As filed with the Securities and Exchange
Commission on November 27, 1996
Registration No. 33-8441
File No. 811-4824
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 13 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 15 [X]
BAILARD, BIEHL & KAISER FUND GROUP
(Exact name of registrant as specified in charter)
2755 Campus Drive
San Mateo, California 94403
(Address of principal executive offices)
Registrant's telephone number, including area code: (800) 882-8383
THOMAS E. BAILARD, Chairman
BAILARD, BIEHL & KAISER FUND GROUP
2755 Campus Drive
San Mateo, California 94403
(Name and address of agent for service of process)
Copies to:
ANDRE W. BREWSTER, ESQ.
HOWARD, RICE, NEMEROVSKI, CANADY, FALK & RABKIN, A PROFESSIONAL CORPORATION
Three Embarcadero Center, 7th Floor
San Francisco, CA 94111-4065
Approximate date of proposed public offering: As soon as practicable after the
effective date of this registration statement.
It is proposed that this filing will become effective (check
appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] On __(date)____, pursuant to paragraph (b) of Rule 485
[X] 60 days after filing pursuant to paragraph (a)(1)
[ ] On __(date)____, pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On __(date)____, pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933:
An indefinite number of shares of Registrant's common stock are being registered
by this post-effective amendment to Registrant's registration statement in
accordance with Rule 24f-2 under the Investment Company Act of 1940. The
non-refundable fee required by paragraph (a)(3) of Rule 24f-2 has already been
paid to the Commission. Registrant's most recent Rule 24f-2 Notice was filed on
or about November 27, 1996.
Total Number of Pages __________. Exhibit Index at Page __________.
<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Item Number and Caption in
Form N-1A Registration Statement Caption in Prospectus
- - - - -------------------------------- ---------------------
<S> <C>
1. Cover Page .................................................. Outside Cover Page.
2. Synopsis .................................................... Costs and Expenses of Fund Borne by
Shareholders.
3. Condensed Financial Information ............................. Financial Highlights; Performance
Information.
4. General Description
of Registrant ............................................... The Fund; What is the Fund's Investment
Objective?; What are the Fund's
Investment Policies?; Investment
Practices; What Risk Factors Should I Be
Aware Of?; What Else Should I Know
About the Fund?; Appendix A, Corporate
Bond and Commercial Paper Ratings;
Appendix B, Hedging and Other
Transactions.
5. Management of the Fund ...................................... Who Is the Fund's Investment Adviser?
5A. Management's Discussion of Fund Performance ................. Not Applicable.
6. Capital Stock and
Other Securities ............................................ How Do I Purchase Shares?; How Do I
Exchange or Redeem Shares?; What Is the
Fund's Share Price?; What Should I Know
About Distributions and Taxes?; What
Else Should I Know About the Fund?
7. Purchase of Securities
Being Offered ............................................... How Do I Purchase Shares?; What is the
Fund's Share Price?; What Else Should I
Know About the Fund?
8. Redemption or Repurchase .................................... How Do I Exchange or Redeem Shares?
9. Legal Proceedings ........................................... Not Applicable.
</TABLE>
i
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<TABLE>
<CAPTION>
Item Number and Caption in Caption in Statement of
Form N-1A Registration Statement Additional Information
- - - - -------------------------------- ----------------------
<S> <C>
10. Cover Page .................................................. Outside Cover Page.
11. Table of Contents ........................................... Table of Contents.
12. General Information and History ............................. Not Applicable.
13. Investment Objectives
and Policies ................................................ Investment Objectives, Policies and
Restrictions.
14. Management of the Fund ...................................... Management.
15. Control Persons and Principal
Holders of Securities ....................................... Shareholder Information.
16. Investment Advisory and Other
Services .................................................... Management; Investment Advisory and
Other Services.
17. Brokerage Allocation and Other Practices .................... Portfolio Transactions and Brokerage
Commissions.
18. Capital Stock and Other Securities .......................... Investment Objectives, Policies and
Restrictions; Net Asset Value for
Purchase, Exchange and Redemption of
Shares.
19. Purchase, Redemption and Pricing
of Securities Being Offered ................................. Net Asset Value for Purchase, Exchange
and Redemption of Shares.
20. Tax Status .................................................. Tax Aspects.
21. Underwriters ................................................ Investment Advisory and Other Services.
22. Calculation of Performance Data............................. Performance Data.
23. Financial Statements......................................... Financial Statements.
</TABLE>
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Bailard, Biehl & Kaiser Diversa Fund
(A No-Load Fund With No 12b-1 Plan)
Prospectus
The Bailard, Biehl & Kaiser Diversa Fund (the "Fund") is designed to achieve an
above average total return (the sum of income and capital gains) with below
average risk through investment in up to six classes of assets: United States
(domestic) stocks, domestic bonds, domestic cash equivalents, international
stocks, international bonds and international cash equivalents.
This Prospectus contains the basic information that you should know about the
Fund before investing and should be retained for future reference. A Statement
of Additional Information containing further information about the Fund has been
filed with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference. A copy of the Statement of Additional Information may
be obtained without charge by writing directly to us or by calling us at (800)
882-8383.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION IS
JANUARY 26, 1997, AS EACH MAY BE SUPPLEMENTED FROM TIME TO TIME.
Fund Information: Shareholder Services:
Bailard, Biehl & Kaiser Diversa Fund Chase Global Funds Services Company
2755 Campus Drive P.O. Box 2798
San Mateo, California 94403 Boston, Massachusetts 02208
(800) 882-8383 (800) 541-4366
(617) 557-8000
(Massachusetts residents)
<PAGE>
TABLE OF CONTENTS
Costs and Expenses of Fund Borne by Shareholders........................... 3
The Fund................................................................... 3
Financial Highlights....................................................... 4
What is the Fund's Investment Objective?................................... 6
What are the Fund's Investment Policies?................................... 6
Investment Practices....................................................... 9
What Risk Factors Should I Be Aware of?.................................... 12
How Do I Purchase Shares?.................................................. 15
How Do I Exchange or Redeem Shares?........................................ 16
What is the Fund's Share Price?............................................ 18
What Should I Know About Distributions and Taxes?.......................... 19
Who is the Fund's Investment Adviser?...................................... 21
What Else Should I Know About the Fund?.................................... 22
Performance Information.................................................... 23
Administrative Services.................................................... 23
Transfer Agent and Custodian............................................... 23
Experts.................................................................... 24
Corporate Bond and Commercial Paper Ratings................................ A-1
Hedging and Other Transactions............................................. B-1
No dealer, salesman or any other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Fund or its distributor or investment adviser.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any jurisdiction or to any
person to whom it is unlawful to make such offer in such jurisdiction.
2
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Costs and Expenses of Fund Borne by Shareholders
Shareholder Transaction Expenses
Sales Load Imposed on Purchases........................................ None
Sales Load Imposed on Reinvested Dividends............................. None
Deferred Sales Load.................................................... None
Redemption Fees........................................................ None
Exchange Fees.......................................................... None
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees........................................................ 0.95%
12b-1 Fees............................................................. None
Other Expenses......................................................... 1.04%
Total Fund Operating Expenses.......................................... 1.99%
Example:
1 year 3 years 5 years 10 years
------ ------- ------- --------
You would pay the following
expenses on a $1,000 investment, assuming
1) 5% annual return and 2) redemption at
the end of each time period: $20 $62 $107 $232
The purpose of the table set forth above is to assist the investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. Use of a 5% annual return in the example is
mandated by the Securities and Exchange Commission and is not intended to be
representative of past or future performance of the Fund. The example should not
be considered a representation of past or future expenses. Actual expenses may
be greater or less than those shown. Redemptions and distributions by wire
transfer are subject to a $10 wire charge. For more information regarding the
fees and expenses of the Fund, see "Who is the Fund's Investment Adviser?"
herein.
The Fund
The Bailard, Biehl & Kaiser Diversa Fund (the "Fund") is a diversified series of
the Bailard, Biehl & Kaiser Fund Group, an open-end management investment
company organized as a Massachusetts business trust. The Fund is sold without a
sales load, which means there is no charge to you when you buy or redeem your
shares, and no fee is charged to shareholders for the distribution of the Fund's
shares. Mutual funds like the Fund provide investors with a means to pool their
money so they can take advantage of diversification and professional investment
management.
3
<PAGE>
Bailard, Biehl and Kaiser, Inc., the Fund's adviser (the "Adviser"), has offered
investment management services since 1970. It managed securities portfolios with
total holdings of approximately $918 million in market value as of November 15,
1996.
Financial Highlights
The following information with respect to the Fund's fiscal years ended
September 30, 1987 through 1996 has been audited by Price Waterhouse LLP,
independent accountants, whose unqualified report for the most recent five years
is included in the Fund's annual report to shareholders for the fiscal year
ended September 30, 1996. Portions of the Fund's annual report to shareholders
for the year ended September 30, 1996 are incorporated by reference into the
Statement of Additional Information. This information should be read in
conjunction with the other financial statements and notes thereto included in
the annual report.
The following information is based upon past results and may not be indicative
of the future performance of the Fund. Further information about the performance
of the Fund is included in the Fund's annual report to shareholders for the
fiscal year ended September 30, 1996. A copy of the annual report is available,
upon request and without charge, by calling the Fund's Investor Services
Department at (800) 882-8383, or writing to the following address: Bailard,
Biehl & Kaiser Fund Group, 2755 Campus Drive, San Mateo, California 94403.
4
<PAGE>
Bailard, Biehl & Kaiser Diversa Fund
Financial Highlights
<TABLE>
<CAPTION>
For a share outstanding throughout the year: Period from
Dec. 2, 1986
(Commencement)
For the year ended September 30, to Sept. 30,
------------------------------------------------------------------------------------------
2 2
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 13.20 $ 12.01 $ 12.68 $ 10.93 $ 10.64 $ 9.71 $ 11.26 $ 10.55 $ 11.70 $10.00
------- ------- ------- ------- ------- ------- ------- -------- -------- ------
Income from Investment Operations:
2 2
Net Investment Income 0.31 0.38 0.26 0.39 0.34 0.44 0.42 0.61 0.52 0.21
Net Realized/Unrealized Gain (Loss) on
Securities and Foreign Currency 0.96 1.13 (0.66) 1.66 0.30 0.90 (1.52) 0.76 (1.03) 1.49
------- ------- ------- ------- ------- ------- ------- -------- -------- ------
Total from Investment Operations 1.27 1.51 (0.40) 2.05 0.64 1.34 (1.10) 1.37 (0.51) 1.70
------- ------- ------- ------- ------- ------- ------- -------- -------- ------
Less Distributions:
From Net Investment Income (0.32) (0.26) (0.05) (0.30) (0.35) (0.41) (0.45) (0.66) (0.35) 0.00
From Net Realized Gains (0.76) (0.06) (0.22) -- -- -- -- -- (0.29) --
------- ------- ------- ------- ------- ------- ------- -------- -------- ------
Total Distributions (1.08) (0.32) (0.27) (0.30) (0.35) (0.41) (0.45) (0.66) (0.64) 0.00
------- ------- ------- ------- ------- ------- ------- -------- -------- ------
Net Asset Value, End of Year $ 13.39 $ 13.20 $ 12.01 $ 12.68 $ 10.93 $ 10.64 $ 9.71 $ 11.26 $ 10.55 $11.70
======= ======= ======= ======= ======= ======= ======= ======== ======== ======
Total Return 10.09% 12.83% (3.18%) 19.05% 6.16% 13.97% -10.19% 13.56% 3.97% 17.00%
Ratios/Supplemental Data:
Net Assets, End of Year (000's) $36,566 $40,688 $46,047 $49,584 $50,487 $57,546 $79,420 $103,864 $105,719 $91,679
1
Ratio of Expenses to Average Net Assets 1.99% 1.85% 1.82% 1.70% 1.90% 1.46% 1.34% 1.26% 1.26% 1.02%
Ratio of Net Investment Income to 1
Average Net Assets 2.09% 2.97% 2.03% 2.88% 2.75% 3.01% 3.60% 5.24% 5.13% 2.45%
1
Portfolio Turnover Rate 68% 166% 137% 96% 94% 254% 235% 100% 89% 66%
3
Average Commission Rate Paid $0.0344 -- -- -- -- -- -- -- -- --
- - - - ----------------
1
Not annualized.
2
In 1995 and 1994, net investment income per share has been computed before
adjustments for book/tax differences.
3
Represents average commission rate paid per share on purchases and sales of
equity securities by the Fund, as computed under SEC rule effective with the
Fund's 1996 fiscal year. Prior period rates have not been presented as
permitted by the rule.
</TABLE>
5
<PAGE>
What is the Fund's Investment Objective?
The Fund's objective is to achieve an above average total return with below
average risk through multiple asset allocation. The Fund's performance with
respect to return and risk will be measured against that of other funds
investing in multiple classes of assets. By investing in up to six classes of
assets (United States (domestic) stocks, domestic bonds, domestic cash
equivalents, international stocks, international bonds, and international cash
equivalents) and adjusting the level of investment it maintains in these classes
in response to changing market conditions, the Fund hopes to provide this unique
combination of risk and return. The Fund is intended to serve as the core or
foundation portfolio for investors because of its investment in several classes
of assets.
All investments, including mutual funds, have risks, and no investment is
suitable for all investors. Accordingly, there is no guarantee that the Fund
will achieve its investment objective, and investors should consult with their
financial and other advisers concerning the suitability of this investment for
their own particular circumstances. The Fund anticipates that its net asset
value will fluctuate.
What are the Fund's Investment Policies?
Asset allocation is the most important area of investment concern for the Fund.
For its private clients, the Adviser has been actively engaged in asset
allocation among three of the classes of assets since 1971, among five of the
classes since 1979 and among all of the asset classes since 1987. The Fund's
asset allocation policy is based on the following three principles:
o Investment in Multiple Classes of Assets. Holdings of domestic stocks
could range from 0% to 65% of Fund assets. Holdings of domestic bonds,
domestic cash equivalents, international stocks, international bonds and
international cash equivalents each could range from 0% to 50% of Fund
assets.
o Analysis of Expected Returns and Other Factors. The Adviser will perform
an asset allocation review at least semi-annually. The recommended asset
mix will be reviewed to help ensure that, based on the Adviser's
forecasted returns, the Fund's assets could undergo such scenarios as high
inflation or recession without significant losses when measured over a
four-year period.
o Response to Market Conditions. The Fund will shift its emphasis among as
many as six classes of assets, as well as various industry sectors, as
financial trends and economic conditions change. The Fund will overweight
sectors that the Adviser believes are undervalued and in the early stages
of an upward move, and will underweight those that appear to be overvalued
and beginning to weaken. Actual asset allocations are intended to change
gradually over any market cycle.
In conducting its asset allocation review, the Adviser undertakes a complex,
quantitative and economic analysis of potential relative returns for each asset
category. As part of this analysis, the Adviser considers future economic
circumstances and assesses the probable performance of each asset class. The
historic volatility and risk characteristics of each asset are also considered.
Based on its analysis, the Adviser determines an appropriate asset allocation.
The six classes of assets in which the Fund will invest are the following:
Domestic Stocks. The Fund will invest in the common and preferred equity
securities of U.S.-based
6
<PAGE>
companies whose activities will normally represent at least eight of the
following eleven economic sectors(each of which includes several industry
groups): basic industry, capital goods, consumer cyclicals, consumer staples,
energy and natural resources (including precious metal-related securities),
finance (including real estate securities), health care, high technology,
transportation, utilities and communication services. The Fund anticipates that
no more than a third of this class will be invested in companies operating in
any one sector, although the Fund may exceed this guideline from time to time.
The Fund may also invest in the equity securities of U.S.-based investment
companies. Such securities will be considered domestic stocks even though the
portfolios of such companies may include other types of assets, including assets
represented by the five other classes. The Fund will invest in stocks that are
listed on an exchange or that are traded over the counter.
Domestic Bonds. The Fund will invest in domestic bonds and debt securities,
including mortgage and asset-backed securities. Approximately 80% of this
portion of the Fund's portfolio will be invested in U.S. Government securities
and other issues rated at least Aa in quality by Moody's Investors Service, Inc.
("Moody's") or AA in quality by Standard & Poor's Corporation ("S&P"). Up to 10%
of this class may be invested in securities rated Baa or BBB in quality by these
services, respectively. Unrated securities will be considered for investment
when the Adviser believes that the financial condition of the issuers of such
securities, or the protection afforded by the terms of the securities
themselves, limits the risk to the Fund to a degree comparable to that of rated
securities which are consistent with the Fund's objectives and policies. See
"What Risk Factors Should I Be Aware of? -- Lower-Rated Bonds." For a
description of ratings by Moody's and S&P, see Appendix A.
Domestic Cash Equivalents. The Fund will invest in cash or cash equivalents
consisting of repurchase agreements, issues of the U.S. Government and its
agencies and instrumentalities (including Treasury bills, notes and bonds), U.S.
banks (including certificates of deposit, securities backed by letters of
credit, bankers' acceptances and fixed time deposits) and other domestic
institutions (including commercial paper) with maturities of less than one year
and with a quality comparable to that indicated by at least an A-3 rating by
S&P. The Fund will not invest in time deposits maturing in over seven days in an
amount exceeding 10% of its total assets.
International Stocks. The Fund will purchase international stocks, normally in
at least five of the 18 largest investment markets of the world as defined by
the EAFE Index, a broad-based index of international market returns published by
Morgan Stanley & Co. The Fund's international stock holdings will be invested in
roughly the same eleven economic sectors that it uses to invest in domestic
stocks. The Fund anticipates that no more than one-third of its international
stock portfolio will be invested in any one sector, although the Fund may exceed
this guideline from time to time. The Fund's international stocks will include
international stocks traded domestically or abroad through American Depositary
Receipts or International Depositary Receipts ("ADRs" and "IDRs," respectively).
The Fund may also invest in the equity securities of foreign investment
companies. Such securities will be considered international stocks even though
the portfolios of such companies may include other types of assets, including
assets represented by the five other classes.
International Bonds. The Fund may purchase international bonds and debt
securities, including mortgage and asset-backed securities. When this class
exceeds 15% of total Fund assets, the international bond portfolio will normally
be invested in at least three of the 12 largest investment markets of the world
as defined by the EAFE Index. Although Moody's or S&P ratings are not available
for all international bonds, the Fund will invest in those international bonds
that are deemed by the Adviser to be of a quality comparable to domestic bonds
rated at least Baa or BBB in quality by Moody's or S&P, respectively. The Fund's
international bonds will include ADRs, IDRs and international government
securities.
International Cash Equivalents. The Fund may invest in non-U.S.
dollar-denominated debt securities that are
7
<PAGE>
considered to be of comparable quality by the Adviser to the domestic cash
equivalents portfolio and which mature in one year or less. The Fund's
investments will consist of: (1) debt obligations issued or guaranteed by a
foreign sovereign government or one of its agencies or political subdivisions;
(2) debt obligations issued or guaranteed by supra-national organizations such
as the World Bank; (3) debt obligations of foreign banks and bank holding
companies; (4) foreign corporate debt securities; (5) debt obligations of
domestic banks and corporations issued in foreign currencies; (6) foreign
commercial paper; and (7) repurchase agreements involving these securities.
The above investment policies may be changed by the Board of Trustees without
shareholder approval.
Limiting Investment Risks. The Fund seeks to limit the risk of investment losses
by adhering to the investment restrictions described below. These investment
restrictions can be changed only with the approval of a vote of a "majority of
the outstanding voting securities" of the Fund as defined in the Investment
Company Act of 1940. A complete list of the restrictions on the Fund's
investment activities is set forth in the Statement of Additional Information.
The Fund will not:
1. Invest in securities of any one issuer (other than cash and cash items, and
securities of the United States Government and its agencies and
instrumentalities), if immediately after and as a result of such investment
more than 5% of the value of the Fund's total assets would be invested in
the securities of such issuer.
2. Invest more than 25% of the value of its total assets in the securities of
companies primarily engaged in any one industry (other than the United
States Government and its agencies and instrumentalities).
3. Acquire more than 10% of the outstanding voting securities of any one
issuer.
4. Invest in companies for the purpose of exercising control or management.
5. Purchase or sell real property; provided that the Fund will invest in
publicly traded securities secured by real estate or interests therein or
issued by companies which invest in real estate or interests therein.
6. Purchase or sell commodities or commodity contracts or invest in put, call,
straddle or spread options or in interests in oil, gas or other mineral
exploration or development programs; provided, however, that the Fund may
invest in precious metals, in the securities of companies that explore for,
extract, process or deal in precious metals and in asset-based securities
related to precious metals. In addition, this policy will not prevent the
purchase, ownership or sale of warrants or other rights where the grantor
of the warrants is the issuer of the underlying securities ("grantor
warrants"); provided that the Fund will not purchase a grantor warrant if,
as a result thereof, the aggregate market value of all purchased grantor
warrants then owned exceeds 5% of the total assets of the Fund or 2% of the
total assets of the Fund in the case of warrants which are not listed on
the New York Stock Exchange or the American Stock Exchange. Moreover, and
notwithstanding this restriction, the Fund may purchase and sell foreign
currencies on a current basis and may engage in interest rate, foreign
currency and market hedging transactions, including investing in, writing
and purchasing forward contracts, options, futures contracts and options on
futures contracts on debt securities, financial indices and foreign
currencies.
7. Issue senior securities or borrow money, except that the Fund may borrow
from a bank as a temporary measure for extraordinary or emergency purposes
in amounts not exceeding 5% of its total assets, and except that the Fund
may obtain such credit as may be necessary for the clearance of purchases
or sales of securities. For the purpose of this restriction, neither margin
or collateral arrangements with respect to forward contracts, options,
futures contracts or options on futures contracts, nor the purchase or sale
of forward contracts, options, futures contracts or options on futures
contracts, are deemed to be the issuance of a senior security or borrowing.
8
<PAGE>
8. Mortgage, pledge or in any other manner transfer any of its assets as
security for any indebtedness, except to secure borrowings described above
or to obtain such credit as may be necessary for the clearance of purchases
or sales of securities. For the purpose of this restriction, margin or
collateral arrangements with respect to forward contracts, options, futures
contracts and options on futures contracts, are not deemed to be a pledge
of assets.
9. Purchase any securities on margin or effect short sales, except that the
Fund may obtain such credit as may be necessary for the clearance of
purchases or sales of securities. The deposit by the Fund of initial or
variation margin in connection with forward contracts, options, futures
contracts and options on futures contracts will not be considered the
purchase of a security on margin.
10. Engage in the business of underwriting securities issued by others, or
purchase illiquid securities, i.e. securities subject to contractual
restrictions on disposition or legal restrictions on disposition in all of
the principal markets where traded, repurchase agreements maturing in over
seven days or securities that are not otherwise readily marketable, if such
purchase will result in more than 10% of the value of its total assets then
being invested in such illiquid securities.
11. Make loans of money or securities to any person or firm, except through the
purchase of debt securities in accordance with the Fund's investment
objectives and policies.
The Fund may engage in short-term trading if the disposition of securities held
for a short period is deemed to be advisable. The Fund estimates that its annual
portfolio turnover rate will generally be in the range of 75% to 150%, but may
from time to time be greater or less than this range. A turnover rate of 100%
exceeds that of many other investment companies, including those which emphasize
total return as a primary investment objective. Higher portfolio turnover
results in increased brokerage costs and may result in the realization of
short-term gains that are taxed to stockholders as ordinary income. See "What
Should I Know About Distributions and Taxes."
Investment Practices
The Fund is authorized to employ certain investment practices to attempt to
minimize the risk to the Fund from adverse changes in currency exchange or
interest rates, or market conditions or as a substitute for an underlying
investment ("Hedging Transactions"). Hedging Transactions may consist of forward
foreign currency exchange contracts ("Forward Contracts"), put and call options
("Options"), futures contracts ("Futures Contracts"), and put and call options
on futures contracts ("Options on Futures Contracts") on debt securities,
financial indices and foreign currencies. The Fund may also conduct foreign
currency exchange transactions on a spot basis at the rate prevailing in the
foreign currency exchange market. These practices involve certain risks, which
are summarized below under "What Risk Factors Should I Be Aware Of? --Hedging
Transactions." For a more detailed description of the uses, risks and costs of
Hedging Transactions, see Appendix B. In addition, certain provisions of the
Internal Revenue Code may limit the extent to which the Fund may enter into
Hedging Transactions. See "What Should I Know About Distributions and Taxes?
- - - - --Hedging and Other Transactions."
Generally, Hedging Transactions involving foreign currencies may directly hedge,
cross-hedge, or indirectly hedge the currency risk associated with a particular
transaction or position. The Fund may directly hedge a currency risk when it
believes that the currency in which a particular portfolio security is
denominated may suffer a substantial adverse movement against the U.S. Dollar.
For example, to directly hedge a position, the Fund could sell an amount of such
foreign currency, or buy an amount of the U.S. Dollar, approximating the value
of some or all of the Fund's portfolio securities denominated in such foreign
currency.
9
<PAGE>
The Fund may enter into a cross-hedge when it believes that the currency in
which a particular portfolio security is denominated may suffer a substantial
adverse movement against a currency other than the U.S. Dollar. A cross-hedge is
accomplished by hedging a foreign currency in which a portfolio security is
denominated against another foreign currency. For example, if the Fund believes
that the German Mark will move adversely against the Japanese Yen, the Fund
could hedge a portfolio position denominated in German Marks by selling the Mark
for a specified amount of Japanese Yen. The Fund could also hedge the German
Mark through the U.S. Dollar against the Japanese Yen. In such a case, the Fund
could sell German Marks for an amount of U.S. Dollars and sell the same amount
of U.S. Dollars for a specified amount of Japanese Yen.
Indirect hedges are similar to direct hedges except that instead of being
obligated to sell a currency in which the Fund's assets are denominated, the
Fund will be obligated to sell a different, or proxy, currency that the Fund
believes will suffer a similar movement against the other currency. For example,
the Fund may hold securities denominated in Dutch Guilders. If the Fund believes
that the exchange rate between the Dutch Guilder and the U.S. Dollar will suffer
a substantial adverse movement, the Fund could directly hedge the currency risk
by selling an amount of Guilders forward for a specified amount of U.S. Dollars.
However, if the Fund believes that the German Mark will suffer a similar adverse
movement against the U.S. Dollar, the Fund could hedge the Guilder denominated
portfolio position by selling an amount of German Marks forward for a specified
amount of U.S. Dollars. Similarly, the Fund may acquire securities denominated
in Guilders at a time that it believes the Guilder and the Mark would appreciate
against the U.S. Dollar. In such circumstances, the Fund may sell U.S. Dollars
forward against an amount of German Marks necessary to acquire the
Guilder-denominated securities. The Fund will enter into such indirect hedges
when it believes that the currency risk associated with a transaction or
position can be hedged more effectively through the purchase or sale of a third
currency (e.g., where the market for the proxy currency is more liquid, or more
easily monitored and analyzed, and/or the cost to the Fund of an indirect hedge
is lower than a corresponding direct hedge).
Generally, to hedge a risk associated with or as a substitute for a market,
economic sector or industry, the Fund may enter into Options, Futures Contracts
or Options on Futures Contracts involving financial indices (including stock,
bond, and U.S. and foreign securities indices). A financial index is a composite
of the market prices of the securities that make up the index. An index may be
broad based (comprised of many securities and designed to be representative of
an overall market, e.g., the CAC-40 Index of French securities) or narrow based
(designed to be representative of a particular industry or market sector, e.g.,
the Morgan Stanley Global Utilities Index). An index may also be composed of
U.S. securities (e.g., the S&P 500 Stock Index) or foreign securities (e.g., the
International Market Index) or a combination of both (e.g., the Morgan Stanley
World Index). Financial indices are used as the underlying value of Options,
Futures Contracts and Options on Futures involving financial indices.
The Fund will not engage in a transaction involving Forward Contracts or Futures
Contracts, and will not write Options or Options on Futures Contracts unless its
position is "covered" by an offsetting position or transaction, or certain
liquid assets equal to the amount of the Fund's contingent obligations are held
by the Fund's custodian in a segregated account. For a more detailed description
of cover transactions, see Appendix B.
Forward Contracts. A Forward Contract is an obligation to purchase or sell a
specific currency for an agreed price at a future date and is individually
negotiated and privately traded by currency traders and their customers. The
precise matching of the Forward Contract amounts and the value of the securities
involved will not generally be possible since the future value of such
securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the Forward Contract
is entered into and the date it matures. Forward Contracts may limit potential
gain from a positive change in the relationship between currencies, and
unanticipated changes in currency prices may result in poorer overall
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performance for the Fund than if it had not engaged in such contracts.
Options. The Fund may purchase and write call and put Options on debt
securities, financial indices and foreign currencies. Call Options on debt
securities and foreign currencies give the holder the right, in exchange for a
premium, to buy the underlying security or currency at a stated price while the
counterparty is obligated, upon exercise, to sell such security or currency. Put
Options on debt securities and foreign currencies give the holder the right, in
exchange for a premium, to sell the underlying security or currency at a stated
price while the counterparty is obligated, upon exercise, to buy such security
or currency. An Option on a financial index is similar to an Option on a
security or foreign currency, except that exercise of the Option results in the
payment of a cash settlement instead of the purchase or sale of securities that
underlie the index. The amount of the cash settlement depends on the change in
the value of the index underlying the Option.
The purchase of an Option may constitute an effective hedge against fluctuations
in currency exchange or interest rates, or changes in market conditions,
although, in the event of movements adverse to the Fund's position, the Fund may
forfeit the entire amount of the premium plus related transaction costs. The
writing of Options constitutes only a partial hedge, up to the amount of the
premium received, and the Fund could be required to purchase or sell debt
securities, foreign currencies, or other assets at disadvantageous rates,
thereby incurring losses.
Options written or purchased by the Fund will be traded on U.S. and foreign
exchanges or, provided a sufficiently liquid secondary market exists,
over-the-counter markets. Over-the-counter Options purchased by the Fund and
the value of securities used to cover over-the-counter Options written by the
Fund will be deemed to be illiquid subject to the Fund's policy limits on
investments in illiquid securities.
Futures Contracts. Generally, a Futures Contract is an exchange traded contract
for the purchase or sale for future delivery of the underlying asset. A sale of
a Futures Contract on a debt security or foreign currency is the acquisition of
a contractual obligation to deliver the security or currency called for by the
contract at a specified price in a fixed delivery month. A purchase of a Futures
Contract on a debt security or foreign currency means the acquisition of a
contractual obligation to acquire the security or currency called for by the
contract at a specified price in a fixed delivery month. A Futures Contract on a
financial index, like an Option on a financial index, results in the payment of
a cash settlement instead of the delivery of the securities that underlie the
index. The amount of the cash settlement depends on the change in the value of
the index underlying the Futures Contract. The successful use of Futures
Contracts will usually depend on the Fund's ability to correctly predict
currency exchange and interest rate movements and market conditions. Should
rates or markets move in an unexpected manner, the Fund may not achieve the
anticipated benefits of Futures Contracts or may realize losses. Losses from
Futures Contracts are potentially unlimited.
Options on Futures Contracts. Call Options on Futures Contracts give the holder
the right, in exchange for a premium, to take the position of a buyer in a
specified Futures Contract while the counterparty is obligated, upon exercise,
to take the position of a seller in that Futures Contract. Put Options on
Futures Contracts give the holder the right, in exchange for a premium, to take
the position of a seller in a specified Futures Contract while the counterparty
is obligated, upon exercise, to take the position of a buyer in that Futures
Contract. Depending on the pricing of an Option on a Futures Contract compared
to either the price of the Futures Contract upon which it is based or the price
of the underlying asset, an Option on a Futures Contract may entail more or less
risk than ownership of the Futures Contract upon which it is based or the
underlying asset. Options on Futures Contracts hedge positions and transactions
in a manner similar to Options. For more information on the uses and limits of
Options on Futures Contracts, see "Options."
Spot Transactions. The Fund also engages in foreign currency exchange
transactions on a spot (i.e., current) basis in connection with the investment
of cash balances held by the Fund outside of the United States. The
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purpose of these cash balances is to provide liquidity for operations. The Fund
expects to invest its cash balances primarily in bank accounts or similar
investments denominated in foreign currencies in lieu of dollar-denominated bank
accounts or investments. This should permit the Fund to profit from declines in
the value of the dollar during periods when the dollar is declining relative to
the foreign currencies in which its cash balances are invested. There is,
however, no guarantee that the Adviser will correctly anticipate currency
fluctuations. Accordingly, if the Fund's cash balances are maintained in
investments denominated in foreign currencies during periods when the value of
the dollar is appreciating relative to those foreign currencies, the Fund will
experience losses. The Fund will also incur service charges in connection with
each currency conversion.
What Risk Factors Should I Be Aware of?
Foreign Securities. Of the total value of the world's stock markets,
approximately two-thirds consists of non-U.S. securities. As a consequence, the
Fund believes it is important to include some of these securities in its
investment assets. However, there are special risks attendant to investment in
foreign securities.
Many of the foreign securities held by the Fund will not be registered with, nor
will the issuers be subject to the reporting requirements of, the U.S.
Securities and Exchange Commission. There is generally less public information
available about foreign companies and less governmental regulation and
supervision of foreign issuers, markets and brokers. The issuers of foreign
securities may be subject to different accounting standards from domestic
securities. Foreign securities often trade with less frequency and volume than
domestic securities and, therefore, tend to be less liquid and exhibit greater
price volatility. In foreign countries there is the possibility of expropriation
or confiscatory taxation, exchange restrictions, limitations on the removal of
assets, political and economic instability and diplomatic developments affecting
investments by domestic companies. Investments in foreign securities generally
involve greater costs than domestic investments, including the cost of currency
conversions and higher brokers' commissions and custodial fees. In investing in
foreign securities, the Fund will consider all these factors, but even such
consideration cannot eliminate all risk.
The Fund may invest in securities issued by the governments of foreign countries
(or agencies or subdivisions thereof); and many, if not all, of the foregoing
considerations apply to such investments as well. In addition, the Fund may
invest in ADRs and IDRs. A purchaser of an unsponsored ADR or IDR may have
limited voting rights and may receive less information about the issuer of the
underlying security than with a sponsored ADR or IDR.
Dividends payable on the Fund's foreign securities may be subject to foreign
withholding taxes, thus reducing the net amount of income available for
distribution to the Fund's shareholders. Tax treaties exist with certain
countries which reduce the tax on U.S. taxpayers. See "What Should I Know About
Distributions and Taxes?"
Currency Exchange Rates. The value of the assets of the Fund invested in
international stocks, bonds, cash and cash equivalents as measured in U.S.
dollars may be affected favorably or unfavorably by fluctuations in currency
rates and exchange control regulations (including, but not limited to, action by
a foreign government to devalue its currency, thereby effecting a possibly
substantial reduction in the U.S. dollar value of the Fund's investments in that
country). The Fund is authorized to employ certain hedging techniques to
minimize this risk. However, to the extent such techniques are not employed or
to the extent such techniques do not fully protect the Fund against adverse
changes in exchange rates, decreases in the value of the currencies of the
countries in which the Fund invests relative to the U.S. dollar will result in a
corresponding decrease in the U.S. dollar value of the Fund's assets denominated
in those currencies. On the other hand, to the extent hedging techniques are
used to reduce currency risk, the Fund will not participate in increases in the
value of the currencies of the countries in which the Fund invests. Further, the
Fund may incur costs in connection
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<PAGE>
with conversions between various currencies. Foreign exchange dealers (including
banks) realize a profit based on the difference between the prices at which they
are buying and selling various currencies. Thus, a dealer or bank normally will
offer to sell a foreign currency to the Fund at one rate, while offering a
lesser rate of exchange should the Fund desire immediately to resell that
currency to the dealer. Moreover, fluctuations in exchange rates may decrease or
eliminate income available for distribution and may change the tax treatment of
any distribution. For example, if foreign exchange losses exceed other
investment company taxable income during a taxable year, the Fund might not be
able to or might determine not to make ordinary income distributions, or
distributions made before the losses were realized would be recharacterized as a
return of capital to shareholders for United States income tax purposes, rather
than as an ordinary income, thereby reducing each shareholder's basis in his
Fund shares.
Lower-Rated Bonds. Bonds that are rated Baa by Moody's or BBB by S&P, and
equivalent unrated bonds, have speculative characteristics, and changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case for higher
grade bonds. The Fund does not have a policy with respect to the retention of a
bond whose rating falls below Baa or BBB, respectively. The Fund will address
such circumstances on a case by case basis.
Real Estate Securities. The Fund may invest in equity securities, of real estate
related companies (i.e., companies at least 50% of whose assets consist of real
property held for sale or investment or at least 50% of whose products or
services are provided to the real estate industry), real estate investment
trusts, and real estate limited partnerships, all of which securities will be
publicly traded, primarily on an exchange (except that the Fund will only invest
in limited partnerships whose securities are listed on the New York Stock
Exchange or the American Stock Exchange). The Fund may also invest in securities
of companies unrelated to the real estate industry but that have significant
real estate holdings believed to be undervalued relative to the price of the
company's securities.
Although the Fund's investments in real estate will be limited to publicly
traded securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein, the Fund may be
subject to risks associated with direct ownership of real estate. These include
declines in the value of real estate, risks related to general and local
economic conditions and increases in interest rates.
Other risks associated with real estate investments include the fact that equity
and mortgage real estate investment trusts are dependent upon management skill,
are not diversified, and are therefore subject to the risk of financing single
projects or a limited number of projects. They are also subject to heavy cash
flow dependency, defaults by borrowers and self liquidation.
Additionally, equity real estate investment trusts may be affected by any
changes in the value of the underlying property owned by the trusts, and
mortgage real estate investment trusts may be affected by the quality of any
credit extended.
Precious Metal-Related Securities. The Fund may invest in the equity securities
of companies that explore for, extract, process or deal in precious metals
(e.g., gold, silver, palladium and platinum). Such securities may be purchased
when the Fund believes that they are attractively priced in relation to the
value of a company's precious metal-related assets or when the value of precious
metals is expected to benefit from inflationary pressure or other economic,
political or financial uncertainty or instability.
The investment of the Fund's assets in precious metal-related securities may
involve additional investment risks. The prices of precious metal-related
securities have historically been subject to high volatility and may depend on
financial conditions and the creditworthiness of the issuer in addition to the
value of the underlying asset. The earnings and financial condition of precious
metal-related companies may be adversely affected by volatile precious metal
prices.
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Repurchase Agreements. Repurchase agreements represent agreements in which the
Fund acquires securities from a seller who agrees to repurchase such securities
at a later date at a specified time and price. The securities acquired by the
Fund will be U.S. Treasury securities, and the Fund will enter into repurchase
agreements only with registered broker-dealers and with domestic banks or other
financial institutions regulated by the FDIC and having total assets in excess
of $10 billion. The seller's obligation to repurchase is fully collateralized
with other securities in which the Fund can invest. The value of the collateral,
including accrued interest, will be marked to market daily. The Fund's right to
liquidate its collateral in the event of a default by the seller could involve
certain costs, losses on delays, and, to the extent that proceeds from any sale
upon a default of the obligation to repurchase are less than the repurchase
price, the Fund could suffer a loss. If the value of the collateral should
decrease below the resale price of the securities acquired, including accrued
interest, additional collateral is required to be deposited.
Hedging Transactions. Hedging Transactions cannot eliminate all risks of loss to
the Fund and may prevent the Fund from realizing some potential gains. The
projection of short-term currency exchange and interest rates and other market
movements is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. Among the risks of Hedging Transactions
are: incorrect prediction of the movement of currency exchange and interest
rates and other market conditions; imperfect correlation of currency movements
in cross-hedges and indirect hedges; imperfect correlation in the price
movements of Futures Contracts and Options on Futures Contracts with the assets
on which they are based; lack of liquid secondary markets and the inability to
effect closing transactions; costs associated with effecting such transactions;
inadequate disclosure and/or regulatory controls in certain markets;
counterparty default with respect to transactions not executed on an exchange;
trading restrictions imposed by governments, or securities and commodities
exchanges; and governmental actions affecting the value or liquidity of
currencies, securities and indices. Hedging Transactions may be effected in
foreign markets or on foreign exchanges and are subject to the same types of
risks that affect foreign securities. See "Risk Factors -- Foreign Securities."
Indirect hedges and cross-hedges are more speculative than other hedges because
they are not directly related to the position or transaction being hedged. With
respect to indirect hedges, movements in the proxy currency may not precisely
mirror movements in the currency in which portfolio securities are denominated.
Accordingly, the potential gain or loss on an indirect hedge may be more or less
than if the Fund had directly hedged a currency risk. Similar risks are
associated with foreign currency cross-hedge transactions. In a cross-hedge, the
foreign currency in which a portfolio security is denominated is hedged against
another foreign currency, rather than the U.S. Dollar. Cross-hedges may also
create a greater risk of loss than other hedging transactions because they may
involve hedging a currency risk through the U.S. Dollar rather than directly to
the U.S. Dollar or another currency.
In order to help reduce certain risks associated with Hedging Transactions, the
Board of Trustees has adopted the requirement that Forward Contracts, Options,
Futures Contracts and Options on Futures Contracts be used as a hedge or as a
substitute for an underlying investment and not for speculation. In addition to
this requirement, the Board of Trustees has adopted the following percentage
restrictions on the use of Options, Futures Contracts and Options on Futures
Contracts:
(i) The Fund will not write a put or call Option if, as a result thereof,
the aggregate value of the assets underlying all such Options
(determined as of the date such Options are written) would exceed 25% of
the Fund's net assets.
(ii) The Fund will not purchase a put or call Option or Option on a Futures
Contract if, as a result thereof, the aggregate premiums paid on all
Options or Options on Futures Contracts held by the Fund would exceed
20% of the Fund's net assets.
(iii) The Fund will not enter into any Futures Contract or Option on a Futures
Contract if, as a result
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thereof, the aggregate margin deposits and premiums required on all such
instruments would exceed 5% of the Fund's net assets.
In order to help reduce the risk of counterparty default in Forward Contracts
and Options traded over-the-counter, the Fund will only enter into such
transactions with registered broker-dealers, or with banks or other financial
institutions regulated by the FDIC or having assets in excess of $1 billion, in
each case having a net worth of at least $20 million. For a more detailed
discussion of the uses, risks and costs of Hedging Transactions, see Appendix B.
Investment Company Securities. The Fund's purchase of securities of another
investment company results in the layering of expenses such that shareholders of
the Fund not only will bear the expenses of the Fund but also will indirectly
bear a proportionate share of the expenses of the other investment company. The
Fund will not invest more than 5% of its total assets in any investment company
or more than 10% of its total assets in investment companies as a group, and it
will not purchase the securities of any investment company that is sponsored or
managed by the Adviser.
How Do I Purchase Shares?
Shares of the Fund are offered at net asset value, without any sales charge, on
a continuous basis directly by the Fund or through a broker-dealer. If shares of
the Fund are purchased through a broker-dealer, a service fee may be charged by
the broker-dealer. If shares of the Fund are purchased directly from the Fund
without the intervention of a broker-dealer, no such fee will be imposed.
Certain Fund services may not be available to shares held in the name of a
broker-dealer or other nominee.
The minimum initial investment in the Fund is $5,000 and each subsequent
investment must be at least $100. The minimum initial investment requirement for
employees and officers of the Adviser and their relatives, and Trustees of the
Trust, is $2,000 and each minimum subsequent investment is $100. Fund shares may
also be purchased by various types of retirement plans, including individual
retirement accounts ("IRAs") of individuals who would otherwise be eligible to
invest in the Fund. The minimum initial and subsequent investments of such plans
correspond to the minimum requirements for such individuals. The Adviser
sponsors the Bailard, Biehl & Kaiser IRA for individuals wishing to establish an
IRA. For information concerning the Bailard, Biehl & Kaiser IRA, call (800)
882-8383. The Fund reserves the right to waive, reduce or increase the minimum
investment for initial and subsequent investments.
The Fund reserves the right to refuse any application to purchase its shares.
Resale of Fund shares (other than by redemption) may be restricted in certain
jurisdictions. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer in such
jurisdiction.
As a condition of this offering, if a purchase is canceled because your check or
wire transfer does not clear, you will be responsible for any loss the Fund or
the Adviser incurs. If you are already a shareholder, the Fund can redeem shares
from your account to reimburse the Fund or the Adviser for any loss. In
addition, you may be prohibited or restricted from making future purchases in
the Fund.
Shares may be purchased directly from the Fund by completing the Shareholder
Application Form included at the end of this Prospectus and sending it, together
with a check (payable to the order of the Fund), to Chase Global Funds Services
Company ("CGFSC"), P.0. Box 2798, Boston, Massachusetts 02208 or (for express
delivery) 73 Tremont Street, Boston, Massachusetts 02108-3913. (CGFSC is an
affiliate of The Chase Manhattan Bank, N.A.) Additional Shareholder Application
Forms can be obtained from the Fund at 2755 Campus Drive, San Mateo, California
94403.
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Shares of the Fund may also be purchased by wire by calling CGFSC at (800)
541-4366 (617/557-8000 for Massachusetts residents) to receive a wire reference
control number and notify CGFSC of your incoming bank wire. A properly completed
application must be sent to CGFSC at the above address before bank-wired
investments can be redeemed. Moreover, any shareholder who fails to submit an
application form containing a correct taxpayer identification number will be
automatically subject to backup tax withholding on distributions at a 31% rate.
Instruct your bank (which may charge for this service) to wire a specified
amount (via the Federal Reserve Bank) to:
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, NY 10081-1000
ABA #021000021
DDA #910-2-733160
Attn:
Bailard, Biehl & Kaiser Diversa Fund
Shareholder's Name:______________
Account Number:__________
Wire Reference Control Number:
A bank-wired investment is considered received when CGFSC has been notified that
the bank wire has been credited to the Fund's account.
You may purchase additional shares of the Fund at any time by mailing or wiring
funds in the manner and subject to the minimums described above. Please remember
to include your Bailard, Biehl & Kaiser Diversa Fund account number on your
check or as part of your wiring instructions.
When an investor makes an initial investment, an account will be opened on the
books of the Fund and a confirmation will be sent of the opening of the account.
Thereafter, whenever a transaction takes place in the account, such as a
purchase of additional shares, exchange or redemption of shares, reinvestment of
distributions or deposit or withdrawal of shares represented by certificates,
the investor will receive a confirmation statement giving complete details of
the transaction. In addition, the statement will show the details of each
transaction in the account during the year. Quarterly account statements are
also provided.
The number of shares that may be purchased will depend upon the applicable net
asset value in effect at the time orders are properly received. Such net asset
value is the net asset value of the Fund next determined after receipt of a
proper request.
How Do I Exchange or Redeem Shares?
You may exchange or redeem all or a portion of your shares of the Fund at any
time, without incurring any charges, by mail or by telephone. If you exchange or
redeem your shares through a broker-dealer, there may be a charge imposed for
such services.
Exchange Privilege. You may exchange your Fund shares for shares of the Bailard,
Biehl & Kaiser International Equity Fund (the "Equity Fund") or the Bailard,
Biehl & Kaiser International Bond Fund (the "Bond Fund") on the basis of the
relative net asset values per share of the Fund and the Equity Fund or Bond Fund
next computed after receipt by CGFSC of your proper written or telephone
request. Written requests should be directed to CGFSC at the address indicated
under "How Do I Purchase Shares?". Telephone
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<PAGE>
requests should follow the procedures described under "Telephone Transactions".
Exchanges can only be made between accounts with identical account
registrations.
Before making an exchange, you should read the Equity Fund's or Bond Fund's
Prospectus, which may be obtained by contacting the Fund at 2755 Campus Drive,
San Mateo, California 94403, (800) 882-8383. Any exchange of shares is, in
effect, a redemption of shares of the Fund and a purchase of shares of the
Equity Fund or Bond Fund. Accordingly, for Federal income tax purposes, an
exchange is a taxable event, and a gain or loss may be realized. Exchanges can
only be made in states where shares of the Equity Fund or Bond Fund are
qualified for sale, and the dollar amount of an exchange must meet the initial
or subsequent minimum investment requirements of the Equity Fund or Bond Fund.
The Fund does not place any limit on the number of exchanges that may be made,
and neither the Fund nor the Equity Fund or Bond Fund charges a fee for
effecting an exchange. The Fund reserves the right to reject any exchange
request and to modify or terminate the exchange privilege at any time.
Regular Redemption Procedure. You have the right to redeem shares by
transmitting to CGFSC, at the address indicated under "How Do I Purchase
Shares", either the related certificates and a stock power in good order for
transfer, or if no certificates have been issued, a written request for
redemption. Redemption will be made at the net asset value next computed after
receipt by CGFSC of the necessary documents in good order. "Good order" means
that certificates and stock powers must be endorsed by the record owner(s)
exactly as the shares are registered and, for redemptions in excess of $50,000,
the signature(s) must be accompanied by a signature guarantee. A signature
guarantee is a widely accepted way to protect shareholders and the Fund by
verifying the signature on the request. Signature guarantees should not be
qualified in any way, whether by date or otherwise. Signatures must be
guaranteed by an "Eligible Guarantor Institution" and not by a notary public or
any other person or entity. An "Eligible Guarantor Institution" means a bank,
trust company, broker, dealer, municipal or government securities broker or
dealer, credit union, national securities exchange, registered securities
association, clearing agency or savings association that is a participant in the
Securities Transfer Agents Medallion Program ("STAMP") endorsed by the
Securities Transfer Association. In some cases, "good order" may require the
furnishing of additional documents. In the event that you need assistance in
determining which documents are required in order to effect a redemption, you
may contact CGFSC at (800) 541-4366 for assistance.
Because the net asset value per share of the Fund fluctuates (reflecting the
market value of the assets owned by the Fund), the amount you receive for your
shares may be more or less than the amount you paid for them. Checks for
redemption payments normally will be mailed within seven days after receipt of
redemption requests. If you request that the redemption proceeds be wired
directly into a bank account, the transfer agent will deduct a wire charge of
$10 from the proceeds to cover the additional expense.
Systematic Withdrawal Plan. A Systematic Withdrawal Plan (SWP) may be
established by a new or existing shareholder if the shares in his account, when
valued at the current net asset value, equal $10,000 or more. Shareholders who
elect to establish a SWP Account will be mailed a semimonthly, monthly or
quarterly check in a stated amount, not less than $100. Depending on the SWP
option chosen, shares sufficient to satisfy the stated amount will be
automatically redeemed on or about the third and/or eighteenth day of the
payment period and a check for the stated amount will be mailed by CGFSC to the
shareholder as soon thereafter as practicable. A transaction fee of $2 per check
will be deducted from the proceeds. Withdrawals may result in a gain or loss for
tax purposes, may reduce principal and may eventually use up all of the shares
in the account.
Payments will be terminated by CGFSC on receipt of satisfactory evidence of the
death or incapacity of the shareholder, but until it has received such evidence,
CGFSC will not be liable for any payments made in accordance with the SWP. The
shareholder or the Fund may terminate the SWP account at any time upon notice to
the other.
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General Conditions of All Redemptions. The right to redeem may be suspended and
the payment of the redemption price deferred during any period when the New York
Stock Exchange is closed, during periods when trading on the Exchange is
restricted as determined by the Securities and Exchange Commission, for any
period during which an emergency (as determined by the Commission) exists as a
result of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets or for such other periods as the Commission may by
order permit for the protection of investors. In addition, if shares have been
recently issued to a shareholder and payment was made by check, the Fund will
effect the redemption, but will hold the proceeds thereof until the check for
the purchase of such shares has cleared, unless the shares were purchased with a
cashier's or certified check.
Special Redemption Procedure. The Fund may redeem the shares of any shareholder
who ceases to hold shares in the Fund having an aggregate net asset value below
$1,000. Shareholders will be given at least 30 days' written notice of any
redemption effected in accordance with this paragraph.
Telephone Transactions. You may establish telephone exchange and redemption
privileges if you have checked the appropriate box and supplied the necessary
information on the Shareholder Application Form accompanying this Prospectus.
You may then exchange and redeem shares of the Fund by telephoning CGFSC at
(800) 541-4366 (or, from outside the U.S., (617) 557-8000) prior to the regular
closing of the New York Stock Exchange (generally 4:00 p.m. New York time) on a
day when the New York Stock Exchange is open. Redemptions by telephone must be
at least $1,000 and may not exceed $150,000. Exchange and redemption requests
received by CGFSC before the regular closing will be processed that day.
Otherwise processing will occur on the next business day.
Interruptions in telephone service may mean that you will be unable to effect a
transaction by telephone when desired. When telephone transactions are difficult
to implement, you should mail or send by overnight delivery a written request to
CGFSC. By making telephone exchanges or redemptions you may be giving up a
measure of security that you may have had if such transactions had been in
writing. The Fund and CGFSC will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. The Fund and CGFSC may be
liable for any losses due to unauthorized or fraudulent instructions if such
procedures are not followed. For your protection, CGFSC records all telephone
calls. Exchanges can only be made between accounts with identical registrations
and only if your account registration has not changed within 30 days. Redemption
proceeds are sent only to shareholders at their registered address or to a bank
account previously designated by the shareholder. It is also the Fund's policy
to mail a written confirmation to you at your address of record within five
business days after any telephone transaction. The Fund or CGFSC may refuse to
honor any telephone transaction request if the Fund or CGFSC believes, for any
reason, that the request is unauthorized. You will be promptly notified of any
refused telephone transaction request. Neither the Fund nor CGFSC will be liable
for following telephone instructions that CGFSC reasonably believes to be
genuine. Since you may bear the risk of loss in the event of an unauthorized
telephone transaction, you should verify the accuracy of telephone transactions
immediately upon receipt of the written confirmation.
Telephone transaction procedures may be modified or suspended without notice
during periods of drastic economic or market changes, and may be modified or
terminated on 60 days' notice to stockholders at any time. Shares held by a
Keogh plan or IRA and shares issued in certificate form are not eligible for
telephone exchange or redemption.
What is the Fund's Share Price?
The net asset value per share, on which purchase and redemption prices are
based, is determined by dividing the total market value of the Fund's assets,
less its liabilities, by the number of shares outstanding. Net asset value is
calculated as of the regular closing of the New York Stock Exchange (generally
4:00 p.m. New York
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<PAGE>
time) on each day the Exchange is open for trading. Because certain securities
of the Fund may be traded on foreign markets that are open when the New York
Stock Exchange is closed, the value of the net assets of the Fund may be
significantly affected on days when no net asset value is calculated. The price
at which a purchase or redemption is effected will be based on the next net
asset value calculated after the receipt of a properly completed order. The
method used by the Fund for determining the net asset value of its shares is
explained in more detail in the Statement of Additional Information.
What Should I Know About Distributions and Taxes?
The Board of Trustees of the Fund will determine the amounts to be distributed
to the holders of shares and the time or times such distributions will be made.
Currently, it is contemplated that all or a portion of net investment income, if
any, will be distributed quarterly, and that any remaining net investment income
and any net realized capital gains will be distributed annually, generally in
December. The amount of net investment income to be distributed, and the
characterization of Fund distributions for tax purposes, may be affected, among
other factors, by foreign currency exchange losses, as described below.
Distributions of net income and capital gains, if any, will be credited to your
account in full or fractional shares at their net asset value on the
distribution date unless you elect to receive your distributions in cash, by
check or wire. Cash distributions will also be paid out on the distribution
date. The transfer agent will deduct a $10 charge from each cash distribution
paid by wire.
For the fiscal year ended September 30, 1996, the Fund believes that it has
qualified as a "regulated investment company" ("RIC") under Subchapter M of the
Internal Revenue Code of 1986 (the "Code") and intends to be able to continue to
so qualify in future years. Qualification as a RIC allows the Fund to qualify
for "pass-through" treatment under the federal income tax laws, which means the
Fund, subject to certain conditions and requirements, will not be subject to
United States federal income tax on amounts it distributes to shareholders.
Accordingly, the Fund plans to distribute substantially all of its net
investment income and net realized capital gains to its shareholders.
RICs are subject to a nondeductible 4% excise tax on the excess (if any) of the
"required distribution" for a calendar year over the "distributed amount" for
such year. To avoid imposition of such tax, a RIC generally will have to
distribute in each calendar year at least 98% of its ordinary income for such
calendar year and at least 98% of its capital gains for the 12-month period
ending on October 31 of such year. The Fund intends to make sufficient
distributions each year to avoid imposition of the excise tax.
Distributions of the Fund's net investment income and net realized short-term
capital gains are generally taxable to the Fund's shareholders as ordinary
income. Distributions paid from long-term capital gains will generally be
taxable as long-term capital gains, regardless of the holding period of the Fund
shares. The Fund will inform shareholders of the source and nature of the
distributions at the time they are paid. Events subsequent to a dividend or
distribution may cause the dividend or distribution to be recharacterized, in
whole or in part, for U.S. federal income tax purposes. For example, if the fund
incurs foreign currency losses that eliminate its tax-basis `earnings and
profits', then distributions made during the year may be recharacterized as
19
<PAGE>
return of capital distributions for U.S. income tax purposes, rather than income
distributions, thereby reducing each shareholder's basis in his Fund shares.
Prior to purchasing shares of the Fund, the impact of declared dividends or
declared capital gains distributions should be carefully considered. Any such
dividends or capital gains distributions paid shortly after a purchase of shares
by an investor prior to the record date will have the effect of reducing the per
share net asset value of his shares by the amount of the dividends or
distributions. Such dividends or capital gains distributions, although in effect
a return of principal are subject to taxes, calculated at ordinary income or
long-term capital gains rates.
Dividends and distributions paid out of the Fund's income and gains will be
taxable to shareholders whether received in cash or reinvested in additional
shares. Any loss recognized upon the sale of shares held for six months or less
will be treated as a long-term capital loss to the extent of any distributions
of long-term capital gains during the period the shares were held. Dividends and
distributions payable to shareholders of record as of a date in October,
November or December of any year will be deemed to have been paid by the Fund
and received by shareholders on December 31 if the dividends are paid by the
Fund at any time during the following January.
Hedging and Other Transactions. The Fund is currently authorized to engage in
Forward Contracts and to invest in or write Options, Futures Contracts and
Options on Futures Contracts to hedge against changes in interest and foreign
currency exchange rates and market movements and as a substitute for an
underlying investment. Certain of these transactions may be "Section 1256
contracts." Gains or losses on Section 1256 contracts generally are treated as
60% long-term and 40% short-term ("60/40") capital gains or losses. Also, any
Section 1256 contracts that are held by the Fund at the end of a taxable year
(and, generally, for purposes of the 4% excise tax, on October 31 of each year)
are "marked-to-market" with the result that unrealized gains or losses are
treated as though they were realized and the resulting gain or loss is generally
treated as a 60/40 gain or loss.
Generally, any Hedging Transactions undertaken by the Fund may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may affect
the character of gains or losses realized by the Fund. For example, Hedging
Transactions may convert gains which would otherwise be taxable as long-term
capital gain into short-term capital gain, which is taxed as ordinary income
when distributed to shareholders. In addition, any losses realized by the Fund
on positions that are part of a straddle may be deferred under the straddle
rules, rather than being taken into account in calculating the taxable income
for the taxable year in which such losses are realized. Because the straddle
rules are complex and their interpretation unclear, the tax consequences to the
Fund of hedging transactions are uncertain.
The Fund may make one or more of the elections available under the Code that are
applicable to straddles. If the Fund makes any of the elections, the amount,
character and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
elections made. The rules applicable under certain of the elections may operate
to accelerate the recognition of gains or losses from the affected straddle
positions.
Because application of the straddle rules may affect the character of gains or
losses, defer losses and/or accelerate the recognition of gains or losses from
the affected straddle positions, the amount which must be distributed to
shareholders, and that will be taxed to shareholders as ordinary income or
long-term capital gain, may be increased or decreased as compared to a fund that
did not engage in Hedging Transactions.
In addition, under the recently enacted "conversion transaction" provisions of
the Code, certain gains derived from the Fund's hedging or other activities may
be recharacterized as ordinary income for federal income tax purposes. The
application of these provisions is expected to be further defined by regulations
to be issued by the Treasury Department. The Adviser will take these provisions,
and any subsequent regulations, into account in assessing the hedging and other
strategies of the Fund.
The diversification and income requirements applicable to the Fund's assets and
other restrictions imposed on the Fund by the Code may limit the extent to which
the Fund will be able to engage in transactions in precious metals, Forward
Contracts, Options, Futures Contracts or Options on Futures Contracts.
20
<PAGE>
Currency Fluctuations -- "Section 988" Gains or Losses. Under the Code, gains or
losses attributable to fluctuations in exchange rates that occur between the
time the Fund accrues interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund actually
collects such receivables or pays such liabilities generally are treated as
ordinary income or ordinary loss. Gains or losses with respect to Forward
Contracts and certain Options, Futures Contracts and Options on Futures
Contracts are generally treated as ordinary income or loss, although an election
is available under certain circumstances that would result in capital gain or
loss treatment. In addition, gains or losses on the disposition of debt
securities denominated in a foreign currency attributable to fluctuations in the
value of the foreign currency between the date of acquisition of the security
and the date of disposition are generally treated as ordinary gain or loss.
These gains or losses, referred to under the Code as "Section 988" gains or
losses, may increase or decrease the amount of the Fund's investment company
taxable income to be distributed to its shareholders as ordinary income, rather
than increasing or decreasing the amount of the Fund's capital gains or losses.
Certain Foreign Tax Consequences. Foreign securities such as those to be
purchased by the Fund may be subject to foreign taxes, which could reduce the
yield on such securities, although a shareholder otherwise subject to United
States federal income taxes may be entitled to claim a credit or deduction for
such tax purposes, subject to certain limitations. The Statement of Additional
Information provides additional details on these tax aspects.
The foregoing is a general and abbreviated summary of tax consequences of
investment in the Fund. Additional details concerning federal and foreign tax
consequences are contained in the Statement of Additional Information. Investors
are urged to consult their own tax advisers to determine the effect of
investment in the Fund upon their individual tax situations.
Who is the Fund's Investment Adviser?
In accordance with Massachusetts law and the Declaration of Trust, the Board of
Trustees has absolute and exclusive control over the Fund assets and the
business of the Fund. The Board is authorized, however, to enter into an
investment advisory or management agreement with an investment adviser pursuant
to which the adviser would furnish the Fund with certain services, including
management, investment and research services. Accordingly, while the Board of
Trustees of the Fund has overall management responsibility for the Fund,
Bailard, Biehl & Kaiser, as the Adviser, manages day-to-day operations pursuant
to a Management Agreement. Under the Management Agreement, the Adviser directs
the purchase and sale of securities in the Fund's investment portfolio in
accordance with the Fund's investment objective and policies.
Peter M. Hill and Arthur A. Micheletti have been primarily responsible for the
asset allocation decisions regarding the Fund's portfolio since 1995. Mr. Hill
directs the team of investment professionals that focuses on each asset category
of the Fund. Mr. Hill has been Co-President of the Adviser since 1992, was
appointed Chief Investment Officer in 1995 and has additional responsibilities
for institutional portfolio management functions. From 1984 to 1992, Mr. Hill
was Executive Vice President and a portfolio manager for the Adviser. He is also
Chairman and a Director of the Bailard, Biehl & Kaiser International Fund Group,
Inc. Mr. Micheletti has been primarily responsible for the bond and cash
equivalent portions of the portfolio since 1992. Mr. Micheletti has been with
the Adviser and has managed international and domestic fixed-income portfolios
since 1981. Mr. Micheletti was a Vice President, portfolio manager and
investment analyst for the Adviser from 1981 to 1992, and has been a Senior Vice
President and investment strategist and the Chief Economist since 1992.
In placing orders for the Fund's portfolio securities, the Adviser is required
to give primary consideration to obtaining the most favorable price and
efficient execution. Within the framework of this policy, the Adviser will
consider the research and investment information and related services, such as
price quotations, provided
21
<PAGE>
by brokers or dealers who effect or are parties to portfolio transactions for
the Fund or the Adviser's other clients. The Adviser does not use any of its
affiliates or affiliates of the Fund to execute portfolio transactions. The
Fund, however, may purchase equity and debt securities of brokers or dealers
that execute its portfolio transactions.
Under the Management Agreement, the Adviser pays the following expenses incurred
in the Fund's day-to-day management: office space and facilities used by the
Adviser, salaries and expenses of personnel of the Adviser and certain costs
associated with the sale of the Fund's shares. For the services and facilities
it provides, the Adviser receives a monthly fee calculated at an annual rate
equal to .95% of the average net assets of the Fund up to $75 million, .80% of
the next $75 million, and .65% of the average net assets in excess of $150
million. While the initial rate is higher than the rate charged by most other
advisers, the Fund believes that it is justified by the complexity of the
services provided by the Adviser. For the fiscal year ended September 30, 1996,
the total fees paid to the Adviser amounted to $370,980, or approximately 0.95%
of the Fund's average net assets.
The Fund bears the balance of the expenses incurred in its operations, including
costs incurred in complying with federal and state securities laws, fees of
counsel and independent auditors, compensation of the Transfer Agent and the
Custodian, taxes, interest, brokerage commissions, costs of shareholder
communications and valuation expenses. The Fund's total expenses for the fiscal
year ended September 30, 1996 were $776,519, which constituted approximately
1.99% of the Fund's average net assets for such period.
As an accommodation to the Fund, from time to time Bailard, Biehl & Kaiser
directly pays certain expenses of the Fund (such as insurance premiums,
Trustees' fees, and fees relating to state securities law filings) for which
Bailard, Biehl & Kaiser is later reimbursed by the Fund. Disbursements by
Bailard, Biehl & Kaiser on behalf of the Fund and their subsequent reimbursement
by the Fund are effected only upon the prior approval of an officer of the
Trust.
The Adviser commenced business as a registered investment advisor in 1970 and
was incorporated as a California corporation in 1972. The principal place of
business of the Adviser is 2755 Campus Drive, San Mateo, California 94403. The
Adviser is a wholly owned subsidiary of BB&K Holdings, Inc., a California
corporation. The Adviser also acts as investment adviser to the Bailard, Biehl &
Kaiser International Equity Fund and the Bailard, Biehl & Kaiser International
Bond Fund series of the Bailard, Biehl & Kaiser International Fund Group, Inc.,
an open-end management investment company. As of November 15, 1996 the Adviser
managed portfolios with total holdings of approximately $918 million in market
value.
What Else Should I Know About the Fund?
The Fund is a diversified series of the Bailard, Biehl & Kaiser Fund Group, an
open-end management investment company organized in August 1986 as a
Massachusetts business trust (the "Trust"). The Trust is authorized to issue an
unlimited number of shares in one or more series. Currently, the Fund is the
only series within the Trust. Additional series may be added, but the Trust has
no immediate plans to do so.
The Distributor of the Fund's shares is BB&K Fund Services, Inc., a registered
broker-dealer and a wholly owned subsidiary of Holdings. The principal business
address of BB&K Fund Services, Inc. is 2755 Campus Drive, San Mateo, California
94403. BB&K Fund Services, Inc. receives no commission or compensation for
acting as the Fund's agent in the continuous public offering of the Fund's
shares.
Each share in the Fund is entitled to participate equally in dividends and
distributions of the Fund, including
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<PAGE>
the distribution of assets upon liquidation of the Fund. When issued, the shares
will be fully paid and non-assessable and will have no preemptive, conversion or
exchange rights.
Shareholders of the Fund are entitled to one vote per share. The shares have
noncumulative voting rights, which means that holders of more than 50% of the
shares voting for the election of Trustees can elect all of the Trustees if they
choose to do so. In such an event, the holders of the remaining shares so voting
will not be able to elect any Trustees. The Trustees may be removed by a vote of
not less than two-thirds of the outstanding shares of the Fund. The Fund is not
required to hold annual meetings for the election of Trustees or otherwise.
Special meetings may be called by the Board of Trustees or by holders of 25% of
the shares entitled to vote. In addition, holders of 10% of the Fund's shares
may call a meeting for the purpose of voting on the question of the removal of a
Trustee. The Fund will assist in shareholder communications with respect to any
meeting duly called by the holders of its shares. In the event that the Trust
issues additional series, shareholders of the Fund will vote with shareholders
of the other funds within the Trust, except with respect to matters affecting
only the rights of a particular fund.
Under certain circumstances, shareholders of the Fund may be held personally
liable for the obligations of the Trust. The Declaration of Trust provides that
shareholders will not be subject to any personal liability for the acts or
obligations of the Trust and that every written agreement, obligation or other
undertaking made or issued by the Trust will contain a provision to the effect
that the shareholders are not personally liable thereunder. The Declaration of
Trust provides for indemnification out of the Fund's assets against claims
against such shareholders as shareholders of the Trust and any legal and other
expenses incident thereto. Accordingly, the risk of any shareholder incurring
financial loss beyond his investment due to personal liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations.
The Adviser believes that, in view of the above, the risk of personal liability
to shareholders is remote.
Performance Information
From time to time, the Fund may advertise its total return. This figure is based
upon historical earnings and is not intended to indicate future performance.
"Total return" refers to the average annual rate of return of an investment
based on its public offering price and reflects all income earned by the Fund,
any appreciation or depreciation of the Fund's assets and all expenses incurred
by the Fund for the stated period. This figure is computed by calculating to the
end of a specified period the percentage change in value of an investment of
$1,000, assuming reinvestment of all income and capital gain distributions.
The Fund may include comparative performance information in advertising or
marketing its shares. Such performance information may include data from market
indices, industry publications, business periodicals, rating services and other
sources.
Administrative Services
The Trust, on behalf of the Fund, has entered into an Administration Agreement
(the "Administration Agreement") with Investment Company Administration
Corporation ("ICAC"). Pursuant to such agreement, ICAC provides certain
administrative services in connection with the management of the Fund's
operations. Such services include: (i) assisting the Fund's accountants in
preparing financial reports, (ii) assisting the Fund's attorneys in preparing
amendments to the Fund's registration statement, any proxy materials and other
forms and reports to be filed with the SEC, (iii) preparing periodic reports to
stockholders, (iv) monitoring compliance with the Fund's investment policies and
restrictions, and (v) other administrative matters. As compensation for such
services, the Fund pays ICAC an annual fee of $32,500.
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Transfer Agent and Custodian
Transfer agent services are provided by Chase Global Funds Services Company
("CGFSC"), P.O. Box 2798, Boston, Massachusetts 02208, an affiliate of The Chase
Manhattan Bank, N.A. As Transfer Agent, CGFSC maintains records of shareholder
accounts, processes purchases and redemptions of shares, acts as dividend and
distribution paying agent and performs other related shareholder functions.
CGFSC also files applications under state law to register the Fund's shares for
sale, and to register the Trust and/or the Trust's officers to sell the Fund's
shares.
Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts 02109, is
the Fund's Custodian. As Custodian, it holds the securities in the Fund's
portfolio and other assets for safekeeping. Foreign securities owned by the Fund
will also be held by various subcustodians in conformity with Section 17(f) of
the Investment Company Act of 1940 and the rules thereunder.
Experts
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110, serves as
the Trust's independent accountants, providing audit services, including review
and consultation in connection with various filings by the Trust with the
Securities and Exchange Commission and tax authorities.
The information under "Financial Highlights" in this Prospectus and the
financial statements as of September 30, 1996 incorporated by reference into the
Statement of Additional Information have been so included in reliance upon the
report of Price Waterhouse LLP, independent accountants, given on the authority
of said firm as experts in accounting and auditing.
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APPENDIX A
Corporate Bond and Commercial Paper Ratings
CORPORATE BONDS
Moody's Investors Service, Inc. ("Moody's"). Bonds rated Aa by Moody's are
judged by Moody's to be of high quality by all standards. Together with bonds
rated Aaa (Moody's highest rating), they comprise what are generally known as
high-grade bonds. Aa bonds are rated lower than Aaa bonds because margins of
protection may not be as large as those of Aaa bonds, or fluctuations of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than those
applicable to Aaa securities. Bonds that are rated A by Moody's possess many
favorable investment attributes and are to be considered as upper medium-grade
obligations. Factors giving security to principal and interest are considered
adequate, but elements may be present that suggest a susceptibility to
impairment sometime in the future.
Moody's Baa rated bonds are considered as medium-grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and may have speculative
characteristics as well.
Standard & Poor's Corporation ("S&P"). Bonds rated AA by S&P are judged by S&P
to have a very strong capacity to pay interest and principal and differ only in
a small degree from issues rated AAA (S&P's highest rating). Bonds rated AAA are
considered by S&P to be the highest grade obligations and the capacity to pay
interest and principal is extremely strong. Bonds rated A by S&P have a strong
capacity to pay principal and interest, although they are somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions.
S&P's BBB rated bonds, or medium-grade category bonds, are regarded as having
adequate capacity to pay principal and interest. Whereas BBB bonds normally
exhibit adequate protection parameters, adverse economic conditions or changes
in circumstances are more likely to lead to a weakened capacity to pay interest
and principal.
Commercial Paper
Moody's. The Prime rating is the highest commercial paper rating assigned by
Moody's. Issuers within this Prime category may be given ratings 1, 2 or 3,
depending on their capacity for repayment. Issuers rated Prime-1 (or supporting
institutions) have a superior ability for repayment of senior short-term debt
obligations. Prime 1 repayment ability will often be evidenced by the issuer's
leading market position in well-established industries, high rates of return on
funds employed, conservative capitalization structures with moderate reliance on
debt, and ample asset protection. Also, a Prime-1 issuer may have broad margins
in earnings coverage of fixed financial charges, high internal cash generation
and a well established access to a range of financial markets and assured
sources of alternative liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong capacity for
repayment of senior short-term debt obligations. Issuers rated Prime-2 will
evidence many of the characteristics of Prime-1 issuers, although to a lesser
degree. Earnings trends and coverage ratios are sound but more subject to
variation. Capital characteristics may be more affected by external conditions.
Ample alternative liquidity is maintained.
A-1
<PAGE>
Issuers rated Prime-3 (or supporting institutions) have an acceptable capacity
for repayment. The effects of industry characteristics and market composition
may be more pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements. Adequate alternative
liquidity is maintained.
S&P. Ratings are graded into four categories, ranging from "A" for the highest
quality obligations to "D" for the lowest. Issues rated A are regarded as having
the greatest capacity for timely payment. Issues in this category are further
refined with the designations 1, 2, and 3 to indicate the relative degree of
safety. Issues rated A-1 have a very strong degree of safety regarding timely
payment. Issues rated A-2 have a strong capacity for timely payment. However,
the relative degree of safety is not as overwhelming as for issues designated
A-1. Issues rated A-3 have a satisfactory capacity for timely payment. They are,
however, somewhat more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
A-2
<PAGE>
APPENDIX B
Hedging and Other Transactions
FORWARD CONTRACTS
The Fund may enter into forward foreign currency exchange contracts to attempt
to minimize the risk to the Fund from adverse changes in currency exchange rates
("Forward Contracts"). All Forward Contracts will be covered. In the case of a
Forward Contract obligating the Fund to purchase a foreign currency (a "long
position"), the Fund may establish a segregated account containing liquid assets
("Liquid Assets") equal to the purchase price of the Forward Contract due on the
settlement date (less any margin on deposit). Liquid Assets include cash, U.S.
Government securities and other liquid high grade debt obligations.
Alternatively, the Fund may cover a long position by purchasing a put option on
the same Forward Contract with a strike price as high or higher than the price
of the Forward Contract held by the Fund (or, if lower than the price of the
Forward Contract held by the Fund, the Fund may segregate Liquid Assets equal to
the difference).
In the case of a Forward Contract obligating the Fund to sell a foreign currency
(a "short position"), the Fund may segregate Liquid Assets equal to the market
value of the currency underlying the Forward Contract (less any margin on
deposit, but not less than the market price at which the short position was
established). Alternatively, the Fund may cover the Forward Contract by (i)
entering into an offsetting position or transaction, (ii) owning the currency
underlying the Forward Contract or (iii) holding a call option permitting the
Fund to purchase the same Forward Contract at a price no higher than the price
at which the short position was established (or, if higher, the Fund may
segregate Liquid Assets equal to the difference).
Options on Debt Securities and Foreign Currencies. The Fund may write covered
call and put options and purchase call and put options ("Options") on debt
securities and foreign currencies that are traded on United States and foreign
exchanges and over-the-counter, to attempt to minimize the risks to the Fund
from adverse changes in currency exchange and interest rates, and market
conditions and as a substitute for an underlying investment.
For example, a decline in the value of a foreign currency in which portfolio
securities are denominated will reduce the value of such securities in U.S.
Dollars, even if their value in the foreign currency remains constant. In order
to protect against such reductions in the value of portfolio securities, the
Fund may purchase put Options on the foreign currency. If the value of the
foreign currency does decline, the Fund will have the right to sell such
currency for a fixed amount and will thereby offset, in whole or in part, the
adverse effect on its portfolio that otherwise would have resulted.
Conversely, when the Fund predicts an increase in the value of a currency in
which securities to be acquired are denominated, the Fund may purchase call
Options on the foreign currency. The purchase of such Options could offset, at
least partially, the effects of the adverse movements in exchange rates.
However, the benefit to the Fund derived from purchases of Options will be
reduced by the amount of the premium and related transaction costs. In addition,
where currency exchange rates do not move in the direction or to the extent
predicted, the Fund could sustain losses that would require it to forego a
portion or all of the benefits of advantageous changes in such rates.
The Fund may also purchase Options on debt securities to hedge against interest
rate changes that adversely affect the value of a portfolio security. For
example, when the Fund anticipates a decline in the market value of a portfolio
security due to rising interest rates, it may purchase put Options on the
security. If the value of the security does decline, the Fund will have the
right to sell the security for a fixed amount and will thereby
B-1
<PAGE>
offset, in whole or in part, the adverse effect that would otherwise have been
caused by rising interest rates.
Where the Fund predicts a change in the market value of a security to be
acquired that would increase the cost of such security, the Fund may purchase
call Options thereon. The purchase of such Options could offset, at least
partially, the effect of declining interest rates. The use of Options to hedge
against adverse movements in interest rates is subject to the same limitations
and risks of loss as the use of Options to hedge against adverse movements in
exchange rates.
The Fund may write put and call Options for the same types of hedging purposes.
For example, when the Fund anticipates a decline in the value of foreign
currency-denominated securities due to adverse fluctuations in exchange rates it
could, instead of purchasing a put Option, write a call Option on the relevant
currency. If the expected decline occurs, the Option will most likely not be
exercised and the diminution in value of portfolio securities will be fully or
partially offset by the amount of the premium received. Similarly, instead of
purchasing a call Option to hedge against an anticipated increase in the cost of
securities to be acquired, the Fund could write a put Option on the relevant
currency that, if rates move in the manner projected, will expire unexercised
and allow the Fund to hedge such increased cost up to the amount of premium. The
writing of an Option constitutes only a partial hedge up to the amount of the
premium, and only if interest or exchange rates move in the expected direction.
If this does not occur, the Option may not be offset by the amount of the
premium. Through the writing of Options, the Fund may also be required to forego
all or a portion of the benefits that might otherwise have been obtained from
favorable movements in interest or exchange rates.
All put and call Options written by the Fund will be covered. The Fund may cover
a put Option by (i) establishing a segregated account containing Liquid Assets
equal to the strike price of the put Option written by the Fund (less any margin
on deposit), (ii) selling short the security or currency underlying the put
Option at the same or higher price than the strike price of the put Option
written by the Fund (or, if lower, the Fund may segregate Liquid Assets equal to
the difference), or (iii) purchasing a put Option with a strike price the same
as or higher than the strike price of the put Option sold by the Fund (or, if
lower, the Fund may segregate Liquid Assets equal to the difference).
The Fund may cover a call Option by (i) segregating Liquid Assets equal to the
market value of the security or currency underlying the call Option (less any
margin on deposit) but not less than the strike price of the call Option, (ii)
owning the security or currency underlying the Option or (iii) purchasing a
separate call Option on that security or currency with a strike price no higher
than the strike price of the Option sold by the Fund (or, if higher, the Fund
may segregate Liquid Assets equal to the difference).
If the Fund, as the writer of an Option, wishes to terminate its obligation, it
may effect a closing purchase transaction. This is accomplished by buying an
Option of the same series as the Option previously written. The effect of the
purchase is that the Fund's position will be canceled. However, a writer may not
effect a closing purchase transaction after being notified of the exercise of an
Option. Likewise, where the Fund holds an Option, it may liquidate its position
by effecting a closing sale transaction. This is accomplished by selling an
Option of the same series as the Option previously purchased. There is no
guarantee that either a closing purchase or a closing sale transaction can be
effected.
The Fund will realize a profit from a closing transaction if the price of the
transaction is less than the premium received from writing the Option or is more
than the premium paid to purchase the Option; the Fund will realize a loss from
a closing transaction if the price of the transaction is more than the premium
received from writing the Option or is less than the premium paid to purchase
the Option. Because increases in the market price of a call Option will
generally reflect increases in the market price of the underlying security or
currency, any loss resulting from the purchase of a call Option to close out a
previously written call Option is likely to be offset in whole or in part by
appreciation of the Fund's portfolio securities denominated in such currency.
B-2
<PAGE>
Options on Financial Indices. The Fund may write covered put and call Options
and purchase put and call Options on financial indices to attempt to minimize
the risks to the Fund from adverse changes in interest rates and market
conditions and as a substitute for an underlying investment. Options on
financial indices are similar to Options on debt securities and foreign
currencies. For additional information on the risks and benefits of Options on
financial indices, see "Options on Debt Securities and Foreign Currencies."
Call Options on indices written by the Fund will be covered (i) by segregating a
portfolio of securities substantially replicating the movement of the index,
(ii) by holding a call Option on the same index with a strike price no higher
than the strike price of the Option written by the Fund or (iii) in such other
manner as may be in accordance with the rules of the exchange on which the
Option is traded and applicable laws and regulations.
The Fund will cover put Options on indices by (i) segregating Liquid Assets
equal to the Option's exercise price, (ii) holding a put Option on the same
index with a strike price no higher than the strike price of the put Option
written by the Fund or (iii) in such other manner as may be in accordance with
the rules of the exchange on which the Option is traded and applicable laws and
regulations.
The Fund will receive a premium for writing a put or call Option that will
increase the Fund's gross income in the event the Option expires unexercised or
is closed out at a profit. If the value of an index on which the Fund has
written a call Option falls or remains the same, the Fund will realize a profit
in the form of the premium received (less transaction costs) that will offset
all or a portion of any decline in the value of the securities it owns. If the
value of the index rises, however, the Fund will realize a loss in its call
Option position, which will reduce the benefit of any unrealized appreciation in
the Fund's securities holdings. By writing a put Option, the Fund assumes the
risk of a decline in the index. To the extent that the price changes of
securities owned by the Fund correlate with changes in the value of the index,
writing covered put Options on indices will increase the Fund's losses in the
event of a market decline, although such losses will be offset in part by the
premium received for writing the Option.
Futures Contracts on Debt Securities, Financial Indices and Foreign Currencies.
The Fund may enter into exchange-traded contracts for the purchase or sale for
future delivery of debt securities, financial indices and foreign currencies to
attempt to minimize the risk to the Fund from adverse changes in currency
exchange and interest rates, and market conditions and as a substitute for an
underlying investment ("Futures Contracts").
The acquisition or sale of Futures Contracts is designed to protect the Fund
from fluctuations in currency exchange and interest rates, and market movements
without actually buying or selling the underlying currencies or securities. For
example, if the Fund owns long-term bonds, and interest rates were expected to
increase, the Fund might enter into a Futures Contract for the sale of debt
securities. Such a sale would have much the same effect as selling an equivalent
value of long-term bonds owned by the Fund. If interest rates did increase, the
value of the debt securities in the portfolio would decline, but the value of
the Futures Contract to the Fund would increase at approximately the same rate,
thereby keeping the net asset value of the Fund from declining as much as it
otherwise would have. The Fund could accomplish similar results by selling bonds
with long maturities and investing in bonds with short maturities. However,
since the futures market generally is more liquid than the cash market, the use
of Futures Contracts as an investment technique allows the Fund to maintain a
defensive position without having to sell its portfolio securities.
Similarly, when it is expected that interest rates may decline, Futures
Contracts may be purchased to attempt to hedge against anticipated purchases of
long-term bonds at higher prices. Since the fluctuations in the value of Futures
Contract should be similar to that of long-term bonds, the Fund could take
advantage of the anticipated rise in the value of long-term bonds without
actually buying them until the market had been established. At that time, the
Futures Contract could be liquidated and the Fund could then buy long-term bonds
on the cash market.
B-3
<PAGE>
All Futures Contracts to which the Fund is a party will be covered. A Futures
Contract obligating the Fund to purchase a security, financial index or currency
is covered if the Fund segregates, in a special account with the Custodian,
Liquid Assets equal to the price of the Futures Contract due on the settlement
date (less any margin on deposit). The Fund may also cover a long position by
purchasing a put Option on the same Futures Contract with an exercise price as
high or higher than the price of the Futures Contract held by the Fund (or, if
lower, the Fund may segregate Liquid Assets equal to the difference).
A Futures Contract in which the Fund has the position of a seller is covered if
the Fund segregates Liquid Assets equal to the market value of the security,
index or currency underlying the Futures Contract (less any margin on deposit,
but not less then the market price at which the position was established).
Alternatively, the Fund may cover such a Futures Contract by (i) owning the
security or currency underlying the Futures Contract, or, in the case of a
financial index, segregating a portfolio of securities substantially replicating
the movement of the index or (ii) holding a call Option permitting the Fund to
purchase the same Futures Contract at a price no higher than the price at which
the position was established (or, if higher, the Fund may segregate Liquid
Assets equal to the difference).
If the Fund enters into a Futures Contract, it will be subject to initial and
variation margin requirements. At the time a Futures Contract is purchased or
sold, the Fund must allocate cash or securities as an initial margin deposit
("initial margin"). It is expected that initial margin will be approximately
1-1/2% to 5% of a Futures Contract's face value. A Futures Contract is valued
("marked to market") daily. The Fund will be required to increase its margin
deposit ("variation margin") when the value of a Futures Contract decreases and,
conversely, the Fund will receive payment for any increase in the Futures
Contract's value.
At the time of delivery of securities pursuant to such a contract, adjustments
may be made to recognize differences in value arising from the delivery of
securities with a different interest rate from that specified in the contract.
In some (but not many) cases, securities called for by a Futures Contract may
not have been issued when the contract was written.
Although Futures Contracts, by their terms, call for the actual delivery or
acquisition of an asset, in most cases the contractual obligation is fulfilled
(or "offset") before the expiration date of the Futures Contract without having
to make or take delivery of the underlying asset. Offset of a Futures Contract
is accomplished by buying (or selling, as the case may be) on a commodities
exchange an identical Futures Contract calling for delivery in the same month.
Such a transaction, which is effected through a member of an exchange, cancels
the obligation to make or take delivery of the underlying asset.
The ordinary spreads between prices in the cash and futures markets, due to
differences in the natures of those markets, are subject to distortions that may
prevent the Fund from successfully using Futures Contracts. First, all
participants in the futures markets are subject to initial and variation margin
requirements. Rather than meeting variation margin requirements, investors may
close Futures Contracts through offsetting transactions which could distort the
normal relationship between the cash and futures markets. Second, the liquidity
of the futures markets depends on participants entering into offsetting
transactions rather than making or taking delivery. To the extent participants
make or take delivery, liquidity in the futures markets could be reduced, thus
producing distortion. Third, from the point of view of speculators, margin
requirements in the futures market are less onerous than margin requirements in
the cash market. Therefore, increased participation by speculators in the
futures market may cause temporary price distortions. Due to the possibility of
distortion, a correct prediction of general interest and currency exchange rates
or market conditions by the Fund may not result in a successful transaction.
If the Fund's judgment about the general direction of interest or currency
exchange rates or market conditions is incorrect, the Fund's overall performance
would be poorer than if it had not entered into any such contract. If the Fund
has hedged against the possibility of a movement in interest or exchange rates
or market conditions
B-4
<PAGE>
that would adversely affect the price of its portfolio securities and such rates
or markets did not move as anticipated, the Fund would lose part or all of the
benefit of the increased value of its securities that it has hedged because it
will have offsetting losses in its futures positions. In addition, in such
situations, if the Fund had insufficient cash and were unable to effect a
closing transaction, it might have to sell securities from its portfolio to meet
daily variation margin requirements. Such sales of securities may, but will not
necessarily, be at increased prices that reflect the rising market. The Fund may
also have to sell securities at a time when it may be disadvantageous to do so.
Options on Futures Contracts on Debt Securities, Financial Indices and Foreign
Currencies. The Fund may purchase and write options on Futures Contracts to
attempt to minimize the risk to the Fund from adverse changes in currency
exchange and interest rates, and market conditions and as a substitute for an
underlying investment ("Options on Futures Contracts").
A call Option on a Futures Contract written by the Fund constitutes a partial
hedge against declining prices of the asset that is deliverable upon exercise of
the Futures Contract. If the price of the Futures Contract at expiration of the
Option is below the exercise price, the Fund will retain the full amount of the
Option premium, which provides a partial hedge against any decline that may have
occurred in the Fund's portfolio. A put Option on a Futures Contract written by
the Fund or constitutes a partial hedge against increasing prices of the asset
that is deliverable under the Futures Contract. If the price of the Futures
Contract at expiration of the Option is higher than the exercise price, the Fund
will retain the full amount of the Option premium, which provides a partial
hedge against an increase in the price of securities that the Fund intends to
purchase.
If a put or call Option on a Futures Contract that the Fund has written is
exercised, the Fund will incur a loss, which will be reduced by the amount of
the premium the Fund received. Depending on the degree of correlation between
changes in the value of its portfolio securities and changes in the value of its
futures positions, the Fund's losses from Options on Futures Contracts may be
reduced or increased by changes in the value of its portfolio securities.
All Options on Futures Contracts written by the Fund will be covered. In the
case of the sale of a call Option on a Futures Contract, the Fund may cover by
(i) entering into a long position on the same Futures Contract at a price no
higher than the strike price of the call Option on the Futures Contract (or, if
higher, the Fund may segregate Liquid Assets equal to the difference), (ii)
owning the security or currency underlying the Futures Contract on which the
Fund holds the Option, or, with respect to a financial index, a portfolio of
securities substantially replicating the movement of the index, or (iii) holding
a separate call Option permitting the Fund to purchase the same Futures Contract
at a price no higher than the strike price of the call Option on the Futures
Contract sold by the Fund (or, if higher, the Fund may segregate Liquid Assets
equal to the difference.)
In the case of the sale of a put Option on a Futures Contract obligating the
Fund to buy a Futures Contract, the Fund may establish a segregated account
containing Liquid Assets equal to the settlement value of the Futures Contract
underlying the Option on a Futures Contract. Alternatively, the Fund may cover
the Option on a Futures Contract by holding a put Option permitting the Fund to
sell the same Futures Contract at a price the same as or higher than the strike
price of the put Option sold by the Fund (or, if lower, the Fund may segregate
Liquid Assets equal to the difference).
The amount of risk the Fund assumes when it purchases an Option on a Futures
Contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of such an
option also entails the risk that changes in the value of the underlying Futures
Contract will not be fully reflected in the value of the option purchased.
B-5
<PAGE>
Additional Risks of Forward Contracts, Options on Debt Securities and Foreign
Currencies, Options on Financial Indices, Futures Contracts and Options on
Futures Contracts.
Hedging transactions may be effective to protect the Fund against certain
changes in interest and currency exchange rates or market movements. However,
such transactions do not eliminate fluctuations in the prices of portfolio
securities or prevent losses if the prices of such securities decline.
The Fund's ability to hedge all or a portion of its portfolio through
transactions in Forward Contracts, Options, Futures Contracts and Options on
Futures Contracts depends on the degree to which price movements in underlying
currencies and securities correlate with price movements in the relevant portion
of the Fund's portfolio. In addition, the use of Futures Contracts and Options
on Futures Contracts involves the risk of imperfect correlation of movements in
the prices of Futures Contracts and Options on Futures Contracts, and movements
in the prices of the underlying assets. If the price of a Futures Contract or an
Option on a Futures Contract moves more or less than the price of the hedged
asset, the Fund will experience a gain or loss that may not be completely offset
by movements in the price of the asset that is the subject of the hedge.
The Fund may cover index Options that it has written, index Futures Contracts to
which it is a party, and Options on index Futures Contracts that it has written
through the segregation of a portfolio of securities that substantially
replicates the movement of the underlying index. The portfolio of securities
used to cover such transactions may not match the actual composition of the
index. In that event, the Fund will not be fully covered and would be subject to
a risk of loss in the event of adverse changes in the value of the index.
The Fund's ability to engage in transactions involving Options, Futures
Contracts and Options on Futures Contracts will depend on the degree to which
liquid secondary markets in such instruments exist. Reasons for the absence of a
liquid market include the following: (i) there may be insufficient trading
interest in a particular instrument; (ii) restrictions may be imposed by an
exchange on opening transactions or closing transactions or both; (iii) trading
halts, suspensions or other restrictions may be imposed with respect to
particular classes or series of Options, Futures Contracts or Options on Futures
Contracts; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation ("OCC"), which effects the settlement of exchange traded
Options, may not at all times be adequate to handle current trading volume; or
(vi) one or more exchanges could, for economic or other reasons, decide or be
compelled at some future date to discontinue the trading of a particular
instrument (or a particular class or series of such instrument). There can be no
assurance that a liquid secondary market will exist for any particular
investment at any specific time. Thus it may not be possible for the Fund to
close certain of its positions.
The costs to the Fund of hedging transactions vary among the various hedging
techniques and also depend on such factors as the security, currency or index
involved, market conditions and the length of the contract or option period.
Forward Contracts are usually conducted on a principal basis, and no fees or
commissions are therefore involved. However, the Fund will incur brokerage
commissions and related transaction costs when it purchases, writes or invests
in Options, Futures Contracts and Options on Futures Contracts. Furthermore, the
Fund's ability to engage in hedging transactions may be limited by tax
considerations.
Forward Contracts and Options on foreign currencies are not traded on markets
regulated by the Commodity Futures Trading Commission ("CFTC") or (with the
exception of certain Options traded on national securities exchanges) by the
Securities and Exchange Commission ("SEC"), but are traded through financial
institutions acting as market-makers. In an over-the-counter trading
environment, many of the protections afforded to exchange participants are not
available. For example, there are no daily price fluctuation limits, and adverse
market movements could therefore continue to an unlimited extent over a period
of time. Although the purchaser of an Option cannot lose more than the amount of
the premium plus related transaction costs, this
B-6
<PAGE>
entire amount could be lost. Moreover, because the performance of
over-the-counter Options and Forward Contracts is not guaranteed by the OCC or
any other settlement agency, there is a risk of counterparty default. The Option
writer and the trader of Forward Contracts could also lose amounts substantially
in excess of his or her initial investments, due to the margin and collateral
requirements associated with such positions.
Options traded on national securities exchanges are within the jurisdiction of
the SEC, as are other securities traded on such exchanges. As a result, many of
the protections provided to traders on organized exchanges are available with
respect to such transactions. In particular, all Options entered into on a
national securities exchange are cleared and guaranteed by the OCC, thereby
reducing the risk of counterparty default. Further, a liquid secondary market in
Options traded on a national securities exchange may be more readily available
than in the over-the-counter market, potentially permitting the Fund to
liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.
Exchange-traded Options involve certain risks not presented by the
over-the-counter market. For example, exercise and settlement of such Options
must be made exclusively through the OCC, which has established banking
relationships in certain foreign countries for that purpose. As a result, the
OCC may, if it determines that foreign governmental restrictions or taxes would
prevent the orderly exercise or settlement of such Options, or would result in
undue burdens on the OCC or its clearing members, impose special procedures on
exercise and settlement, such as technical changes in the mechanics of delivery,
the fixing of dollar settlement prices or prohibitions on exercise.
The exchanges on which Options, Futures Contracts and Options on Futures
Contracts are traded may impose additional limitations governing the maximum
number of positions on the same side of the market and involving the same
underlying instrument that may be held by a single investor, whether acting
alone or in concert with others (regardless of whether such positions are held
or written on the same or different exchanges or held or written in one or more
accounts or through one or more brokers). In addition, the CFTC and the various
markets have established limits, referred to as "speculative position limits,"
on the maximum net long or net short positions that any person may hold or
control in a particular Futures Contract or Option on a Futures Contract. An
exchange may order the liquidation of positions found to be in violation of
these limits and it may impose other sanctions or restrictions. The Fund does
not believe that these trading and position limits will have an adverse impact
on the strategies for hedging the portfolio of the Fund.
Forward Contracts, Options, Futures Contracts and Options on Futures Contracts
may be traded in foreign markets or on foreign exchanges. Such transactions are
subject to the risk of governmental actions affecting trading in or the prices
of foreign currencies. The value of such positions also could be adversely
affected by, among other things, (i) other foreign political and economic
factors, (ii) lesser availability than in the United States of data on which to
make trading decisions, (iii) delays in the Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the United
States, (iv) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the United States and (v) lesser
trading volume.
Future Developments. The Fund proposes to take advantage of investment
opportunities in the area of Forward Contracts, Options, Future Contracts and
Options on Futures Contracts that are not presently contemplated for use by the
Fund or that are not currently available but that may be developed, to the
extent such opportunities are both consistent with the Fund's investment
objectives and legally permissible investments for the Fund. Such opportunities,
if they arise, may involve risks that differ from or exceed those involved in
the activities described above. The Fund will not invest in such opportunities
without prior disclosure to investors.
B-7
<PAGE>
Bailard, Biehl & Kaiser Diversa Fund
Shareholder Application Form
<TABLE>
<S> <C>
Important - Please mail completed forms to: Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208
Note: Please do not use this application to establish a Bailard, Biehl & Kaiser IRA. You may obtain a Bailard, Biehl & Kaiser IRA
application by calling the Bailard, Biehl & Kaiser Fund Group at (800) 882-8383.
I. Investment Information - Minimum initial investment of $5,000.00.
Amount being invested $________________. Do not send cash. Investments will be paid by (please check one)
[ ] Check or draft made payable to the Fund [ ] Wire through Federal Reserve System
II. Account Registration - Register shares as one of the following: (Please print)
NAME OF INDIVIDUAL NAME(S) OF CO-SHAREHOLDER(S)
_____________________________________ _____________________________________
[ ] Community Property [ ] Tenants in Common
[ ] Joint Tenants with Rights of Survivorship [ ] Other (specify) ________________________________
NAME OF ORGANIZATION OR TRUST______________________________________________________________________________
Name(s) of Trustee(s)__________________________________________________________________________________
Date of Trust _________________________________________________________________________________________
GIFT OR TRANSFER TO MINOR
____________________________________ as Custodian for ____________________________________ under the
(Custodian's Name) (Minor's Name)
_______________________________ Uniform Gift or Transfer to Minor's Act (as applicable in the minor's state of residence).
(Minor's State of Residence)
III. Taxpayer Identification Number (Important Tax Information)
You (as payee) are required by law to provide us (as payer) with your correct taxpayer identification number. Accounts that have a
missing or incorrect taxpayer identification number will be subject to backup withholding at a 31% rate on interest, dividends and
other payments. Backup withholding is not anadditional tax. The tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld.
Part 1. Enter your taxpayer identification number. For most individual taxpayers, this is your Social Security number. For accounts
established under the Uniform Gift or Transfer to Minor's Act, this would be the minor's social security number.
Social Security # ___ ___ ___ - ___ ___ - ___ ___ ___ ___ OR Tax ID # ___ ___ - ___ ___ ___ ___ ___ ___ ___
Part 2. Backup Withholding
[ ] Check here if you are NOT subject to backup withholding, either because you have not been notified by the Internal
Revenue Service (IRS) that you are subject to backup withholding as a result of failure to report all interest or dividends or
because the IRS has notified you that you are no longer subject to backup withholding.
IV. Other Account Information
Address: ______________________________________________________________________________________________
Street or P.O. Box Number City State Zip Code
Home Phone ______________________ Business Phone ______________________ Date of Birth________________
Marital Status _______________ Occupation ________________________ State of Residence_______________
Citizen of: [ ] United States [ ] Other (specify) ___________ Do you have other Bailard, Biehl & Kaiser accounts? [ ] Yes [ ] No.
V. Distribution Option - If none is selected, distributions will be reinvested in additional shares.
(If you choose to have your dividends or capital gains sent by wire, please also complete Section VII.)
[ ] Dividends reinvested at net asset value [ ] Dividends paid in cash [ ] Dividends wired
[ ] Capital gains reinvested at net asset value [ ] Capital gains paid in cash [ ] Capital gains wired
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
VI. Telephone Exchange and Redemption Option [ ] Yes [ ] No
I/We authorize the Bailard, Biehl & Kaiser Diversa Fund and its agent, Chase Global Funds Services Company, to honor exchange and
redemption requests of between $1,000 and $150,000, by telephone. I/We agree that the Bailard, Biehl & Kaiser Diversa Fund and Chase
Global Funds Services Company will not be liable for losses sustained as a result of acting on telephone instructions that Chase
Global Funds Services Company reasonably believes to be genuine and that such authorization will apply until I/we revoke it.
I/We select one of the following telephone redemption options:
[ ] Please mail telephone redemption proceeds to the name and address in which my/our fund account is registered;
[ ] Please mail or wire telephone redemption proceeds to the commercial bank indicated below. (Please obtain wiring
instructions from your bank before completing the section below.)
VII. Wiring Instructions - Please add the following wiring instructions to my account for distributions and redemption proceeds:
(All wires except for dividend and capital gains distributions will be assessed a $10.00 wiring fee by the transfer agent.)
Bank Name _________________________________________________ Bank ABA Number ________________________________________________
Bank Address_________________________________________________________________________________________________________________
Street Address City State Zip Code
Nominee Account Name & Number (if applicable)__________________________________________________________________________________
Client Account Name & Number___________________________________________________________________________________________________
Please attach a voided check or deposit slip from the account to which the monies are to be mailed or wired.
VIII. Systematic Withdrawal Plan Option
If you select this option, please review the terms and conditions of this plan in the Prospectus. This Application must be received
in good order at least 10 days prior to the first designated payment from the Systematic Withdrawal Plan (SWP) account, and 10 days
prior notice is required before any changes to the instructions in this Application can be implemented.
[ ] I/We hereby authorize the Bailard, Biehl & Kaiser Diversa Fund and its agent, Chase Global Funds Services Company, to
liquidate shares in and withdraw cash from this account beginning ________________, 19 _____, in the amount of $ _________
[ ] SEMIMONTHLY, on or about the [ ] THIRD or the [ ] EIGHTEENTH, or [ ] MONTHLY, on or about the [ ] THIRD or the
[ ] EIGHTEENTH, or [ ] QUARTERLY, on or about the [ ] THIRD or the [ ] EIGHTEENTH, to provide SWP payments, and to mail
a check for such amount from Boston as soon as practicable after the third and/or eighteenth day of the payment period, as
applicable, to me or to the following payee (complete only if different from information previously stated):
Name(s) of Payee ______________________________________________________________________________________________________________
Address _______________________________________________________________________________________________________________________
Street or P.O. Box Number City State Zip Code
IX. Duplicate Statement Authorization
I/We hereby authorize the Bailard, Biehl & Kaiser Diversa Fund and its agent, Chase Global Funds Services Company, to release
information regarding my account to the person listed below:
Name & Title (if applicable)______________________________________________________________ Telephone # ________________________
Firm Name (if applicable)______________________________________________________________________________________________________
Address________________________________________________________________________________________________________________________
Street or P.O. Box Number City State Zip Code
X. Investment Representations and Signature(s)
The undersigned represent that the shares subscribed to hereby, and any other shares of the Fund purchased by the
undersigned in the future, will be purchased for the undersigned's own account (or for a trust account described in "Account
Registration" above) and not with a view to or for sale in connection with any distribution of the shares. This representation shall
in no way restrict the undersigned's ability to redeem some or all of the undersigned's shares at any time.
The undersigned certify that I/we have received and read the current Fund Prospectus and agree to be bound by its terms.
Under penalties of perjury, I/we certify that the taxpayer identification number and the statement as to backup withholding provided
in "Taxpayer Identification Number" above are true, correct and complete. The establishment of this account is subject to acceptance
by the Fund.
The Internal Revenue Service does not require your consent to any provision of this document other than the
certifications required to avoid backup withholding.
___________________________________________ _______________ ________________________________________ ______________
Signature Date Signature Date
</TABLE>
<PAGE>
Investment Adviser
Bailard, Biehl & Kaiser, Inc.
2755 Campus Drive
San Mateo, California 94403
Transfer Agent
Chase Global Funds Services Company
Boston, Massachusetts
Custodian And Accountant
Brown Brothers Harriman & Co.
Boston, Massachusetts
Counsel
Howard, Rice, Nemerovski, Canady, Falk & Rabkin, a Professional
Corporation San Francisco, California
Distributor
BB&K Fund Services, Inc.
2755 Campus Drive
San Mateo, California 94403
Independent Accountants
Price Waterhouse LLP
Boston, Massachusetts
IRA Custodian
The Chase Manhattan Bank, N.A
New York, New York
Diversa Fund Trustees And Officers
Thomas E. Bailard, Chairman, Trustee
Burnice E. Sparks, Jr., President, Trustee
Shirley L. Clayton, Trustee
David B. Shippey, Trustee
James C. Van Horne, Trustee
Barbara V. Bailey, Treasurer
Janis M. Horne, Secretary and Chief Compliance Officer
Sofi Zacharias, Assistant Secretary and Assistant Treasurer
Investor Services Department
(800) 882-8383
<PAGE>
(This page was intentionally left blank)
<PAGE>
As filed with the Securities and Exchange
Commission on November 27, 1996
Registration No. 33-8441
File No. 811-4824
================================================================================
Part B
of
Form N-1A
REGISTRATION STATEMENT
BAILARD, BIEHL & KAISER FUND GROUP
================================================================================
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Bailard, Biehl & Kaiser Diversa Fund
2755 Campus Drive
San Mateo, California 94403
This Statement of Additional Information is not a Prospectus, but contains
information in addition to that contained in the Prospectus which may be of
interest to some investors. This Statement of Additional Information should be
read in conjunction with the Prospectus dated January 26, 1997. You can request
the Prospectus by writing directly to us at the address above or by calling us
at (800) 882-8383.
Table of Contents
Page
----
Investment Objectives, Policies and Restrictions.................. B-2
Management........................................................ B-5
Right to Use Name................................................. B-8
Investment Advisory and Other Services............................ B-8
Portfolio Transactions and Brokerage Commissions.................. B-10
Net Asset Value for Purchase, Exchange and Redemption of Shares... B-11
Tax Aspects....................................................... B-12
Shareholder Information........................................... B-13
Performance Data.................................................. B-13
Financial Statements.............................................. B-13
This Statement of Additional Information Does Not
Constitute an Offer to Sell Securities.
The date of this Statement of Additional Information
is January 26, 1997.
B - 1
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The Bailard, Biehl & Kaiser Diversa Fund (the "Fund") is designed to achieve an
above average total return (the sum of income and capital gains) with below
average risk through investment in up to nine classes of assets: United States
(domestic) cash equivalents, stocks and bonds; international cash equivalents,
stocks and bonds; real estate securities; precious metal-related securities; and
precious metals. The Fund's performance with respect to return and risk will be
measured against that of other funds investing in multiple classes of
securities. The specific objectives and policies of the Fund are more fully
described in the Prospectus.
The Fund's investment activities are subject to certain restrictions that are
deemed "fundamental policies." These fundamental policies may not be changed
without the approval of the holders of a majority of the Fund's outstanding
voting securities, which for this purpose means the vote of (a) 67% or more of
the shares of the Fund represented at a meeting where more than 50% of the
Fund's shares are represented, or (b) more than 50% of the outstanding shares of
the Fund, whichever is less. These fundamental policies provide that the Fund
will not:
1. Invest in securities of any one issuer (other than cash and cash items, and
securities of the United States Government and its agencies and
instrumentalities), if immediately after and as a result of such investment
more than 5% of the value of the Fund's total assets would be invested in
the securities of such issuer.
2. Invest more than 25% of the value of its total assets in the securities of
companies primarily engaged in any one industry (other than the United
States Government and its agencies and instrumentalities).
3. Acquire more than 10% of the outstanding voting securities of any one
issuer or invest for the purpose of exercising control.
4. Invest in companies for the purpose of exercising control or management.
5. Purchase or sell real property; provided that the Fund will invest in
publicly traded securities secured by real estate or interests therein or
issued by companies which invest in real estate or interests therein.
6. Purchase or sell commodities or commodity contracts or invest in put, call,
straddle or spread options or in interests in oil, gas or other mineral
exploration or development programs; provided, however, that the Fund may
invest in precious metals, in the securities of companies that explore for,
extract, process or deal in precious metals and in asset-based securities
related to precious metals. In addition, this policy will not prevent the
purchase, ownership or sale of warrants or other rights where the grantor
of the warrants is the issuer of the underlying securities ("grantor
warrants"); provided that the Fund will not purchase a grantor warrant if,
as a result thereof, the aggregate market value of all purchased grantor
warrants then owned exceeds 5% of the total assets of the Fund or 2% of the
total assets of the Fund in the case of warrants which are not listed on
the New York Stock Exchange or the American Stock Exchange. Moreover, and
notwithstanding this restriction, the Fund may purchase and sell foreign
currencies on a current basis and may engage in interest rate, foreign
currency and market hedging transactions, including investing in, writing
and purchasing forward contracts, options, futures contracts and options on
futures contracts on debt securities, financial indices and foreign
currencies.
7. Issue senior securities or borrow money, except that the Fund may borrow
from a bank as a temporary measure for extraordinary or emergency purposes
in amounts not exceeding 5% of its total assets and except that the Fund
may obtain such credit as may be necessary for the
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<PAGE>
clearance of purchases or sales of securities. For the purpose of this
restriction, neither margin or collateral arrangements with respect to
forward contracts, options, futures contracts or options on futures
contracts, nor the purchase or sale of forward contracts, options, futures
contracts or options on futures contracts, are deemed to be the issuance of
a senior security or borrowing.
8. Mortgage, pledge or in any other manner transfer any of its assets as
security for any indebtedness, except to secure borrowings described above
or to obtain such credit as may be necessary for the clearance of purchases
or sales of securities. For the purpose of this restriction, margin or
collateral arrangements with respect to forward contracts, options, futures
contracts and options on futures contracts, are not deemed to be a pledge
of assets.
9. Purchase any securities on margin or effect short sales, except that the
Fund may obtain such credit as may be necessary for the clearance of
purchases or sales of securities. The deposit by the Fund of initial or
variation margin in connection with forward contracts, options, futures
contracts and options on futures contracts will not be considered the
purchase of a security on margin.
10. Engage in the business of underwriting securities issued by others, or
purchase illiquid securities, i.e. securities subject to contractual
restrictions on disposition or legal restrictions on disposition in all of
the principal markets where traded, repurchase agreements maturing in over
seven days, or securities that are not otherwise readily marketable, if
such purchase will result in more than 10% of the value of its total assets
then being invested in such illiquid securities.
11. Invest in securities of an issuer which, together with any predecessor, has
been in operation for less than three years if, as a result, more than 5%
of the Fund's total assets would then be invested in such securities.
12. Participate on a joint or a joint and several basis in any trading account
in securities. (The "bunching" or combining of orders for the sale or
purchase of marketable securities with other accounts under the management
of Bailard, Biehl and Kaiser, Inc. ("Bailard, Biehl & Kaiser," or the
"Adviser") to save brokerage costs or achieve an average price among them
is not deemed to result in a securities trading account.)
13. Make loans of money or securities to any person or firm, except through the
purchase of debt securities in accordance with the Fund's investment
objectives and policies.
14. Purchase securities from or sell securities to its officers or directors or
other "interested persons" of the Fund (as defined in the Investment
Company Act of 1940 (the "1940 Act").
15. Purchase or retain the securities of an issuer if, to the Fund's knowledge,
one or more of the officers or directors of the Fund, or one or more of the
officers or directors of the Adviser, individually own beneficially more
than 1/2 of 1% of the securities of such issuer or together own
beneficially more than 5% of such securities.
Unless otherwise specified, if a percentage restriction on investment or
utilization of assets set forth above is adhered to at the time an investment is
made, a later change in percentage resulting from changing values or a similar
type of event (such as a reduction in the size of the Fund occasioned by the
redemption of shares) will not be considered a violation of the Fund's
investment restrictions.
With respect to the Fund's policy not to invest more than 25% of the value of
its total assets in any one industry, the Fund deems the following eleven
economic sectors, representing the industry groups listed, to be separate
industries:
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<PAGE>
Basic Industry Energy and Natural Resources
- - - - -------------- ----------------------------
Aluminum Coal
Chemicals Domestic Oils
Containers Exploration (on and offshore)
Fertilizer Gas Pipelines/Distribution
Paper Gold and Precious Metals
Steel International Oils
Metals
Oil Service
Capital Goods
- - - - -------------
Agricultural Machines
Construction Machines Finance
Electricals -------
Machine Tools Banks - NYC
Miscellaneous Capital Goods - Regional
Insurers - Multi
- Casualty
Communication Services - Life
- - - - ---------------------- Miscellaneous Finance
Telecommunications Savings and Loan Companies
Finance Companies
Consumer Cyclicals
- - - - ------------------
Advertising
Auto/Parts/Tires Health Care
Broadcasting -----------
Entertainment Drugs
Forest Products Hospital Management
Home Builders/Mobile Home Hospital Supply
Home Furnishings/Appliances
Newspapers High Technology
Publishing ---------------
Restaurants Business Equipment
Retailing-Food, Drug, Department Computer Services
Waste Management Defense Electronics
Electronic-Instrumentation
Electronic-Semiconductors
Electronic Warfare
Consumer Staples Transportation
- - - - ---------------- --------------
Apparel Air Freight
Brewers Air Transport
Cosmetics Railroads
Distillers Trucking
Food
Photography
Soft Drinks
Shoes Utilities
Soaps ---------
Textiles Electric
Tobacco Gas Pipelines
Toys Regulated Telecommunications
Water
In addition, the Investment Company Act of 1940, with certain exceptions,
prohibits the Fund from
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<PAGE>
investing its assets in more than 3% of the outstanding voting stock of any
other investment company, more than 5% of its total value in any other
investment company, more than 10% of its total value in other investment
companies as a group, or, together with other investment companies having the
same investment adviser, more than 10% of the outstanding voting stock of any
closed-end invstment company, unless the security is acquired pursuant to a plan
of reorganization or a Securities and Exchange Commission approved offer of
exchange.
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<PAGE>
MANAGEMENT
Trustees and Officers
The names and business addresses of the Trustees and officers of the Trust,
their positions with the Trust and their other principal occupations during the
past five years are as follows:
<TABLE>
<CAPTION>
Position(s) Held Other Principal
Name and Address with Trust Occupation(s) During Past Five Years
- - - - ---------------- ----------------- ------------------------------------
<S> <C> <C>
Thomas E. Bailard(1) Chairman of the Chairman, Chief Executive Officer
2755 Campus Drive Board, Chief and President of BB&K Holdings,
San Mateo, CA 94403 Executive Officer Inc. ("Holdings"). Officer and Director
and Trustee of the Adviser, currently Chairman and Chief
Executive Officer. Chairman of BB&K Fund
Services, Inc., a registered broker-dealer
("Fund Services"). Chairman of Bailard,
Biehl & Kaiser REIT.
Burnice E. Sparks, Jr.(1) President and Director and officer of the Adviser,
2755 Campus Drive Trustee currently co-President. Director and
San Mateo, CA 94403 Chief Executive Officer of Fund Services
since June 1992. President and Director of
the Bailard, Biehl & Kaiser International
Fund Group, Inc. (the "International Fund
Group").
Janis M. Horne(1) Secretary and Senior Vice President, Investment
2755 Campus Drive Chief Compliance Officer Counselor and Chief Compliance Officer
San Mateo, CA 94403 of the Adviser. Secretary and
Chief Compliance Officer of the International
Fund Group.
Barbara V. Bailey(1) Treasurer Senior Vice President and Treasurer of
2755 Campus Drive Holdings and Senior Vice President and
San Mateo, CA 94403 Treasurer/Secretary of the Adviser since
December 1995. Treasurer of International
Fund Group since September 1996. Treasurer
and Secretary of Bailard, Biehl & Kaiser
REIT since June 1996. Secretary of Fund
Services and Management consultant from
September 1995 to December 1995.
Manager/Consultant at Watson Wyatt
from December 1994 to September 1995.
Vice President at Cavise Nationale
de Credit Aguide from July 1991 to
April 1994.
Sofi Zacharias(1) Assistant Treasurer Employee of the Adviser since
2755 Campus Drive and Assistant Secretary November 1995, most recently as Fund
San Mateo, CA 94403 Services Administrator. Assistant
Treasurer and Assistant Secretary of the
International Fund Group since
September 1996. Assistant Treasurer of
Bailard, Biehl & Kaiser REIT since June
1996. Employee of Franklin Resources,
Inc. from July 1994 to May 1995.
</TABLE>
- - - - --------
(1) "Interested person" of the Trust, as defined in the 1940 Act.
B - 6
<PAGE>
<TABLE>
Position(s) Held Other Principal
Name and Address with Trust Occupation(s) During Past Five Years
- - - - ---------------- ---------------- ------------------------------------
<S> <C> <C>
Shirley L. Clayton(1) Trustee President and Chief Operating Officer
TopoMetrix of TopoMetrix, a manufacturer of
5403 Betsy Ross Drive scanning probe microscopes, since
Santa Clara, CA 95054-1162 January 1996; Chief Financial Officer
from June 1993 to January 1996.
Chief Financial Officer of Cygnus
Therapeutic Systems, Inc., a biotechnology
company, from March 1990 to June 1993.
Director of the International Fund Group.
David B. Shippey(1) Trustee Prior to September 1983 associated
5130 Enterprise Rd. with Saga Corporation, a restaurant
Santa Rosa, CA 95404 and contract food service business, his last
position being Vice President and Treasurer.
Director of the International Fund Group.
James C. Van Horne(1) Trustee A.P. Giannini Professor of Finance at
Graduate School of Graduate School of Business of
Business Stanford University from September
Stanford University 1976 to the present. From September
Stanford, CA 94305 1975 to August 1976, Deputy Assistant
Secretary of the United States Treasury
Department. Director of Sanwa Bank
California and Montgomery Street Income
Securities, Inc., a registered investment
company. Director of the International Fund
Group.
</TABLE>
______________________________
(1) Member of the Audit Committee
B - 7
<PAGE>
The following table sets forth the compensation paid to the Trust's Trustees
during the fiscal year ended September 30, 1996.
<TABLE>
<CAPTION>
Compensation Table
Name of Person Aggregate Pension or Retirement Estimated Total Compensation
and Position Compensation Benefits Accrued as Part Annual From Company and
from Trust of Trust Expenses Benefits Upon Fund Complex(1)
Retirement Paid to Trustees
- - - - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Thomas E. Bailard $0(2) $0 $0 $0
Burnice E. Sparks, Jr. $0(2) $0 $0 $0
Shirley L. Clayton $10,000(3) $0 $0 $20,000
David B. Shippey $10,000(3) $0 $0 $20,000
James C. Van Horne $10,000(3) $0 $0 $20,000
</TABLE>
The Trust and the International Fund Group reimburse each Trustee and Director
for travel and other out-of-pocket disbursements incurred in connection with
attending Board meetings. The Trust and the International Fund Group also
reimburse other travel expenses of Trustees, Directors and officers, including
international travel expenses, incurred incident to the performance of their
duties as Trustees, Directors and officers.
________________________
(1) A Fund Complex consists of investment companies that hold themselves
out to investors as related companies for purposes of investment and investor
services, have a common investment adviser or have an investment adviser that is
an affiliated person of the investment adviser of any other investment
companies. The Trust and the International Fund Group are considered to be part
of the same Fund Complex.
(2) Does not include fees paid to the Adviser pursuant to the Management
Agreement as described below under "INVESTMENT ADVISORY AND OTHER SERVICES".
(3) Consists of $6,000 annual trustee fee plus $1,000 for each Board
meeting attended in person.
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<PAGE>
RIGHT TO USE NAME
Bailard, Biehl & Kaiser has granted the Fund the right to use the designation,
"Bailard, Biehl & Kaiser," in its name. The Adviser has reserved the right to
withdraw its consent to the use of such designation by the Fund under certain
conditions and to grant the use of such name to others, including other
investment companies.
INVESTMENT ADVISORY AND OTHER SERVICES
The Fund has entered into an Investment Advisory and Management Agreement (the
"Management Agreement") with Bailard, Biehl and Kaiser for investment advisory
and certain portfolio transaction services. Pursuant to the Management
Agreement, the Adviser manages the day-to-day operations of the Fund and directs
the purchase and sale of securities in the Fund's portfolio in accordance with
the Fund's investment objectives and policies.
The Adviser receives a monthly fee calculated at an annual rate equal to .95% of
the average net assets of the Fund up to $75 million, .80% of the next $75
million, and .65% of the average net assets in excess of $150 million. While the
initial rate is higher than the rate charged by most other advisers, the Fund
believes that it is justified by the complexity of the services provided by the
Adviser. For the fiscal years ended September 30, 1994, 1995, and 1996, the
total fees paid to the Adviser amounted to $472,318, $398,374, and $370,980
respectively. The Adviser pays the following expenses incurred in the Fund's
day-to-day management: office space and facilities used by the Adviser, salaries
and expenses of personnel of the Adviser and certain costs associated with the
sale of the Fund's shares.
The Management Agreement may be terminated at any time, without penalty upon 60
days' written notice, by majority vote of the Board of Trustees of the Fund or
by a vote of the holders of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund. The Management Agreement may also be
terminated by the Adviser upon not less than 180 days' written notice to the
Fund and terminates automatically upon its assignment (as defined in the 1940
Act).
The Fund pays all of its own expenses (except for those expressly to be paid by
the Adviser) including without limitation the following: all costs and expenses
incident to the registration, including the maintenance of registration, of the
Fund under the 1940 Act or the qualification of the shares of the Fund for sale
under federal, state or other securities laws; printing or other reproduction
and distribution of any prospectuses and any other documents necessary and
incident to any public offering (other than costs incident to the reproduction
and distribution of prospectuses to prospective new investors and the
advertising of Fund shares, which are payable by the Adviser); charges and
expenses of any registrar or custodian of the Fund; all auditing, accounting,
bookkeeping and record keeping charges and expenses; transfer agent and dividend
agent charges and expenses; all commissions payable on portfolio securities
transactions; all taxes and organizational fees payable by the Fund to any
federal, state or other governmental agencies; the costs of preparing and
printing stock certificates; all expenses of meetings of shareholders and
Trustees and of preparing, printing and mailing proxy statements and any reports
to shareholders; fees and travel expenses of officers and Trustees; fees and
expenses incident to any dividend or distribution reinvestment program; all
charges and expenses of legal counsel for the Fund; fees and expenses incurred
in obtaining rulings, advice or other information or counselling relating to the
taxation of the Fund or its shareholders; all association dues; all interest
payable on Fund borrowings; and all costs of information obtained from sources
other than the Adviser or its affiliated persons (as defined in the 1940 Act)
relating to the pricing and valuation of securities.
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<PAGE>
As an accommodation to the Fund, from time to time Bailard, Biehl & Kaiser
directly pays certain expenses of the Fund (such as insurance premiums, Trustee
fees, and fees relating to state securities law filings) for which Bailard,
Biehl & Kaiser is later reimbursed by the Fund. Disbursements by Bailard, Biehl
& Kaiser on behalf of the Fund and their subsequent reimbursement by the Fund
are effected only upon the prior approval of an officer of the Trust. For the
fiscal year ended September 30, 1996, the Fund reimbursed the Adviser
approximately $41,800.
The Adviser has agreed to reduce the investment management fee payable to it in
any fiscal year by the amount by which the expenses of the Fund exceed the most
stringent limits prescribed by any state in which the Fund's shares are offered
for sale. Currently, only California imposes an expense limitation. California
law requires reimbursement of expenses (up to the amount of fees received) if in
any fiscal year the annual aggregate expenses of the Fund (determined in
accordance with generally accepted accounting principles), exclusive of
interest, taxes, brokerage and excess custodian costs attributable to
investments in foreign securities (as compared to custodian costs that would
have been incurred had the investments been in domestic securities) exceed 2.5%
of the first $30 million of the average net assets of the Fund, or 2% of the
next $70 million, or 1.5% of the remaining average net assets of the Fund.
(Expenditures which are capitalized in accordance with generally accepted
accounting principles applicable to investment companies, including costs
generally incurred in connection with the purchase or sale of portfolio
securities, are not deemed expenses for purposes of the foregoing reimbursement
provisions.) On September 14, 1989 the Fund received an order from the
California Commissioner of Corporations allowing the Adviser to exclude from the
calculation of the Fund's aggregate annual expenses, not only excess foreign
custodian costs, but also the investment management, recordkeeping, legal and
auditing fees attributable to its foreign investments and asset allocation
practices. For the fiscal years ended September 30, 1994, 1995, and 1996 no
expense reimbursement was required. The imposition of an expense limitation by
California or any other state after October 1996 appears to be prohibited by the
National Securities Markets Improvement Act of 1996.
BB&K Fund Services, Inc., 2755 Campus Drive, San Mateo, California 94403 ("Fund
Services"), serves as the exclusive Distributor for the Fund's shares pursuant
to an agreement with the Fund. Fund Services receives no commission or
compensation for acting as the Fund's agent in the continuous public offering of
the Fund's shares.
The Adviser and the Distributor are wholly owned subsidiaries of BB&K Holdings,
Inc. ("Holdings"). In addition, Thomas E. Bailard and his spouse, Terri, may be
deemed to be controlling persons of the Adviser and the Distributor by virtue of
their beneficial ownership of more than 25% of Holdings' securities as
individuals or as trustees.
As part of the Custodian Agreement, the Fund's Custodian has agreed to act as
the Fund's financial agent, and will maintain certain books and records for the
Fund, perform the calculations necessary to compute the value of the Fund's
investment securities and other assets and the net asset value of the Fund's
shares, confirm all share purchases and redemptions to the Fund's Transfer
Agent, provide financial reports to the Fund necessary to prepare its financial
statements, and provide additional services of a similar nature. For services
rendered by the Custodian in the 1994, 1995, and 1996 fiscal years, the Fund
paid the Custodian $168,037, $145,700, and $174,875 respectively.
The Trust, on behalf of the Fund, has entered into an Administration Agreement
dated as of April 1, 1994, as amended, with Investment Company Administration
Corporation.
Officers, directors and employees of the Trust and the Adviser are permitted to
invest in securities for their own account, including securities that may be
purchased or held by the Fund. To
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<PAGE>
address potential conflicts with the interests of the Fund that might arise from
personal securities transactions, both the Trust and the Adviser have adopted
codes of ethics pursuant to Rule 17j-1 under the 1940 Act. These codes include
certain preclearance and reporting procedures and certain restrictions on
contemporaneous and short-term trading and on purchases of securities in private
placements and initial public offerings.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
The Adviser supervises the allocation of brokerage and reviews the efficiency of
execution and reasonableness of the commissions charged. The primary objective
in placing orders for the purchase and sale of securities for the Fund's
portfolio is to obtain the most favorable net results taking into account such
factors as price, commission (which is negotiated in the case of the U.S. stock
exchange transactions but which is generally fixed in the case of foreign stock
exchange transactions), size of order, difficulty of execution and skill
required of the executing broker or dealer. Securities are ordinarily purchased
from the primary markets, whether over-the-counter or listed, and listed
securities may be purchased in the over-the-counter market if in the judgment of
the Adviser it is the primary market.
Although favorable price and efficient execution of portfolio transactions are
primary considerations, other factors may also be relevant. Accordingly, the
Adviser may, consistent with the Fund's best interest, place orders with brokers
who provide research services, such as analyses of industries or issuers and
statistical or economic information. While allocation of brokerage on this basis
may result in the Fund being charged a higher commission rate on certain
transactions, the Adviser periodically reviews the brokerage commissions paid by
the Fund to ensure their reasonableness in relation to (i) the brokerage
commissions paid by other similarly situated investors and (ii) the value of the
brokerage and research services provided, viewed in terms of either particular
transactions or the overall responsibilities of the Adviser to the Fund. It is
not contemplated that there will be any set formula or allocation with respect
to brokerage.
The extent to which commissions charged by brokers may reflect an element of
value for research services cannot be determined. To the extent that research
services are provided by brokers through whom the Fund places portfolio
transactions, the Adviser may be relieved of expenses which it might otherwise
bear. Research services furnished by brokers could be useful to the Adviser in
serving its other clients as well as the Fund; on the other hand, certain
research services obtained by the Adviser as a result of the placement of
portfolio brokerage of other clients could be useful to it in serving the Fund.
There are occasions in which portfolio transactions for the Fund may be executed
as part of concurrent authorizations to purchase or sell the same security for
other accounts served by the Adviser, some of which accounts have investment
objectives similar to the Fund's investment objective. Although such concurrent
authorizations potentially could be either advantageous or disadvantageous to
the Fund, they will be effected only when the Adviser believes that to do so
will be in the best interest of the Fund. When such concurrent authorizations
occur, the objective will be to allocate the executions in a manner which is
deemed equitable by the Adviser to the accounts involved, including the Fund.
The Adviser does not use any of its affiliates or affiliates of the Fund to
execute portfolio transactions. The Fund, however, may purchase equity and debt
securities of brokers or dealers that execute its portfolio transactions. During
the fiscal year ended September 30, 1996, the Fund did not acquire any
securities issued by the ten brokers (or their parent companies) who executed
the largest dollar amounts of portfolio transactions for the Fund.
B - 11
<PAGE>
During the fiscal years ended September 30, 1994, 1995, and 1996, the Fund paid
brokerage commissions on Fund portfolio securities transactions of approximately
$252,531, $134,521, and $85,971 respectively. The Fund's portfolio turnover rate
for the fiscal years ended September 30, 1994, 1995, and 1996, was 137%, 166%,
and 68%, respectively. Brokerage commissions declined in 1995 largely as a
result of lower commission rates. The decision in brokerage commissions and
portfolio turnover rate in 1996 was primarily due to fewer asset allocation
changes and fewer trades in the international stock class of the portfolio.
NET ASSET VALUE FOR PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
The net asset value per share, on which purchase, exchange and redemption prices
are based, is calculated in accordance with the formula and at the times set
forth in the Prospectus. As of the date of this Statement of Additional
Information, the Fund understands that the New York Stock Exchange will be
closed (and, thus, no net asset value will be calculated) on the following U.S.
holidays: New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas.
Changes in holdings of portfolio securities are accounted for no later than the
first calculation of net asset value following the trade date (date the order to
buy or sell is executed). Dividends are accounted for on the ex-dividend date
and detachments of securities from other securities are accounted for on the
date of detachment, except that certain dividends or detachments from
international securities are recorded as soon as the Fund is informed of the
ex-dividend or detachment date.
Securities traded on an exchange or on the NASDAQ National Market System are
valued at the closing price on that exchange. If there has been no sale on such
date or if the closing price is not the last sale price, then the security is
valued at the mean of the closing bid and asked prices on such day. Equity
securities that are not traded on an exchange or on the NASDAQ National Market
System are valued at the mean of the closing bid and asked prices.
Short-term debt obligations with a remaining maturity of 60 days or less are
valued at amortized cost. Other debt securities are valued at prices provided by
one or more bona fide market-makers as of the closing of the relevant market.
Options and Options on Futures Contracts are valued at the last sale price on
the exchange on which they are listed, unless no sales of such options have
taken place that day, in which case they will be valued at the mean between
their closing bid and asked prices. Options traded over-the-counter are valued
at the most recent bid quotation in the case of purchased options and at the
most recent asked quotation in the case of written options. When the Fund writes
an option, an amount equal to the premium received is included as an asset, and
an equivalent deferred credit is included as a liability and marked to market on
a daily basis. If a call option written by the Fund is exercised, the proceeds
are increased by the premium received. If a call option written by the Fund
expires, the Fund has a gain in the amount of the premium. If the Fund enters
into a closing purchase transaction, the Fund will have a gain or loss depending
on whether the premium was more or less than the cost of the closing
transaction. If a put option held by the Fund is exercised, the amount the Fund
receives on sale of the underlying investment is reduced by the amount of the
premium paid by the Fund.
Futures Contracts and precious metals are valued at the last settlement price as
of the close of the commodities exchange on which they are traded. Forward
currency contracts are valued based on their amortized forward points and the
closing spot price of their underlying currencies as of 12:00 p.m. New York
time. Foreign securities and cash are converted into U.S. dollar values at the
mean of the bid and asked prices for the underlying currencies as of the same
time.
B - 12
<PAGE>
All prices are taken from the primary market in which the portfolio security or
other asset is traded.
The Board of Trustees has delegated to the Fund's Custodian and the Adviser the
authority to make valuations of marketable securities and rate of exchange
determinations in accordance with the standards described above. If market
quotations are not readily available for valuation purposes, portfolio
securities and other assets will be valued by or under the direction of the
Board of Trustees in such manner as the Board of Trustees in good faith deems
appropriate to reflect the fair value thereof.
The general procedures for purchasing, exchanging and redeeming shares are fully
described in the Prospectus. In addition, during any 90-day period, the Fund is
committed to pay in cash all requests to redeem shares by any one shareholder,
up to the lesser of $250,000 or 1% of the value of the Fund's net assets at the
beginning of the period. The Fund may change this commitment only with the
approval of the Securities and Exchange Commission. Should redemptions by any
shareholder exceed this limitation, the Fund reserves the right to redeem the
excess amount in whole or in part in readily marketable securities. The same
method used to determine net asset value will be used to value portfolio
securities distributed in connection with such redemptions. If shares of the
Fund are redeemed in kind, the redeeming shareholder may incur additional
brokerage costs in converting to cash any portfolio securities distributed.
TAX ASPECTS
The Fund believes that it has qualified for "pass-through" tax treatment as a
regulated investment company for its fiscal year ended September 30, 1996, and
intends to be able to continue to so qualify. To qualify as a regulated
investment company, the Fund must, among other things, (a) derive in each
taxable year at least 90% of its gross income from dividends, interest, gains
from the sale or other disposition of stocks, securities or foreign currencies,
or certain other sources, (b) derive in each taxable year less than 30% of its
gross income from the sale or other disposition of certain assets, including
stock, securities, and certain foreign currency positions, held for less than
three months, (c) diversify its holdings so that, at the end of each quarter of
the taxable year, (i) at least 50% of the market value of the Fund's assets is
represented by cash, U.S. government obligations and other securities limited in
respect of any one issuer to an amount not greater than 5% of the Fund's assets
and 10% of the outstanding voting securities of such issuer, and (ii) not more
than 25% of the value of its assets is invested in the securities of any one
issuer (other than U.S. government obligations or the securities of other
regulated investment companies), and (d) distribute in each year at least 90% of
its investment company taxable income.
For any year in which it does not qualify as a regulated investment company, (a)
the Fund will be taxed as an ordinary corporation, (b) distributions to its
shareholders will not be deductible by the Fund in computing its taxable income,
and (c) the Fund's distributions, to the extent made out of the Fund's current
or accumulated earnings and profits, will be taxable to its shareholders as
dividends (regardless of whether they would otherwise have been considered
long-term capital gains). Should the Fund be deemed a personal holding company,
its undistributed income would be taxed at the highest marginal rate applicable
to corporations and it could be subject to an additional personal holding
company tax generally equal to 39.6% of its net undistributed dividend and
interest income.
Backup Tax Withholding Requirement
Certain shareholders may be subject to backup tax withholding at a 31% rate.
Generally, a shareholder will be subject to backup withholding if the
shareholder fails to provide the Fund with its correct taxpayer identification
number, or if the IRS notifies the Fund that the shareholder has underreported
interest or dividends. In addition, shareholders who fail to certify that they
are not
B - 13
<PAGE>
subject to backup withholding (on the grounds only of underreporting and notice
from the IRS) will be subject to backup withholding. Accordingly, to avoid being
subject to backup withholding, investors who acquire shares in the Fund must
certify that they have provided their correct taxpayer identification numbers
and that they are not subject to backup withholding in the appropriate spaces on
the application at the end of the Prospectus.
Other Tax Consequences
Dividends and interest received by the Fund in connection with its foreign
securities investments may give rise to withholding and other taxes imposed by
foreign countries, generally at rates from 10% to 35%. Tax conventions between
certain countries and the United States may reduce or eliminate such taxes.
Investors may be entitled to claim U.S. foreign tax credits with respect to such
taxes, subject to the limitations of the Code. Foreign countries generally do
not impose taxes on capital gains in respect of investments by foreign
investors.
Some investments made by the Fund may be treated as "passive foreign investment
companies" ("PFICs") for U.S. income tax purposes. Investment by the Fund in
PFICs could alter the timing or characterization of certain distributions to
shareholders or subject the Fund to federal income tax or other charges in
certain circumstances.
The discussion in the Prospectus, together with the foregoing, is a general and
abbreviated summary of the tax consequences of investment in the Fund. Investors
are urged to consult their own tax advisors to determine the effect of
investment in the Fund upon their individual tax situations.
SHAREHOLDER INFORMATION
As of November 15, 1996 all officers and Trustees of the Trust as a group held
of record and beneficially less than 1% of the outstanding shares of the Fund.
No shareholders held of record or, to the Fund's knowledge, beneficially in
excess of 5% of the outstanding shares of the Fund on that date.
PERFORMANCE DATA
The Fund may compute its average annual compounded rate of total return during
specified periods that would equate a hypothetical initial investment of $1,000
to the ending redeemable value of such investment by (a) adding one to the
computed average annual total return, (b) raising the sum to a power equal to
the number of years covered by the computation and (c) multiplying the result by
$1,000 (which represents the hypothetical initial investment). The ending
redeemable value is determined by assuming a complete redemption at the end of
the periods covered by the average annual total return computation. The Fund's
average annual compounded rates of total return for the one-year and five-year
periods ended September 30, 1996 were 10.09% and 8.73%, respectively. The Fund's
average annual compounded rate of total return from December 18, 1986
(commencement of operations) to September 30, 1996 was 7.26%. These figures
assume that all dividends and distributions by the Fund are reinvested at net
asset value on the reinvestment dates.
These figures represent past performance and an investor should be aware that
the investment return and principal value of an investment in the Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Therefore, there is no assurance that this performance
will be repeated in the future.
FINANCIAL STATEMENTS
Incorporated by reference herein are the report of the independent accountants
dated November 15, 1996, and the other portions of Registrant's annual report to
shareholders for the fiscal year ended September 30, 1996, under the headings:
"SCHEDULE OF INVESTMENTS," "STATEMENT OF
B - 14
<PAGE>
ASSETS AND LIABILITIES," "STATEMENT OF OPERATIONS," "STATEMENT OF CHANGES IN NET
ASSETS," "FINANCIAL HIGHLIGHTS, " "NOTES TO FINANCIAL STATEMENTS" and "REPORT OF
INDEPENDENT ACCOUNTANTS". Copies of the annual report are available, upon
request and without charge, by calling the Fund's Investor Services Department
at (800) 882-8383, or by writing to the following address: Bailard, Biehl &
Kaiser Fund Group, Investor Services Department, 2755 Campus Drive, San Mateo,
CA 94403.
_____________________________________________________
The Prospectus and this Statement of Additional Information, together, do not
contain all of the information set forth in our registration statement filed
with the Securities and Exchange Commission. Certain information is omitted in
accordance with rules and regulations of the Commission. The registration
statement may be inspected at the Public Reference Room of the Commission at
Room 1024; 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and
copies thereof may be obtained from the Commission at prescribed rates.
B - 15
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Par
Value Value Shares Value
<S> <C> <C> <C> <C> <C>
Domestic Securities (71.9%) Finance (3.6%)
Aetna Inc. 7,000 $ 492,625
Domestic Fixed Income (33.0%) Chase Manhattan Corp. 10,300 825,288
Government Bonds (33.0%) *National Mercantile Bancorp
United States Treasury Bonds Wts Exp: 6/2/99 1,434 0
-----------
7.625% 02-15-25 $ 1,920,000 $ 2,061,300 Total Finance 1,317,913
United States Treasury Notes
7.125% 02-29-00 4,365,000 4,467,305 Health Care (4.3%)
United States Treasury Notes *Forest Labs, Inc. (Class A) 7,700 278,163
5.625% 02-28-01 700,000 678,562 Johnson & Johnson 8,400 430,500
United States Treasury Notes Teva Pharmaceutical Inds Ltd. ADR 10,600 491,575
6.500% 05-31-01 1,100,000 1,101,719 Warner Lambert Co. 5,600 369,600
-----------
United States Treasury Notes Total Health Care 1,569,838
5.875% 02-15-04 1,500,000 1,434,844
United States Treasury Notes High Technology (4.5%)
5.625% 02-15-06 2,500,000 2,320,703 *Cisco Systems Inc. 6,000 372,375
-------------
Intel Corp. 2,700 257,681
Total Domestic Fixed Income *Microsoft Corp. 2,800 369,250
(Identified Cost $11,454,187) 12,064,433 Xerox Corp. 12,300 659,588
------------- -----------
Total High Technology 1,658,894
Domestic Stock Market (38.9%) Shares Value
Transportation (2.2%)
Basic Industry (2.2%) CSX Corp. 10,200 515,100
Millipore Corp. 7,000 276,500 Rollins Truck Leasing Corp. 25,700 289,125
-----------
Nucor Corp. 6,200 314,650 Total Transportation 804,225
Sigma Aldrich Corp. 4,000 228,000
-------------
Total Basic Industry 819,150 Utilities (3.9%)
AT&T Corp. 12,000 627,000
Capital Goods (5.0%) MCI Communications Corp. 15,300 392,063
Deere (John) & Co. 8,100 340,200 Ohio Edison Co. 20,800 403,000
-----------
Fluor Corp. 3,700 227,550 Total Utilities 1,422,063
General Electric Company 8,500 773,500
Harnischfeger Inds Inc. 5,400 203,850 Total Domestic Stock Market
*Litton Ind., Inc. 6,200 305,350 (Identified Cost $11,236,022) 14,217,261
------------- -----------
Total Capital Goods 1,850,450
Total Domestic Securities
Consumer Durables (1.4%) (Identified Cost $23,690,208) 26,281,694
-----------
*Lear Corp. 9,000 297,000
Sunbeam Corp. 7,400 171,125
-------------
Total Consumer Durables 468,125 International Securities (26.3%)
Par Value
Consumer Services (2.4%) International Fixed Income (9.6%) (Local Currency)
Danka Business Systems Plc ADR 6,100 242,475
General Nutrition Cos Inc. 9,700 170,356 Asian Development Bank
*Sound Advice Inc. Wts Exp: 6/14/99 93 0 5.625% 02-18-2002 (Y) 15,000,000 157,170
Sysco Corp. 14,000 470,750 British Telecom Plc
-------------
Total Consumer Services 883,581 7.125% 09-15-2003 (pound) 30,000 45,960
German Federal Republic
Consumer Staples (7.2%) 8.375% 05-21-2001 DM 810,000 603,074
Archer Daniels Midland Co. 22,155 426,484 Government of Australia
Eastman Kodak Co. 5,200 408,200 10.000% 10-15-2002 A$ 150,000 132,815
Pepsico, Inc. 19,800 559,350 Government of Canada
Philip Morris Co., Inc. 4,900 439,775 8.500% 04-01-2002 C$ 400,000 321,586
Procter & Gamble Co. 8,100 789,750 Government of France OAT
-------------
Total Consumer Staples 2,623,559 9.500% 01-25-2001 FF 2,050,000 464,926
Government of Netherlands
Energy/Resources (2.2%) 8.500% 03-15-2001 NLG 300,000 200,225
Kerr McGee Corp. 5,200 316,550 Government of Sweden
Texaco Inc. 2,800 257,600 13.000% 06-15-2001 SEK 2,000,000 377,225
Valero Energy Corp. 10,300 225,313 Kingdom of Denmark
-------------
Total Energy/Resources 799,463 8.000% 05-15-2003 DKr 1,125,000 209,033
Ontario Hydro (Global)
10.000% 03-19-2001 C$ 25,000 20,997
</TABLE>
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Par Value
(Local Currency) Value Shares Value
<S> <C> <C> <C> <C> <C>
International Fixed Income (Continued) France - Continued
Soc. Natl des Chemins de Fer Credit Local de France SA 200 17,036
6.750% 03-01-2000 (Y) 32,000,000 $ 335,439 Ecco 50 11,983
Treuhandanstalt Eramet 150 8,947
7.750% 10-01-2002 DM 450,000 328,382 Eridania Beghin Say SA 100 15,429
U.K. Treasury Generale Des Eaux 100 10,861
9.750% 08-27-2002 (pound) 180,000 314,674 Michelin CL B 300 15,303
----------
Peugeot SA 150 16,523
Total International Fixed Income Sagem 20 11,616
(Identified Cost $3,464,573) 3,511,506 St Gobain 100 13,551
----------
Sanofi 370 30,313
International Stocks (16.7%) Shares Seita 300 12,603
Argentina (0.10%) Soc Natl Elf Aquitaine Bearer 500 39,096
Banco Frances Del Rio Della Plata ADR 500 13,063 Societe Generale Paris 200 22,108
Telefonica De Argentina ADR 500 12,438 Technip SA 200 18,271
---------
YPF SA ADR 500 11,438 Total France 375,056
----------
Total Argentina 36,939
Germany (1.2%)
Australia (0.3%) BASF AG 700 22,006
Australia & New Zealand Bank Group Ltd. 2,200 12,592 Bankgesellschaft Berlin AG 1,100 21,973
Broken Hill Proprietary Ltd. 2,500 32,062 Bayer AG 1,000 36,677
CRA Ltd. 1,200 18,050 Bayeriache Motoren Werke AG 30 17,163
Davids Ltd. 7,700 10,728 Berliner Kraft & Licht Class A 70 19,026
National Australia Bank Ltd. 1,200 12,673 CKAG Colonia Konzern AG 600 46,173
The News Corporation Ltd. 2,900 15,221 Degussa 30 10,856
----------
Total Australia 101,326 Deutsche Bank AG Bearer 650 30,609
Fresenius AG Pfd. 90 16,622
Belgium (0.1%) Ind-Werke Karl-Aug (IWKA) AG 50 11,131
Kredietbank NPV 40 13,108 Man AG 60 15,483
Powerfin SA NPV 50 7,174 Mannesmann AG 50 18,731
Societe Generale de Belgique 100 7,811 SAP AG Pfd. 150 25,199
----------
Total Belgium 28,093 Siemens AG Bearer 1,050 55,332
Veba AG 850 44,480
Canada (0.7%) Volkswagen AG 100 37,266
---------
Alcan Aluminum Ltd. 300 9,000 Total Germany 428,727
B C Gas Inc. 800 10,895
Bank of Montreal 800 21,497 Hong Kong (0.9%)
Barrick Gold Corp. 700 17,588 Cheung Kong Holdings 3,000 23,083
Bombardier Inc. CL B 700 9,970 Dickson Concept Intl Ltd. 4,000 12,854
Canadian Imperial Bank of Commerce 900 32,642 Electric & Eltek Intl Holdings Ltd. 65,000 12,356
Canadian Natural Resources 600 13,480 Hang Seng Bank 2,000 21,208
Imasco Ltd. 1,000 21,952 Henderson Land & Development 4,000 34,269
Imperial Oil Ltd. 300 12,750 Hong Kong & China Gas 12,000 20,406
Inco Ltd. 400 12,300 *Hong Kong & China Gas Wts (Ex 9/30/97) 1,000 304
Loblaw Cos Ltd. 1,200 10,044 Hong Kong & Shanghai Hotels 5,000 9,020
Molson Co. Ltd. CL A 600 8,700 Hong Kong Telecommunications 7,000 12,673
*Newbridge Networks Corp. 200 12,750 HSBC Holdings 1,200 22,268
Noranda Inc. 800 16,358 Hutchison Whampoa Ltd. 9,000 60,520
Quebecor Inc. CL B 700 10,484 New World Development Co. Ltd. 5,000 26,316
*Renaissance Energy Ltd. 400 11,732 *Peregrine Investment Wts (Ex 5/15/98) 800 150
Shell Canada Ltd. Class A 300 9,603 Qingling Motor Company 31,000 11,926
Telus Corp. 500 6,846 Shanghai Industrial Holdings 6,000 13,772
Thomson Corp. 600 10,793 Sinocan Holdings Limited 26,000 11,600
Transcanada Pipelines Ltd 700 11,288 Sun Hung Kai Properties Ltd. 3,000 31,909
----------
Total Canada 270,672 Varitronix International 5,000 9,181
---------
Total Hong Kong 333,815
France (1.0%)
Air Liquide (L') 121 18,740 Indonesia (0.1%)
Alcatel Alsthom CGE 200 16,862 Bank International Indonesia (Fgn Regd) 6,115 8,950
Axa SA 150 8,985 Citra Marga Nusaphale Persada (Fgn Regd) 12,000 8,136
Canal Plus 100 24,586 Gudang Garam (Fgn Regd) 2,000 7,533
Carrefour Super Marche 88 49,388 Indah Kiat Pulp & Paper (Fgn Regd) 13,310 10,170
---------
CIE Financiere De Paribas A Shares 200 12,855 Total Indonesia 34,789
</TABLE>
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Shares Value Shares Value
<S> <C> <C> <C> <C> <C>
Ireland (0.1%) Korea (0.1%)
Allied Irish Banks 2,000 $ 11,773 Kepco/ Korea Electric Power Corp. 210 $ 6,941
CRH 1,000 10,217 Korea Long Term Credit Bank 400 9,434
Irish Life Plc 1,000 4,042 Samsung Electronics 100 7,845
---------
Kerry Group Class A 1,000 10,746 Total Korea 24,220
Smurfit (Jefferson) Plc 2,500 6,817
Waterford Wedgewood Units 1,000 1,291 Malaysia (0.4%)
----------
Total Ireland 44,886 Commerce Asset Holdings Berhad 1,500 9,336
DCB Holdings Berhad 4,000 13,725
Italy (0.6%) Genting Berhad 1,400 10,166
Banca Comm Italiana 2,800 5,589 Fraser & Neave Holdings Berhad 2,500 11,969
Credito Italiano 4,400 5,053 Petronas Gas Berhad 4,000 16,278
Danieli & Co. 1,700 10,995 Rashid Hussain Berhad 3,000 16,637
Edison SpA 1,800 11,216 Sime Darby Berhad 4,000 13,246
ENI SpA 6,900 35,269 Sime UEP Properties Berhad 5,000 12,269
Fiat SpA ORD 7,500 21,076 Sungei Way Holdings 2,000 10,693
IFI (Istit Fi Ind) Priv 1,000 7,978 Telekom Malaysia 2,000 17,635
Istituto Nazionale Delle Assicurazioni 20,000 28,955 Tractors Malaysia Holdings 5,000 10,473
---------
Istituto Mobilaire Italiano 5,100 43,331 Total Malaysia 142,427
* Olivetti & Co. SpA 20,000 7,327
R.A.S. 660 6,511 Mexico (0.4%)
Telecom Italia SpA 17,700 32,598 Alfa SA De Cv Class A 2,200 9,755
Telecom Italia Mobile SpA 10,800 23,968 Cemex SA ADR 1,500 12,281
----------
Total Italy 239,866 *Cifra SA De Cv ADR 6,500 9,100
Coca Cola Femsa SA De Cv ADR 600 14,250
Japan (3.4%) Empresa La Moderna SA De Cv ADR 800 15,300
Bridgestone Metalpha Corp. 5,000 58,684 Femsa "B" 3,500 10,655
Canon Inc. 1,000 19,621 *,**Grupo Financiero Bancomer SA ADR (144A) 1,100 10,588
Canon Sales Co. Inc. 50 1,357 Grupo Carso A1 2,100 9,617
Chugoku Bank 3,000 49,456 Grupo Ind. Maseca ADR 500 9,438
Daikyo Inc. 5,000 33,642 *Grupo Televisa GDR 300 8,663
Dowa Fire & Marine 9,000 46,284 Kimberly Clark de Mexico SA ADR Class A 300 11,250
Fuji Machine Manufacturing 2,000 51,068 Telefonos de Mexico SA ADR 600 19,275
---------
Hitachi Ltd. 5,000 48,381 Total Mexico 140,172
Hokkaido Takushoku 3,000 7,687
JACCS Co. Ltd. 2,000 16,862 Netherlands (2.2%)
Japan Tobacco Inc. 7 51,552 ABN-AMRO Holdings NV 800 44,331
Kansai Paint Co. 3,000 14,111 Aegon NV 300 14,802
Kitz Corp. 3,000 14,030 D.S.M. NV 200 19,620
Komai Tekko 2,000 14,693 Fortis Amev NV 500 14,948
Kurita Water Industries 3,000 64,776 Getronics NV 1,200 30,410
Makita Corp. 1,000 14,604 Heineken NV 100 18,247
Mitsubishi Heavy Industries Ltd. 9,000 73,135 Hoogovens NV CV A 100 3,579
Mitsubishi Motors Corp. 2,000 16,862 IHC Caland NV 300 15,783
Mitsubishi Oil Co. 3,000 22,846 ING Groep NV 2,250 70,158
Nippon Steel Corp. 11,000 34,099 Koninklijke Ahold NV 200 11,316
Nippon Yankin Kogyo 4,000 16,091 Nutricia Ver Bedrijven CV A 300 39,590
Omron Corp. 1,000 18,725 OCE - Van Der Grinten NV 100 10,913
Promise Co. 1,000 46,589 Royal Dutch Petroleum Co. (new shares) 2,600 405,920
Roland Corp. 2,000 34,942 Royal Dutch Petroleum Co. 650 101,529
Santen Pharmaceutical Co. 1,100 23,948 Van Ommeren NV CV A (Ptg Cert) 300 11,737
---------
Sanwa Bank Ltd. 5,000 90,042 Total Netherlands 812,883
Sanyo Electric Co. 5,000 26,833
Sekisui House Ltd. 5,000 54,652 Norway (0.1%)
Sumitomo Electric Industries 2,000 27,416 Awilco AS B 1,200 10,330
Suzuki Motor Corp. 7,000 85,293 Leif Hoegh & Co. 600 10,053
Toho Gas Co. 8,000 26,018 Norsk Hydro AS 500 23,404
Tokyo Gas Co. 9,000 30,722 Saga Petroleum AS 700 11,298
---------
Tokyo Ohka Kogyo Co. Ltd. 1,000 25,355 Total Norway 55,085
Toyo Trust & Banking Co. Ltd. 3,000 27,416
Yamaichi Securities Co. 4,000 24,549 Phillipines (0.1%)
Yamamura Glass Co. 2,000 10,572 *Filinvest Land Inc. 30,900 11,189
Yamanouchi Pharmaceutical Co. Ltd. 1,000 21,144 *Philippine National Bank 600 9,891
----------
Total Japan 1,244,057 *Pilipino Telephone 6,200 8,508
---------
Total Phillipines 29,588
</TABLE>
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Shares Value Shares Value
<S> <C> <C> <C> <C> <C>
Portugal (0.1%) United Kingdom (2.7%)
Banco Totta & Acores (Fgn Regd) 500 $ 8,739 Anglian Water Plc 1,400 $ 11,779
Portugal Telecom ADR 500 12,875 Associated British Foods 3,000 19,206
----------
Total Portugal 21,614 B.A.T. Industries Plc 4,000 26,641
BAA Group 2,100 16,238
Singapore (0.2%) Barclays Bank Plc 6,000 88,186
Acma Ltd. 2,000 4,772 Bardon Group Plc 31,900 17,226
DBS Land 4,000 13,237 Bass Plc 3,300 40,264
Development Bank of Singapore 800 9,828 *British Aerospace 1,000 16,537
(Fgn Regd) *British Biotechnology 5,620 18,473
Jardine Strategic Holdings 3,000 9,540 British Gas Plc 5,000 15,613
Overseas Chinese Bank (Fgn Regd) 1,000 12,001 British Petroleum Plc 5,500 57,077
Singapore Airlines Ltd. (Fgn Regd) 1,000 10,084 British Steel Plc 9,300 28,823
United Overseas Land 4,500 7,094 British Telecom Plc 11,600 64,729
* United Overseas Land Wts Exp: 5/28/01 450 320 East Midland Electric Plc 2,000 16,294
* Want Want Holdings 5,000 11,900 General Accident 2,000 21,319
----------
Total Singapore 78,776 General Electric Company Plc 3,500 21,667
Great Universal Stores Plc 3,600 36,120
Spain (0.4%) Hyder Plc Pfd. 2,520 4,038
Autopistas Cesa 525 6,273 Iceland Group Plc 8,000 11,019
*Argentaria 500 20,705 Imperial Chemical Industries 1,400 18,517
Banco de Santander 300 15,599 Invesco Plc 4,500 16,658
Banco Intercontl 100 11,520 Lloyds Chemists 2,000 15,762
Banco Bilbao Vizcaya (Fgn Regd) 400 18,432 Lloyds TSB Group Plc 12,982 76,810
Endesa 300 17,654 London Clubs International 6,000 28,175
Fuerzas Electrica de Cataluna 1,000 7,488 London Electric Plc 1,500 14,404
(FECSA) Series A Lonrho 5,000 13,344
Iberdrola SA 2,200 21,320 Mirror Group Plc 13,600 46,194
Tabacalera SA Series A 100 4,266 Prudential Corp. 1,800 12,664
Telefonica de Espana SA 1,500 27,847 Reuters Holdings 3,000 34,678
----------
Total Spain 151,104 Shell Transport & Trading 2,500 38,153
Smithkline Beecham 3,057 37,347
Sweden (0.4%) Tate & Lyle 2,500 18,294
ABB AB A 100 10,590 Unichem Plc 4,600 18,072
AGA AB Series B Free 700 11,405 Yorkshire Electricity Group 1,200 14,031
Astra AB Series A Free 700 29,568 Yorkshire Water Plc 400 3,960
Ericsson Tele Series B 1,000 25,193 Zeneca Group Plc 1,500 37,284
-----------
Investor AB Class B 500 19,008 Total United Kingdom 975,596
* Scania AB Wts Exp: 6/04/99 500 528
Stora Kopparbergs Series A 900 11,676 Total International Stocks
Svenska Handelsbanken Series A 800 19,672 (Identified Cost $5,706,030) 6,122,010
-----------
* Swedish Match AB 500 1,509
Volvo AB Free 500 10,749 Total International Securities
----------
Total Sweden 139,898 (Identified Cost $9,170,603) 9,633,516
-----------
Switzerland (1.0%) Total Bonds and Equity Securities (98.2%)
Adecco SA Bearer 60 16,493 (Identified Cost $32,860,811) 35,915,210
-----------
Ciba-Geigy AG (Regd) 20 25,560
Clariant AG (Regd) 50 17,329
CS Holding (Regd) 520 51,374
Danzas Holdings AG (Ptg Cert) 60 11,521
Nestle AG (Regd) 30 33,416
Roche Holding AG (Div Right Cert) 5 36,790
Sandoz AG (Regd) 125 149,988
Swiss Bank Corp. (Regd) 220 41,937
----------
Total Switzerland 384,408
Thailand (0.1%)
Bangkok Bank Public Co. Ltd. (Fgn Regd) 1,500 19,582
Thai Farmers Bank Pcl (Fgn Regd) 800 8,431
----------
Total Thailand 28,013
</TABLE>
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1996
Par Value Value
Short-Term Investments (1.5%)
Brown Brothers Harriman & Co.
(Grand Cayman Branch)
5.00% Call Account $ 550,000 $ 550,000
------------
(Identified Cost $550,000)
Total Investments (99.7%)
(Identified Cost $33,410,811) 36,465,210
Other Assets less Liabilities (0.3%) 101,045
------------
Net Assets (100.0%) $ 36,566,255
============
A$ - Australian Dollar FF - French Franc
(pound) - British Sterling (Y) - Japanese Yen
C$ - Canadian Dollar NLG - Netherlands Guilder
DKr - Danish Kroner ESP - Spanish Peseta
DM - German Mark SEK - Swedish Krona
- - - - -----------------
* Non-income producing security
** Exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. On September 30, 1996, these
securities were valued at $10,588, less than .01% of Net Assets.
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
<TABLE>
- - - - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments, at value
(Identified cost $33,410,811) $ 36,465,210
Foreign Currency, at value
(Identified cost $16,209) 15,659
Cash 908
Receivables:
Dividend, interest and recoverable foreign taxes receivable $ 305,396
Unrealized gain on forward currency contracts open (Note 5) 37,981
Portfolio securities sold 51,588
Fund shares sold 6,426 401,391
--------------
Prepaid expenses 7,844
-----------------
Total assets 36,891,012
-----------------
Liabilities
Payables:
Portfolio securities purchased 36,337
Shares of the Fund redeemed 81,665 118,002
--------------
Accrued management fees (Note 3) 29,509
Other accrued expenses 177,246
-----------------
Total liabilities 324,757
-----------------
Net assets (equivalent to $13.39 per share, representing
the offering and redemption price for 2,730,050
shares outstanding, unlimited number of shares authorized) $ 36,566,255
=================
Net assets consist of:
Capital paid in $ 29,310,028
Accumulated undistributed net investment income 575,755
Accumulated net realized gain on investments
and foreign currency transactions 3,592,688
Unrealized appreciation on:
Investments $ 3,054,399
Foreign currency 33,385 3,087,784
-------------- -----------------
$ 36,566,255
=================
</TABLE>
See "Notes to Financial Statements"
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
STATEMENT OF OPERATIONS
SEPTEMBER 30, 1996
<TABLE>
- - - - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Dividends (net of foreign taxes withheld of $19,917) $ 553,367
Interest (net of foreign taxes withheld of $1,160) 1,035,480
----------------
1,588,847
Expenses
Advisory fees $ 370,980
Custodian fees 174,875
Audit and legal fees 106,998
Transfer agent fees 36,999
Administrative fees 32,999
Trustees' fees and expenses 31,502
Insurance 5,464
Printing fees 5,000
Registration fees 6,466
Miscellaneous expenses 5,236
------------
Total expenses 776,519
----------------
Net investment income 812,328
----------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Net realized gain on investments 3,636,128
Net unrealized loss on investments (708,875)
----------------
Net gain on investments 2,927,253
----------------
Net realized gain on foreign currency 42,779
Net unrealized gain on foreign currency
and foreign currency denominated assets and
liabilities 72,952
----------------
Net gain on foreign currency 115,731
----------------
Net gain on investments and foreign currency 3,042,984
----------------
FOREIGN CURRENCY
Net increase in net assets resulting from operations $ 3,855,312
================
</TABLE>
See "Notes to Financial Statements"
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
- - - - -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
For the year ended September 30,
-----------------------------------------------
1996 1995
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 812,328 $ 1,247,408
Net realized gain on investments 3,636,128 2,659,873
Net unrealized gain (loss) on investments (708,875) 1,243,444
Net realized gain (loss) on foreign currency 42,779 (199,310)
Net unrealized gain on foreign currency and
foreign currency denominated assets and liabilities 72,952 40,362
-------------------- --------------------
Net increase (decrease) resulting from operations 3,855,312 4,991,777
-------------------- --------------------
Distributions to shareholders:
From net investment income (950,677) (931,330)
From net realized gains (2,284,254) (184,888)
-------------------- --------------------
Total distributions (3,234,931) (1,116,218)
-------------------- --------------------
Fund share transactions:
Proceeds from shares sold 2,017,739 1,839,930
Net asset value of shares issued on
reinvestment of distributions 2,932,877 1,013,443
Cost of shares redeemed (9,693,163) (12,087,247)
-------------------- --------------------
Net decrease resulting from Fund share
transactions (4,742,547) (9,233,874)
-------------------- --------------------
Net decrease (4,122,166) (5,358,315)
Net Assets
Beginning of year 40,688,421 46,046,736
-------------------- --------------------
End of year (including undistributed net
investment income of $575,755 and
$687,154, respectively) $ 36,566,255 $ 40,688,421
==================== ====================
Number of Fund Shares
Sold 153,963 152,238
Issued on reinvestment of distributions 228,096 83,514
Redeemed (734,896) (985,362)
-------------------- --------------------
Net decrease (352,837) (749,610)
==================== ====================
</TABLE>
See "Notes to Financial Statements"
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
FINANCIAL HIGHLIGHTS
<TABLE>
- - - - ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
For a share outstanding throughout the year:
Year End September 30
------------------------------------------------------------------------
1 1
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 13.20 $ 12.01 $ 12.68 $ 10.93 $ 10.64
------------ ---------- ---------- ---------- ----------
Income from Investment Operations:
Net Investment Income 0.31 0.38 0.26 0.39 0.34
Net Realized/Unrealized Gain (Loss) on
Securities and Foreign Currency 0.96 1.13 (0.66) 1.66 0.30
------------ ---------- ---------- ---------- ----------
Total from Investment Operations 1.27 1.51 (0.40) 2.05 0.64
------------ ---------- ---------- ---------- ----------
Less Distributions:
From Net Investment Income (0.32) (0.26) (0.05) (0.30) (0.35)
From Net Realized Gains (0.76) (0.06) (0.22) -- --
------------ ---------- ---------- ---------- ----------
Total Distributions (1.08) (0.32) (0.27) (0.30) (0.35)
------------ ---------- ---------- ---------- ----------
Net Asset Value, End of Year $ 13.39 $ 13.20 $ 12.01 $ 12.68 $ 10.93
============ ========== ========== ========== ==========
Total Return 10.09% 12.83% (3.18%) 19.05% 6.16%
Ratios/Supplemental Data:
Net Assets, End of Year (000's) $ 36,566 $ 40,688 $ 46,047 $ 49,584 $ 50,487
Ratio of Expenses to Average Net Assets 1.99% 1.85% 1.82% 1.70% 1.90%
Ratio of Net Investment Income to
Average Net Assets 2.09% 2.97% 2.03% 2.88% 2.75%
Portfolio Turnover Rate 68% 166% 137% 96% 94%
2
Average Commission Rate Paid $ 0.0344 -- -- -- --
</TABLE>
- - - - ---------------------------------
1. In 1995 and 1994, net investment income per share has been computed before
adjustments for book/tax differences.
2. Represents average commission rate paid per share on purchases and sales
of equity securities by the Fund, as computed under SEC rule effective
with the Fund's 1996 fiscal year. Prior period rates have not been
presented as permitted by the rule.
See "Notes to Financial Statements"
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
NOTES TO FINANCIAL STATEMENTS
- - - - --------------------------------------------------------------------------------
Note 1 - Summary of Significant Accounting Policies
Bailard, Biehl & Kaiser Diversa Fund (the "Fund") is the sole series of the
Bailard, Biehl & Kaiser Fund Group, which was organized as a Massachusetts
business trust in August 1986 and is registered under the Investment Company Act
of 1940 as a diversified, open-end management investment company. The following
significant accounting policies are followed by the Fund in the preparation of
its financial statements and are in conformity with generally accepted
accounting principles.
Security Valuation
Each listed investment security is valued at the closing price reported by the
principal securities exchange on which the issue is traded or, if no sale is
reported, the mean of the closing bid and asked prices. Securities which are
traded over-the-counter are normally valued at the mean of the closing bid and
asked prices quoted by major dealers of such securities, or, in the absence of
such prices, as determined in good faith by, or under procedures determined by,
the Trustees of the Fund. Short-term obligations with a maturity of 60 days or
less are valued at amortized cost which approximates market.
The Fund's investment in foreign securities may entail risks due to the
potential of political and economic instability in the countries in which the
securities are offered or the issuers conduct their operations. It is the Fund's
policy to continuously monitor its exposure to these risks.
Foreign Currency
Foreign currency amounts, other than the cost of investments, are translated
into U.S. dollar values at the mean of the bid and offer price of such currency
against U.S. dollars last quoted on the valuation date. The cost of investments
is translated at the rates of exchange prevailing on the dates the portfolio
securities were acquired.
The Fund includes foreign exchange gains and losses from dividends and interest
receivable and other foreign-currency denominated payables and receivables in
realized and unrealized gain (loss) on foreign currency. The Fund does not
isolate that portion of the results of operations resulting from changes in
foreign exchange rates on investments from fluctuations arising from changes in
the market price of securities for financial reporting purposes. Fluctuations in
foreign exchange rates on investments are included with net realized and
unrealized gain (loss) on investments.
Forward Foreign Currency Exchange Contracts
In connection with purchases and sales of securities denominated in foreign
currencies, the Fund may enter into forward foreign currency exchange contracts
("contracts"). Additionally, from time to time the Fund may enter into contracts
to sell foreign currencies to hedge certain foreign currency assets. All
commitments are "marked-to-market" daily at the applicable translation rates
supplied by a quotation service and any resulting unrealized gains or losses are
included as unrealized appreciation (depreciation) on foreign currency
denominated assets and liabilities. The Fund records realized gains or losses at
the time the forward contract is settled. Risks may arise upon entering into
these contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
Federal Income Taxes
The Fund's policy is to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to its shareholders. Therefore, no provision is made for Federal
income taxes.
For the fiscal year ended September 30, 1996, the Fund distributed to
shareholders $2,229,000 of long term capital gains.
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
- - - - --------------------------------------------------------------------------------
Note 1 - Continued
Paid in capital, undistributed net investment income and undistributed realized
net gain have been adjusted for permanent book-tax differences.
Reclassifications between undistributed net investment income and undistributed
realized net gain arose principally from differing book and tax treatments for
foreign currency transactions.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Other
Investment security transactions are accounted for on the trade date (the date
the order to buy or sell is executed). Dividend income is recorded on the
ex-dividend date or when the Fund first becomes aware of such dividends.
Interest income is recorded on the accrual basis. Distributions to shareholders
are recorded on the ex-dividend date.
The Fund uses the identified cost method for determining realized gain or loss
on investments.
Note 2 - Purchases and Sales of Securities
For the year ended September 30, 1996, purchases and sales of investment
securities other than U.S. Government obligations and short-term investments
aggregated $18,372,065 and $23,124,485, respectively. Purchases and sales of
U.S. Government obligations aggregated $6,593,745 and $4,271,988, respectively.
Note 3 - Management Fee and Other Transactions with Affiliates
The Fund has an Investment Advisory and Management Agreement with Bailard, Biehl
& Kaiser, Inc. (the Advisor). The Agreement requires the payment of a monthly
fee computed on an annual basis as follows:
.95% of the first $75,000,000 of the average daily net assets of the Fund;
.80% on the next $75,000,000;
.65% on amounts in excess of $150,000,000.
The Advisor has agreed to reimburse the Fund to the extent that the Fund's
operating expenses (as defined) exceed 2.5% of the first $30 million, 2.0% of
the next $70 million, and 1.5% of the remaining average net assets of the Fund.
As approved by the Trustees, the Fund has entered into an agreement with its
custodian, Brown Brothers Harriman & Co. ("BBH & Co."), whereby brokerage
commissions charged on U.S. equity trades executed through BBH & Co. are
available to offset custody transaction charges. For the year ended September
30, 1996, there were no such credits. In addition, the Fund did not receive any
other credits which reduced its expenses for the year ended September 30, 1996.
Certain officers and Trustees of the Fund are currently officers and directors
of Bailard, Biehl & Kaiser, Inc. and receive compensation of $500 per year from
the Fund. Each other Trustee is compensated by the Fund at the rate of $6,000
per year plus an attendance fee of $1,000 for each Trustees' meeting attended
and related travel expenses.
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
- - - - --------------------------------------------------------------------------------
Note 4 - Unrealized Appreciation (Depreciation) on a Tax Basis
Unrealized appreciation (depreciation) at September 30, 1996 based on cost of
securities of $33,448,532 for federal income tax purposes, consists of the
following:
Gross unrealized appreciation $ 4,097,245
Gross unrealized depreciation (1,080,567)
--------------
Net unrealized appreciation $ 3,016,678
==============
Note 5 - Forward Foreign Currency Contracts
At September 30, 1996, the Fund had entered into forward foreign currency
contracts which obligated the Fund to exchange currencies at specified future
dates. At the maturity of a forward contract, the Fund may either make delivery
of the foreign currency from currency held, if any, or from the proceeds of
portfolio securities sold, or it may terminate its obligation to deliver the
foreign currency at any time by purchasing an offsetting contract. The forward
value of amounts due to the Fund under the contracts, including contracts which
have been offset but remained unsettled, has been netted against the forward
value of the currency to be delivered by the Fund and the remaining amount is
shown as receivable (payable) for forward currency contracts in the financial
statements. Open forward foreign currency exchange contracts outstanding at
September 30, 1996 were as follows:
Unrealized
Currency Currency Delivery Appreciation
Receivable Deliverable Date (Depreciation)
---------- ----------- ---- --------------
$ 195,056 DKr 1,106,940 10/29/96 $ 5,804
60,313 A$ 76,416 11/29/96 (77)
134,804 (Y) 14,437,500 11/29/96 4,358
320,578 DM 477,773 12/09/96 6,180
227,842 (pound) 145,924 12/10/96 (459)
211,090 FF 1,068,114 12/10/96 3,462
300,000 NLG 499,170 12/11/96 6,934
50,000 CHF 61,200 12/12/96 819
25,000 FIM 113,580 12/12/96 14
110,318 (pound) 70,944 12/16/96 (674)
185,975 NLG 312,810 12/16/96 2,246
50,648 SEK 337,825 12/16/96 (422)
319,777 DM 480,305 12/18/96 3,500
344,709 C$ 470,872 12/20/96 (2,312)
30,253 ITL 46,473,000 12/20/96 (104)
442,727 (Y) 47,832,713 12/24/96 8,712
------------
$ 37,981
============
Currency Legend:
A$ - Australian Dollar FIM - Finnish Markka
C$ - Canadian Dollar ITL - Italian Lira
CHF - Swiss Franc NLG - Netherlands Guilder
Dkr - Danish Kroner SEK - Swedish Krona
DM - German Mark (pound) - British Sterling
FF - French Franc (Y) - Japanese Yen
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
INDEPENDENT ACCOUNTANTS
- - - - --------------------------------------------------------------------------------
To the Shareholders and the Board of Trustees of
Bailard, Biehl & Kaiser Diversa Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Bailard, Biehl & Kaiser Diversa
Fund at September 30, 1996, and the results of its operations, the changes in
its net assets and its financial highlights for the periods indicated in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 1996 by
correspondence with the custodian and brokers (and the application of
alternative auditing procedures where confirmations from brokers were not
received), provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
November 15, 1996
<PAGE>
As filed with the Securities and
Exchange Commission on November 27, 1996
Registration No. 33-8441
File No. 811-4828
- - - - --------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------
Part C
of
Form N-1A
REGISTRATION STATEMENT
BAILARD, BIEHL & KAISER FUND GROUP
- - - - --------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
----------------------------------
(a) Financial Statements:
Incorporated by reference in Part B (Statement of
Additional Information) under the heading "Financial
Statements"
Financial Highlights:
Included in Part A (Prospectus)
(b) Exhibits:
Exhibit Number and Description
------------------------------
(1) Declaration of Trust of Registrant, as amended (incorporated
by reference to Exhibit 1 of Post-Effective Amendment No. 3 to
Registrant's Form N-1A Registration Statement dated January
30, 1989).
(2) By-Laws of Registrant (incorporated by reference to Exhibit 2
of Registrant's Form N-1A Registration Statement dated
November 3, 1987).
(3) Not applicable.
(4) Specimen Stock Certificate of Registrant (incorporated by
reference to Exhibit 4 of Pre-Effective Amendment No. 1 to
Registrant's Form N-1A Registration Statement dated November
28, 1986).
(5) Amended Investment Advisory And Management Agreement by and
between Registrant and Bailard, Biehl & Kaiser, Inc.
(incorporated by reference to Exhibit 5 of Post-Effective
Amendment No. 7 to Registrant's Form N-1A Registration
Statement dated June 29, 1990)
(6) Distribution Agreement by and between Registrant and BB&K Fund
Services, Inc. (incorporated by reference to Exhibit 6 of
Post-Effective Amendment No. 3 to Registrant's Form N-1A
Registration Statement dated January 30, 1989).
(7) Not applicable.
(8) Custodian Agreement by and between Registrant and Brown
Brothers Harriman & Co. (incorporated by reference to Exhibit
8 of Post-Effective Amendment No. 1 to Registrant's Form N-1A
Registration Statement dated June 15, 1987).
(9) Administration Agreement between Registrant and Investment
Company Administration Corporation, as amended (incorporated
by reference to Exhibit 9 of Post-Effective
C-1
<PAGE>
Exhibit Number
and Description
- - - - ---------------
Amendment No. 12 to Registrant's Form N-1A Registration
Statement dated January 26, 1996).
(10) Opinion and Consent of Counsel (incorporated by reference to
Exhibit 10 of Pre-Effective Amendment No. 2 to Registrant's
Form N-1A Registration Statement dated December 18, 1986).
(11) Consent of Price Waterhouse LLP.
(12) Not applicable.
(13) Investment letter provided in connection with the shares
issued to raise initial capital (incorporated by reference to
Exhibit 13 of Pre-Effective Amendment No. 1 to Registrant's
Form N-1A Registration Statement dated November 28, 1986).
(14) Model IRA Plan (incorporated by reference to Exhibit 14 of
Registrant's Form N-1A Registration Statement dated June 15,
1987).
(15) Not applicable.
(16) Schedule for Computation of Performance Quotations.
(17) Financial Data Schedule.
Item 25. Persons Controlled by or under Common Control with Registrant.
Registrant's organization has been sponsored by Bailard, Biehl
& Kaiser, Inc. ("Bailard, Biehl & Kaiser"), a California corporation and a
wholly owned subsidiary of BB&K Holdings, Inc., a California corporation
("Holdings"). Thomas E. Bailard, Burnice E. Sparks, Jr., Barbara V. Bailey, and
Janis M. Horne, who are officers and/or Trustees of Registrant, are also
officers and/or Directors of Holdings, Bailard, Biehl & Kaiser and/or BB&K Fund
Services, Inc. ("Fund Services"), a California corporation and a wholly owned
subsidiary of Holdings. Mr. Bailard, Mr. Sparks, and Ms. Horne are also each
shareholders of Holdings. Registrant's shares of common stock are offered to
investment advisory or counselling clients and employees (including officers and
relatives of employees and officers) and Directors of Bailard, Biehl & Kaiser.
As a result, Holdings, Bailard, Biehl & Kaiser and/or Fund Services may be
deemed to be directly or indirectly under common control with Registrant.
Mr. Sparks, Ms. Bailey, Ms. Horne and Sofi Zacharias, who are
officers and/or Trustees of Registrant, are also officers and/or Directors of
Bailard, Biehl & Kaiser International Fund Group, Inc. (the "International Fund
Group"), a Maryland corporation and a registered investment company. Shirley L.
Clayton, David B. Shippey and James C. Van Horne, Trustees of Registrant, are
also Directors of the International Fund Group. Bailard, Biehl & Kaiser serves
as the
C-2
<PAGE>
investment adviser to each series of the International Fund Group. As a result,
the International Fund Group may be deemed to be directly or indirectly under
common control with Registrant.
Item 26. Number of Holders of Securities.
--------------------------------
As of September 30, 1996 the number of record holders of the
Registrant's shares was as follows:
Shares Number of Record
Title of Class Outstanding Holders
- - - - -------------- ----------- ----------------
Shares of beneficial interest 2,730,050 397
Item 27. Indemnification.
----------------
Registrant participates in a policy of insurance which
insures the Trust and its Trustees, officers and employees against any liability
arising by reason of any actual or alleged breach of duty, neglect, error,
misstatement, misleading statement or other act or omission within the scope of
their duties.
Reference is made to Sections 5.1, 5.2, 5.3 and 5.4 of the
Declaration of Trust (see Exhibit 1 to this Registration Statement) and Article
XI of the By-Laws (see Exhibit 2 to this Registration Statement), which reflect
the positions taken in Investment Company Act Release 11330.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to Trustees, officers and controlling
persons of Registrant pursuant to the foregoing provisions, or otherwise,
Registrant has been advised that in the opinion of the Securities and Exchange
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 Registrant of expenses
incurred or paid by a Trustee, officer or controlling person of Registrant in
the successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person in connection with the securities being
registered, 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 such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 28. Business and Other Connections of Investment Adviser.
Bailard, Biehl & Kaiser is the investment adviser of the
Registrant. The other business, profession, vocation or employment of a
substantial nature in which the Directors and officers of Bailard, Biehl &
Kaiser who are Trustees or officers of Registrant have been engaged for the past
two fiscal years are as follows:
C-3
<PAGE>
<TABLE>
<CAPTION>
Position(s) With
Name Bailard, Biehl & Kaiser Other Principal Occupations
- - - - ---- ----------------------- ---------------------------
<S> <C> <C>
Thomas E. Bailard Chairman of the Board Chairman of the Board, Chief
and Chief Executive Executive Officer and President of
Officer Holdings; Chairman of the Board of Fund
Services Inc.; Chairman of the Board
and Trusteee of Registrant; Chairman of
Bailard, Biehl & Kaiser REIT
Peter M. Hill Co-President, Chief Director of Fund Services; Chairman of
Investment Officer and the Board of the International Fund
Director Group
Burnice E. Sparks, Jr. Co-President and Director Chief Executive Officer and Director of
Fund Services; President and Trustee of
Registrant; President and Director of the
International Fund Group
Barbara V. Bailey Senior Vice President Senior Vice President and Treasurer of
and Treasurer/Secretary Holdings; Secretary of Fund Services;
Treasurer of Registrant and the
International Fund Group; Treasurer and
Secretary of Bailard, Biehl & Kaiser
REIT
Janis M. Horne Senior Vice President and Secretary and Chief Compliance Officer
Chief Compliance Officer of Registrant and the International Fund
Group
</TABLE>
For additional information as to any other business,
profession, vocation or employment of a substantial nature of Bailard, Biehl &
Kaiser, its Directors and officers, reference is made to Part B of this
Registration Statement and to Form ADV, as amended on June 28, 1996, filed under
the Investment Advisers Act of 1940 by Bailard, Biehl & Kaiser, SEC File No.
801-8562. The principal business address of Bailard, Biehl & Kaiser and each
Director and officer of Bailard, Biehl & Kaiser is 2755 Campus Drive, San Mateo,
CA 94403.
C-4
<PAGE>
Item 29. Principal Underwriters.
-----------------------
Fund Services, located at 2755 Campus Drive, San Mateo,
California 94403, is the principal underwriter for the Registrant and for the
International Fund Group. Certain information with respect to the officers and
Directors of Fund Services is set forth below. The principal business address of
each such person is 2755 Campus Drive, San Mateo, California, 94403.
<TABLE>
<CAPTION>
Name Position(s) With Fund Services Other Principal Occupations
- - - - ---- ------------------------------ ---------------------------
<S> <C> <C>
Thomas E. Bailard Chairman of the Board Chairman of the Board and Chief
Executive Officer of Holdings;
Chairman of the Board and Chief
Executive Officer of Bailard, Biehl
& Kaiser; Chairman of the Board
and Trustee of Registrant; Chairman
of Bailard, Biehl & Kaiser REIT
Peter M. Hill Director Co-President, Chief Investment
Officer and Director of Bailard,
Biehl & Kaiser; Chairman of the
Board of the International Fund
Group
Burnice E. Sparks, Jr. Chief Executive Officer Co-President and Director of
and Director Bailard, Biehl & Kaiser; President
and Trustee of Registrant; President
and Director of the International
Fund Group
Christine D. Timmerman Treasurer Independent consultant
Barbara V. Bailey Secretary Senior Vice President and
Treasurer/Secretary of Bailard, Biehl
& Kaiser; Senior Vice President and
Treasurer of Holdings; Treasurer of
Registrant and the International Fund
Group; Treasurer and Secretary of
Bailard, Biehl & Kaiser REIT
</TABLE>
C-5
<PAGE>
Item 30. Location of Accounts and Records.
---------------------------------
Name and Address of Persons Records, Books and
Maintaining Physical Possession Accounts Required by:
- - - - ------------------------------- ---------------------
Brown Brothers Harriman & Co. Rule 31a-1(b)(1), (2)(i-iii), (3), (8), (9)
40 Water Street
Boston, MA 02109
Bailard, Biehl & Kaiser Fund Group Rule 31a-1(b)(4), (5), (6), (7), (10), (11)
2755 Campus Drive
San Mateo, CA 94403
Chase Global Funds Services Company Rule 31a-1(b)(2)(iv)
73 Tremont St.
Boston, MA 02108-3913
Item 31. Management Services.
--------------------
Not applicable.
Item 32. Undertakings.
-------------
Registrant undertakes to furnish each person to whom a Prospectus is
delivered with a copy of Registrant's latest annual report to
shareholders, upon request and without charge.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, Registrant has duly caused this Amendment to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of San Mateo and State of California on the 27th day of November, 1996.
BAILARD, BIEHL & KAISER FUND GROUP
By: /s/ Thomas E. Bailard
--------------------------
Thomas E. Bailard
Chief Executive Officer
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.
Signature Title Date
--------- ----- ----
/s/ Thomas E. Bailard Chairman and Trustee November 22, 1996
- - - - -----------------------------
Thomas E. Bailard(1)
/s/ Burnice E. Sparks, Jr. President and Trustee November 22, 1996
- - - - -----------------------------
Burnice E. Sparks, Jr.
/s/ Barbara V. Bailey Treasurer November 22, 1996
- - - - -----------------------------
Barbara V. Bailey(2)
Trustee November __, 1996
- - - - -----------------------------
Shirley L. Clayton
/s/ David B. Shippey Trustee November 21, 1996
- - - - -----------------------------
David B. Shippey
/s/ James C. Van Horne Trustee November 21, 1996
- - - - -----------------------------
James C. Van Horne
________________________
(1)Principal Executive Officer
(2)Principal Financial Officer
C-7
<PAGE>
As filed with the Securities
Exchange Commission on November 27, 1996
Registration No. 33-8441
File No. 811-4828
- - - - --------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
EXHIBITS TO
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 13 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 15 [X]
BAILARD, BIEHL & KAISER FUND GROUP
(Exact name of registrant as specified in charter)
2755 Campus Drive
San Mateo, California 94403
(Address of principal executive offices)
Registrant's telephone number, including area code: (800) 882-8383
Exhibits 11, 16 and 17
<PAGE>
INDEX TO EXHIBITS
Sequentially
Exhibit Number Exhibit Numbered Page
- - - - -------------- ------- -------------
(11) Consent of Price Waterhouse LLP
(16) Schedule for Computation of Performance Quotations
(17) Financial Data Schedule
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 13 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated November 15, 1996, relating to the financial
statements and financial highlights appearing in the September 30, 1996 Annual
Report to Shareholders of Bailard, Biehl & Kaiser Diversa Fund, portions of
which are incorporated by reference in the Registration Statement. We also
consent to the references to us under the headings "Financial Highlights" and
"Experts" in the Prospectus of the Fund constituting part of the Registration
Statement.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Boston, Massachusetts
November 26, 1996
3
EXHIBIT 16
SCHEDULE FOR COMPUTATION OF
PERFORMANCE QUOTATIONS OF THE
BAILARD, BIEHL & KAISER DIVERSA FUND
TOTAL RETURN FORMULA
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
1-, 5- or 10-year periods at the end of the
1-, 5- or 10-year periods (or fractional
portion thereof)
For the 1-year period ended September 30, 1996:
$1,000(1+T)1 = $1,128.30 or an annual compounded rate of
10.09%
For the 5-year period ended September 30, 1996:
$1,000 (1+T)5 = $1,573.40 or an average annual compounded rate
of 8.73%
For the period December 18, 1986 (inception) to September 30, 1996:
$1,000(1+T)9 = $1,802.80 or an average annual compounded rate
of 7.26%
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 33,410,811
<INVESTMENTS-AT-VALUE> 36,465,210
<RECEIVABLES> 401,391
<ASSETS-OTHER> 7,844
<OTHER-ITEMS-ASSETS> 16,567
<TOTAL-ASSETS> 36,891,012
<PAYABLE-FOR-SECURITIES> 36,337
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 288,420
<TOTAL-LIABILITIES> 324,757
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29,310,028
<SHARES-COMMON-STOCK> 2,730,050
<SHARES-COMMON-PRIOR> 3,082,887
<ACCUMULATED-NII-CURRENT> 575,755
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,592,688
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,087,784
<NET-ASSETS> 36,566,255
<DIVIDEND-INCOME> 553,367
<INTEREST-INCOME> 1,035,480
<OTHER-INCOME> 0
<EXPENSES-NET> 776,519
<NET-INVESTMENT-INCOME> 812,328
<REALIZED-GAINS-CURRENT> 3,678,907
<APPREC-INCREASE-CURRENT> (635,923)
<NET-CHANGE-FROM-OPS> 3,855,312
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (950,677)
<DISTRIBUTIONS-OF-GAINS> (2,284,254)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 153,693
<NUMBER-OF-SHARES-REDEEMED> (734,896)
<SHARES-REINVESTED> 228,096
<NET-CHANGE-IN-ASSETS> (4,122,166)
<ACCUMULATED-NII-PRIOR> 687,154
<ACCUMULATED-GAINS-PRIOR> 2,231,306
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 370,980
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 370,980
<AVERAGE-NET-ASSETS> 38,948,554
<PER-SHARE-NAV-BEGIN> 13.20
<PER-SHARE-NII> 0.31
<PER-SHARE-GAIN-APPREC> 0.96
<PER-SHARE-DIVIDEND> 0.32
<PER-SHARE-DISTRIBUTIONS> 0.76
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.39
<EXPENSE-RATIO> 1.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
