May 23, 2000
Dear Shareholder:
We are pleased to present your semi-annual Bailard, Biehl & Kaiser Diversa Fund
shareholders' report for the six months ended March 31, 2000. In this report, we
examine how differing views about the potentially inflationary impact of
stronger economic growth have impacted the financial markets during this time
period. We also discuss our market outlook and investment strategy.
MARKET REVIEW AND PERFORMANCE UPDATE
The Bailard, Biehl & Kaiser Diversa Fund advanced 5.9% in the fourth quarter of
last year and 2.3% in the first quarter of this year, for a total return of 8.4%
for the six months ended March 31, 2000.(1) These healthy returns belied the
volatility within the financial markets, as investors struggled to come to terms
with the implications of stronger global economic growth. Had the U.S. (and the
rest of the world) entered a "New Era" in which the information technology
revolution and its productivity gains could sustain non- or low inflationary
growth for an indefinite period of time? Or would economic recovery overseas and
continued expansion in the U.S. lead to "cyclical inflation" as in past economic
cycles?
During the fourth quarter of 1999, the "New Era" was in the ascendancy. After
bottoming in mid-October, the world's equity markets generally shrugged off
concerns about inflation amidst enthusiasm for the "New Era" point of view. "New
Economy" technology, media and telecommunications stocks, in particular,
skyrocketed around the world. Diversa's best performance, however, came from
international stocks, which realized strong double-digit returns. Domestic
stocks also posted positive results, although almost all of the gains came from
technology stocks and a relatively small number of momentum stocks. U.S. and
international bond prices declined slightly due to worries about inflation and
the dollar's strength versus the Euro.
This pattern began to change during the first quarter of 2000, as investors
shifted away from the "New Economy" to worry about an old foe - "cyclical
inflation." As the Federal Reserve Board and other central bankers raised
interest rates to combat the inflationary pressures of growth, the world's
equity markets became unsettled while the tone of the global bond markets
improved. In March, "New Economy" stocks began to falter, pulling down global
equity returns. The S&P 500 U.S. stock index ended the quarter up 2.3%, although
the Dow Jones Industrials declined 4.7%.(2) International stocks, as measured by
the Morgan Stanley Capital International EAFE index, were basically flat. U.S.
bonds, on the other hand, rose as long-term interest rates declined during the
quarter. Domestic bonds benefited from a belief that the Fed would be successful
in its efforts to keep inflation under control and from the announcement that
the government would use some of the budget surplus to buy back outstanding
long-term U.S. Treasury obligations. International bonds were basically flat,
since a strong dollar reduced local currency returns.
Diversa's best performance during the first quarter came from the U.S. stock
portfolio. It outperformed the S&P 500 after lagging that index for much of
1999. In contradiction to the previous quarter, the weakest returns came from
the international stock portfolio, which was hurt by its exposure to Far-East
Asia.
1
<PAGE>
The volatility in the financial markets, if anything, has increased since the
end of the quarter. Fears of cyclical inflation have prevailed, and "New
Economy" stocks in particular have remained under pressure both here and
overseas. Bonds have also declined slightly as interest rates have begun to edge
higher. As a result, the Diversa Fund is off about 3.0%1 for the month of April.
Over this same time period, the S&P 500 fell 3.0% and the NASDAQ 100 declined
14.2%.2
MARKET OUTLOOK
Looking forward, we expect the volatility in the financial markets to continue.
The U.S. economy is still growing strongly and inflationary pressures are
increasing. To combat these inflationary pressures, the Fed is likely to
continue to raise interest rates until economic growth moderates and/or the
stock market corrects sufficiently to slow consumer spending. Although the Fed
may ultimately be successful in steering the economy to a "soft landing," we
believe it is only prudent to maintain a somewhat defensive asset mix for the
time being. At the same time, we remain alert to the longer-term opportunities
that near-term set backs in the stock market may provide.
International stocks continue to look more attractive than U.S. stocks. The
former offer better valuations, more earnings growth potential and a less
hostile environment than domestic equities. However, since international stocks
tend to correct when U.S. stocks decline, we are not yet ready to add
significantly to this asset class. U.S. bonds offer good valuations and
important diversification benefits, despite the pressure from inflation concerns
in the short run. We believe international bonds will act as particularly good
diversifiers should the U.S. stock market experience a major correction.
INVESTMENT STRATEGY
We have not made any changes to our strategic asset allocation targets in recent
months. We continue to overweight U.S. bonds, underweight U.S. stocks and remain
neutral in international stocks and bonds. The current strategic asset
allocation targets of the Bailard, Biehl & Kaiser Diversa Fund are reflected
below:
U.S. Stocks 45%
U.S. Bonds 25%
International Stocks 15%
International Bonds 10%
Cash 5%
THESE ARE THE STRATEGIC ASSET ALLOCATION TARGETS FOR THE BAILARD, BIEHL & KAISER
DIVERSA FUND AS OF MAY 1, 2000. 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 SLIGHTLY HIGHER WEIGHTING IN U.S. STOCKS AND A
SLIGHTLY LOWER WEIGHTING IN CASH EQUIVALENTS THAN THESE TARGETS WOULD INDICATE.
2
<PAGE>
CLOSING COMMENTS
The recent volatility in the financial markets has reminded many complacent
investors that investing has its risks as well as its rewards. If anything, in
today's economic and investment environment, volatility is likely to increase
further. The Diversa Fund gives investors an opportunity to manage that
volatility by diversifying globally and across multiple asset classes. It also
provides an investment vehicle that can take advantage of significant market
pullbacks.
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, 2000: 3 months: 2.33%;
6 months: 8.41%; 12 months: 6.76%; 5 years: 11.90% annualized; 10 years:
8.55% 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.
3
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 2000
(UNAUDITED)
--------------------------------------------------------------------------------
Par Value Value
---------- -----------
DOMESTIC SECURITIES (76.3%)
DOMESTIC FIXED INCOME (24.5%)
CORPORATE BONDS (3.4%)
GTE North, Inc.
6.375% 02/15/10 $ 675,000 $ 619,934
Gerber Products
9.000% 10/15/06 320,000 346,922
HRPT Properties
6.875% 08/26/02 200,000 192,504
-----------
Total Corporate Bonds 1,159,360
-----------
GOVERNMENT AGENCY (4.0%)
Federal Farm Credit Banks
7.375% 02/09/10 250,000 253,673
Federal Home Loan Banks
6.000% 06/11/03 200,000 193,375
Federal Home Loan Banks
5.250% 04/22/04 200,000 187,000
Federal Home Loan Banks
5.540% 10/15/08 300,000 266,344
Federal National Mortgage Association
6.500% 04/29/09 500,000 464,845
-----------
Total Government Agency 1,365,237
-----------
UNITED STATES TREASURY OBLIGATIONS (17.1%)
United States Treasury Bonds
8.750% 11/15/08 725,000 774,277
United States Treasury Bonds
8.000% 11/15/21 425,000 517,969
United States Treasury Notes
5.625% 09/30/01 400,000 395,188
United States Treasury Notes
5.625% 02/15/06 450,000 434,953
United States Treasury Notes
6.625% 05/15/07 350,000 356,727
United States Treasury Notes
4.750% 11/15/08 800,000 723,125
United States Treasury Notes
5.500% 02/15/08 750,000 715,898
United States Treasury Notes
5.625% 05/15/08 750,000 721,523
United States Treasury Notes
5.500% 05/15/09 1,250,000 1,191,992
-----------
Total United States Treasury Obligations 5,831,652
-----------
TOTAL DOMESTIC FIXED INCOME
(IDENTIFIED COST $8,702,781) 8,356,249
-----------
4
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 2000
(UNAUDITED) - (CONTINUED)
--------------------------------------------------------------------------------
DOMESTIC STOCKS (51.5%) Shares Value
---------- -----------
BASIC INDUSTRY (1.5%)
Bemis Company 6,800 $ 250,750
Du Pont (E.I.) De Nemours 1,926 101,837
Nucor Corp. 3,600 180,000
-----------
Total Basic Industry 532,587
-----------
CAPITAL GOODS (4.3%)
General Electric Co. 6,300 977,681
Tyco Int'l. Ltd. 4,700 234,413
United Technologies Corp. 3,800 240,113
-----------
Total Capital Goods 1,452,207
-----------
COMMUNICATIONS (4.3%)
AT & T Corp. 8,500 478,125
Bell Atlantic Corp. 6,000 366,750
* Broadwing, Inc. 4,600 171,063
* Global Crossing Ltd. 4,400 180,125
* MCI Worldcom, Inc. 3,000 135,938
Sprint Corp. 2,200 138,600
-----------
Total Communications 1,470,601
-----------
CONSUMER CYCLICALS (3.7%)
* Lear Corp. 5,100 143,438
Lowes Companies, Inc. 6,900 402,788
Sears Roebuck & Co. 6,900 213,038
Wal Mart Stores, Inc. 9,000 499,500
-----------
Total Consumer Cyclicals 1,258,764
-----------
CONSUMER STAPLES (4.9%)
Anheuser Busch, Inc. 2,200 136,950
Colgate-Palmolive Co. 3,100 174,763
Kimberly Clark Corp. 5,500 308,000
PepsiCo, Inc. 13,000 449,313
Procter and Gamble Co. 850 47,813
Sysco Corp. 16,000 571,000
-----------
Total Consumer Staples 1,687,839
-----------
ENERGY/RESOURCES (3.3%)
Conoco, Inc. 1,103 28,264
Exxon Mobil Corp. 4,356 338,951
Royal Dutch Petroleum Co. 7,400 425,963
Unocal Corp. 3,900 116,025
Valero Refining & Marketing Co. 7,500 229,688
-----------
Total Energy/Resources 1,138,891
-----------
FINANCE (6.5%)
American International Group 2,300 251,850
Bank of America Corp. 5,601 293,702
Chase Manhattan Corp. 6,500 566,719
Citigroup, Inc. 4,300 255,044
Federal National Mortgage Association 6,300 355,556
Firstar Corp. 3,345 76,726
Lehman Brothers Holdings, Inc. 2,000 194,000
Wachovia Corp. 1,000 67,563
Wells Fargo & Company 3,700 151,469
-----------
Total Finance 2,212,629
-----------
5
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 2000
(UNAUDITED) - (CONTINUED)
--------------------------------------------------------------------------------
Shares Value
---------- -----------
DOMESTIC STOCKS - (CONTINUED)
HEALTH CARE (4.1%)
Abbott Laboratories 3,500 $ 123,156
American Home Products Corp. 8,200 439,725
* Amgen, Inc. 1,400 85,925
Guidant Corp. 3,200 188,200
Johnson & Johnson 5,100 357,319
Merck & Co. 3,400 211,225
-----------
Total Health Care 1,405,550
-----------
HIGH TECHNOLOGY (17.0%)
* America Online, Inc. 2,800 188,300
* Cisco Systems, Inc. 17,200 1,329,775
Compaq Computer Corp. 7,000 186,375
* Electronics for Imaging, Inc. 3,700 222,000
* EMC Corp. 2,100 262,500
Hewlett-Packard Co. 2,100 278,381
Intel Corp. 6,400 844,400
International Business Machines 4,000 472,000
Lucent Technologies, Inc. 3,300 200,475
* Microsoft Corp. 8,000 850,000
Nortel Networks Corp. 1,800 226,800
* Oracle Corp. 3,000 234,188
* Quantum Corp. DLT & Storage 6,500 77,594
* Sun Microsystems, Inc. 2,000 187,406
Texas Instruments, Inc. 1,500 240,000
-----------
Total High Technology 5,800,194
-----------
TRANSPORTATION (0.7%)
* AMR Corp. 4,000 127,500
* Sabre Holdings Corp. 2,890 106,749
-----------
Total Transportation 234,249
-----------
UTILITIES (1.2%)
Enron Corp. 5,200 389,350
-----------
TOTAL DOMESTIC STOCKS
(IDENTIFIED COST $10,467,271) 17,582,861
-----------
PUT OPTIONS ON STOCK INDICIES (0.3%) Contracts
PURCHASED ----------
S & P 500 Stock Index June
Put @ 1390 Exp 06/17/00 30 69,000
S & P 500 Stock Index June
Put @ 1450 Exp 06/17/00 10 37,000
-----------
TOTAL PUT OPTIONS ON STOCK INDICES
(IDENTIFIED COST $115,620) 106,000
-----------
TOTAL DOMESTIC SECURITIES
(IDENTIFIED COST $19,285,672) 26,045,110
-----------
6
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 2000
(UNAUDITED) - (CONTINUED)
--------------------------------------------------------------------------------
Par Value
INTERNATIONAL SECURITIES (23.0%) (Local Currency) Value
---------- -----------
INTERNATIONAL FIXED INCOME (8.9%)
Asian Development Bank
3.125% 06/29/05 JPY 15,000,000 $ 160,377
British Aero Plc
7.450% 11/30/03 GBP 243 380
Eurohypo AG
4.000% 04/27/09 EUR 150,000 126,919
Government of Canada
8.500% 04/01/02 CAD 75,000 54,013
Government of Canada
7.250% 06/01/07 CAD 400,000 295,054
Government of Canada
6.000% 06/01/08 CAD 120,000 82,830
Government of France
9.500% 01/25/01 EUR 236,295 235,472
Government of France
5.250% 04/25/08 EUR 175,000 167,741
Government of the Netherlands
8.500% 03/15/01 EUR 100,000 99,365
International Bank for Rec. & Dev.
7.250% 04/09/01 NZD 200,000 99,390
Kingdom of Denmark
8.000% 05/15/03 DKR 1,125,000 156,073
Kingdom of Sweden
6.500% 10/25/06 SEK 1,600,000 196,628
Quebec Province
8.625% 11/04/11 GBP 60,000 109,600
Republic of Austria
6.250% 10/16/03 JPY 20,000,000 233,276
Republic of Austria
4.500% 09/28/05 JPY 10,000,000 114,234
Republic of Finland
8.750% 10/17/01 EUR 340,000 344,996
Republic of Germany
6.500% 10/14/02 EUR 100,000 102,350
Republic of Germany
6.000% 06/20/16 EUR 100,000 102,733
Republic of Italy
7.250% 11/01/26 EUR 100,000 113,182
Tesco Plc
7.500% 07/30/07 GBP 30,000 49,783
Treuhandanstalt
7.750% 10/01/02 EUR 89,476 91,697
U.K. Treasury
9.750% 08/27/02 GBP 55,000 94,147
TOTAL INTERNATIONAL FIXED INCOME
(IDENTIFIED COST $3,313,631) 3,030,240
-----------
7
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 2000
(UNAUDITED) - (CONTINUED)
--------------------------------------------------------------------------------
Shares Value
---------- -----------
INTERNATIONAL STOCKS (14.1%)
ARGENTINA (0.2%)
Banco de Galicia y Buenos Aires 2,350 $ 11,920
Banco de Galicia y Buenos Aires ADR 800 16,200
Perez Companc SA 3,800 15,245
Siderar SA 3,750 15,756
Telecom Argentina 400 13,900
-----------
Total Argentina 73,021
-----------
AUSTRALIA (0.2%)
Broken Hill Proprietary Ltd. 1,000 10,830
Colonial Ltd. 5,000 22,978
Fairfax (John) Holdings Ltd. 2,355 8,505
Qantas Airways Ltd. 5,000 10,440
The News Corporation Ltd. 300 4,192
-----------
Total Australia 56,945
-----------
BRAZIL (0.6%)
Brasileira Distribuicao Pao de Acucar GDR 800 28,600
Centrais Electricas Brasileiras Pfd. ADR 2,500 24,141
Cia Paranaense de Energia 2,470 20,878
Cia Vale Do Rio Doce ADR 950 25,947
* Telebras Holders pfd. ADR 425 63,617
* Telebras pfd. ADR 650 26
Unibanco Holdings GDR 1,350 42,863
-----------
Total Brazil 206,072
-----------
CANADA (0.4%)
Quebecor, Inc. Class B 500 13,087
Toronto Dominion Bank 600 15,870
* Webs Index Fund, Inc., Canada Webs 5,000 92,188
-----------
Total Canada 121,145
-----------
DENMARK (0.2%)
Den Danske Bank 140 14,665
Novo-Nordisk 102 13,765
Tele Denmark 398 35,807
-----------
Total Denmark 64,237
-----------
FINLAND (0.6%)
Nokia Corp. ADR 750 162,938
UPM-Kymmene OY 1,000 28,229
-----------
Total Finland 191,167
-----------
FRANCE (0.8%)
AXA- UAP SA 150 21,258
Banque Natl De Paris Ord. 413 32,604
Banque Natl De Paris Wts. (Ex. 07/15/02) 91 639
Elf Aquitaine SA ADR 300 26,063
FranceTelecom SA 450 77,509
Havas Advertising 100 54,065
Peugeot SA 80 17,300
Sanofi-Synthelabo SA 400 15,253
Scor 300 14,087
-----------
Total France 258,778
-----------
8
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 2000
(UNAUDITED) - (CONTINUED)
--------------------------------------------------------------------------------
Shares Value
---------- -----------
INTERNATIONAL STOCKS - (CONTINUED)
GERMANY (0.9%)
Deutsche Bank AG 200 $ 13,291
Deutsche Telekom AG 300 24,171
Marschollek Lautenschager und Partner AG 100 39,233
Siemens AG 200 28,803
* Webs Index Fund, Inc., Germany Webs 7,000 189,000
-----------
Total Germany 294,498
-----------
HONG KONG/ CHINA (0.6%)
Cathay Pacific Air 10,000 15,026
Cheung Kong Holdings 2,000 29,924
* China Telecom Ltd. 4,000 35,189
Dao Heng Bank 3,500 15,328
Giordano International Ltd. 24,000 29,127
Gold Peak Industrial 13,000 2,354
Gold Peak Industrial Hldg. Wts. (Ex. 08/06/00) 2,600 29
Shangri La Asia 20,000 22,475
Sun Hung Kai Properties 3,000 26,296
Swire Pacific 7,000 36,050
-----------
Total Hong Kong/ China 211,798
-----------
HUNGARY (0.1%)
Matav Rt. ADR 350 15,619
OTP Bank 200 10,787
Richter Gedeon Vegyeszeti 230 15,123
Tiszai Vegyi Kombinat 500 9,168
-----------
Total Hungary 50,697
-----------
INDIA (0.2%)
* Infosys Technologies ADR 125 24,125
* Mahanagar Telephone Nigam Ltd. GDR 144A** 908 12,939
Ranbaxy Laboratories GDR 144A** 1,000 21,350
State Bank of India GDR 144A** 1,000 9,825
Videsh Sanchar Nigam Ltd. GDR 144A** 450 12,049
-----------
Total India 80,288
-----------
INDONESIA (0.1%)
* Sampoerna 11,000 18,309
Telekomunikasi Indo 50,000 24,273
-----------
Total Indonesia 42,582
-----------
IRELAND (0.1%)
Bank of Ireland 2,500 17,703
CRH 750 13,456
Eircom Plc 2,500 11,100
-----------
Total Ireland 42,259
-----------
ISRAEL (0.3%)
* Elbit Computers Ltd. 3,100 40,300
* Gilat Satellite Networks Ltd. ADR 400 46,900
-----------
Total Israel 87,200
-----------
ITALY (0.3%)
* Webs Index Fund, Inc., Italy Webs 4,600 115,000
-----------
9
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 2000
(UNAUDITED) - (CONTINUED)
--------------------------------------------------------------------------------
Shares Value
---------- -----------
INTERNATIONAL STOCKS - (CONTINUED)
JAPAN (2.9%)
Daiwa Securities 4,000 $ 75,269
Fast Retailing Co. Ltd. 200 88,042
Hokkaido Takushoku 12,000 117
Konami Co. Ltd. 300 40,950
Kyocera Corp. 300 50,193
NTT Mobile Communications 2 82,094
* Webs Index Fund, Inc., Japan Webs 39,500 649,280
-----------
Total Japan 985,945
-----------
MEXICO (0.2%)
* Cemex SA 300 6,788
Fermento Economico Mexica -UBD 2,300 10,334
* Grupo Financiero Banamex 2,500 11,448
* Grupo Televisa GDR 144A** 225 15,300
Telefonos de Mexico Series L ADR 600 40,200
-----------
Total Mexico 84,070
-----------
NETHERLANDS (0.6%)
ASM Lithography Holding NV 100 11,166
Axxicon Group NV 1,700 26,028
Philips Electronics NV 200 33,606
* Webs Index Fund, Inc., Netherlands Webs 6,200 149,575
-----------
Total Netherlands 220,375
-----------
NEW ZEALAND (0.3%)
Fletcher Challenge Building 20,000 21,656
Telecom Corp. of New Zealand 16,000 72,399
-----------
Total New Zealand 94,055
-----------
NORWAY (0.1%)
Christiana Bank 5,000 25,950
Norsk Hydro 500 18,930
-----------
Total Norway 44,880
-----------
POLAND (0.2%)
KGHM Polska Miedz SA 3,000 22,739
Telekomunikacja Polska SA 3,000 28,478
-----------
Total Poland 51,217
-----------
RUSSIA (0.3%)
* AO Mosenergo ADR 3,800 24,225
* Lukoil Oil Co. ADR 450 28,575
Rao Unified Energy System ADR 1,100 21,863
Vimpel Communications ADR 350 14,808
-----------
Total Russia 89,471
-----------
SINGAPORE (0.2%)
DBS Land 8,000 10,430
Elec & Eltek International Co. 4,000 10,120
Overseas Chinese Banking Corp. 2,310 14,315
Singapore Airlines Ltd. (Fgn. Reg'd) 1,300 12,160
United Overseas Bank (Fgn. Reg'd) 2,112 12,965
United Overseas Land Wts. (Ex. 5/28/01) 450 50
-----------
Total Singapore 60,040
-----------
10
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 2000
(UNAUDITED) - (CONTINUED)
--------------------------------------------------------------------------------
Shares Value
---------- -----------
INTERNATIONAL STOCKS - (CONTINUED)
SOUTH AFRICA (0.2%)
Anglo-American Corp. of South Africa 300 $ 13,852
Impala Platinum Holdings Ltd. 850 29,481
Rembrandt Group Ltd. 1,500 13,293
Sappi Ltd. 1,000 7,730
Standard Bank Investment Group 4,800 19,800
-----------
Total South Africa 84,156
-----------
SOUTH KOREA (0.4%)
Cheil Jedang Corp. 288 18,944
Korea Telecom Corp. 200 17,734
Medison Co. Ltd. 1,000 12,983
Pohang Iron & Steel 255 25,309
Samsung Electronics 100 30,310
SK Corp. 621 14,328
-----------
Total South Korea 119,608
-----------
SPAIN (0.6%)
Aceralia SA 1,000 11,913
Banco Bilboa Vizcaya 2,500 36,744
Repsol SA 500 10,960
* Telefonica De Espana 1,020 25,767
Union Electrica Fenosa 800 16,428
* Webs Index Fund, Inc., Spain Webs 3,400 97,325
-----------
Total Spain 199,137
-----------
SWEDEN (0.7%)
Ericsson LM Tel Co. ADR 700 65,668
Sandvik AB 1,000 25,925
Skandia Forsakrings 1,000 47,338
* Webs Index Fund, Inc., Sweden Webs 2,700 92,138
-----------
Total Sweden 231,069
-----------
THAILAND (0.1%)
* National Petrochemical 20,000 21,158
-----------
UNITED KINGDOM (1.7%)
Barclays Plc 1,500 39,770
BP Amoco Plc 4,500 41,170
British Aerospace Plc 771 4,354
British Telecom Plc 3,000 56,234
Cadbury Schweppes Plc 3,500 23,520
GKN Plc 2,400 29,920
Glaxo Wellcome Plc 1,500 42,953
Hilton Group Plc 3,400 15,825
Kingfisher Plc 2,000 16,432
* Orange Plc 600 24,631
Powergen Plc 4,000 23,403
Reuters Group Plc 2,500 50,731
Rolls-Royce Ord. 15,000 48,636
Royal Bank of Scotland Group 3,000 44,174
Sage Group Plc 1,700 19,079
SmithKline Beecham Plc 2,064 27,264
Vodafone Airtouch Plc 15,000 83,394
-----------
Total United Kingdom 591,490
-----------
11
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 2000
(UNAUDITED) - (CONTINUED)
--------------------------------------------------------------------------------
Value
-----------
TOTAL INTERNATIONAL STOCKS
(IDENTIFIED COST $3,827,464) $ 4,772,358
-----------
TOTAL INTERNATIONAL SECURITIES
(IDENTIFIED COST $7,141,095) 7,802,598
-----------
TOTAL INVESTMENTS: 99.3%
(IDENTIFIED COST $26,426,767) 33,847,708
OTHER ASSETS LESS LIABILITIES: 0.7% 256,946
-----------
NET ASSETS: 100.0% $34,104,654
===========
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 March 31, 2000, these
securities were valued at $71,463 or 0.21% of Net Assets.
(See "Notes to Financial Statements")
12
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2000
(UNAUDITED)
--------------------------------------------------------------------------------
ASSETS
Investments, at value
(Identified cost $26,426,767) $33,847,708
Receivables:
Portfolio securities sold $ 368,493
Dividend, interest and recoverable
foreign taxes receivable 281,109 649,602
----------
Prepaid expenses 11,288
Other assets 4,838
-----------
Total assets 34,513,436
-----------
LIABILITIES
Cash overdraft 130,194
Payables:
Portfolio securities purchased $ 173,007
Advisory fees (Note 3) 32,670
Trustee fees and expenses 8,775
Unrealized loss on forward currency contracts
(Note 5) 3,382 217,834
----------
Accrued expenses 60,754
-----------
Total liabilities 408,782
-----------
Net assets (equivalent to $13.16 per share of no par
value capital stock, representing the offering and
redemption price for 2,590,862 shares outstanding,
unlimited number of shares authorized) $34,104,654
===========
Net assets consist of:
Capital paid in $26,824,043
Accumulated net investment income
37,063
Accumulated net realized loss on investments
and foreign currency transactions (169,973)
Unrealized appreciation (depreciation) on:
Investments $7,420,941
Foreign currency (7,420) 7,413,521
---------- -----------
$34,104,654
===========
(See "Notes to Financial Statements")
13
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $3,567) $ 120,237
Interest 419,879
-----------
Total income 540,116
-----------
EXPENSES
Advisory fees (See Note 3) $ 171,593
Custodian fees 67,902
Audit and legal fees 48,550
Transfer agent fees 19,773
Administrative fees 18,697
Trustee fees and expenses (See Note 3) 5,704
Registration expense 4,788
Insurance expense 2,094
Report to shareholders 1,913
-----------
Total expenses 341,014
Less: Fees waived and expenses absorbed (16,540)
-----------
Net expenses 324,474
-----------
Net investment income 215,642
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
Net realized gain on investments 57,311
Net unrealized gain on investments 2,527,431
-----------
Net gain on investments 2,584,742
-----------
Net realized loss on foreign currency (43,442)
Net unrealized gain on foreign currency
and foreign currency denominated assets and
liabilities 32,653
-----------
Net loss on foreign currency (10,789)
-----------
Net gain on investments and foreign currency 2,573,953
-----------
Net increase in net assets resulting from operations $ 2,789,595
===========
(See "Notes to Financial Statements")
14
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months Ended For the Year Ended
March 31, 2000 September 30, 1999
-------------- ------------------
(Unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 215,642 $ 562,833
Net realized gain on investments 57,311 2,115,899
Net unrealized gain on investments 2,527,431 694,793
Net realized loss on foreign currency (43,442) (55,224)
Net unrealized gain on foreign currency and
foreign currency denominated assets and liabilities 32,653 18,651
------------ ------------
Net increase resulting from operations 2,789,595 3,336,952
------------ ------------
Distributions to shareholders:
From net investment income (540,898) (163,662)
From net realized gain (1,998,030) (2,803,986)
------------ ------------
Total distributions (2,538,928) (2,967,648)
------------ ------------
Fund share transactions:
Proceeds from shares sold 1,163,185 2,389,535
Net asset value of shares issued on
reinvestment of distributions 2,284,014 2,674,173
Cost of shares redeemed (4,141,707) (6,213,943)
------------ ------------
Net decrease resulting from
Fund share transactions (694,508) (1,150,235)
------------ ------------
Net decrease (443,841) (780,931)
NET ASSETS
Beginning of period 34,548,495 35,329,426
------------ ------------
End of period (including accumulated net investment
income of $37,063 and $362,319, respectively) $ 34,104,654 $ 34,548,495
============ ============
NUMBER OF FUND SHARES
Sold 89,843 176,414
Issued on reinvestment of distributions 181,645 206,618
Redeemed (321,040) (461,523)
------------ ------------
Net decrease (49,552) (78,491)
============ ============
</TABLE>
(See "Notes to Financial Statements")
15
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a share outstanding throughout the period:
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year Ended September 30,
March 31, 2000 ------------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.08 $ 12.99 $ 13.91 $ 13.39 $ 13.20 $ 12.01
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.06 0.28(1) 0.13(1) 0.40(1) 0.31 0.38(1)
Net Realized/Unrealized Gain (Loss) on
Securities and Foreign Currency 0.97 0.90 0.23 1.92 0.96 1.13
-------- -------- -------- -------- -------- --------
Total from Investment Operations 1.03 1.18 0.36 2.32 1.27 1.51
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Net Investment Income (0.18) (0.13) (0.23) (0.42) (0.32) (0.26)
Capital Gain (0.77) (0.96) (1.05) (1.38) (0.76) (0.06)
-------- -------- -------- -------- -------- --------
Total Distributions (0.95) (1.09) (1.28) (1.80) (1.08) (0.32)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 13.16 $ 13.08 $ 12.99 $ 13.91 $ 13.39 $ 13.20
======== ======== ======== ======== ======== ========
TOTAL RETURN 8.41%(2) 9.25% 2.98% 19.14% 10.09% 12.83%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000's) $ 34,105 $ 34,548 $ 35,329 $ 37,471 $ 36,566 $ 40,688
Ratio of Expenses to Average Net Assets
Before Expenses Paid Indirectly 1.88%(3) 1.95% 1.86% 1.84% 1.99% 1.85%
After Expenses Paid Indirectly 1.88%(3) 1.95% 1.80% 1.84% 1.99% 1.85%
Ratio of Expenses to Average Net Assets
Before fees waived and expenses absorbed 1.97%(3) -- -- -- -- --
After fees waived and expenses absorbed 1.88%(3) -- -- -- -- --
Ratio of Net Investment Income to Average
Net Assets
Before fees waived and expenses absorbed 1.15%(3) 1.51% 1.34% 1.87% 2.09% 2.97%
After fees waived and expenses absorbed 1.25%(3) 1.51% 1.34% 1.87% 2.09% 2.97%
Portfolio Turnover Rate 22%(2) 54% 59% 66% 68% 166%
</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")
16
<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. 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.
17
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
--------------------------------------------------------------------------------
NOTE 1 - 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.
At the end of each year, capital paid in, accumulated net investment income and
accumulated net realized loss on investments will be adjusted for permanent
book-tax differences. Reclassifications between accumulated net investment
income and accumulated net realized loss on investments arise 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, 2000, purchases and sales of investment
securities other than U.S. Government obligations and short-term investments
aggregated $6,029,470 and $7,237,239, respectively. Purchases and sales of U.S.
Government obligations aggregated $1,294,561 and $2,942,342, 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.
18
<PAGE>
BAILARD, BIEHL & KAISER DIVERSA FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - (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 six months ended March 31, 2000.
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 March 31, 2000 based on
a cost of $26,426,767 for federal income tax purposes, is as follows:
Gross unrealized appreciation $ 8,880,658
Gross unrealized depreciation (1,459,717)
-----------
Net unrealized appreciation $ 7,420,941
===========
NOTE 5 - FORWARD FOREIGN CURRENCY CONTRACTS
At March 31, 2000, 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
unrealized loss on forward currency contracts in the financial statements. Open
forward foreign currency exchange contracts outstanding at March 31, 2000 is as
follows:
Unrealized
Currency Currency Delivery Appreciation
Receivable Deliverable Date (Depreciation)
---------- ----------- -------- --------------
$ 95,300 SEK 803,000 04/19/00 $ 2,218
190,261 EUK 187,117 04/25/00 10,911
48,704 NZD 100,000 05/17/00 (1,015)
217,073 JPY 23,402,400 05/18/00 (12,964)
123,570 SEK 1,068,563 05/31/00 (636)
132,728 EUR 137,835 06/12/00 170
278,206 GBP 176,415 06/20/00 (3,378)
39,156 SEK 337,825 06/20/00 (159)
54,635 CAD 80,000 06/22/00 (600)
145,062 DKK 1,106,940 06/23/00 2,071
---------
$ (3,382)
=========
CURRENCY LEGEND:
CAD - Canadian Dollar JPY - Japanese Yen
DKK - Danish Kroner NZD - New Zealand Dollar
EUR - Euro SEK - Swedish Krona
GBP - British Sterling
19
