November 30, 1999
Dear Shareholder:
We are pleased to present your Bailard, Biehl & Kaiser Diversa Fund annual
shareholders' report for the year ended September 30, 1999. In this report, we
will review the Diversa Fund's performance during a year of considerable
volatility in the world's financial markets. We will also discuss our current
market outlook and investment strategy.
MARKET REVIEW AND PERFORMANCE UPDATE
The Bailard, Biehl & Kaiser Diversa Fund advanced 9.2%(1) for the year ended
September 30, 1999. This solid return belies the volatility of the financial
markets during a time when investors moved from fears that the world was on the
verge of a major economic crisis to concerns that strong economic growth would
rekindle inflation.
The year began on September 30, 1998, when foreign economic problems seemed on
the verge of disrupting the U.S. economy. The Asian crisis, Russia's financial
difficulties and the near collapse of a large American hedge fund had plunged
the U.S. and international stock markets into a major correction. U.S.
government bond prices soared and interest rates fell as investors looked for
the safest possible investments. But several well-timed policy moves by the
world's monetary authorities soon restored confidence to the global financial
system. As a result, the fourth quarter of 1998 saw the U.S. and international
equity markets post high double-digit returns as they rebounded from the depths
of the global crisis.(2)
The world's financial markets experienced much more mixed results during the
first and second quarters of 1999. U.S. and international stocks generally
benefited from signs of economic recovery overseas and strong economic growth at
home. However, the returns of some equity indices were misleading. The strong
performance of the most widely quoted U.S. stock market indices were driven by a
relatively small number of large growth stocks. The broader domestic stock
market did not fare nearly as well. Overseas, the Japanese and Asian stock
markets significantly outperformed their European counterparts. Moreover, the
U.S. and international bond markets were hurt by rising interest rates and a
stronger dollar amidst concerns that strong economic growth might rekindle
inflation.
During the third quarter of 1999, these fears of inflation finally caught up
with the U.S. stock market. After a strong start, the S&P 500 fell -6.2% for the
three month period, while some domestic stock market indices actually
experienced double-digit losses.(2) Overseas, the Japanese stock market was the
only bright spot in a quarter that saw Asian stocks decline and European stocks
tread water. International bonds outperformed the basically flat U.S. bond
market by eeking out a slight positive return as the dollar began to weaken
against both the yen and the euro. All in all, this was a rather difficult
quarter for the investment markets.
<PAGE>
In keeping with these market trends, most of Diversa's 9.2% return for the past
year was realized during the fourth quarter of 1998. The Fund was essentially
flat during the first quarter of 1999, rose 3.5% during the second quarter of
1999, and fell -4.9% during the third quarter of 1999.(1) Diversa could have
performed even better over the past year if it had held more in equities and
less in bonds. However, the Fund's fixed-income holdings provided important
diversification during the Asian crisis and the stock market correction during
the third quarter of 1999. Moreover, Diversa's policy of investing in S&P 500
put options continued to allow the Fund to maintain a larger position in U.S.
stocks than would otherwise be the case.
During the past year, the best performance came from Diversa's international
stock portfolio, which advanced over 35%. Diversa's U.S. stock portfolio also
achieved high double-digit returns.(2) Although both asset classes lagged their
benchmarks for the third quarter of 1999, their returns for the past year were
competitive given the behavior of the broader equity markets. International
stocks and bonds outperformed their domestic counterparts, highlighting the
benefits of overseas diversification.
Since the end of September, the global financial markets have continued to
exhibit volatility. The U.S. stock market in particular has been very sensitive
to inflation perceptions, declining when fears of inflation increase and
rallying when fears of inflation subside.
MARKET OUTLOOK
The U.S. economy has been much more resilient than we expected, achieving strong
growth with little inflation. However, short-term inflationary pressures are
increasing. Should the economy continue to grow at a rapid pace, these pressures
will mount, forcing the Fed to raise interest rates further. This would be a
negative environment for both U.S. stocks and bonds. Fortunately, there is still
a reasonable chance that the interest rate increases we have already seen will
slow economic growth enough to ease the inflationary pressures, creating an
environment that would be positive for both U.S. stocks and bonds.
From a valuation standpoint, U.S. bonds are much more attractive than U.S.
stocks. U.S. stocks remain overvalued and vulnerable to disappointments.
Although further interest rate increases may not be fully discounted in today's
bond market, we believe the downside risk for domestic bonds is much less than
that of domestic equitites. Global competition, global excess capacity,
technology and the internet should all help keep inflation under control longer
term. Slower economic growth should also eventually help ease inflation
concerns.
International stocks are attractively valued. They should benefit from improving
economic growth overseas and any further weakness in the U.S. dollar, although
they would be vulnerable to an U.S. stock market correction. International bonds
face less inflationary pressures than U.S. bonds and provide important
diversification benefits.
INVESTMENT STRATEGY
Given our market outlook, the Diversa Fund continues to maintain a defensive
asset allocation. However, we did make some strategy changes this August, when
the U.S. stock market was in the midst of a correction and the U.S. dollar began
to weaken versus other currencies. We used the market correction to add some
selected names to the U.S. stock portfolio. We also slightly increased our
weighting in both international stocks and bonds to a neutral position. The
funds for these investments came from U.S. bonds and cash equivalents. As a
result of these strategy changes, the current asset allocation targets of the
Diversa Fund are 14% cash equivalents, 28% U.S. bonds, 35% U.S. stocks, 9%
international bonds, and 14% international stocks. We remain underweight in U.S.
stocks and overweight in cash equivalents and U.S. bonds.
<PAGE>
[PIE CHART]
Cash 14%
U.S. Bonds 28%
U.S. Stocks 35%
International Bonds 9%
International Stocks 14%
THESE ARE THE INVESTMENT TARGETS FOR THE BAILARD, BIEHL & KAISER DIVERSA FUND AS
OF NOVEMBER 8, 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 46% AND CASH
EQUIVALENTS CONSTITUTE ABOUT 3% OF THE DIVERSA FUND'S INVESTMENT ASSETS.
CLOSING COMMENTS
The recent volatility of the financial markets highlights the importance of
global diversification, which gives investors the opportunity to participate in
the markets' gains with less downside risk. As the era of automatic double-digit
U.S. stock market returns appears to be drawing to a close, diversification will
help investors navigate the uncertain waters that 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.
Thomas E. Bailard Burnie E. Sparks, Jr., CFA
Chairman President
- ----------
1 Total returns for investment periods ended September 30, 1999: 3 months:
-4.87%; 12 months: 9.25%; 5 years: 10.71% annualized; 10 years: 7.62%
annualized. 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
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
PAR
VALUE VALUE
Domestic Securities (74.2%)
DOMESTIC FIXED INCOME (28.6%)
CORPORATE BONDS (3.2%)
GTE North Incorporated
6.375% 02-15-10 $ 675,000 $ 643,086
Hertz Corporation
7.000% 07-01-04 250,000 250,158
HRPT Properties
6.875% 08-26-02 200,000 193,840
----------
Total Corporate Bonds 1,087,084
----------
GOVERNMENT AGENCY (2.8%)
Federal National Mortgage Association
4.390% 10-13-00 500,000 492,160
Federal National Mortgage Association
6.500% 04-29-09 500,000 476,875
----------
Total Government Agency 969,035
----------
UNITED STATES TREASURY OBLIGATIONS (22.6%)
United States Treasury Bonds
11.625% 11-15-02 225,000 261,598
United States Treasury Notes
5.625% 02-15-06 950,000 931,297
United States Treasury Notes
6.625% 05-15-07 900,000 928,688
United States Treasury Notes
5.500% 02-15-08 1,400,000 1,350,562
United States Treasury Notes
5.625% 05-15-08 750,000 728,437
United States Treasury Notes
4.750% 11-15-08 800,000 728,875
United States Treasury Notes
8.750% 11-15-08 725,000 793,875
United States Treasury Notes
5.500% 05-15-09 1,500,000 1,452,890
United States Treasury Bonds
8.000% 11-15-21 550,000 650,289
----------
Total US Treasury Obligations 7,826,511
----------
TOTAL DOMESTIC FIXED INCOME
(IDENTIFIED COST $10,283,214) 9,882,630
----------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
DOMESTIC STOCKS (44.5%) SHARES VALUE
BASIC INDUSTRY (1.5%)
Bemis Company 6,800 $ 230,350
Du Pont (E.I.) De Nemours 1,926 117,245
Nucor Corp. 3,600 171,450
----------
Total Basic Industry 519,045
----------
CAPITAL GOODS (4.9%)
General Electric Company 6,300 746,944
Tyco Int'l. Ltd. 6,900 712,425
United Technologies Corp. 3,800 225,388
----------
Total Capital Goods 1,684,757
----------
COMMUNICATIONS (4.0%)
AT & T Corp. 8,500 369,750
Bell Atlantic Corp. 6,000 403,875
*MCI Worldcom Inc. 3,250 233,594
Sprint Corporation 7,200 390,600
----------
Total Communications 1,397,819
----------
CONSUMER CYCLICALS (3.4%)
*Lear Corp. 5,100 179,456
Lowes Companies Inc. 6,900 336,375
Sears Roebuck & Co. 6,900 216,488
Wal Mart Stores Inc. 9,000 428,063
----------
Total Consumer Cyclicals 1,160,382
----------
CONSUMER STAPLES (5.3%)
Colgate-Palmolive Co. 1,600 73,200
Delhaize America Inc. 9,266 209,643
Kimberly Clark Corp. 5,500 288,750
Newell Rubbermaid Inc. 6,542 186,856
PepsiCo, Inc. 13,000 393,250
Sysco Corp. 16,000 561,000
*Unilever NV New York Shares 1,785 121,603
----------
Total Consumer Staples 1,834,302
----------
ENERGY/RESOURCES (3.2%)
Conoco Inc. 1,103 30,195
Mobil Corp. 3,300 332,475
Royal Dutch Petroleum Co. 7,400 437,063
Unocal Corp. 3,900 144,544
Valero Refining & Marketing Co. 7,500 144,375
----------
Total Energy/Resources 1,088,652
----------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
DOMESTIC STOCKS- CONTINUED SHARES VALUE
FINANCE (6.1%)
ACE Limited 5,400 $ 91,463
American International Group 1,625 141,273
Banc One Corp. 8,250 287,203
Bank of America Corp. 5,601 311,906
Chase Manhattan Corp. 6,500 489,938
Citigroup Inc. 4,300 189,200
Federal National Mortgage Association 3,800 238,213
Firstar Corp. 3,345 85,716
Wachovia Corp. 1,000 78,625
Washington Mutual Inc. 6,700 195,975
-----------
Total Finance 2,109,512
-----------
HEALTH CARE (4.3%)
Aetna Inc. 1,700 83,725
*Alza Corp. 4,300 184,094
American Home Products Corp. 9,800 406,700
*Boston Scientific Corp. 4,600 113,563
Johnson & Johnson 5,100 468,563
Merck & Co. 3,400 220,363
-----------
Total Health Care 1,477,008
-----------
HIGH TECHNOLOGY (9.4%)
*Cisco Systems, Inc. 8,600 589,638
Compaq Computer Corp. 7,000 160,563
Intel Corp. 6,400 475,600
International Business Machines 4,000 485,500
Lucent Technologies Inc. 3,300 214,088
*Microsoft Corp. 8,000 724,500
*Quantum Corp. DLT & Storage 6,500 91,406
*Quantum Corp. Hard Disk Drive 3,250 24,172
Xerox Corp. 11,400 478,088
-----------
Total High Technology 3,243,555
-----------
TRANSPORTATION (0.6%)
*AMR Corp. 4,000 218,000
-----------
UTILITIES (1.8%)
Enron Corp. 10,400 429,000
Peco Energy Co. 1,900 71,250
Southern Company 5,400 139,050
-----------
Total Utilities 639,300
-----------
TOTAL DOMESTIC STOCKS
(IDENTIFIED COST $10,627,292) 15,372,332
-----------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
PUT OPTIONS ON STOCK INDICIES (1.1%) CONTRACTS VALUE
PURCHASED
S & P 500 Stock Index Jan
Put @ 1325 Exp 01/22/00 50 $ 392,500
-----------
TOTAL PUT OPTIONS ON STOCK INDICES
(IDENTIFIED COST $316,150) 392,500
-----------
TOTAL DOMESTIC SECURITIES
(IDENTIFIED COST $21,226,656) 25,647,462
-----------
PAR VALUE
INTERNATIONAL SECURITIES (23.7%) (LOCAL CURRENCY) VALUE
INTERNATIONAL FIXED INCOME (9.3%)
Asian Development Bank
3.125% 06-29-05 JPY 15,000,000 156,291
Eurohypo AG
4.000% 04/27/09 EUR 150,000 142,358
Government of Canada
8.500% 04-01-02 CAD 75,000 54,460
Government of Canada
6.000% 06/01/08 CAD 120,000 83,130
Government of Canada
7.250% 06/01/07 CAD 400,000 297,407
Government of France
9.500% 01-25-01 EUR 236,295 270,893
Government of France
5.250% 04-25-08 EUR 175,000 188,246
Government of the Netherlands
8.500% 03-15-01 EUR 100,000 113,737
International Bank for Rec. & Dev.
7.250% 04-09-01 NZD 200,000 104,759
Kingdom of Denmark
8.000% 05-15-03 DKR 1,125,000 178,158
Kingdom of Sweden
6.500% 10-25-06 SEK 1,600,000 204,532
Quebec Province
8.625% 11-04-11 GBP 60,000 111,225
Republic of Austria
6.250% 10-16-03 JPY 20,000,000 229,140
Republic of Finland
8.750% 10-17-01 EUR 340,000 395,661
Republic of Germany
6.875% 05-12-05 EUR 102,258 120,237
Republic of Germany
6.000% 06-20-16 EUR 100,000 113,071
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
PAR VALUE
(LOCAL CURRENCY) VALUE
INTERNATIONAL FIXED INCOME- CONTINUED
Republic of Italy
6.500% 11-01-27 EUR 103,291 $ 116,517
Societe Nat'l. Chemins de Francaise
6.750% 03-01-00 JPY 8,000,000 77,187
Tesco Plc
7.500% 07-30-07 GBP 30,000 51,129
Treuhandanstalt
7.750% 10-01-02 EUR 89,476 104,717
U.K. Treasury
9.750% 08/27/02 GBP 55,000 98,738
----------
TOTAL INTERNATIONAL FIXED INCOME
(IDENTIFIED COST $3,329,801) 3,211,593
----------
SHARES
International Stocks (14.4%)
AUSTRALIA (0.3%)
Australia & New Zealand Bank Group 1,600 10,703
Broken Hill Proprietary Ltd. 1,500 17,278
Colonial Ltd. 5,000 18,142
Pasminco Ltd. 20,000 22,188
Qantas Airways Ltd. 5,000 15,662
Telstra Corporation 2,000 10,366
The News Corporation Ltd. 1,600 11,227
--------
Total Australia 105,566
--------
BELGIUM (0.3%)
Fortis B Strip VVPR 108 1
Fortis B 958 31,219
Electrabel NPV 110 38,119
KBC Bancassurance Holding SA 300 15,255
Solvay Et Cie NPV 200 14,249
--------
Total Belgium 98,843
--------
BRAZIL (0.3%)
Cia Paranaense Energy 2,470,000 16,274
Centrais Electricas Brasileiras Pfd. ADR 2,500 22,031
*Telebras Holders pfd. ADR 650 48,709
*Telebras Spns'd pfd. ADR 650 20
--------
Total Brazil 87,034
--------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
INTERNATIONAL STOCKS- CONTINUED SHARES VALUE
CANADA (0.3%)
BCT Telus Communication Inc. 291 $ 6,070
BCT Telus Communication Inc. Non Voting 97 1,997
Quebecor, Inc. Class B 500 12,079
Seagram Ltd. 300 13,637
Toronto Dominion Bank 600 11,616
*Webs Index Fund, Inc., Canada Webs 5,000 67,188
--------
Total Canada 112,587
--------
FINLAND (0.7%)
Enso OY 2,500 33,120
Merita Ltd. 4,500 25,303
Nokia Corp. ADR 1,600 143,700
UPM-Kymmene OY 1,000 34,078
--------
Total Finland 236,201
--------
FRANCE (0.9%)
AXA- UAP SA 150 18,977
Banque Natl De Paris Ord. 413 32,965
Banque Natl De Paris Wts. (Ex. 07/15/02) 91 756
Cap Gemini SA 100 15,761
Casino Guichard Perrachon et Cie. 250 28,754
Cie De St Gobain 115 21,432
Elf Aquitaine SA Spns'd ADR 300 27,488
Eridania Beghin Say SA 100 12,119
Essilor Int'l. 50 15,974
FranceTelecom SA 350 30,713
Havas Advertising 100 23,961
Peugeot SA 80 16,034
Sanofi-Synthelabo SA 400 17,039
Schneider SA 300 21,949
Scor 300 14,537
Usinor 1,000 14,111
--------
Total France 312,570
--------
GERMANY (0.6%)
Alliance AG 50 14,409
Deutsche Bank AG 300 20,080
Deutsche Telekom AG 620 25,420
Veba AG 200 10,958
*Webs Index Fund, Inc., Germany Webs 7,000 146,563
--------
Total Germany 217,430
--------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
INTERNATIONAL STOCKS- CONTINUED SHARES VALUE
GREECE (0.6%)
Alpha Credit Bank 848 $ 68,028
Attica Enterprises S.A. 1,200 29,405
Ergo Bank 231 21,938
Hellenic Telecom Org 500 11,669
National Bank of Greece 400 32,024
Panafon Hellenic Telecom 630 17,153
Titan Cement Co. 150 17,498
--------
Total Greece 197,715
--------
HONG KONG/ CHINA (0.5%)
Cheung Kong Holdings 3,000 25,007
Dao Heng Bank 7,000 31,991
Giordano International Ltd. 24,000 19,001
Gold Peak Industrial 13,000 2,426
Gold Peak Industrial Hldg. Wts. (Ex. 08/06/00) 2,600 30
Great Eagle Holdings 10,000 12,874
Hong Kong Electric 5,000 15,513
Huaneng Power Int'l. ADR 500 6,219
JCG Holdings Ltd. 40,000 23,430
Sun Hung Kai Properties 2,000 15,255
Swire Pacific 7,000 33,162
--------
Total Hong Kong/ China 184,908
--------
HUNGARY (0.6%)
Magyar Olaj-Es Gazpari 1,470 31,138
Matav Rt. Sponsored ADR 650 17,713
Matav Rt. 2,340 12,853
OTP Bank 815 36,212
Pick Szeged Ord. 1,000 35,132
Richter Gedeon Vegyeszeti 470 18,843
Tiszai Vegyi Kombinat 4,000 61,253
--------
Total Hungary 213,144
--------
INDONESIA (0.1%)
Indostat Satellite 18,000 24,129
*Indofood Sukes Makmur 14,000 13,279
*Sampoerna 5,000 8,842
--------
Total Indonesia 46,250
--------
IRELAND (0.2%)
Allied Irish Banks 1,500 18,003
CRH 1,500 28,722
Smurfit (Jefferson) Plc 6,500 19,244
--------
Total Ireland 65,969
--------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
INTERNATIONAL STOCKS- CONTINUED SHARES VALUE
ISRAEL (0.3%)
*DSP Group Inc. ADR 700 $ 27,913
*ECI Telecom ADR 600 14,813
*Elbit Computers Ltd. 3,100 39,912
*Gilat Satellite Networks Ltd. ADR 400 21,450
Teva Pharmaceutical Ind. Spns'd ADR 300 15,094
--------
Total Israel 119,182
--------
ITALY (0.3%)
*Webs Index Fund, Inc., Italy Webs 4,600 101,488
--------
JAPAN (2.4%)
Bank of Tokyo-Mitsubishi 2,000 30,713
Daiwa House Industries 3,000 29,670
Daiwa Securities 4,000 36,442
Hitachi 2,000 22,165
Hokkaido Takushoku 12,000 113
NTT Mobile Communications 2 39,448
Rohm Co. 100 20,898
Sankyo Co. 1,000 30,055
Takefuji Corp. 300 49,958
Toyota Motor Corp. 1,000 31,840
*Webs Index Fund, Inc., Japan Webs 39,500 550,531
--------
Total Japan 841,833
--------
MEXICO (0.3%)
Fermento Economico Mexica -UBD 4,600 14,297
* Corporacion Geo S.A. Series B 4,000 10,121
Grupo Industrial Maseca 19,000 10,977
** Grupo Televisa GDR 144A 450 17,972
Organizacion Soriana SA Series B 3,500 14,043
Telefonos de Mexico Series L ADR 600 42,750
--------
Total Mexico 110,160
--------
NETHERLANDS (0.5%)
Axxicon Group NV 1,700 19,100
*Webs Index Fund, Inc., Netherlands Webs 6,200 140,275
--------
Total Netherlands 159,375
--------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
INTERNATIONAL STOCKS- CONTINUED SHARES VALUE
PHILIPPINES (0.4%)
Ayala Corp. 108,000 $ 25,877
Bank of the Phillipine Island 11,000 29,853
C & P Homes Inc. 433,000 7,410
*Davao Union Cement Corp. 168,000 3,820
*Digital Telecommnications 500,000 18,826
*Empire East Land Inc. 84,600 1,386
*Mondragon International 42,000 2,403
Philippine Long Distance 1,300 28,129
*Philippine National Bank 225 781
San Miguel Corp. Class B 16,500 25,012
--------
Total Philippines 143,497
--------
POLAND (0.3%)
Big Bank Gdanski SA 30,000 68,090
KGHM Polska Miedz SA 3,000 16,986
*Mostostal Export 5,000 3,941
*Stalexport S.A. Port A 2,000 12,593
Telekomunikacja Polska SA 3,000 14,936
--------
Total Poland 116,546
--------
SINGAPORE (0.6%)
DBS Land 16,000 29,732
Elec & Eltek International Co. 4,000 15,520
Overseas Chinese Bank (Fgn. Reg'd.) 6,200 48,127
Singapore Airlines Ltd. (Fgn. Reg'd) 2,800 27,333
Singapore Press Holdings (Fgn. Reg'd) 2,000 31,520
Singapore Telecom 13,000 23,698
United Overseas Bank (Fgn. Reg'd) 2,000 15,172
United Overseas Land Wts. (Ex.5/28/01) 450 100
--------
Total Singapore 191,202
--------
SOUTH AFRICA (0.5%)
Anglo-American Corp of South Africa 600 33,620
Bidvest Group Ltd. 2,618 17,453
BOE Corp. Ltd. 17,000 9,633
Impala Platinum Holdings Ltd. 850 29,325
Imperial Holdings Ltd. 3,075 27,163
Rembrandt Group Ltd. 3,000 22,750
Sappi 1,000 9,750
Standard Bank Investment Group 4,800 15,360
--------
Total South Africa 165,054
--------
SOUTH KOREA (0.3%)
Dongwon Securities 1,000 23,510
Pohang Iron & Steel 355 40,232
Samsung Electronics 200 32,388
SK Corp. 500 9,946
--------
Total South Korea 106,076
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
INTERNATIONAL STOCKS- CONTINUED SHARES VALUE
SPAIN (0.5%)
Aceralia SA 1,000 $ 12,779
Argentaria Caja Postal y Banco 1,500 33,003
Endesa SA 700 13,299
Repsol SA 500 9,792
*Telefonica De Espana 1,000 16,006
*Webs Index Fund, Inc., Spain Webs 3,400 85,000
--------
Total Spain 169,879
--------
SWEDEN (0.4%)
Ericsson LM Tel Co ADR 700 21,875
Rottneros Bruk AB 25,000 23,176
Sandvik AB 1,000 27,324
*Webs Index Fund, Inc., Sweden Webs 2,700 60,413
--------
Total Sweden 132,788
--------
SWITZERLAND (0.1%)
Julius Baer Holdings 10 29,655
--------
TAIWAN (0.3%)
*Taiwan Semiconductor 3,800 112,100
--------
THAILAND (0.3%)
*Advanced Information Services (Fgn. Reg'd) 2,200 25,158
*Bangkok Bank (Fgn. Reg'd) 12,000 23,604
*Siam Cement Plc(Fgn. Reg'd.) 1,000 20,819
*Thai Airways International (Fgn. Reg'd) 8,000 11,044
Thai Farmers Bank Rts. (12/31/49) 10,000 6,902
*Thai Farmers Bank Plc 10,000 11,790
--------
Total Thailand 99,317
--------
UNITED KINGDOM (1.5%)
Abbey National 2,000 35,506
Amec Ord. 3,500 14,295
BG Plc. 4,000 22,990
Berisford Plc. 3,500 17,609
British-Borneo Oil & Gas Plc. 4,500 12,598
British Petroleum Ord. 1,300 23,743
British Sky Broadcasting Group Plc. 3,000 29,026
British Telecom Plc 2,000 30,286
Daily Mail & General Trust 250 13,331
Dixons Group 1,500 26,728
Glaxo Wellcome Plc 1,500 39,129
Hanson Plc 2,500 19,268
*Logica Plc. 1,800 23,804
Norwich Union Plc. 3,300 23,872
*Orange Plc. 1,500 29,495
Rolls-Royce Ord. 3,600 12,495
Scottish & Newcastle Plc. 1,600 15,902
Somerfield Plc 3,000 6,423
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
INTERNATIONAL STOCKS- CONTINUED SHARES VALUE
SmithKline Beecham Plc 1,064 $ 12,239
Viridian Group Plc. 2,300 23,806
Vodafone Airtouch Plc. 1,500 35,523
Woolwich Plc. 6,000 32,385
-----------
Total United Kingdom 500,453
-----------
TOTAL INTERNATIONAL STOCKS
(IDENTIFIED COST $4,385,910) 4,976,822
-----------
TOTAL INTERNATIONAL SECURITIES
(IDENTIFIED COST $7,715,711) 8,188,415
-----------
TOTAL INVESTMENTS: 97.9%
(IDENTIFIED COST $28,942,367) 33,835,877
OTHER ASSETS LESS LIABILITIES: 2.1% 712,618
-----------
NET ASSETS: 100.0% $34,548,495
===========
CURRENCY LEGEND:
GBP - British Pound JPY - Japanese Yen
CAD - Canadian Dollar NZD - New Zealand
DKR - Danish Kronar SEK - Swedish Krona
EUR - Euro
- --------------------------------------------------------------------------------
* 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, 1999, these
securities were valued at $17,972 or 0.05% of Net Assets.
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
ASSETS
Investments, at value
(Identified cost $28,942,367) $33,835,877
Cash 602,685
Receivables:
Portfolio securities sold $ 773,650
Dividend, interest and recoverable foreign
taxes receivable 344,304
Fund shares sold 2,284 1,120,238
----------
Prepaid expenses 6,700
Other assets 4,838
-----------
Total assets 35,570,338
-----------
LIABILITIES
Payables:
Portfolio securities purchased 808,629
Unrealized loss on forward currency contracts
open (Note 5) 42,380
Shares redeemed 20,000 871,009
-----------
Accrued management fees (Note 3) 20,192
Accrued Directors' fees (Note 3) 3,746
Other accrued expenses 126,896
-----------
Total liabilities 1,021,843
-----------
Net assets (equivalent to $13.08 per share of no
par value capital stock, representing the offering
and redemption price for 2,640,414 shares
outstanding, unlimited number of shares authorized) $34,548,495
===========
Net assets consist of:
Capital paid in $27,518,551
Accumulated net investment income 362,319
Accumulated net realized gain on investments
and foreign currency transactions 1,814,188
Unrealized appreciation on:
Investments $4,893,510
Foreign currency (40,073) 4,853,437
---------- -----------
$34,548,495
===========
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
STATEMENT OF OPERATIONS
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes
withheld of $12,181) $ 362,642
Interest 927,092
-----------
Total income 1,289,734
-----------
EXPENSES
Advisory fees (See Note 3) $354,190
Custodian fees 146,629
Audit and legal fees 100,517
Transfer agent fees 35,821
Administrative fees 33,600
Trustees' fees and expenses (See Note 3) 22,067
Registration fees 13,720
Insurance 5,010
Miscellaneous fees 15,347
--------
Total expenses 726,901
-----------
Net investment income 562,833
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
Net realized gain on investments 2,115,899
Net change in unrealized gain on investments 694,793
-----------
Net gain on investments 2,810,692
-----------
Net realized loss on foreign currency (55,224)
Net change in unrealized gain on foreign
currency and foreign currency denominated
assets and liabilities 18,651
-----------
Net loss on foreign currency (36,573)
-----------
Net gain on investments and foreign currency 2,774,119
-----------
Net increase in net assets resulting from operations $ 3,336,952
===========
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year ended For the year ended
September 30, 1999 September 30, 1998
--------------------- ---------------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 562,833 $ 502,693
Net realized gain on investments 2,115,899 3,196,058
Net unrealized gain (loss) on investments 694,793 (2,284,196)
Net realized loss on foreign currency (55,224) (147,495)
Net unrealized gain (loss) on foreign
currency and foreign currency denominated
assets and liabilities 18,651 (46,089)
------------ ------------
Net increase resulting from operations 3,336,952 1,220,971
------------ ------------
Distributions to shareholders:
From net investment income (163,662) (620,306)
From net realized gains (2,803,986) (2,829,561)
------------ ------------
Total distributions (2,967,648) (3,449,867)
------------ ------------
Fund share transactions:
Proceeds from shares sold 2,389,535 1,693,538
Net asset value of shares issued on
reinvestment of distributions 2,674,173 3,114,218
Cost of shares redeemed (6,213,943) (4,720,565)
------------ ------------
Net increase (decrease) resulting from
Fund share transactions (1,150,235) 87,191
------------ ------------
Net increase (decrease) (780,931) (2,141,705)
Net Assets
Beginning of period 35,329,426 37,471,131
------------ ------------
End of period (including accumulated
net investment income of $411,368 and
$12,197, respectively) $ 34,548,495 $ 35,329,426
============ ============
Number of Fund Shares
Sold 176,414 124,255
Issued on reinvestment of distributions 206,618 245,803
Redeemed (461,523) (345,267)
------------ ------------
Net increase (decrease) (78,491) 24,791
============ ============
</TABLE>
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended September 30,
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 12.99 $ 13.91 $ 13.39 $ 13.20 $ 12.01
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.28(1) 0.13(1) 0.40(1) 0.31 0.38(1)
Net Realized/Unrealized Gain (Loss)
on Securities and Foreign Currency 0.90 0.23 1.92 0.96 1.13
------- ------- ------- ------- -------
Total from Investment Operations 1.18 0.36 2.32 1.27 1.51
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From Net Investment Income (0.13) (0.23) (0.42) (0.32) (0.26)
From Net Realized Gains (0.96) (1.05) (1.38) (0.76) (0.06)
------- ------- ------- ------- -------
Total Distributions (1.09) (1.28) (1.80) (1.08) (0.32)
------- ------- ------- ------- -------
Net Asset Value, End of Period $ 13.08 $ 12.99 $ 13.91 $ 13.39 $ 13.20
------- ------- ------- ------- -------
TOTAL RETURN 9.25% 2.98% 19.14% 10.09% 12.83%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000's) $34,548 $35,329 $37,471 $36,566 $40,688
Ratio of Expenses to Average Net Assets
Before Expenses Paid Indirectly 1.95% 1.86% 1.84% 1.99% 1.85%
After Expenses Paid Indirectly 1.95% 1.80% 1.84% 1.99% 1.85%
Ratio of Net Investment Income to
Average Net Assets 1.51% 1.34% 1.87% 2.09% 2.97%
Portfolio Turnover Rate 54% 59% 66% 68% 166%
</TABLE>
- ----------
1. Net investment income per share has been computed before adjustments for
book/tax differences.
(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 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. The impact of
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 year ended September 30, 1999, purchases and sales of investment
securities other than U.S. Government obligations and short-term investments
aggregated $10,568,397 and $13,615,038, respectively. Purchases and sales of
U.S. Government obligations aggregated $8,733,103 and $9,010,882, 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. There were no such credits
during the year ended September 30, 1999.
Each outside Trustee is compensated by the Fund at the rate of $4,000 per year
plus an attendance fee of $667 for each Trustees' meeting attended and related
travel expenses.
Note 4 - Tax Basis Unrealized Appreciation (Depreciation)
Gross and net unrealized appreciation (depreciation) at September 30, 1999 based
on a cost of $28,994,399 for federal income tax purposes, is as follows:
Gross unrealized appreciation $ 6,463,409
Gross unrealized depreciation (1,621,931)
-----------
Net unrealized appreciation $ 4,841,478
===========
Under current tax law, net capital and currency losses realized after October
31, 1998 may be deferred and treated as occurring on the first day of the
following fiscal year ended September 30, 2000. The Fund elected to defer
currency losses occurring between November 1, 1998 and September 30, 1999 in the
amount of $47,750.
NOTE 5 - FORWARD FOREIGN CURRENCY CONTRACTS
At September 30, 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 September 30,
1999 is as follows:
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Unrealized
Currency Currency Delivery Appreciation
Receivable Deliverable Date (Depreciation)
---------- ----------- ---- --------------
$193,965 EUR 187,117 10/21/99 $ (5,633)
200,000 JPY 22,802,000 11/15/99 (13,732)
53,154 NZD 100,000 11/17/99 1,425
206,942 JPY 23,402,400 11/18/99 (14,510)
129,053 SEK 1,068,563 11/30/99 (1,856)
146,939 EUR 137,835 12/10/99 (692)
286,868 GBP 176,415 12/20/99 (3,843)
40,984 SEK 337,825 12/20/99 (473)
54,376 CAD 80,000 12/22/99 (211)
156,813 DKK 1,106,940 12/23/99 (2,855)
--------
$(42,380)
========
CURRENCY LEGEND:
CAD - Canadian Dollar SEK - Swedish Krona
DKK - Danish Kroner GBP - British Sterling
EUR - Euro JPY - Japanese Yen
NZD - New Zealand Dollar
<PAGE>
(UNAUDITED)
CUMULATIVE TOTAL RETURN OF A $10,000 INVESTMENT
OCTOBER 1, 1998 - SEPTEMBER 30, 1999
BB&K MSCI World
Diversa Fund (Local Currency) MSCI World (US$)
Sep-88 $10,000 $10,000 $10,000
Dec-88 $10,247 $10,632 $11,128
Mar-89 $10,465 $11,307 $11,376
Jun-89 $10,964 $11,661 $11,217
Sep-89 $11,346 $12,734 $12,517
Dec-89 $11,551 $13,190 $12,978
Mar-90 $11,190 $11,658 $11,117
Jun-90 $11,690 $12,282 $12,013
Sep-90 $10,198 $9,560 $9,819
Dec-90 $10,452 $10,363 $10,769
Mar-91 $11,620 $11,854 $11,825
Jun-91 $11,361 $11,592 $11,424
Sep-91 $11,623 $12,008 $12,227
Dec-91 $12,122 $12,047 $12,737
Mar-92 $11,945 $11,499 $11,696
Jun-92 $11,957 $11,277 $11,907
Sep-92 $12,339 $11,295 $12,103
Dec-92 $12,659 $11,890 $12,072
Mar-93 $13,616 $12,674 $13,107
Jun-93 $13,937 $13,204 $13,902
Sep-93 $14,690 $13,813 $14,554
Dec-93 $15,391 $14,382 $14,788
Mar-94 $14,561 $14,041 $14,879
Jun-94 $14,139 $14,111 $15,325
Sep-94 $14,222 $14,307 $15,653
Dec-94 $13,949 $14,264 $15,539
Mar-95 $14,620 $14,073 $16,266
Jun-95 $15,500 $14,648 $16,961
Sep-95 $16,047 $16,061 $17,909
Dec-95 $16,814 $17,034 $18,759
Mar-96 $17,141 $17,971 $19,523
Jun-96 $17,403 $18,656 $20,089
Sep-96 $17,666 $18,947 $20,356
Dec-96 $18,607 $19,864 $21,288
Mar-97 $18,533 $20,541 $21,350
Jun-97 $20,292 $23,491 $24,563
Sep-97 $21,048 $24,553 $25,266
Dec-97 $21,063 $24,323 $24,644
Mar-98 $23,009 $27,990 $28,173
Jun-98 $23,143 $28,614 $28,746
Sep-98 $21,659 $24,665 $25,300
Dec-98 $23,938 $29,349 $30,641
Mar-99 $24,029 $31,197 $31,735
Jun-99 $24,875 $33,138 $33,249
Sep-99 $23,663 $31,769 $32,756
AVERAGE ANNUAL TOTAL RETURN *
1 Year 5 Year 10 Year
------ ------ -------
9.25% 10.71% 7.62%
As mandated by the Securities and Exchange Commission, the above graph shows the
historic growth of a $10,000 investment in the Bailard, Biehl & Kaiser Diversa
Fund since October 1, 1988. We compare this investment to the growth of the
Morgan Stanley World stock index over the same time period. This index, which
measures the performance of the domestic and international equity markets, is
given in both U.S. dollar and local currency terms. The index does not measure
the performance of the Fund's other asset classes, including domestic and
international bonds. As the graph indicates, a $10,000 investment in the
Bailard, Biehl & Kaiser Diversa Fund would have grown to $23,663 by September
30, 1999.
* These figures reflect the average annual 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
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, 1999, 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, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PriceWaterhouseCoopers LLP
San Francisco, California
November 18, 1999
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Federal Income Tax Information: (Unaudited)
In Accordance with the Code, during the fiscal year ended September 30, 1999,
the Fund declared long-term capital gain distribution in the amount of
$2,803,986.
