May 28, 1998
Dear Shareholder:
We are pleased to present your Bailard, Biehl & Kaiser Diversa Fund semi-annual
shareholders' report for the six months ended March 31, 1998. In this report, we
will review the Diversa Fund's recent performance, its investment strategy and
our market outlook, with particular emphasis on the question of how much longer
the unusually robust returns in the U.S. stock market can continue.
Market Review and Performance Update
The six months ended March 31, 1998 were a volatile period for investors. During
the first half of the period (the three months ended December 31, 1997), the
Asian currency crisis roiled the world's investment markets, depressing global
equity returns. When all the dust had settled, U.S. stocks barely managed to end
the quarter on a positive note, while international stocks as measured by the
MSCI-EAFE (Morgan Stanley Capital International Europe, Australia and Far East)
Index declined about 8%.(1)
All of this changed during the first quarter of 1998. Bail-out packages for some
of the most troubled Asian markets helped stabilize those financial markets,
setting the stage for an impressive surge in both U.S. and international stocks.
The S&P 500 U.S. stock index, for example, returned 14.0%(1) during the quarter.
U.S. equities benefited from good news of strong growth, low inflation, low
unemployment, a Federal budget surplus and a strong dollar. Overseas,
international stocks as measured by the MSCI-EAFE Index gained 14.7%(1), as
continued progress toward European Monetary Union helped fuel a rally in
European stocks. Even the global bond markets were stable to slightly up during
the quarter.
The Bailard, Biehl & Kaiser Diversa Fund reflected these market conditions,
returning 0.1%(2) for the quarter ended December 31, 1997 and 9.2%(2) for the
quarter ended March 31, 1998, for a gain of 9.3%(2) for the entire six-month
period. We are very pleased with these investment results. The Fund's
diversification helped limit its downside risk during the fourth quarter of
1997, while its significant weighting in U.S. and international stocks allowed
it to participate in the markets' gains during the first quarter of 1998. Since
last May, the Fund has been pursuing a strategy of holding S&P 500 put options
to hedge against the risk of a correction in the U.S. stock market. This
"insurance" proved to be unnecessary during the first quarter of 1998, but
allowed the Fund to have a heavier weighting in U.S. stocks than would otherwise
be the case. We should also note that the Fund's U.S. stock portfolio
outperformed the S&P 500 index during the first quarter of 1998 after lagging
that index for most of 1997.
The Bailard, Biehl & Kaiser Diversa Fund also advanced a handsome 24.2%(2) for
the year ended March 31, 1998. This performance was driven by the
extraordinarily high results achieved by the U.S. stock market over the same
time period - the S&P 500 Index, for example, returned 48.0%(1) during those
twelve months. A key question is, how much longer can we expect the U.S. stock
market to produce such spectacular gains?
<PAGE>
Market Outlook
One factor fueling the extraordinary performance of the U.S. stock market has
been the unusually good state of the American economy, which is now in its
seventh year of expansion. Looking forward, we do not expect these ideal
economic conditions to continue. On balance, it is most likely that U.S.
economic growth will slow due to a drag on trade from the Asian crisis. However,
if the Asian drag fails to develop, growth could surprise on the upside, setting
the stage for the Fed to raise interest rates in an effort to keep inflation in
check. And, although it is too soon to suggest this will happen, there is a
possibility that further upheaval in Asia could lead to recession here in the
United States given that the current economic expansion is already getting long
in the tooth.
Regardless of what happens to the U.S. economy, we believe the odds of a U.S.
stock market correction are increasing. U.S. equities are overvalued by almost
any measure used. The rationalizations used to justify today's valuation levels
sound amazingly like those used during previous speculative periods. If the
economy slows as we expect, disappointing corporate earnings will probably be
the catalyst for a stock market correction. Should the economy fail to
decelerate, the Fed will likely tighten, and rising interest rates will most
likely be the wake up call for investors. Additional shocks from Asia or a more
severe economic slowdown would also undermine investor confidence. Nevertheless,
we recognize that, since overvalued markets can remain overvalued for
significant periods of time, it is important to maintain a presence in U.S.
stocks.
Although international stocks are more attractively valued than U.S. stocks, we
remain neutral in our outlook to this asset area due to concerns about the
on-going impact of the Asian crisis, the continuing strength of the U.S. dollar
and the possible impact of a U.S. stock market correction on global equity
returns. U.S. bonds would benefit slightly from slower economic growth but would
be hurt by an increase in U.S. interest rates should continued strong economic
growth force the Fed to tighten. International bonds are overvalued relative to
U.S. bonds and the underlying inflation rate. They are also vulnerable to
further strength in the U.S. dollar.
Investment Strategy
Given our belief that the U.S. stock market is in overvalued territory and
increasingly vulnerable to a correction, we have reduced our target weighting
for U.S. stocks to 35%. We continue to maintain a neutral weighting in
international stocks and U.S. bonds and an underweight position in international
bonds, relative to our long-term norms for these asset classes. The current
asset allocation targets of the Diversa Fund are 18% cash equivalents, 25% U.S.
bonds, 35% U.S. stocks, 7% international bonds and 15% international stocks.
<PAGE>
International International
Stocks Bonds Cash U.S. Stocks U.S. Bonds
------ ----- ---- ----------- ----------
15% 7% 18% 35% 25%
These are the investment targets for the Bailard, Biehl & Kaiser Diversa Fund as
of May 15, 1998. The Fund's actual asset allocations may fluctuate from time to
time above or below these targets.
Please note that our use of S&P 500 put options reduces our effective U.S.
equity exposure from the 49% level shown in the Schedule of Investments dated
March 31, 1998, to about 35% of the total portfolio.
Closing Comments
Despite the volatility caused by the Asian crisis during the fourth quarter of
1997, investors have enjoyed unusually good returns in recent years due in large
part to the extraordinary performance record compiled by the U.S. stock market.
It is not reasonable to expect such robust returns to continue indefinitely.
Although no one can predict the timing or magnitude of a U.S. stock market
correction, the odds of such a correction are increasing. In such an
environment, it is critical for investors to be diversified across many
different asset classes to reduce their portfolio risk. We believe that the
Diversa Fund offers the important diversification that will allow its investors
to weather the troubled waters that may lie ahead.
Please feel free to contact one of our client service counselors at 800-882-8383
if you have any questions or would like to discuss the Fund in greater detail.
We continue to appreciate your confidence and support.
Sincerely,
/s/ Thomas E. Bailard /s/ Burnie E. Sparks, Jr., CFA
Thomas E. Bailard Burnie E. Sparks, Jr., CFA
Chairman President
(1) The performance data quoted represents past performance and is no indication
of future results.
(2) Average annual total returns for investment periods ended March 31, 1998: 3
months: 9.24%; 6 months: 9.32%; 12 months: 24.15%; 5 years: 11.06% annualized;
10 years: 8.80% annualized. As required by the Securities and Exchange
Commission, these figures reflect the average compounded return over the period
indicated that would equate an initial amount invested in shares of the Fund to
the ending redeemable value of such shares, assuming that all dividends and
distributions by the Fund were reinvested at net asset value. The performance
data quoted represents past performance, and the investment return and principal
value of an investment in the Bailard, Biehl & Kaiser Diversa Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Par
Value Value Shares Value
<S> <C> <C> <C> <C> <C>
Domestic Securities (73.4%) Finance-Continued
* National Mercantile Bancorp
Domestic Fixed Income (24.2%) Warrants Exp. 06/02/99 1,434 $ 0
* Ocwen Financial Corporation 11,000 305,250
Corporate Bonds PMI Group Inc. 3,700 298,775
BankBoston Reliastar Financial Corp. 6,400 294,042
6.375% 03-25-08 $ 450,000 $ 444,602 Washington Mutual Inc. 8,600 616,781
Citicorp ----------
7.200% 06-15-07 600,000 628,438 Total Finance 2,872,886
GTE North Incorporated ----------
6.375% 02-15-10 675,000 676,974 Health Care (5.4%)
Key Bank USA Mountain American Home Products Corp. 8,600 820,225
7.550% 09-15-06 250,000 265,838 * ATL Ultrasound Inc. 6,600 335,775
United States Treasury Bonds Johnson & Johnson 9,100 667,144
7.625% 02-15-25 910,000 1,105,081 Merch & Co. 2,400 308,100
United States Treasury Notes ----------
7.125% 02-29-00 925,000 950,582 Total Health Care 2,131,244
United States Treasury Notes ----------
5.875% 02-15-04 3,050,000 3,084,312 High Technology (9.4%)
United States Treasury Notes Boeing Co. 6,760 352,365
5.625% 02-15-06 2,500,000 2,482,422 * Cisco Systems, Inc. 8,850 605,119
---------- Computer Associates International Inc. 6,600 381,150
Total Domestic Fixed Income Intel Corp. 5,400 421,538
(Identified Cost $9,402,631) 9,638,249 International Business Machines 2,400 249,300
---------- * Microsoft Corp. 5,800 519,100
United Technologies Corp. 3,700 341,556
Domestic Stock Market (49.2%) Shares Value Xerox Corp. 8,200 872,787
----------
Basic Industry (3.4%) Total High Technology 3,742,915
Bemis Company 6,800 306,850 ----------
Du Pont (EI) De Nemours 4,600 312,800 Transportation (1.1%)
IMC Global, Inc. 7,000 266,438 * AMR Corp. 3,000 429,562
Nucor Corp. 6,200 337,512 ----------
Solutia Inc. 2,880 85,680 Utilities (1.6%)
* Tricon Global Restaurants 1,980 59,524 Enron Corp. 7,000 324,625
---------- Southern Co. 11,300 312,869
Total Basic Industry 1,368,804 ----------
---------- Total Utilities 637,494
Capital Goods (3.3%) ----------
Corning Incorporated 5,500 243,375 Index Options (0.4%)
General Electric Company 12,300 1,060,106 Purchased
---------- S & P 500 Stock Index June
Total Capital Goods 1,303,481 Put @ 1085 Exp 06/20/98 50 166,563
---------- ----------
Communications (2.2%) Total Put Options on Stock Indices
AT & T Corp. 8,000 525,000 (Identified Cost $160,250) 166,563
* LCI International Inc. 9,500 365,750 ----------
---------- Total Domestic Stocks
Total Communications 890,750 (Identified Cost $13,144,979) 19,567,201
---------- ----------
Total Domestic Securities
Consumer Cyclicals (3.3%) (Identified Cost $22,707,860) 29,205,450
* General Nutrition Cos. Inc. 7,400 294,150 ----------
* Lear Corp. 5,100 287,513
* Sound Advice Inc. Warrants, Exp. 6/14/19 93 0 International Securities (23.2%) Par Value
Sysco Corp. 28,000 717,500 (Local Currency) Value
----------
Total Consumer Cyclicals 1,299,163 International Fixed Income (5.6%)
----------
Consumer Staples (8.6%) Asian Development Bank
First Brands Corp. 11,200 279,300 5.625% 02-18-02 (Y) 15,000,000 131,744
Food Lion Inc. Class B 46,000 504,563 German/Deutschland Bundsrepublk
Hasbro Inc. 7,800 275,438 5.250% 01-04-08 DM 250,000 138,670
PepsiCo, Inc. 19,800 845,213 German Federal Republic
Philip Morris Co. Inc. 10,300 429,381 8.375% 05-21-01 DM 210,000 126,816
Sears Roebuck & Co. 5,500 315,906 Government of Australia
Tyco Intl. Ltd. 6,900 376,912 9.750% 03-15-02 A$ 150,000 115,145
Unilever NY Shrs 5,400 370,575 Government of Canada
---------- 8.500% 04-01-02 C$ 150,000 118,071
Total Consumer Staples 3,397,288 Government of France
---------- 9.500% 01-25-01 FF 1,550,000 284,040
Government of Netherlands
Energy/Resources (3.3%) 8.500% 03-15-01 NLG 300,000 160,245
Elf Aquitaine SA ADR 300 19,425 Government of Sweden
Kerr McGee Corp. 5,200 361,725 13.00% 06-15-01 SEK 1,400,000 215,719
Mobil Corp. 6,900 528,713 Kingdom of Denmark
Valero Energy Corp. 12,500 417,188 8.000% 05-15-03 DKr 1,125,000 182,814
---------- Ontario Hydro Global Bond
Total Energy/Resources 1,327,051 10.000% 03-19-01 C$ 25,000 19,849
---------- Quebec Province
Finance (7.2%) 8.625% 11-04-11 (pound) 60,000 114,961
Banc One Corp. 8,250 521,813
Chase Manhattan Corp. 6,200 836,225
</TABLE>
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1998 - CONTINUED
(Unaudited)
<TABLE>
<CAPTION>
Par Value Value Shares Value
<S> <C> <C> <C> <C> <C>
International Fixed Income-Continued Denmark- Continued
Republic of Germany Den Danske Bank 300 $ 39,209
6.875% 05-12-05 DM 200,000 $ 121,513 Novo Nordisk A/S B 300 51,065
Societe Nat'l. Des Chemins De Fer Teledanmark A/S B 500 45,391
6.750% 03-01-00 (Y) 8,000,000 66,904 --------
Tesco Plc Mountain Total Denmark 164,218
7.500% 07-30-07 (pound) 30,000 53,498 --------
Treuhandanstalt Finland (0.5%)
7.750% 10-01-02 DM 175,000 106,903 Nokia Corp. ADR 1,800 194,288
U.K. Treasury --------
9.750% 08/27/02 (pound) 130,000 246,468 France (1.2%)
--------- Air Liquide L 121 20,506
Total International Fixed Income Alcatel Alsthom CGE 200 37,541
(Identified Cost $2,433,485) 2,203,360 Axa SA 150 15,446
--------- CLF Dexia France 200 26,792
Eaux (CIE Generale Des) 300 48,710
International Stocks (17.6%) Shares Value Eaux (CIE Generale Des) FF Wts
Exp. 5/2/01 100 112
Argentina (0.3%) Eridania Beghin Say SA 100 20,013
Banco Frances Del Rio Plata ADR 650 19,581 Essilor Intl 100 33,264
Perez Companc SA ADR 1,000 13,422 FranceTelecom SA 1,000 52,745
Telecom Argent Stet France ADR 600 21,487 LaFarge SA 400 34,023
Transp. Gas Del Sur (TGS) ADR 1,600 18,800 LaFarge SA Rts. 4/8/98 400 523
YPF SA ADR 1,600 54,400 Michelin Class B 300 17,910
--------- Peugeot SA 150 25,856
Total Argentina 127,690 Promodes 110 52,889
--------- Soc. Natl. Elf Aquitaine Bearer 500 65,528
Australia (0.4%) Societe Generale Paris 200 40,027
Australia & NZ Bank GRP 11,400 76,355 --------
Broken Hill Proprietary Ltd. 1,900 19,454 Total France 491,885
CSR Ltd. Ord 4,000 13,926 --------
Lend Lease Corp. Ltd. 850 19,842 Germany (1.2%)
North Limited 7,292 19,875 BASF AG 1,000 44,232
--------- Bayer AG 500 22,751
Total Australia 149,452 Commerzbank AG 650 23,549
--------- Deutsche Bank AG Bearer 950 71,224
Austria (0.3%) Deutsche Telekom AG 2,500 54,681
Bank Austria AG 400 27,085 Douglas Holdings AG 500 18,628
Creditanstalt Bankverein 250 21,731 Ind. - Werke Karl - Aug (IWKA) AG 110 24,090
Evn Energy-Versorg 150 22,089 SAP AG Pfd 110 46,930
Mayr-Melnhof Karton AG 250 17,293 Veba AG 850 60,601
OMV AG 150 19,333 Viag AG 50 27,496
VA Technologie AG 100 15,756 Volkswagenwerk AG 120 93,957
--------- Volkwagen AG Rts. 4/7/98 120 2,180
Total Austria 123,287 --------
--------- Total Germany 490,319
Belgium (0.6%) --------
Fortis 162 45,012 Greece (0.4%)
Fortis Strip 12 1 Alpha Credit Bank 700 54,178
Delhaize Le Lion NPV 200 12,844 Attica Enterprises S.A 1,000 14,854
D'Ieteren Trading 130 42,254 Ergo Bank 353 25,279
Electrabel NPV 110 28,026 Hellenic Bottling Co. 500 14,385
Kredietbank NPV 80 42,988 Hellenic Telecom Org 900 22,515
PetroFina SA NPV 50 18,054 Titan Cement Co. 300 21,915
Tessenderlo Chemie 360 21,610 --------
Tractebel Cap NPV 80 8,409 Total Greece 153,126
--------- --------
Total Belgium 219,198 Hong Kong/ China (0.6%)
--------- CLP Holdings Ltd. 6,000 30,123
Brazil (0.5%) Cheung Kong Holdings 2,000 14,197
Electrobras Pfd. ADR 1,900 47,263 * China Telecom Ltd. 10,000 20,262
Itaubanco SA Pfd ADR 40,000 25,680 Gold Peak Industrial 13,000 5,998
Petrobras ADR 700 16,625 Gold Peak Industrial Hldg. Wts. Exp. 12/21/25 2,600 168
Telebras ADR 900 116,831 HSBC Holdings 800 24,470
--------- Hong Kong & China Gas 840 1,409
Total Brazil 206,399 Hong Kong Electric 14,000 48,153
--------- Hong Kong Telecommunications 12,000 24,780
Canada (0.5%) Hutchison Whampoa 8,000 56,270
Bombardier, Inc. Class B 700 17,252 Peregrine Investment
Canadian Imperial Bank of Commerce 1,000 34,806 Warrants Exp. 5/15/98 800 0
* Canadian Natural Resources 600 12,446 Shanghai Industrial Holdings 2,000 8,208
Cott Corp. 1,500 11,444 Swire Pacific Class A 2,000 10,583
Hudsons Bay Company Ord 1,000 21,095 --------
Imperial Oil Ltd. 300 16,969 Total Hong Kong/ China 244,621
Quebecor, Inc. Class B 700 14,520 --------
Telus Corp. 500 14,591 Hungary (0.6%)
Thomson Corp. 600 18,774 Egis Rt 500 26,957
Transcanada Pipelines Ltd. 700 16,537 Graboplast Textil 850 34,589
--------- * Magyar Olaj-Es Gaz 2,400 73,585
Total Canada 178,434 OTP Bank (Reg'd.) 850 43,236
--------- ** Richter (Gedeon) GDR 144A 500 52,375
Denmark (0.4%) --------
Aarhus Oliefabrik Class A 300 15,490 Total Hungary 230,742
Carlsberg B 200 13,063 --------
</TABLE>
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1998 - CONTINUED
(Unaudited)
<TABLE>
<CAPTION>
Shares Value Shares Value
<S> <C> <C> <C> <C> <C>
Indonesia (0.0%) Norway (0.4%)
Bank International Indonesia Wts. Exp.1/17/00 1,812 $ 21 * Bona Shipholding Ltd. 50 $ 525
Citra Marga Nusaphala Persad 24,000 2,289 Elkem A/S A 1,000 14,428
Gudang Garam (Fgn. Reg'd.) 2,000 2,769 Kvaerner Industrier 400 18,048
Kalbe Farma 17,000 1,867 Leif Hoegh & Co. 600 10,466
------- Norsk Hydro AS 1,300 64,452
Total Indonesia 6,946 Orkla A/S A 400 40,922
------- -------
Ireland (0.3%) Total Norway 148,841
Allied Irish Banks 2,000 24,540 -------
Bank Of Ireland 1,500 29,656 Philippines (0.1%)
CRH Ord 2,500 37,571 * Davao Union Cement 60,000 3,071
Greencore Group Plc 2,500 14,131 * Empire East Land 84,600 1,875
Irish Life Plc 1,000 9,131 Filinvest Land Inc. 30,900 3,384
Smurfit (Jefferson) Plc 2,500 7,168 * Mondragon International 42,000 1,485
------- Philippine Long Distance 600 16,702
Total Ireland 122,197 * Philippine National Bank 225 552
------- -------
Italy (0.6%) Total Philippines 27,069
Eni Spa 10,000 68,132 -------
Fiat Spa Ord 5,000 20,859 Poland (0.5%)
Instituto Nazionale Delle Assicu 12,000 38,905 Big Bank Gdanski SA 65,000 91,297
Istituto Mobilaire Italiano 2,500 40,594 Debica Series A 600 15,639
Telecom Italia Spa 10,800 85,106 Elektrim SA Bearer 2,700 33,623
------- * Mostostal Export Bearer 5,000 13,105
Total Italy 253,596 * Okocimskie Zaklady Piwowarskie 1,800 14,805
------- * Polifarb Cieszyn Bearer 3,000 12,858
Japan (1.0%) Polifarb Cieszyn Rights 12/15/97 1,000 4,170
Bank of Tokyo-Mitsubishi 2,000 24,296 * Stalex Port A 2,000 15,465
Citizen Watch Co. 3,000 21,821 Zaklady Piwowarski Bearer 118 11,448
Hokkaido Takushoku 12,000 90 -------
Honda Motor Co. 1,000 35,994 Total Poland 212,410
Japan Tobacco Inc. 2 14,938 -------
Mitsubishi Corporation 4,000 32,695 Portugal (0.6%)
Mitsubishi Material 5,000 9,598 * Banco Pinto & Sotto Mayor 1,950 48,391
Nippon Tel & Tel 4 33,295 EST Jeronimo Martins Filho Admin 600 24,678
Promise Co. 850 44,044 * Electric De Portugal Spon ADR 1,100 51,425
Sankyo Co. Ltd. 2,000 55,491 * Mundial Confianca 750 24,255
Sony Corp. 500 42,368 Portugal Telecom Spon. ADR 1,450 76,034
Sumitomo Electric Industries 2,000 25,796 Somague - SGPS 2,340 27,799
Tohoku Electric Power 1,500 22,496 -------
Tokyo Broadcasting 1,000 11,473 Total Portugal 252,582
Uniden Corp. 2,000 19,197 -------
------- Singapore (0.3%)
Total Japan 393,592 * Creative Technology Ltd. 700 15,430
------- Development BK of Singapore A Shares 300 2,192
Malaysia (0.3%) Development BK of Singapore Rts. 5/4/98 600 1,226
Commerce Asset Holdings Berhad 17,000 14,852 Development BK of Singapore 3,000 21,919
Genting Berhad 7,000 24,038 Jardine Strategic 3,000 8,220
Public Bank Berhad 28,800 17,011 Overseas Chinese Bank (Fgn. Reg'd.) 1,200 6,762
Sime Darby Herhad 11,000 12,330 Singapore Airlines Ltd. 1,000 7,121
Telekom Malaysia 10,000 34,615 Singapore Telecom 23,000 40,446
Tenaga Nasional 4,000 10,110 United Overseas Land
United Engineers 6,000 7,022 Wts. Exp. 5/28/01 450 85
------- * Want Want Holdings 8,400 9,912
Total Malaysia 119,978 -------
------- Total Singapore 113,313
Mexico (0.5%) -------
Alfa SA de CV Class A 2,200 12,423 Spain (0.8%)
* Cemex SA ADR 1,300 14,422 Aceralia SA 2,500 35,188
Cifra SA de CV ADR 1,116 19,669 Acerinox SA 100 16,412
* Empressa La Moderna ADR 700 13,912 Autopistas Cesa 551 9,124
Fomento Economico Mexicano (Femsa) B 3,500 25,434 Banco Bilbao Vizcaya (Fgn. Reg'd.) 1,200 56,326
** Grupo Indl. Maseca SA ADR 144A 500 5,750 Banco De Santander (Fgn. Reg'd.) 900 44,824
* Grupo Televisa GDR Rep 144A 300 10,987 Endesa 2,000 48,085
Kimberly Clark de Mexico SA ADR Class A 600 15,300 Iberdrola SA 1,600 24,303
Telefonos de Mexico ADR 1,100 62,013 Repsol SA 500 25,507
------- Tabacalera SA Series A 100 11,222
Total Mexico 179,910 Telefonica de Espana SA 1,000 44,072
------- -------
Netherlands (2.1%) Total Spain 315,063
ABN Amro Hldgs NV 1,000 23,073 -------
* Baan Co NV 500 23,912 Switzerland (0.9%)
Fortis Amev NV 500 29,501 Clariant AG (Reg'd.) 50 53,952
ING Groep 1,350 76,608 Credit Suisse Group (Reg'd.) 320 64,021
Koninklijke Numico NV 1,100 39,521 Nestle AG (Reg'd.) 30 57,324
OCE - Van Der Grinten NV 100 14,381 Novartis AG (Reg'd.) 86 152,199
Philips Electronics 500 36,696 Swiss Bank Corp. (Reg'd) 100 35,225
Royal Dutch Petroleum Co. 9,200 522,298 -------
* Samas-Groep NV 300 17,628 Total Switzerland 362,721
Van Ommeren (Koninklijke) 300 12,678 -------
Verenigd Bezit VNU 1,000 34,202
-------
Total Netherlands 830,498
-------
</TABLE>
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1998 - CONTINUED
(Unaudited)
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
United Kingdom (1.7%)
Abbey National 1,800 $ 34,754
Anglian Water Plc 2,000 31,314
BAA Group 2,100 20,554
BG Plc 4,411 22,898
British Petroleum Plc 2,500 35,982
Britist Steel 20,000 47,473
British Telecom Plc 8,600 93,391
General Accident Plc 2,000 49,399
General Electric Company Plc 3,500 27,678
Great Universal Stores Plc 3,600 44,670
Ladbroke Group 6,500 36,409
Mirror Group Plc 13,600 44,068
Prudential Corp. 1,800 26,480
Royal Bank of Scotland Group 5,300 82,184
Smithkline Beecham 3,564 44,910
Unigate Plc 4,000 48,562
-----------
Total United Kingdom 690,726
-----------
Total International Stocks
(Identified Cost $4,303,902) 7,003,101
Total International Securities
(Identified Cost $6,737,387) 9,206,461
(Identified Cost $29,445,247) 38,411,911
Total Investments: 96.6%
(Identified Cost $29,445,247) 38,411,911
Covered Call Options Written: (0.2%)
S & P 500 Stock Index June Put @ 1005 Exp 06/20/98
(Proceeds $64,748) 50 (78,437)
Other Assets less Liabilities: 3.6% 1,437,708
-----------
Net Assets: 100.0% $39,771,182
===========
Currency Legend:
A$ - Australian Dollar DM - German Mark
(pound) - British Pound (Y) - Japanese Yen
C$ - Canadian Dollar NLG - Netherlands Guilders
DKR - Danish Kronar SEK - Swedish Krona
FF - French Franc
- --------------------------------------------------------------------------------
* Non-income producing security.
** Exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may resold in transactions exempt from registration,
normally to qualified institutional buyers. On March 31, 1998, these
securities were valued at $69,112 or 0.17% of net assets.
</TABLE>
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998
Unaudited
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments, at value
(Identified cost $29,445,247) $ 38,411,911
Cash 1,438,291
Receivables:
Portfolio securities sold $ 411,750
Dividend, interest and recoverable foreign taxes receivable 181,123
Unrealized gain on forward currency contracts open (Note 5) 21,780 614,653
Prepaid expenses ------------ 23,169
------------
Total assets 40,488,024
------------
Liabilities
Payables:
Portfolio securities purchased 532,137
Covered call options written, at value (proceeds $64,748) 78,438 610,575
Accrued management fees (Note 3) ------------ 30,762
Other accrued expenses 75,505
------------
Total liabilities 716,842
------------
Net assets (equivalent to $13.83 per share, representing
the offering and redemption price for 2,875,560
shares outstanding, unlimited number of shares authorized) $ 39,771,182
============
Net assets consist of:
Capital paid in $ 30,926,991
Accumulated overdistributed net investment income (72,366)
Accumulated net realized loss on investments
and foreign currency transactions (56,734)
Unrealized appreciation on:
Investments $ 8,952,975
Foreign currency 20,316 8,973,291
------------ ------------
$ 39,771,182
============
</TABLE>
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1998
Unaudited
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Dividends (net of foreign taxes withheld of $4,460) $ 148,527
Interest (net of foreign taxes withheld of $517) 395,635
----------
544,162
Expenses
Advisory fees $ 177,288
Custodian fees 71,959
Audit and legal fees 39,644
Transfer agent fees 19,164
Administrative fees 16,260
Trustees' fees and expenses 9,154
Registration fees 3,393
Insurance 2,164
Miscellaneous expenses 5,390
----------
Total expenses 344,416
----------
Net investment income 199,746
----------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Net realized gain on investments 661,293
Net change in unrealized gain on investments 2,470,062
----------
Net gain on investments 3,131,355
----------
Net realized gain on foreign currency 49,860
Net change in unrealized gain on foreign currency
and foreign currency denominated assets and
liabilities 32,951
----------
Net gain on foreign currency 82,811
----------
Net gain on investments and foreign currency 3,214,166
----------
FOREIGN CURRENCY
Net increase in net assets resulting from operations $3,413,912
==========
</TABLE>
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
For the six months
ended March 31, 1998 For the year ended
(Unaudited) September 30, 1997
----------- ------------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 199,746 $ 689,032
Net realized gain on investments 661,293 2,096,865
Net unrealized gain on investments 2,470,062 3,428,514
Net realized gain on foreign currency 49,860 255,932
Net unrealized (loss) on foreign currency and
foreign currency denominated assets and liabilities 32,951 (46,020)
------------ ------------
Net increase resulting from operations 3,413,912 6,424,323
------------ ------------
Distributions to shareholders:
From net investment income (535,160) (1,145,896)
From net realized gains (2,829,561) (3,707,053)
------------ ------------
Total distributions (3,364,721) (4,852,949)
------------ ------------
Fund share transactions:
Proceeds from shares sold 511,076 815,065
Net asset value of shares issued on
reinvestment of distributions 3,021,425 4,298,913
Cost of shares redeemed (1,281,641) (5,780,476)
------------ ------------
Net increase (decrease) resulting from
Fund share transactions 2,250,860 (666,498)
------------ ------------
Net increase 2,300,051 904,876
Net Assets
Beginning of period 37,471,131 36,566,255
------------ ------------
End of period (including undistributed (overdistributed)
net investment income of ($72,366) and
$263,048, respectively) $ 39,771,182 $ 37,471,131
============ ============
Number of Fund Shares
Sold 38,104 62,408
Issued on reinvestment of distributions 239,138 345,801
Redeemed (95,798) (444,142)
------------ ------------
Net increase (decrease) 181,444 (35,933)
============ ============
</TABLE>
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
For a share outstanding throughout the period:
For the six-months Year Ended September 30,
ended March 31, 1998------------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.91 $ 13.39 $ 13.20 $ 12.01 $ 12.68 $ 10.93
-------- -------- ------- ------- -------- -------
Income from Investment Operations:
Net Investment Income 0.08 0.40(1) 0.31 0.38(1) 0.26(1) 0.39
Net Realized/Unrealized Gain (Loss) on
Securities and Foreign Currency 1.09 1.92 0.96 1.13 (0.66) 1.66
-------- -------- ------- ------- -------- -------
Total from Investment Operations 1.17 2.32 1.27 1.51 (0.40) 2.05
-------- -------- ------- ------- -------- -------
Less Distributions:
From Net Investment Income (0.20) (0.42) (0.32) (0.26) (0.05) (0.30)
From Net Realized Gains (1.05) (1.38) (0.76) (0.06) (0.22) --
-------- -------- ------- ------- -------- -------
Total Distributions (1.25) (1.80) (1.08) (0.32) (0.27) (0.30)
-------- -------- ------- ------- -------- -------
Net Asset Value, End of Period $ 13.82 $ 13.91 $ 13.39 $ 13.20 $ 12.01 $ 12.68
======== ======== ======= ======= ======== =======
Total Return 9.32%(4) 19.14% 10.09% 12.83% (3.18%) 19.05%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) $39,771 $37,471 $36,566 $40,688 $46,047 $49,584
Ratio of Expenses to Average Net Assets 1.85%(3) 1.84% 1.99% 1.85% 1.82% 1.70%
Ratio of Net Investment Income to
Average Net Assets 1.07%(3) 1.87% 2.09% 2.97% 2.03% 2.88%
Portfolio Turnover Rate 27% 66% 68% 166% 137% 96%
Average Commission Rate Paid(2) $0.0340 $0.0347 $0.0344 -- -- --
</TABLE>
- --------------------------------
1. 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.
3. Annualized.
4. Not annualized.
See ("Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
NOTES TO FINANCIAL STATEMENTS
Unaudited
- --------------------------------------------------------------------------------
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 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.
Options
The Fund may purchase and write call and put options on foreign currencies and
stock indices. When the Fund writes a call or put option, an amount equal to the
premium received is recorded as a liability and subsequently marked to market to
reflect the current value of the option written. Premiums received from writing
options which are exercised or closed are offset against the proceeds or amounts
paid on the transaction to determine the realized gain or loss. The Fund as a
writer of an option has no control over whether the underlying currencies or
indices may be sold (called) or purchased (put) and as a result bears the market
risk of an unfavorable change in the price of the currency or indices underlying
the written option.
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
Unaudited
- --------------------------------------------------------------------------------
Transactions in covered put options written by the Fund for the six months ended
March 31, 1998, were as follows:
Number of Premiums
Contracts Received
--------- --------
Outstanding at beginning of period 0 $ 0
Written 50 64,748
Closed or assigned 0 0
------- -------
Outstanding at end of period 50 $64,748
The Fund may also purchase put and call options. The Fund pays a premium which
is included in the Fund's Statement of Assets and Liabilities as an investment
and subsequently marked to market to reflect the current value of the option.
The risk associated with purchasing a put and call option is limited to the
premium paid.
The Fund follows the following procedures when valuing options. For all options
other than index options, the value is the last sale price on the exchange on
which they are listed, unless no sales of such options have taken place on that
day, in which case they will be valued at the mean between their closing bid and
asked prices. Exchange traded index options are valued at the last sale price
only if that price falls on or between the closing bid and asked prices on that
day. If the last sale price falls outside of the range of the closing bid and
asked prices, or if there has been no sale that day, then the index option will
be valued using the mean of the closing bid and asked prices.
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.
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.
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
Unaudited
- --------------------------------------------------------------------------------
Note 2 - Purchases and Sales of Securities
For the six months ended March 31, 1998, purchases and sales of investment
securities other than U.S. Government obligations and short-term investments
aggregated $8,731,287 and $7,218,967, respectively. Purchases and sales of U.S.
Government obligations aggregated $1,565,625 and $2,326,172, 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.
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 six months ended March
31, 1998, there were no such credits. In addition, the Fund did not receive any
other credits which reduced its expenses for the six months ended March 31,
1998.
Each outside Trustee is compensated by the Fund at the rate of $4,000 per year
plus an attendance fee of $666 for each Trustees' meeting attended and related
travel expenses.
Note 4 - Unrealized Appreciation (Depreciation) on a Tax Basis
Unrealized appreciation (depreciation) at March 31, 1998 based on cost of
securities of $29,445,247 for federal income tax purposes, consists of the
following:
Gross unrealized appreciation $ 9,552,765
Gross unrealized depreciation (586,101)
-----------
Net unrealized appreciation $ 8,966,664
===========
Note 5 - Forward Foreign Currency Contracts
At March 31, 1998, 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
payable for forward currency contracts in the financial statements. Open forward
foreign currency exchange contracts outstanding at March 31, 1998 were as
follows:
Unrealized
Currency Currency Delivery Appreciation
Receivable Deliverable Date (Depreciation)
---------- ----------- ---- --------------
$ 92,742 (Y) 11,314,500 05/12/98 $ 7,270
28,362 ITL 51,022,500 05/26/98 364
48,520 A$ 72,743 05/29/98 348
71,865 DKr 495,150 06/03/98 1,403
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
Unaudited
- --------------------------------------------------------------------------------
Note 5 - Continued
Unrealized
Currency Currency Delivery Appreciation
Receivable Deliverable Date (Depreciation)
---------- ----------- ---- --------------
470,734 DM 858,573 06/10/98 4,654
174,785 FF 1,068,114 06/10/98 1,675
143,132 (pound) 86,276 06/17/98 (931)
29,301 NLG 59,715 06/17/98 517
42,817 SEK 337,825 06/17/98 544
266,894 DM 483,505 06/18/98 4,307
70,922 C$ 100,425 06/23/98 (90)
159,410 DKr 1,106,940 06/23/98 1,719
---------
$ 21,780
=========
Currency Legend:
A$ - Australian Dollar ITL - Italian Lira
C$ - Canadian Dollar NLG - Netherlands Guilder
DKr - Danish Kroner SEK - Swedish Krona
DM - German Mark (pound) - British Sterling
FF - French Franc (Y) - Japanese Yen
