May 28, 1999
Dear Shareholder:
We are pleased to present your Bailard, Biehl & Kaiser Diversa Fund semi-annual
shareholders' report for the six months ended March 31, 1999. In this report, we
will review the Diversa Fund's recent performance, explain why we continue to be
cautious about the market outlook and discuss our current investment strategy.
MARKET REVIEW AND PERFORMANCE UPDATE
The Diversa Fund's performance over the six months ended March 31, 1999 can be
divided into two very distinct periods - a very strong three months ended
December 31, 1998 and an essentially flat first quarter of 1999. The Fund
advanced an outstanding 10.4%1 during the fourth quarter of 1998 and a much more
sedate 0.4%1 during the three months ended March 31, 1999, for a total return of
10.8%1 for the entire six months.
Why was the Diversa Fund's performance so different during these two periods?
During the fourth quarter of 1998, the Diversa Fund's performance was driven by
a rally in the global equity markets. Both U.S. and international stocks
experienced high double-digit returns as they rebounded from last August's
lows.2 Several well-timed interest rate cuts, Japanese reforms, more stable
Asian markets and an IMF bailout of Brazil all helped restore confidence to the
world's equity markets. By the end of 1998, last August's global stock market
correction was but a distant memory.
During the first quarter of 1999, on the other hand, the world's financial
markets experienced much more mixed results. The best performance ostensibly
came from U.S. stocks. Spurred on by good economic news, both the S&P 500 and
the Dow Jones Industrial Average hit record highs. However, a very limited
number of large growth stocks were responsible for this performance. Most of the
stocks in these two indices did not fare as well. Moreover, many small-cap,
mid-cap and value domestic stock indices actually posted NEGATIVE returns for
the quarter. Overseas, gains in Asian and emerging market stocks were offset by
losses in European stocks. Finally, both U.S. and international bonds posted
slightly negative returns due to rising interest rates in the U.S. and a
stronger dollar overseas.(2)
We continue to be pleased with the Diversa Fund's performance at a time when the
shifting tides within the financial markets have made it more difficult to
manage investment portfolios. The Diversa Fund has benefited from the
competitive performance of its U.S. stock portfolio, our country allocations
overseas and our policy of using S&P 500 stock options to protect against the
downside risk in the U.S. stock market. However, in hindsight, our decision in
January to slightly reduce the Fund's U.S. and international stock exposure and
increase its U.S. bond exposure did prove to be premature.
Since the end of March, both U.S. and international stocks have enjoyed good
gains. As a result, the Diversa Fund was up 3.0%(1) for the month of April.
<PAGE>
MARKET OUTLOOK
It is hard to flash cautionary signals when America is enjoying such good
economic times and its stock market remains so buoyant. Nevertheless, we expect
the financial markets to remain volatile. Although the U.S. economy has enjoyed
a strong first quarter, we are concerned that the underpinnings of this growth
are not sound or sustainable. Chief among our concerns are the virtually zero
savings rate and the widening U.S. trade deficit. As a result, growth should
slow later this year. Economic growth in Europe is decelerating, Japan is still
mired in recession, and potential trouble spots abound overseas. We are
particularly concerned about the outlook for the U.S. stock market. We believe
domestic stocks are overvalued and displaying many of the characteristics of a
market top. Although overvalued markets can remain overvalued for extended
periods of time, we would rather protect the Diversa Fund against downside risk
than be too greedy in the short term.
INVESTMENT STRATEGY
As a result, we are maintaining a defensive asset mix that is underweight in
both U.S. and international stocks and overweight in U.S. bonds. We believe
international stocks would be adversely affected by a strong dollar or a U.S.
stock market correction. U.S. bonds, on the other hand, provide a stable income
return and the possibility of capital appreciation should interest rates
decline. The current asset allocation targets of the Diversa Fund are 16% cash
equivalents, 35% U.S. bonds, 30% U.S. stocks, 7% international bonds and 12%
international stocks.
Cash 16%
U.S. Bonds 35%
U.S. Stocks 30%
International Bonds 7%
International Stocks 12%
These are the investment targets for the Bailard, Biehl & Kaiser Diversa Fund as
of May 6, 1999. The Fund's actual asset allocations may fluctuate from time to
time above or below these targets. Please note that the Fund uses S&P 500 put
options to reduce its effective U.S. stock exposure. As a result, the Fund
actually has a significantly higher weighting in U.S. stocks and a significantly
lower weighting in cash equivalents than these targets would indicate. At the
time of this writing, for example, U.S. stocks represent about 44% and cash
equivalents constitute less than 5% of the Diversa Fund's investment assets.
<PAGE>
CLOSING COMMENTS
Although the U.S. is enjoying some of the best economic conditions in its
history, we believe this is a time for prudent investors to be more defensive in
their investment strategy. Domestic stocks, in particular, appear vulnerable to
downside risks. However, the Diversa Fund retains enough U.S. stock exposure to
benefit if the market defies our current expectations and continues to move
upward.
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,
Thomas E. Bailard Burnie E. Sparks, Jr., CFA
Chairman President
(1) Total returns for investment periods ended March 31, 1999: 3 months: 0.38%;
6 months: 10.85%; 12 months: 4.42%; 5 years: 10.53% annualized; 10 years:
8.67% 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.
(2) The performance quoted represents past performance and is no indication of
future results.
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
PAR
VALUE VALUE
----- -----
DOMESTIC SECURITIES (78.8%)
DOMESTIC FIXED INCOME (34.2%)
CORPORATE BONDS
GTE North Incorporated
6.375% 02-15-10 $ 675,000 $ 697,140
Hertz Corporation
7.000% 07-01-04 250,000 258,575
HRPT Properties
6.875% 08-26-02 200,000 195,752
Key Bank USA
7.550% 09-15-06 250,000 267,695
GOVERNMENT AGENCY
Federal National Mortgage Association
4.390% 10-13-00 500,000 493,930
Federal National Mortgage Association
6.000% 05-15-08 500,000 507,190
UNITED STATES TREASURY OBLIGATIONS
United States Treasury Bonds
11.625% 11-15-02 475,000 573,340
United States Treasury Bonds
7.625% 02-15-25 1,400,000 1,720,688
United States Treasury Notes
5.875% 02-15-04 800,000 823,750
United States Treasury Notes
5.625% 02-15-06 2,125,000 2,155,879
United States Treasury Notes
6.625% 05-15-07 2,700,000 2,911,359
United States Treasury Notes
5.500% 02-15-08 800,000 809,500
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
PAR
VALUE VALUE
----- -----
DOMESTIC FIXED INCOME- CONTINUED
UNITED STATES TREASURY NOTES- CONTINUED
United States Treasury Notes
5.625% 05-15-08 $750,000 $ 763,828
United States Treasury Notes
4.750% 11-15-08 500,000 481,874
-----------
TOTAL DOMESTIC FIXED INCOME
(IDENTIFIED COST $12,663,867) 12,660,500
-----------
DOMESTIC STOCKS (44.6%) SHARES VALUE
------ -----
BASIC INDUSTRY (1.7%)
Bemis Company 6,800 211,225
Du Pont (E.I.) De Nemours 4,600 267,088
Nucor Corp. 3,600 158,625
-----------
Total Basic Industry 636,938
-----------
CAPITAL GOODS (4.6%)
General Electric Company 6,300 696,938
Tyco Int'l. Ltd. 6,900 495,075
United Technologies Corp. 3,700 501,119
-----------
Total Capital Goods 1,693,132
-----------
COMMUNICATIONS (4.2%)
AT & T Corp. 8,000 638,500
Bell Atlantic Corp. 6,000 310,125
*Qwest Communications 3,429 247,209
Sprint Corporation 3,600 353,250
-----------
Total Communications 1,549,084
-----------
CONSUMER CYCLICALS (3.7%)
*Lear Corp. 5,100 217,706
Lowes Companies Inc. 6,900 417,450
Sears Roebuck & Co. 6,900 311,794
*Sound Advice Inc. Wts (Ex. 6/14/99) 93 0
Wal Mart Stores Inc. 4,500 414,844
-----------
Total Consumer Cyclicals 1,361,794
-----------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
DOMESTIC STOCKS- CONTINUED
CONSUMER STAPLES (5.8%)
Food Lion Inc. Class B 27,800 $ 250,200
Kimberly Clark Corp. 4,100 196,544
Rubbermaid Inc. 6,542 310,745
PepsiCo, Inc. 15,000 587,812
Sysco Corp. 26,200 689,388
Unilever NV New York Shares 2,000 132,875
-----------
Total Consumer Staples 2,167,564
-----------
ENERGY/RESOURCES (3.2%)
Mobil Corp. 6,900 607,200
Royal Dutch Petroleum Co. 7,400 384,800
Valero Refining & Marketing Co. 7,500 186,563
-----------
Total Energy/Resources 1,178,563
-----------
FINANCE (6.1%)
Banc One Corp. 8,250 454,266
BankAmerica Corp. 5,601 395,571
Chase Manhattan Corp. 7,200 585,450
Federal National Mortgage Assoc. 2,500 173,125
*National Mercantile Bancorp
Warrants (Ex. 06/02/99) 1,434 0
*Ocwen Financial Corporation 11,000 96,938
Reliastar Financial Corp. 6,900 294,113
Washington Mutual Inc. 6,700 273,863
-----------
Total Finance 2,273,326
-----------
HEALTH CARE (4.9%)
*Alza Corp. 4,300 164,475
American Home Products Corp. 11,000 717,750
*Boston Scientific Corp. 4,600 186,587
Johnson & Johnson 5,100 477,806
Merck & Co. 3,400 272,637
-----------
Total Health Care 1,819,255
-----------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
DOMESTIC STOCKS- CONTINUED
HIGH TECHNOLOGY (6.9%)
*Cisco Systems, Inc. 4,300 $ 471,119
Intel Corp. 3,200 381,200
International Business Machines 2,000 354,500
*Microsoft Corp. 8,000 717,000
Xerox Corp. 11,400 608,474
-----------
Total High Technology 2,532,293
-----------
TRANSPORTATION (0.6%)
*AMR Corp. 4,000 234,250
-----------
UTILITIES (2.0%)
Enron Corp. 7,000 449,750
Peco Energy Co. 1,900 87,874
Southern Co. 5,400 125,887
Texas Utilities 1,700 70,869
-----------
Total Utilities 734,380
-----------
PUT OPTIONS ON STOCK INDICIES (0.9%)
PURCHASED
S & P 500 Stock Index Apr.
Put @ 1250 Exp 04/17/99 30 28,500
S & P 500 Stock Index May
Put @ 1275 Exp 05/22/99 20 73,250
S & P 500 Stock Index Apr.
Put @ 1225 Exp 04/17/99 20 10,500
S & P 500 Stock Index Jun
Put @ 1290 Exp 06/19/99 40 212,000
-----------
TOTAL PUT OPTIONS ON STOCK INDICES
(IDENTIFIED COST $166,362) 324,250
-----------
TOTAL DOMESTIC STOCKS
(IDENTIFIED COST $11,513,965) 16,180,579
-----------
TOTAL DOMESTIC SECURITIES
(IDENTIFIED COST $24,344,194) 29,165,329
-----------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
INTERNATIONAL SECURITIES (18.5%) (LOCAL CURRENCY) VALUE
---------------- -----
INTERNATIONAL FIXED INCOME (6.1%)
Asian Development Bank
3.125% 06-29-05 (Y) 15,000,000 $ 141,464
Deutschland Bundsrepublk
5.250% 01-04-08 EUR 127,823 150,535
Government of Canada
8.500% 04-01-02 C$ 75,000 54,383
Government of Canada
6.000% 06/01/08 C$ 120,000 84,796
Government of France
9.500% 01-25-01 EUR 236,295 284,288
Government of the Netherlands
8.500% 03-15-01 EUR 249,580 297,146
International Bank for
Reconstruction & Development
7.250% 04-09-01 NZD 200,000 110,352
Kingdom of Denmark
8.000% 05-15-03 DKr 1,125,000 190,324
Kingdom of Sweden
6.500% 10-25-06 SEK 1,600,000 223,842
Quebec Province
8.625% 11-04-11 (pound) 60,000 118,328
Republic of Germany
6.875% 05-12-05 EUR 102,258 129,645
Republic of Italy
6.500% 11-01-27 EUR 103,291 133,063
Societe Nat'l. des Chemins de Fer
6.750% 03-01-00 (Y) 8,000,000 71,667
Tesco Plc
7.500% 07-30-07 (pound) 30,000 54,821
Treuhandanstalt
7.750% 10-01-02 EUR 89,476 110,839
U.K. Treasury
9.750% 08/27/02 (pound) 55,000 102,522
-----------
TOTAL INTERNATIONAL FIXED INCOME
(IDENTIFIED COST $2,332,533) 2,258,015
-----------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
INTERNATIONAL STOCKS (12.4%)
ARGENTINA (0.1%)
Telecom Argentina Stet France ADR 600 $ 16,463
Transp. Gas Del Sur (TGS) Spns'd ADR 1,600 15,000
-----------
Total Argentina 31,463
-----------
AUSTRALIA (0.3%)
Australia & New Zealand Bank Group 1,600 11,569
CSR Ltd. 4,000 8,636
Lend Lease Corp. Ltd. 1,700 21,569
National Australia Bank Ltd. 1,000 18,092
National Mutual Holdings 7,000 11,272
Telstra Corporation 5,000 26,065
The News Corporation Ltd. 1,600 11,794
Woodside Petroleum Ltd. 1,000 6,026
-----------
Total Australia 115,023
-----------
AUSTRIA (0.4%)
Austria Tabakwerke AG 157 10,577
Bank Austria AG 824 49,016
Brau-Union AG 275 14,340
Brau-Union Hungaria Pfd. 690 10,801
Evn Energy-Versorg AG 150 19,506
Mayr-Melnhof Karton AG 257 11,373
OMV AG 284 25,111
-----------
Total Austria 140,724
-----------
BELGIUM (0.3%)
Fortis Strip VVPR 108 1
Fortis Nl NV 958 35,372
Electrabel NPV 110 39,427
KBC Bancassurance Holding SA 300 19,999
-----------
Total Belgium 94,799
-----------
BRAZIL (0.2%)
Cia Paranaense Energy 2,470,000 18,637
Electrobras Pfd. ADR 1,200 12,600
Telebras Spns'd pfd. ADR 450 36,281
-----------
Total Brazil 67,518
-----------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
INTERNATIONAL STOCKS- CONTINUED
CANADA (0.3%)
*BCT Telus Communication Inc. 291 $ 7,117
*BCT Telus Communication Inc. Non Voting 97 2,292
Canadian Imperial Bank of Commerce 500 12,758
Quebecor, Inc. Class B 500 10,990
*Webs Index Fund, Inc., Canada Webs 5,000 62,187
-----------
Total Canada 95,344
-----------
DENMARK (0.1%)
Den Danske Bank 200 21,010
Teledenmark A/S B 300 29,719
-----------
Total Denmark 50,729
-----------
FINLAND (0.1%)
Nokia Corp. ADR 300 46,725
-----------
Total Finland 46,725
-----------
FRANCE (0.8%)
L'Air Liquide 6 894
AXA- UAP SA 150 19,886
Banque Paribas A Shares 300 33,489
Cap Gemini SA 100 16,745
Casino Guichard Perrachon et Cie. 250 22,186
Elf Aquitaine SA Spns'd ADR 300 20,194
Eridania Beghin Say SA 100 14,811
Essilor Int'l. 50 16,680
FranceTelecom SA 350 28,302
LaFarge SA 200 18,029
Peugeot SA 80 11,504
Sanofi 100 16,842
Schneider SA 300 16,599
Scor 300 15,093
Suez Lyonnaise des Eaux 200 37,009
Vivendi Wts. (Ex. 5/2/01) 100 246
-----------
Total France 288,509
-----------
GERMANY (0.4%)
Alliance AG 50 15,222
Volkswagenwerk AG 150 9,992
*Webs Index Fund, Inc., Germany Webs 7,000 139,125
-----------
Total Germany 164,339
-----------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
INTERNATIONAL STOCKS- CONTINUED
GREECE (0.4%)
Alpha Credit Bank 754 $ 50,029
Attica Enterprises S.A. 1,200 10,216
Ergo Bank 231 17,259
Hellenic Telecom Org 500 12,125
National Bank of Greece 400 27,043
*Panafon Hellenic Telecom 630 16,349
Titan Cement Co. 150 11,406
-----------
Total Greece 144,427
-----------
HONG KONG/ CHINA (0.4%)
Cheung Kong Holdings 3,000 22,840
Dao Heng Bank 13,000 42,861
Gold Peak Industrial 13,000 2,164
Gold Peak Industrial Rts. 04/01/99 3,250 96
Gold Peak Industrial Hldg. Wts. (Ex. 08/06/00) 2,600 $91
Hong Kong & China Gas Wts. (Ex. 9/30/99) 42 2
Hong Kong Electric 5,000 15,130
Hong Kong Telecommunications 6,000 11,807
*Huaneng Power Int'l. ADR 500 4,969
Hutchison Whampoa 4,000 31,485
-----------
Total Hong Kong/ China 131,445
-----------
HUNGARY (0.3%)
Magyar Olaj-Es Gazpari 1,470 31,536
Matav Rt. ADR 650 17,388
Matav Rt. 2,340 12,470
OTP Bank 815 31,496
Richter Gedeon Vegyeszeti 470 15,244
-----------
Total Hungary 108,134
-----------
INDONESIA (0.3%)
Gudang Garam 12,000 15,942
Indostat Satellite 24,000 31,885
*Indofood Sukes Makmur 30,000 18,674
*Pabrik Kert Tjiwi Kimia 50,000 11,095
Semen Gresik 20,000 22,363
Telekomunikasi Indo B 65,000 21,168
-----------
Total Indonesia 121,127
-----------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
INTERNATIONAL STOCKS- CONTINUED
IRELAND (0.3%)
Allied Irish Banks 3,000 $ 51,821
CRH 1,500 25,894
Fyffes 7,000 16,475
Smurfit (Jefferson) Plc 6,500 13,122
-----------
Total Ireland 107,312
-----------
ISRAEL (0.2%)
*DSP Group Inc. ADR 700 10,281
*ECI Telecom ADR 600 21,000
*Gilat Satellite Networks Ltd. ADR 400 24,000
Teva Pharmaceutical Ind. Spns'd ADR 600 28,463
-----------
Total Israel 83,744
-----------
ITALY (0.5%)
*Webs Index Fund, Inc., Italy Webs 6,800 176,800
-----------
Total Italy 176,800
-----------
JAPAN (1.2%)
Bank of Tokyo-Mitsubishi 2,000 27,561
Hokkaido Takushoku 12,000 101
Mitsui Chemicals 2,000 9,626
Sankyo Co. Ltd. 1,000 21,447
Takefuji Corp. 300 23,052
*ebs Index Fund, Inc., Japan Webs 32,500 373,750
-----------
Total Japan 455,537
-----------
MEXICO (0.3%)
Alfa SA de CV Class A 2,200 6,663
Empresas Ica Soc Controladora 13,000 11,190
Fermento Economico Mexica 4,600 14,052
Grupo Industrial Maseca 19,000 15,358
Soriana SA Series B 3,500 12,088
Telefonos de Mexico Series L ADR 600 39,300
-----------
Total Mexico 98,651
-----------
NETHERLANDS (0.4%)
*Webs Index Fund, Inc., Netherlands Webs 6,200 147,250
-----------
Total Netherlands 147,250
-----------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
INTERNATIONAL STOCKS- CONTINUED
NEW ZEALAND (0.3%)
*Auckland International Airport Ltd. 10,000 $ 14,612
Flecther Challenge Buildings 2,000 2,699
Telecom Corp. of New Zealand 18,000 87,546
-----------
Total New Zealand 104,857
-----------
NORWAY (0.1%)
*Bona Shipholding Ltd. 33 224
Elkem A/S A 1,000 14,750
Kvaerner Industrier 200 3,558
Norsk Hydro AS 650 26,492
-----------
Total Norway 45,024
-----------
PHILIPPINES (0.4%)
Ayala Corp. 90,000 27,290
Bank of the Phillipine Island 11,000 27,535
*C & P Homes Inc. 433,000 7,263
*Davao Union Cement 60,000 1,672
*Empire East Land 84,600 1,528
*Filinvest Land 480,900 39,713
*Mondragon International 42,000 661
Philippine Long Distance 1,300 34,219
*Philippine National Bank 225 312
San Miguel Corp. Class B 15,000 24,968
-----------
Total Philippines 165,161
-----------
POLAND (0.3%)
Big Bank Gdanski SA 30,000 57,736
Elektrim SA 1,500 16,870
Mostostal Export 5,000 5,999
*Stalex Port A 2,000 9,847
*Telekomunikacja Polska SA 3,000 16,346
-----------
Total Poland 106,798
-----------
PORTUGAL (0.1%)
Banco Pinto & Sotto Mayor 795 15,681
Jeronimo Martins Filho SGPS SA 200 7,125
Electric de Portugal Spns'd ADR 500 19,781
Telecel Comuni Pes 100 15,924
-----------
Total Portugal 58,511
-----------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
INTERNATIONAL STOCKS- CONTINUED
SINGAPORE (0.4%)
Creative Technology Ltd. 700 $ 8,140
DBS Land 16,000 23,604
Elec & Eltek International Co. 4,000 14,720
Overseas Chinese Bank (Fgn. Reg'd.) 6,200 41,967
Overseas Union Bank (Fgn. Reg'd) 8,000 28,233
Singapore Press Holdings (Fgn. Reg'd) 2,000 22,100
Singapore Telecom 13,000 18,502
United Overseas Land Wts. (Ex. 5/28/01) 450 100
-----------
Total Singapore 157,366
-----------
SOUTH AFRICA (0.2%)
Bidvest Group Ltd. 2,600 21,229
Impala Platinum Holdings Ltd. 850 14,568
Imperial Holdings Ltd. 3,040 24,575
Rembrandt Group Ltd. 3,000 21,487
-----------
Total South Africa 81,859
-----------
SOUTH KOREA (0.6%)
Hankuk Electric Glass Co. 1,150 14,719
*Housing & Commercial Bank 2,050 40,933
*Kookmin Bank 1,500 14,792
*Korea Electric Power Corp. 1,600 38,598
*Korea Telecom Corp. 500 16,952
*Pohang Iron & Steel 355 21,902
*Samsung Corporation 4,000 27,351
*Samsung Electronics 800 61,940
*Ssangyong Oil Refining 800 12,389
-----------
Total South Korea 249,576
-----------
SPAIN (0.4%)
*Webs Index Fund, Inc., Spain Webs 5,000 136,562
-----------
Total Spain 136,562
-----------
SWEDEN (0.3%)
Ericsson LM Tel Co ADR 1,500 35,719
*Webs Index Fund, Inc., Sweden Webs 4,300 86,000
-----------
Total Sweden 121,719
-----------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
INTERNATIONAL STOCKS- CONTINUED
SWITZERLAND (0.5%)
Julius Baer Holdings 10 $ 32,423
*Webs Index Fund, Inc., Switzerland Webs 8,780 138,834
-----------
Total Switzerland 171,257
-----------
THAILAND (0.4%)
*Bangkok Bank (Fgn. Reg'd) 12,000 24,597
*Electricity Generating (Fgn. Reg'd.) 8,000 15,973
*National Finance Public Co. (Fgn. Reg'd) 50,000 14,642
*Siam Cement Plc(Fgn. Reg'd.) 2,000 40,463
*Thai Farmers Bank Plc 15,000 30,347
-----------
Total Thailand 126,022
-----------
UNITED KINGDOM (1.1%)
BP Amoco Plc 1,300 22,355
British Aerospace 1,500 10,025
British Energy Plc 1,300 12,487
British Telecom Plc 2,000 32,706
Cadbury Schwepps Ord. 1,100 16,053
Diageo Plc 1,500 31,668
Dixons Group 1,000 11,187
Glaxo Wellcome Plc 1,500 50,068
Hanson Plc 2,500 22,358
Lloyds TSB Group 2,000 30,793
Logica Plc. 1,800 18,524
National Westminster Bank 1,700 39,573
Reuters Group Plc. 2,000 29,348
Somerfield Plc 3,000 15,376
SmithKline Beecham Plc 1,064 15,355
Vodafone Group Plc 1,500 28,012
-----------
Total United Kingdom 385,888
-----------
TOTAL INTERNATIONAL STOCKS
(IDENTIFIED COST $2,794,433) 4,580,200
-----------
TOTAL INTERNATIONAL SECURITIES
(IDENTIFIED COST $5,126,966) 6,838,215
-----------
TOTAL INVESTMENTS: 97.3%
(IDENTIFIED COST $29,649,754) $36,003,544
===========
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
CONTRACTS
(100 SHARES
PER CONTRACT) VALUE
------------- -----
COVERED PUT OPTIONS WRITTEN: (0.3%)
S & P 500 Stock Index Apr.
Put @ 1175 Exp 04/17/99 20 ($5,125)
S & P 500 Stock Index May
Put @ 1175 Exp 05/22/99 20 (25,750)
S & P 500 Stock Index Jun
Put @ 1175 Exp 06/19/99 40 (84,000)
-----------
TOTAL COVERED PUT OPTION WRITTEN
(PREMIUM RECEIVED $178,594) (114,875)
-----------
OTHER ASSETS LESS LIABILITIES: 3.0% 1,036,286
-----------
NET ASSETS: 100.0% $37,039,830
===========
CURRENCY LEGEND:
(pound) - British Pound (Y) - Japanese Yen
C$ - Canadian Dollar NZD - New Zealand
DKR - Danish Kronar SEK - Swedish Krona
EUR - Euro
- --------------------------------------------------------------------------------
* Non-income producing security.
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments, at value
(Identified cost $29,649,754) $36,003,544
Cash 667,178
Receivables:
Portfolio securities sold $ 279,455
Dividend, interest and recoverable foreign
taxes receivable 280,572
Unrealized gain on forward currency contracts
open (Note 5) 16,698
Fund shares sold 11,438 588,163
-----------
Prepaid expenses 18,648
Other assets 4,838
-----------
Total assets 37,282,371
-----------
LIABILITIES
Payables:
Covered put options written, at value
(proceeds $178,594) 114,875
Portfolio securities purchased 27,097
Shares redeemed 17,000 158,972
----------
Accrued management fees (Note 3) 24,210
Other accrued expenses 59,359
-----------
Total liabilities 242,541
-----------
Net assets (equivalent to $13.36 per share,
representing the offering and redemption
price for 2,771,679 shares outstanding,
unlimited number of shares authorized) $37,039,830
===========
Net assets consist of:
Capital paid in $29,389,652
Accumulated net investment income 145,816
Accumulated net realized gain on investments
and foreign currency transactions 1,071,886
Unrealized appreciation on:
Investments $ 6,417,509
Foreign currency 14,967 6,432,476
----------- -----------
$37,039,830
===========
See ("Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
STATEMENT OF OPERATIONS
MARCH 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $3,652) $ 161,324
Interest 454,104
-----------
615,428
Expenses
Advisory fees (See Note 3) $ 177,504
Custodian fees 71,705
Audit and legal fees 50,265
Transfer agent fees 9,145
Administrative fees 16,205
Trustees' fees and expenses (See Note 3) 9,850
Registration fees 7,670
Insurance 2,530
Printing fees 990
---------
Total expenses 345,864
Net investment income 269,564
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
Net realized gain on investments 1,302,213
Net change in unrealized gain on investments 2,218,792
-----------
Net gain on investments 3,521,005
-----------
Net realized loss on foreign currency (31,138)
Net change in unrealized gain on foreign currency
and foreign currency denominated assets and
liabilities 73,691
-----------
Net gain on foreign currency 42,553
-----------
Net gain on investments and foreign currency 3,563,558
-----------
Net increase in net assets resulting from operations $ 3,833,122
===========
See ("Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the six For the
months ended year ended
March 31, 1999 September
Unaudited 30, 1998
-------------- -------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 269,564 $ 502,693
Net realized gain on investments 1,302,213 3,196,058
Net unrealized gain (loss) on investments 2,218,792 (2,284,196)
Net realized loss on foreign currency (31,138) (147,495)
Net unrealized gain (loss) on foreign currency
and foreign currency denominated assets and
liabilities 73,691 (46,089)
------------ ------------
Net increase resulting from operations 3,833,122 1,220,971
------------ ------------
Distributions to shareholders:
From net investment income (135,945) (620,306)
From net realized gains (2,613,103) (2,829,561)
------------ ------------
Total distributions (2,749,048) (3,449,867)
------------ ------------
Fund share transactions:
Proceeds from shares sold 1,585,674 1,693,538
Net asset value of shares issued on
reinvestment of distributions 2,484,194 3,114,218
Cost of shares redeemed (3,443,538) (4,720,565)
------------ ------------
Net increase resulting from
Fund share transactions 626,330 87,191
------------ ------------
Net increase (decrease) 1,710,404 (2,141,705)
Net Assets
Beginning of period 35,329,426 37,471,131
------------ ------------
End of period (including accumulated
net investment income of $123,874 and
$12,197, respectively) $ 37,039,830 $ 35,329,426
============ ============
Number of Fund Shares
Sold 117,858 124,255
Issued on reinvestment of distributions 192,652 245,803
Redeemed (257,738) (345,267)
------------ ------------
Net increase 52,772 24,791
============ ============
See ("Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For a share outstanding throughout the period:
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------------------------------------------------
For the six months
ended March 31, 1999
(Unaudited) 1998 1997 1996 1995 1994
----------- ------- ------- ----- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 12.99 $ 13.91 $ 13.39 $ 13.20 $ 12.01 $ 12.68
------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net Investment Income 0.28 0.13(1) 0.40(1) 0.31 0.38(1) 0.26
Net Realized/Unrealized Gain (Loss) on
Securities and Foreign Currency 1.37 0.23 1.92 0.96 1.13 (0.66)
------- ------- ------- ------- ------- -------
Total from Investment Operations 1.65 0.36 2.32 1.27 1.51 (0.40)
------- ------- ------- ------- ------- -------
Less Distributions:
From Net Investment Income (0.23) (0.23) (0.42) (0.32) (0.26) (0.05)
From Net Realized Gains (1.05) (1.05) (1.38) (0.76) (0.06) (0.22)
------- ------- ------- ------- ------- -------
Total Distributions (1.28) (1.28) (1.80) (1.08) (0.32) (0.27)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period $ 13.36 $ 12.99 $ 13.91 $ 13.39 $ 13.20 $ 12.01
======= ======= ======= ======= ======= =======
Total Return 10.85%(2) 2.98% 19.14% 10.09% 12.83% (3.18%)
Ratios/Supplemental Data:
Net Assets, End of Period (000's) $37,018 $35,329 $37,471 $36,566 $40,688 $46,047
Ratio of Expenses to Average Net Assets
Before Expenses Paid Indirectly 1.85%(3) 1.86% 1.84% 1.99% 1.85% 1.82%
After Expenses Paid Indirectly 1.85%(3) 1.80% 1.84% 1.99% 1.85% 1.82%
Ratio of Net Investment Income to
Average Net Assets 1.44%(3) 1.34% 1.87% 2.09% 2.97% 2.03%
Portfolio Turnover Rate 21% 59% 66% 68% 166% 137%
</TABLE>
- ----------
1. Net investment income per share has been computed before adjustments for
book/tax differences.
2. Not annualized
3. 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)
- --------------------------------------------------------------------------------
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. Also, it is the Fund's intention to make
distributions in amounts sufficient to avoid imposition of excise tax under the
Internal Revenue Code. Therefore, no provision is made for Federal income or
excise 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.
NOTE 2 - PURCHASES AND SALES OF SECURITIES
For the six months ended March 31, 1999, purchases and sales of investment
securities other than U.S. Government obligations and short-term investments
aggregated $3,566,174 and $7,539,795, respectively. Purchases and sales of U.S.
Government obligations aggregated $4,006,779 and $1,783,063, 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.
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 3 - CONTINUED
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, 1999, there were no such credits.
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, 1999 based on cost of
securities of $29,649,754 for federal income tax purposes, consists of the
following:
Gross unrealized appreciation $ 7,456,542
Gross unrealized depreciation (1,102,752)
-----------
Net unrealized appreciation $ 6,353,790
===========
NOTE 5 - FORWARD FOREIGN CURRENCY CONTRACTS
At March 31, 1999, 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 for forward currency contracts in the financial statements. Open
forward foreign currency exchange contracts outstanding at March 31, 1999 were
as follows:
Unrealized
Currency Currency Delivery Appreciation
Receivable Deliverable Date (Depreciation)
---------- ----------- ---- --------------
$ 100,128 (Y) 11,314,500 05/12/99 $ 4,049
55,430 NZD 100,000 05/17/99 2,023
200,000 (Y) 23,402,400 05/18/99 1,131
63,474 SEK 514,140 05/28/99 720
605,634 EUR 553,535 06/10/99 5,613
286,129 (pound) 176,415 06/17/99 1,399
41,661 SEK 337,825 06/17/99 381
52,844 C$ 80,000 06/22/99 (72)
162,912 DKr 1,106,940 06/23/99 1,449
-------
$16,698
=======
CURRENCY LEGEND:
C$ - Canadian Dollar SEK - Swedish Krona
DKr - Danish Kroner (pound) - British Sterling
EUR - Euro (Y) - Japanese Yen
NZD - New Zealand Dollar
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
REPORT OF 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 (the "Fund") at September 30, 1998, and the results of its operations, the
changes in its net assets and the 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, 1998 by correspondence with the custodian and brokers and
application of alternative procedures where broker confirmations were not
received, provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
San Francisco, California
November 18, 1998
