on illiquid investments.

The Board of Directors has adopted guidelines and delegated to the Adviser and
Administrator the daily function of determining and monitoring the liquidity of
portfolio securities, including restricted and illiquid securities. The Board of
Directors, however, retains oversight and is ultimately responsible for such
determinations. The purchase price and subsequent valuation of illiquid
securities normally reflect a discount, which may be significant, from the
market price of comparable securities for which a liquid market exists.

Options and Futures

To the extent consistent with their investment policies, the Funds may employ
special investment practices as a means of obtaining market exposure to
securities without purchasing the securities directly. These practices include
the purchase of put and call options on securities and securities indexes.

A call option gives the purchaser of the option, in return for premium paid, the
right to buy the underlying security at a specified price at any point during
the term of the option. A put option gives the purchaser the right to sell the
underlying security at the exercise price during the option period. In the case
of an option on a securities index, the option holder has the right to obtain,
upon exercise of the option, a cash settlement based on the difference between
the exercise price and the value of the underlying index.

The purchase of put and call options does involve certain risks. Through
investment in options, a Fund can profit from favorable movements in the price
of an underlying security to a greater extent than if the Fund purchased the
security directly. However, if the security does not move in the anticipated
direction during the term of the option in an amount greater than the premium
paid for the option, the Fund may lose a greater percentage of its investment
than if the transaction were effected in the security directly. Generally,
transactions in securities index options pose the same type of risks as do
transactions in securities options.

Subject to certain limits imposed by the Commodity Futures Trading Commission
("CFTC"), a Fund may also (i) invest in securities index futures contracts and
options on securities index futures and (ii) engage in margin transactions with
respect to such investments. A Fund will use futures as a temporary means of
gaining exposure to its particular market prior to making investments of
incoming cash in additional securities.

A securities index futures contract is an agreement under which two parties
agree to take or make delivery of an amount of cash based on the difference
between the value of a securities index at the beginning and at the end of the
contract period. When a Fund enters into a securities index futures contract, it
must make an initial deposit, known as "initial margin," as a partial guarantee
of its performance under the contract. As the value of the securities index
fluctuates, the Fund may be required to make additional margin deposits, known
as "variation margin," to cover any additional obligation it may have under the
contract.

<PAGE> 26

Options on securities index futures contracts are similar to options on
securities except that an option on a securities index futures contract gives
the purchaser the right, in return for the premium paid, to assume a position in
a securities index futures contract (a long position if the option is a call and
a short position if the option is a put), upon deposit of required margin. In
the alternative, the purchaser may resell the option, if it has value, or simply
let it expire. Upon expiration, the purchaser will either realize a gain or the
option will expire worthless, depending on the closing price of the index on
that day. Thus, the purchaser's risk is limited to the premium paid for the
option.

The Funds' transactions in futures contracts and related options are subject to
limits under certain rules of the CFTC. Under these rules, initial margin
deposits and premiums paid by a Fund for such transactions, except those for
bona fide hedging purposes, are limited to no more than 5% of the fair market
value of the Fund's total assets.

Successful use by a Fund of securities index futures contracts is subject to
certain special risk considerations. A liquid index futures market may not be
available when a Fund seeks to purchase or sell a contract. In addition, there
may be an imperfect correlation between movements in the securities included in
the index and movements in the prices of securities the Fund wishes to purchase.
Successful use of securities index futures contracts and options on such
contracts is further dependent on the Adviser and Administrator's ability to
predict correctly movements in the direction of the stock markets, and no
assurance can be given that its judgment in this respect will be correct.

The SEC generally requires that when investment companies, such as the Funds,
effect transactions of the foregoing nature, such funds must segregate either
cash or readily marketable securities with its Custodian in the amount of its
obligations under the foregoing transactions, or cover such obligations by
maintaining positions in portfolio securities or options that would serve to
satisfy or offset the risk of such obligations. When effecting transactions of
the foregoing nature, the Funds will comply with such segregation or cover
requirements.

Securities Index Futures and Related Options (All Funds)

A Fund may engage in transactions in options on securities and securities
indices, and securities index futures and options on such futures as a proxy for
investing in underlying securities in accordance with the Fund's investment
policies.

A Fund may purchase options on securities indices. A securities index (such as
the S&P 500) assigns relative values to the securities included in the index and
the index fluctuates with the changes in the market values of the securities so
included. Options on securities indices are similar to options on securities
except that, rather than giving the purchaser the right to take delivery of the
securities at a specified price, an option on a securities index gives the
purchaser the right to receive cash. The amount of cash is equal to the
difference between the closing price of the index and the exercise price of the
option, expressed in dollars, times a specified multiple (the "multiplier"). The
writer of the option is obligated, in return for the premium received, to make
delivery of this amount. Gain or loss with respect to options on securities
indices depends on price movements in the stock market generally rather than
price movements in individual securities.

<PAGE> 27

The multiplier for an index option performs a function similar to the unit of
trading for a securities option. It determines the total dollar value per
contract of each point in the difference between the exercise price of an option
and the current level of the underlying index. A multiplier of 100 means that a
one-point difference will yield $100. Options on different indices may have
different multipliers.

Because the value of the securities index option depends upon movements in the
level of the index rather than the price of a particular security, whether a
fund will realize a gain or loss on the purchase of a put or call option on a
securities index depends upon movements in the level of prices in the market
generally or in an industry or market segment rather than movements in the price
of a particular security.

A securities index futures contract is a bilateral agreement to which two
parties agree to take or make delivery of an amount of cash equal to a specified
dollar amount times the difference between the index value at the close of the
last trading day of the contract and the futures contract price. The value of a
unit is the current value of the securities index. For example, the Standard &
Poor's Stock Index is composed of 500 selected common stocks, most of which are
listed on the New York Stock Exchange. The S&P 500 Index assigns relative
weightings to the value of one share of each of these 500 common stocks included
in the Index, and the Index fluctuates with changes in the market values of the
shares of those common stocks. In the case of the S&P 500 Index, contracts are
to buy or sell 500 units. Thus, if the value of the S&P 500 Index Futures were
$150, one contract would be worth $75,000 (500 units X $150). Stock index
futures contracts specify that no delivery of the actual stocks making up the
index will take place. Instead, settlement in cash must occur upon the
termination of a contract, with the settlement being the difference between the
contract price and the actual level of the stock index at the expiration of the
contract. For example, a Fund enters into a futures contract to buy 500 units of
the S&P 500 Index at a specified future date at a contract price of $150 and the
S&P 500 Index is at $154 on that future date, the Fund will gain $2,000 (500
units X gain of $4). If the Fund enters into a futures contract to sell 500
units of the stock index at a specified future date at a contract price of $150
and the S&P 500 Index is at $154 on that future date, the Fund will lose $2,000
(500 units X loss of $4).

Options on securities index futures contracts are similar to options on
securities except that an option on a securities index futures contract gives
the purchaser the right, in return for a premium paid, to assume a position in a
securities index futures contract (a long position if the option is a call and a
short position if the option is a put), upon deposit of required margin. In the
alternative, the purchaser may resell the option, if it has value, or simply let
it expire. Upon expiration the purchaser will either realize a gain or the
option will expire worthless, depending on the closing price of the index on
that day. Thus, the purchaser's risk is limited to the premium paid for the
option.

Successful use of securities index futures contracts and options on such
contracts is limited by the fact that the correlation between movements in the
price of futures contracts or options on futures contracts and movements in
prices of securities in a particular Benchmark may not be perfect.

<PAGE> 28

A Fund will purchase and sell securities futures contracts and will purchase put
and call options on securities index contracts only as a means of obtaining
market exposure to securities in its Benchmark. A Fund will not engage in
transactions in securities index futures contracts or options on such contracts
for speculation and will not write options on securities index futures
contracts.

When purchasing securities index futures contracts, a Fund will be required to
post a small initial margin deposit, held in a segregated account with the
futures broker selected by the Fund; the remaining portion of the contracts'
value will be retained in short-term investments in order to meet variation
margin requirements or net redemptions. In the event of net redemptions, the
Fund would close out open futures contracts and meet redemptions with cash
realized from liquidating short-term investments. A Fund will not leverage its
portfolio by purchasing an amount of contracts that would increase its exposure
to securities market movements beyond the exposure of a portfolio that was 100%
invested in those securities.

A Fund's transactions in futures and related options are subject to limits under
rules of the CFTC. In accordance with those rules, a Fund will not enter into
transactions involving futures contracts and options on futures contracts to the
extent that, immediately thereafter, the sum of its initial margin deposits on
open futures contracts and premiums paid for options on futures contracts, other
than contracts entered into for bona fide hedging purposes, as defined by
applicable rules of the CFTC, would exceed 5% of the market value of the Fund's
total assets.

Securities index futures contracts by their terms settle at settlement date on a
cash basis. In most cases, however, the contracts are "closed out" before the
settlement date. Closing out an open futures position is done by taking an
opposite position ("buying" a contract which has previously been "sold" or
selling a previously purchased contract) in an identical contract to terminate
the position.

Positions in securities index futures contracts may be closed out only on an
exchange which provides a secondary market for such futures. There can be no
assurance, however, that a liquid secondary market will exist for any particular
futures contract at any specified time. Thus, it may not be possible to close
out a futures position, which could have an adverse impact on the cash position
of a Fund, and which could possibly force the sale of portfolio securities at a
time when it may be disadvantageous to do so. In the option of the Funds'
management, the risk that a Fund will be unable to close out a futures contract
will be minimized by entering only into futures contracts which are traded on
national futures exchanges and for which there appears to be a liquid secondary
market.

The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required and to the extremely
high degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and
substantial loss (as well as gain) to an investor. Because a Fund will only
engage in futures strategies for hedging purposes, the Funds' management does
not believe that the Funds will be subject to the risks of substantial loss that
may be associated with futures transactions.

Below-Investment Grade Securities (All Funds)

Although a Fund may not purchase debt obligations rated below Baa by Moody's or
BBB by S&P (or, if unrated, deemed of comparable quality by the Adviser and

<PAGE> 29

Administrator), a Fund will not necessarily sell securities whose rating falls
below Baa or BBB (or, if unrated, whose quality is deemed by the Adviser and
Administrator to be below Baa or BBB). However, a Fund may not hold such
downgraded securities in an amount in excess of 5% of its net assets.

Below-investment grade securities (sometimes referred to as "junk bonds") are
considered predominantly speculative with respect to their capacity to pay
interest and to repay principal. They generally involve a greater risk of
default and have more price volatility than securities in higher rating
categories. The risk of default can increase with changes in the financial
condition of the issuer or with changes in the U.S. economy, such as a
recession.

INVESTMENT RESTRICTIONS

The Funds are subject to investment restrictions designed to reflect their
socially acceptable investment policies. In addition, the Funds have adopted the
following investment restrictions which are fundamental policies of each of the
Funds (except as otherwise noted) and may not be changed with respect to a Fund
without approval by vote of a majority of the outstanding shares of the
particular Fund. For this purpose such a majority vote means the lesser of (1)
67% or more of the voting securities present at an annual or special meeting of
shareholders, if holders of more than 50% of the outstanding voting securities
of the particular Fund are present or represented by proxy or (2) more than 50%
of the outstanding voting securities of the Fund.

Each of the Funds has elected to be qualified as a diversified series of the
Company.

A Fund may not:

1. borrow money, except as permitted under the Investment Company Act of
1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time;

2. issue senior securities, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time;

3. concentrate its investments in a particular industry, as that term is
used in the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having jurisdiction,
from time to time provided that there is no limitation on investment
by Bond Index Fund in U. S. Government securities or in repurchase
agreements with respect thereto;

4. engage in the business of underwriting securities issued by others,
except to the extent that a Fund may be deemed to be an underwriter in
connection with the disposition of portfolio securities;

5. purchase or sell real estate, which does not include securities of
companies which deal in real estate or mortgages or investments
secured by real estate or interests therein, except that each Fund
reserves freedom of action to hold and to sell real estate acquired as
a result of the Fund's ownership of securities;

6. purchase physical commodities or contracts relating to physical
commodities;

<PAGE> 30

7. make loans to other persons, except (i) loans of portfolio securities,
and (ii) to the extent that entry into repurchase agreements and the
purchase of debt instruments or interests in indebtedness in
accordance with a Fund's investment objective and policies may be
deemed to be loans.

With respect to senior securities, borrowing and concentrating investments, the
Investment Company Act of 1940, as amended, and regulatory interpretations of
relevant provisions of that Act establish the following general limits. Open-end
registered investment companies ("funds"), such as the Funds, are not permitted
to issue any class of senior security or to sell any senior security of which
they are the issuers. Funds are, however, permitted to issue separate series of
shares (the Funds are series of the Company) and to divide those series into
separate classes (Individual and Institutional are such separate classes.) The
Funds have no intention to issue senior securities, except that the Company may
issue its shares in separate series and divide those series into classes of
shares. Although borrowings could be deemed to be senior securities, a fund is
"permitted to borrow from a bank provided that immediately after any such
borrowing there is an asset coverage of at least 300 per cent for all borrowings
by the fund. The Act also permits a fund to borrow for temporary purposes only
in an amount not exceeding 5 per cent of the value of the total assets of the
issuer at the time when the loan is made. (A loan shall be presumed to be for
temporary purposes if it is repaid within 60 days and is not extended or
renewed.) The Securities and Exchange Commission ("SEC") has indicated, however,
that certain types of transactions, which could be deemed "borrowings" (such as
firm commitment agreements and reverse repurchase agreements), are permissible
if a fund "covers" the agreements by establishing and maintaining segregated
accounts. The Funds presently do not intend to borrow except when advisable to
satisfy redemptions and a Fund will make no purchases if its outstanding
borrowings exceed 5% of its total assets. With respect to concentration, the SEC
staff takes the position that investment of 25% or more of a fund's total assets
in any one industry represents concentration.

The portfolio securities of a 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.

PERFORMANCE AND YIELD INFORMATION

CSF may from time to time include figures indicating a Fund's yield, total
return or average annual total return in advertisements or reports to
shareholders or prospective investors.

Large Cap Equity Index Fund, Small Cap Equity Index Fund and International
Equity Index Fund: The Funds may from time to time include figures indicating
total return or average annual total return in advertisements or reports to
stockholders or prospective investors. Average annual total return and total
return figures are calculated for each class of shares and represent the
increase (or decrease) in the value of an investment in a class of shares of a
Fund over a specified period. Both calculations assume that all income dividends
and capital gain distributions during the period are reinvested at net asset
value in additional shares of that class. Quotations of the average annual total
return reflect the deduction of a proportional share of Fund and class expenses
on an annual basis. The results, which are annualized, represent an average
annual compounded rate of return on a hypothetical investment in the particular
class of shares of the Fund over a period of 1, 3, 5 and 10 years (or life of

29
<PAGE> 31

the Fund or class) ending on the most recent calendar quarter. Quotations of
total return, which are not annualized, represent historical earnings and asset
value fluctuations.

Bond Index Fund: Quotations of the Fund's yield and effective yield may be
included along with total return or average annual total return calculations in
advertisements or reports to stockholders or prospective investors. Both yield
figures are based on the historical performance of a class of shares of the Fund
and show the performance of a hypothetical investment. Yield refers to the net
investment income generated by the Fund's portfolio with respect to a particular
class of shares over a specified seven-day period. This income is then
annualized. That is, the amount of income generated with respect to that class
of shares during that week is assumed to be generated during each week over a
52-week period and is shown as a percentage. The effective yield is expressed
similarly but, when annualized, the income earned by an investment in a
particular class of shares of the Fund is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect on the assumed reinvestment. Yield and effective yield for a
class of shares of the Fund will vary based upon, among other things, changes in
market conditions, the level of interest rates and the level of expenses borne
by the class.

Performance and yield calculations are based on past performance and are not a
guarantee of future results. A more detailed description of the methods used to
determine the Funds' average annual total return, total return, yield and
effective yield follows.

Quotations of yield for each class of shares of a Fund will be based on the
investment income per share earned during a particular 30-day period, less
expenses accrued with respect to that class during the period ("net investment
income"), and will be computed by dividing net investment income for the class
by the maximum offering price per share of that class on the last day of the
period, according to the following formula:

YIELD = 2[(a-b + 1)6-1]
---
cd

where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of any reimbursements), c = the average daily number of
shares of the class outstanding during the period that were entitled to receive
dividends, and d = the maximum offering price per share of the class on the last
day of the period.

Average annual total return and total return figures represent the increase (or
decrease) in the value of an investment in a class of shares of a 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 shares of the class.

30
<PAGE> 32

Quotations of the average annual total return reflect the deduction of a
proportional share of class expenses on an annual basis. The results, which are
annualized, represent an average annual compounded rate of return on a
hypothetical investment in the particular class of shares of the Fund over a
period of 1, 5 and 10 years ending on the most recent calendar quarter, or the
life of the Fund or class, 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.

Quotations of total return, which are not annualized, represent historical
earnings and asset value fluctuations of a class of shares. Total return is
based on past performance and is not a guarantee of future results.

Performance information for the Funds may be compared, in reports and
promotional literature, to: (i) 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;
(ii) 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; and (iii) the Consumer Price Index (a measure of inflation)
to assess the real rate of return from an investment in a Fund. 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 Funds reflects only the performance of a hypothetical
investment in a Fund during the particular time period on which the calculations
are based. Performance information should be considered in light of each 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 a Fund's future performance.

MANAGEMENT OF THE COMPANY

Directors and Executive Officers

The Directors are responsible for the overall management and supervision of the
Company and to perform the functions of Directors under the Company's Articles
of Incorporation, its principal governing document, as amended from time to
time. The Directors, while retaining overall supervisory responsibility, have
delegated day-to-day operating responsibilities to Capstone Asset Management
Company, the Adviser and Administrator; Fifth Third Bank of Cincinnati, Ohio,
the custodian; and Declaration Services Company, which acts as fund accounting,
transfer and shareholder servicing agent.

CSF's Directors and executive officers are listed below:

BERNARD J. VAUGHAN (71), Director. 113 Bryn Mawr Avenue, Bala Cynwyd,
Pennsylvania 19004. Director or Trustee of other Capstone Funds; formerly Vice
President of Fidelity Bank (1979-1993).

JAMES F. LEARY (69), Director. 2006 Peakwood Dr., Garland, Texas 75044. Managing
Director of Benefit Capital South West, Inc. (financial services). Director/
Trustee of other Capstone Funds; Director: Associated Materials, Inc. (tire

31
<PAGE> 33

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), Director. 541 Shaw Hill, Stowe, Vermont 05672. Consultant
and private investor (since 1990); Director of Nova Natural Resources (oil, gas,
minerals); Director or Trustee of other Capstone Funds; formerly Senior Vice
President of McRae Capital Management, Inc. (1991-1995); and registered
representative of Rickel & Associates, a registered broker-dealer (1988-1991).

*EDWARD L. JAROSKI (53), President and Director. 5847 San Felipe, Suite 4100,
Houston, Texas 77057. President (since 1992) and Director (since 1987) of
Capstone Asset Management Company; President and Director of Capstone Asset
Planning Company and Capstone Financial Services, Inc. (since 1987); Director/
Trustee and Officer of other Capstone Funds.

DAN E. WATSON (51), Executive Vice President. 5847 San Felipe, Suite 4100,
Houston, Texas 77057. Chairman of the Board (since 1992) and Director of
Capstone Asset Management Company (since 1987); Chairman of the Board and
Director of Capstone Asset Planning Company and Capstone Financial Services,
Inc. (since 1987); Officer of other Capstone Funds.

LINDA G. GIUFFRE (38), Secretary/Treasurer. 5847 San Felipe, Suite 4100,
Houston, Texas 77057. Vice President, Compliance of Capstone Financial Services,
Inc., Capstone Asset Management Company and Capstone Planning Company; Officer
of other Capstone Funds.

- ----------------
* Mr. Jaroski is an "interested person" of the Funds, as defined in the
Investment Company Act of 1940.

Each independent Director serves on the Board of ten (10) other mutual funds,
comprising the Capstone Complex of Mutual Funds. The independent Directors are
entitled to $2,000 per meeting attended and are paid an annual retainer of
$6,000. In addition, each independent Director is paid $500 per committee for
serving on four (4) committees. Commencing November 15, 1999, the Directors have
determined to appoint a Lead Director, and selected Bernard Vaughan for that
position. The Lead Director is paid an additional $2,000 for serving the
complex. All fees received by the Directors are allocated among the funds based
on net assets. The Directors and officers of the Company are also reimbursed for
expenses incurred in attending committee meetings and meetings of the Board of
Directors/Trustees.

The following table represents the projected compensation to be received by the
independent Directors during fiscal 2000 from the Capstone Funds complex.

32
<PAGE> 34

Compensation Table
<TABLE>
<CAPTION>
Pension or Estimated Total Compensation
Aggregate Retirement Benefits Annual From Registrant
Compensation Accrued As Part Benefits Upon and Fund Complex
Name of Person, Position From Registrant(1) of Fund Expenses Retirement Paid to Directors
- ---------------------------- ------------------ ------------------- ------------- ------------------
<S> <C> <C> <C> <C>
James F. Leary, Director (4) $ 0 $ 0 $16,000(1)(2)(3)

John R. Parker, Director (4) $ 0 $ 0 $16,000(1)(2)(3)

Bernard J. Vaughan, Director (4) $ 0 $ 0 $16,000(1)(2)(3)
</TABLE>

- ---------------

(1) Company does not pay deferred compensation.
(2) Director of Capstone Growth Fund, Inc., Trustee of Capstone Social Ethics
and Religious Values Fund, and Trustee of Capstone International Series
Trust
(3) Fund Complex includes 14 funds.
(4) Compensation received by independent Directors/Trustees is allocated among
the Capstone Complex of Mutual Funds based on net assets. Therefore,
compensation from the Company cannot be accurately predicted.

Adviser and Administrator

Pursuant to the terms of an investment advisory agreement dated _________,
2000,(the "Advisory Agreement"), the Company employs Capstone Asset Management
Company (the "Adviser and Administrator") to furnish investment advisory
services. The Adviser and Administrator was formed in 1982 as a wholly-owned
subsidiary of Capstone Financial Services, Inc. The Adviser and Administrator is
located at 5847 San Felipe, Suite 4100, Houston, Texas 77057. The Adviser and
Administrator provides investment management services to pension and profit
sharing accounts, corporations and individuals, and serves as investment adviser
and/or administrator to fourteen (14) registered investment companies. The
Adviser and Administrator manages assets in excess of $2.5 billion.

The Investment Advisory Agreement provides that the Adviser and Administrator
shall have full discretion to manage the assets of the Funds in accordance with
their investment objectives and policies and the terms of the Articles of
Incorporation. The Adviser and Administrator is authorized, with the consent of
the Directors, to engage sub-advisers for the Funds. The Adviser and
Administrator has sole authority to select broker-dealers to execute
transactions for the Funds, subject to the reserved authority of the Directors
to designate particular broker-dealers for this purpose. The Adviser and
Administrator will vote proxies on portfolio securities of the Funds, subject to
any guidelines that may be established by the Directors. The Investment Advisory
Agreement provides that the Adviser and Administrator will generally not be
liable in connection with its services except for acts or omissions that
constitute misfeasance, bad faith or gross negligence, and the Adviser and
Administrator shall not be liable for the acts of third parties. The Investment
Advisory Agreement provides that it may be terminated at any time without
penalty on sixty days' notice by either party.

33
<PAGE> 35

For its services, the Adviser and Administrator receives investment advisory
fees monthly, in arrears, from each Fund at the following annual rates. The fee
rates indicated are applied to the aggregate average daily net assets of the
Funds, as a group, and the resulting total fees are pro rated among the Funds
based on their relative net assets.

<TABLE>
<CAPTION>
Annual Fee rate as a percentage
of average daily net assets
----------------------------------
<S> <C>
0.15% of the first $500 million
0.125% of the next $500 million
0.10% of assets over $ 1 billion
</TABLE>

Pursuant to the Advisory Agreement, the Adviser and Administrator pays the
compensation and expenses of all of its directors, officers and employees who
serve as officers and executive employees of the Company (including the
Company's share of payroll taxes), except expenses of travel to attend meetings
of the Company's Board of Directors or committees or advisers to the Board. The
Adviser and Administrator also agrees to make available, without expense to the
Company, the services of its directors, officers and employees who serve as
officers of the Company.

The Advisory Agreement provides that the Adviser and Administrator shall not be
liable for any error of judgment or of law, or for any loss suffered by a Fund
in connection with the matters to which the agreement relates except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Adviser and Administrator in the performance of its obligations and duties,
or by reason of its reckless disregard of its obligations and duties under the
Advisory Agreement and the Adviser and Administrator shall not be liable for the
acts of third parties.

The Advisory Agreement will remain in effect for an initial two year period and
thereafter from year to year provided its renewal in each case and as to each
Fund is specifically approved (a) by the Company's Board of Directors or, as to
each Fund, by vote of a majority of the Fund's outstanding voting securities,
and (b) by the affirmative vote of a majority of the Directors 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 may be
terminated (a) at any time without penalty by the Company upon the vote of a
majority of the Directors or, as to a Fund, by vote of the majority of that
Fund's outstanding voting securities, upon 60 days' written notice to the
Adviser and Administrator or (b) by the Adviser and Administrator at any time
without penalty, upon 90 days' written notice to the Company. The Advisory
Agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act).

Advisory Committee

The Board of Directors has appointed an advisory committee ("Advisory
Committee") to consult with and make recommendations to the Directors regarding
the application of social, ethical and religious values in selecting investments
for the Funds, as well as on other matters regarding the structure, philosophy
and operations of the Funds. Members of the Advisory Committee are not
compensated for their services, although they will be reimbursed by the Company
for expenses of attendance at Fund-related meetings. The Advisory Committee
consists of members selected by the Board of Directors on the basis of their
qualifications to provide this type of advice to the Board. Neither the Board of
Directors nor the Adviser and Administrator are obliged to accept the
recommendations of any Advisory Committee.

34
<PAGE> 36

Administration Agreement

Pursuant to an Administration Agreement dated _________, 2000 between the
Company and Capstone Asset Management Company, the Adviser and Administrator
supervises all aspects of the Funds' operations. It oversees the performance of
administrative and professional services to the Funds 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 Adviser and
Administrator. For these services, the Funds will pay to the Adviser and
Administrator a fee, calculated daily and payable monthly in arrears, equal to
an annual rate of 0.05% of each Fund's average net assets.

The Administration Agreement will remain in effect for an initial two-year
period and will continue thereafter until terminated by either party.

Distributor

Capstone Asset Planning Company (the "Distributor"), 5847 San Felipe, Suite
4100, Houston, Texas 77057, acts as the principal underwriter of the Funds'
shares pursuant to a written agreement with the Company dated __________, 2000
(the "Distribution Agreement"). The Distributor has the exclusive right (except
for distributions of shares directly by the Company) to distribute shares of the
Funds 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. Except to the extent otherwise permitted by the Service and
Distribution Plan (see below), 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.

Edward L. Jaroski is President of the Company and is a Director and President of
the Adviser and Administrator and the Distributor. Some other officers of the
Company are also officers of the Adviser and Administrator, the Distributor, and
their parent, Capstone Financial Services.

The Distribution Agreement shall continue for an initial two-year term and is
renewable from year to year if approved in each case as to each Fund (a) by the
Company's Board of Directors or, with respect to a Fund, by a vote of a majority
of the Fund's outstanding voting securities and (b) by the affirmative vote of a
majority of Directors 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 not ice.

The Company has adopted a Service and Distribution Plan (the "Plan") pursuant to
Rule 12b-1 of the Investment Company Act of 1940 for the Funds' Individual
shares which permits Individual shares of each Fund to compensate the
Distributor for its services in connection with the distribution of its
Individual shares and provision of certain services to Individual shareholders.
These services include, but are not limited to, the payment of compensation,

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including incentive compensation, to securities dealers (which may include the
Distributor itself) and other financial institutions and organizations
(collectively, "Service Organizations") to obtain various distribution-related
and/or administrative services for the Funds. These services include, among
other things, processing new stockholder account applications, preparing and
transmitting to the Funds' Transfer Agent computer processable tapes of all
transactions by customers and serving as the primary source of information to
customers in answering questions concerning the Funds and their transactions
with the Funds. The Distributor is also authorized to engage in advertising, the
preparation and distribution of sales literature and other promotional
activities on behalf of the Fund. In addition, the Plan authorizes Individual
shares of each Fund to bear the cost of preparing, printing and distributing
Fund prospectuses and Statements of Additional Information to prospective
Individual investors and of implementing and operating the Plan.

Under the Plan, payments are made to the Distributor at an annual rate of 0.25%
of the average net assets of Individual shares of each of the Funds and 0.05% of
the average net assets of Institutional shares of each of the Funds. Subject to
these limits, the Distributor may reallow to Service Organizations (which may
include the Distributor itself) amounts at an annual rate up to 0.25% for
Individual shares and 0.05% for Institutional shares for each Fund based on the
average net asset value of shares held by shareholders for whom the Service
Organization provides services. Any remaining amounts not so allocated will be
retained by the Distributor. The Distributor collects the fees under the Plan on
a monthly basis.

Rule 12b-1 requires that the Plan and related agreements have been approved by a
vote of the Company's Board of Directors and by a vote of the Directors who are
not "interested persons" of the Company 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 Directors"). The Plan will continue in effect for
successive one year periods provided that such continuance is specifically
approved at least annually by a majority of the Directors, including a majority
of the Plan Directors. In determining whether to adopt or continue the Plan, the
Directors must request and evaluate information they believe is necessary to
make an informed determination of whether the Plan and related agreements should
be implemented, and must conclude, 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 Funds and their
Individual shareholders. Any change in the Plan that would materially increase
the distribution expenses to be paid requires approval by shareholders of
Individual shares of each affected Fund, but otherwise, the Plan may be amended
by the Directors, including a majority of the Plan Directors.

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 Plan and related agreements may be terminated at any time by a
vote of the Plan Directors or, as to a Fund, by vote of a majority of the Fund's
outstanding voting securities. As required by Rule 12b-1, selection and
nomination of disinterested Directors for the Company is committed to the
discretion of the Directors who are not "interested persons" as defined under
the 1940 Act.

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Other Services

Under the Administration Agreement, the Company bears the cost of the Funds'
accounting services, which includes maintaining the financial books and records
of the Funds and calculating daily net asset value. Declaration Services
Company, performs accounting, bookkeeping and pricing services for the Company.
For these services, Declaration receives a monthly fee from the Company.

Expenses

The Funds pays all of their expenses not borne by the Adviser and Administrator
pursuant to the Administration Agreement including such expenses as (i) advisory
and administrative fees, (ii) fees under the Service and Distribution Plan (see
"Distributor"), (iii) fees for legal, auditing, transfer agent, state filings,
dividend disbursing, and custodian services, (iv) the expenses of issue,
repurchase, or redemption of shares, (v) interest, taxes and brokerage
commissions, (vi) membership dues in the Investment Company Institute allocable
to the Company, (vii) the cost of reports and notices to shareholders, and
(viii) fees to Directors and salaries of any officers or employees who are not
affiliated with the Adviser and Administrator, if any.

Each Fund's expenses and expenses of each class of shares are accrued daily and
are deducted from total income before dividends are paid. Company expenses are
generally allocated among the Funds based on their respective net asset values.
Fund expenses, as well as a Fund's share of Company expenses, are generally
allocated between classes based on their respective net asset values, except
that Individual and Institutional expenses pursuant to the Service and
Distribution Plan are borne by Individual and Institutional shares and the
Directors may determine that other expenses are specific to a particular class
and should be borne by that class alone.

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Adviser and Administrator is responsible for decisions to buy and sell
securities for each Fund and for the placement of its portfolio business and the
negotiation of the commissions paid on such transactions. It is the policy of
the Adviser and Administrator to seek the best security price available with
respect to each transaction. 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. The Adviser and Administrator
seeks the best security price at the most favorable commission rate. In
selecting dealers and in negotiating commissions, the Adviser and Administrator
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 Funds or the Adviser and Administrator. In
addition, the Adviser and Administrator may cause a Fund to pay a broker that
provides brokerage and research services a commission in excess of the amount
another broker might have charged for effecting a securities transaction. Such
higher commission may be paid if the Adviser and Administrator determines in
good faith that the amount paid is reasonable in relation to the services
received in terms of the particular transaction or the Adviser and
Administrator's overall responsibilities to the Fund and the Adviser and
Administrator's other clients. Such research services must provide lawful and
appropriate assistance to the Adviser and Administrator in the performance of
its investment decision-making responsibilities and may include advice, both
directly and in writing, as to the value of the securities, the advisability of
investing in, purchasing or selling securities, and the availability of
securities, or purchasers or sellers of securities, as well as furnishing
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and the performance of accounts.

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<PAGE> 39

The Adviser and Administrator places portfolio transactions for other advisory
accounts including other investment companies. Research services furnished by
firms through which a Fund effects its securities transactions may be used by
the Adviser and Administrator in servicing all of its accounts; not all of such
services may be used by the Adviser and Administrator in connection with the
Fund. The Adviser and Administrator has arrangements to receive research only
with respect to accounts for which it exercises brokerage discretion, including
the Funds. Many of the clients of the Adviser and Administrator have not granted
brokerage discretion and therefore, any research services received as a result
of paying commissions in excess of the amount another broker might have charged
is subsidized by accounts that have granted the Adviser and Administrator such
discretion, including the Funds. Other research received, although not by a
specific arrangement may also be used by the Adviser and Administrator in pro-
viding service to other accounts, including the Funds. In the opinion of the
Adviser and Administrator, the benefits from research services to each of the
accounts (including the Funds) managed by the Adviser and Administrator cannot
be measured separately.

The Adviser and Administrator seeks to allocate portfolio transactions equitably
whenever concurrent decisions are made to purchase or sell securities by a 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 a Fund. In
making such allocations among the Funds and other advisory accounts, the main
factors considered by the Adviser and Administrator 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.

From time to time, the Adviser and Administrator may effect securities
transactions through Capstone Asset Planning Company ("CAPCO"), a broker-dealer
affiliate of the Adviser and Administrator.

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 Directors may determine, the Adviser and Administrator
may consider sales of shares of the Funds as a factor in the selection of
dealers to execute portfolio transactions for the Funds.

Personal Trading Policies

The Funds, the Adviser and Administrator, and the Distributor have adopted Codes
of Ethics under Rule 17j-1 under the Investment Company Act of 1940. Consistent
with requirements of that Rule, the Codes permit persons subject to the Codes to
invest in securities, including securities that may be purchased by a Fund. The
codes and the Rule require these transactions to be monitored.

DETERMINATION OF NET ASSET VALUE

The net asset value per share of each class of shares of each Fund 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 (certain derivatives
are priced at 4:15 p.m. Eastern time), except that the 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.

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The net asset value of each of the Funds' shares is computed by dividing the
value of all securities plus other assets, less liabilities, by the number of
shares outstanding, and adjusting to the nearest cent per share. Such
computation is made by (i) valuing securities listed on an exchange or quoted on
the NASDAQ national market system at the last reported sale price, or if there
has been no sale that day at the mean between the last reported bid and asked
prices, (ii) valuing other securities at the mean between the last reported bid
and asked prices and (iii) valuing any securities for which market quotations
are not readily available and any other assets at fair value as determined in
good faith by the Board of Directors. For investments in securities traded on
foreign exchanges that close prior to the time at which a Fund's net asset value
is determined, the calculation of net asset value does not take place
contemporaneously with the determination of the prices of those securities. If
an event were to occur after the value of a Fund instrument was so established,
but before the net asset value per share is determined, which is likely to
materially change the net asset value, the Fund instrument would be valued using
fair value considerations established by the Board of Directors.

However, debt securities (other than short-term obligations) including listed
issues, are valued on the basis of valuations furnished by a pricing service
which utilizes electronic data processing techniques to determine valuations for
normal institutional size trading units of debt securities, without exclusive
reliance upon exchange or over-the-counter prices. Short-term obligations are
valued at amortized cost.

HOW TO BUY AND REDEEM SHARES

Shares of each 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 may charge a fee for this
service in addition to a Fund's net asset value. After each investment, the
stockholder and the authorized investment dealer receive confirmation statements
of the number of shares purchased and owned.

Shares will be credited to a shareholder's account at the net asset value next
computed after an order is received by the Distributor. Initial purchases of
Individual shares must be at least $2,000; however, this requirement may be
waived by the Distributor for plans involving continuing investments. There is
no minimum for subsequent purchases of shares. The minimum initial investment
for Institutional shares is $500,000 in aggregate, with no minimum required for
subsequent purchases. No stock certificates representing shares purchased will
be issued. The Company's management reserves the right to reject any purchase
order if, in its opinion, it is in the Company's best interest to do so.

At various times, the Distributor may implement programs under which a dealer's
sales force may be eligible to win nominal awards for certain sales efforts or
recognition programs conforming to criteria established by the Distributor, or
to participate in sales programs sponsored by the Distributor. In addition, the
Adviser and Administrator and/or the Distributor in their discretion may from
time to time, pursuant to objective criteria established by the Adviser and
Administrator and/or the Distributor, sponsor programs designed to reward
selected dealers for certain services or activities which are primarily intended
to result in the sale of shares of the Funds. Such payments are made out of
their own assets and not out of the assets of the Funds. These programs will not
change the price paid by a stockholder for shares of a Fund or the amount that
the Funds will receive from such sale.

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<PAGE> 41

Generally, shareholders may require the Funds to redeem their shares by sending
a written request, signed by the record owner(s), to The Christian Stewardship
Funds, c/o Declaration Services Company, 555 North Lane, Suite 6160,
Conshohocken, PA 19428. In addition, certain expedited redemption methods are
available.

DIVIDENDS AND DISTRIBUTIONS

Each Fund's policy is to distribute each year to shareholders substantially all
of its investment company taxable income (which includes, among other items,
dividends, interest and the excess of net short-term capital gains over net
long-term capital losses). Each Fund intends similarly to distribute to
shareholders at least annually any net realized capital gains (the excess of net
long-term capital gains over net short-term capital losses). The Funds intend to
declare and pay such amounts as dividends quarterly. All dividends and capital
gain distributions are reinvested in shares of the particular Fund at net asset
value without sales commission, except that any shareholder may otherwise
instruct the Transfer Agent in writing and receive cash. Shareholders are
informed as to the sources of distributions at the time of payment. Any dividend
or distribution paid shortly after a purchase of shares by an investor will have
the effect of reducing the per share net asset value of his or her shares by the
amount of the dividend or distribution. All or a portion of any such dividend or
distribution, although in effect a return of capital, may be taxable, as set
forth below.

TAXES

Set forth below is a discussion of certain U.S. federal income tax issues
concerning the Funds and the purchase, ownership, and disposition of Fund
shares. This discussion does not purport to be complete or to deal with all
aspects of federal income taxation that may be relevant to shareholders in light
of their particular circumstances. This discussion is based upon present
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
regulations promulgated thereunder, and judicial and administrative ruling
authorities, all of which are subject to change, which change may be
retroactive. Prospective investors should consult their own tax advisors with
regard to the federal tax consequences of the purchase, ownership, or
disposition of Fund shares, as well as the tax consequences arising under the
laws of any state, foreign country, or other taxing jurisdiction.

Each Fund intends to be taxed as a regulated investment company under Subchapter
M of the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly,
each Fund generally must, among other things, (a) derive in each taxable year at
least 90% of its gross income from dividends, interest, payments with respect to
certain securities loans, and gains from the sale or other disposition of stock,
securities or foreign currencies, or other income derived with respect to its
business of investing in such stock, securities or currencies; and (b) diversify
its holdings so that, at the end of each fiscal quarter, (i) at least 50% of the
value of the Fund's total assets is represented by cash and cash items, U.S.
Government securities, the securities of other regulated investment companies
and other securities, with such other securities limited, in respect of any one
issuer, to an amount not greater than 5% of the value of the Fund's total assets
and 10% of the outstanding voting securities of such issuer, and (ii) not more
than 25% of the value of its total assets is invested in the securities of any
one issuer (other than U.S. Government securities and the securities of other
regulated investment companies).

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<PAGE> 42

As a regulated investment company, a Fund generally is not subject to U.S.
federal income tax on income and gains that it distributes to shareholders, if
at least 90% of the Fund's investment company taxable income (which includes,
among other items, dividends, interest and the excess of any net short-term
capital gains over net long-term capital losses) for the taxable year is
distributed. Each Fund intends to distribute substantially all of such income.
Amounts not distributed on a timely basis in accordance with a calendar year
distribution requirement are subject to a nondeductible 4% excise tax at the
Fund level. To avoid the tax, each 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 (adjusted for
certain ordinary losses) for a one-year period generally ending on October 31 of
the calendar year, and (3) all ordinary income and capital gains for previous
years that were not distributed during such years. To avoid application of the
excise tax, the Funds intend to make distributions in accordance with the
calendar year distribution requirement. A distribution will be treated as paid
on December 31 of a calendar year if it is declared by the Fund in October,
November or December of that year with a record date in such a month and paid by
the Fund during January of the following year. Such distributions will be
taxable to shareholders in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.

The Company is organized as a Maryland corporation and, under current law, is
not liable for any income or franchise tax in the State of Maryland, provided
that each of the Funds qualifies as a regulated investment company for purposes
of Maryland law.

Market Discount

If a Fund purchases a debt security at a price lower than the stated redemption
price of such debt security, the excess of the stated redemption price over the
purchase price is "market discount". If the amount of market discount is more
than a de minimis amount, a portion of such market discount must be included as
ordinary income (not capital gain) by a Fund in each taxable year in which the
Fund owns an interest in such debt security and receives a principal payment on
it. In particular, the Fund will be required to allocate that principal payment
first to the portion of the market discount on the debt security that has
accrued but has not previously been includable in income. In general, the amount
of market discount that must be included for each period is equal to the lesser
of (i) the amount of market discount accruing during such period (plus any
accrued market discount for prior periods not previously taken into account) or
(ii) the amount of the principal payment with respect to such period. Generally,
market discount accrues on a daily basis for each day the debt security is held
by a Fund at a constant rate over the time remaining to the debt security's
maturity or, at the election of the Fund, at a constant yield to maturity which
takes into account the semi-annual compounding of interest. Gain realized on the
disposition of a market discount obligation must be recognized as ordinary
interest income (not capital gain) to the extent of the "accrued market
discount."

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Original Issue Discount

Certain debt securities acquired by the Funds may be treated as debt securities
that were originally issued at a discount. Very generally, original issue
discount is defined as the difference between the price at which a security was
issued and its stated redemption price at maturity. Although no cash income on
account of such discount is actually received by a Fund, original issue discount
that accrues on a debt security 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 applicable to regulated investment companies. Some
debt securities may be purchased by the Funds at a discount that exceeds the
original issue discount on such debt securities, if any. This additional
discount represents market discount for federal income tax purposes (see above).

Options, Futures and Forward Contracts

Any regulated futures contracts and certain options (namely, non-equity options
and dealer equity options) in which a Fund may invest may be "section 1256
contracts." Gains (or losses) on these contracts generally are considered to be
60% long-term and 40% short-term capital gains or losses. Also, section 1256
contracts held by a Fund at the end of each taxable year (and on certain other
dates prescribed in the Code) are "marked to market" with the result that
unrealized gains or losses are treated as though they were realized.
Transactions in options, futures and forward contracts undertaken by the Funds
may result in "straddles" for federal income tax purposes. The straddle rules
may affect the character of gains (or losses) realized by a Fund, and 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 the losses are realized. In
addition, certain carrying charges (including interest expense) associated with
positions in a straddle may be required to be capitalized rather than deducted
currently. Certain elections that a Fund may make with respect to its straddle
positions may also affect the amount, character and timing of the recognition of
gains or losses from the affected positions.

Because only a few regulations implementing the straddle rules have been
promulgated, the consequences of such transactions to the Funds are not entirely
clear. The straddle rules may increase the amount of short-term capital gain
realized by a Fund, which is taxed as ordinary income when distributed to
shareholders. 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 shareholders 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 transactions.

Constructive Sales

Recently enacted rules may affect the timing and character of gain if a Fund
engages in transactions that reduce or eliminate its risk of loss with respect
to appreciated financial positions. If a Fund enters into certain transactions
in property while holding substantially identical property, the Fund would be
treated as if it had sold and immediately repurchased the property and would be
taxed on any gain (but not loss) from the constructive sale. The character of
gain from a constructive sale would depend upon the Fund's holding period in the
property. Loss from a constructive sale would be recognized when the property
was subsequently disposed of, and its character would depend on the Fund's
holding period and the application of various loss deferral provisions of the
Code.

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Currency Fluctuations - Section 988 Gains or Losses

Gains or losses attributable to fluctuations in exchange rates which occur
between the time a Fund accrues income 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 disposition of some
investments, including debt securities and certain forward contracts denominated
in a foreign currency, gains or losses attributable to fluctuations in the value
of the foreign currency between the acquisition and disposition of the position
also are treated as ordinary gain or loss. These gains and losses, referred to
under the Code as "section 988" gains or losses, increase or decrease the amount
of a Fund's investment company taxable income available to be distributed to its
shareholders as ordinary income. If section 988 losses exceed other investment
company taxable income during a taxable year, a Fund would not be able to make
any ordinary dividend distributions, or distributions made before the losses
were realized would be recharacterized as a return of capital to shareholders,
rather than as an ordinary dividend, reducing each shareholder's basis in his or
her Fund shares.

Passive Foreign Investment Companies

The Funds may invest in shares of foreign corporations that may be classified
under the Code as passive foreign investment companies ("PFICs"). In general, a
foreign corporation 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. If a Fund receives a so-called "excess distribution"
with respect to PFIC stock, the Fund itself may be subject to a tax on a portion
of the excess distribution, whether or not the corresponding income is
distributed by the Fund to shareholders. In general, under the PFIC rules, an
excess distribution is treated as having been realized ratably over the period
during which the Fund held the PFIC shares. Each Fund will itself be subject to
tax on the portion, if any, of an excess distribution that is so allocated to
prior Fund taxable years and an interest factor will be added to the tax, as if
the tax had been payable in such prior taxable years. Certain distributions from
a PFIC as well as gain from the sale of PFIC shares are treated as excess
distributions. Excess distributions are characterized as ordinary income even
though, absent application of the PFIC rules, certain excess distributions might
have been classified as capital gain.

The Funds may be eligible to elect alternative tax treatment with respect to
PFIC shares. Under an election that currently is available in some
circumstances, a 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
distributions were received from the PFIC in a given year. If this election were
made, the special rules, discussed above, relating to the taxation of excess
distributions, would not apply. In addition, 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 Fund shares would be deductible as ordinary losses to the
extent of any net mark-to-market gains included in income in prior years.

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Distributions

Distributions of investment company taxable income are taxable to a U.S.
shareholder as ordinary income, whether paid in cash or shares. Dividends paid
by a Fund to a corporate shareholder, to the extent such dividends are
attributable to dividends received by the Fund from U.S. corporations, may,
subject to limitation, be eligible for the dividends received deduction.
However, the alternative minimum tax applicable to corporations may reduce the
value of the dividends received deduction.

Properly designated distributions of net capital gains, if any, will generally
be taxable to shareholders as long-term capital gains, regardless of how long
the stockholder has held the Fund's shares, and are not eligible for the
dividends received deduction.

Shareholders will be notified annually as to the U.S. federal tax status of
distributions, and shareholders receiving distributions in the form of newly
issued shares will receive a report as to the net asset value of the shares
received.

If the net asset value of shares is reduced below a shareholder's cost as a
result of a distribution by a Fund, such distribution generally will be taxable
even though it represents a return of invested capital. Investors should be
careful to consider the tax implications of buying shares of a Fund just prior
to a distribution. The price of shares purchased at this time will include the
amount of the forthcoming distribution, but the distribution will generally be
taxable to the shareholder.

If a Fund retains its net capital gains, although there are no plans to do so,
the Fund may elect to treat such amounts as having been distributed to
shareholders. As a result, the shareholders would be subject to tax on
undistributed capital gain, would be able to claim their proportionate share of
the federal income taxes paid by the Fund on such gain as a credit against their
own federal income tax liabilities, and would be entitled to an increase in the
basis of their Fund shares.

Disposition of Shares

Upon a redemption, sale or exchange of shares of a Fund, a shareholder will
realize a taxable gain or loss depending upon his or her basis in the shares. A
gain or loss will be treated as capital gain or loss if the shares are capital
assets in the shareholder's hands, and the rate of tax will depend upon the
shareholder's holding period for the shares. Any loss realized on a redemption,
sale or exchange will be disallowed to the extent the shares disposed of are
replaced (including through reinvestment of dividends) within a period of 61
days, beginning 30 days before and ending 30 days after the shares are disposed
of. In such a case the basis of the shares acquired will be adjusted to reflect
the disallowed loss. If a shareholder holds Fund shares for six months or less
and during that period receives a distribution taxable to the shareholder as
long-term capital gain, any loss realized on the sale of such shares during such
six-month period would be a long-term loss to the extent of such distribution.

Backup Withholding

Each Fund generally will be required to withhold federal income tax at a rate of
31% ("backup withholding") from dividends paid, capital gain distributions, and
redemption proceeds to shareholders if (1) the shareholder fails to furnish the
Fund with the shareholder's correct taxpayer identification number or social
security number, (2) the IRS notifies the shareholder or the Fund that the
shareholder has failed to report properly certain interest and dividend income
to the IRS and to respond to notices to that effect, or (3) when required to do

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so, the shareholder fails to certify that he or she is not subject to backup
withholding. Any amounts withheld may be credited against the shareholder's
federal income tax liability.

Other Taxation

Distributions may be subject to additional state, local and foreign taxes,
depending on each shareholder's particular situation. Non-U.S. shareholders may
be subject to U.S. tax rules that differ significantly from those summarized
above, including the likelihood that ordinary income dividends to them would be
subject to withholding of U.S. tax at a rate of 30% (or a lower treaty rate, if
applicable).

OTHER INFORMATION

Custody of Assets. All securities owned by the Funds and all cash, including
proceeds from the sale of shares of the Funds and of securities in the Funds'
investment portfolio, are held by The Fifth Third Bank, 38 Fountain Square,
Cincinnati, Ohio 45263, as custodian.

Shareholder Reports. Semi-annual statements are furnished to shareholders, and
annually such statements are audited by the independent accountants.

Independent Accountants. Briggs, Bunting & Dougherty, LLP, Two Logan Square,
Suite 2121, Philadelphia, Pennsylvania 19103-4901, the independent accountants
for the Company, performs annual audits of each Fund's financial statements.

Legal Counsel. Dechert Price & Rhoads, 1775 Eye Street, N.W., Washington, DC
20006, is legal counsel to the Company.

45
<PAGE> 47

THE CAPSTONE CHRISTIAN VALUE FUND, INC.
OTHER INFORMATION
(PART C TO REGISTRATION STATEMENT NO. 2-28174)

Item 23. Exhibits

Exhibits incorporated by reference to a prior filing are designated by an
asterisk; all exhibits not so designated are incorporated herein.

(a) Copy of Articles of Incorporation dated May 11, 1992.

(b) Copy of by-laws.

**(d) Copy of Investment Advisory Agreement between Capstone
Christian Values Fund, Inc. on behalf of the Christian
Stewardship Funds, and Capstone Asset Management Company.

**(e)(1) copy of General Distribution Agreement between Capstone
Christian Values Fund, Inc. on behalf of the Christian
Stewardship Funds, and Capstone Asset Planning Company.

(e)(2) Copy of Selling Group Agreement/Service Agreement.

(f) None.

(g)(1) Form of proposed Custodian Agreement between Capstone Christian
Values Fund, Inc., on behalf of the Christian Stewardship
Funds, and Fifth Third Bank.

***(g)(2) Form of proposed Foreign Custody Manager Agreement between
Capstone Christian Values Fund, Inc., on behalf of the
Christian Stewardship Funds, and Fifth Third Bank.

**(h)(1) Copy of Administration Agreement between Capstone Christian
Values Fund, Inc. on behalf of the Christian Stewardship Funds,
and Capstone Asset Management Company.

***(h)(2) Form of proposed Shareholder Services Agreement between
Capstone Christian Values Fund, Inc., on behalf of the
Christian Stewardship Funds, and Declaration Service Company.

****(i) Opinion of Dechert Price & Rhoads.

*(j) Power of Attorney of Messrs. Bernard J. Vaughan, James F. Leary
and John R. Parker.

(k) None.

(l) None.

**(m) Service and Distribution Plan.

(n) Rule 18f-3 Plan.

(o) Codes of Ethics.

- -------------------------
* Filed with Post-Effective Amendment No. 50, dated March 31, 1998.
** Filed with Post-Effective Amendment No. 53, dated December 14, 1999.
*** Filed with Post-Effective Amendment No. 54, dated February 25, 2000.
**** To be filed by amendment.

46
<PAGE> 48

Item 24. Persons Controlled by or under Common Control with Registrant

Registrant does not control and is not under common control with any
person.

Item 25. Indemnification

The Articles of Incorporation of the Registrant include the following:

Article 7.4

Indemnification. The Corporation, including its successors and assigns,
shall indemnify its directors and officers and make advance payment of related
expenses to the fullest extent permitted, and in accordance with the procedures
required, by the General Laws of the State of Maryland and the Investment
Company Act of 1940. The By-Laws may provide that the Corporation shall
indemnify its employees and/or agents in any manner and within such limits as
permitted by applicable law. Such indemnification shall be in addition to any
other right or claim to which any director, officer, employee or agent may
otherwise be entitled. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise or
employee benefit plan, against any liability [(including, with respect to
employee benefit plans, excise taxes)] asserted against and incurred by such
person in any such capacity or arising out of such person's position, whether or
not the Corporation would have had the power to indemnify against such
liability. The rights provided to any person by this Article 7.4 shall be
enforceable against the Corporation by such person who shall be presumed to have
relied upon such rights in serving or continuing to serve in the capacities
indicated herein. No amendment of these Articles of Incorporation shall impair
the rights of any person arising at any time with respect to events occurring
prior to such amendment.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, 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 director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, 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 Articles of Incorporation, By-Laws or any other
instrument pursuant to which the Registrant is organized or administered
indemnify any director or officer of the Registrant, or that any contract or
agreement indemnifies any person who undertakes to act as investment adviser 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 interpreted from time to
time by authorized regulatory, judicial or other authorities.

Item 26. Business and Other Connections of Investment Adviser

The investment adviser of the Registrant is also the investment adviser
and/or administrator of four other investment companies: Capstone Growth Fund,
Inc., Capstone Social Ethics and Religious Values Fund, Capstone Japan Fund and
Capstone New Zealand Fund. Such adviser also manages private accounts. For
Further information, see "Directors and Officers" in Part B. hereof.

47
<PAGE> 49

Item 27. Principal Underwriters

(a) The principal underwriter of the Registrant, Capstone Asset Planning
Company, also acts as principal underwriter for Capstone Social Ethics and
Religious Values Fund, Capstone Growth Fund, Inc., Capstone New Zealand Fund and
Capstone Japan Fund.

<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------

<S> <C> <C>
Dan E. Watson Chairman of the Board and Executive Vice
Director President

Edward L. Jaroski President and Director President and Director

Leticia N. Jaroski Secretary --

Carla Homer Treasurer --

Linda G. Giuffre Vice President, Compliance Secretary/Treasurer
</TABLE>

- -------------
* 5847 San Felipe, Suite 4100, Houston, Texas 77057

Item 28. Location of Accounts and Records

Capstone Asset Management Company, the investment adviser and administrator
to the Registrant, 5847 San Felipe, Suite 4100, Houston, TX 77057; The Fifth
Third Bank, the Registrant's custodian, 38 Fountain Square, Cincinnati, Ohio
45263; and Declaration Service Company, the Registrant's shareholder service
agent, 555 North Lane, Suite 6160, Conshohocken, PA 19428, 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

N/A

48
<PAGE> 50

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this 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 17th day of April,
2000.

CHRISTIAN STEWARDSHIP FUNDS
Registrant

By: Edward L. Jaroski
------------------------
Edward L. Jaroski

49
<PAGE> 51

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.

<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>

- ------------------------- Director Arpil 17, 2000
*Bernard J. Vaughan

- ------------------------- Director April 17, 2000
*James F. Leary

- ------------------------- Director April 17, 2000
*John R. Parker

Edward L. Jaroski Director and President April 17, 2000
- ------------------------- (Principal Executive Officer)
Edward L. Jaroski

Linda Giuffre Secretary/Treasurer
- -------------------------- (Principal Financial & April 17, 2000
Linda Giuffre Accounting Officer)
</TABLE>

By: Edward L. Jaroski
--------------------------------
*Edward L. Jaroski, Attorney In Fact

50
<PAGE> 52

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------
<S> <C>
(a) Copy of Articles of Incorporation dated May 11, 1992.

(b) Copy of by-laws.

**(d) Copy of Investment Advisory Agreement between Capstone
Christian Values Fund, Inc. on behalf of the Christian
Stewardship Funds, and Capstone Asset Management Company.

**(e)(1) copy of General Distribution Agreement between Capstone
Christian Values Fund, Inc. on behalf of the Christian
Stewardship Funds, and Capstone Asset Planning Company.

(e)(2) Copy of Selling Group Agreement/Service Agreement.

(f) None.

(g)(1) Form of proposed Custodian Agreement between Capstone Christian
Values Fund, Inc., on behalf of the Christian Stewardship
Funds, and Fifth Third Bank.

***(g)(2) Form of proposed Foreign Custody Manager Agreement between
Capstone Christian Values Fund, Inc., on behalf of the
Christian Stewardship Funds, and Fifth Third Bank.

**(h)(1) Copy of Administration Agreement between Capstone Christian
Values Fund, Inc. on behalf of the Christian Stewardship Funds,
and Capstone Asset Management Company.

***(h)(2) Form of proposed Shareholder Services Agreement between
Capstone Christian Values Fund, Inc., on behalf of the
Christian Stewardship Funds, and Declaration Service Company.

****(i) Opinion of Dechert Price & Rhoads.

*(j) Power of Attorney of Messrs. Bernard J. Vaughan, James F. Leary
and John R. Parker.

(k) None.

(l) None.

**(m) Service and Distribution Plan.

(n) Rule 18f-3 Plan.

(o) Codes of Ethics.
</TABLE>

<PAGE> 1

ARTICLES OF INCORPORATION
OF
CAPSTONE FIXED INCOME SERIES, INC.

ARTICLE I

INCORPORATOR

THE UNDERSIGNED, Olivia P. Adler, whose post office address is Dechert Price &
Roads, 1500 K Street, N.W., Washington, D.C. 20005, being at least eighteen (18)
years of age, does hereby act as incorporator to form a corporation under and by
virtue of the Maryland General Corporation Law.

ARTICLE II

NAME

2.1 Name. The name of the corporation is Capstone Fixed Income Series, Inc. (the
"Corporation").

2.2 Name Reservation. The Corporation acknowledges that it uses the word
"Capstone" in its corporate name, and in the name of any series designated
pursuant to Article V hereof, only with the permission of Capstone Financial
Services, Inc., a Delaware corporation ("CFS"), the parent company of the
investment of advisor to the Corporation, and agrees that CFS shall control the
use of the word "Capstone" by the Corporation. The Corporation further agrees
that if CFS, its successors or assigns should at any time cease to be parent to
the investment advisor to the Corporation, the Corporation shall, at the written
request of CFS or its successors or assigns eliminate the word "Capstone" from
its corporate name, from the name of any series, and from any materials or
documents referring to the Corporation or a series, and will not henceforth use
the word "Capstone" in the conduct of the Corporation's business, except to any
extent specifically agreed to by CFS. The Corporation further acknowledges that
CFS reserves the right to grant the non-exclusive right to use the word
"Capstone" to any other persons or entities, including other investment
companies, whether now in existence or hereafter created. The provisions of this
paragraph are binding on the Corporation, its successors, creditors and all
other persons claiming under or through it.

<PAGE> 2

ARTICLE III

CORPORATE PURPOSES AND POWERS

The purpose or purposes for which the Corporation is formed is to act as an
investment company under the federal Investment Company Act of 1940, and to
exercise and enjoy all the powers, rights and privileges granted to, or
conferred upon, corporations by the General Laws of the State of Maryland. The
Corporation shall exercise and enjoy all such powers, rights and privileges to
the extent not inconsistent with these Articles of Incorporation.

ARTICLE IV

PRINCIPAL OFFICE AND RESIDENT AGENT

The post office address of the principal office of the Corporation in the State
of Maryland is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202-3242. The name of the Corporation's resident agent in
the State of Maryland is The Corporation Trust Incorporated, a corporation of
the State of Maryland, and the post office address of the resident agent is 32
South Street, Baltimore, Maryland 21202-3242.

ARTICLE V

CAPITAL STOCK

5.1 Authorized Shares. The total number of shares of capital stock which the
Corporation shall have authority to issue is fifteen million (15,000,000) shares
of the par value of one tenth of one cent ($0.001) per share and of the
aggregate par value of fifteen thousand dollars ($15,000), all of which shares
are designated Common Stock.

5.2 Authorization of Stock Issuance. The Board of Directors may authorize the
issuance and sale of capital stock of the Corporation, including stock of any
class or series, from time to time in such amounts and on such terms and
conditions, for such purposes and for such amount or kind of consideration as
the Board of Directors shall determine, subject to any limits required by then
applicable law. All shares be issued on a fully paid and non-assessable basis.

5.3 Fractional Shares. The Corporation may issue fractional shares. Any
fractional share shall carry proportionately the rights of a whole share,
excepting the right to receive a certificate evidencing such fractional share,
but including, without limitation, the right to vote and the right to receive
dividends.

5.4 Power to Classify. The Board of Directors of the Corporation may classify
and reclassify any unissued shares of capital stock into one or more additional
or other classes or series as may be established from time to time by setting or
changing in any one or more respects the designations, preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms of such shares of stock and pursuant to such
classification or reclassification to increase or decrease the number of
authorized shares of stock, or shares of any

<PAGE> 3

existing class or series of stock. Except as otherwise provided herein, all
references herein to capital stock shall apply without discrimination to the
shares of each class or series of stock. Pursuant to such power, the Board of
Directors has initially designated all shares of its capital stock into one
series of shares of capital stock of the Corporation, the name of which is as
follows:

Name of Series

Capstone Government Income Fund

5.5 Classes and Series - General. The relative preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of each class or series
of stock of the Corporation shall be as follows, unless otherwise provided in
Articles Supplementary hereto:

(a) Assets Belonging to Class or Series. All consideration received by the
Corporation for the issue or sale of stock of a particular class or
series, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that class or series for all purposes, subject
only to the rights of creditors, and shall be so recorded on the books
of account of the Corporation. Any assets, income, earnings, profits
or proceeds thereof, funds or payments which are not readily
attributable to a particular class or series shall be allocated to and
among any one or more series or classes in such manner and on such
basis as the Board of Directors, in its sole discretion, shall deem
fair and equitable, and items so allocated to a particular series or
class shall belong to that series or class. Each such allocation
shall be conclusive and binding upon the stockholders of all classes
and series for all purposes.

(b) Liabilities Belonging to Class or Series. The assets belonging to each
class or series shall be charged with the liabilities of the
Corporation in respect of that class or series and with all expenses,
costs, charges and reserves attributable to that class or series and
shall be so recorded on the books of account of the Corporation. Any
general liabilities, expenses, costs, charges or reserves of the
Corporation which are not readily identifiable as belonging to any
particular class or series shall be allocated and charged to and
among any one or more of the classes or series in such manner and on
such basis as the Board of Directors in its sole discretion deems
fair and equitable, and any items so allocated to a particular class
or series shall be charged to, and shall be a liability belonging to,
that class or series. Each such allocation shall be conclusive and
binding upon the stockholders of all classes and series for all
purposes.

(c) Income. The Board of Directors shall have full discretion, to the
extent not inconsistent with the General Laws of the State of Maryland
and the Investment Company Act of 1940, to determine which items shall
be treated as income and which items shall be treated as capital. Each
such determination shall be conclusive and binding.

<PAGE> 4

(d) Dividends and Distributions. The holders of each class or series of
capital stock of record as of a date determined by the Board of
Directors from time to time shall be entitled, from funds or other
assets legally available therefor, to dividends and distributions,
including distributions of capital gains, in such amounts and at such
times as may be determined by the Board of Directors. Any such
dividends or distributions may be declared payable in cash, property
or shares of the class or series, as determined by the Board of
Directors or pursuant to a standing resolution or program adopted or
approved by the Board of Directors. Dividends and distributions may
be declared with such frequency, including daily, as the Board of
Directors may determine and in any reasonable manner, including by
standing resolution, by resolutions adopted only once or with such
frequency as the Board of Directors may determine, or by formula or
other similar method of determination, whether or not the amount of
the dividend or distribution so declared can be calculated at the
time of such declaration. The Board of Directors may establish
payment dates for such dividends and distributions on any basis,
including payment that is less frequent than the effectiveness of such
declarations. The Board of Directors shall have the discretion to
designate for such dividends and distributions amounts sufficient to
enable the Corporation or any class or series thereof to qualify as a
"regulated investment company" under the Internal Revenue Code of
1986 or any successor or comparable statute, and regulations
promulgated
thereunder (collectively, the "IRC"), and to avoid liability of the
Corporation or any class or series for Federal income tax in respect
of a given year and to make other appropriate adjustments in
connection therewith. Nothing in the foregoing sentence shall limit
the authority of the Board of Directors to designate greater or lesser
amounts for such dividends and distributions. The amounts of dividends
and distributions declared and paid with respect to the various
classes or series of capital stock and the timing of declaration and
payment of such dividends and distributions may vary among such
classes and series.

(e) Tax Elections. The Board of Directors shall have the power, in its
discretion, to make such elections as to the tax status of the
Corporation or any series or class of the Corporation as may be
permitted or required by the IRC without the vote of stockholders of
the Corporation or any series or class.

(f) Liquidation. At any time there are no shares outstanding for a
particular class or series, the Board of Directors may liquidate such
class or series in accordance with applicable law. In the event of the
liquidation or dissolution of the Corporation, or of a class or series
thereof when there are shares outstanding of the Corporation or of
such class or series, as applicable, the stockholders of such, or of
each, class or series, as applicable, shall be entitled to receive,
when and as declared by the Board of Directors, the excess of the
assets of that class or series over the liabilities of that class or
series, determined as provided herein and including assets and
liabilities allocated pursuant to sections (a) and (b) of this Article
5.5. Any such excess

<PAGE> 5

amounts will be distributed to each stockholder of the applicable
class or series in proportion to the number of outstanding shares of
that class or series held by that stockholder and recorded on the
books of the Corporation. Subject to the requirements of applicable
law, dissolution of a class or series may be accomplished by
distribution of assets to stockholders of that class or series as
provided herein, by the transfer of assets of that class or series
to another class or series of the Corporation, by the exchange of
shares of that class or series for shares of another class or series
of the Corporation, or in any other legal manner.

(g) Voting Rights. On each matter submitted to a vote of stockholders,
each holder of a share of capital stock of the Corporation shall be
entitled to one vote for each full share, and a fractional vote for
each fractional share of stock standing in such holder's name
on the books of the Corporation, irrespective of the class or
series thereof, and all shares of all classes and series shall vote
together as a single class, provided that (a) when the Maryland
General Corporation Law or the Investment Company Act of 1940 requires
that a class vote separately with respect to a given matter, the
separate voting requirements of the applicable law shall govern with
respect to the affected class[es] and other classes shall vote as a
single class and (b) unless otherwise required by those laws, no
class shall vote on any matter which does not affect the interest
of that class.

(h) Quorum. The presence in person or by proxy of the holders of one-third
of the shares of stock of the Corporation entitled to vote thereat,
without regard to class, shall constitute a quorum at any meeting of
the stockholders, except with respect to any matter which, under
applicable statues or regulatory requirements, requires approval by a
separate vote of one or more classes of stock, in which case the
presence in person or by proxy of the holders of one-third of the
shares of stock of each class required to vote as a class on the
matter shall constitute a quorum. If at any meeting of the
stockholders there shall be less than a quorum present, the
stockholders present at such meeting may, without further notice,
adjourn the same from time to time until a quorum shall be present.

5.6 Authorizing Vote. Notwithstanding any provision of the General Laws of the
State of Maryland requiring for any propose a proportion greater than a
majority of the votes of all classes or series, the affirmative vote of the
holders of a majority of the total number of shares of the Corporation, or
of a series of the Corporation, as applicable, outstanding and entitled to
vote under such circumstances pursuant to these Articles of Incorporation
and the By-Laws of the Corporation, shall be effective for such purpose,
except to the extent otherwise required by the Investment Company Act of
1940 and rules thereunder; provided that, to the extent consistent with the
General Laws of the State of Maryland and other applicable law, the By-laws
may provide for authorization to be by the vote of a proportion less than a
majority of the votes of the Corporation, or of a class or series.

5.7 Preemptive Rights. No stockholder of the Corporation shall be entitled as
of right to subscribe for, purchase, or otherwise acquire any shares of any
classes or series, or any other securities of the Corporation which the
Corporation proposes to issue or sell; and any or all of such shares or
securities of the Corporation, whether now or hereafter authorized or

<PAGE> 6

created, may be issued, or may be reissued or transferred if the same have
been reaquired, and sold to such persons, firms, corporations and
associations, and for such lawful consideration, and on such terms as the
Board of Directors in its discretion may determine, without first offering
the same, or any thereof, to any said stockholder.

5.8 Redemption.

(a) The Board of Directors shall authorize the Corporation, to the extent
it has funds or other property legally available therefor and subject
to such reasonable conditions as the directors may determine, to
permit each holder of shares of capital stock of the Corporation, or
of any class or series, to require the Corporation to redeem all or
any part of the shares starting in the name of such holder on the
books of the Corporation, at the applicable redemption price of such
shares (which may reflect such fees and charges as the Board of
Directors may establish from time to time) determined in accordance
with procedures established by the Board of Directors of the
Corporation from time to time in accordance with applicable law.

(b) Without limiting the generality of the foregoing, the Board of
Directors may authorize the Corporation, at its option and to the
extent permitted by and in accordance with the conditions of
applicable law, to redeem stock of the Corporation, or of any class or
series, owned by any stockholder under circumstances deemed
appropriate by the Board of Directors in its sole discretion from
time to time, such circumstances including by not limited to (1)
failure to provide the Corporation with a tax identification number
and (2) failure to maintain ownership of a specified minimum number
or value of shares of any class or series of stock of the
Corporation, such redemption to be effected at such price, at such
time and subject to such conditions as may be required or permitted
by applicable law.

(c) Payment for redeemed stock shall be made in cash unless, in the
opinion of the Board of Directors, which shall be conclusive,
conditions exist which make it advisable for the Corporation to make
payment wholly or partially in securities or other property or assets
of the class or series of the shares being redeemed. Payment made
wholly or partially in securities or other property or assets may be
delayed to such reasonable extent, not inconsistent with applicable
law, as is reasonably necessary under the circumstances. No
stockholder shall have the right, except as determined by the Board of
Directors, to have his shares redeemed in such securities, property or
other assets.

(d) All rights of a stockholder with respect to a share redeemed,
including the right to receive dividends and distributions with
respect to such share, shall cease and determine as of the time as of
which the redemption price to be paid for such shares shall be fixed,
in accordance with applicable law, except the right of such
stockholder to receive payment for such shares as provided herein.

(e) Notwithstanding any other provision of the Article 5.5, the Board of
Directors may suspend the right of stockholders of any or all classes
or series of shares to require the Corporation to redeem shares held
by them for such periods and to the extent permitted

<PAGE> 7

by, or in accordance with, the Investment Company Act of 1940. The
Board of Directors may, in the absence of a ruling by a responsible
regulatory official, terminate such suspension at such time as the
Board of Directors, in its discretion, shall deem reasonable, such
determination to be conclusive.

(f) Shares of any class or series which have been redeemed shall
constitute authorized but unissued shares subject to classification
and reclassification as provided in these Articles of Incorporation.

5.9 Repurchase of Shares. The Board of Directors may by resolution from time to
time authorize the Corporation to purchase or otherwise acquire, directly
or through an agent, shares of any class or series of its outstanding stock
upon such terms and conditions and for such consideration as permitted by
applicable law and determined to be reasonable by the Board of Directors
and to take all other steps deemed necessary in connection therewith.
Shares so purchased or acquired shall have the status of authorized but
unissued shares.

5.10 Valuation. Subject to the requirements of applicable law, the Board of
Directors may, in its absolute discretion, establish the basis or method,
timing and frequency for determining the value of assets belonging to each
class or series and for determining the net asset value of each share of
each class or series for purposes of sales, redemption, repurchases or
otherwise. Without limiting the foregoing, the Board of Directors may
determine that the net asset value per share of any class or series should
be maintained at a designated constant value and may establish procedures,
not inconsistent with applicable law, to accomplish that result. Such
procedures may include a requirement, in the event of a net loss with
respect to the particular class or series from time to time, for automatic
pro rata capital contributions from each stockholder of that class or
series in amounts sufficient to maintain the designated constant share
value.

5.11 Certificates. Subject to the requirement of the Maryland General
Corporation Law, the Board of Directors may authorize the issuance of some
all of the shares of any or all classes or series without certificates and
may establish such conditions as it may determine in connection with the
issuance of certificates.

5.12 Shares Subject to Articles and Bylaws. All persons who shall acquire shares
of capital stock in the Corporation shall acquire the same subject to the
provisions of these Articles of Incorporation and the By-Laws of the
Corporation, as each may be amended, supplemented and/or restated from time
to time.

ARTICLE VI

BOARD OF DIRECTORS

6.1 Number of Directors. Prior to the issuance of stock, the number of directors
of the Corporation shall be four and after the issuance of stock shall be as
provided in the By-Laws, provided that the By-Laws may, subject to the
limitations of the Maryland General Corporation Law, fix a different number of
directors and may authorize a majority of the directors to Articles

<PAGE> 8

or the By-Laws within limits set by the By-Laws and to fill vacancies created by
an increase in the amount of directors. Unless otherwise provided by the
By-Laws, the directors of the Corporation need not be stockholders of the
Corporation. The names of the directors who will serve until the first annual
meeting and until their successors are elected and qualify are:

Edward L. Jaroski
James F. Leary
John R. Parker
Philip C. Smith

6.2 Removal of Directors. Subject to the limits of the Investment Company Act of
1940 and unless otherwise provided by the By-Laws, a director may be removed,
with or without cause, by the affirmative vote of a majority of (a) the Board of
Directors, (b) a committee of the Board of Directors appointed for such purpose,
or (c) the stockholders by vote of a majority of the outstanding shares of the
Corporation.

6.3 Liability of Directors and Officers.

(a) To the fullest extent permitted by the Maryland General Corporation
Law and the Investment Company Act of 1940, no director or officer of
the Corporation shall be liable to the Corporation or to its
stockholders for money damages. No amendment to these Articles of
Incorporation or repeal of any of its provisions shall limit or
eliminate the benefits provided to directors and officers under this
provision with respect to any act or omission which occurred prior to
such amendment or repeal.

(b) In performance of his duties, a director is entitled to rely on any
information, opinion, report, or statement, including any financial
statement or other financial data, prepared by others, to the extent
not inconsistent with the General Law of the State of Maryland. A
person who performs his duties in accordance with the standards of
Article 2-405.1 of the Maryland General Corporation Law of otherwise
in accordance with applicable law shall have no liability by reason of
being or having been a director of the Corporation.

6.4 Powers of Directors. In addition to any powers conferred herein in the
By-Laws, the Board of Directors may, subject to any express limitations
contained in these Articles of Incorporation or in the By-Laws, exercise the
full extent of powers conferred by the General Laws of the State of Maryland or
other applicable law upon corporations or directors thereof and the enumeration
and definition of particular powers herein or in the By-Laws shall in no way be
deemed to restrict or otherwise limit those lawfully conferred powers. In
furtherance and without limitation of the foregoing, the Board of Directors
shall have power:

(a) to make, alter, amend or repeal from time to time the By-Laws of the
Corporation except as otherwise provided by the By-Laws;

(b) subject to requirements of the Investment Company Act of 1940 and the
General Laws of the State of Maryland, to authorize the Corporation to
enter into contracts with any person, including any firm, corporation,
trust or association in which a

<PAGE> 9

director, officer, employee or stockholder of the Corporation may be
interested. Such contracts may be for any lawful purpose, whether or
not such purpose involves delegating functions normally performed by
the board of directors or officers or a corporation, including, but
not limited to, the provision of investment management for the
Corporation's investment portfolio, the distribution of securities
issued by the Corporation, the administration of the Corporation's
affairs, the provision of transfer agent services with respect to the
Corporation's shares of capital stock, and the custody of the
Corporation's assets. Any person (including its affiliates) may be
retained in multiple capacities pursuant to one or more contracts and
may also perform services, including similar or identical services for
others, including payments of multiple amounts for persons (including
their affiliates) acting in multiple capacities, as the Board of
Directors shall determine in its discretion to be proper and
reasonable.

(c) to authorize from time to time the payment of compensation to the
Directors for services to the Corporation, including fees for
attendance at meetings of the Board of Directors and committees
thereof.

6.5 Determinations by Board of Directors. Any determination made by or pursuant
tot he direction of the Board of Directors and in accordance with the standards
set by the General Laws of the State of Maryland shall be final and conclusive
and shall be binding upon the Corporation and upon all stockholders, past,
present and future, of each class and series.

ARTICLE VII

PROVISIONS FOR DEFINING, LIMITING AND REGULATING THE POWERS OF THE
CORPORATION AND THE DIRECTORS AND STOCKHOLDERS

7.1 Location of Meetings, Offices and Books. Both directors and stockholders may
hold meetings within or without the State of Maryland and abroad, and the
Corporation may have one or more offices and may keep its books within or
without the State of Maryland and abroad, and the Corporation may have one or
more offices and may keep its books within or without the State of Maryland and
abroad at such places as the directors shall determine.

7.2 Meetings of Shareholders. Except as otherwise provided in the By-Laws, in
accordance with applicable law, the Corporation shall not be required to hold an
annual meeting of shareholders in any year unless required law. Election of
directors, whether by the directors or by stockholders, need not be by ballot
unless the By-Laws so provide.

7.3 Inspection of Records. Stockholders of the Corporation shall have only such
rights to inspect and copy the records, documents, accounts and books of the
Corporation and to request statements regarding its affairs as are provided by
the Maryland General Corporation Law, subject to such reasonable regulations,
not contrary to the General Law of the State of Maryland, as the Board of
Directors may from time to time adopt regarding the conditions and limits of
such rights.

<PAGE> 10

7.4 Indemnification. The Corporation, including its successors and assigns,
shall indemnify its directors and officers and make advance payment of related
expenses to the fullest extent permitted, and in accordance with the procedures
required, by the General Laws of the State of Maryland and the Investment
Company Act of 1940. The By-Laws may provide that the Corporation shall
indemnify its employees and/or agents in any manner and within such limits as
permitted by applicable by law. Such indemnification shall be in addition to any
other right or claim to which any director, officer, employee or agent may
otherwise be entitled. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise or
employee benefit plan, against any liability (including, with respect to
employee benefit plans, excise taxes) asserted against and incurred by such
person in any such capacity or arising out of such person's position, whether or
not the Corporation would have had the power to indemnify against such
liability. The rights provided to any person by this Article 7.4 shall be
enforceable against the Corporation by such person who shall be presumed to have
relied upon such rights in serving or continuing to serve in the capacities
indicated herein. No amendment of these Articles of Incorporation shall impair
the rights of any person arising at any time with respect to events occurring
prior to such amendment.

7.5 Wholly-Owned Subsidiaries. The Corporation may own all or any portion of the
securities of, make loans to, or contribute to the costs or other financial
requirements of any company which is wholly owned by the Corporation or by the
Corporation and by one or more other investments companies and is primarily
engaged in the business of providing, at cost, management, administrative or
related services to the Corporation or to the Corporation and other investment
companies.

7.6 Amendments. The Corporation reserves the right to amend, alter, change or
repeal any provision of these Articles of Incorporation, and all rights
conferred upon stockholders herein are granted subject to this reservation.

7.7 References to Statues, Articles and By-Laws. All references herein to
statutes, to these Articles of Incorporation or to the By-Laws shall be deemed
to refer to those statutes, Articles or By-Laws as they are amended and in
effect from time to time.

IN WITNESS WHEREOF, the undersigned incorporator of Capstone Fixed Income
Series, Inc. hereby executes the foregoing Articles of Incorporation and
acknowledges the same to be her act.

Dated this 11th day of May, 1992.

------------------------------
Olivia P. Adler, Incorporator

<PAGE> 1
BY-LAWS

FOR

CAPSTONE FIXED INCOME SERIES, INC.

ARTICLE I

Offices

Section 1. Principal Office. The principal office of the Corporation in the
State of Maryland shall be in the City of Baltimore.

Section 2. Other Offices. The Corporation may have such other offices in
such places as the Board of Directors may from time to time determine.

ARTICLE II

Meetings of Stockbrokers

Section 1. Annual Meeting. Subject to this Article II, an annual meeting of
stockholders for the election of Directors and the transaction of such other
business as may properly come before the meeting shall be held at such time and
place as the Board of Directors shall select. The Corporation shall not be
required to hold an annual meeting of its stockholders in any year in which the
election of Directors is not required to be acted upon under the Investment
Company Act of 1940.

Section 2. Special Meetings. Special meetings of stockholders may be called
at any time by the President, the Secretary or by a majority of the Board of
Directors and shall be held at such time and place as may be stated in the
notice of the meeting.

Special meetings of the stockholders shall be called by the Secretary upon
receipt of written request of the holders of shares entitled to cast not less
than 10% of the votes entitled to be cast at such meeting, provided that (1)
such request shall state the purposes of such meeting and the matters proposed
to be acted on, and (2) the stockholders requesting such meeting shall have paid
to the Corporation the reasonably estimated cost of preparing and mailing the
notice thereof, which the Secretary shall determine and specify to such
shareholders. No special meeting shall be called upon the request of
stockholders to consider any matter which is substantially the same as a matter
voted upon at any special meeting of the stockholders held during the preceding
12 months, unless requested by the holders of a majority of all shares entitled
to be voted at such meeting.

<PAGE> 2

Section 3. Place of Meetings. Meetings of stockholders shall be held at
such place within the United States as the Board of Directors may from time to
time determine.

Section 4. Notice of Meetings; Waiver of Notice. Notice of the place, date
and time of the holding of each stockholders' meeting and, if the meeting is a
special meeting, the purpose or purposes of the meeting, shall be given
personally or by mail, not less than ten nor more than ninety days before the
date of such meeting, to each stockholder entitled to vote at such meeting and
to each other stockholder entitled to notice of the meeting. Notice by mail
shall be deemed to be duly given when deposited in the United States mail
addressed to the stockholder at his address as it appears on the records of the
Corporation, with postage thereon prepaid.

Notice of any meeting of stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting.

Section 5. Quorum, Adjournment of Meetings. The presence at a ny
stockholders' meeting, in person or by proxy, of stockholders of one third of
the shares of the stock of the Corporation thereat shall be necessary and
sufficient to constitute a quorum for the transaction of business, except for
any matter which, under applicable statutes or regulatory requirements, requires
approval by a separate vote of one or more classes of stock, in which case the
presence in person or by proxy of stockholders of one third of the shares of
stock of each class required to vote as a class on the matter shall constitute a
quorum. The holders of a majority of shares entitled to vote at the meeting and
present in person or by proxy, whether or not sufficient to constitute a quorum,
or, any officer present entitled to preside or act as Secretary of such meeting
may adjourn the meeting without determining the date of the new meeting or from
time to time without further notice to a date not more than 120 days after the
original record date. Any business that might have been transacted at the
meeting originally called may be transacted at any such adjourned meeting at
which a quorum is present.

<PAGE> 3

Section 6. Organization. At each meeting of the stockholders, the Chairman
of the Board (if one has been designated by the Board), or in his absence or
inability to act, the President, or in the absence or inability to act of the
Chairman of the Board and the President, a Senior Vice President or a Vice
President, shall act as chairman of the meeting; provided, however, that if no
such officer is present or able to act, a chairman of the meeting shall be
elected at the meeting. The Secretary, or in his absence or inability to act,
any person appointed by the chairman of the meeting, shall act as secretary of
the meeting and keep the minutes thereof.

Section 7. Order of Business. The order of business at all meetings of the
stockholders shall be as determined by the chairman of the meeting.

Section 8. Voting. Except as otherwise provided by statute or the Articles
of Incorporation, each holder of record of shares of stock of the Corporation
having voting power shall be entitled at each meeting of the stockholders to one
vote for every full share of such stock, with a fractional vote for any
fractional shares, standing in his name on the record of stockholders of the
Corporation as of the record date determined pursuant to Section 9 of this
Article or if such record date shall not have been so fixed, then at the later
of (i) the close of business on the day on which notice of the meeting is mailed
or (ii) the thirtieth day before the meeting.

Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by proxy signed by such
stockholder or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof, unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the stockholder
executing it, except in those cases where such proxy states that it is
irrevocable and where an irrevocable proxy is permitted by law. Except as
otherwise provided by statute, the Articles of Incorporation or these By-Laws,
any corporate action to be taken by vote of the stockholders shall be authorized
by a majority of the total votes validly cast at a meeting of stockholders at
which a quorum is present.

<PAGE> 4

If a vote shall be taken on any question other than the election of
directors, which shall be by written ballot, then unless required by statute or
these By-Laws, or determined by the chairman of the meeting to be advisable, any
such vote need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholder voting, or by his proxy, if there be such proxy, and
shall state the number of shares voted.

Section 9. Fixing of Record Date. The Board of Directors may fix a time not
less than 10 nor more than 90 days prior to the date of any meeting of
stockholders or prior to the last day on which the consent or dissent of
stockholders may be effectively expressed for any purpose without a meeting, as
the time as of which stockholders entitled to notice of and to vote at such a
meeting or whose consent or dissent is required or may be expressed for any
purpose, as the case may be, shall be determined; and all persons who were
holders of record of voting stock at such time and no other shall be entitled to
notice of and to vote at such meeting or to express their consent or dissent, as
the case may be. If no record date has been fixed, the record date for the
determination of stockholders entitled to notice of or to vote at the meeting of
stockholders shall be the later of the close of business on the day on which
notice of the meeting is mailed or the thirtieth day before the meeting, or, if
notice is waived by all stockholders, at the close of business on the tenth day
next preceding the day on which the meeting is held. The Board of Directors may
fix a record date for determining stockholders entitled to receive payment of a
dividend or an allotment of any rights, but such date shall be not more than 90
days before the date on which such payment or allotment is made. If no record
date has been fixed, the record date for determining stockholders entitled to
receive dividends or an allotment of rights shall be the close of business on
the day on which the resolution of the Board of Directors declaring the dividend
or an allotment of rights is adopted, but the payment or allotment shall not be
made more than 60 days after the date on which the resolution is adopted.

Section 10. Consent of Stockholders in Lieu of Meeting. Except as otherwise
provided by the statute or the Article of Incorporation, any action required to
be taken at any meeting of such stockholders, or any action which may be taken
at any meeting of such stockholders, may be taken without a meeting, without
prior notice and without a vote, if the following are filed with the records of
stockholders meetings: (i) a unanimous written consent which sets forth the
action and is signed by each stockholder entitled to vote on the matter and (ii)
a written waiver of any right to dissent signed by each stockholder entitled to
notice of the meeting but not entitled to vote thereat.

<PAGE> 5

ARTICLE III
Board of Directors

Section 1. General Powers. The business and affairs of the Corporation
shall be managed under the direction of the Board of Directors and all powers of
the Corporation may be exercised by or under authority of the Board of
Directors.

Section 2. Number of Directors. The number of directors shall be fixed from
time to time by resolution of the Board of Directors adopted by a majority of
the Directors then in office; provided, however, that the number of Directors
shall in no event be less than three (3) nor more than (15) except that the
Corporation shall have at least one (1) Director if there is no stock
outstanding, and may have a number of Directors no fewer than the number of
stockholders so long as there are fewer than three (3) stockholders. Any
vacancy created by an increase in Directors may be filled in accordance with
Section 6 of this Article III. No reduction in the number of Directors shall
have the effect of removing any Director from office prior to the expiration of
is tem unless such Director is specifically removed pursuant to Section 5 of
this Article III at the time of such decrease. Directors need not be
stockholders.

Section 3. Election and Term of Directors. Directors shall be elected
annually, by written ballot at the annual meeting of stockholders or a special
meeting held for that purpose; provided, however, that if no annual meeting of
the stockholders of the Corporation is required to be held in a particular year
pursuant to Section 1 of Article II of these By-Laws, Directors shall be elected
at the next annual meeting held. The term of office of each Director shall be
from the time of his election and qualification until the election of Directors
next succeeding his election and until successor shall have been elected and
shall have qualified.

Section 4. Resignation. A Director of the Corporation may resign at any
time by giving written notice of his resignation to the Board or the Chairman of
the Board or the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.

<PAGE> 6

Section 5. Removal of Directors. Any Director of the Corporation may be
removed in accordance with the Articles of Incorporation.

Section 6. Vacancies. If any vacancies shall occur in the Board of
Directors (i) by reason of death, resignation, removal or otherwise, the
remaining Directors shall continue to act, and such vacancies (if not previously
filed by the stockholders) may be filled by a majority of the remaining
Directors, although less than a quorum, and (ii) by reason of an increase in the
authorized number of Directors, such vacancies (if not previously filled by the
stockholders) may be filled only by a majority vote of the entire Board of
Directors.

Section 7. Place of Meeting. The Board may hold their meetings, have one or
more offices, and keep the books of the Corporation, outside the State of
Maryland, and within or without the United States of America, at any office or
offices of the Corporation or at any other place as they may from time to time
by resolution determine, or in the case of meetings, as they may from time to
time by resolution determine or as shall be specified or fixed in the respective
notices or waivers of notice thereof.

Section 8. Regular Meetings. The Board of Directors from time to time may
provide by resolution for the holding of regular meetings and fix their time and
place as the Board of Directors may determine. Notice of such regular meetings
need not be in writing, provided that notice of any change in the time or place
or such fixed regular meetings shall be communicated promptly to each Director
not present at the meeting at which such change was made in the manner provided
in Section 9 of the Article III for notice of special meetings. Members of the
Board of Directors or any committee designated thereby may participate in a
meeting of such Board or committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time, and participation by such means
shall constitute presence in person at a meeting.

<PAGE> 7

Section 9. Special Meetings. Special meetings of the Board of Directors may
be held at any time or place and for any purpose when called by the President,
the Secretary or two or more of the Directors. Notice of special meetings,
stating the time and place, shall be communicated to each Director personally by
telephone or transmitted to him by telegraph, telefax, telex, cable or wireless
at least one day before the meeting.

Section 10. Waiver of Notice. No notice of any meeting of the Board of
Directors or a committee of the Board need be given to any Director who is
present at the meeting or who waives notice of such meeting in writing (which
waiver shall be filed with the records of such meeting), either before or after
the time of the meeting.

Section 11. Quorum and Voting. At all meetings of the Board of Directors,
the presence of one third of the entire Board of Directors shall constitute a
quorum unless there are only two or three Directors, in which case two Directors
shall constitute a quorum. If there is only one Director, the sole Director
shall constitute a quorum. At any adjourned meeting at which a quorum is
present, any business may be transacted which might have been transacted at the
meeting as originally called.

Section 12. Organization. The Board may, by resolution adopted by a
majority of the entire Board, designate a Chairman of the Board, who shall
preside at each meeting of the Board. In the absence or inability of the
Chairman of the Board to preside a meeting, the President, or, in his absence or
in ability to act, another Director chosen by a majority of the Directors
present, shall act as chairman of the meeting and preside thereat. The Secretary
(or, in his absence or inability to act, any person appointed by the Chairman)
shall act as secretary of the meeting and keep the minutes thereof.

Section 13. Written Consent of Directors in Lieu of a Meeting. Subject to
the provisions of the Investment Company Act of 1940, as amended, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if all members of the Board
of committee, as the case may be, consent thereto in writing, and the writings
are filed with the minutes of the proceedings of the Board or committee.
<PAGE> 8

Section 14. Compensation. Directors may receive compensation for services
to the Corporation in their capacities as directors or otherwise in such manner
and in such amounts as may be fixed from time to time by the Board.

ARTICLE IV
Committee

Section 1. Organization. By resolution adopted by the Board of Directors,
the Board may designate one or more committees, including an Executive
Committee, composed of two or more Directors. The Chairman of such committees
shall be elected by the Board of Directors. The Board of Directors shall have
the power at any time to change the members of such committees and to fill
vacancies in the committees. The Board may delegate to these committees any of
its powers, except the power to authorize the issuance of stock, declare a
dividend or distribution on stock, recommend to stockholders any action
requiring stockholder approval, amend these By-Laws, or approve any merger of
share exchange which does no require stockholder approval. If the Board of
Directors has given general authorization for the issuance of stock, a committee
of the Board, in accordance with a general formula or method specified by the
Board by resolution or general formula or method specified by the Board by
resolution or adoption of a stock option or other plan, may fix the terms of
stock subject to classification or reclassification and the terms on which any
stock may be issued, including all terms and conditions required or permitted to
be established or authorized by the Board of Directors.

Section 2. Proceedings and Quorum. In the absence of an appropriate
resolution of the Board of Directors, each committee may adopt such rules and
regulations governing its proceedings, quorum and manner of acting as it shall
deem proper and desirable. In the event any member of any committee is

<PAGE> 9

absent from any meeting, the members thereof present at the meeting, whether or
not they constitute a quorum, may appoint a member of the Board of Directors to
act in the place of such absent member.

ARTICLE V
Officers, Agents and Employees

Section 1. General. The officers of the Corporation shall be a President, a
Secretary and a Treasurer, and may include one or more Executive Vice
Presidents, Vice Presidents, Assistant Secretaries or Assistant Treasurers, and
such other officers as may be appointed in accordance with the provisions of
Section 8 of this Article.

Section 2. Election, Tenure and Qualifications. The officers of the
Corporation, except those appointed as provided in Section 8 of this Article V,
shall be elected by the Board of Directors at its first meeting and thereafter
annually at an annual meeting. If any officers are not chosen at any annual
meeting, such officers may be chosen at any subsequent regular or special
meeting of the Board. Except as otherwise provided in this Article V, each
officer chosen by the Board of Directors shall hold office until the next annual
meeting of the Board of Directors and until his successor shall have been
elected and qualified. Any person may hold one or more offices of the
Corporation except the offices of President and Vice President.

Section 3. Removal and Resignation. Whenever in the judgement of the Board
of Directors the best interest of the Corporation will be served thereby, any
officer may be removed from office by the vote of a majority of the members of
the Board of Directors at any regular meeting or at a special meeting called for
such purpose. Any officer may resign his office at any time by delivering a
written resignation to the Board of Directors, the President, the Secretary, or
any Assistant Secretary. Unless otherwise specified therein, such resignation
shall take effect upon delivery.

<PAGE> 10

Section 4. President. The President shall be the chief executive officer of
the Corporation. Subject to the supervision of the Board of Directors, he shall
have general charge of the business, affairs and property of the Corporation and
general supervision over its officer, employees and agents. Except as the Board
of Directors may otherwise order, he may sign in the name and on behalf of the
Corporation all deeds, bonds, contracts, or agreements. He shall exercise such
other powers and perform such other duties as from time to time may be assigned
to him by the Board of Directors.

Section 5. Executive Vice President and Vice President. The Board of
Directors may from time to time elect one or more such duties as from time to
time may be assigned to them by the Board of Directors or the President. At the
request or in the absence or disability of the President, the Executive Vice
President (or, if there are two or more Executive Vice Presidents, then the more
senior of such officers present and able to act) may perform all the duties of
the President and, when so acting, shall have the powers of and be subject to
all the restrictions upon the President. Any Vice President may perform such
duties as the Board of Directors may assign.

Section 6. Treasurer and Assistant Treasurer. The treasurer shall be the
principal financial and accounting officer of the Corporation and shall have
general charge of the finances and books of account of the Corporation. Except
as otherwise provided by the Board of Directors, he shall have general
supervision of the funds and property of the Corporation and of the performance
by the Custodian of its duties with respect thereto. He shall render to the
Board of Directors, whenever directed by the Board, an account of the financial
condition of the Corporation and of all his transactions as Treasurer. He shall
perform all acts incidental to the Office of Treasurer, subject to the control
of the Board of Directors.

Any Assistant Treasurer may perform such duties of the Treasurer as the
Treasurer or the Board of Directors may assign, and, in the absence of the
Treasurer, the Assistant Treasurer (or if there are two or more Assistant
Treasurers, then the more senior of such officers present and able to act) may
perform all of the duties of the Treasurer.

<PAGE> 11

Section 7. Secretary and Assistant Secretaries. The Secretary shall attend
to the giving and serving of all notices of the Corporation and shall record all
proceedings of the meetings of the stockholders and Directors in books to be
kept for that purpose. He shall in safe custody the seal of the Corporation, and
shall have charge of the records of the Corporation, including such books and
papers as the Board of Directors may direct and such books, reports,
certificates and other documents required by law to be kept, all of which shall
at all reasonable times be open to inspection by any Director. He shall perform
such other duties as appertain to his office or as may be required by the Board
of Directors.

Any Assistant Secretary may perform such duties of the Secretary as the
Secretary of the Board of Directors may assign, and, in the absence of the
Secretary, he may perform all the duties of the Secretary.

Section 8. Subordinate Officers. The Board of Directors from time to time
may appoint such other officers or agents as it may deem advisable, each of whom
shall have such title, hold office for such period, have such authority and
perform such duties as the Board of Directors may determine. The Board of
Directors from time to time may delegate to one or more officers or agents the
power to appoint any such subordinate officers or agents and to prescribe their
rights, terms of office, authorities and duties.

Section 9. Remuneration. The salaries or other compensation, if any, of the
officers of the Corporation shall be fixed from time to time by resolution of
the Board of Directors, except that the Board of Directors may by resolution
delegate to any person or group of persons the power to fix the salaries or
other compensation of any subordinate officers or agents appointed in accordance
with the provisions of Section 8 of this Article V.

Section 10. Surety Bonds. The Board of Directors may require any officer or
agent of the Corporation to execute a bond (including, without limitation, any
bond required by the Investment Company Act of 1940, as amended, as amended, and
the rules and regulations of the Securities Exchange Commission) to the
Corporation in such sum and with such surety or sureties as the Board of
Directors may determine, conditioned upon the faithful performance of this
duties to the Corporation, including responsibility for negligence and for the
accounting of any of the Corporation's property, funds or securities that may
come into his hands.

<PAGE> 12

ARTICLE VI
Indemnification

The Corporation shall indemnify (a) its Directors and officers, whether
serving the Corporation or at its request any other entity, to the full extent
requires or permitted by (i) Maryland law now or hereafter in force, including
the advance of expenses under the procedures and to the full extent permitted by
law, and (ii) the Investment Company Act of 1940, as amended, and (b) other
employees and agents to such extent as shall be authorized by the Board of
Directors and be permitted by law. The foregoing rights of indemnification shall
not be exclusive of any other rights to which those seeking indemnification may
be entitled. The Board of Directors may take such action as is necessary to
carry out these indemnification provisions and is expressly empowered to adopt,
approve, and amend from time to time such resolutions or contracts implementing
such provisions or such further indemnification arrangements as may be permitted
by law.

ARTICLE VII
Capital Stock

Section 1. Stock Certificates. The interest of each stockholder of the
Corporation may be evidenced by certificates for shares of stock in such form as
the Board of Directors may from time to time prescribe. The certificates
representing shares of stock shall be signed by or in the name of the
Corporation by the President, an Executive Vice President or a Vice President
and countersigned by the Secretary or an Assistant Secretary or the Treasurer or
an Assistant Treasurer. Certificates may be sealed with the actual corporate
seal or a facsimile of it or in any other form. Any or all of the signatures or
the seal on the certificate may be manual or a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate shall be issued, it may be issued by the
Corporation with the same effect as if such officer, transfer

<PAGE> 13

agent or registrar were still in office at the date of issue unless written
instructions of the Corporation to the contrary are delivered to such officer,
transfer agent registrar.

Section 2. Stock Ledgers. The stock ledgers of the Corporation, containing
the names and addresses of the stockholders and the number of shares held by
them respectively, shall be kept at the principal offices of the Corporation or,
if the Corporation employs a transfer agent, at the offices of the transfer
agent of the Corporation.

Section 3. Transfers of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent or
transfer clerk, and on surrender of the certificate or certificates, if issued,
for such shares properly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, with such proof of the
authenticity of the signature as the Corporation or its agents may reasonably
require and the payment of all taxes thereon. Except as otherwise provided by
law, the Corporation shall be entitled to recognize the exclusive right of a
person in whose name any such share or shares for all purposes, including,
without limitation, the rights to receive dividends or other distributions, and
to vote as such owner, and the Corporation shall not be bound to recognize any
equitable or legal claim to or interest in any such share or shares on the part
of any other person. The Board may make such additional rules and regulations,
not inconsistent with these By-Laws, as it may deem expedient concerning the
issue, transfer and registration of certificates for shares of stock of the
Corporation.

Section 4. Transfer Agents and Registrars. The Board of Directors may from
time to time appoint or remove transfer agents and/or registrars of transfers of
shares of stock of the Corporation, and it may appoint the same person as both
transfer agent and registrar. Upon any such appointment being made all
certificates representing shares of capital stock thereafter issued shall be
countersigned by one of such transfer agents or by one of such registrars of
transfers or by both and shall not be valid unless so

<PAGE> 14

countersigned. If the same person shall be both transfer agent and registrar,
only one countersignature by such person shall be required.

Section 5. Lost, Destroyed or Mutilated Certificates. The holder of any
certificates representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of such
certificate, and the Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it which the owner thereof shall
allege to have been lost or destroyed or which shall have been mutilated, and
the Board may, in its discretion, require such owner or his legal
representatives to give to the Corporation a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties, as the Board in
its absolute discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss or
destruction of any such certificate, or issuance of a new certificate. Anything
herein to the contrary notwithstanding, the Board, in its absolute discretion,
may refuse to issue any such new certificate, except pursuant to legal
proceedings under the laws of the State of Maryland.

ARTICLE VIII
Seal

The seal of the Corporation shall be circular in form and shall bear, in
addition to any other emblem or device approved by the Board of Directors, the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal" and "Maryland." The form of the seal may be altered by the Board of
Directors. Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced. Any Officer or Director
of the Corporation shall have the authority to affix the corporate seal of the
Corporation to any document requiring the same.

ARTICLE IX
Fiscal Year

The fiscal year of the Company shall be determined by resolution of the
Board of Directors.

<PAGE> 15

ARTICLE IX
Depositories and Custodians

Section 1. Depositories. The funds of the Corporation shall be deposited
with such banks or other depositories as the Board of Directors of the
Corporation may from time to time determine.

Section 2. Custodians. All securities and other investments shall be
deposited in the sage keeping of such banks or other companies as the Board of
Directors of the Corporation may from time to time determine. Every arrangement
entered into with any bank or other company for the safe keeping of the
securities and investments of the Corporation shall contain provisions complying
with the Investment Company Act of 1940, as amended, and the general rules and
regulations thereunder.

ARTICLE XI
Execution of Instruments

Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts, acceptances,
bills of exchange and other orders or obligations for the payment of money shall
be signed by such officer or officers or person or persons as the Board of
Directors by resolution shall from time to time designate or as these By-Laws
provide.

Section 2. Sale or Transfer of Securities. Stock certificates, bonds or
other securities at any time owned by the Corporation may be held on behalf of
the Corporation or so transferred or otherwise disposed of subject to any limits
imposed by these By-Laws and pursuant to authorization by the Board and, when so
authorized to be held on behalf of the Corporation or sold, transferred or
otherwise disposed of, may be transferred from the name of the Corporation by
the signature of the President, any Executive Vice President, any Vice President
or the Treasurer or pursuant to any procedure approved by the Board of
Directors, subject to applicable law.

<PAGE> 16

ARTICLE XII
Independent Public Accountants

The Corporation shall employ an independent public accountant or a firm of
independent public accountants as its accountants or a firm of independent
public accountants as its accountants to examine the accounts of the Corporation
and to sign and certify financial statements filed by the Corporation.

ARTICLE XIII
Amendments

These By-Laws or any of them may be amended, altered or repealed at any
regular meeting of the stockholders at which a quorum is present or represented,
provided that notice of the proposed amendment, alteration or repeal be
contained in the notice of such special meeting. These By-Laws may also be
amended, altered or repealed by the affirmative vote of a majority of the Board
of Directors at any regular or special meeting of the Board of Directors, except
any particular By-Law which is specified as not subject to the requirements of
the Investment Company Act of 1940, as amended.

<PAGE> 1

CAPSTONE ASSET PLANNING COMPANY
5847 SAN FELIPE, SUITE 4100
HOUSTON, TEXAS 77057
713-260-9000
800-262-6631

SELLING GROUP AGREEMENT

Ladies/Gentlemen:

We invite you to participate in the distribution of the shares of any open-end
investment companies (herein collectively referred to as the "shares"), of which
we are or may become the principal underwriter (herein collectively referred to
as the "Funds" and individually as a "Fund"), subject to the following terms:

1. You agree to use your best efforts in the development and promotion of
shares of the Funds. In all sales of shares of the Funds to the public, you
shall act as dealer for your own account, and in no transaction shall you
have any authority to act as agent for the Fund or for us.

2. Orders for the purchase of shares of a Fund will be accepted by us only at
its public offering price (net asset value plus the applicable sales
commission, if any) described in the Fund's then current prospectus and in
accordance with the terms and conditions set forth in the prospectus. You
will forward to us the orders in accordance with our procedures then in
effect.

3. All orders are subject to acceptance or rejection by us and become
effective only upon confirmation by us. We reserve the right not to accept
any specific order for the purchase of shares. We will not accept a
conditional order.

4. Payment for shares purchased from us must be received by us within five
business days after the acceptance of your order or such shorter time as
may be required by law. If such payment is not so received, we reserve the
right, without notice, forthwith to cancel the sale or, at our option, to
sell the shares ordered by you back to the Fund, in which latter case you
may be held responsible for any loss, including loss of profit, suffered by
us and/or the Fund resulting from your failure to make the aforesaid
payment. Where sales of any Fund shares are contingent upon the Fund's
receipt of funds in payment therefor, you will forward promptly to us any
purchase orders and payments received by you from investors.

5. You shall purchase shares only from us or from your customers. If you
purchase shares from us, all such purchases shall be made only to cover
orders received by you from customers or for your own bona fide investment.
If you purchase shares from your customers, you shall pay such customers
not less than the applicable redemption price as established by the then
current prospectus.

6. You shall sell shares only: (a) to customers at the applicable public
offering price; and (b) to us as agent for the Fund at the repurchase
price. In such a sale to us, you may act either as principal for your own
account or as agent for your customer. If you act as agent for your
customer in selling shares to us, you agree not to charge your customer
more than a fair commission for handling the transaction.

7. You shall not withhold placing with us orders received from your customers
so as to profit yourself as a result of such withholding; e.g., by a change
in the net asset value from that used in determining the public offering
price to your customers.

8. Unless at the time of transmitting an order you advise us to the contrary,
we may consider the order to be the total holding of the investor and
assume that the investor is not entitled to any reduction in sales price
beyond that accorded to the amount of the purchase as determined by the
schedule set forth in the then current prospectus.

9. We shall pay to you a commission on each order solicited by you and
accepted by us equal to the amount calculated pursuant to the commission
schedule in effect on the day such order is accepted. We may amend such
schedule from time to time by providing written notice of amendment to you.
You shall not share or rebate any portion of such commissions or otherwise
grant any concessions, discounts or other allowances to any person who is
not a broker or dealer actually engaged in the investment banking or
securities business. No commission will be payable with respect to a
purchase of shares involving the reinvestment of income dividends and
capital gain distributions.

10. If any shares sold pursuant to an order solicited by you under the terms of
this Agreement are redeemed by any of the Funds (including redemptions
resulting from an exchange for shares of another investment company) or are
repurchased by us as agent for the Fund or are tendered to a Fund for
redemption within seven business days after the confirmation to you of the
original purchase order for such shares, you shall pay forthwith to us the
full amount of the commission allowed to you on the original sale, provided
we notify you of such repurchase or redemption within ten days of the date
upon which written redemption requests and, if applicable, share
certificates are delivered to us or to the Fund.

11. (a) To the extent you provide distribution and shareholder services to
shareholders of any Fund which has adopted a Service and Distribution Plan
("12b-1 Plan") pursuant to Rule 12b-1 of the Investment Company Act of 1940
(the "Act"), we shall pay you a fee, as established by the Board of
Directors or Trustees and stated in the then current Fund prospectus, based
upon the average net asset value of Fund shares for which you are the
dealer of record or holder of record, or owned by shareholders with whom
you have a servicing relationship. These distribution and shareholder
services may include, among other items, services in connection with the
distribution of Fund shares to your clients; answering client inquiries
about the Fund; assisting clients in changing dividend options, account
designations and addresses; performance of sub-accounting; establishing and
maintaining shareholder accounts and records; processing purchase and
redemption transactions; investing client account cash balances
automatically in shares of the Fund; providing periodic statements with
those of other transactions and balances in the client's other accounts
serviced by you; arranging for bank wires; and such other information and
services as may be requested, to the extent permitted by applicable

<PAGE> 2

statute, rule or regulation. You shall provide such office space and
equipment, telephone facilities and personnel as is necessary or beneficial
for providing information and services to shareholders of the Fund, and to
assist you in servicing accounts of clients. You shall transmit promptly to
clients all communications sent to you for transmittal to clients by or on
behalf of the Fund, us or the Fund's investment adviser, custodian or
transfer or dividend disbursing agent.

(b) You shall furnish us with such information as shall reasonably be
requested by us or by directors or trustees of the Fund with respect to
fees paid to you pursuant to this Section. It is our obligation to furnish
to the directors or trustees, for their review, (1) on a quarterly basis, a
written report of the amounts expended under this Section, and the purposes
for which such expenditures were made, and (2) on an annual basis, such
information as may be reasonably necessary to make an informed
determination as to whether the 12b-1 Plan should be continued.

(c) The provisions of this Section shall continue in full force and effect
(1) from year to year only so long as such continuance is specifically
approved at least annually by vote of the Fund's Board of Director or
Trustees, and of the directors or trustees who are not "interested persons"
of the Fund as defined in the Act and have no direct or indirect financial
interest in the 12b-1 Plan or in any agreements related to the 12b-1 Plan,
cast in person at a meeting called for the purpose of voting on the 12b-1
Plan or this Section, and (2) only so long as the Fund's Distribution
Agreement with us or this Agreement remains in effect. The provisions of
this Section may be terminated at any time, without the payment of any
penalty, by vote of the directors or trustees, or by vote of a majority of
the Fund's outstanding voting securities, and shall be terminated
immediately in the event of assignment as that term is defined in the Act.
The provisions of the 12b-1 Plan and the Distribution Agreement between the
Fund and us, insofar as they relate to this Section, are incorporated
herein by reference. The 12b-1 Plans in effect on the date of this
Agreement are substantially in the form set forth as Exhibit A hereto.

12. You represent that (check one):

(a) You are a member of the National Association of Securities Dealers,
Inc. ("NASD") and agree to maintain membership in the NASD. You agree to
abide by all the rules and regulations of the Securities and Exchange
Commission and the NASD which are binding upon underwriters and dealers in
the distribution of the securities of open-end investment companies,
including without limitation, Section 26 of Article III of the NASD Rules
of Fair Practice, all of which are incorporated herein as if set forth in
full. You shall comply with all applicable state and Federal laws and the
rules and regulations of authorized regulatory agencies. You will not sell
or offer for sale shares of any Fund in any state where (i) you are not
qualified to act as a dealer or (ii) the shares are not qualified for sale
under the Blue Sky laws and regulations for such state, except for states
in which they are exempt from qualification. You agree to notify us
immediately if your license or registration to act as a broker-dealer is
revoked or suspended by any Federal, self-regulatory or state agency; or

(b) You are a broker or dealer in a country other than the United States
who is not eligible for membership in the NASD (or any other registered
securities association) and, as a condition of your receipt of commissions
hereunder with respect to transactions in Fund shares, you agree that, in
making sales to purchasers within the United States of Fund shares as to
which commissions are paid to you hereunder, you will conform, to the same
extent as if you were an NASD member, to the provisions of paragraphs (a)
and (b) of Section 25 of the NASD Rules of Fair Practice, which paragraphs
are attached hereto and incorporated herein.

13. Stock certificates for shares sold to you shall be issued only if
specifically requested.

14. Each Fund reserves the right in its discretion, and we reserve the right in
our discretion, without notice, to suspend sales or withdraw the offering
of shares entirely. We reserve the right, without notice, to amend, modify
or cancel this Agreement.

15. We may cooperate with other broker-dealers who are licensed members of the
NASD, registered with the SEC and duly licensed by the appropriate
regulatory agency of each state in which they will solicit orders to
purchase shares of the Funds and with qualified broker-dealers in other
countries. Such other broker-dealers may be employed by us on terms and
conditions identical or similar to this Agreement and to that extent such
other broker-dealers shall compete with you in the sale of shares.

16. This Agreement shall become effective as of the date when it is executed
and dated by you below. After this Agreement becomes effective, either
party may terminate it at any time for any reason by giving 30 days'
written notice to the other party. This Agreement shall automatically
terminate at the first occurrence of any of the following events: (a) the
Registration Statement shall cease to be effective; (b) the Fund shall be
dissolved or liquidated; or (c) your license or registration to act as a
broker-dealer shall be revoked or suspended by any Federal, self-regulatory
or state agency, or, with respect to a firm that has checked paragraph
12(b), above, by any equivalent non-United States regulatory organization.

17. Any and all notices or other communications required or permitted under
this Agreement shall be in writing and shall be delivered at or mailed to
you at the address specified below and to us at Capstone Asset Planning
Company - Compliance Dept., 5847 San Felipe, Suite 4100, Houston, Texas
77057. Either party may change the address to which notices are to be
delivered to it by providing the other party with written notice of such
change of address. Any notice required or permitted under this Agreement
shall not be deemed given until actual receipt.

18. This Agreement shall not be assigned by either party without the prior
written consent of the other party.

19. This Agreement shall be construed and enforced in accordance with the laws
of the State of Texas without giving effect to conflict of laws.

<PAGE> 3

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first below written.

CAPSTONE ASSET PLANNING COMPANY

By
---------------------------------------------
President

Accepted and Agreed to this ____________ day ___________ of ______, 19___.

- --------------------------------------------------------------------------------
(Firm)

- --------------------------------------------------------------------------------
(Firm's Tax Identification Number)

By:
-----------------------------------------------------------------------------
Name:
---------------------------------------------------------------------------
Title:
--------------------------------------------------------------------------
Address:
------------------------------------------------------------------------

- --------------------------------------------------------------------------------

Telephone:
----------------------------------------------------------------------

<PAGE> 4

EXHIBIT A
FORM OF 12b-1 PLANS

THE 12b-1 PLANS ADOPTED BY FUNDS IN THE CAPSTONE GROUP WITH SUCH PLANS ARE
SUBSTANTIALLY IN THE FOLLOWING FORM:

SERVICE AND DISTRIBUTION PLAN

INTRODUCTION: It has been determined that the Fund will pay for certain costs
and expenses incurred in connection with the distribution of its shares and
servicing of its shareholders and adopt the Service and Distribution Plan (the
"Plan") set forth herein pursuant to Rule 12b-1 under the Investment Company Act
of 1940 (the "Act").

The Board of Directors, in considering whether the Fund should implement the
Plan, has requested and evaluated such information as it deemed necessary to
make an informed determination as to whether the Plan should be implemented and
has considered such pertinent factors as it deemed necessary to form the basis
for a decision to use assets of the Fund for such purposes.

In voting to approve the implementation of the Plan, the directors have
concluded, in the exercise of their reasonable business judgment and in light of
their respective fiduciary duties, that there is a reasonable likelihood that
the Plan will benefit the Fund and its existing and future shareholders.

THE PLAN: The material aspects of the financing by the Fund of distribution
expenses to be incurred in connection with securities of which it is the issuer
are as follows:

1. The Fund will reimburse Capstone Asset Planning Company ("CAPCO") for costs
and expenses incurred in connection with the distribution and marketing of
shares of the Fund and servicing of Fund shareholders. Such distribution
and servicing costs and expenses may include: (1) printing and advertising
expenses; (2) payments to employees or agents of CAPCO who engage in or
support distribution of the Fund's shares, including salary, commissions,
travel and related expenses; (3) the costs of preparing, printing and
distributing prospectuses and reports to prospective investors; (4)
expenses of organizing and conducting sales seminars; (5) expenses related
to selling and servicing efforts, including processing new account
applications, transmitting customer transaction information to the Fund's
transfer agent and answering questions of shareholders; (6) payments of
fees to one or more broker-dealers (which may include CAPCO itself),
financial institutions or other industry professionals, such as investment
advisers, accountants and estate planning firms (severally, a "Service
Organization"), in respect of the average daily value of the Fund's

<PAGE> 5

shares owned by shareholders for whom the Service Organization is the
dealer of record or holder of record, or owned by shareholders with whom
the Service Organization has a servicing relationship; (7) costs and
expenses incurred in implementing and operating the Plan; and (8) such
other similar services as the Fund's Board of Directors determines to be
reasonably calculated to result in the sale of Fund shares.

CAPCO will be reimbursed monthly for such costs, expenses or payments at an
annual rate of up to but not more than ______% of the average daily net
assets of the Fund. Any expense payable hereunder may be carried forward
for reimbursement for up to twelve months beyond the date in which it is
incurred, subject always to the limit that not more than ______% of the
Fund's average daily net assets may be used in any month to pay expenses
pursuant to the Plan. The Fund shall incur no interest or carrying charges
for expenses carried forward. In the event the Plan is terminated as herein
provided, the Fund shall have no liability for expenses that were not
reimbursed as of the date of termination.

2. CAPCO may periodically pay to one or more Service Organizations (which may
include CAPCO itself) a fee in respect of the Fund's shares owned by
shareholders for whom the Service Organizations are the dealers of record
or holders of record, or owned by shareholders with whom the Service
Organizations have servicing relationships. Such fees will be computed
daily and paid quarterly by CAPCO at an annual rate not exceeding ______%
of the average net asset value of the Fund's shares owned by shareholders
for whom the Service Organizations are the dealers of record or holders of
record, or owned by shareholders with whom the Service Organizations have
servicing relationships.

The payment to a Service Organization is subject to compliance by the
Service Organization with the terms of a Selling Group Agreement between
the Service Organization and CAPCO (the "Agreement"), the form of which is
attached hereto as Exhibit A. If a shareholder of the Fund ceases to be a
client of a Service Organization that has entered into an Agreement with
CAPCO, but continues to hold shares of the Fund, CAPCO will be entitled to
receive a similar payment in respect of the servicing provided to such
investors. For the purposes of determining the fees payable under the Plan,
the average daily net asset value of the Fund's shares shall be computed in
the manner specified in the Fund's current prospectus for the computation
of the value of the Fund's net asset value per share.

3. The Board of Directors shall be provided, at least quarterly, with a
written report of all amounts expended pursuant to the Plan. The report
shall state the purposes for which the amounts were expended.

4. The Plan will become effective immediately upon approval by (a) a majority
of the outstanding voting securities of the Fund, and (b) a majority of the
Board of Directors, including a majority of the directors who are not
"interested persons" (as defined in the Act) of the Fund and have no direct
or indirect financial interest in the operation of the Plan or in any
agreements entered into in connection with the Plan (the "Plan Directors"),
pursuant to a vote cast in person at a meeting called for the purpose of
voting on the approval of the Plan. If additional series are added to the
Fund, the Plan will become effective as to each such series upon approval
by (a) a majority of the outstanding voting securities of such series, and
(b) a majority of the Board of Directors, including a majority of the Plan
Directors, pursuant to a vote cast in person at a meeting called for such
purpose.

5. The Plan shall continue for a period of one year from its effective date,
unless earlier terminated in accordance with its terms, and thereafter
shall continue automatically for successive annual periods, provided such
continuance is approved by a majority of the Board of Directors, including
a majority of the Plan Directors pursuant to a vote cast in person at a
meeting called for the purpose of voting on the continuance of the Plan.

6. The Plan may be amended at any time by the Board of Directors provided that
(a) any amendment to increase materially the costs which the Fund or a
series may bear for distribution pursuant to the Plan shall be effective
only upon approval by a vote of a majority of the outstanding voting
securities of the respective series of the Fund and (b) any material
amendments of the terms of the Plan shall become effective only upon
approval as provided in paragraph 4(b) hereof.

7. The Plan is terminable without penalty at any time with respect to any
series of the Fund by (a) vote of a majority of the Plan Directors, or (b)
vote of a majority of the outstanding voting securities of the respective
series of the Fund.

8. Any person authorized to direct the disposition of monies paid or payable
by the Fund pursuant to the Plan or any agreement entered into in
connection with the Plan shall provide to the Board of Directors, and the
Board of Directors shall review, at least quarterly, a written report of
the amounts expended pursuant to the Plan and the purposes for which such
expenditures were made.

9. While the Plan is in effect, the selection and nomination of directors who
are not "interested persons" (as defined in the Act) of the Fund shall be
committed to the discretion of the directors who are not "interested
persons."

10. The Fund shall preserve copies of the Plan, any agreement in connection
with the Plan, and any report made pursuant to paragraph 8 hereof, for a
period of not less than six years from the date of the Plan or such
agreement or report, the first two years in an easily accessible place.

<PAGE> 1

CUSTODY AGREEMENT

THIS AGREEMENT, is made as of 2000, by and between CAPSTONE
CHRISTIAN VALUES FUND, INC., a corporation organized under the laws of the State
of Maryland (the "Company"), and THE FIFTH THIRD BANK, a banking trust organized
under the laws of the State of Ohio (the "Custodian").

WITNESSETH:

WHEREAS, the Company desires that the Securities and cash of each of the
investment portfolios identified in Exhibit A hereto (such investment portfolios
and individually referred to herein as a "Fund" and collectively as the
"Funds"), be held and administered by the Custodian pursuant to this Agreement;
and

WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and

WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;

NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Company and the Custodian hereby agree as follows:

ARTICLE I
DEFINITIONS

Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:

1.1 "Authorized Person" means any Officer or other person duly authorized
by resolution of the Board of Directors to give Oral Instructions and Written
Instructions on behalf of the Company and named in Exhibit B hereto or in such
resolutions of the Board of Directors, certified by an Officer, as may be
received by the Custodian from time to time.

1.2 "Board of Directors" shall mean the Directors from time to time serving
as such under the Company's Articles of Incorporation and Bylaws as from time to
time amended.

1.3 "Book-Entry System" shall mean a federal book-entry system as provided
in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of 31 CFR
Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form of such Subpart O.

1.4 "Business Day" shall mean any day recognized as a settlement day by The
New York Stock Exchange, Inc. and any other day for which the Fund computes the
net asset value of the Fund.

1.5 "NASD" shall mean The National Association of Securities Dealers, Inc.

1.6 "Officer" shall mean the President, any Vice President, the Secretary,
any Assistant Secretary, the Treasurer, or any Assistant Treasurer of the
Company.

1.7 "Oral Instructions" shall mean instructions orally transmitted to and
accepted by the Custodian because such instructions are: (i) reasonably believed
by the Custodian to have been given by an Authorized Person, (ii) recorded and
kept among the records of the Custodian made in the ordinary course of business
and (iii) orally confirmed by the Custodian. The Company shall cause all Oral
Instructions to be confirmed by Written Instructions. If such Written
Instructions confirming Oral Instructions are not received by the Custodian
prior to a transaction, it shall in no way affect the validity of the
transaction or the authorization thereof by the Company. If Oral Instructions
vary from the Written Instructions which purport to confirm them, the Custodian
shall notify the company of such variance but such Oral Instructions will govern
unless the Custodian has not yet acted.

1.8 "Custody Account" shall mean any account in the name of the Company,
which is provided for in Section 3.2 below.

1.9 "Proper Instructions" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.

<PAGE> 2

1.10 "Securities Depository" shall mean The Participants Trust Company or
The Depository Trust Company and (provided that Custodian shall have received a
copy of a resolution of the Board of Directors, certified by an Officer,
specifically approving the use of such clearing agency as a depository for the
Company) any other clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities and Exchange Act of 1934 (the
"1934 Act"), which acts as a system for the central handling of Securities where
all Securities of any particular class or series of an issuer deposited within
the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of the Securities.

1.11 "Securities" shall include, without limitation, common and preferred
stocks, bonds, call options, put options, debentures, notes, bank certificates
of deposit, bankers' acceptances, mortgage-backed securities, other money market
instruments or other obligations, and any certificates, receipts, warrants or
other instruments or documents representing rights to receive, purchase or
subscribe for the same, or evidencing or representing any other rights or
interests therein, or any similar property or assets that the Custodian has the
facilities to clear and to service.

1.12 "Shares" shall mean the units of beneficial interest issued by the
Company.

1.13 "Written Instructions" shall mean (i) written communications actually
received by the Custodian and signed by one or more persons as the Board of
Directors shall have from time to time authorized, or (ii) communications by
telex or any other such system from a person or persons reasonably believed by
the Custodian to be Authorized, or (iii) communications transmitted
electronically through the Institutional Delivery System (IDS), or any other
similar electronic instruction system acceptable to Custodian and approved by
resolutions of the Board of Directors, a copy of which, certified by an Officer,
shall have been delivered to the Custodian.

ARTICLE II
APPOINTMENT OF CUSTODIAN

2.1 Appointment. The Company hereby constitutes and appoints the Custodian
as custodian of all Securities and cash owned by or in the possession of the
Company at any time during the period of this Agreement, provided that such
Securities or cash at all times shall be and remain the property of the Company.

2.2 Acceptance. The Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth and in
accordance with the 1940 Act as amended. Except as specifically set forth
herein, the Custodian shall have no liability and assumes no responsibly for any
non-compliance by the Company or a Fund of any laws, rules or regulations.

ARTICLE III
CUSTODY OF CASH AND SECURITIES

3.1 Segregation. All Securities and non-cash property held by the Custodian
for the account of the Fund, except Securities maintained in a Securities
Depository or Book-Entry System, shall be physically segregated from other
Securities and non-cash property in the possession of the Custodian and shall be
identified as subject to this Agreement.

3.2 Custody Account. The Custodian shall open and maintain in its trust
department a custody account in the name of each Fund, subject only to draft or
order of the Custodian, in which the Custodian shall enter and carry all
Securities, cash and other assets of the Fund which are delivered to it.

3.3 Appointment of Agents. In its discretion, the Custodian may appoint,
and at any time remove, any domestic bank or trust company, which has been
approved by the Board of Directors and is qualified to act as a custodian under
the 1940 Act, as sub-custodian to hold Securities and cash of the Funds and to
carry out such other provisions of this Agreement as it may determine, and may
also open and maintain one or more banking accounts with such a bank or trust
company (any such accounts to be in the name of the Custodian and subject only
to its draft or order), provided, however, that the appointment of any such
agent shall not relieve the Custodian of any of its obligations or liabilities
under this Agreement.

3.4 Delivery of Assets to Custodian. The Fund shall deliver, or cause to be
delivered, to the Custodian all of the Fund's Securities, cash and other assets,
including (a) all payments of income, payments of principal and capital
distributions received by the Fund with respect to such Securities, cash or
other assets owned by the Fund at any time during the period of this Agreement,
and (b) all cash received by the Fund for the issuance, at any time during such
period, of Shares. The Custodian shall not be responsible for such Securities,
cash or other assets until actually received by it.

<PAGE> 3

3.5 Securities Depositories and Book-Entry Systems. The Custodian may
deposit and/or maintain Securities of the Funds in a Securities Depository or in
a Book-Entry System, subject to the following provisions:

(a) Prior to a deposit of Securities of the Funds in any Securities
Depository or Book-Entry System, the Fund shall deliver to the
Custodian a resolution of the Board of Directors, certified by an
Officer, authorizing and instructing the Custodian on an on-going
basis to deposit in such Securities Depository or Book-Entry System
all Securities eligible for deposit therein and to make use of such
Securities Depository or Book-Entry System to the extent possible and
practical in connection with its performance hereunder, including,
without limitation, in connection with settlements of purchases and
sales of Securities, loans of Securities, and deliveries and returns
of collateral consisting of Securities.

(b) Securities of the Fund kept in a Book-Entry System or Securities
Depository shall be kept in an account ("Depository Account") of the
Custodian in such Book-Entry System or Securities Depository which
includes only assets held by the Custodian as a fiduciary, custodian
or otherwise for customers.

(c) The records of the Custodian and the Custodian's account on the books
of the Book-Entry System and Securities Depository as the case may be,
with respect to Securities of a Fund maintained in a Book-Entry System
or Securities Depository shall, by book-entry, or otherwise identify
such Securities as belonging to the Fund.

(d) If Securities purchases by the Fund are to be held in a Book-Entry
System or Securities Depository, the Custodian shall pay for such
Securities upon (i) receipt of advice from the Book-Entry System or
Securities Depository that such Securities have been transferred to
the Depository Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for the account
of the Fund. If Securities sold by the Fund are held in a Book-Entry
System or Securities Depository, the Custodian shall transfer such
Securities upon (i) receipt of advice from the Book-Entry System or
Securities depository that payment for such Securities has been
transferred to the Depository Account, and (ii) the making of an entry
on the records of the Custodian to reflect such transfer and payment
for the account of the Fund.

(e) Upon request, the Custodian shall provide the Fund with copies of any
report (obtained by the Custodian from a Book-Entry System or
Securities Depository in which Securities of the Fund is kept) on the
internal accounting controls and procedures for safeguarding
Securities deposited in such Book-Entry System or Securities
Depository.

(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Company for any loss or damage to the
Company resulting (i) from the use of a Book-Entry System or
Securities Depository by reason of any negligence or willful
misconduct on the part of Custodian or any sub-custodian appointed
pursuant to Section 3.3 above or any of its or their employees, or
(ii) from failure of Custodian or any such sub-custodian to enforce
effectively such rights as it may have against a Book-Entry System or
Securities Depository. At its election, the Company shall be
subrogated to the rights of the Custodian with respect to any claim
against a Book-Entry System or Securities Depository or any other
person for any loss or damage to the Funds arising from the use of
such Book-Entry System or Securities Depository, if and to the extent
that the Company has been made whole for any such loss or damage.

3.6 Disbursement of Moneys from Custody Accounts. Upon receipt of Proper
Instructions, the Custodian shall disburse moneys from a Fund Custody Account
but only in the following cases:

(a) For the purchase of Securities for the Fund but only upon compliance
with Section 4.1 of this Agreement and only (i) in the case of
Securities (other than options on Securities, futures contracts and
options on futures contracts), against the delivery to the Custodian
(or any sub-custodian appointed pursuant to Section 3.3 above) of such
Securities registered as provided in Section 3.9 below in proper form
for transfer, or if the purchase of such Securities is effected
through a Book-Entry System or Securities Depository, in accordance
with the conditions set forth in Section 3.5 above; (ii) in the case
of options on Securities, against delivery to the Custodian (or such
sub-custodian) of such receipts as are required by the customs
prevailing among dealers in such options; (iii) in the case of futures
contracts and options on futures contracts, against delivery to the
Custodian (or such sub-custodian) of evidence of title thereto in
favor of the Company or any nominee referred to in Section 3.9 below;

and (iv) in the case of repurchase or reverse repurchase agreements
entered into between the Company and a bank which is a member of the
Federal Reserve System or between the Company and a primary

<PAGE> 4

dealer in U.S. Government securities, against delivery of the
purchased Securities either in certificate form or through an entry
crediting the Custodian's account at a Book-Entry System or Securities
Depository for the account of the Fund with such Securities;

(b) In connection with the conversion, exchange or surrender, as set forth
in Section 3.7(f) below, of Securities owned by the Fund;

(d) In payment of the redemption price of Shares as provided in Section
5.1 below;

(e) For the payment of any expense or liability incurred by the Company,
including but not limited to the following payments for the account of
a Fund: interest; taxes; administration, investment management,
investment advisory, accounting, auditing, transfer agent, custodian,
trustee and legal fees; and other operating expenses of a Fund; in all
cases, whether or not such expenses are to be in whole or in part
capitalized or treated as deferred expenses;

(f) For transfer in accordance with the provisions of any agreement among
the Company, the Custodian and a broker-dealer registered under the
1934 Act and a member of the NASD, relating to compliance with rules
of The Options Clearing Corporation and of any registered national
securities exchange (or of any similar organization or organizations)
regarding escrow or other arrangements in connection with transactions
by the Company;

(g) For transfer in accordance with the provisions of any agreement among
the Company, the Custodian, and a futures commission merchant
registered under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or organizations)
regarding account deposits in connection with transactions by the
Company;

(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution (including the
Custodian), which deposit or account has a term of one year or less;
and

(i) For any other proper purposes, but only upon receipt, in addition to
Proper Instructions, of a copy of a resolution of the Board of
Directors, certified by an Officer, specifying the amount and purpose
of such payment, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such payment is to
be made.

3.7 Delivery of Securities from Fund Custody Accounts. Upon receipt of
Proper Instructions, the Custodian shall release and deliver Securities from a
Custody Account but only in the following cases:

(a) Upon the sale of Securities for the account of a Fund but only against
receipt of payment therefor in cash, by certified or cashiers check or
bank credit;

(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of Section
3.5 above;

(c) To an Offeror's depository agent in connection with tender or other
similar offers for Securities of a Fund; provided that, in any such
case, the cash or other consideration is to be delivered to the
Custodian;

(d) To the issuer thereof or its agent (i) for transfer into the name of
the Company, the Custodian or any sub-custodian appointed pursuant to
Section 3.3 above, or of any nominee or nominees of any of the
foregoing, or (ii) for exchange for a different number of certificates
or other evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new Securities
are to be delivered to the Custodian;

(e) To the broker selling Securities, for examination in accordance with
the "street delivery" custom;

(f) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
issuer of such Securities, or pursuant to provisions for conversion
contained in such Securities, or pursuant to any deposit agreement,
including surrender or receipt of

<PAGE> 5

underlying Securities in connection with the issuance or cancellation
of depository receipts; provided that, in any such case, the new
Securities and cash, if any, are to be delivered to the Custodian;

(g) Upon receipt of payment therefor pursuant to any repurchase or reverse
repurchase agreement entered into by a Fund;

(h) In the case of warrants, rights or similar Securities, upon the
exercise thereof, provided that, in any such case, the new Securities
and cash, if any, are to be delivered to the Custodian;

(i) For delivery in connection with any loans of Securities of a Fund, but
only against receipt of such collateral as the Company shall have
specified to the Custodian in Proper Instructions;

(j) For delivery as security in connection with any borrowings by the
Company on behalf of a Fund requiring a pledge of assets by such Fund,
but only against receipt by the Custodian of the amounts borrowed;

(k) Pursuant to any authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Company or a Fund;

(l) For delivery in accordance with the provisions of any agreement among
the Company, the Custodian and a broker-dealer registered under the
1934 Act and a member of the NASD, relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange (or of any similar organization or
organizations) regarding escrow or other arrangements in connection
with transactions by the Company on behalf of a Fund; (m) For delivery
in accordance with the provisions of any agreement among the Company
on behalf of a Fund, the Custodian, and a futures commission merchant
registered under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or organizations)
regarding account deposits in connection with transactions by the
Company on behalf of a Fund; or

(n) For any other proper corporate purposes, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of the
Board of Directors, certified by an Officer, specifying the Securities
to be delivered, setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom delivery of such Securities
shall be made.

3.8 Actions Not Requiring Proper Instructions. Unless otherwise instructed
by the Company, the Custodian shall with respect to all Securities held for a
Fund;

(a) Subject to Section 7.4 below, collect on a timely basis all income and
other payments to which the Company is entitled either by law or
pursuant to custom in the securities business;

(b) Present for payment and, subject to Section 7.4 below, collect on a
timely basis the amount payable upon all Securities which may mature
or be called, redeemed, or retired, or otherwise become payable;

(d) Surrender interim receipts or Securities in temporary form for
Securities in definitive form;

(e) Execute, as custodian, any necessary declarations or certificates of
ownership under the federal income tax laws or the laws or regulations
of any other taxing authority now or hereafter in effect, and prepare
and submit reports to the Internal Revenue Service ("IRS") and to the
Company at such time, in such manner and containing such information
as is prescribed by the IRS;

(f) Hold for a Fund, either directly or, with respect to Securities held
therein, through a Book-Entry System or Securities Depository, all
rights and similar securities issued with respect to Securities of the
Fund; and

(g) In general, and except as otherwise directed in Proper Instructions,
attend to all non-discretionary details in connection with sale,
exchange, substitution, purchase, transfer and other dealings with
Securities and assets of the Fund.

<PAGE> 6

3.9 Registration and Transfer of Securities. All Securities held for a Fund
that are issued or issuable only in bearer form shall be held by the Custodian
in that form, provided that any such Securities shall be held in a Book-Entry
System for the account of the Company on behalf of a Fund, if eligible therefor.
All other Securities held for a Fund may be registered in the name of the
Company on behalf of such Fund, the Custodian, or any sub-custodian appointed
pursuant to Section 3.3 above, or in the name of any nominee of any of them, or
in the name of a Book-Entry System, Securities Depository or any nominee of
either thereof; provided, however, that such Securities are held specifically
for the account of the Company on behalf of a Fund. The Company shall furnish to
the Custodian appropriate instruments to enable the Custodian to hold or deliver
in proper form for transfer, or to register in the name of any of the nominees
hereinabove referred to or in the name of a Book-Entry System or Securities
Depository, any Securities registered in the name of a Fund.

3.10 Records. (a) The Custodian shall maintain, by Fund, complete and
accurate records with respect to Securities, cash or other property held for the
Company, including (i) journals or other records of original entry containing an
itemized daily record in detail of all receipts and deliveries of Securities and
all receipts and disbursements of cash; (ii) ledgers (or other records)
reflecting (A) Securities in transfer, (B) Securities in physical possession,
(C) monies and Securities borrowed and monies and Securities loaned (together
with a record of the collateral therefor and substitutions of such collateral),
(D) dividends and interest received, and (E) dividends receivable and interest
accrued; and (iii) canceled checks and bank records related thereto. The
Custodian shall keep such other books and records of the Company as the Company
shall reasonably request, or as may be required by the 1940 Act, including, but
not limited to Section 3.1 and Rule 31a-1 and Rule 31a-2 promulgated thereunder.

(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Company and in compliance with rules and
regulations of the Securities and Exchange Commission, (ii) be the property of
the Company and at all times during the regular business hours of the Custodian
be made available upon request for inspection by duly authorized officers,
employees or agents of the Company and employees or agents of the Securities and
Exchange Commission, and (iii) if required to be maintained by Rule 31a-1 under
the 1940 Act, be preserved for the periods prescribed in Rule 31a-2 under the
1940 Act.

3.11 Fund Reports by Custodian. The Custodian shall furnish the Company
with a daily activity statement by Fund and a summary of all transfers to or
from the Custody Account on the day following such transfers. At least monthly
and from time to time, the Custodian shall furnish the Company with a detailed
statement, by Fund, of the Securities and moneys held for the Company under this
Agreement.

3.12 Other Reports by Custodian. The Custodian shall provide the Company
with such reports, as the Company may reasonably request from time to time, on
the internal accounting controls and procedures for safeguarding Securities,
which are employed by the Custodian or any sub-custodian appointed pursuant to
Section 3.3 above.

3.13 Proxies and Other Materials. The Custodian shall cause all proxies if
any, relating to Securities which are not registered in the name of a Fund, to
be promptly executed by the registered holder of such Securities, without
indication of the manner in which such proxies are to be voted, and shall
include all other proxy materials, if any, promptly deliver to the Company such
proxies, all proxy soliciting materials, which should include all other proxy
materials, if any, and all notices to such Securities.

3.14 Information on Corporate Actions. Custodian will promptly notify the
Company of corporate actions, limited to those Securities registered in nominee
name and to those Securities held at a Depository or sub-Custodian acting as
agent for Custodian. Custodian will be responsible only if the notice of such
corporate actions is published by Xcitek, DTC, or received by first class mail
from the transfer agent. For market announcements not yet received and
distributed by Custodian's services, Company will inform its custody
representative with appropriate instructions. Custodian will, upon receipt of
Company's response within the required deadline, affect such action for receipt
or payment for the Company. For those responses received after the deadline,
Custodian will affect such action for receipt or payment, subject to the
limitations of the agent(s) affecting such actions. Custodian will promptly
notify Company for put options only if the notice is received by first class
mail from the agent. The Company will provide or cause to be provided to
Custodian with all relevant information contained in the prospectus for any
security which has unique put/option provisions and provide Custodian with
specific tender instructions at least ten business days prior to the beginning
date of the tender period.

ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND

4.1 Purchase of Securities. Promptly upon each purchase of Securities for
the Company, Written Instructions shall be delivered to the Custodian,
specifying (a) the name of the issuer or writer of such Securities, and the
title or other

<PAGE> 7

description thereof, (b) the number of shares, principal amount (and accrued
interest, if any) or other units purchased, (c) the date of purchase and
settlement, (d) the purchase price per unit, (e) the total amount payable upon
such purchase, and (f) the name of the person to whom such amount is payable.
The Custodian shall upon receipt of such Securities purchased by a Fund pay out
of the moneys held for the account of such Fund the total amount specified in
such Written Instructions to the person named therein. The Custodian shall not
be under any obligation to pay out moneys to cover the cost of a purchase of
Securities for a Fund, if in the relevant Custody Account there is insufficient
cash available to the Fund for which such purchase was made.

4.2 Liability for Payment in Advance of Receipt of Securities Purchased. In
any and every case where payment for the purchase of Securities for a Fund is
made by the Custodian in advance of receipt for the account of the Fund of the
Securities purchased but in the absence of specific Written or Oral Instructions
to so pay in advance, the Custodian shall be liable to the Fund for such
Securities to the same extent as if the Securities had been received by the
Custodian.

4.3 Sale of Securities. Promptly upon each sale of Securities by a Fund,
Written Instructions shall be delivered to the Custodian, specifying (a) the
name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any), or other units sold, (c) the date of sale and settlement (d)
the sale price per unit, (e) the total amount payable upon such sale, and (f)
the person to whom such Securities are to be delivered. Upon receipt of the
total amount payable to the Company as specified in such Written Instructions,
the Custodian shall deliver such Securities to the person specified in such
Written Instructions. Subject to the foregoing, the Custodian may accept payment
in such form as shall be satisfactory to it, and may deliver Securities and
arrange for payment in accordance with the customs prevailing among dealers in
Securities.

4.4 Delivery of Securities Sold. Notwithstanding Section 4.3 above or any
other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally
accepted market practice, to deliver such Securities prior to actual receipt of
final payment therefor. In any such case, the Company shall bear the risk that
final payment for such Securities may not be made or that such Securities may be
returned or otherwise held or disposed of by or through the person to whom they
were delivered, and the Custodian shall have no liability for any of the
foregoing.

4.5 Payment for Securities Sold, etc. In its sole discretion and from time
to time, the Custodian may credit the relevant Custody Account, prior to actual
receipt of final payment thereof, with (i) proceeds from the sale of Securities
which it has been instructed to deliver against payment, (ii) proceeds from the
redemption of Securities or other assets of the Company, and (iii) income from
cash, Securities or other assets of the Company. Any such credit shall be
conditional upon actual receipt by Custodian of final payment and may be
reversed if final payment is not actually received in full. The Custodian may,
in its sole discretion and from time to time, permit the Company to use funds so
credited to its Custody Account in anticipation of actual receipt of final
payment. Any such funds shall be repayable immediately upon demand made by the
Custodian at any time prior to the actual receipt of all final payments in
anticipation of which funds were credited to the Custody Account.

4.6 Advances by Custodian for Settlement. The Custodian may, in its sole
discretion and from time to time, advance funds to the Company to facilitate the
settlement of a Company transactions on behalf of a Fund in its Custody Account.
Any such advance shall be repayable immediately upon demand made by Custodian.

ARTICLE V
REDEMPTION OF TRUST SHARES

Transfer of Funds. From such funds as may be available for the purpose in
the relevant Custody Account, and upon receipt of Proper Instructions specifying
that the funds are required to redeem Shares of a Fund, the Custodian shall wire
each amount specified in such Proper Instructions to or through such bank as the
Company may designate with respect to such amount in such Proper Instructions.
Upon effecting payment or distribution in accordance with proper Instruction,
the Custodian shall not be under any obligation or have any responsibility
thereafter with respect to any such paying bank.

ARTICLE VI
SEGREGATED ACCOUNTS

Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of each Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,

<PAGE> 8

(a) in accordance with the provisions of any agreement among the Company,
the Custodian and a broker-dealer registered under the 1934 Act and a
member of the NASD (or any futures commission merchant registered
under the Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading
commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other arrangements
in connection with transactions by the Company,

(b) for purposes of segregating cash or Securities in connection with
securities options purchased or written by a Fund or in connection
with financial futures contracts (or options thereon) purchased or
sold by a Fund,

(d) for purposes of compliance by the Company with requirements under the
1940 Act for the maintenance of segregated accounts by registered
investment companies in connection with reverse repurchase agreements
and when-issued, delayed delivery and firm commitment transactions,
and

(e) for other proper corporate purposes, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of
the Board of Directors, certified by an Officer, setting forth the
purpose or purposes of such segregated account and declaring such
purposes to be proper corporate purposes.

ARTICLE VII
CONCERNING THE CUSTODIAN

7.1 Standard of Care. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Company for any loss, damage, cost, expense
(including attorneys' fees and disbursements), liability or claim unless such
loss, damages, cost, expense, liability or claim arises from negligence, bad
faith or willful misconduct on its part or on the part of any sub-custodian
appointed pursuant to Section 3.3 above. The Custodian's cumulative liability
within a calendar year shall be limited with respect to the Company or any party
claiming by, through or on behalf of the Company for the initial and all
subsequent renewal terms of this Agreement, to the actual damages sustained by
the Company, (actual damages for uninvested funds shall be the overnight Feds
fund rate). However, Custodian will not be liable for special incidental or
punitive damages. The Custodian shall be entitled to rely on and may act upon
advice of counsel on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. The Custodian shall
promptly notify the Company of any action taken or omitted by the Custodian
pursuant to advice of counsel. The Custodian shall not be under any obligation
at any time to ascertain whether the Company is in compliance with the 1940 Act,
the regulations thereunder, the provisions of the Company's charter documents or
by-laws, or its investment objectives and policies as then in effect.

7.2 Actual Collection Required. The Custodian shall not be liable for, or
considered to be the custodian of, any cash belonging to the Company or any
money represented by a check, draft or other instrument for the payment of
money, until the Custodian or its agents actually receive such cash or collect
on such instrument.

7.3 No Responsibility for title, etc. So long as and to the extent that it
is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.

7.4 Limitation on Duty to Collect. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for the Company if such Securities
are in default or payment is not made after due demand or presentation.

7.5 Reliance Upon Documents and Instructions. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Oral Instructions and/or any Written Instructions
actually received by it pursuant to this Agreement.

7.6 Express Duties Only. The Custodian shall have no duties or obligations
whatsoever except such duties and obligations as are specifically set forth in
this Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.

8
<PAGE> 9

7.7 Cooperation. The Custodian shall cooperate with and supply necessary
information, by the Company, to the entity or entities appointed by the Company
to keep the books of account of the Company and/or compute the value of the
assets of the Company. The Custodian shall take all such reasonable actions as
the Company may from time to time request to enable the Company to obtain, from
year to year, favorable opinions from the Company's independent accountants with
respect to the Custodian's activities hereunder in connection with (a) the
preparation of the Company's report on Form N-1A and Form N-SAR and any other
reports required by the Securities and Exchange Commission, and (b) the
fulfillment by the Company of any other requirements of the Securities and
Exchange Commission.

ARTICLE VIII
INDEMNIFICATION

8.1 Indemnification. The Company shall indemnify and hold harmless the
Custodian and any sub-custodian appointed pursuant to Section 3.3 above, and any
nominee of the Custodian or of such sub-custodian from and against any loss,
damage, cost, expense (including attorneys' fees and disbursements), liability
(including, without limitation, liability arising under the Securities Act of
1933, the 1934 Act, the 1940 Act, and any state or foreign securities and/or
banking laws) or claim arising directly or indirectly (a) from the fact that
Securities are registered in the name of any such nominee, or (b) from any
action or inaction by the Custodian or such sub-custodian (i) at the request or
direction of or in reliance on the advice of the Company, or (ii) upon Proper
Instructions, or (c) generally, from the performance of its obligations under
this Agreement or any sub-custody agreement with a sub-custodian appointed
pursuant to Section 3.3 above or, in the case of any such sub-custodian, from
the performance of its obligations under such custody agreement, provided that
neither the Custodian nor any such sub-custodian shall be indemnified and held
harmless from and against any such loss, damage, cost, expense, liability or
claim arising from the Custodian's or such sub-custodian's negligence, bad faith
or willful misconduct.

8.2 Indemnity to be Provided. If the Company requests the Custodian to take
any action with respect to Securities, which may, in the opinion of the
custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Company shall have provided
indemnity therefor to the Custodian in an amount and form satisfactory to the
Custodian.

ARTICLE IX
FORCE MAJEURE

Neither the Custodian nor the Company shall be liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God; earthquakes; fires; floods; wars;
civil or military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its reasonable
control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
service; accidents; labor disputes, acts of civil or military authority;
governmental actions; or inability to obtain labor, material, equipment or
transportation; provided, however, that the Custodian in the event of a failure
or delay shall use its best efforts to ameliorate the effects of any such
failure or delay. Notwithstanding the foregoing, the Custodian shall maintain
sufficient disaster recovery procedures to minimize interruptions.

ARTICLE X
EFFECTIVE PERIOD; TERMINATION

10.1 Effective Period. This Agreement shall become effective as of the date
first set forth above and shall continue in full force and effect until
terminated as hereinafter provided.

10.2 Termination. Either party hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than ninety (90) days after the date of the
giving of such notice. If a successor custodian shall have been appointed by the
Board of Directors, the Custodian shall, upon receipt of a notice of acceptance
by the successor custodian, on such specified date of termination (a) deliver
directly to the successor custodian all Securities (other than Securities held
in a Book-Entry System or Securities Depository) and cash then owned by the
Company and held by the Custodian as custodian, and (b) transfer any Securities
held in a Book-Entry System or Securities Depository to an account of or for the
benefit of the Company at the successor custodian, provided that the Company
shall have paid to the Custodian all fees, expenses and other amounts to the
payment or reimbursement of which it shall then be entitled. Upon such delivery
and transfer, the Custodian shall be relieved of all obligations under this
Agreement. The Company may at any time immediately terminate this Agreement in
the event of the appointment of a conservator or receiver for the Custodian by
regulatory authorities in the State of Ohio or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.

<PAGE> 10

10.3 Failure to Appoint Successor Custodian. If a successor custodian is
not designated by the Company on or before the date of termination specified
pursuant to Section 10.1 above, then the Custodian shall have the right to
deliver to a bank or trust company of its own selection, which is (a) a "Bank"
as defined in the 1940 Act, (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published report of not less than $25
million, and (c) is doing business in New York, New York, all Securities, cash
and other property held by Custodian under this Agreement and to transfer to an
account of or for the Company at such bank or trust company all Securities of
the Company held in a Book-Entry System or Securities Depository. Upon such
delivery and transfer, such bank or trust company shall be the successor
custodian under this Agreement and the Custodian shall be relieved of all
obligations under this Agreement. If, after reasonable inquiry, Custodian cannot
find a successor custodian as contemplated in this Section 10.3, then Custodian
shall have the right to deliver to the Company all Securities and cash then
owned by the Company and to transfer any Securities held in a Book-Entry System
or Securities Depository to an account of or for the Company. Thereafter, the
Company shall be deemed to be its own custodian with respect to the Company and
the Custodian shall be relieved of all obligations under this Agreement.

ARTICLE XI
COMPENSATION OF CUSTODIAN

The Custodian shall be entitled to compensation as agreed upon from time to
time by the Company and the Custodian. The fees and other charges in effect on
the date hereof and applicable to the Funds are set forth in Exhibit B attached
hereto.

ARTICLE XII
LIMITATION OF LIABILITY

The Company is a corporation organized under the laws of the State of
Maryland. The obligations of the Company entered into in the name of the Company
or on behalf thereof by any of the Directors, officers, employees or agents are
made not individually, but in such capacities, and are not binding upon any of
the Directors, officers, employees, agents or shareholders of the Company or the
Funds personally, but bind only the assets of the Company, and all persons
dealing with any of the Funds of the Company must look solely to the assets of
the Company belonging to such Fund for the enforcement of any claims against the
Company.

ARTICLE XIII
NOTICES

Unless otherwise specified herein, all demands, notices, instructions, and
other communications to be given hereunder shall be in writing and shall be sent
or delivered to The receipt at the address set forth after its name herein
below:

To the Company:

Capstone Christian Values Fund, Inc.
5847 San Felipe, Suite 4100
Houston, TX 77057
Attn: Ms. Linda Giuffre

Telephone: (713) 260-9000
Facsimile: (713) 260-9025

To the Custodian:

The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Attn: Area Manager - Trust Operations

Telephone: (513) 579-5300
Facsimile: (513) 744-6622

<PAGE> 11

or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII. Writing shall include
transmission by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.

ARTICLE XIV
MISCELLANEOUS

14.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.

14.2 References to Custodian. The Company shall not circulate any printed
matter which contains any reference to Custodian without the prior written
approval of Custodian, excepting printed matter contained in the prospectus or
statement of additional information or its registration statement for the
Company and such other printed matter as merely identifies Custodian as
custodian for the Company. The Company shall submit printed matter requiring
approval to Custodian in draft form, allowing sufficient time for review by
Custodian and its counsel prior to any deadline for printing.

14.3 No Waiver. No failure by either party hereto to exercise and no delay
by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.

14.4 Amendments. This Agreement cannot be changed orally and no amendment
to this Agreement shall be effective unless evidenced by an instrument in
writing executed by the parties hereto.

14.5 Counterparts. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.

14.6 Severability. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.

14.7 Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.

14.8 Headings. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered in its name and on its behalf by its representatives
thereunto duly authorized, all as of the day and year first above written.

ATTEST: CAPSTONE CHRISTIAN VALUES FUND, INC.

By:
- ------------------------------- --------------------------------------

Its:
--------------------------------------

ATTEST: THE FIFTH THIRD BANK

By:
- ------------------------------- --------------------------------------

Its:
--------------------------------------

<PAGE> 12

Dated: __________, 2000

EXHIBIT A
TO THE CUSTODY AGREEMENT BETWEEN
CAPSTONE CHRISTIAN VALUES FUND, INC.
AND THE FIFTH THIRD BANK

_____________, 2000

<TABLE>
<CAPTION>
Name of Fund Date
- ------------ ----
<S> <C>
Capstone Christian Stewardship Large-Cap Index Fund
Capstone Christian Stewardship Small-Cap Index Fund
Capstone Christian Stewardship International Index Fund
Capstone Christian Stewardship Bond Index Fund
</TABLE>

CAPSTONE CHRISTIAN VALUES FUND, INC.

By:
---------------------------------
Its:
--------------------------------

THE FIFTH THIRD BANK

By:
---------------------------------
Its:
--------------------------------

<PAGE> 13

Dated: __________, 2000

EXHIBIT B
TO THE CUSTODY AGREEMENT BETWEEN
CAPSTONE CHRISTIAN VALUES FUND, INC.
AND THE FIFTH THIRD BANK

______________, 2000

AUTHORIZED PERSONS

Set forth below are the names and specimen signatures of the persons
authorized by the Company to Administer each Custody Account.

Name Signature
---- ---------

- ------------------------------------- ----------------------------------

<PAGE> 14

SIGNATURE RESOLUTION

RESOLVED, That all of the following officers of CAPSTONE CHRISTIAN VALUES FUND,
INC. and any of them, namely the Chairman, President, Vice President, Secretary
and Treasurer, are hereby authorized as signers for the conduct of business for
an on behalf of the Funds with THE FIFTH THIRD BANK:

CHAIRMAN
- ---------------------- -------------------------------

PRESIDENT
- ---------------------- -------------------------------

VICE PRESIDENT
- ---------------------- -------------------------------

TREASURER
- ---------------------- -------------------------------

SECRETARY
- ---------------------- -------------------------------

In addition, the following Assistant Treasurer is authorized to sign on behalf
of the Company for the purpose of effecting securities transactions:

ASSISTANT TREASURER
- ---------------------- -------------------------------

The undersigned officers of CAPSTONE CHRISTIAN VALUES FUND, INC. hereby
certify that the foregoing is within the parameters of a Resolution adopted
by Directors of the Company in a meeting held ______________, 2000,
directing and authorizing preparation of documents and to do everything
necessary to effect the Custody Agreement between CAPSTONE CHRISTIAN VALUES
FUND, INC. and THE FIFTH THIRD BANK.

By:
------------------------------------
Its:
-----------------------------------

<PAGE> 15

- --------------------------------------------------------------------------------

FIFTH THIRD BANK
MUTUAL FUND CUSTODY FEE SCHEDULE
CAPSTONE CHRISTIAN VALUES FUND, INC.
-------------
PER UNIT
FEE
-------------

I BASIC PER ACCOUNT FEE

Annual Asset Based Fees
Under $25 Million 1 bp
-------------
$25 - $100 Million .75 bp
-------------
$100-$200 Million .5 bp
-------------
Over $200 Million .25 bp
-------------
Yearly Minimum * $2,400.00
-------------

II SECURITY TRANSACTION FEES

-------------
DTC/Fed Eligible $9.00
-------------
Physical 25.00
-------------
Amortized Securities 25.00
-------------
Options 25.00
-------------
Mutual Funds 15.00
-------------
Foreign - Euroclear & Cedel 50.00
-------------
Foreign - Other TBD
-------------

III SYSTEMS

------------
Automated Securities Workstation $150.00
$200.00 Initial Setup
------------
Mainframe-To-Mainframe 150.00
$200.00 Initial Setup
------------
ACCESS Single Account 50.00
Multiple Accounts 100.00
------------

IV MISCELLANEOUS FEES

------------
Principal & Interest Collection (on amortized securities) $5.00
------------
Wire Transfers (In/Out) 7.00
------------
Check Requests 7.00
------------

- --------------------------------------------------------------------------------

<PAGE> 1

CHRISTIAN STEWARDSHIP FUNDS
CHRISTIAN STEWARDSHIP BOND INDEX FUND
CHRISTIAN STEWARDSHIP LARGE CAP EQUITY INDEX FUND
CHRISTIAN STEWARDSHIP SMALL CAP EQUITY INDEX FUND
CHRISTIAN STEWARDSHIP INTERNATIONAL INDEX FUND
(EACH, A "FUND;" COLLECTIVELY, "CSF FUNDS")
SERIES OF
CAPSTONE CHRISTIAN VALUES FUND, INC.
("COMPANY")

PLAN PURSUANT TO RULE 18F-3
UNDER THE
INVESTMENT COMPANY ACT OF 1940

THE PLAN

I. Introduction

As required by Rule 18f-3 under the Investment Company Act of 1940, as
amended ("1940 Act"), this Plan describes the multi-class system for the CSF
Funds, including the separate class arrangements for shareholder services and/or
distribution of shares, the method for allocating expenses to classes and any
related conversion features or exchange privileges applicable to the classes.

Upon the effective date of this Plan, the Company, on behalf of the CSF
Funds, elects to offer multiple classes of shares of each of the CSF Funds, as
described herein, pursuant to Rule 18f-3 and this Plan.

II. The Multi-Class System

Each of the CSF Funds shall offer two classes of shares, Individual Class
and Institutional Class. Shares of each class of a Fund shall represent an equal
pro rata interest in that Fund and, generally, shall have identical voting,
dividend, liquidation, and other rights, preferences, powers, restrictions,
limitations, qualifications and terms and conditions, except that: (a) each
class shall have a different designation; (b) each class of shares shall bear
its own Class Expenses, as defined in Section C, below; (c) each class shall
have exclusive voting rights on any matter submitted to shareholders that
relates solely to its distribution arrangement; and (d) each class shall have
separate voting rights on any matter submitted to shareholders in which the
interests of one class differ from the interests of any other class. In
addition, Individual Class and Institutional Class shares shall have the
features described in Sections A, B, C and D, below.

<PAGE> 2

A. Sales Charge Structure

1. Individual Class Shares. Individual Class shares of each Fund shall
be offered at the then-current net asset value, with no front-end or contingent
deferred sales charge, provided, however, that such charges may be imposed in
such cases as the Board may approve and as disclosed in a future prospectus or
prospectus supplement for a Fund. Individual Class shares shall be distinguished
from Institutional Class shares by the relative rates of fees under the Service
and Distribution Plan (see below) applicable to each class.

2. Institutional Class Shares. Institutional Class shares of each Fund
shall be offered at the then-current net asset value with no front-end sales
charge or contingent deferred sales charge, provided, however, that such charges
may be imposed in such cases as the Board may approve and as disclosed in a
future prospectus or prospectus supplement for a Fund. Institutional Class
shares shall be distinguished from Individual Class shares by the relative rates
of fees under the Service and Distribution Plan (see below) applicable to each
class.

B. Service and Distribution Plan

The CSF Funds have adopted a Service and Distribution Plan pursuant to Rule
12b-1 with respect to each class of shares of each Fund, containing the
following terms:

1. Individual Class Shares. Individual Class shares of each Fund shall
reimburse the Distributor for costs and expenses incurred in connection with
distribution and marketing of shares of the CSF Funds, as provided in the
Service and Distribution Plan, subject to an annual limit of 0.25% of the
average daily net assets of a Fund attributable to its Individual Class shares,
provided that up to 0.25% of such average daily net assets may be designated out
of such reimbursements as a "service fee," as defined in rules and policy
statements of the National Association of Securities Dealers.

2. Institutional Class Shares. Institutional Class shares of each Fund
shall reimburse the Distributor for costs and expenses incurred in connection
with distribution and marketing of shares of the CSF Funds, as provided in the
Service and Distribution Plan, subject to an annual limit of 0.05% of the
average daily net assets of a Fund attributable to its Institutional Class
shares, provided that up to 0.05% of such average daily net assets may be
designated out of such reimbursements as a "service fee," as defined in rules
and policy statements of the National Association of Securities Dealers.

C. Allocation of Income and Expenses

a. General

The gross income, realized and unrealized capital gains and
losses and expenses (other than Class Expenses, as defined below) of each Fund
shall be allocated to each class on the basis of its net asset value relative to
the net asset value of the Fund. Expenses to be

<PAGE> 3

so allocated also include (a) expenses of the Company that are allocated to a
Fund and are not attributable to a particular Fund or class of a Fund ("Company
Expenses"), (b) expenses of the CSF Funds that are allocated to a Fund and are
not attributable to a particular Fund or class of a Fund ("CSF Funds Expenses")
and expenses of the particular Fund that are not attributable to a particular
class of the Fund ("Fund Expenses"). Company Expenses include, but are not
limited to, Directors' fees, insurance costs and certain legal fees. CSF Funds
Expenses include expenses incurred on behalf of the Funds as a group that are
not attributable to other series of the Company, such as costs of preparing and
printing the CSF Funds' combined prospectus. Fund Expenses include, but are not
limited to, certain registration fees, advisory fees, custodial fees, and other
expenses relating to the management of a Fund's assets.

2. Class Expenses

Expenses attributable to a particular class ("Class Expenses") shall
be limited to: (a) payments pursuant to the Service and Distribution Plan by
that class; (b) transfer agent fees attributable to that class; (c) printing and
postage expenses related to preparing and distributing material such as
shareholder reports, prospectuses and proxy materials to current shareholders of
that class; (d) registration fees for shares of that class; (e) the expense of
administrative personnel and services as required to support the shareholders of
that class; (f) litigation or other legal expenses relating solely to that
class; and (g) Directors' fees incurred as a result of issues relating to that
class. Expenses described in (a) of this paragraph must be allocated to the
class for which they are incurred. All other expenses described in this
paragraph may be allocated as Class Expenses, but only if the Company's
President and Treasurer have determined, subject to Board approval or
ratification, which of such categories of expenses will be treated as Class
Expenses, consistent with applicable legal principles under the 1940 Act and the
Internal Revenue Code of 1986, as amended ("Code").

In the event a particular expense is no longer reasonably allocable by
class or to a particular class, it shall be treated as a Company Expense, a CSF
Funds Expense or a Fund Expense, and in the event a Company Expense, a CSF Funds
Expense or a Fund Expense becomes allocable at a different level, including as a
Class Expense, it shall be so allocated, subject to compliance with Rule 18f-3
and to approval or ratification by the Board of Directors.

The initial determination of expenses that will be allocated as Class
Expenses and any subsequent changes thereto shall be reviewed by the Board of
Directors and approved by such Board and by a majority of the Directors who are
not "interested persons" of the CSF Funds or a Fund, as defined in the 1940 Act.

3. Waivers or Reimbursements of Expenses

Expenses may be waived or reimbursed by the Adviser and Administrator,
the Distributor or any other provider of services to a Fund, the CSF Funds or
the Company without the prior approval of the Board of Directors.

<PAGE> 4

D. Exchange and Conversion Privileges

Shareholders of a Fund may exchange shares of a particular class for shares
of the same class in another Fund at relative net asset value and with no sales
charge, provided the shares to be acquired in the exchange are qualified for
sale in the shareholder's state of residence and subject to the applicable
requirements as to minimum amount.

There are currently no conversion privileges.

E. Board Review

1. Initial Approval

The Board of Directors, including a majority of the Directors who are
not interested persons (as defined in the 1940 Act) of the CSF Funds or a Fund
("Independent Directors"), at a meeting held February 2, 1995, initially
approved the Plan based on a determination that the Plan, including the expense
allocation, is in the best interests of each class and Fund individually and of
the CSF Funds. Their determination was based on their review of information
furnished to them which they deemed reasonably necessary and sufficient to
evaluate the Plan.

2. Approval of Amendments

The Plan may not be amended materially unless the Board of Directors,
including a majority of the Independent Directors, have found that the proposed
amendment, including any proposed related expense allocation, is in the best
interests of each class and Fund individually and of the CSF Funds. Such finding
shall be based on information requested by the Board and furnished to them which
the Board deems reasonably necessary to evaluate the proposed amendment.

3. Periodic Review

The Board shall review reports of expense allocations and such other
information as they request at such times, or pursuant to such schedule, as they
may determine consistent with applicable legal requirements.

F. Contracts

Any agreement related to the Multi-Class System shall require the parties
thereto to furnish to the Board of Directors, upon their request, such
information as is reasonably necessary to permit the Directors to evaluate the
Plan or any proposed amendment.

<PAGE> 5

G. Effective Date

The Plan, having been reviewed and approved by the Board of Directors and
by a majority of the Independent Directors as indicated in Section E1 of the
Plan, shall take effect as of February 2, 2000.

H. Amendments

The Plan may not be amended to modify materially its terms unless such
amendment has been approved in the manner specified in Section E2 of the Plan.

Effective Date: February 2, 2000

5
<PAGE> 6

[DECHERT PRICE & RHOADS LETTERHEAD]

April 13, 2000

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549

Re: Capstone Christian Values Fund, Inc. ("Registrant") - File
Nos. 2-28174; 811-1597

Dear Sirs:

Enclosed for filing under the Securities Act of 1933 ("Securities
Act") is Post-Effective Amendment No. 56 to Registrant's Registration Statement
on Form N-1A concerning the Christian Stewardship Funds. This filing is made
pursuant to Rule 485(b) under the Securities Act and does not contain
disclosures that would render it ineligible to become effective in accordance
with that Rule and paragraph.

If you have questions regarding this filing, please call the
undersigned at 202-261-3352.

Sincerely,

Olivia P. Adler

OPA/vlp

<PAGE> 1

CAPSTONE GROWTH FUND, INC.
CAPSTONE FIXED INCOME SERIES, INC.
CAPSTONE INTERNATIONAL SERIES TRUST
CAPSTONE SOCIAL ETHICS AND RELIGIOUS VALUES FUND
CAPSTONE ASSET MANAGEMENT COMPANY
CAPSTONE ASSET PLANNING COMPANY

CODE OF ETHICS
(Rule 17j-l Policy)

Governing Purchase and Sale of Securities by Each
Officer, Director, Trustee and Employee

I. Definitions

1. Access Person -

A. as to a Fund, each director or officer of the Fund and(2) any
Advisory Person;

B. with respect to the Distributor, any director, officer, or
general partner of the Distributor who in the ordinary course of
business makes, participates in or obtains information regarding
the purchase or sale of Covered Securities by a Fund or whose
functions or duties in the ordinary course of business relate to
the making of any recommendation to a Fund regarding the purchase
or sale of Covered Securities; provided that, each Access Person
who is affiliated with the Distributor will be governed by the
provisions of the Code of Ethics of the Distributor and will not
be subject to the provisions of this Code; and

C. with respect to an Adviser (which is primarily engaged in a
business or businesses other than advising registered investment
companies or other advisory clients), any director, officer,
general partner, or Advisory Person of the Adviser who, with
respect to any Fund, makes any recommendation, participates in
the determination of which recommendation will be made, or whose
principal function or duties relate to the determination of which
recommendation shall be made, or who, in connection with his or
her duties, obtains any information concerning recommendations on
Covered Securities being made by the Adviser to any Fund.

2. Act - Investment Company Act of 1940.

<PAGE> 2

3. Adviser - Capstone Asset Management Company and FCA Corp.

4. Advisory Person - includes (a) any natural person in a control
relationship (25% ownership) to a Fund or Adviser who obtains
information concerning recommendations made to a Fund with regard to
the purchase or sale of Covered Securities by a Fund, and (b) each
employee of a Fund or Adviser (or of any company in a control
relationship to a Fund or Adviser) who, in connection with his or her
regular functions or duties, makes, participates in, or obtains
information regarding the purchase or sale of Covered Securities by a
Fund or whose functions relate to the making of any recommendations
with respect to the purchases or sales.

5. Beneficial Ownership - generally means having a direct or indirect
pecuniary interest in a security and is legally defined to be
beneficial ownership as used in Rule 16a-1(a)(2) under Section 15 of
the Securities Act of 1934. Among other things, beneficial ownership
is presumed regarding securities and accounts held in the name of a
spouse or any other family member living in the same household.
Beneficial ownership also extends to transactions by entities over
which a person has ownership, voting or investment control, including
corporations (and similar entities), trusts and foundations.

6. Code - this Code of Ethics.

7. Compliance Officer - person designated by a Fund's Board of
Directors/Trustees to fulfill the responsibilities assigned to the
Compliance Officer hereunder.

8. Covered Security - any security as defined in Section 2(a)(16) of the
Act (a broad definition that includes any interest or instrument
commonly known as a security), but excluding (a) direct obligations of
the U.S. Government, (b) bankers' acceptances, bank certificates of
deposit, commercial paper and high quality short-term debt
instruments, including repurchase agreements, and (c) shares of
open-end investment companies.

9. Distributor - Capstone Asset Planning Company.

10. Fund- Capstone Growth Fund, Inc., Capstone Fixed Income Series, Inc.,
Capstone International Series Trust and Capstone Social Ethics and
Religious Values Fund and each of their series of shares.

11. Initial Public Offering - an offering of securities registered under
the Securities Act of 1933, the issuer of which, immediately before
the registration, was not subject to the reporting requirements of
Sections 13 or 15(d) of the Securities Exchange Act of 1934.

<PAGE> 3

12. Investment Personnel or Investment Person (a) any employee of a Fund
or Adviser (or of any company in a control relationship to a Fund or
Adviser) who, in connection with his or her regular functions or
duties, makes or participates in making recommendations regarding the
purchase or sale of securities by a Fund; or (b) any natural person
who controls a Fund or Adviser and who obtains information concerning
recommendations made to a Fund regarding the purchase or sale of
securities by the Fund. Investment Personnel are Advisory Persons.

11. Limited Offering - an offering that is exempt from registration under
the Securities Act of 1933 pursuant to Section 4(2) or Section 4(6) or
pursuant to Rule 504, Rule 505, or Rule 506 under that Act.

12. Portfolio Manager - those employees of a Fund or Adviser authorized to
make investment decisions on behalf of the Fund.

13. Security held or to be acquired - any Covered Security that, within
the most recent 15 days (i) is or has been held by a Fund, (ii) is
being considered by a Fund or by the Adviser for purchase by the Fund,
or (iii) any option to purchase or sell, and any security convertible
into or exchangeable for, one of the foregoing.

II. Legal Requirement

Rule 17j-l under the Investment Company Act of 1940 makes it unlawful for
an Adviser, Distributor, any director, officer or employee or other affiliated
person of a Fund or of an Adviser or the Distributor, in connection with the
purchase and sale by such person of a "security held or to be acquired" by a
Fund:

1. To employ any device, scheme or artifice to defraud the Fund;

2. To make to the Fund any untrue statement of a material fact or omit to
state to the Fund a material fact necessary in order to make the
statements made, in light of the circumstances under which they are
made, not misleading;

3. To engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon the Fund; or

4. To engage in any manipulative practice with respect to the Fund.

To assure compliance with these restrictions, each Fund agrees to be
governed by the provisions contained in this Code, and FCA Corp. agrees to be
governed by a Code of Ethics that complies with the provisions of Rule 17j-1 and
has been approved by each Fund's board of directors or trustees. Each person
affiliated with FCA Corp. who would otherwise be subject to the provisions of
this Code will instead be governed by the provisions of the Code of Ethics of
FCA Corp., provided that FCA Corp. shall each provide to the Compliance Officer,
in advance of each meeting of the Board of Directors/Trustees of a Fund,
information regarding any

<PAGE> 4

violations of FCA Corp.'s Code of Ethics involving persons who would otherwise
be Access Persons hereunder whose violations were relevant to a Fund.

III. General Principles

Each Fund, Adviser and the Distributor shall be governed by the following
principles and shall apply them to its Access Persons.

1. No Access Person shall engage in any act, practice or course of
conduct that would violate the provisions of Rule 17j-l set forth
above.

2. The interests of the Funds and their shareholders are paramount and
come before the interests of any Access Person or employee.

3. Personal investing activities of all Access Persons and employees
shall be conducted in a manner that shall avoid actual or potential
conflicts of interest with the Funds and their shareholders.

4. Access Persons shall not use such positions, or any investment
opportunities presented by virtue of such positions, to the detriment
of the Funds and their shareholders.

IV. Substantive Restrictions

1. The price paid or received by a Fund for any security should not be
affected by a buying or selling interest on the part of an Access
Person, or otherwise result in an inappropriate advantage to the
Access Person. To that end:

A. no Access Person shall enter an order for the purchase or sale of
a security which a Fund is, or is considering, purchasing or
selling until the day after the Fund's transactions in that
security have been completed, provided that the provisions of
this paragraph IV.1 shall not apply to any director or trustee of
a Fund who is not an "interested person" of the Fund (as defined
in Section 2(a)(19) of the Investment Company Act of 1940) except
with respect to securities transactions where such director or
trustee knew or, in the ordinary course of fulfilling his or her
official duties as a director or trustee of a Fund, should have
known that such security was being purchased or sold by a Fund or
that a purchase or sale of such security was being considered by
or with respect to a Fund; and

B. a Portfolio Manager of a Fund may not buy or sell a security
within seven days before or after that Fund trades in the
security.

<PAGE> 5

C. The foregoing restrictions shall not apply to the following
transactions unless the Compliance Officer determines that such
transactions violate the General Principles of this Code:

(a) reinvestments of dividends pursuant to a plan;

(b) transactions in: short-term securities issued or guaranteed
by an agency or instrumentality of the U.S. Government;
bankers' acceptances; U.S. bank certificates of deposit; and
commercial paper;

(d) transactions in accounts as to which an Access Person has no
investment control;

(e) transactions in accounts of an Access Person for which
investment discretion is not retained by the Access Person
but is granted to any of the following that are unaffiliated
with an Adviser or the Distributor: a registered
broker-dealer, registered investment adviser or other
investment manager acting in a similar fiduciary capacity,
provided the following conditions are satisfied:

1 The terms of the account agreement ("Agreement") must
be in writing and filed with the Compliance Officer
prior to any transactions;

2 Any amendment to the Agreement must be filed with the
Compliance Officer prior to its effective date; and

3 The Agreement must require the account manager to
comply with the reporting provisions of Section V.6 of
this Code.

(f) transactions in securities in connection with an employer
sponsored or other tax qualified plan, such as a 401(k)
plan, an IRA, or ESOP, in an amount not exceeding $1,000 in
any calendar month.

2. No Investment Person may, without first obtaining approval from the
Compliance Officer, directly or indirectly acquire beneficial
ownership of any securities issued as part of an Initial Public
Offering or a Limited Offering. Any such approval shall take into
account, among other factors, whether the investment opportunity
should be reserved for a Fund and whether the opportunity is being
offered to

<PAGE> 6

such Investment Person because of his or her position with or a Fund.
Any such Investment Person who has been authorized to acquire
securities in a Limited Offering must disclose his or her interest if
he or she is involved in a Fund's consideration of an investment in
such issuer. Any decision to acquire such issuer's securities on
behalf of a Fund shall be subject to review by Investment Persons with
no personal interest in the issuer.

3. An Investment Person must not accept gifts that would be deemed of
"material value under Section 2830(l) of the Conduct Rules of The
National Association of Securities Dealers from any entity doing
business with or on behalf of a Fund, an Adviser or the Distributor.

4. An Investment Person shall not serve on the boards of
directors/trustees of publicly traded companies, or in any similar
capacity, absent the prior approval of such service by the Compliance
Officer following the receipt of a written request for such approval.
In the event such a request is approved, procedures shall be developed
to avoid potential conflicts of interest.

5. Any profits derived from securities transactions in violation of
paragraphs 1, 2 or 3 of this Section IV, shall be forfeited and paid
to the appropriate Fund or Funds for the benefit of its or their
shareholders. Gifts accepted in violation of paragraph 4 of this
Section IV shall be forfeited, if practicable, and/or dealt with in
any manner determined appropriate and in the best interests of any
affected Fund and its shareholders.

V. Access Person Reports

1. Initial Holdings Report. Within 10 days of commencement of employment
by a Fund, Adviser or the Distributor or otherwise assuming the status
of "Access Person," and annually thereafter, each Access Person shall
disclose in writing, in a form acceptable to the Compliance Officer,
all direct or indirect Beneficial Ownership interests of such Access
Person in Covered Securities. Information to be reported includes:

A. title, number of shares and principal amount of each Covered
Security in which the Access Person had any direct or indirect
Beneficial Ownership interest when the person became an Access
Person;

B. name of any broker, dealer or bank with whom the Access Person
maintained an account in which any securities were held for the
direct or indirect benefit of the Access Person as of the date
the person became an Access Person;

C. the date the report is submitted by the Access Person.

<PAGE> 7

2. Quarterly Transaction Report. Unless the following information would
duplicate information provided pursuant to paragraph V.6, below, each
Access Person shall report to the Compliance Officer within 10 days of
the end of each calendar quarter:

A. with respect to any transaction during the quarter in a Covered
Security in which the Access person had any direct or indirect
beneficial ownership:

(a) the date of the transaction, the title, the interest rate
and maturity date (if applicable), the number of shares and
the principal amount of each Covered Security involved;

(b) the nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);

(d) the name of the broker, dealer or bank with or through which
the transaction was effected; and

(e) the date that the report is submitted by the Access Person.

B. with respect to any account established by the Access Person in
which any securities were held during the quarter for the direct
or indirect benefit of the Access Person:

(a) the name of the broker, dealer or bank with whom the Access
Person established the account;

(b) the date the account was established; and

3. Annual Holdings Report. Each Access Person shall report annually,
within 10 days of the close of each calendar year, the following
information, which must be current as of a date no more than 30 days
before the report is submitted:

A. the title, number of shares and principal amount of each Covered
Security in which the Access Person had any direct or indirect
beneficial ownership;

<PAGE> 8

B. the name of any broker, dealer or bank with whom the Access
Person maintains an account in which any securities are held for
the direct or indirect benefit of the Access Person; and

C. the date the report is submitted.

4. Any report required to be submitted pursuant to this Section V may
contain a statement that the report will not be construed as an
admission that the person making the report has any direct or indirect
beneficial ownership in the Covered Security to which the report
relates.

5. Each Access Person shall obtain the prior approval of the Compliance
Officer of all personal securities transactions in Covered Securities.

6. Each Access Person, with respect to each brokerage account in which
such Access Person has any beneficial interest shall arrange that the
broker shall mail directly to the Compliance Officer at the same time
they are mailed or furnished to such Access Person (a) duplicate
copies of brokers' advice covering each transaction in Covered
Securities in such account and (b) copies of periodic statements with
respect to the account.

7. Exceptions from Reporting Requirements.

A. A person need not submit reports pursuant to this Section V with
respect to transactions effected for, and Covered Securities held
in, any account over which the person has no direct or indirect
influence or control;

B. A director or trustee of a Fund who is not an "interested person"
of the Fund (as defined in Section 2(a)(19) of the Investment
Company Act of 1940), and who would be required to make a report
solely by reason of being a director or trustee of the Fund, need
not make:

(a) an Initial Holdings Report or an Annual Holdings Report;

(b) a Quarterly Transaction Report unless the director or
trustee knew or, in the ordinary course of fulfilling his
official duties as a director or trustee of the Fund, should
have known that, during the 15-day period immediately
preceding or after the director's or trustee's transaction
in a Covered Security, a Fund purchased or sold such Covered
Security or a Fund or an Adviser considered purchasing or
selling the Covered Security.

8. Promptly after the adoption of this Code, and promptly after a person
becomes an Access Person, the Compliance Officer shall notify each
Access Person that he or she is subject to the reporting requirements
of this Code, and shall deliver a copy

<PAGE> 9

of this Code to each Access Person. The Compliance Officer shall
annually obtain written assurances from each Access Person that he or
she is aware of his or her obligations under this Code and has
complied with the Code and with its reporting requirements.

9. The Compliance Officer shall develop and implement procedures for the
review by appropriate management or compliance personnel of reports
submitted pursuant to this Code and for monitoring of personal
investment activity by Access Persons that would identify abusive or
inappropriate trading patterns or other practices of Access Persons.
The Compliance Officer shall report on such procedures to the Board of
Directors/Trustees of each Fund at the next Board meeting following
its design and thereafter in connection with the annual review of this
Code referred to in Section VI.4 below.

VI. Reports to the Board

1. The Compliance Officer of the Funds, the Advisers and Distributor
shall each report in writing to the Board of Directors/Trustees at
least annually regarding the following matters not previously
reported:

A. Significant issues arising under their respective Codes of
Ethics, including material violations of the Code of Ethics,
violations that, in the aggregate, are material, and any
sanctions imposed;

B. Significant conflicts of interest involving the personal
investment policies of the Funds, Advisers or Distributor, as
applicable, even if they do not involve a violation of the Code
of Ethics; and

C. The results of monitoring of personal investment activities of
Access Persons in accordance with the procedures referred to in
Section V.9 hereof.

Each such report shall certify that the Funds, Advisers or
Distributor, as applicable, have adopted procedures reasonably
necessary to prevent Access Persons from violating the relevant Code
of Ethics.

2. The Compliance Officer shall have discretion to determine that a
violation is not material and need not be included in a report to the
Board of Directors/Trustees under Section VI.1 if he or she finds that
by reason of the size of the transaction, the circumstances or
otherwise, no fraud or deceit or manipulative practice could
reasonably be found to have been practiced on a Fund in connection
with its holding or acquisition of the security or that no other
material violation of this Code has occurred. A written memorandum of
any such finding shall be filed with reports made pursuant to this
Code.

<PAGE> 10

3. The Board of Directors/Trustees shall consider reports made to it
hereunder and may impose such sanctions or further sanctions, in
addition to any forfeitures imposed pursuant to Section IV.5 hereof,
as it deems appropriate, including, among other things, a letter of
sanction or suspension or termination of the employment of the
violator.

4. In addition to the annual report required by Section VI.1, the
Compliance Officer shall report to the Board of Directors/Trustees
promptly, but no later than the next board meeting, regarding serious
violations of the Code of the Company, and any serious violations of
the Codes of Ethics of an Adviser or the Distributor that are reported
to the Compliance Officer.

5. The Board of Directors/Trustees shall review the Code and its
operation at least once a year.

VII. Recordkeeping

1. The Fund, Advisers and Distributor shall maintain the following
records at their principal offices:

A. the Code and any related procedures, and any code that has been
in effect during the past five years shall be maintained in an
easily accessible place;

B. a record of any violation of the Code and of any action taken as
a result of the violation, to be maintained in an easily
accessible place for at least five years after the end of the
fiscal year in which the violation occurs;

C. a copy of each report under the Code by (or duplicate brokers'
advice for the account of) an Access Person, to be maintained for
at least five years after the end of the fiscal year in which the
report is made, the first two years in an easily accessible
place;

D. a record of all persons, currently or within the past five years,
who are or were required to make or to review reports under
Section V.1, 2 or 3, to be maintained in an easily accessible
place;

E. a copy of each report under Section VI.1 by the Compliance
Officer to the Fund Boards, to be maintained for at least five
years after the end of the fiscal year in which it is made, the
first two years in an easily accessible place; and

F. a record of any decision, and the reasons supporting the
decision, to approve an acquisition by an Investment Person of
securities offered in an Initial Public Offering or in a Limited
Offering, to be maintained for at least five years after the end
of the fiscal year in which the approval is granted.

<PAGE> 11

VIII. Approval Requirements

The Codes of Ethics of the Funds, each Adviser and the Distributor, and
any material changes to the Code of Ethics of the Funds, each Adviser or the
Distributor, must be approved by the Board of Directors/Trustees applicable
Fund(s). Each such approval must be based on a determination that the Code
contains provisions reasonably necessary to prevent Access Persons from engaging
in any conduct prohibited by Rule 17j-1. Before approving a Code of Ethics of a
Fund, an Adviser or the Distributor, or any amendment thereto, the Board of
Directors/Trustees of the applicable Fund must receive a certification from the
relevant entity that it has adopted procedures reasonably necessary to prevent
its Access Persons from violating its Code of Ethics. Before initially retaining
any investment adviser, sub-adviser or principal underwriter, a Fund's Board of
Directors/Trustees must approve the Code of Ethics of the relevant entity, and
must approve any material change to that Code of Ethics within six months after
the adoption of the change.

Dated: February 2, 2000