As filed with the Securities and Exchange
Commission on January 26, 1996
Registration No. 2-63270
File No. 811-6146
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 24 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 26 [x]
BAILARD, BIEHL & KAISER INTERNATIONAL FUND GROUP, INC.
(Exact name of registrant as specified in charter)
2755 Campus Drive
San Mateo, California 94403
(Address of principal executive offices)
Telephone number (including area code): (800) 882-8383
PETER M. HILL, CHAIRMAN
BAILARD, BIEHL & KAISER INTERNATIONAL FUND GROUP, INC.
2755 Campus Drive
San Mateo, California 94403
(Name and address of agent for service of process)
Copies to:
ANDRE W. BREWSTER, ESQ.
HOWARD, RICE, NEMEROVSKI, CANADY, FALK & RABKIN
Three Embarcadero Center, 7th Floor
San Francisco, California 94111-4065
Approximate date of proposed public offering: As soon as practicable
after this post-effective amendment becomes effective.
It is proposed that this filing will become effective (check
appropriate box):
( ) Immediately upon filing pursuant to paragraph (b)
(x) On January 26, 1996, pursuant to paragraph (b) of Rule 485
( ) 60 days after filing pursuant to paragraph (a)(1)
( ) On __(date)____, pursuant to paragraph (a)(1)
( ) 75 days after filing pursuant to paragraph (a)(2)
( ) On __(date)____, pursuant to paragraph (a)(2) of Rule 485
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933:
An indefinite number of shares of Registrant's common stock are being registered
by this post-effective amendment to Registrant's registration statement in
accordance with Rule 24f-2 under the Investment Company Act of 1940. The
<PAGE>
non-refundable fee required by paragraph (a)(3) of Rule 24f-2 has been paid to
the Commission. Registrant's most recent Rule 24f-2 Notice was filed on November
29, 1995.
Total No. of Pages __________. Exhibit Index at __________.
ii
<PAGE>
Cross Reference Sheet Pursuant to Rule 481
of the Securities Act of 1933
Information Required in
Prospectus by Form N-1A
Registration Statement Prospectus Caption
- ---------------------- ------------------
Item 1. Cover Page .........................Prospectus Cover.
Item 2. Synopsis ........................Costs and Expenses of the Fund
Borne by Stockholders; Prospectus
Summary.
Item 3. Condensed Financial
Information .....................Financial Highlights;
Performance Information
Item 4. General Description of
Registrant ......................The Fund; Investment Objectives
and Policies; Risk Factors.
Item 5. Management of the Fund ..........Management; Transfer Agent and
Custodian.
Item 5A. Management's Discussion of Fund
Performance......................Inapplicable
Item 6. Capital Stock and Other
Securities ......................Description of Capital Stock; The
Fund; Distributions; Tax Aspects.
Item 7. Purchase of Securities
Being Offered ...................Net Value; Purchase of Shares.
Item 8. Redemption or Repurchase ........Exchange and Redemption of
Shares.
Item 9. Legal Proceedings ...............Inapplicable.
iii
<PAGE>
Information Required in
Statement of Additional
Information by Form N-1A Statement of Additional
Registration Statement Information Caption
- ---------------------- -------------------
Item 10. Cover Page ....................Cover Page.
Item 11. Table of Contents..............First Inside Page.
Item 12. General Information
and History ...................Investment Objectives and Policies.
Item 13. Investment Objectives
and Policies...................Investment Objectives and
Policies; Brokerage.
Item 14. Management of the
Fund...........................Directors and Officers.
Item 15. Control Persons and
Principal Holders of
Securities.....................Stockholder Information.
Item 16. Investment Advisory and
Other Services.................Investment Advisory and
Other Services.
Item 17. Brokerage Allocation
and Other Practices............Brokerage.
Item 18. Capital Stock and
Other Securities...............Inapplicable.
Item 19. Purchase, Redemption
and Pricing of Securities
Being Offered..................Net Asset Value for Purchase,
Exchange and
Redemption of Shares.
Item 20. Tax Status.....................Tax Aspects.
Item 21. Underwriters...................Inapplicable.
Item 22. Calculation of
Performance Data...............Performance Data.
Item 23. Financial Statements...........Financial Statements.
iv
<PAGE>
Bailard, Biehl & Kaiser International Equity Fund
(A No Load Fund With No 12b-1 Plan
Emphasizing Foreign Equity Investments)
2755 Campus Drive
San Mateo, California 94403
(800) 882-8383
Bailard, Biehl & Kaiser International Equity Fund (the "Fund") is a
non-diversified series of the Bailard, Biehl & Kaiser International Fund Group,
Inc., a Maryland corporation and an open-end management investment company (the
"Company"). The Fund's primary investment objective is to seek capital
appreciation. Current income, while a factor in portfolio selection, is a
secondary objective and will be pursued only when consistent with the Fund's
primary investment objective. The Fund seeks to achieve its objectives by
investing in foreign equity securities, principally common stocks, preferred
stocks and convertible securities. Foreign securities include securities issued
by U.S. companies whose assets are primarily located or whose operations are
primarily conducted outside the United States. Investing in foreign securities,
foreign currencies or foreign markets involves certain considerations comprising
both risk and opportunity not typically associated with investing in United
States securities in United States markets. See "Risk Factors". Of course, there
can be no assurance that the Fund will be able to achieve its objectives.
Investors should read and retain this Prospectus for future reference.
This Prospectus sets forth concisely information about the Fund that a
prospective investor ought to know before investing. A Statement of Additional
Information, dated January 26, 1996, has been filed with the Securities and
Exchange Commission and is available upon request without charge. The Statement
of Additional Information contains information about the Fund and its management
that is not included in this Prospectus, as well as more detailed information
concerning certain aspects of the Fund's operations that are discussed briefly
in this Prospectus. You can request a copy of the Statement of Additional
Information by contacting the Fund at the address and telephone number listed
above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus and the date of the Statement of Additional
Information is January 26, 1996, as each may be supplemented from time to time.
<PAGE>
TABLE OF CONTENTS
Page
----
Costs and Expenses of the Fund Borne by Stockholders......................... 3
Prospectus Summary........................................................... 4
Financial Highlights......................................................... 6
The Fund..................................................................... 9
Investment Objectives and Policies........................................... 9
Investment Practices........................................................ 11
Risk Factors................................................................ 14
Management.................................................................. 17
Net Asset Value............................................................. 18
Purchase of Shares.......................................................... 18
Exchange and Redemption of Shares........................................... 20
Distributions............................................................... 22
Tax Aspects................................................................. 23
Description of Capital Stock................................................ 25
Performance Information..................................................... 26
Distributor................................................................. 26
Administrative Services..................................................... 26
Transfer Agent and Custodian................................................ 27
Experts..................................................................... 27
Hedging and Other Transactions....................................... Appendix A
No dealer, salesman or any other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Fund or its distributor or investment adviser.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any jurisdiction or to any
person to whom it is unlawful to make such offer in such jurisdiction.
2
<PAGE>
COSTS AND EXPENSES OF THE FUND BORNE BY STOCKHOLDERS
Stockholder Transaction Expenses
Sales Load Imposed on Purchases........................................ None
Sales Load Imposed on Reinvested Dividends............................. None
Deferred Sales Load.................................................... None
Redemption Fees........................................................ None
Exchange Fee........................................................... None
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees........................................................ 0.95%
12b-1 Fees............................................................. None
Other Expenses......................................................... 0.58%
Total Fund Operating Expenses...................................... 1.53%
Example. The purpose of the following example is to assist the investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. Use of a 5% annual return in the example is
mandated by the Securities and Exchange Commission and is not intended to be
representative of past or future performance of the Fund. The example should not
be considered a representation of past or future expenses. Actual expenses may
be greater or less than those shown. For more information regarding the fees and
expenses of the Fund, see "Management".
1 year 3 years 5 years 10 years
------ ------- ------- --------
You would pay the following
expenses on a $1,000 invest-
ment, assuming (1) 5% annual
return and (2) redemption at
the end of each time period: $16 $48 $83 $182
3
<PAGE>
PROSPECTUS SUMMARY
What is the Purpose of The Fund?
The Fund is designed to provide stockholders with a specialized vehicle for
investing outside the United States using a multi-country, multi-sector
structured approach. It does not represent a balanced investment program.
Moreover, investment risk cannot be eliminated by an investment in the Fund.
What is the Fund's Primary Objectives?
To seek capital appreciation through investments in foreign Investment
equity securities.
Are There any Risk Factors Regarding an Investment in the Fund?
The Fund invests primarily in equity securities of foreign issuers, including
U.S. companies whose assets are primarily located or whose operations are
primarily conducted outside the United States. Investment in securities of this
type involves considerations that are different from those relating to
investments in U.S.-based companies, such as possible adverse effects of changes
in currency exchange rates or of exchange controls, possible expropriation or
nationalization of the assets of the companies of which the Fund has purchased
securities, less public information with respect to issuers of such securities,
less liquid securities markets in some instances and less governmental
supervision of stock exchanges, securities brokers and issuers of securities.
In seeking to protect against the effects of changes in currency exchange rates
and market conditions, the Fund may purchase and sell forward contracts,
options, futures contracts and options on futures contracts relating to foreign
currencies and stock indices, for hedging and other purposes and not for
speculation. Risks associated with such transactions include: incorrect
prediction of the movement of currency exchange rates and market conditions;
imperfect correlation of currency movements in cross-hedges and indirect hedges;
imperfect correlation in the price movements of futures contracts and options on
futures contracts with the assets on which they are based; lack of liquid
secondary markets and the inability to effect closing transactions; costs
associated with effecting such transactions; inadequate disclosure and/or
regulatory controls in certain markets; counterparty default with respect to
transactions not executed on an exchange; trading restrictions imposed by
governments, or securities and commodities exchanges; and governmental actions
affecting the value or liquidity of currencies and stock indices.
The Fund is deemed to be non-diversified within the meaning of the Investment
Company Act of 1940. Investment of a substantial percentage of the Fund's assets
in the securities of single issuers will expose the Fund
4
<PAGE>
to a greater risk of loss resulting from unfavorable price movements or market
conditions related to such issuers.
Substantially all of the Fund's shares are currently held by advisory clients of
the Fund's investment adviser. Decisions by the investment adviser to purchase
or redeem Fund shares on behalf of its clients may cause significant volatility
in the Fund's asset size. As a result, the Fund may experience, from time to
time, increased expense ratios, liquidation of portfolio positions at
inopportune times for certain stockholders, and increased brokerage and other
transaction costs. See "Risk Factors".
How Are Shares Purchased?
Shares of Common Stock of the Fund are being offered, without any sales charge,
on a continuous basis directly by the Fund or through a broker-dealer. If shares
of the Fund are purchased through a broker-dealer, a service fee may be charged
by the broker-dealer. If shares of the Fund are purchased directly from the Fund
without the intervention of a broker-dealer, no such fee will be imposed. The
minimum initial investment in the Fund is $5,000 and each subsequent investment
must be atleast $100; the minimum initial investment for Bailard, Biehl & Kaiser
employees, officers and their relatives, and directors of the Company is $2,000
and each subsequent investment must be at least $100. See "Purchase of Shares".
Who is the Fund's Investment Adviser and What Fees Does the Fund Pay?
Bailard, Biehl & Kaiser, Inc. acts as the investment adviser (the Investment
Adviser and "Adviser") of the Fund. The Adviser also acts as the investment
adviser for the Bailard, Biehl & Kaiser International Bond Fund (the other
series of the Company) and the Bailard, Biehl & Kaiser Diversa Fund. As of
Decenber 31, 1995 , the Adviser managed approximately $917 million in assets
invested globally. The Adviser receives a monthly fee calculated at an annual
rate equal to .95% of the average daily net assets of the Fund. See
"Management".
The total expenses incurred by the Fund for the fiscal year ended September 30,
1995 represented 1.53% of the average net assets of the Fund. See "Costs and
Expenses of the Fund Borne by Stockholders".
How Often are Distributions Made?
Dividends from net investment income and net realized capital gains, if
any, will be distributed annually, generally in December. See "Distributions".
How are Shares Redeemed?
Shares in the Fund will be redeemed at the net asset value next determined after
receipt of complete redemption instructions, as described under "Net Asset
Value" and "Exchange and Redemption of Shares".
5
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Share of the Fund Outstanding Throughout Each Fiscal Year)
The following information has been audited by Price Waterhouse LLP, independent
accountants, whose unqualified report thereon covering the most recent five
years is included in the Fund's annual report to stockholders for the fiscal
year ended September 30, 1995. Portions of the Fund's annual report to
stockholders for the fiscal year ended September 30, 1995 are incorporated by
reference into the Statement of Additional Information. This information should
be read in conjunction with the financial statements and notes thereto included
in the annual report.
The following information is based upon past results and may not be indicative
of the future performance of the Fund. Further information about the performance
of the Fund is included in the Fund's annual report to stockholders for the
fiscal year ending September 30, 1995 . A copy of the annual report is
available, upon request and without charge, by contacting Bailard, Biehl &
Kaiser International Fund Group, Inc., 2755 Campus Drive, San Mateo, California
94403.
6
<PAGE>
<TABLE>
Bailard, Biehl & Kaiser International Equity Fund
Financial Highlights
For a share outstanding throughout the year:
<CAPTION>
Fiscal Year Ended September 30,(5)
- ------------------------------------------------------------------------------------------------------------------------------------
1995(3) 1994(3) 1993(2), 1992(2) 1991(2) 1990(2), 1989(1) 1988(1) 1987(1) 1986(1)
(3) (4)
------- ------- ------- ------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $ 6.10 $ 5.66 $ 4.80 $ 5.69 $ 5.26 $ 6.59 $ 5.50 $ 22.16 $ 28.10 $ 14.44
Income from Investment
Operations:
Net Investment Income(6) 0.06(7) 0.01 0.07 0.06 0.11 0.06 0.04 0.08 0.05 0.14
Net Realized/Unrealized
Gain (Loss) on
Securities and Foreign
Currency 0.06 0.43 0.79 (0.87) 0.54 (1.32) 1.05 (3.53) 2.97 13.87
---- ---- ---- ------ ---- ------ ---- ------ ---- -----
Total from Investment
Operations 0.12 0.44 0.86 (0.81) 0.65 (1.26) 1.09 (3.45) 3.02 14.01
---- ---- ---- ------ ---- ------ ---- ------ ---- -----
Less Distributions:
Net Investment Income -- -- -- (0.08) (0.11) (0.07) -- (0.08) (0.14) (0.18)
Capital Gains (0.22) -- -- -- (0.11) -- -- (13.13) 8.82 (0.17)
------ ------- ------ ------ ------ ------ ------ ------- ------ ------
Total Distributions (0.22) -- -- (0.08) (0.22) (0.07) -- (13.21) (8.96) (0.35)
------ ------- ------ ------ ------ ------ ------ ------- ------ ------
Net Asset Value, End of
Year $ 6.00 $ 6.10 $ 5.66 $ 4.80 $ 5.69 $ 5.26 $ 6.59 $ 5.50 $ 22.16 $ 28.10
======= ======= ======= ======= ======= ======= ======= ========= ====== ======
Total Return 2.13% 7.77% 17.92% (14.20%) 12.30% (19.38%) 19.82% (11.52%) 16.25% 98.49%
Ratios/Supplemental Data:
Net Assets, End of Year
(000's) $108,210 $204,788 $182,894 $127,092 $126,132 $64,904 $79,487 $48,938 $113,335 $149,456
Ratio of Expenses to
Average Net Assets 1.53% 1.39% 0.68% 1.05% 1.22% 1.30% 1.22% 1.24% 0.88% 0.81%
Ratio of Net Income to
Average Net Assets 0.97% 0.29% 1.88% 1.55% 1.93% 0.88% 1.07% 0.76% 0.24% 0.54%
Portfolio Turnover Rate 174% 176% 131% 77% 81% 134% 86% 96% 121% 99%
</TABLE>
(1)The investment advisers to the Fund beginning in April 1983 was Warburg
Investment Management International (Jersey) Limited (and its affiliate, Warburg
Investment Management International Limited);
(2)The investment advisers to the Fund beginning in August 1990 were Nomura
Capital Management, Inc. (and its affiliates, Nomura Investment Management Co.,
Ltd., and Nomura Capital Management (U.K.) Limited), Acadian Asset Management,
Inc. and Bailard, Biehl & Kaiser, Inc.;
(3) Bailard, Biehl & Kaiser, Inc. became the sole adviser to the Fund in
February 1993. The Fund's investment advisers have received fees during the 10
year period shown in the above table. The Fund paid no advisory fees from
February 1, 1993 to September 30, 1993. See "Management" for further discussion.
(4)Prior to July 31, 1990, the investment objective of the Fund was to seek
a total return on assets. Since that time, the Fund's primary investment
objective has been to seek capital appreciation.
(5)Does not reflect separate advisory fees charged by Bailard, Biehl &
Kaiser, Inc. to its clients prior to October 1, 1993. See "Management" for
further discussion. If such fees were included at an assumed 1% annual rate
payable quarterly, pro-forma total return information would be as follows
(unaudited):
Fiscal Year Ended September 30,
- --------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987 1986
- ---- ---- ---- ---- ---- ---- ---- ----
16.74% (15.05%) 11.18% (20.18%) 18.62% (12.40%) 15.09% 96.51%
(6)1995 amounts are computed on the basis of average shares outstanding,
before book-to-tax adjustements of undistributed net investment income
(7)The amount shown for each share outstanding may not accord with the
change in the aggregate gains and losses in the portfolio securities for the
period because of the timing of purchases and redemptions of shares in relation
to the fluctuating market value of the portfolio.
<PAGE>
THE FUND
The Fund is a non-diversified series of the Bailard, Biehl & Kaiser
International Fund Group, Inc., a Maryland corporation and an open-end
management investment company (the "Company"). The Fund is not intended as a
complete investment program because of the specialized nature of its investment
objectives. Bailard, Biehl & Kaiser, Inc. (the "Adviser") has sponsored the
organization of the Fund primarily to provide investment opportunities in
foreign equity securities that may not otherwise be available. Of course, there
can be no assurance that the Fund will achieve its investment objectives, and,
as indicated below, under "Risk Factors", there are risks associated with
investing in foreign securities, foreign currencies and foreign markets that are
not present with respect to investing in U.S. securities denominated in U.S.
dollars and traded in U.S. markets.
The Fund issues to stockholders unaudited semi-annual reports and annual reports
containing audited financial statements of the Fund. Shortly after the end of
each calendar year, the Fund furnishes investors with information necessary for
the preparation of income tax returns.
The Fund is the successor to the Bailard, Biehl & Kaiser International Fund,
Inc., a Delaware corporation that was organized on March 12, 1979 and merged
into the Company on July 31, 1990. The Company's fiscal year ends on September
30 of each year.
INVESTMENT OBJECTIVES AND POLICIES
The Fund's primary investment objective is to seek capital appreciation through
investment in foreign issuers, including U.S. companies whose assets are
primarily located or whose operations are primarily conducted outside the United
States. Current income, while a factor in portfolio selection, is a secondary
objective, and will be pursued only when consistent with the Fund's primary
objective. To help achieve these objectives, the Fund will ordinarily invest at
least 65% of its assets in at least three countries other than the United States
in equity securities that have potential for growth of capital or income, or
both. For this purpose, "equity securities" will consist of common stocks,
preferred stocks and convertible securities (such as convertible debt securities
and warrants). The remainder of the portfolio will be invested in short-term
obligations of U.S. and foreign companies and governments pending investment or
for protection against market declines. Short-term obligations will consist of
short-term notes, commercial paper, certificates of deposit and, within certain
limitations, repurchase agreements. Such short-term obligations will be rated
Prime by Moody's or A by S&P, or, if unrated, will be of a similar quality in
the opinion of the Adviser. Investors should be aware that warrants do not
entitle the holder to voting, liquidation or dividend rights with respect to the
issuer of the underlying securities. Repurchase agreements represent
transactions in which the Fund buys securities from the seller who agrees to
repurchase such securities at a later date. The seller's obligation to
repurchase is fully collateralized with other securities in which the Fund can
invest, although the Fund may experience delays in acquiring control of the
collateral upon a default by the seller. The Fund may also engage in certain
hedging and other transactions. See "Investment Practices".
The Fund will ordinarily invest its assets in securities of issuers that, in the
judgment of the Adviser, have their principal governing headquarters located
outside the United States, in order to provide investors in the Fund with
participation in companies located in, or the economies of, a number of
countries other than the United States. While there is no limitation on
countries in which the Fund may invest, other than those imposed from time to
time by the Board of Directors, under ordinary circumstances investments will be
principally in companies based in the Far East, Europe, the United Kingdom,
Canada and Australia. Investments may be made in companies based in developed as
well as developing countries. The Fund may also invest in securities traded
domestically and abroad in the form of American Depositary Receipts and
International Depositary Receipts, and in domestic and foreign closed-end
investment companies whose portfolios are invested primarily in the securities
of foreign issuers. The Fund's purchase of securities of a closed-end investment
company will result in the layering of expenses such that stockholders of the
Fund will not only bear the expenses of the Fund but also will indirectly bear a
proportionate share of the expenses of the closed-end investment company.
As a general rule, the Fund will purchase securities that are traded on
exchanges or over-the-counter markets often located in the respective countries
in which the various issuers of such securities are principally based. There is
no limitation on the percentage of the Fund's assets that may be invested in
securities of issuers located within any one country, other than restrictions
that may be imposed from time to time by the Company's Board of Directors, nor
is there any minimum asset or net worth requirement with respect to issuers in
which the Fund's assets may be invested.
The Fund has certain "fundamental policies" that limit, to specified levels, the
Fund's investment in certain securities. Those policies include the following.
As much as 25% of the value of the Fund's assets may be invested in a single
industry. However, the Fund will not acquire more than 10% of the outstanding
voting securities of any one issuer and will not invest for the purpose of
controlling or managing companies. The Fund may not purchase or sell commodities
or commodity contracts or invest in options except that the Fund may invest in,
purchase or write forward contracts on foreign currencies, and options, futures
contracts and options on futures contracts on foreign currencies and stock
indices in connection with foreign currency and market hedging transactions. The
Fund may not borrow money or pledge its assets, except from a bank as a
temporary measure for extraordinary or emergency purposes in amounts not
exceeding 5% of the value of the Fund's total assets. The Fund will not effect
short sales or purchase securities on margin, except for the deposit of initial
or variation margin in connection with hedging transactions. Moreover, the Fund
will not invest more than 10% of the value of its total assets in securities
subject to contractual or legal restrictions on disposition in all of the
principal markets where traded.
The investment objectives and policies described above may be changed by the
action of the Board of Directors of the Fund without stockholder approval,
except for the fundamental policy restrictions of the Fund, which may be changed
only with the approval of a majority of the stockholders of the Fund. A
description of the Fund's fundamental policies is contained in the Statement of
Additional Information.
The Fund may engage in short-term trading if the disposition of securities held
for a short period is deemed to be advisable. The Fund anticipates that its
portfolio turnover rate will generally be in the range of 75% to 150%, but may
from time to time be greater or less than this range. A turnover rate of 100%
exceeds that of many other investment companies, including those which emphasize
capital appreciation as a primary investment objective. Higher portfolio
turnover results in increased brokerage costs and may result in the realization
of short-term gains that are taxed to stockholders as ordinary income. See "Tax
Aspects".
INVESTMENT PRACTICES
The Fund is authorized to employ certain investment practices to attempt to
minimize the risk to the Fund from adverse changes in currency exchange rates
and market conditions or as a substitute for an underlying investment ("Hedging
Transactions"). Hedging Transactions may consist of forward foreign currency
exchange contracts ("Forward Contracts"), and call and put options ("Options"),
futures contracts ("Futures Contracts"), and call and put options on futures
contracts ("Options on Futures Contracts") on foreign currencies and stock
indices. The Fund may also conduct foreign currency exchange transactions on a
spot basis at the rate prevailing in the foreign currency exchange market. These
practices involve certain risks, which are summarized below under "Risk Factors
- -- Hedging Transactions". For a more detailed description of the uses, risks and
costs of Hedging Transactions, see Appendix A. In addition, certain provisions
of the Internal Revenue Code may limit the extent to which the Fund may enter
into Hedging Transactions. See "Tax Aspects -- Hedging and Other Transactions".
Generally, Hedging Transactions involving foreign currencies may directly hedge,
cross-hedge, or indirectly hedge the currency risk associated with a particular
transaction or position. The Fund may directly hedge a currency risk when it
believes that the currency in which a particular portfolio security is
denominated may suffer a substantial adverse movement against the U.S. Dollar.
For example, to directly hedge a position, the Fund could sell an amount of such
foreign currency, or buy an amount of the U.S. Dollar, approximating the value
of some or all of the Fund's portfolio securities denominated in such foreign
currency.
The Fund may enter into a cross-hedge when it believes that the currency in
which a particular portfolio security is denominated may suffer a substantial
adverse movement against a currency other than the U.S. Dollar. A cross-hedge is
accomplished by hedging a foreign currency in which a portfolio security is
denominated against another foreign currency. For example, if the Fund believes
that the German Mark will move adversely against the Japanese Yen, the Fund
could hedge a portfolio position denominated in German Marks by selling the Mark
for a specified amount of Japanese Yen. The Fund could also hedge the German
Mark through the U.S. Dollar against the Japanese Yen. In such a case, the Fund
could sell German Marks for a specified amount of U.S. Dollars and sell the same
amount of U.S. Dollars for a specified amount of Japanese Yen.
Indirect hedges are similar to direct hedges except that instead of being
obligated to sell a currency in which the Fund's assets are denominated, the
Fund will be obligated to sell a different, or proxy, currency that the Fund
believes will suffer a similar movement against the other currency. For example,
the Fund may hold securities denominated in Dutch Guilders. If the Fund believes
that the exchange rate between the Dutch Guilder and the U.S. Dollar will suffer
a substantial adverse movement, the Fund could directly hedge the currency risk
by selling an amount of Guilders forward for a specified amount of U.S. Dollars.
However, if the Fund believes that the German Mark will suffer a similar adverse
movement against the U.S. Dollar, the Fund could hedge the Guilder denominated
portfolio position by selling an amount of German Marks forward for a specified
amount of U.S. Dollars. Similarly, the Fund may acquire securities denominated
in Guilders at a time that it believes the Guilder and the German Mark would
appreciate against the U.S. Dollar. In such circumstances, the Fund may sell
U.S. Dollars forward against an amount of German Marks necessary to acquire the
Guilder-denominated securities. The Fund will enter into such indirect hedges
when it believes that the currency risk associated with a transaction or
position can be hedged more effectively through the purchase or sale of a third
currency (e.g. where the market for the proxy currency is more liquid, or more
easily monitored and analyzed, and/or the cost to the Fund of an indirect hedge
is lower than a corresponding direct hedge).
Generally, to hedge a risk associated with or as a substitute for a market,
economic sector or industry, the Fund may enter into a transaction involving a
stock index Option, stock index Futures Contract or Option on a stock index
Futures Contract. A stock index is a composite of the market prices of the
stocks that make up the index. An index may be broad based (comprised of many
stocks and designed to be representative of an overall market, e.g., the CAC-40
Index of French securities) or narrow based (designed to be representative of a
particular industry or market sector, e.g., the Morgan Stanley Global Utilities
Index). An index may also be composed of U.S. stocks (e.g., the S & P 500 Stock
Index) or foreign stocks (e.g., the International Market Index) or a combination
of both (e.g., the Morgan Stanley World Index). Stock indices are used as the
underlying value of stock index Options, stock index Futures and Options on
stock index Futures.
The Fund will not engage in a transaction involving Forward Contracts or Futures
Contracts, and will not write Options or Options on Futures Contracts unless its
position is "covered" by an offsetting position or transaction, or certain
liquid assets equal to the amount of the Fund's contingent obligations are held
by the Fund's custodian in a segregated account.
For a more detailed description of cover transactions, see Appendix A.
Forward Contracts
A Forward Contract is an obligation to purchase or sell a specific currency for
an agreed price at a future date and is individually negotiated and privately
traded by currency traders and their customers. The precise matching of the
Forward Contract amounts and the value of the securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the Forward Contract is entered into and the
date it matures. Forward Contracts may limit potential gain from a positive
change in the relationship between currencies, and unanticipated changes in
currency prices may result in poorer overall performance for the Fund than if it
had not engaged in such contracts.
Options
The Fund may purchase and write call and put Options on foreign currencies and
stock indices. Call Options on foreign currencies give the holder the right, in
exchange for a premium, to buy the underlying currency at a stated price while
the counterparty is obligated, upon exercise, to sell such currency. Put Options
on foreign currencies give the holder the right, in exchange for a premium, to
sell the underlying currency at a stated price while the counterparty is
obligated, upon exercise, to buy such currency. An Option on a stock index is
similar to an Option on a foreign currency, except that exercise of the Option
results in the payment of a cash settlement instead of the purchase or sale of
the stocks that underlie the index. The amount of the cash settlement depends on
the change in the value of the index underlying the Option.
The purchase of an Option may constitute an effective hedge against fluctuations
in currency exchange rates or changes in market conditions, although, in the
event of movements adverse to the Fund's position, the Fund may forfeit the
entire amount of the premium plus related transaction costs. The writing of
Options constitutes only a partial hedge, up to the amount of the premium
received, and the Fund could be required to purchase or sell foreign currencies,
securities or other assets at disadvantageous rates, thereby incurring losses.
Options written or purchased by the Fund will be traded on U.S. and foreign
exchanges or, provided a sufficiently liquid secondary market exists,
over-the-counter markets. Over-the-counter Options purchased by the Fund and the
value of securities used to cover over-the-counter Options written by the Fund
will be deemed to be illiquid subject to the Fund's policy limits on investments
in illiquid securities.
Futures Contracts
A Futures Contract is an exchange traded contract for the purchase or sale for
future delivery of the underlying asset. A sale of a Futures Contract on a
foreign currency is the acquisition of a contractual obligation to deliver the
currency called for by the contract at a specified price in a fixed delivery
month. A purchase of a Futures Contract on a foreign currency means the
acquisition of a contractual obligation to acquire the currency called for by
the contract at a specified price in a fixed delivery month. A Futures Contract
on a stock index, like an Option on a stock index, results in the payment of a
cash settlement instead of the delivery of the stocks that underlie the index.
The amount of the cash settlement depends on the change in the value of the
index underlying the Futures Contract. The successful use of Futures Contracts
will usually depend on the Fund's ability to correctly predict currency exchange
rate and market movements. Should rates or markets move in an unexpected manner,
the Fund may not achieve the anticipated benefits of Futures Contracts or may
realize losses. Losses from Futures Contracts are potentially unlimited.
Options on Futures Contracts
The Fund may purchase and write call and put Options on Futures Contracts. Call
Options on Futures Contracts give the holder the right, in exchange for a
premium, to take the position of a buyer in a specified Futures Contract while
the counterparty is obligated, upon exercise, to take the position of a seller
in that Futures Contract. Put Options on Futures Contracts give the holder the
right, in exchange for a premium, to take the position of a seller in a
specified Futures Contract while the counterparty is obligated, upon exercise,
to take the position of a buyer in that Futures Contract. Depending on the
pricing of an Option on a Futures Contract compared to either the price of the
Futures Contract upon which it is based or the price of the underlying asset, an
Option on a Futures Contract may entail more or less risk than ownership of the
Futures Contract upon which it is based or the underlying asset. Options on
Futures Contracts hedge positions and transactions in a manner similar to
Options. For more information on the uses and limits of Options on Futures
Contracts, see "Options".
Spot Transactions
The Fund also engages in foreign currency exchange transactions on a spot (i.e.,
current) basis in connection with the investment of cash balances held by the
Fund outside of the United States. The purpose of these cash balances is to
provide liquidity for operations. The Fund normally expects to invest its cash
balances primarily in bank accounts or similar investments denominated in
foreign currencies in lieu of dollar-denominated bank accounts or investments.
This should permit the Fund to profit from declines in the value of the dollar
during periods when the dollar is declining relative to the foreign currencies
in which its cash balances are invested. There is, however, no guarantee that
the Fund will correctly anticipate currency fluctuations. Accordingly, if the
Fund's cash balances are maintained in investments denominated in foreign
currencies during periods when the value of the dollar is appreciating relative
to those foreign currencies, the Fund will experience losses. The Fund will also
incur service charges in connection with each currency conversion.
RISK FACTORS
Foreign Securities
The Fund is intended to provide an investor with an opportunity to invest a
portion of his or her assets in equity securities of foreign companies or
companies (wherever organized) with significant foreign operations. Management
of the Fund believes that international investment of one's assets may decrease
the degree to which events in any one country, including the United States, will
affect one's entire investment holdings. Of course international investment of
one's assets will not eliminate risks inherent in investing in securities.
Because of the Fund's investment objectives, the Fund is not intended to provide
a complete investment program for an investor.
Investors should recognize that investing in foreign companies, foreign
currencies and foreign markets involves certain considerations, including those
set forth below, that are not typically associated with investing in U.S.
securities denominated in U.S. dollars and traded in U.S. markets. Many of the
securities held by the Fund will not be registered with, nor will the issuers
thereof be subject to the reporting requirements of, the Securities and Exchange
Commission. Accordingly, there may be less publicly available information about
a foreign company than about a domestic company. Foreign companies are not
generally subject to uniform accounting and auditing and financial reporting
standards, practices and requirements comparable to those applicable to domestic
companies. Securities of some foreign companies are less liquid and more
volatile than securities of comparable domestic companies.
It is contemplated that most foreign securities will be purchased in
over-the-counter markets or stock exchanges located in the countries in which
the respective principal offices of the issuers of the various securities are
located, if that is the best available market. Fixed commissions on foreign
stock exchanges are generally higher than negotiated commissions on United
States exchanges. There is generally less governmental supervision and
regulation of foreign stock exchanges, brokers and issuers than in the United
States.
In addition, with respect to some foreign countries, there is the possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of the Fund, political or social instability, or diplomatic
developments that could affect United States investments in those countries.
Moreover, individual foreign economies may differ favorably or unfavorably from
the United States economy in such respects as growth of gross domestic product,
rate of inflation, capital reinvestment, resource self-sufficiency and balance
of payments position.
The Fund may invest in securities issued by the governments of foreign countries
(or agencies or subdivisions thereof); and many, if not all, of the foregoing
considerations apply to such investments as well. In addition, the Fund may
invest in American Depository Receipts ("ADRs") and International Depository
Receipts ("IDRs"). A purchaser of an unsponsored ADR or IDR may have limited
voting rights and may receive less information about the issuer of the
underlying security than with a sponsored ADR or IDR.
Currency Exchange Rates
The value of the assets of the Fund as measured in U.S. dollars may be affected
favorably or unfavorably by fluctuations in currency rates and exchange control
regulations (including, but not limited to, actions by a foreign government to
devalue its currency, thereby effecting a possibly substantial reduction in the
U.S. dollar value of the Fund's investments in that country). The Fund is
authorized to employ certain hedging techniques to minimize this risk. However,
to the extent such techniques are not employed or to the extent such techniques
do not fully protect the Fund against adverse changes in exchange rates,
decreases in the value of the currencies of the countries in which the Fund will
invest will result in a corresponding decrease in the U.S. dollar value of the
Fund's assets denominated in those currencies. On the other hand, to the extent
hedging techniques are used to reduce currency risk, the Fund will not
participate in increases in the value of the currencies of the countries in
which the Fund invests. Further, the Fund may incur costs in connection with
conversions between various currencies. Foreign exchange dealers (including
banks) realize a profit based on the difference between the prices at which they
buy and sell various currencies. Thus, a dealer or bank normally will offer to
sell a foreign currency to the Fund at one rate, while offering a lesser rate of
exchange should the Fund desire immediately to resell that currency to the
dealer. Moreover, fluctuations in exchange rates may decrease or eliminate
income available for distribution and may change the tax treatment of any
distribution. For example, if foreign exchange losses exceed other investment
company taxable income during a taxable year, the Fund might not be able to or
might determine not to make ordinary income distributions, or distributions made
before the losses were realized would be recharacterized as a return of capital
to stockholders for United States income tax purposes, rather than as ordinary
income, thereby reducing each stockholder's basis in his Fund shares.
Hedging Transactions
Hedging Transactions cannot eliminate all risks of loss to the Fund and may
prevent the Fund from realizing some potential gains. The projection of
short-term foreign currency and market movements is extremely difficult, and the
successful execution of a short-term hedging strategy is highly uncertain. Among
the risks of Hedging Transactions are: incorrect prediction of the movement of
currency exchange rates and market movements; imperfect correlation of currency
movements in cross-hedges and indirect hedges; imperfect correlation in the
price movements of Options, Futures Contracts and Options on Futures Contracts
with the assets on which they are based; lack of liquid secondary markets and
the inability to effect closing transactions; costs associated with effecting
such transactions; inadequate disclosure and/or regulatory controls in certain
markets; counterparty default with respect to transactions not executed on an
exchange; trading restrictions imposed by governments, or securities and
commodities exchanges; and governmental actions affecting the value or liquidity
of currencies. Hedging Transactions may be effected in foreign markets or on
foreign exchanges and are subject to the same types of risks that affect foreign
securities. See "Risk Factors-- Foreign Securities".
Indirect hedges and cross-hedges are more speculative than other hedges because
they are not directly related to the position or transaction being hedged. With
respect to indirect hedges, movements in the proxy currency may not precisely
mirror movements in the currency in which portfolio securities are denominated.
Accordingly, the potential gain or loss on an indirect hedge may be more or less
than if the Fund had directly hedged a currency risk. Similar risks are
associated with cross-hedge transactions. In a cross-hedge, the foreign currency
in which a portfolio security is denominated is hedged against another foreign
currency, rather than the U.S. Dollar. Cross-hedges may also create a greater
risk of loss than other hedging transactions because they may involve hedging a
currency risk through the U.S. Dollar rather than directly to the U.S. Dollar or
another currency.
In order to help reduce certain risks associated with Hedging Transactions, the
Board of Directors has adopted the requirement that Forward Contracts, Options,
Futures Contracts and Options on Futures Contracts be used as a hedge or as a
substitute for an underlying investment and not for speculation. In addition to
this requirement, the Board of Directors has adopted the following percentage
restrictions on the use of Options, Futures Contracts and Options on Futures
Contracts:
(i) The Fund will not write a put or call Option if, as a result thereof,
the aggregate value of the assets underlying all such Options (determined
as of the date such Options are written) would exceed 25% of the Fund's net
assets.
(ii) The Fund will not purchase a put or call Option or Option on a Futures
Contract if, as a result thereof, the aggregate premiums paid on all
Options or Options on Futures Contracts held by the Fund would exceed 20%
of the Fund's net assets.
(iii) The Fund will not enter into any Futures Contract or Option on a
Futures Contract if, as a result thereof, the aggregate margin deposits and
premiums required on all such instruments would exceed 5% of the Fund's net
assets.
In order to help reduce the risk of counterparty default in Forward Contracts
and Options traded over-the-counter, the Fund will only enter into such
transactions with registered broker-dealers, or with banks or other financial
institutions regulated by the FDIC or having assets in excess of $1 billion, in
each case having a net worth of at least $20 million. For a more detailed
discussion of the uses, risks and costs of Hedging Transactions, see Appendix A.
Non-Diversification
The Fund is deemed to be non-diversified within the meaning of the Investment
Company Act of 1940 (the "1940 Act"), because it may invest more than 25% of its
assets in issuers in which it invests more than 5% of its assets. However, the
Fund still intends to qualify as a regulated investment company under the
Internal Revenue Code. In order to so qualify, the Fund may not, among other
things, invest more than 50% of its assets in such issuers. A more detailed
description of this and other requirements applicable to regulated investment
companies is set forth under "Tax Aspects" and in the Statement of Additional
Information under the caption "Tax Aspects". Investment of a substantial
percentage of the Fund's assets in the securities of single issuers will expose
the Fund to a greater risk of loss resulting from unfavorable price movements or
market conditions related to such issuers.
Asset Volatility
Substantially all of the Fund's shares are currently held by advisory clients of
the Adviser. As a result, decisions by the Adviser to purchase or redeem Fund
shares on behalf of its clients may cause the assets of the Fund to increase or
decrease by a significant amount from time to time. Any significant decline in
the Fund's assets is likely to result in an increase of the Fund's expenses as a
percentage of its net assets. In addition, in order to meet the redemption
requests of the Adviser's clients, the Fund may be required to liquidate
portfolio positions and realize gains and losses at inopportune times for
non-redeeming stockholders. Higher portfolio turnover also results in increased
brokerage and other transaction costs. Stockholders who are not clients of the
Adviser will not be notified of any changes in the Fund's assets that occur as a
result of decisions by the Adviser on behalf of its clients or otherwise.
MANAGEMENT
The Board of Directors of the Company is responsible for the management of the
Fund, including the general overall supervision of the Fund's portfolio
transactions. The names and business addresses of the directors and officers of
the Company and their principal occupations and other affiliations during the
past five years are set forth in the Statement of Additional Information.
The Fund and the Adviser have entered into an Investment Management Agreement
(the "Management Agreement") dated as of October 1, 1993. Under the Management
Agreement, the Adviser directs the purchase and sale of securities in the Fund's
investment portfolio and all hedging transactions in accordance with the Fund's
objectives and policies. The Adviser also selects and reviews firms to effect
portfolio transactions, and reviews commissions paid and the execution of
portfolio transactions for the Fund. In addition, the Adviser provides certain
managerial and administrative services to the Fund.
Rosemary Macedo has been primarily responsible for the day-to-day management of
the Fund's portfolio since November 1995. Ms. Macedo joined the Adviser in 1992
with responsibility for quantitative research and became a Senior Vice President
of the Adviser in 1995. She worked at First Quadrant Corporation conducting
quantitative research and systems development on equity and asset allocation
models from 1988 to 1992.
Since October 1, 1993, the Adviser has been paid a monthly fee calculated at an
annual rate equal to .95% of the average daily net assets of the Fund. While
this rate is higher than the rate charged by most other advisers, the Fund
believes that it is justified by the complexity of investing in multiple
international markets and engaging in Hedging Transactions and by the
administrative services provided by the Adviser. Prior to October 1, 1993, the
Fund employed other investment advisers and the Adviser received no fees from
the Fund. However, investors in the Fund who were advisory clients of the
Adviser paid separate advisory fees directly to the Adviser. Since October 1,
1993, the separate advisory fees payable to the Adviser by its advisory clients
have been reduced by the amount of fees it receives from the Fund attributable
to the assets of its advisory clients.
The Fund pays all of its own expenses except for those expressly to be paid by
the Adviser. For the fiscal year ended September 30, 1995 , the Fund's total
expenses represented 1.53% of average net assets for the year. Additional
information concerning the expenses of the Fund is contained in the Statement of
Additional Information. The Adviser commenced business as a registered
investment adviser in 1970 and was incorporated as a California corporation in
1972. The principal place of business of the Adviser is 2755 Campus Drive, San
Mateo, California 94403. The Adviser is a wholly owned subsidiary of BB&K
Holdings, Inc., a California corporation, and acts as investment adviser to the
Bailard, Biehl & Kaiser International Bond Fund (the other series of the
Company) and the Bailard, Biehl & Kaiser Diversa Fund. As of Decmeber 31, 1995,
the Adviser managed portfolios with total holdings of approximately $917 million
in market value.
NET ASSET VALUE
The net asset value per share, on which purchase and redemption prices are
based, is obtained by dividing the value of the net assets of the Fund (i.e.,
the market value of the securities and other assets of the Fund less its
liabilities, including expenses payable or accrued but excluding capital stock
and surplus), by the total number of shares outstanding. Net asset value is
calculated once daily, at the regular closing of the New York Stock Exchange
(generally 4:00 P.M. New York time), except that no net asset value per share is
calculated on Saturdays, Sundays or other days when the New York Stock Exchange
is closed. Because the Fund's investment securities are traded on foreign
markets that may be open when the New York Stock Exchange is closed, the value
of the net assets of the Fund may be significantly affected on days when no net
asset value is calculated. The method used by the Fund for determining the net
asset value of its shares is explained in more detail in the Statement of
Additional Information.
PURCHASE OF SHARES
Shares of the Fund are offered at net asset value, without any sales charge, on
a continuous basis directly by the Fund or through a broker-dealer. If shares of
the Fund are purchased through a broker-dealer, a service fee may be charged by
the broker-dealer. If shares of the Fund are purchased directly from the Fund
without the intervention of a broker-dealer, no such fee will be imposed.
Certain Fund services may not be available to shares held in the name of a
broker-dealer or other nominee.
The minimum initial investment is $5,000 and each subsequent investment must be
at least $100. The minimum initial investment for Bailard, Biehl & Kaiser
employees, officers and their relatives, and directors of the Company is $2,000
and each minimum subsequent investment is $100. The Fund reserves the right to
waive, reduce or increase the minimum for initial and subsequent investments.
Fund shares may also be purchased by various types of retirement plans,
including individual retirement accounts ("IRAs"). The minimum initial and
subsequent investments of such plans correspond to the minimum investment
requirements for individuals. The Adviser offers the Bailard, Biehl & Kaiser IRA
for individuals wishing to establish an IRA. For information concerning the
Bailard, Biehl & Kaiser IRA, call (800) 882-8383.
The Fund reserves the right to refuse any application to purchase its shares.
Resale of Fund shares (other than by redemption) may be restricted in certain
jurisdictions. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such an offer in such
jurisdiction.
Shares may be purchased directly from the Fund by completing the Purchase
Application form accompanying this Prospectus and sending it, together with a
check (payable to the order of the Fund), to Chase Global Funds Services Company
("CGFSC"), P.0. Box 2798, Boston, Massachusetts 02208 or (for express delivery)
73 Tremont Street, Boston, Massachusetts 02108-3913. (CGFSC is an affiliate of
The Chase Manhattan Bank, N.A.) Additional Purchase Application forms can be
obtained from the Fund at 2755 Campus Drive, San Mateo, California 94403.
Shares of the Fund may also be purchased by bank wire by calling CGFSC at (800)
541-4366 (617/557-8000 for Massachusetts residents) to receive a wire reference
control number and to notify CGFSC of your incoming wire. A properly completed
Purchase Application form must be sent to CGFSC at the above address before
bank-wired investments can be redeemed. Instruct your bank (which may charge for
this service) to wire a specified amount (via the Federal Reserve Bank) to:
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, NY 10081-1000
ABA #021000021
DDA #910-2-733160
Attn:
Bailard, Biehl & Kaiser International Equity Fund
Shareholder's Name:
Account Number:
Wire Reference Control Number:
A bank-wired investment is considered received when CGFSC has been notified that
the bank wire has been credited to the Fund's account.
You may purchase additional shares of the Fund at any time by mailing or wiring
funds in the manner and subject to the minimums described above. Please remember
to include your Bailard, Biehl & Kaiser International Equity Fund account number
on your check or as part of your wiring instructions.
When an investor makes an initial investment, an account will be opened on the
books of the Fund and a confirmation will be sent of the opening of the account.
Thereafter, whenever a transaction takes place in the account, such as a
purchase of additional shares, exchange or redemption of shares, reinvestment of
distributions or deposit or withdrawal of shares represented by certificates,
the stockholder will receive a confirmation statement giving complete details of
the transaction. In addition, the statement will show the details of every prior
transaction in the account during the year. Issuance and delivery of
certificates is unnecessary and holders of shares are thereby relieved of the
responsibility of safekeeping, although certificates will be issued, without
charge, to requesting stockholders.
The number of shares that may be purchased will depend upon the applicable net
asset value in effect at the time orders are properly received. Such net asset
value is the net asset value of the Fund next determined after receipt of a
proper request.
EXCHANGE AND REDEMPTION OF SHARES
You may exchange or redeem all or a portion of your shares of the Fund at any
time, without incurring any charges, by mail or by telephone. If you exchange or
redeem your shares through a broker-dealer, there may be a charge imposed for
such services.
Exchange Privilege
You may exchange your Fund shares for shares of the Bailard, Biehl & Kaiser
International Bond Fund (the "Bond Fund") or the Bailard, Biehl & Kaiser Diversa
Fund (the "Diversa Fund") on the basis of the relative net asset values per
share of the Fund and the Bond Fund or Diversa Fund next computed after receipt
by CGFSC of your proper written or telephone request. Written requests should be
directed to CGFSC at the address indicated under "Purchase of Shares". Telephone
requests should follow the procedures described under "Telephone Transactions".
Exchanges can only be made between accounts with identical account
registrations.
Before making an exchange, you should read the Bond Fund's or Diversa Fund's
Prospectus, which may be obtained by contacting the Company at 2755 Campus
Drive, San Mateo, California 94403, (800) 882-8383. Any exchange of shares is,
in effect, a redemption of shares of the Fund and a purchase of shares of the
Bond Fund or Diversa Fund. Accordingly, for Federal income tax purposes, an
exchange is a taxable event, and a gain or loss may be realized. Exchanges can
only be made in states where shares of the Bond Fund or Diversa Fund are
qualified for sale, and the dollar amount of an exchange must meet the initial
or subsequent minimum investment requirements of the Bond Fund or Diversa Fund.
The Fund does not place any limit on the number of exchanges that may be made,
and neither the Fund nor the Bond Fund or Diversa Fund charges a fee for
effecting an exchange. The Fund reserves the right to reject any exchange
request and to modify or terminate the exchange privilege at any time.
Regular Redemption Procedure
A stockholder has the right to redeem shares by transmitting to CGFSC, at the
address indicated under "Purchase of Shares", either the related certificates
and a stock power in good order for transfer, or if no certificates have been
issued, a written request for redemption. Redemption will be made at the net
asset value next computed after receipt by CGFSC of the necessary documents in
good order. "Good order" means that certificates and stock powers must be
endorsed by the record owner(s) exactly as the shares are registered and, for
redemptions in excess of $50,000, the signature(s) must be accompanied by a
signature guarantee. A signature guarantee is a widely accepted way to protect
stockholders and the Fund by verifying the signature on the request. Signature
guarantees should not be qualified in any way, whether by date or otherwise.
Signatures must be guaranteed by an "Eligible Guarantor Institution" and not by
a notary public or any other person or entity. An "Eligible Guarantor
Institution" means a bank, trust company, broker, dealer, municipal or
government securities broker or dealer, credit union, national securities
exchange, registered securities association, clearing agency or savings
association that is a participant in the Securities Transfer Agents Medallion
Program ("STAMPSM") endorsed by the Securities Transfer Association. In some
cases, "good order" may require the furnishing of additional documents. In the
event that a stockholder needs assistance in determining which documents are
required in order to effect a redemption, he or she may contact CGFSC at (800)
541-4366 for assistance. Subject to the limitations set forth below, payment for
shares redeemed will ordinarily be made within seven days after receipt of the
foregoing documents in good order.
Systematic Withdrawal Plan
A Systematic Withdrawal Plan ("SWP") may be established by a new or existing
stockholder if the shares in his or her account, when valued at the current net
asset value, equal $10,000 or more. Stockholders who elect to establish a SWP
account will be mailed a semimonthly, monthly or quarterly check in a stated
amount, not less than $100. Depending on the SWP option chosen, shares
sufficient to satisfy the stated amount will be automatically redeemed on or
about the third and/or eighteenth day of the payment period and a check for the
stated amount will be mailed by CGFSC to the stockholder as soon thereafter as
practicable. A transaction fee of $2 per check will be deducted from the
proceeds. Withdrawals may result in a gain or loss for tax purposes, may reduce
principal and may eventually use up all of the shares in the account.
Payments will be terminated by CGFSC on receipt of satisfactory evidence of the
death or incapacity of the stockholder, but until it has received such evidence,
CGFSC will not be liable for any payments made in accordance with the SWP. The
stockholder or the Fund may terminate the SWP account at any time upon notice to
the other.
General Conditions of All Redemptions
The right to redeem may be suspended and the payment of the redemption price
deferred during any period when the New York Stock Exchange is closed, during
periods when trading on the Exchange is restricted as determined by the
Securities and Exchange Commission, for any period during which an emergency (as
determined by the Commission) exists as a result of which disposal by the Fund
of securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets or for
such other periods as the Commission may by order permit for the protection of
investors. In addition, if shares have been recently issued to a stockholder and
payment was made by check, the Fund will effect the redemption, but will hold
the proceeds thereof until the check for the purchase of such shares has
cleared, unless such shares were purchased with a cashier's or certified check.
Special Redemption Procedure
The Fund may redeem the shares of any stockholder who ceases to hold shares in
the Fund having an aggregate net asset value at least equal to the minimum
initial investment. However, the Fund will not effect such a redemption if the
decline in share value is caused by a reduction in the Fund's net asset value.
Stockholders will be given at least 30 days' written notice of any redemption
effected in accordance with this paragraph.
Telephone Transactions
You may establish telephone exchange and redemption privileges if you have
checked the appropriate box and supplied the necessary information on the
Purchase Application form accompanying this Prospectus. You may then exchange
and redeem shares of the Fund by telephoning CGFSC at (800) 541-4366 (or, from
outside the U.S., (617) 557-8000) prior to the regular closing of the New York
Stock Exchange (generally 4:00 P.M. New York time) on a day when the New York
Stock Exchange is open. Redemptions by telephone must be at least $1,000 and may
not exceed $150,000. Exchange and redemption requests received by CGFSC before
the regular closing will be processed that day. Otherwise processing will occur
on the next business day.
Interruptions in telephone service may mean that you will be unable to effect a
transaction by telephone when desired. When telephone transactions are difficult
to implement, you should mail or send by overnight delivery a written request to
CGFSC. By making telephone exchanges or redemptions you may be giving up a
measure of security that you may have had if such transactions had been in
writing. The Fund and CGFSC will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. The Fund and CGFSC may be
liable for any losses due to unauthorized or fraudulent instructions if such
procedures are not followed. For your protection, CGFSC records all telephone
calls. Exchanges can only be made between accounts with identical registrations
and only if your account registration has not changed within 30 days. Redemption
proceeds are sent only to stockholders at their registered address or to a bank
account previously designated by the stockholder. It is also the Fund's policy
to mail a written confirmation to you at your address of record within five
business days after any telephone transaction. The Fund or CGFSC may refuse to
honor any telephone transaction request if the Fund or CGFSC believes, for any
reason, that the request is unauthorized. You will be promptly notified of any
refused telephone transaction request. Neither the Fund nor CGFSC will be liable
for following telephone instructions that CGFSC reasonably believes to be
genuine. Since you may bear the risk of loss in the event of an unauthorized
telephone transaction, you should verify the accuracy of telephone transactions
immediately upon receipt of the written confirmation.
Telephone transaction procedures may be modified or suspended without notice
during periods of drastic economic or market changes, and may be modified or
terminated on 60 days' notice to stockholders at any time. Shares held by a
Keogh plan or IRA and shares issued in certificate form are not eligible for
telephone exchange or redemption.
DISTRIBUTIONS
The Board of Directors will determine the amounts to be distributed to the
holders of shares and the time or times such distributions will be made.
Presently it is contemplated that net investment income and net realized capital
gains, if any, will be distributed annually, generally in December.
Distributions of net income and capital gains, if any, will be reinvested
without a sales charge in full or fractional shares of the Fund on the payment
date, using the net asset value of the Fund on the ex-dividend date (the
business day following the record date). Distributions elected to be taken in
cash will be made on the payment date. (The Purchase Application form contains a
distribution option election.) Once an election is made, it may be changed at
any time and will be effective for the next distribution the record date of
which is more than five days after receipt by CGFSC of the change of election.
(The notice of such a change should be sent to the address of CGFSC set forth
under "Purchase of Shares".) Investors electing to receive their distributive
share of the Fund's net investment income and any net realized capital gains in
Fund shares will have to pay any taxes on such distributions.
Prior to purchasing shares of the Fund, the impact of declared dividends or
declared capital gains distributions should be carefully considered. Any such
dividends or capital gains distributions paid shortly after a purchase of shares
by an investor prior to the record date will have the effect of reducing the per
share net asset value of his shares by the amount of the dividends or
distributions. Such dividends or capital gains distributions, although in effect
a return of principal, are subject to taxes, calculated at ordinary income or
long-term capital gains rates. See "Tax Aspects" for further information
regarding the taxation of distributions.
TAX ASPECTS
For the fiscal year ended September 30, 1995, the Fund believes that it has
qualified for tax treatment as a "regulated investment company" ("RIC") under
Subchapter M of the Internal Revenue Code of 1986 (the "Code"), and intends to
be able to continue to so qualify in future years. Qualification as a RIC allows
the Fund to qualify for "pass-through" tax treatment under the federal income
tax laws, which means the Fund, subject to certain conditions and requirements,
will not be subject to United States federal income tax on amounts it
distributes to its stockholders. Accordingly, the Fund plans to distribute
substantially all of its net investment income and net capital gains to its
stockholders.
RICs are subject to a nondeductible 4% excise tax on the excess (if any) of the
"required distribution" for a calendar year over the "distributed amount" for
such year. To avoid imposition of such tax, a RIC generally will have to
distribute in each calendar year at least 98% of its ordinary income for such
calendar year and at least 98% of its capital gains for the 12-month period
ending on October 31 of such year. The Fund intends to make sufficient
distributions each year to avoid imposition of the excise tax.
The Fund intends to qualify for and, if the Fund determines it to be in the best
interest of the stockholders, to make the election provided for in Section 853
of the Code to treat certain foreign taxes paid by the Fund as paid by the
stockholders. As a result, each stockholder may be required to include in income
his proportionate share of such foreign taxes and may elect to deduct his share
of such foreign taxes or to credit such foreign taxes against his federal income
tax liability, subject to the provisions and limitations of the Code relating to
foreign tax credits.
Distributions of the Fund's net investment income and net realized short-term
capital gains will be taxable to stockholders as ordinary income. Distributions
paid from long-term capital gains will generally be taxable as long-term capital
gains, regardless of the holding period of the Fund shares. The Fund will inform
stockholders of the source and nature of the dividends and distributions at the
time they are paid. Stockholders should take note that any dividends and
distributions on Fund shares received shortly after their purchase, although in
effect a return of capital, are also subject to federal income tax. Dividends
and distributions will be taxable to stockholders whether received in cash or
reinvested in additional shares. Any loss recognized upon the sale of shares
held for six months or less will be treated as long-term capital loss to the
extent of any distributions of long-term capital gains during the period the
shares were held. Dividends and distributions payable to stockholders of record
as of a date in October, November or December of any year will be deemed to have
been paid by the Fund and received by the stockholders on December 31 if the
dividends are paid by the Fund at any time during the following January.
Hedging and Other Transactions
The Fund is currently authorized to engage in Forward Contracts and to invest in
or write Options, Futures Contracts and Options on Futures Contracts to hedge
against changes in foreign currency exchange rates and market conditions and as
a substitute for an underlying investment. Certain of these transactions may be
"Section 1256 contracts". Gains or losses on Section 1256 contracts generally
are treated as 60% long-term and 40% short-term ("60/40") capital gains or
losses. Any Section 1256 contracts that are held by the Fund at the end of a
taxable year (and, generally, for purposes of the 4% excise tax, on October 31
of each year) are "marked-to-market", with the result that unrealized gains or
losses are treated as though they were realized and the resulting gain or loss
is generally treated as a 60/40 gain or loss.
Generally, any Hedging Transactions undertaken by the Fund may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may affect
the character of gains or losses realized by the Fund. For example, Hedging
Transactions may convert gains which would otherwise be taxable as long-term
capital gain into short-term capital gain, which is taxed as ordinary income
when distributed to stockholders. In addition, any losses realized by the Fund
on positions that are part of a straddle may be deferred under the straddle
rules, rather than being taken into account in calculating the taxable income
for the taxable year in which such losses are realized. Because the straddle
rules are complex and their interpretation is unclear, the tax consequences to
the Fund of Hedging Transactions are uncertain.
The Fund may make one or more of the elections available under the Code that are
applicable to straddles. If the Fund makes any of the elections, the amount,
character and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
elections made. The rules applicable under certain of the elections may operate
to accelerate the recognition of gains or losses from the affected straddle
positions.
Because application of the straddle rules may affect the character of gains or
losses, defer losses and/or accelerate the recognition of gains or losses from
the affected straddle positions, the amount that must be distributed to
stockholders, and that will be taxed to stockholders as ordinary income or
long-term capital gain, may be increased or decreased as compared to a Fund that
did not engage in Hedging Transactions.
In addition, under the recently enacted "conversion transaction" provisions of
the Code, certain gains derived from the Fund's hedging or other activities may
be recharacterized as ordinary income for federal income tax purposes. The
application of these provisions is expected to be further defined by regulations
to be issued by the Treasury Department. The Adviser will take these provisions,
and any subsequent regulations, into account in assessing the hedging and other
strategies of the Fund.
The diversification requirements applicable to the Fund's assets and other
restrictions imposed on the Fund by the Code may limit the extent to which the
Fund will be able to engage in transactions in Forward Contracts, Options,
Futures Contracts or Options on Futures Contracts.
Currency Fluctuations -- "Section 988" Gains or Losses
Under the Code, gains or losses attributable to fluctuations in exchange rates
that occur between the time the Fund accrues interest or other receivables or
accrues expenses or other liabilities denominated in a foreign currency and the
time the Fund actually collects such receivables or pays such liabilities
generally are treated as ordinary income or ordinary loss. Gains or losses with
respect to Forward Contracts and certain Options, Futures Contracts and Options
on Futures Contracts are generally treated as ordinary income or loss, although
an election is available under certain circumstances that would result in
capital gain or loss treatment. In addition, gains or losses on the disposition
of debt securities denominated in a foreign currency attributable to
fluctuations in the value of the foreign currency between the date of
acquisition of the security and the date of disposition are generally treated as
ordinary gain or loss. These gains or losses, referred to under the Code as
"Section 988" gains or losses, may increase or decrease the amount of the Fund's
investment company taxable income to be distributed to its stockholders as
ordinary income, rather than increasing or decreasing the amount of the Fund's
capital gains or losses.
Certain Foreign Tax Consequences
Foreign securities such as those to be purchased by the Fund may be subject to
foreign taxes, which could reduce the yield on such securities, although a
stockholder otherwise subject to United States federal income taxes may be
entitled to claim a credit or deduction for such tax purposes, subject to
certain limitations. The Statement of Additional Information provides additional
details on these tax aspects.
The foregoing is a general and abbreviated summary of tax consequences of
investment in the Fund. Additional details concerning federal and foreign tax
consequences are contained in the Statement of Additional Information. Investors
are urged to consult their own tax advisers to determine the effect of
investment in the Fund upon their individual tax situations.
DESCRIPTION OF CAPITAL STOCK
The Fund is a series within the Bailard, Biehl & Kaiser International Fund
Group, Inc., an open-end management investment company organized on June 12,
1990 as a Maryland corporation (the "Company"). Currently, the Company has two
series, the Fund and the Bailard, Biehl & Kaiser International Bond Fund (the
"Bond Fund"). Further series may be added without stockholder approval, but the
Company has no immediate plans to do so.
The Company has authorized the issuance of up to 1,000,000,000 shares of Common
Stock, par value $.0001, in one or more series. Currently, the Fund and the Bond
Fund are each authorized to issue 100,000,000 shares of Common Stock. When
issued, shares in the Fund will be fully paid and non-assessable and will have
no preemptive, conversion or exchange rights.
Shares of each series are entitled to one vote for all purposes. Shares of each
series vote as a single class with respect to matters, such as election of
directors, that affect all series in substantially the same manner. As to
matters affecting each series separately, such as approval of agreements with
investment advisers, shares of each series vote as separate series. Shares of
each series are entitled to dividends as determined by the Board of Directors
and, in liquidation of the Fund, are entitled to receive the net assets of that
series. Stockholders are entitled to require the Fund to redeem their shares,
and the Fund may redeem shares under certain circumstances, as set forth under
"Redemption of Shares". The transfer of shares, other than by redemption, is
subject to restrictions in some jurisdictions.
The voting rights of the shares are non-cumulative, which means that the holders
of more than 50% of the shares voting for the election of directors can elect
100% of the directors if they choose to do so. In such event, the holders of the
remaining shares voting will not be able to elect any director. The Company is
not required to hold annual meetings for the election of directors or otherwise.
Special meetings may be called by the Chairman of the Board, the Board of
Directors, or the President or by stockholders entitled to cast at least 10% of
the shares entitled to vote. The Company will assist in stockholder
communications with respect to any meeting duly called by the holders of its
shares.
A full statement of the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the shares of each
series of stock that the Company is authorized to issue and the differences in
the relative rights and preferences between the shares of each series to the
extent that they have been set, and the authority of the Board of Directors to
set the relative rights and preferences of subsequent series, will be furnished
by the Company to any stockholder, without charge, upon request to the Secretary
of the Company at its principal office.
PERFORMANCE INFORMATION
From time to time, the Fund may advertise its total return. This figure is based
upon historic earnings and is not intended to indicate future performance.
"Total return" refers to the average annual rate of return of an investment
based on its public offering price and reflects all income earned by the Fund,
any appreciation or depreciation of the Fund's assets and all expenses incurred
by the Fund for the stated period, including, for periods prior to October 1,
1993, an assumed 1% annual advisory fee charged by the Adviser to its clients.
See "Management". This figure is computed by calculating to the end of a
specified period the percentage change in value of an investment of $1,000,
assuming reinvestment of all income and capital gain distributions.
DISTRIBUTOR
The Distributor of the Fund's shares is BB&K Fund Services, Inc., a registered
broker-dealer and a wholly owned subsidiary of Holdings. The principal business
address of BB&K Fund Services, Inc. is 2755 Campus Drive, San Mateo, California
94403. BB&K Fund Services, Inc. receives no commission or compensation for
acting as the Fund's agent in the continuous public offering of the Fund's
shares.
ADMINISTRATIVE SERVICES
The Company, on behalf of the Fund, has entered into an Administration Agreement
(the "Administration Agreement") with Investment Company Administration
Corporation ("ICAC"). Pursuant to such agreement, ICAC provides certain
administrative services in connection with the management of the Fund's
operations. Such services include: (i) filing applications under state law to
register the Fund's shares for sale, and to register the Company and/or the
Company's officers to sell the Fund's shares, (ii) assisting the Fund's
accountants in preparing financial reports, (iii) assisting the Fund's attorneys
in preparing amendments to the Fund's registration statement, any proxy
materials and other forms and reports to be filed with the SEC, (iv) preparing
periodic reports to stockholders, (v) monitoring compliance with the Fund's
investment policies and restrictions, and (vi) other administrative matters. As
compensation for such services, the Fund pays ICAC an annual fee of $32,500.
TRANSFER AGENT AND CUSTODIAN
Transfer agent and dividend paying agent services are provided by Chase Global
Funds Services Company, P.O. Box 2798, Boston, Massachusetts 02208, an affiliate
of The Chase Manhattan Bank, N.A.
Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts 02109,
acts as Custodian of the Fund's assets and has been authorized to cause
securities and other assets of the Fund to be held in separate accounts with
various subcustodians in conformity with Section 17(f) of the 1940 Act and the
rules thereunder.
EXPERTS
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110, has been
selected as independent accountants for the Fund and provides auditing services,
including review and consultation in connection with various filings by the Fund
with the SEC and tax authorities.
The information under "Financial Highlights" for the 10 years ended September
30, 1995 in this Prospectus and the financial statements as of September 30,
1995 incorporated by reference into the Statement of Additional Information have
been so included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in accounting and
auditing.
<PAGE>
APPENDIX A
HEDGING AND OTHER TRANSACTIONS
Forward Contracts. The Fund may enter into forward foreign currency exchange
contracts to attempt to minimize the risk to the Fund from adverse changes in
currency exchange rates ("Forward Contracts"). All Forward Contracts will be
covered. In the case of a Forward Contract obligating the Fund to purchase a
foreign currency (a "long position"), the Fund may establish a segregated
account containing liquid assets ("Liquid Assets") equal to the purchase price
of the Forward Contract due on the settlement date (less any margin on deposit).
Liquid Assets include cash, U.S. Government securities and other liquid high
grade debt obligations. For purposes of covering Forward Contracts only, Liquid
Assets also include equity securities in the Fund's portfolio that are readily
marketable. Alternatively, the Fund may cover a long position by purchasing a
put option on the same Forward Contract with a strike price as high or higher
than the price of the Forward Contract held by the Fund (or, if lower than the
price of the Forward Contract held by the Fund, the Fund may segregate Liquid
Assets equal to the difference).
In the case of a Forward Contract obligating the Fund to sell a foreign currency
(a "short position"), the Fund may segregate Liquid Assets equal to the market
value of the currency underlying the Forward Contract (less any margin on
deposit, but not less than the market price at which the short position was
established). Alternatively, the Fund may cover the Forward Contract by (i)
entering into an offsetting position or transaction, (ii) owning the currency
underlying the Forward Contract or (iii) holding a call option permitting the
Fund to purchase the same Forward Contract at a price no higher than the price
at which the short position was established (or, if higher, the Fund may
segregate Liquid Assets equal to the difference).
Options on Foreign Currencies. The Fund may write covered call and put options
and purchase call and put options ("Options") on foreign currencies that are
traded on United States and foreign exchanges and over-the-counter to attempt to
minimize the risk to the Fund from adverse changes in currency exchange rates.
For example, a decline in the value of a foreign currency in which portfolio
securities are denominated will reduce the value of such securities in U.S.
Dollars, even if their value in the foreign currency remains constant. In order
to protect against such reductions in the value of portfolio securities, the
Fund may purchase put Options on the foreign currency. If the value of the
foreign currency does decline, the Fund will have the right to sell such
currency for a fixed amount and will thereby offset, in whole or in part, the
adverse effect on its portfolio that otherwise would have resulted.
Conversely, when the Fund predicts an increase in the value of a currency in
which securities to be acquired are denominated, the Fund may purchase call
Options on the foreign currency. The purchase of such Options could offset, at
least partially, the effects of the adverse movements in exchange rates.
However, the benefit to the Fund derived from purchases of Options will be
reduced by the amount of the premium and related transaction costs. In addition,
where currency exchange rates do not move in the direction or to the extent
predicted, the Fund could sustain losses that would require it to forego a
portion or all of the benefits of advantageous changes in such rates.
The Fund may write put and call Options for the same types of hedging purposes.
For example, when the Fund anticipates a decline in the value of foreign
currency-denominated securities due to adverse fluctuations in exchange rates it
could, instead of purchasing a put Option, write a call Option on the relevant
currency. If the expected decline occurs, the Option will most likely not be
exercised and the diminution in value of portfolio securities will be fully or
partially offset by the amount of the premium received. Similarly, instead of
purchasing a call Option to hedge against an anticipated increase in the cost of
securities to be acquired, the Fund could write a put Option on the relevant
currency that, if rates move in the manner projected, will expire unexercised
and allow the Fund to hedge such increased cost up to the amount of premium. The
writing of an Option constitutes only a partial hedge up to the amount of the
premium, and only if currency exchange rates move in the expected direction. If
this does not occur, the Option may not be offset by the amount of the premium.
Through the writing of Options, the Fund may also be required to forego all or a
portion of the benefits that might otherwise have been obtained from favorable
movements in exchange rates.
All put and call Options written by the Fund will be covered. The Fund may cover
a put Option by (i) establishing a segregated account containing Liquid Assets
equal to the strike price of the put Option written by the Fund (less any margin
on deposit), (ii) selling short the currency underlying the put Option at the
same or higher price than the strike price of the put Option written by the Fund
(or, if lower, the Fund may segregate Liquid Assets equal to the difference), or
(iii) purchasing a put Option with a strike price the same as or higher than the
strike price of the put Option sold by the Fund (or, if lower, the Fund may
segregate Liquid Assets equal to the difference).
The Fund may cover a call Option by (i) segregating Liquid Assets equal to the
market value of the currency underlying the call Option (less any margin on
deposit) but not less than the strike price of the call Option, (ii) owning the
currency underlying the Option or (iii) purchasing a separate call Option on
that currency with a strike price no higher than the strike price of the Option
sold by the Fund (or, if higher, the Fund may segregate Liquid Assets equal to
the difference).
If the Fund, as the writer of an Option, wishes to terminate its obligation, it
may effect a closing purchase transaction. This is accomplished by buying an
Option of the same series as the Option previously written. The effect of the
purchase is that the Fund's position will be canceled. However, a writer may not
effect a closing purchase transaction after being notified of the exercise of an
Option. Likewise, where the Fund holds an Option, it may liquidate its position
by effecting a closing sale transaction. This is accomplished by selling an
Option of the same series as the Option previously purchased. There is no
guarantee that either a closing purchase or a closing sale transaction can be
effected.
The Fund will realize a profit from a closing transaction if the price of the
transaction is less than the premium received from writing the Option or is more
than the premium paid to purchase the Option; the Fund will realize a loss from
a closing transaction if the price of the transaction is more than the premium
received from writing the Option or is less than the premium paid to purchase
the Option. Because increases in the market price of a call Option will
generally reflect increases in the market price of the underlying currency, any
loss resulting from the purchase of a call Option to close out a previously
written call Option is likely to be offset in whole or in part by appreciation
of the Fund's portfolio securities denominated in such currency.
Options on Stock Indices. The Fund may write covered put and call Options and
purchase put and call Options on stock indices to attempt to minimize the risks
to the Fund from adverse changes in market conditions and as a substitute for an
underlying investment. Options on stock indices are similar to Options on
foreign currencies. For additional information on the risks and benefits of
Options on stock indices, see "Options on Foreign Currencies".
Call Options on stock indices written by the Fund will be covered (i) by
segregating a portfolio of stocks substantially replicating the movement of the
index, (ii) by holding a call Option on the same index with a strike price no
higher than the strike price of the Option written by the Fund or (iii) in such
other manner as may be in accordance with the rules of the exchange on which the
Option is traded and applicable laws and regulations.
The Fund will cover put Options on stock indices by (i) segregating Liquid
Assets equal to the Option's exercise price, (ii) holding a put Option on the
same index with a strike price no higher than the strike price of the put Option
written by the Fund or (iii) in such other manner as may be in accordance with
the rules of the exchange on which the Option is traded and applicable laws and
regulations.
The Fund will receive a premium for writing a put or call Option that will
increase the Fund's gross income in the event the Option expires unexercised or
is closed out at a profit. If the value of an index on which the Fund has
written a call Option falls or remains the same, the Fund will realize a profit
in the form of the premium received (less transaction costs) that will offset
all or a portion of any decline in the value of the securities it owns. If the
value of the index rises, however, the Fund will realize a loss in its call
Option position, which will reduce the benefit of any unrealized appreciation in
the Fund's securities holdings. By writing a put Option, the Fund assumes the
risk of a decline in the index. To the extent that the price changes of
securities owned by the Fund correlate with changes in the value of the stock
index, writing covered put Options on indices will increase the Fund's losses in
the event of a market decline, although such losses will be offset in part by
the premium received for writing the Option.
Futures Contracts on Foreign Currencies and Stock Indices. The Fund may enter
into exchange-traded contracts for the purchase or sale for future delivery of
foreign currencies to attempt to minimize the risk to the Fund from adverse
changes in currency exchange rates and market conditions and as a substitute for
an underlying investment ("Futures Contracts").
The acquisition or sale of Futures Contracts is designed to protect the Fund
from fluctuations in currency exchange rates and market movements without
actually buying or selling the underlying currencies or securities. For example,
if the Fund expected a general market movement that would adversely affect its
portfolio securities, the Fund might enter into a Futures Contract for the sale
of a stock index that the Fund believes will be affected in a manner similar to
the expected effect on the Fund's portfolio. If the market did move in the
anticipated manner, the value of the Fund's portfolio securities would decline,
but the value of the Futures Contract to the Fund would increase, thereby
offsetting, in whole or in part, the reduction in the value of the Fund's
portfolio securities.
All Futures Contracts to which the Fund is a party will be covered. A Futures
Contract obligating the Fund to purchase a foreign currency or stock index is
covered if the Fund segregates, in a special account with the Custodian, Liquid
Assets equal to the price of the Futures Contract due on the settlement date
(less any margin on deposit). The Fund may also cover a long position by
purchasing a put Option on the same Futures Contract with an exercise price as
high or higher than the price of the Futures Contract held by the Fund (or, if
lower, the Fund may segregate Liquid Assets equal to the difference).
A Futures Contract in which the Fund has the position of a seller is covered if
the Fund segregates Liquid Assets equal to the market value of the currency or
stock index underlying the Futures Contract (less any margin on deposit, but not
less then the market price at which the position was established).
Alternatively, the Fund may cover such a Futures Contract by (i) owning the
currency underlying the Futures Contract or, in the case of a stock index,
segregating a portfolio of stocks substantially replicating the movement of the
index or (ii) holding a call Option permitting the Fund to purchase the same
Futures Contract at a price no higher than the price at which the position was
established (or, if higher, the Fund may segregate Liquid Assets equal to the
difference).
If the Fund enters into a Futures Contract, it will be subject to initial and
variation margin requirements. At the time a Futures Contract is purchased or
sold, the Fund must allocate cash or securities as an initial margin deposit
("initial margin"). It is expected that initial margin will be approximately
1-1/2% to 5% of a Futures Contract's face value. A Futures Contract is valued
("marked to market") daily. The Fund will be required to increase its margin
deposit ("variation margin") when the value of a Futures Contract decreases and,
conversely, the Fund will receive payment for any increase in the Futures
Contract's value.
Although Futures Contracts, by their terms, call for the actual delivery or
acquisition of an asset, in most cases the contractual obligation is fulfilled
(or "offset") before the expiration date of the Futures Contract without having
to make or take delivery of the underlying asset. Offset of a Futures Contract
is accomplished by buying (or selling, as the case may be) on a commodities
exchange an identical Futures Contract calling for delivery in the same month.
Such a transaction, which is effected through a member of an exchange, cancels
the obligation to make or take delivery of the underlying asset.
The ordinary spreads between prices in the cash and futures markets, due to
differences in the natures of those markets, are subject to distortions that may
prevent the Fund from successfully using Futures Contracts. First, all
participants in the futures markets are subject to initial and variation margin
requirements. Rather than meeting variation margin requirements, investors may
close Futures Contracts through offsetting transactions, which could distort the
normal relationship between the cash and futures markets. Second, the liquidity
of the futures markets depends on participants entering into offsetting
transactions rather than making or taking delivery. To the extent participants
make or take delivery, liquidity in the futures markets could be reduced, thus
producing distortion. Third, from the point of view of speculators, margin
requirements in the futures market are less onerous than margin requirements in
the cash market. Therefore, increased participation by speculators in the
futures market may cause temporary price distortions. Due to the possibility of
distortion, a correct prediction of general currency exchange rates or market
conditions by the Fund may not result in a successful transaction.
If the Fund's judgment about the general direction of currency exchange rates or
market conditions is incorrect, the Fund's overall performance would be poorer
than if it had not entered into any such contract. If the Fund has hedged
against the possibility of a movement in exchange rates or market conditions
that would adversely affect the price of its portfolio securities and exchange
rates or markets did not move as anticipated, the Fund would lose part or all of
the benefit of the increased value of its securities that it has hedged because
it will have offsetting losses in its futures positions. In addition, in such
situations, if the Fund had insufficient cash and were unable to effect a
closing transaction, it might have to sell securities from its portfolio to meet
daily variation margin requirements. Such sales of securities may, but will not
necessarily, be at increased prices that reflect the rising market. The Fund may
also have to sell securities at a time when it may be disadvantageous to do so.
Options on Futures Contracts on Foreign Currencies and Stock Indices. The Fund
may purchase and write options on Futures Contracts on foreign currencies and
stock indices to attempt to minimize the risk to the Fund from adverse changes
in currency exchange rates and market conditions and as a substitute for an
underlying investment ("Options on Futures Contracts").
A call Option on a Futures Contract written by the Fund constitutes a partial
hedge against declining prices of the asset that is deliverable upon exercise of
the Futures Contract. If the price of the Futures Contract at expiration of the
Option is below the exercise price, the Fund will retain the full amount of the
Option premium, which provides a partial hedge against any decline that may have
occurred in the Fund's portfolio. A put Option on a Futures Contract written by
the Fund constitutes a partial hedge against increasing prices of the asset that
is deliverable under the Futures Contract. If the price of the Futures Contract
at expiration of the Option is higher than the exercise price, the Fund will
retain the full amount of the Option premium, which provides a partial hedge
against an increase in the price of securities that the Fund intends to
purchase.
If a put or call Option on a Futures Contract that the Fund has written is
exercised, the Fund will incur a loss, which will be reduced by the amount of
the premium the Fund received. Depending on the degree of correlation between
changes in the value of its portfolio securities and changes in the value of its
futures positions, the Fund's losses from Options on Futures Contracts may be
reduced or increased by changes in the value of its portfolio securities.
All Options on Futures Contracts written by the Fund will be covered. In the
case of the sale of a call Option on a Futures Contract, the Fund may cover by
(i) entering into a long position on the same futures contract at a price no
higher than the strike price of the call Option on the Futures Contract (or, if
higher, the Fund may segregate Liquid Assets equal to the difference), (ii)
owning the currency underlying the Futures Contract on which the Fund holds the
Option, or with respect to a stock index, segregating a portfolio of stock
substantially replicating the movement of the index, or (iii) holding a separate
call Option permitting the Fund to purchase the same Futures Contract at a price
no higher than the strike price of the call Option on the Futures Contract sold
by the Fund (or, if higher, the Fund may segregate Liquid Assets equal to the
difference.)
In the case of the sale of a put Option on a Futures Contract obligating the
Fund to buy a Futures Contract, the Fund may establish a segregated account
containing Liquid Assets equal to the settlement value of the Futures Contract
underlying the Option on the Futures Contract. Alternatively, the Fund may cover
the Option on a Futures Contract by holding a put Option permitting the Fund to
sell the same Futures Contract at a price the same as or higher than the strike
price of the put Option sold by the Fund (or, if lower, the Fund may segregate
Liquid Assets equal to the difference).
The amount of risk the Fund assumes when it purchases an Option on a Futures
Contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of such an
option also entails the risk that changes in the value of the underlying Futures
Contract will not be fully reflected in the value of the option purchased.
Additional Risks of Forward Contracts, Options, Futures Contracts and Options on
Futures Contracts. Hedging transactions may be effective to protect the Fund
against certain changes in currency exchange rates. However, such transactions
do not eliminate fluctuations in the prices of portfolio securities or prevent
losses if the prices of such securities decline.
The Fund's ability to hedge all or a portion of its portfolio through
transactions in Forward Contracts, Options, Futures Contracts and Options on
Futures Contracts depends on the degree to which price movements in underlying
currencies and securities correlate with price movements in the relevant portion
of the Fund's portfolio. In addition, the use of Futures Contracts and Options
on Futures Contracts involves the risk of imperfect correlation of movements in
the prices of Futures Contracts and Options on Futures Contracts, and movements
in the prices of the underlying assets. If the prices of a Futures Contract or
an Option on a Futures Contract moves more or less than the price of the hedged
asset, the Fund will experience a gain or loss that may not be completely offset
by movements in the price of the asset that is the subject of the hedge.
The Fund may cover stock index Options that it has written, stock index Futures
Contracts to which it is a party, and Options on stock index Futures Contracts
that it has written through the segregation of a portfolio of stocks that
substantially replicates the movement of the underlying stock index. The
portfolio of securities used to cover such transactions may not match the actual
composition of the index. In that event, the Fund will not be fully covered and
would be subject to a risk of loss in the event of adverse changes in the value
of the index.
The Fund's ability to engage in transactions involving Options, Futures
Contracts and Options on Futures Contracts will depend on the degree to which
liquid secondary markets in such instruments exist. Reasons for the absence of a
liquid market include the following: (i) there may be insufficient trading
interest in a particular instrument; (ii) restrictions may be imposed by an
exchange on opening transactions or closing transactions or both; (iii) trading
halts, suspensions or other restrictions may be imposed with respect to
particular classes or series of Options, Futures Contracts or Options on Futures
Contracts; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation ("OCC"), which effects the settlement of exchange traded
Options, may not at all times be adequate to handle current trading volume; or
(vi) one or more exchanges could, for economic or other reasons, decide or be
compelled at some future date to discontinue the trading of a particular
instrument (or a particular class or series of such instrument). There can be no
assurance that a liquid secondary market will exist for any particular
investment at any specific time. Thus it may not be possible for the Fund to
close certain of its positions.
The costs to the Fund of hedging transactions vary among the various hedging
techniques and also depend on such factors as the currency and stock index
involved, market conditions and the length of the contract or option period.
Forward Contracts are usually conducted on a principal basis, and no fees or
commissions are therefore involved. However, the Fund will incur brokerage
commissions and related transaction costs when it purchases, writes or invests
in Options, Futures Contracts and Options on Futures Contracts. Furthermore, the
Fund's ability to engage in hedging transactions may be limited by tax
considerations.
Forward Contracts and Options on foreign currencies are not traded on markets
regulated by the Commodity Futures Trading Commission ("CFTC") or (with the
exception of certain Options traded on national securities exchanges) by the
Securities and Exchange Commission ("SEC"), but are traded through financial
institutions acting as market-makers. In an over-the-counter trading
environment, many of the protections afforded to exchange participants are not
available. For example, there are no daily price fluctuation limits, and adverse
market movements could therefore continue to an unlimited extent over a period
of time. Although the purchaser of an Option cannot lose more than the amount of
the premium plus related transaction costs, this entire amount could be lost.
Moreover, because the performance of over-the-counter Options and Forward
Contracts is not guaranteed by the OCC or any other settlement agency, there is
a risk of counterparty default. The Option writer and the trader of Forward
Contracts could also lose amounts substantially in excess of his or her initial
investments, due to the margin and collateral requirement associated with such
positions.
Options traded on national securities exchanges are within the jurisdiction of
the SEC, as are other securities traded on such exchanges. As a result, many of
the protections provided to traders on organized exchanges are available with
respect to such transactions. In particular, all Options entered into on a
national securities exchange are cleared and guaranteed by the OCC thereby
reducing the risk of counterparty default. Further, a liquid secondary market in
Options traded on a national securities exchange may be more readily available
than in the over-the-counter market, potentially permitting the Fund to
liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.
Exchange-traded Options involve certain risks not presented by the
over-the-counter market. For example, exercise and settlement of such Options
must be made exclusively through the OCC, which has established banking
relationships in certain foreign countries for that purpose. As a result, the
OCC may, if it determines that foreign governmental restrictions or taxes would
prevent the orderly exercise or settlement of such Options, or would result in
undue burdens on the OCC or its clearing members, impose special procedures on
exercise and settlement, such as technical changes in the mechanics of delivery,
the fixing of dollar settlement prices or prohibitions on exercise.
The exchanges on which Options, Futures Contracts and Options on Futures
Contracts are traded may impose additional limitations governing the maximum
number of positions on the same side of the market and involving the same
underlying instrument that may be held by a single investor, whether acting
alone or in concert with others (regardless of whether such positions are held
or written on the same or different exchanges or held or written in one or more
accounts or through one or more brokers). In addition, the CFTC and the various
markets have established limits, referred to as "speculative position limits,"
on the maximum net long or net short positions that any person may hold or
control in a particular Futures Contract or Option on a Futures Contract. An
exchange may order the liquidation of positions found to be in violation of
these limits and it may impose other sanctions or restrictions. The Fund does
not believe that these trading and position limits will have an adverse impact
on the strategies for hedging the portfolio of the Fund.
Forward Contracts, Options, Futures Contracts and Options on Futures Contracts
may be traded in foreign markets or on foreign exchanges. Such transactions are
subject to the risk of governmental actions affecting trading in or the prices
of foreign currencies. The value of such positions also could be adversely
affected by, among other things, (i) other foreign political and economic
factors, (ii) lesser availability than in the United States of data on which to
make trading decisions, (iii) delays in the Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the United
States, (iv) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the United States and (v) lesser
trading volume.
Future Developments. The Fund proposes to take advantage of investment
opportunities in the area of Forward Contracts, Options, Future Contracts and
Options on Futures Contracts that are not presently contemplated for use by the
Fund or that are not currently available but that may be developed, to the
extent such opportunities are both consistent with the Fund's investment
objectives and legally permissible investments for the Fund. Such opportunities,
if they arise, may involve risks that differ from or exceed those involved in
the activities described above. The Fund will not invest in such opportunities
without prior disclosure to investors.
<PAGE>
(This page was intentionally left blank.)
<PAGE>
Bailard, Biehl & Kaiser
International Fund Group, Inc. Purchase Application
Important - Please mail completed forms to: Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208
I. Fund Selection and Investment Instructions: Investment
[ ] Bailard, Biehl & Kaiser International Equity Fund $_________________
[ ] Bailard, Biehl & Kaiser International Bond Fund $_________________
[ ] Separate Check Made Payable to Each Fund
[ ]Wire through Federal Reserve System
See Prospectus for information on minimum investment.
II. Account Registration. Register shares as one of the following:
(Please print)
NAME OF INDIVIDUAL________________________________________________________
NAME(S) OF CO-STOCKHOLDER(S)______________________________________________
__________________________________________________________________________
[ ] Community property [ ] Joint Tenants with right of survivorship
[ ] Tenants in common [ ] Other (specify)
* NAME OF ORGANIZATION ______________________________________________________
* NAME OF TRUST _____________________________________________________________
Name(s) of Trustee(s)______________________________________________________
Date of Trust______________________________________________________________
* GIFT TO MINOR
Custodian's Name (only one)________________________________________
Minor's Name (only one)____________________________________________
Minor's State of Residence_________________________________________
* OTHER (specify)____________________________________________________________
III. Taxpayer Identification Number. (Important tax information)
You (as payee) are required by law to provide us (as payer) with your
correct taxpayer identification number. Accounts that have a missing or
incorrect taxpayer identification number will be subject to backup
withholding at a 31% rate on interest, dividends, and other payments.
Backup withholding is not an additional tax; the tax liability of persons
subject to backup withholding will be reduced by the amount of tax
withheld.
PART 1. Enter your taxpayer identification number. For most
individual taxpayers, this is your Social Security number.
Social Security # - - Tax ID # -
--------------------- ----------------------
PART 2. Backup Withholding
[ ] Check here if you are NOT subject to backup withholding, either
because you have not been notified by the Internal Revenue
Service that you are subject to backup withholding as a result
of failure to report all interest or dividends or because the
Internal Revenue Service has notified you that you are no
longer subject to backup withholding.
IV. Other Account Information.
Address:__________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
Home Phone________________Bus. Phone_______________Date of Birth__________
Marital Status______ Occupation_________________
Citizen of: [ ] United States [ ] Other (Specify)
State of Residence_________ Do you have additional Bailard, Biehl &
Kaiser accounts? [ ] Yes [ ] No
V. Distribution Option.
[ ] Dividends Reinvested at Net Asset Value
[ ] Dividends Paid in Cash
[ ] Dividends Wired
[ ] Capital Gains Reinvested at Net Asset Value
[ ] Capital Gains Paid in Cash
[ ] Capital Gains Wired
<PAGE>
VI. Telephone Exchange and Redemption Option.
I/We authorize Bailard, Biehl & Kaiser International Fund Group, Inc. and
its agent, Chase Global Funds Services Company, to honor exchange
requests, and redemption requests of between $1,000 and $150,000, by
telephone. I/We agree that Bailard, Biehl & Kaiser International Fund
Group, Inc. and Chase Global Funds Services Company will not be liable for
losses sustained as a result of acting on telephone instructions that
Chase Global Funds Services Company reasonably believes to be genuine and
that this authorization will apply until I/we revoke it. I/We select one
of the following telephone redemption options:
[ ] Please mail telephone redemption proceeds to the name and address in
which my/our fund account is registered.
[ ] Please mail or wire telephone redemption proceeds to the commercial
bank indicated below.
VII. Wiring Instructions.
Bank Name_________________________________________________________________
Bank Address _____________________________________________________________
Bank ABA Number __________________________________________________________
Nominee Account Name _____________________________________________________
Nominee Account Number ___________________________________________________
Client Account Name ______________________________________________________
Client Account Number ____________________________________________________
VIII. Systematic Withdrawal Plan Option.
[ ] I/We hereby authorize Bailard, Biehl & Kaiser International Fund
Group, Inc. and its agent, Chase Global Funds Services Company, to
liquidate shares in and withdraw cash from this account beginning ,
__________, 19____ in the amount of $ _________ [ ] SEMIMONTHLY, on or
about the THIRD and the EIGHTEENTH, or [ ] MONTHLY on or about the [ ]
THIRD or the [ ] EIGHTEENTH, or [ ] QUARTERLY, on or about the [ ]
THIRD or the [ ] EIGHTEENTH, to provide SWP payments, and to mail a
check for such amount from Boston as soon as practicable after the
third and/or eighteenth day of the payment period, as applicable, to
me or to the following payee (complete only if different from the
address in "Other Account Information"):
Name of Payee _____________________________________________________________
Street Address ___________________________________________________________
City _____________________________ State ________ Zip Code _______________
IX. Duplicate Statements Authorization.
I/We hereby authorize Bailard, Biehl & Kaiser International Fund Group,
Inc. and its agent, Chase Global Funds Services Company, to release
information regarding my/our account to the person(s) listed below:
Name _______________________Title (if applicable) ________________________
Telephone No. ____________________Firm (if applicable)____________________
Address __________________________________________________________________
X. Investor Representations and Signature(s).
The undersigned represent that the shares subscribed to hereby, and any
other shares of the Fund purchased by the undersigned in the future, will
be purchased for the undersigned's own account (or for an organization or
trust described in "Account Registration" above) and not with a view to or
for sale in connection with any distribution of the shares. This
representation shall in no way restrict the undersigned's ability to
redeem some or all or the undersigned's shares at any time.
The undersigned certify that I/we have received and read the current Fund
Prospectus and agree to be bound by its terms. Under penalties of perjury,
I/we certify that the taxpayer identification number and the statement as
to backup withholding provided in "Taxpayer Identification Number" above
are true, correct and complete. The establishment of this account is
subject to acceptance by the Fund.
------------------------- ------------------------ ---------------
Signature of Individual, Signature of Joint Owner Date
Officer, Trustee, etc.
-------------------------
Title
<PAGE>
Investment Adviser
Bailard, Biehl & Kaiser, Inc.
2755 Campus Drive
San Mateo, California 94403
Transfer Agent
Chase Global Funds Services Company
Boston, Massachusetts
Custodian and Accountant
Brown Brothers Harriman & Co.
Boston, Massachusetts
Counsel
Howard, Rice, Nemerovski, Canady, Falk & Rabkin
San Francisco, California
Distributor
BB&K Fund Services, Inc.
2755 Campus Drive
San Mateo, California 94403
Independent Accountants
Price Waterhouse LLP
Boston, Massachusetts
IRA Custodian
The Chase Manhattan Bank, N.A.
New York, New York
International Equity Fund Officers and Directors
Peter M. Hill, Chairman, Director
Burnice E. Sparks, Jr., President, Director
Tina Thomas, Treasurer
Janis M. Horne, Secretary
Shirley L. Clayton, Director
David B. Shippey, Director
James C. Van Horne, Director
Investor Services Department
(800) 882-8383
<PAGE>
Bailard, Biehl & Kaiser International Bond Fund (formerly Fixed-Income Fund)
(A No Load Fund With No 12b-1 Plan Emphasizing
Foreign Debt Investments)
2755 Campus Drive
San Mateo, California 94403
(800) 882-8383
The Bailard, Biehl & Kaiser International Bond Fund (the "Fund") is a
non-diversified series of the Bailard, Biehl & Kaiser International Fund Group,
Inc., a Maryland corporation and an open-end management investment company (the
"Company"). The Fund's investment objective is to seek a total return on its
assets from long-term growth of capital and from income through investment. The
Fund seeks to achieve its objective by investing primarily in debt securities of
foreign issuers. Foreign issuers include foreign corporations, foreign
governments, supra-national entities and U.S. issuers whose assets are primarily
located or whose operations are primarily conducted outside the United States or
whose securities are denominated in foreign currencies. The Fund may also invest
in securities of other U.S. issuers under certain circumstances. Investing in
foreign securities involves certain considerations comprising both risk and
opportunity not typically associated with investing in U.S. securities
denominated in U.S. dollars and traded in U.S. markets. See "Risk Factors". Of
course, there can be no assurance that the Fund will be able to achieve its
objective.
Investors should read and retain this Prospectus for future reference.
This Prospectus sets forth concisely information about the Fund that a
prospective investor ought to know before investing. A Statement of Additional
Information, dated January 26, 1996, has been filed with the Securities and
Exchange Commission and is available upon request without charge. The Statement
of Additional Information contains information about the Fund and its management
that is not included in this Prospectus, as well as more detailed information
concerning certain aspects of the Fund's operations that are discussed briefly
in this Prospectus. You can request a copy of the Statement of Additional
Information by contacting the Fund at the address and telephone number listed
above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus and the Statement of Additional Information is
January 26, 1996, as each may be supplemented from time to time.
<PAGE>
TABLE OF CONTENTS
Page
----
Costs and Expenses of the Fund Borne by Stockholders......................... 3
Prospectus Summary........................................................... 4
Financial Highlights......................................................... 6
The Fund..................................................................... 8
Investment Objectives and Policies........................................... 8
Investment Practices......................................................... 12
Risk Factors................................................................. 15
Management................................................................... 19
Net Asset Value.............................................................. 20
Purchase of Shares........................................................... 20
Exchange and Redemption of Shares............................................ 22
Distributions................................................................ 24
Tax Aspects.................................................................. 25
Description of Capital Stock................................................. 27
Performance Information...................................................... 28
Distributor.................................................................. 29
Administrative Services...................................................... 29
Transfer Agent and Custodian................................................. 29
Experts...................................................................... 29
Corporate Bond and Commercial Paper Ratings.......................... Appendix A
Hedging and Other Transactions....................................... Appendix B
No dealer, salesman or any other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Fund or its distributor or investment adviser.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any jurisdiction or to any
person to whom it is unlawful to make such offer in such jurisdiction.
<PAGE>
COSTS AND EXPENSES OF THE FUND BORNE BY STOCKHOLDERS
Stockholder Transaction Expenses
Sales Load Imposed on Purchases......................................... None
Sales Load Imposed on Reinvested Dividends.............................. None
Deferred Sales Load..................................................... None
Redemption Fees......................................................... None
Exchange Fee............................................................ None
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees......................................................... 0.75%
12b-1 Fees.............................................................. None
Other Expenses.......................................................... 0.41%
Total Fund Operating Expenses......................................... 1.16%
Example
The purpose of the following example is to assist the investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. Use of a 5% annual return in the example is mandated by the
Securities and Exchange Commission and is not intended to be representative of
past or future performance of the Fund. The example should not be considered a
representation of past or future expenses. Actual expenses may be greater or
less than those shown. For more information regarding the fees and expenses of
the Fund, see "Management".
1 year 3 years 5 years 10 years
------ ------- ------- --------
You would pay the following
expenses on a $1,000
investment, assuming
(1) 5% annual return and
(2) redemption at the
end of each time period: $12 $37 $64 $141
<PAGE>
PROSPECTUS SUMMARY
What is the Purpose of The Fund?
The Fund is a series of Bailard, Biehl & Kaiser International Fund Group, Inc.
(the "Company"), and is designed primarily to provide investors who wish to
invest beyond the United States with a specialized vehicle to use in developing
their portfolios. It does not represent a balanced investment program. Moreover,
investment risk cannot be eliminated by an investment in the Fund.
What is the Fund's Investment Objective?
To seek a total return on its assets from long-term growth of capital and from
income primarily through investments in foreign debt securities.
Are There any Risk Factors Regarding an Investment in the Fund?
The net asset value of the shares of the Fund, which invests in interest rate
sensitive securities, will change as the general levels of interest rates
fluctuate. When interest rates decline, the value of a portfolio of such
securities can be expected to rise. Conversely, when interest rates rise, the
value of a portfolio of such securities can be expected to decline.
The Fund invests in debt securities of foreign issuers, including foreign
corporations, foreign governments, supra-national entities and United States
issuers whose assets are primarily located or whose operations are primarily
conducted outside the United States or whose securities are denominated in
foreign currencies. The Fund may also invest in securities of other U.S. issuers
under certain circumstances. Investment in foreign securities involves
considerations that are different from those relating to investments in U.S.
securities denominated in U.S. dollars and traded in U.S. markets, such as
possible adverse effects of changes in currency exchange rates or of exchange
controls, possible expropriation or nationalization of the assets of the
companies of which the Fund has purchased securities, less public information
with respect to issuers of such securities, less liquid securities markets in
some instances and less governmental supervision of stock exchanges, securities
brokers and issuers of securities.
The Fund may invest in indexed securities, whose value is linked to interest
rates, currencies, commodities, indices or other financial indicators. The
interest rate or principal amount of such securities may vary significantly as a
result of changes in the reference instruments, and such securities may be more
volatile and less liquid than other Debt securities.
In seeking to protect against the effects of changes in interest and exchange
rates, the Fund may purchase and sell forward contracts, options, futures
contracts, options on futures contracts and swaps relating to debt securities
and foreign currencies, for hedging and other purposes and not for speculation.
Risks associated with such transactions include: incorrect prediction of the
movement of interest or currency exchange rates; imperfect correlation of
currency movements in cross-hedges and indirect hedges; imperfect correlation in
the price movements of futures contracts and options on futures contracts with
the assets on which they are based; lack of liquid secondary markets and the
inability to effect closing transactions; costs associated with effecting such
transactions; inadequate disclosure and/or regulatory controls in certain
markets; counterparty default with respect to transactions not executed on an
exchange; trading restrictions imposed by governments, or securities and
commodities exchanges; and governmental actions affecting the value or liquidity
of currencies or securities.
The Fund is deemed to be non-diversified within the meaning of the Investment
Company Act of 1940. Investment of a substantial percentage of the Fund's assets
in the securities of single issuers will expose the Fund to a greater risk of
loss resulting from unfavorable price movements or market conditions related to
such issuers.
Substantially all of the Fund's shares are currently held by advisory clients of
the Fund's investment adviser. Decisions by the investment adviser to purchase
or redeem Fund shares on behalf of its clients may cause significant volatility
in the Fund's asset size. As a result, the Fund may experience, from time to
time, increased expense ratios, liquidation of portfolio positions at
inopportune times for certain stockholders, and increased brokerage and other
transaction costs. See "Risk Factors".
How Are Shares Purchased?
Shares of Common Stock of the Fund are being offered, without any sales charge,
on a continuous basis directly by the Fund or through a broker-dealer. If shares
of the Fund are purchased through a broker-dealer, a service fee may be charged
by the broker-dealer. If shares of the Fund are purchased directly from the Fund
without the intervention of a broker-dealer, no such fee will be imposed. The
minimum initial investment in the Fund is $5,000 and each subsequent investment
must be at least $100; the minimum initial investment for Bailard, Biehl &
Kaiser employees, officers and their relatives, and directors of the Company is
$2,000 and each subsequent investment must be at least $100. See "Purchase of
Shares".
Who is the Fund's Investment Adviser and What Fees Does the Fund Pay?
Bailard, Biehl & Kaiser, Inc. acts as the investment adviser (the "Adviser") of
the Fund. The Adviser also acts as the investment adviser for the Bailard, Biehl
& Kaiser International Equity Fund (the other series of the Company) and the
Bailard, Biehl & Kaiser Diversa Fund. As of December 31, 1995, the Adviser
managed approximately $917 million in assets invested globally. The Adviser
receives a monthly fee calculated at an annual rate equal to .75% of the average
daily net assets of the Fund. See "Management".
The total expenses incurred by the Fund for the fiscal year ended September 30,
1995 represented 1.16% of the average net assets of the Fund. See "Costs and
Expenses of the Fund Borne by Stockholders".
How Often are Distributions Made?
All or a portion of net investment income, if any, will be distributed
quarterly, and any remaining net investment income and any net realized capital
gains will be distributed annually, generally in December. See "Distributions".
How are Shares Redeemed?
Shares of the Fund will be redeemed at the net asset value next determined after
receipt of complete redemption instructions, as described under "Net Asset
Value" and "Exchange and Redemption of Shares".
FINANCIAL HIGHLIGHTS
(For a Share of the Fund Outstanding Throughout the Fiscal Year)
The following information has been audited by Price Waterhouse LLP, independent
accountants, whose unqualified report thereon is included in the Fund's annual
report to stockholders for the fiscal year ended September 30, 1995. Portions of
the Fund's annual report to stockholders for the fiscal year ended September 30,
1995 are incorporated by reference into the Statement of Additional Information.
This information should be read in conjunction with the financial statements and
notes thereto included in the annual report.
The following information is based upon past results and may not be indicative
of the future performance of the Fund. Further information about the performance
of the Fund is included in the Fund's annual report to stockholders for the
fiscal year ending September 30, 1995. A copy of the annual report is available,
upon request and without charge, by contacting Bailard, Biehl & Kaiser
International Fund Group, Inc., 2755 Campus Drive, San Mateo, California 94403.
<PAGE>
<TABLE>
<CAPTION>
Bailard, Biehl & Kaiser International Bond Fund
Financial Highlights
For a share outstanding throughout the year:
Fiscal Year Ended September 30,(1)
---------------------------------------------------
1995(2) 1994(2) 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $ 8.02 $ 10.85 $ 11.29 $ 10.94 $ 10.00
------- ------- ------- ------- -------
Income from Investment Operations:
Net Investment Income 0.47 0.61 0.67 0.85 0.73
Net Realized/Unrealized Gain (Loss)
on Securities and Foreign Currency 0.86 (2.39) 0.39 0.53 0.38
------- ------- ------- ------- -------
Total from Investment Operations 1.33 (1.78) 1.06 1.38 1.11
------- ------- ------- ------- -------
Less Distributions:
Net Investment Income (0.45) (0.26) (1.08) (0.94) (0.17)
For Tax Purposes in Excess of
Net Investment Income (0.12) -- -- -- --
Capital Gains -- (0.27) (0.42) (0.09) --
Return of Capital -- (0.52) -- -- --
------- ------- ------- ------- -------
Total Distributions (0.57) (1.05) (1.50) (1.03) (0.17)
------- ------- ------- ------- -------
Net Asset Value, End of Year $ 8.78 $8.02 $10.85 $11.29 $10.94
======= ======= ======= ======= =======
Total Return2 17.33% (17.90%) 10.65% 13.57% 11.22%
Ratios/Supplemental Data:
Net Assets, End of Year (000's) $ 64,640 $136,366 $165,484 $115,628 $ 91,256
Ratio of Expenses to Average Net
Assets 1.16% 1.12% 0.42% 0.64% 0.53%
Ratio of Net Investment Income to
Average Net Assets 5.66% 5.87% 6.25% 7.37% 7.33%
Portfolio Turnover Rate 179% 319% 157% 140% 89%
</TABLE>
- -----------------------------
(1) On October 1, 1993, the Fund and the Adviser entered into a new
Invesment Management Agreement pursuant to which the Fund is required to pay
certain management fees to the Adviser. Prior to that date, advisory fees were
directly charged to clients of Bailard, Biehl & Kaiser, Inc. and the Fund did
not pay any management fees. See "Management" for further discussion. If such
directly charged fees were included as Fund expenses at an assumed 1% annual
rate payable quarterly, pro-forma total return information would be as follows
(unaudited):
Fiscal Year Ended September 30,
---------------------------------------
1993 1992 1991
---- ---- ----
9.55% 12.44% 10.12%
(2)Net investment income per share has been computed on the basis of
average shares outstanding before adjustments for book/tax differences.
"Destributions for Tax Purposes in Excess of Net Investment Income" represent
amounts paid from foreign currency gains reclassified to net investment income
under the Internal Revenue Code.
<PAGE>
THE FUND
The Fund is a non-diversified series of the Bailard, Biehl & Kaiser
International Fund Group, Inc., a Maryland corporation and an open-end
management investment company (the "Company"). The Fund is not intended as a
complete investment program because of the nature of its investment objectives.
Bailard, Biehl & Kaiser, Inc. (the "Adviser") has sponsored the organization of
the Fund primarily to provide investment opportunities in foreign debt
securities that may not otherwise be available. Of course, there can be no
assurance that the Fund will achieve its investment objective, and, as indicated
below under "Risk Factors," there are risks associated with investing in foreign
securities, foreign currencies and foreign markets, that are not present with
respect to investing in U.S. securities denominated in U.S. dollars and traded
in U.S. markets.
The Fund issues to stockholders unaudited semi-annual reports and annual reports
containing audited financial statements of the Fund. Shortly after the end of
each calendar year, the Fund furnishes investors with information necessary for
the preparation of income tax returns.
The Company was organized as a Maryland corporation and the Fund was established
as a separate series of the Company on June 12, 1990. Prior to January 1996, the
name of the Fund was the Bailard, Biehl & Kaiser International Fixed-Income
Fund. The Company's fiscal year ends on September 30 of each year.
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objective is to seek a total return on its assets
primarily through investment in foreign debt securities. Total return consists
of capital appreciation or depreciation (realized and unrealized) in the value
of the Fund's assets and net income earned by the Fund. Investments may be made
for capital appreciation or for income or any combination of both for the
purpose of achieving a higher overall total return than could be achieved solely
from investing for appreciation of capital or for income alone. The value of the
Fund's assets will appreciate or depreciate depending on changes in interest
rates, currency exchange rates, credit quality and market and other conditions.
Net income consists primarily of the interest received on the Fund's debt
securities, less Fund expenses. Of course, there is no assurance that the Fund
will achieve its objectives. For example, when interest rates and the value of
the U.S. Dollar are generally stable or rising, the opportunity for capital
growth will be limited and the Fund may incur losses. See "Risk Factors --
Interest Rate Fluctuations, and -- Currency Exchange Rates."
To help achieve its objective, the Fund invests in debt securities and
obligations of foreign issuers, consisting of foreign governments,
supra-national entities, foreign corporation and banks and United States issuers
whose assets are primarily located or whose operations are primarily conducted
outside of the United States or whose securities are denominated in foreign
currencies ("Foreign Securities"). Ordinarily, the Fund invests at least 65% of
its assets in at least three countries other than the United States. The Fund
may also invest in securities and obligations of U.S. issuers under certain
circumstances.
<PAGE>
Debt Securities of Foreign Governments and Supra-National Entities
The Fund may invest in debt securities issued or guaranteed as to payment of
principal and interest by governments, semi-governmental entities and
governmental agencies of countries throughout the world denominated in the
currencies of such countries or other currencies. The Fund may also invest in
debt securities of supra-national entities, which may be denominated in dollars
or other currencies. Such securities will be rated at least A by Moody's or S&P,
or, if unrated, will be of a comparable quality as determined by the Adviser. A
supra-national entity is an entity designated or supported by a national
government or governments to promote economic reconstruction or development.
Examples of supra-national entities in which the Fund may invest include the
World Bank (International Bank for Reconstruction and Development), the European
Investment Bank, the Asian Development Bank and the European Coal and Steel
Community. These supra-national entities do not have taxing authority and
therefore depend upon their members' continued support to meet interest and
principal payments.
Foreign Corporate Debt Securities
The Fund may invest in debt securities of foreign companies and U.S. companies
whose assets are primarily located or whose operations are primarily conducted
outside of the United States or whose securities are denominated in foreign
currencies. These securities will consist of all types of long or short-term
debt obligations, such as bonds, debentures, notes, mortgage and asset-backed
obligations, equipment lease certificates, equipment trust certificates,
conditional sales contracts and commercial paper. The Fund may invest in any
debt security rated from AAA to A by Standard & Poor's Corporation ("S&P") or
from Aaa to A by Moody's Investors Service, Inc. ("Moody's") and securities that
are unrated by any rating agency but that are, in the opinion of the Adviser, of
comparable quality. See Appendix A for a description of S&P and Moody's ratings.
The Fund will not invest in higher yielding, lower rated corporate debt
securities. See "Domestic Debt Securities" for information concerning
mortgage-backed securities.
Foreign Bank Obligations
The Fund may invest in obligations of foreign banks, bank holding companies and
other financial institutions (consisting of certificates of deposit, bankers'
acceptances and other short-term debt obligations) that, at the date of
investment, have total assets in excess of $1 billion. Under normal
circumstances, the Fund would not expect to invest a substantial portion of its
assets in such obligations. However, if short-term interest rates exceed
long-term interest rates, the Fund may hold a greater proportion of its assets
in these instruments.
Indexed Securities
The Fund may invest in indexed securities, the value of which is linked to
interest rates, currencies, commodities, indices or other financial indicators
("reference instruments"). Typically, the reference instruments will be debt
securities of foreign issuers, while the issuer of the indexed security may be a
domestic or foreign entity. Indexed securities may provide for periodic interest
payments to holders, or they may be structured as "zero coupon" instruments with
no payments to holders prior to maturity. They may be subject to a "cap" on the
maximum principal amount, or a "floor" on the minimum principal amount, to be
repaid to holders on maturity. Indexed securities may be traded on an exchange
or over-the-counter. Indexed securities will be rated at least A by Moody's or
S&P or, if unrated, will be of a comparable quality as determined by the
Adviser.
Unlike other debt securities, the interest rate or the principal amount payable
at maturity of an indexed security may vary based on changes in one or more
reference instruments, such as a change in the interest rate of the reference
instrument compared with a fixed interest rate. The reference instrument need
not be related to the terms of the debt security. For example, the interest rate
or the principal amount of a U.S. dollar denominated indexed security may vary
based on a change in a foreign security or basket of foreign securities. An
indexed security may also be positively or negatively indexed, so that its value
may increase or decrease as the value of the reference instrument increases or
decreases. Further, the change in the interest rate or the principal amount
payable of an indexed security may be some multiple of the change (positive or
negative) in the value of the reference instrument. Indexed securities involve
certain risks, which are summarized below under "Risk Factors - Indexed
Securities".
Domestic Debt Securities
When the Adviser believes that international markets for debt securities may
experience excessive volatility or instability, or are otherwise unfavorable,
the Fund may invest up to 100% of its assets in debt securities of U.S. issuers.
Such securities will consist of U.S. Government securities, domestic corporate
debt securities, and obligations of domestic banks, bank holding companies and
other financial institutions, all of a nature and quality similar to the Fund's
investments in Foreign Securities.
The Fund's investments in U.S. Government securities will consist of: (i) U.S.
Treasury obligations, which differ only in their interest rates, maturities and
times of issuance, U.S. Treasury bills (maturities of one year or less), U.S.
Treasury notes (maturities of one to ten years), and U.S. Treasury bonds
(generally maturities of greater than ten years), all of which are backed by the
full faith and credit of the United States; and (ii) obligations issued or
guaranteed by U.S. Government agencies or instrumentalities, some of which are
backed by the full faith and credit of the United States (e.g., direct
pass-through certificates of the Government National Mortgage Association
("GNMA"), some of which are supported by the right of the issuer to borrow from
the U.S. Government (e.g., obligations of Federal Home Loan Banks) and some of
which are backed only by the credit of the issuer itself. Mortgage-backed
securities such as GNMAs are often subject to more rapid repayment than their
stated maturity date would indicate as a result of the pass-through of
prepayments of principal on the underlying mortgage obligations. Thus, GNMAs may
be less effective than other types of securities as a means of "locking in"
attractive long-term interest rates. Also, GNMAs may have less potential for
capital appreciation during periods of declining interest rates than other debt
securities of comparable maturities because of the prepayment feature, although
such obligations may have a comparable risk of decline in market value during
periods of rising interest rates. U.S. Government securities generally do not
involve the credit risks associated with U.S. corporate debt securities and, as
a result, the yields available from U.S. Government securities are generally
lower than the yields available from U.S. corporate debt securities. Like other
debt securities, however, the values of U.S. Government securities change as
interest rates fluctuate.
Temporary Investments
When the Adviser believes that investing for temporary defensive purposes is
appropriate (such as during periods of unusual market conditions or when it is
anticipated that interest rates will rise), the Fund may invest up to 100% of
its total assets in money market securities, denominated in dollars or in the
currency of any foreign country, issued by entities organized in the United
States or any foreign country, consisting of: short-term (less than twelve
months to maturity) and medium-term (not greater than five years to maturity)
obligations issued or guaranteed by the United States government or the
government of a foreign country or their agencies or instrumentalities; finance
company and corporate commercial paper, and other short-term corporate
obligations, in each case rated Prime-1 or Prime-2 by Moody's or A-1 or A-2 by
S&P or, if unrated, of comparable quality as determined by the Adviser; and
obligations of banks (including certificates of deposit, time deposits and
bankers' acceptances). For a description of ratings by Moody's and S&P, see
Appendix A. The Fund's investment objective may not be achieved when the Fund is
invested for temporary defensive purposes.
The Fund will ordinarily invest its assets in Foreign Securities in order to
provide investors in the Fund with participation in companies located in, or the
economies of, a number of countries other than the United States. While there is
no limitation on countries in which the Fund may invest, other than those
imposed from time to time by the Board of Directors, under ordinary
circumstances the Fund will invest principally in companies based in the Far
East, Europe, the United Kingdom, Canada and Australia. Investments may be made
in companies based in developed as well as developing countries. The Fund may
also invest in securities traded domestically and abroad in the form of American
Depositary Receipts and International Depositary Receipts, and in domestic and
foreign closed-end investment companies whose portfolios are invested primarily
in the securities of foreign issuers. The Fund's purchase of the securities of a
closed-end investment company will result in the layering of expenses such that
stockholders of the Fund will not only bear the expenses of the Fund but also
will indirectly bear a proportionate share of the expenses of the closed-end
investment company.
The average maturity of the debt securities in the Fund's portfolio will
fluctuate depending on the Adviser's judgment as to future interest rate
changes. To protect against the risks of interest rate and currency exchange
rate fluctuations and as a substitute for an underlying investment, the Fund is
authorized to engage in forward foreign currency exchange transactions,
transactions in options, futures contracts and options on futures contracts on
interest rates and foreign currencies, and interest rate and foreign currency
swaps. See "Investment Practices".
As a general rule, the Fund will purchase securities that are traded on
exchanges or over-the-counter markets often located in the respective countries
in which the various issuers of such securities are principally based. There is
no limitation on the percentage of the Fund's assets that may be invested in
securities of issuers located within any one country, other than restrictions
that may be imposed from time to time by the Company's Board of Directors, nor
is there any minimum asset or net worth requirement with respect to issuers in
which the Fund's assets may be invested.
The Fund has certain "fundamental policies" that limit, to specified levels, the
Fund's investment in certain securities. Those policies include the following.
As much as 25% of the value of the Fund's assets may be invested in a single
industry. However, the Fund will not acquire more than 10% of the outstanding
voting securities of any one issuer and will not invest for the purpose of
controlling or managing companies. The Fund may not purchase or sell commodities
or commodity contracts or invest in options, except that the Fund may engage in
forward contracts on foreign currencies, options, futures contracts and options
on futures contracts on debt securities and foreign currencies, and interest
rate and foreign currency swaps in connection with hedging transactions. The
Fund may not borrow money or pledge its assets, except from a bank as a
temporary measure for extraordinary or emergency purposes in amounts not
exceeding 5% of the value of the Fund's total assets. The Fund will not effect
short sales or purchase securities on margin, except for the deposit of initial
or variation margin in connection with hedging transactions. Moreover, the Fund
will not invest more than 10% of the value of its total assets in securities
subject to contractual or legal restrictions on disposition in all of the
principal markets where traded.
The investment objectives and policies described above may be changed by the
action of the Board of Directors of the Company without stockholder approval,
except for the fundamental policy restrictions of the Fund, which may be changed
only with the approval of a majority of the stockholders of the Fund. A
description of the Fund's fundamental policies is contained in the Statement of
Additional Information.
The Fund may engage in short-term trading if the disposition of securities held
for a short period is deemed to be advisable. The Fund estimates that its annual
portfolio turnover rate will generally be in the range of 100% to 200%, but may
from time to time be greater or less than this range. A turnover rate of 100%
exceeds that of many other investment companies, including those which emphasize
total return as a primary investment objective. Higher portfolio turnover
results in increased brokerage costs and may result in the realization of
short-term gains that are taxed to stockholders as ordinary income. See "Tax
Aspects".
INVESTMENT PRACTICES
The Fund is authorized to employ certain investment practices to attempt to
minimize the risk to the Fund from adverse changes in currency exchange and
interest rates or as a substitute for an underlying investment ("Hedging
Transactions"). Hedging Transactions may consist of forward foreign currency
exchange contracts ("Forward Contracts"); call and put options ("Options"),
futures contracts ("Futures Contracts"), call and put options on futures
contracts ("Options on Futures Contracts") on debt securities and foreign
currencies; and interest rate and foreign currency swaps, and related caps,
floors and collars ("Swaps"). The Fund may also conduct foreign currency
exchange transactions on a spot basis at the rate prevailing in the foreign
currency exchange market. These practices involve certain risks, which are
summarized below under "Risk Factors -- Hedging Transactions". For a more
detailed description of the uses, risks and costs of Hedging Transactions, see
Appendix B. In addition, certain provisions of the Internal Revenue Code may
limit the extent to which the Fund may enter into Hedging Transactions. See "Tax
Aspects -- Hedging and Other Transactions".
Generally Hedging Transactions involving currency exchange rate risks may
directly hedge, cross-hedge, or indirectly hedge the currency risk associated
with a particular transaction or position. The Fund may directly hedge a
currency risk when it believes that the currency in which a particular portfolio
security is denominated may suffer a substantial adverse movement against the
U.S. Dollar. For example, to directly hedge a position, the Fund could sell an
amount of such foreign currency, or buy an amount of the U.S. Dollar,
approximating the value of some or all of the Fund's portfolio securities
denominated in such foreign currency.
The Fund may enter into a cross-hedge when it believes that the currency in
which a particular portfolio security is denominated may suffer a substantial
adverse movement against a currency other than the U.S. Dollar. A cross-hedge is
accomplished by hedging a foreign currency in which a portfolio security is
denominated against another foreign currency. For example, if the Fund believes
that the German Mark will move adversely against the Japanese Yen, the Fund
could hedge a portfolio position denominated in German Marks by selling the Mark
for a specified amount of Japanese Yen. The Fund could also hedge the German
Mark through the U.S. Dollar against the Japanese Yen. In such a case, the Fund
could sell German Marks or a specified amount of U.S. Dollars and sell the same
amount of U.S. Dollars for an amount of Japanese Yen.
Indirect hedges are similar to direct hedges except that instead of being
obligated to sell a currency in which the Fund's assets are denominated, the
Fund will be obligated to sell a different, or proxy, currency that the Fund
believes will suffer a similar movement against the other currency. For example,
the Fund may hold securities denominated in Dutch Guilders. If the Fund believes
that the exchange rate between the Dutch Guilder and the U.S. Dollar will suffer
a substantial adverse movement, the Fund could directly hedge the currency risk
by selling an amount of Guilders forward for a specified amount of U.S. Dollars.
However, if the Fund believes that the German Mark will suffer a similar adverse
movement against the U.S. Dollar, the Fund could hedge the Guilder denominated
portfolio position by selling an amount of German Marks forward for a specified
amount of U.S. Dollars. Similarly, the Fund may acquire securities denominated
in Guilders at a time that it believes the Guilder and the Mark would appreciate
against the Dollar. In such circumstances, the Fund may sell Dollars forward
against an amount of Marks necessary to acquire the Guilder-denominated
securities. The Fund will enter into such indirect hedges when it believes that
the currency risk associated with a transaction or position can be hedged more
effectively through the purchase or sale of a third currency (e.g. where the
market for the proxy currency is more liquid, or more easily monitored and
analyzed, and/or the cost to the Fund of an indirect hedge is lower than a
corresponding direct hedge).
The Fund will not engage in a transaction involving Forward Contracts , Futures
Contracts or Swaps, and will not write Options or Options on Futures Contracts
unless its obligation is "covered" by an offsetting position or transaction, or
certain liquid assets equal to the amount of the Fund's contingent obligations
are held by the Fund's custodian in a segregated account. For a more detailed
description of cover transactions, see Appendix B.
Forward Contracts
A Forward Contract is an obligation to purchase or sell a specific currency for
an agreed price at a future date and is individually negotiated and privately
traded by currency traders and their customers. The precise matching of the
Forward Contract amounts and the value of the securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the Forward Contract is entered into and the
date it matures. Forward Contracts may limit potential gain from a positive
change in the relationship between currencies, and unanticipated changes in
currency prices may result in poorer overall performance for the Fund than if it
had not engaged in such contracts.
<PAGE>
Options
The Fund may purchase and write call and put Options on debt securities and
foreign currencies. Call Options give the holder the right, in exchange for a
premium, to buy the underlying asset at a stated price while the counterparty is
obligated, upon exercise, to sell such asset. Put Options give the holder the
right, in exchange for a premium, to sell the underlying asset at a stated price
while the counterparty is obligated, upon exercise, to buy such asset.
The purchase of an Option may constitute an effective hedge against fluctuations
in currency exchange or interest rates, although, in the event of rate movements
adverse to the Fund's position, the Fund may forfeit the entire amount of the
premium plus related transaction costs. The writing of Options constitutes only
a partial hedge, up to the amount of the premium received, and the Fund could be
required to purchase or sell assets at disadvantageous rates, thereby incurring
losses.
Options written or purchased by the Fund will be traded on U.S. and foreign
exchanges or, provided a sufficiently liquid secondary market exists,
over-the-counter markets. Over-the-counter Options purchased by the Fund and the
value of securities used to cover over-the-counter Options written by the Fund
will be deemed to be illiquid subject to the Fund's policy limits on investments
in illiquid securities.
Futures Contracts
A Futures Contract is an exchange traded contract for the purchase or sale for
future delivery of the underlying asset. A sale of a Futures Contract means the
acquisition of a contractual obligation to deliver the asset called for by the
contract at a specified price in a fixed delivery month. A purchase of a Futures
Contract means the acquisition of a contractual obligation to acquire the asset
called for by the contract at a specified price in a fixed delivery month. The
successful use of Futures Contracts will usually depend on the Fund's ability to
correctly predict currency exchange and interest rate movements. Should rates
move in an unexpected manner, the Fund may not achieve the anticipated benefits
of Futures Contracts or may realize losses. Losses from Futures Contracts are
potentially unlimited.
Options on Futures Contracts
The Fund may purchase and write call and put Options on Futures Contracts. Call
Options on Futures Contracts give the holder the right, in exchange for a
premium, to take the position of a buyer in a specified Futures Contract while
the counterparty is obligated, upon exercise, to take the position of a seller
in that Futures Contract. Put Options on Futures Contracts give the holder the
right, in exchange for a premium, to take the position of a seller in a
specified Futures Contract while the counterparty is obligated, upon exercise,
to take the position of a buyer in that Futures Contract. Depending on the
pricing of an Option on a Futures Contract compared to either the price of the
Futures Contract upon which it is based or the price of the underlying asset, an
Option on a Futures Contract may entail more or less risk than ownership of the
Futures Contract upon which it is based or the underlying asset. Options on
Futures Contracts hedge positions and transactions in a manner similar to
Options. For more information on the uses and limits of Options on Futures
Contracts, see "Options".
<PAGE>
Swaps
Swap transactions are individually negotiated agreements to exchange the right
to receive payment on a particular type of obligation for a different type of
payment. In a typical interest rate Swap, one party agrees to pay a fixed rate
of interest while the counterparty agrees to pay a floating rate. Interest rate
Swaps also permit counterparties to exchange a floating rate obligation (based
on one or more reference rates, such as the London Interbank Offered Rate
("LIBOR"), a specified bank's prime rate or U.S. Treasury Bill rates), for a
floating rate obligation based on a different reference rate. A currency Swap
allows the parties to exchange fixed or floating rate obligations (and, in some
cases, principal obligations) denominated in different currencies .
Caps, floors and collars are forms of Swap transactions that have additional
features. The purchase of a cap permits the purchaser, to the extent that a
specified index exceeds a predetermined rate, to receive payments from the
seller. The purchase of a floor entitles the purchaser, to the extent that a
specified index falls below a predetermined rate, to receive payments from the
seller. A collar combines the elements of purchasing a cap and selling a floor
protecting against rate fluctuation above the maximum amount or to the minimum
amount. The Fund will deem the obligations owed to it under a Swap to be
illiquid for purposes of the restrictions on investments in illiquid securities,
except to the extent that a third party (such as a large commercial bank) has
guaranteed the Fund's ability to offset the Swap at any time.
Spot Transactions
The Fund also engages in foreign currency exchange transactions on a spot (i.e.
current) basis in connection with the investment of cash balances held by the
Fund outside of the United States. The purpose of these cash balances is to
provide liquidity for operations. The Fund normally expects to invest its cash
balances primarily in bank accounts or similar investments denominated in
foreign currencies in lieu of dollar-denominated bank accounts or investments.
This should permit the Fund to profit from declines in the value of the dollar
during periods when the dollar is declining relative to the foreign currencies
in which its cash balances are invested. There is, however, no guarantee that
the Fund will correctly anticipate currency fluctuations. Accordingly, if the
Fund's cash balances are maintained in investments denominated in foreign
currencies during periods when the value of the dollar is appreciating relative
to those foreign currencies, the Fund will experience losses. The Fund will also
incur service charges in connection with each currency conversion.
RISK FACTORS
Interest Rate Fluctuations
The value of the Fund's shares will vary as the aggregate value of its portfolio
securities increases or decreases. The net asset value of the Fund may change as
the general levels of interest rates fluctuate. When interest rates decline, the
value of a portfolio of debt securities can be expected to rise. Conversely,
when interest rates rise, the value of such a portfolio can be expected to
decline. If the Fund's expectations of changes in interest rates or its
evaluation of the normal yield relationship between two securities proves to be
incorrect, the Fund's income, net asset value and potential capital gain may be
decreased or its potential capital loss may be increased.
<PAGE>
Foreign Securities
The Fund is intended to provide an investor with an opportunity to invest a
portion of his or her assets primarily in debt securities of issuers or
companies (wherever organized) with significant foreign operations. Management
of the Fund believes that international investment of one's assets may decrease
the degree to which events in any one country, including the United States, will
affect one's entire investment holdings. Of course international investing of
one's assets will not eliminate risks inherent in investing in securities.
Because of the Fund's investment objective, the Fund is not intended to provide
a complete investment program for an investor.
Investors should recognize that investing in foreign companies, foreign
currencies and foreign markets involves certain considerations, including those
set forth below, that are not typically associated with investing in U.S.
securities denominated in U.S. dollars and traded in U.S. markets. Many of the
securities held by the Fund will not be registered with, nor will the issuers
thereof be subject to the reporting requirements of, the Securities and Exchange
Commission. Accordingly, there may be less publicly available information about
a foreign company than about a domestic company. Foreign companies are not
generally subject to uniform accounting and auditing and financial reporting
standards, practices and requirements comparable to those applicable to domestic
companies. Securities of some foreign companies are less liquid and more
volatile than securities of comparable domestic companies.
It is contemplated that most foreign securities will be purchased in
over-the-counter markets or stock exchanges located in the countries in which
the respective principal offices of the issuers of the various securities are
located, if that is the best available market. Fixed commissions on foreign
stock exchanges are generally higher than negotiated commissions on United
States exchanges. There is generally less governmental supervision and
regulation of foreign stock exchanges, brokers and issuers than in the United
States.
In addition, with respect to some foreign countries, there is the possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of the Fund, political or social instability, or diplomatic
developments that could affect United States investments in those countries.
Moreover, individual foreign economies may differ favorably or unfavorably from
the United States economy in such respects as growth of gross domestic product,
rate of inflation, capital reinvestment, resource self-sufficiency and balance
of payments position.
The Fund may invest in securities issued by the governments of foreign countries
(or agencies or subdivisions thereof) and supra-national entities; many, if not
all, of the foregoing considerations apply to such investments as well. In
addition, the Fund may invest in American Depository Receipts ("ADRs") and
International Depository Receipts ("IDRs"). A purchaser of an unsponsored ADR or
IDR may have limited voting rights and may receive less information about the
issuer of the underlying security than with a sponsored ADR or IDR.
Currency Exchange Rates
The value of the assets of the Fund as measured in U.S. dollars may be affected
favorably or unfavorably by fluctuations in currency rates and exchange control
regulations (including, but not limited to, actions by a foreign government to
devalue its currency, thereby effecting a possibly substantial reduction in the
U.S. dollar value of the Fund's investments in that country). The Fund is
authorized to employ certain hedging techniques to minimize this risk. However,
to the extent such techniques are not employed or to the extent such techniques
do not fully protect the Fund against adverse changes in exchange rates,
decreases in the value of the currencies of the countries in which the Fund
invests will result in a corresponding decrease in the U.S. dollar value of the
Fund's assets denominated in those currencies. On the other hand, to the extent
hedging techniques are used to reduce currency risk, the Fund will not
participate in increases in the value of the currencies of the countries in
which the Fund invests. Further, the Fund may incur costs in connection with
conversions between various currencies. Foreign exchange dealers (including
banks) realize a profit based on the difference between the prices at which they
buy and sell various currencies. Thus, a dealer or bank normally will offer to
sell a foreign currency to the Fund at one rate, while offering a lesser rate of
exchange should the Fund desire immediately to resell that currency to the
dealer. Moreover, fluctuations in exchange rates may decrease or eliminate
income available for distribution and may change the tax treatment of any
distribution. For example, if foreign exchange losses exceed other investment
company taxable income during a taxable year, the Fund might not be able to or
might determine not to make ordinary income distributions, or distributions made
before the losses were realized would be recharacterized as a return of capital
to stockholders for United States income tax purposes, rather than as ordinary
income, thereby reducing each stockholder's basis in his Fund shares.
Indexed Securities
Investment in indexed securities involves certain risks. In addition to the
credit risk of the security's issuer and the normal risks of price fluctuations
in response to changes in interest rates, the interest rate or principal amount
of indexed securities may decrease, sometimes substantially, as a result of
changes in the value of the reference instruments. Further, indexed securities
may be more volatile than the reference instruments, particularly those that are
negatively indexed to the reference instrument and those that are based on a
multiple of the change in the value of the reference instrument. Because it is
common for indexed securities to be individually negotiated with the issuer,
such securities also tend to be less liquid than other debt securities and may
be more difficult to value.
Hedging Transactions
Hedging Transactions cannot eliminate all risks of loss to the Fund and may
prevent the Fund from realizing some potential gains. The projection of
short-term currency exchange and interest rate movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain. Among the risks of Hedging Transactions are: incorrect prediction of
the movement of currency exchange and interest rates; imperfect correlation of
currency movements in cross-hedges and indirect hedges; imperfect correlation in
the price movements of Futures Contracts and Options on Futures Contracts with
the assets on which they are based; lack of liquid secondary markets and the
inability to effect closing transactions; costs associated with effecting such
transactions; inadequate disclosure and/or regulatory controls in certain
markets; counterparty default with respect to transactions not executed on an
exchange; trading restrictions imposed by governments, or securities and
commodities exchanges; and governmental actions affecting the value or liquidity
of currencies or securities. Hedging transactions may be effected in foreign
markets or on foreign exchanges and are subject to the same types of risks that
affect foreign securities. See "Risk Factors -- Foreign Securities".
Indirect hedges and cross-hedges are more speculative than other hedges because
they are not directly related to the position or transaction being hedged. With
respect to indirect hedges, movements in the proxy currency may not precisely
mirror movements in the currency in which portfolio securities are denominated.
Accordingly, the potential gain or loss on an indirect hedge may be more or less
than if the Fund had directly hedged a currency risk. Similar risks are
associated with foreign currency cross-hedge transactions. In a cross-hedge, the
foreign currency in which a portfolio security is denominated is hedged against
another foreign currency, rather than the U.S. Dollar. Cross-hedges may also
create a greater risk of loss than other hedging transactions because they may
involve hedging a currency risk through the U.S. Dollar rather than directly to
the U.S. Dollar or another currency.
In order to help reduce certain risks associated with Hedging Transactions, the
Board of Directors has adopted the requirement that Forward Contracts, Options,
Futures Contracts, Options on Futures Contracts and Swaps be used as a hedge or
as a substitute for an underlying investment and not for speculation. In
addition to this requirement, the Board of Directors has adopted the following
percentage restrictions on the use of Options, Futures Contracts, Options on
Futures Contracts and Swaps:
(i) The Fund will not write a put or call Option if, as a result
thereof, the aggregate value of the assets underlying all
such Options (determined as of the date such Options are
written) would exceed 25% of the Fund's net assets.
(ii) The Fund will not purchase a put or call Option or Option on
a Futures Contract if, as a result thereof, the aggregate
premiums paid on all Options or Options on Futures Contracts
held by the Fund would exceed 20% of the Fund's net assets.
(iii) The Fund will not enter into any Futures Contract or Option
on a Futures Contract if, as a result thereof, the aggregate
margin deposits and premiums required on all such
instruments would exceed 5% of the Fund's net assets.
(iv) The Fund will not enter into a Swap if the aggregate
notional principal amount with respect to all such
agreements exceeds the net assets of the Fund.
In order to help reduce the risk of counterparty default in Forward Contracts
,Options traded over-the-counter and Swaps, the Fund will only enter into such
transactions with registered broker-dealers, or with banks or other financial
institutions regulated by the FDIC or having assets in excess of $1 billion, in
each case having a net worth of at least $20 million. For a more detailed
discussion of the uses, risks and costs of Hedging Transactions, see Appendix B.
Non-Diversification
The Fund is deemed to be non-diversified within the meaning of the Investment
Company Act of 1940 (the "1940 Act"), because it may invest more than 25% of its
assets in issuers in which it invests more than 5% of its assets. However, the
Fund still intends to qualify as a regulated investment company under the
Internal Revenue Code. In order to so qualify, the Fund must, among other
things, invest less than 50% of its assets in such issuers. A more detailed
description of this and other requirements applicable to regulated investment
companies is set forth under "Tax Aspects" and in the Statement of Additional
Information under the caption "Tax Aspects". Investment of a substantial
percentage of the Fund's assets in the securities of single issuers will expose
the Fund to a greater risk of loss resulting from unfavorable price movements or
market conditions related to such issuers.
Asset Volatility
Substantially all of the Fund's shares are currently held by advisory clients of
the Adviser. As a result, decisions by the Adviser to purchase or redeem Fund
shares on behalf of its clients may cause the assets of the Fund to increase or
decrease by a significant amount from time to time. Any significant decline in
the Fund's assets is likely to result in an increase of the Fund's expenses as a
percentage of its net assets. In addition, in order to meet the redemption
requests of the Adviser's clients, the Fund may be required to liquidate
portfolio positions and realize gains and losses at inopportune times for
non-redeeming stockholders. Higher portfolio turnover also results in increased
brokerage and other transaction costs. Stockholders who are not clients of the
Adviser will not be notified of any changes in the Fund's assets that occur as a
result of decisions by the Adviser on behalf of its clients or otherwise.
MANAGEMENT
The Board of Directors of the Company is responsible for the management of the
Fund, including the general overall supervision of the Fund's portfolio
transactions. The names and business addresses of the directors and officers of
the Company and their principal occupations and other affiliations during the
past five years are set forth in the Statement of Additional Information.
The Fund and the Adviser have entered into an Investment Management Agreement
(the "Management Agreement") dated as of October 1, 1993. Under the Management
Agreement, the Adviser directs the purchase and sale of securities in the Fund's
investment portfolio and all hedging transactions in accordance with the Fund's
objectives and policies. The Adviser also selects and reviews firms to effect
portfolio transactions, and reviews commissions paid and the execution of
portfolio transactions for the Fund. In addition, the Adviser provides certain
managerial and administrative services to the Fund.
Arthur A. Micheletti has been the senior investment strategist and portfolio
manager for the Fund since June 1992. Mr. Micheletti has been with the Adviser
and has managed international and domestic debt portfolios since 1981. Mr.
Micheletti was a Vice President, portfolio manager and investment analyst for
the Adviser from 1981 to 1992, and has been a Senior Vice President and
investment strategist and the Chief Economist since 1992. Julie A. Grandstaff
and Michael J. Faust joined the Fund as co-portfolio managers in June 1992 and
February 1993, respectively. Since September 1994, Ms. Grandstaff has focused on
the day-to-day management of the country allocation and bond selection for the
Fund. From 1988 to 1992, Ms. Grandstaff worked as the fixed income and economic
analyst for the Adviser's Fixed Income team. Mr. Faust has focused on the
day-to-day management of the currency exposure for the Fund. Prior to joining
the Adviser in 1993, Mr. Faust worked as a fixed income and currency analyst for
MMS International.
Since October 1, 1993, the Adviser has been paid a monthly fee calculated at an
annual rate equal to .75% of the average daily net assets of the Fund. While
this rate is higher than the rate charged by most other advisers, the Fund
believes that it is justified by the complexity of investing in multiple
international markets and engaging in Hedging Transactions and by the
administrative services provided by the Adviser. Prior to October 1, 1993, the
Adviser received no fees from the Fund. However, investors in the Fund who were
advisory clients of the Adviser paid separate advisory fees directly to the
Adviser. Since October 1, 1993, the separate advisory fees payable to the
Adviser by its advisory clients have been reduced by the amount of fees it
receives from the Fund attributable to the assets of its advisory clients.
The Fund pays all its own expenses except those expressly to be paid by the
Adviser. For the fiscal year ended September 30, 1995, the Fund's total expenses
represented 1.16% of average net assets for the year. Additional information
concerning the expenses of the Fund is contained in the Statement of Additional
Information.
The Adviser commenced business as a registered investment adviser in 1970 and
was incorporated as a California corporation in 1972. The principal place of
business of the Adviser is 2755 Campus Drive, San Mateo, California 94403. The
Adviser is a wholly owned subsidiary of BB&K Holdings, Inc., a California
corporation, and acts as investment adviser to the Bailard, Biehl & Kaiser
International Equity Fund (the other series of the Company) and the Bailard,
Biehl & Kaiser Diversa Fund. As of December 31, 1995, the Adviser managed
portfolios with total holdings of approximately $917 million in market value.
NET ASSET VALUE
The net asset value per share, on which purchase and redemption prices are
based, is obtained by dividing the value of the net assets of the Fund (i.e.,
the market value of the securities and other assets of the Fund less its
liabilities, including expenses payable or accrued but excluding capital stock
and surplus), by the total number of shares outstanding. Net asset value is
calculated once daily, at the regular closing of the New York Stock Exchange
(generally 4:00 P.M. New York time), except that no net asset value per share is
calculated on Saturdays, Sundays or other days when the New York Stock Exchange
is closed. Because the Fund's investment securities are traded on foreign
markets that may be open when the New York Stock Exchange is closed, the value
of the net assets of the Fund may be significantly affected on days when no net
asset value is calculated. The method used by the Fund for determining the net
asset value of its shares is explained in more detail in the Statement of
Additional Information.
PURCHASE OF SHARES
Shares of the Fund are offered at net asset value, without any sales charge, on
a continuous basis directly by the Fund or through a broker-dealer. If shares of
the Fund are purchased through a broker-dealer, a service fee may be charged by
the broker-dealer. If shares of the Fund are purchased directly from the Fund
without the intervention of a broker-dealer, no such fee will be imposed.
Certain Fund services may not be available to shares held in the name of a
broker-dealer or other nominee.
The minimum initial investment is $5,000 and each subsequent investment must be
at least $100. The minimum initial investment requirement for employees and
officers of the Adviser and their relatives, and directors of the Company is
$2,000 and each minimum subsequent investment is $100. The Fund reserves the
right to waive, reduce or increase the minimum for initial and subsequent
investments.
Fund shares may also be purchased by various types of retirement plans,
including individual retirement accounts ("IRAs"). The minimum initial and
subsequent investments of such plans correspond to the minimum investment
requirements for such individuals. The Adviser offers the Bailard, Biehl &
Kaiser IRA for individuals wishing to establish an IRA. For information
concerning the Bailard, Biehl & Kaiser IRA, call (800) 882-8383.
The Fund reserves the right to refuse any application to purchase its shares.
Resale of Fund shares (other than by redemption) may be restricted in certain
jurisdictions. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such an offer in such
jurisdiction.
Shares may be purchased directly from the Fund by completing the Purchase
Application form accompanying this Prospectus and sending it, together with a
check (payable to the order of the Fund), to Chase Global Funds Services Company
("CGFSC"), P.0. Box 2798, Boston, Massachusetts 02208 or (for express delivery)
73 Tremont Street, Boston, Massachusetts 02108-3913. (CGFSC is an affiliate of
The Chase Manhattan Bank, N.A.) Additional Purchase Application forms can be
obtained from the Fund at 2755 Campus Drive, San Mateo, California 94403.
Shares of the Fund may also be purchased by bank wire by calling CGFSC at (800)
541-4366 (617/557-8000 for Massachusetts residents) to receive a wire reference
control number and to notify CGFSC of your incoming wire. A properly completed
Purchase Application form must be sent to CGFSC at the above address before
bank-wired investments can be redeemed. Instruct your bank (which may charge for
this service) to wire a specified amount (via the Federal Reserve Bank) to:
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, NY 10081-1000
ABA #021000021
DDA #910-2-733160
For further credit to Attn:
Bailard, Biehl & Kaiser International Bond Fund
Shareholder's Name:
Account Number:
Wire Reference Control Number:
A bank-wired investment is considered received when CGFSC has been notified that
the bank wire has been credited to the Fund's account.
You may purchase additional shares of the Fund at any time by mailing or wiring
funds in the manner and subject to the minimums described above. Please remember
to include your Bailard, Biehl & Kaiser International Bond Fund account number
on your check or as part of your wiring instructions.
When an investor makes an initial investment, an account will be opened on the
books of the Fund and a confirmation will be sent of the opening of the account.
Thereafter, whenever a transaction takes place in the account, such as a
purchase of additional shares, exchange or redemption of shares, reinvestment of
distributions or deposit or withdrawal of shares represented by certificates,
the investor will receive a confirmation statement giving complete details of
the transaction. In addition, the statement will show the details of every prior
transaction in the account during the year. Issuance and delivery of
certificates is unnecessary and holders of shares are thereby relieved of the
responsibility of safekeeping, although certificates will be issued, without
charge, to requesting stockholders.
The number of shares that may be purchased will depend upon the applicable net
asset value in effect at the time orders are properly received. Such net asset
value is the net asset value of the Fund next determined after receipt of a
proper request.
EXCHANGE AND REDEMPTION OF SHARES
You may exchange or redeem all or a portion of your shares of the Fund at any
time, without incurring any charges, by mail or by telephone. If you exchange or
redeem your shares through a broker-dealer, there may be a charge imposed for
such services.
Exchange Privilege
You may exchange your Fund shares for shares of the Bailard, Biehl & Kaiser
International Equity Fund (the "Equity Fund") or the Bailard, Biehl & Kaiser
Diversa Fund (the "Diversa Fund") on the basis of the relative net asset values
per share of the Fund and the Equity Fund or Diversa Fund next computed after
receipt by CGFSC of your proper written or telephone request. Written requests
should be directed to CGFSC at the address indicated under "Purchase of Shares".
Telephone requests should follow the procedures described under "Telephone
Transactions". Exchanges can only be made between accounts with identical
account registrations.
Before making an exchange, you should read the Equity Fund's or Diversa Fund's
Prospectus, which may be obtained by contacting the Company at 2755 Campus
Drive, San Mateo, California 94403, (800) 882-8383. Any exchange of shares is,
in effect, a redemption of shares of the Fund and a purchase of shares of the
Equity Fund or Diversa Fund. Accordingly, for Federal income tax purposes, an
exchange is a taxable event, and a gain or loss may be realized. Exchanges can
only be made in states where shares of the Equity Fund or Diversa Fund are
qualified for sale, and the dollar amount of an exchange must meet the initial
or subsequent minimum investment requirements of the Equity Fund or Diversa
Fund. The Fund does not place any limit on the number of exchanges that may be
made, and neither the Fund nor the Equity Fund or Diversa Fund charges a fee for
effecting an exchange. The Fund reserves the right to reject any exchange
request and to modify or terminate the exchange privilege at any time.
Regular Redemption Procedure
A stockholder has the right to redeem shares by transmitting to CGFSC, at the
address indicated under "Purchase of Shares", either the related certificates
and a stock power in good order for transfer, or if no certificates have been
issued, a written request for redemption. Redemption will be made at the net
asset value next computed after receipt by CGFSC of the necessary documents in
good order. "Good order" means that certificates and stock powers must be
endorsed by the record owner(s) exactly as the shares are registered and for
redemptions in excess of $50,000, the signature(s) must be accompanied by a
signature guarantee. A signature guarantee is a widely accepted way to protect
the stockholders and the Fund by verifying the signature on the request. Such
signature guarantees should not be qualified in any way, whether by date or
otherwise. Signatures must be guaranteed by an "Eligible Guarantor Institution"
and not by a notary public or any other person or entity. An "Eligible Guarantor
Institution" means a bank, trust company, broker, dealer, municipal or
government securities broker or dealer, credit union, national securities
exchange, registered securities association, clearing agency or savings
association that is a participant in the Securities Transfer Agents Medallion
Program ("STAMPSM") endorsed by the Securities Transfer Association. In some
cases, "good order" may require the furnishing of additional documents. In the
event that a stockholder needs assistance in determining what documents are
required in order to effect a redemption, he or she may contact CGFSC at (800)
541-4366 for assistance. Subject to the limitations set forth below, payment for
shares redeemed will ordinarily be made within seven days after receipt of the
foregoing documents in good order.
Systematic Withdrawal Plan
A Systematic Withdrawal Plan ("SWP") may be established by a new or existing
stockholder if the shares in his or her account, when valued at the current net
asset value, equal $10,000 or more. Stockholders who elect to establish a SWP
account will be mailed a semimonthly, monthly or quarterly check in a stated
amount, not less than $100. Depending on the SWP option chosen, shares
sufficient to satisfy the stated amount will be automatically redeemed on or
about the third and/or eighteenth day of the payment period and a check for the
stated amount will be mailed by CGFSC to the stockholder as soon thereafter as
practicable. A transaction fee of $2 per check will be deducted from the
proceeds. Withdrawals may result in a gain or loss for tax purposes, may reduce
principal and may eventually use up all of the shares in the account.
Payments will be terminated by CGFSC on receipt of satisfactory evidence of the
death or incapacity of the stockholder, but until it has received such evidence,
CGFSC will not be liable for any payments made in accordance with the SWP. The
stockholder or the Fund may terminate the SWP account at any time upon notice to
the other.
General Conditions of All Redemptions
The right to redeem may be suspended and the payment of the redemption price
deferred during any period when the New York Stock Exchange is closed, during
periods when trading on the Exchange is restricted as determined by the
Securities and Exchange Commission, for any period during which an emergency (as
determined by the Commission) exists as a result of which disposal by the Fund
of securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets or for
such other periods as the Commission may by order permit for the protection of
investors. In addition, if shares have been recently issued to a stockholder and
payment was made by check, the Fund will effect the redemption, but will hold
the proceeds thereof until the check for the purchase of such shares has
cleared, unless such shares were purchased with a cashier's or certified check.
Special Redemption Procedure
The Fund may redeem the shares of any stockholder who ceases to hold shares in
the Fund having an aggregate net asset value at least equal to the minimum
initial investment. However, the Fund will not effect such a redemption if the
decline in share value is caused by a reduction in the Fund's net asset value.
Stockholders will be given at least 30 days' written notice of any redemption to
be effected in accordance with this paragraph.
Telephone Transactions
You may establish telephone exchange and redemption privileges if you have
checked the appropriate box and supplied the necessary information on the
Purchase Application form accompanying this Prospectus. You may then exchange
and redeem shares of the Fund by telephoning CGFSC at (800) 541-4366 (or, from
outside the U.S., (617) 557-8000) prior to the regular closing of the New York
Stock Exchange (generally 4:00 P.M. New York time) on a day when the New York
Stock Exchange is open. Redemptions by telephone must be at least $1,000 and may
not exceed $150,000. Exchange and redemption requests received by CGFSC before
the regular closing will be processed that day. Otherwise processing will occur
on the next business day.
Interruptions in telephone service may mean that you will be unable to effect a
transaction by telephone when desired. When telephone transactions are difficult
to implement, you should mail or send by overnight delivery a written request to
CGFSC. By making telephone exchanges or redemptions you may be giving up a
measure of security that you may have had if such transactions had been in
writing. The Fund and CGFSC will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. The Fund and CGFSC may be
liable for any losses due to unauthorized or fraudulent instructions if such
procedures are not followed. For your protection, CGFSC records all telephone
calls. Exchanges can only be made between accounts with identical registrations
and only if your account registration has not changed within 30 days. Redemption
proceeds are sent only to stockholders at their registered address or to a bank
account previously designated by the stockholder. It is also the Fund's policy
to mail a written confirmation to you at your address of record within five
business days after any telephone transaction. The Fund or CGFSC may refuse to
honor any telephone transaction request if the Fund or CGFSC believes, for any
reason, that the request is unauthorized. You will be promptly notified of any
refused telephone transaction request. Neither the Fund nor CGFSC will be liable
for following telephone instructions that CGFSC reasonably believes to be
genuine. Since you may bear the risk of loss in the event of an unauthorized
telephone transaction, you should verify the accuracy of telephone transactions
immediately upon receipt of the written confirmation.
Telephone transaction procedures may be modified or suspended without notice
during periods of drastic economic or market changes, and may be modified or
terminated on 60 days' notice to the stockholder at any time. Shares held by a
Keogh plan or IRA and shares issued in certificate form are not eligible for
telephone exchange or redemption.
DISTRIBUTIONS
The Board of Directors will determine the amounts to be distributed to the
holders of shares and the time or times such distributions will be made.
Currently, it is contemplated that all or a portion of net investment income, if
any, will be distributed quarterly, and that any remaining net investment income
and any net realized capital gains will be distributed annually, generally in
December. The amount of net investment income to be distributed, and the
characterization of Fund distributions for tax purposes, may be affected, among
other factors, by foreign currency exchange losses. See "Tax Aspects".
Distributions of net income and capital gains, if any, will be reinvested
without a sales charge in full or fractional shares of the Fund on the payment
date using the net asset value of the Fund determined on the ex-dividend date
(the business day after the record date). Distributions elected to be taken in
cash will be made on the payment date. (The Purchase Application form contains a
distribution option election.) Once an election is made, it may be changed at
any time and will be effective for the next distribution the record date of
which is more than five days after receipt by CGFSC of the change of election.
(The notice of such a change should be sent to the address of CGFSC set forth
under "Purchase of Shares".) Investors electing to receive their distributive
share of the fund's net investment income and any net realized capital gains in
fund shares will have to pay any taxes on such distributions.
Prior to purchasing shares of the Fund, the impact of declared dividends or
declared capital gains distributions should be carefully considered. Any such
dividends or capital gains distributions paid shortly after a purchase of shares
by an investor prior to the record date will have the effect of reducing the per
share net asset value of his shares by the amount of the dividends or
distributions. Such dividends or capital gains distributions, although in effect
a return of principal, are subject to taxes, calculated at ordinary income or
long-term capital gains rates. See "Tax Aspects" for further information
regarding the taxation of distributions.
TAX ASPECTS
For the fiscal year ended September 30, 1995, the Fund believes that it
qualified for tax treatment as a "regulated investment company" ("RIC") under
Subchapter M of the Internal Revenue Code of 1986 (the "Code"), and intends to
be able to continue to so qualify in future years. Qualification as a RIC allows
the Fund to qualify for "pass-through" tax treatment under the federal income
tax laws, which means the Fund, subject to certain conditions and requirements,
will not be subject to United States federal income tax on amounts it
distributes to its stockholders. Accordingly, the Fund plans to distribute
substantially all of its net investment income and net capital gains to its
stockholders.
RICs are subject to a nondeductible 4% excise tax on the excess (if any) of the
"required distribution" for a calendar year over the "distributed amount" for
such year. To avoid imposition of such tax, a RIC generally will have to
distribute in each calendar year at least 98% of its ordinary income for such
calendar year and at least 98% of its capital gains for the 12-month period
ending on October 31 of such year. The Fund intends to make sufficient
distributions each year to avoid imposition of the excise tax.
The Fund intends to qualify for and, if the Fund determines it to be in the best
interest of the stockholders, to make the election provided for in Section 853
of the Code to treat certain foreign taxes paid by the Fund as paid by the
stockholders. As a result, each stockholder may be required to include in income
his proportionate share of such foreign taxes and may elect to deduct his share
of such foreign taxes or to credit such foreign taxes against his federal income
tax liability, subject to the provisions and limitations of the Code relating to
foreign tax credits.
Distributions of the Fund's net investment income and net realized short-term
capital gains will generally be taxable to stockholders as ordinary income.
Distributions paid from long-term capital gains will generally be taxable as
long-term capital gains, regardless of the holding period of the Fund shares.
The Fund will inform stockholders of the source and nature of the dividends and
distributions at the time they are paid. Events subsequent to a dividend or
distribution may cause the dividend or distribution to be recharacterized, in
whole or in part, for U.S. federal income tax purposes. For example, if the fund
incurs foreign currency losses that eliminate its tax-basis `earnings and
profits', then distributions made during the year may be recharacterized as
return of capital distributions for U.S. income tax purposes, rather than income
distributions, thereby reducing each shareholder's basis in his Fund shares.
Stockholders should take note that any dividends and distributions on Fund
shares received shortly after their purchase, although in effect a return of
capital, are also subject to federal income tax. Dividends and distributions
paid out of the Fund's income and gains will be taxable to stockholders whether
received in cash or reinvested in additional shares. Any loss recognized upon
the sale of shares held for six months or less will be treated as a long-term
capital loss to the extent of any distributions of long-term capital gains
during the period the shares were held. Dividends and distributions payable to
stockholders of record as of a date in October, November or December of any year
will be deemed to have been paid by the Fund and received by stockholders on
December 31 if the dividends are paid by the Fund at any time during the
following January.
Hedging and Other Transactions
The Fund is currently authorized to engage in Forward Contracts and to invest in
Options, Futures Contracts, Options on Futures Contracts and Swaps to hedge
against changes in interest rates and foreign currency exchange rates and as a
substitute for an underlying investment. Certain of these transactions may be
"Section 1256 contracts". Gains or losses on Section 1256 contracts generally
are treated as 60% long-term and 40% short-term ("60/40") capital gains or
losses. Any Section 1256 contracts that are held by the Fund at the end of a
taxable year (and, generally, for purposes of the 4% excise tax, on October 31
of each year) are "marked-to-market", with the result that unrealized gains or
losses are treated as though they were realized and the resulting gain or loss
is generally treated as a 60/40 gain or loss.
Generally, any such hedging transactions undertaken by the Fund may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may affect
the character of gains or losses realized by the Fund. For example, Hedging
Transactions may convert gains which would otherwise be taxable as long-term
capital gain into short-term capital gain, which is taxed as ordinary income
when distributed to stockholders. In addition, any losses realized by the Fund
on positions that are part of a straddle may be deferred under the straddle
rules, rather than being taken into account in calculating the taxable income
for the taxable year in which such losses are realized. Because the straddle
rules are complex and their interpretation is unclear, the tax consequences to
the Fund of Hedging Transactions are uncertain.
The Fund may make one or more of the elections available under the Code that are
applicable to straddles. If the Fund makes any of the elections, the amount,
character and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
elections made. The rules applicable under certain of the elections may operate
to accelerate the recognition of gains or losses from the affected straddle
positions.
Because application of the straddle rules may affect the character of gains or
losses, defer losses and/or accelerate the recognition of gains or losses from
the affected straddle positions, the amount that must be distributed to
stockholders, and that will be taxed to stockholders as ordinary income or
long-term capital gain, may be increased or decreased as compared to a fund that
did not engage in such Hedging Transactions.
In addition, under the recently enacted "conversion transaction" provisions of
the Code, certain gains derived from the Fund's hedging or other activities may
be recharacterized as ordinary income for federal income tax purposes. The
application of these provisions is expected to be further defined by regulations
to be issued by the Treasury Department. The Adviser will take these provisions,
and any subsequent regulations, into account in assessing the hedging and other
strategies of the Fund.
The diversification requirements applicable to the Fund's assets and other
restrictions imposed on the Fund by the Code may limit the extent to which the
Fund will be able to engage in transactions in Forward Contracts, Options,
Futures Contracts, Options on Futures Contracts or Swaps.
Currency Fluctuations -- "Section 988" Gains or Losses
Under the Code, gains or losses attributable to fluctuations in exchange rates
that occur between the time the Fund accrues interest or other receivables or
accrues expenses or other liabilities denominated in a foreign currency and the
time the Fund actually collects such receivables or pays such liabilities
generally are treated as ordinary income or ordinary loss. Gains or losses with
respect to Forward Contracts and certain Options, Futures Contracts and Options
on Futures Contracts are generally treated as ordinary income or loss, although
an election is available under certain circumstances that would result in
capital gain or loss treatment. In addition, gains or losses on the disposition
of debt securities denominated in a foreign currency attributable to
fluctuations in the value of the foreign currency between the date of
acquisition of the security and the date of disposition are generally treated as
ordinary gain or loss. These gains or losses, referred to under the Code as
"Section 988" gains or losses, may increase or decrease the amount of the Fund's
investment company taxable income to be distributed to its stockholders as
ordinary income, rather than increasing or decreasing the amount of the Fund's
capital gains or losses.
Certain Foreign Tax Consequences
Foreign securities such as those to be purchased by the Fund may be subject to
foreign taxes, which could reduce the yield on such securities, although a
stockholder otherwise subject to United States federal income taxes may be
entitled to claim a credit or deduction for such tax purposes, subject to
certain limitations. The Statement of Additional Information provides additional
details on these tax aspects.
The foregoing is a general and abbreviated summary of tax consequences of
investment in the Fund. Additional details concerning federal and foreign tax
consequences are contained in the Statement of Additional Information. Investors
are urged to consult their own tax advisers to determine the effect of
investment in the Fund upon their individual tax situations.
DESCRIPTION OF CAPITAL STOCK
The Fund is a series within the Bailard, Biehl & Kaiser International Fund
Group, Inc., an open-end management investment company organized on June 12,
1990 as a Maryland corporation (the "Company"). Currently, the Company has two
series, the Fund and the Bailard, Biehl & Kaiser International Equity Fund (the
"Equity Fund"). Further series may be added, without stockholder approval, but
the Company has no immediate plans to do so.
The Company has authorized the issuance of up to 1,000,000,000 shares of Common
Stock, par value $.0001, in one or more series. Currently, the Fund and the
Equity Fund are each authorized to issue 100,000,000 shares of Common Stock.
When issued, shares in the Fund will be fully paid and non-assessable and will
have no preemptive, conversion or exchange rights.
Shares of each series are entitled to one vote for all purposes. Shares of each
series vote as a single class with respect to matters, such as election of
directors, that affect all series in substantially the same manner. As to
matters affecting each series separately, such as approval of agreements with
investment advisers, shares of each series vote as separate series. Shares of
each series are entitled to dividends as determined by the Board of Directors
and, in liquidation of the Fund, are entitled to receive the net assets of that
series. Stockholders are entitled to require the Fund to redeem their shares,
and the Fund may redeem shares under certain circumstances, as set forth under
"Redemption of Shares". The transfer of shares, other than by redemption, is
subject to restrictions in some jurisdictions.
The voting rights of the shares are non-cumulative, which means that the holders
of more than 50% of the shares voting for the election of directors can elect
100% of the directors if they choose to do so. In such event, the holders of the
remaining shares voting will not be able to elect any director. The Company is
not required to hold annual meetings for the election of directors or otherwise.
Special meetings may be called by the Chairman of the Board, the Board of
Directors, or the President or by stockholders entitled to cast at least 10% of
the shares entitled to vote. The Company will assist in stockholder
communications with respect to any meeting duly called by the holders of its
shares.
A full statement of the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the shares of each
series of stock which the Company is authorized to issue and the differences in
the relative rights and preferences between the shares of each series to the
extent that they have been set, and the authority of the Board of Directors to
set the relative rights and preferences of subsequent series, will be furnished
by the Company to any stockholder, without charge, upon request to the Secretary
of the Company at its principal office.
PERFORMANCE INFORMATION
From time to time, the Fund may advertise its total return. This figure is based
upon historic earnings and is not intended to indicate future performance.
"Total return" refers to the average annual rate of return of an investment
based on its public offering price and reflects all income earned by the Fund,
any appreciation or depreciation of the Fund's assets and all expenses incurred
by the Fund for the stated period, including, for periods prior to October 1,
1993, an assumed 1% annual advisory fee charged by the Adviser to its clients.
See "Management". This figure is computed by calculating to the end of a
specified period the percentage change in value of an investment of $1,000,
assuming reinvestment of all income and capital gain distributions.
<PAGE>
DISTRIBUTOR
The Distributor of the Fund's shares is BB&K Fund Services, Inc., a registered
broker-dealer and a wholly owned subsidiary of Holdings. The principal business
address of BB&K Fund Services, Inc. is 2755 Campus Drive, San Mateo, California
94403. BB&K Fund Services, Inc. receives no commission or compensation for
acting as the Fund's agent in the continuous public offering of the Fund's
shares.
ADMINISTRATIVE SERVICES
The Company, on behalf of the Fund, has entered into an Administration Agreement
(the "Administration Agreement") with Investment Company Administration
Corporation ("ICAC"). Pursuant to such agreement, ICAC provides certain
administrative services in connection with the management of the Fund's
operations. Such services include: (i) filing applications under state law to
register the Fund's shares for sale, and to register the Company and/or the
Company's officers to sell the Fund's shares, (ii) assisting the Fund's
accountants in preparing financial reports, (iii) assisting the Fund's attorneys
in preparing amendments to the Fund's registration statement, any proxy
materials and other forms and reports to be filed with the SEC, (iv) preparing
periodic reports to stockholders, (v) monitoring compliance with the Fund's
investment policies and restrictions, and (vi) other administrative matters. As
compensation for such services, the Fund pays ICAC an annual fee of $32,500.
TRANSFER AGENT AND CUSTODIAN
Transfer agent and dividend paying agent services are provided by Chase Global
Funds Services Company, P.O. Box 2798, Boston, Massachusetts 02208, an affiliate
of The Chase Manhattan Bank, N.A.
Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts 02109,
acts as Custodian of the Fund's assets and has been authorized to cause
securities and other assets of the Fund to be held in separate accounts with
various subcustodians in conformity with Section 17(f) of the 1940 Act and the
rules thereunder.
EXPERTS
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110, has been
selected as independent accountants for the Fund and provides auditing services,
including review and consultation in connection with various filings by the Fund
with the SEC and tax authorities.
The information under "Financial Highlights" for the five years ended September
30, 1995 in this Prospectus and the financial statements as of September 30,
1995 incorporated by reference into the Statement of Additional Information have
been so included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in accounting and
auditing.
<PAGE>
APPENDIX A
CORPORATE BOND AND COMMERCIAL PAPER RATINGS
Corporate Bonds
Moody's Investors Service, Inc. ("Moody's"). Bonds rated Aa by Moody's are
judged by Moody's to be of high quality by all standards. Together with bonds
rated Aaa (Moody's highest rating), they comprise what are generally known as
high-grade bonds. Aa bonds are rated lower than Aaa bonds because margins of
protection may not be as large as those of Aaa bonds, or fluctuations of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than those
applicable to Aaa securities. Bonds that are rated A by Moody's possess many
favorable investment attributes and are to be considered as upper medium-grade
obligations. Factors giving security to principal and interest are considered
adequate, but elements may be present that suggest a susceptibility to
impairment sometime in the future.
Standard & Poor's Corporation ("S&P"). Bonds rated AA by S&P are judged by S&P
to have a very strong capacity to pay interest and principal and differ only in
a small degree from issues rated AAA (S&P's highest rating). Bonds rated AAA are
considered by S&P to be the highest grade obligations and the capacity to pay
interest and principal is extremely strong. Bonds rated A by S&P have a strong
capacity to pay principal and interest, although they are somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions.
Commercial Paper
Moody's. The Prime rating is the highest commercial paper rating assigned by
Moody's. Issuers within this Prime category may be given ratings 1, 2 or 3,
depending on their capacity for repayment. Issuers rated Prime-1 (or supporting
institutions) have a superior ability for repayment of senior short-term debt
obligations. Prime 1 repayment ability will often be evidenced by the issuer's
leading market position in well-established industries, high rates of return on
funds employed, conservative capitalization structures with moderate reliance on
debt, and ample asset protection. Also, a Prime-1 issuer may have broad margins
in earnings coverage of fixed financial charges, high internal cash generation
and a well established access to a range of financial markets and assured
sources of alternative liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong capacity for
repayment of senior short-term debt obligations. Issuers rated Prime-2 will
evidence many of the characteristics of Prime-1 issuers, although to a lesser
degree. Earnings trends and coverage ratios are sound but more subject to
variation. Capital characteristics may be more affected by external conditions.
Ample alternative liquidity is maintained.
S&P. Ratings are graded into four categories, ranging from A for the highest
quality obligations to D for the lowest. Issues rated A are regarded as having
the greatest capacity for timely payment. Issues in this category are further
refined with the designations 1, 2, and 3 to indicate the relative degree of
safety. Issues rated A-1 have a very strong degree of safety regarding timely
payment. Issues rated A-2 have a strong capacity for timely payment. However,
the relative degree of safety is not as overwhelming as for issues designated
A-1.
<PAGE>
APPENDIX B
HEDGING AND OTHER TRANSACTIONS
Forward Contracts. The Fund may enter into forward foreign currency exchange
contracts to attempt to minimize the risk to the Fund from adverse changes in
currency exchange rates ("Forward Contracts"). All such Forward Contracts will
be covered. In the case of a Forward Contract obligating the Fund to purchase a
foreign currency (a "long position"), the Fund may establish a segregated
account containing liquid assets ("Liquid Assets") equal to the purchase price
of the Forward Contract due on the settlement date (less any margin on deposit).
Liquid Assets include cash, U.S. Government securities and other liquid high
grade debt obligations. Alternatively, the Fund may cover a long position by
purchasing a put option on the same Forward Contract with a strike price as high
or higher than the price of the Forward Contract held by the Fund (or, if lower
than the price of the Forward Contract held by the Fund, the Fund may segregate
Liquid Assets equal to the difference).
In the case of a Forward Contract obligating the Fund to sell a foreign currency
(a "short position"), the Fund may segregate Liquid Assets equal to the market
value of the currency underlying the Forward Contract (less any margin on
deposit, but not less than the market price at which the short position was
established). Alternatively, the Fund may cover the Forward Contract by (i)
entering into an offsetting position or transaction, (ii) owning the currency
underlying the Forward Contract, or (iii) holding a call option permitting the
Fund to purchase the same Forward Contract at a price no higher than the price
at which the short position was established (or, if higher, the Fund may
segregate Liquid Assets equal to the difference).
Options on Debt Securities and Foreign Currencies. The Fund may write covered
put and call options and purchase put and call options on debt securities and
foreign currencies that are traded on United States and foreign exchanges and
over-the-counter to attempt to minimize the risk to the Fund from adverse
changes in currency exchange and interest rates and as a substitute for an
underlying investment ("Options").
For example, a decline in the value of a foreign currency in which portfolio
securities are denominated will reduce the value of such securities in U.S.
Dollars, even if their value in the foreign currency remains constant. In order
to protect against such reductions in the value of portfolio securities, the
Fund may purchase put Options on the foreign currency. If the value of the
foreign currency does decline, the Fund will have the right to sell such
currency for a fixed amount and will thereby offset, in whole or in part, the
adverse effect on its portfolio that otherwise would have resulted.
Conversely, when the Fund predicts an increase in the value of a currency in
which securities to be acquired are denominated, the Fund may purchase call
Options on the foreign currency. The purchase of such Options could offset, at
least partially, the effects of the adverse movements in exchange rates.
However, the benefit to the Fund derived from purchases of Options will be
reduced by the amount of the premium and related transaction costs. In addition,
where currency exchange rates do not move in the direction or to the extent
predicted, the Fund could sustain losses that would require it to forego a
portion or all of the benefits of advantageous changes in such rates.
The Fund may also purchase Options on debt securities to hedge against interest
rate changes that adversely affect the value of a portfolio security. For
example, if the Fund anticipates a decline in the market value of a portfolio
security due to rising interest rates, it may purchase put Options on the
security. If the value of the security does decline, the Fund will have the
right to sell the security for a fixed amount and will thereby offset, in whole
or in part, the adverse effect that would otherwise have been caused by rising
interest rates.
Where the Fund predicts a change in the market value of a security to be
acquired that would increase the cost of such security, the Fund may purchase
call Options thereon. The purchase of such Options could offset, at least
partially, the effect of declining interest rates. The use of Options to hedge
against adverse movements in interest rates is subject to the same limitations
and risks of loss as the use of Options to hedge against adverse movements in
exchange rates.
The Fund may write put and call Options for the same types of hedging purposes.
For example, when the Fund anticipates a decline in the value of
foreign-currency denominated securities due to adverse fluctuations in exchange
rates it could, instead of purchasing a put Option, write a call Option on the
relevant currency. If the expected decline occurs, the Option will most likely
not be exercised and the diminution in value of portfolio securities will be
fully or partially offset by the amount of the premium received. Similarly,
instead of purchasing a call Option to hedge against an anticipated increase in
the cost of securities to be acquired, the Fund could write a put Option on the
relevant currency that, if rates move in the manner projected, will expire
unexercised and allow the Fund to hedge such increased cost up to the amount of
premium. The writing of an Option constitutes only a partial hedge up to the
amount of the premium received, and only if interest or currency exchange rates
move in the expected direction. If this does not occur, the Option may not be
offset by the amount of the premium. Through the writing of Options, the Fund
may also be required to forego all or a portion of the benefits that might
otherwise have been obtained from favorable movements in interest or exchange
rates.
All put and call Options written by the Fund will be covered. The Fund may cover
a put Option by (i) establishing a segregated account containing Liquid Assets
equal to the strike price of the put Option written by the Fund (less any margin
on deposit), (ii) selling short the security or currency underlying the put
Option at the same or higher price than the strike price of the put Option
written by the Fund (or, if lower, the Fund may segregate Liquid Assets equal to
the difference), or (iii) purchasing a put Option with a strike price the same
as or higher than the strike price of the put Option sold by the Fund (or, if
lower, the Fund may segregate Liquid Assets equal to the difference).
The Fund may cover a call Option by (i) segregating Liquid Assets equal to the
market value of the security or currency underlying the call Option (less any
margin on deposit) but not less than the strike price of the call Option, (ii)
owning the security or currency underlying the Option or (iii) holding a
separate call Option on that security or currency with a strike price no higher
than the strike price of the Option sold by the Fund (or, if higher, the Fund
may segregate Liquid Assets equal to the difference).
If the Fund, as the writer of an Option, wishes to terminate its obligation, it
may effect a closing purchase transaction. This is accomplished by buying an
Option of the same series as the Option previously written. The effect of the
purchase is that the Fund's position will be canceled. However, a writer may not
effect a closing purchase transaction after being notified of the exercise of an
Option. Likewise, where the Fund holds an Option, it may liquidate its position
by effecting a closing sale transaction. This is accomplished by selling an
Option of the same series as the Option previously purchased. There is no
guarantee that either a closing purchase or a closing sale transaction can be
effected.
The Fund will realize a profit from a closing transaction if the price of the
transaction is less than the premium received from writing the Option or is more
than the premium paid to purchase the Option; the Fund will realize a loss from
a closing transaction if the price of the transaction is more than the premium
received from writing the Option or is less than the premium paid to purchase
the Option. Because increases in the market price of a call Option will
generally reflect increases in the market price of the underlying security or
currency, any loss resulting from the purchase of a call Option to close out a
previously written call Option is likely to be offset in whole or in part by
appreciation of the Fund's portfolio securities denominated in such currency.
Futures Contracts on Debt Securities and Foreign Currencies. The Fund may enter
into exchange-traded contracts for the purchase or sale for future delivery of
debt securities and foreign currencies to attempt to minimize the risk to the
Fund from adverse changes in currency exchange and interest rates and as a
substitute for an underlying investment("Futures Contracts").
With respect to debt securities, the acquisition or sale of Futures Contracts is
designed to protect the Fund from fluctuations in interest rates without
actually buying or selling the underlying securities. For example, if the Fund
owns long-term bonds, and interest rates were expected to increase, the Fund
might enter into a Futures Contract for the sale of debt securities. Such a sale
would have much the same effect as selling an equivalent value of long-term
bonds owned by the Fund. If interest rates did increase, the value of the debt
securities in the portfolio would decline, but the value of the Futures Contract
to the Fund would increase at approximately the same rate, thereby keeping the
net asset value of the Fund from declining as much as it otherwise would have.
The Fund could accomplish similar results by selling bonds with long maturities
and investing in bonds with short maturities. However, since the futures market
is more liquid that the cash market, the use of Futures Contracts as an
investment technique allows the Funds to maintain a defensive position without
having to sell its portfolio securities.
Similarly, when it is expected that interest rates may decline, Futures
Contracts may be purchased to attempt to hedge against anticipated purchases of
long-term bonds at higher prices. Since the fluctuations in the value of Futures
Contract should be similar to that of long-term bonds, the Fund could take
advantage of the anticipated rise in the value of long-term bonds without
actually buying them until the market had been established. At that time, the
Futures Contract could be liquidated and the Fund could then buy long-term bonds
on the cash market.
All Futures Contracts to which the Fund is a party will be covered. A Futures
Contract obligating the Fund to purchase a debt security or foreign currency is
covered if the Fund segregates, in a special account with the Custodian, Liquid
Assets equal to the purchase price of the Futures Contract due on the settlement
date (less any margin on deposit). The Fund may also cover a long position by
purchasing a put option on the same Futures Contract with an exercise price as
high or higher than the price of the Futures Contract held by the Fund (or, if
lower, the Fund may segregate Liquid Assets equal to the difference).
A Futures Contract in which the Fund has the position of a seller is covered if
the Fund segregates, in a special account with the Custodian, Liquid Assets
equal to the market value of the security or currency underlying the Futures
Contract (less any margin on deposit, but not less than the market price at
which the short position was established). Alternatively, the Fund may cover
such a Futures Contract by (i) owning the security or currency underlying the
Futures Contract or (ii) holding a call option permitting the Fund to purchase
the same Futures Contract at a price no higher then the price at which the short
position was established (or, if higher, the Fund may segregate Liquid Assets
equal to the difference).
If the Fund enters into a Futures Contract, it will be subject to initial and
variation margin requirements. At the time a Futures Contract is purchased or
sold, the Fund must allocate cash or securities as an initial margin deposit
("initial margin"). It is expected that initial margin will be approximately
1-1/2% to 5% of a Futures Contract's face value. A Futures Contract is valued
("marked to market") daily. The Fund will be required to increase its margin
deposit ("variation margin") when the value of a Futures Contract decreases and,
conversely, the Fund will receive payment for any increase in the Futures
Contract's value.
Although Futures Contracts, by their terms, call for the actual delivery or
acquisition of an asset, in most cases the contractual obligation is fulfilled
(or "offset") before the expiration date of the Futures Contract without having
to make or take delivery of the underlying asset. Offset of a Futures Contract
is accomplished by buying (or selling, as the case may be) on a commodities
exchange an identical Futures Contract calling for delivery in the same month.
Such a transaction, which is effected through a member of an exchange, cancels
the obligation to make or take delivery of the underlying asset.
The ordinary spreads between prices in the cash and futures markets, due to
differences in the natures of those markets, are subject to distortions that may
prevent the Fund from successfully using Futures Contracts. First, all
participants in the futures markets are subject to initial and variation margin
requirements. Rather than meeting variation margin requirements, investors may
close Futures Contracts through offsetting transactions, which could distort the
normal relationship between the cash and futures markets. Second, the liquidity
of the futures markets depends on participants entering into offsetting
transactions rather than making or taking delivery. To the extent participants
make or take delivery, liquidity in the futures markets could be reduced, thus
producing distortion. Third, from the point of view of speculators, margin
requirements in the futures market are less onerous than margin requirements in
the cash market. Therefore, increased participation by speculators in the
futures market may cause temporary price distortions. Due to the possibility of
distortion, a correct prediction of general interest rate and currency exchange
rate trends by the Fund may not result in a successful transaction.
If the Fund's judgment about the general direction of interest or currency
exchange rates is incorrect, the Fund's overall performance would be poorer than
if it had not entered into any such contract. If the Fund has hedged against the
possibility of a movement in interest or exchange rates that would adversely
affect the price of its portfolio securities and such rates did not move as
anticipated, the Fund would lose part or all of the benefit of the increased
value of its securities that it has hedged because it will have offsetting
losses in its futures positions. In addition, in such situations, if the Fund
had insufficient cash and were unable to effect a closing transaction, it might
have to sell securities from its portfolio to meet daily variation margin
requirements. Such sales of securities may, but will not necessarily, be at
increased prices that reflect the rising market. The Fund may also have to sell
securities at a time when it may be disadvantageous to do so.
Options on Futures Contracts on Debt Securities and Foreign Currencies. The Fund
may purchase and write options on Futures Contracts to minimize the risk to the
Fund from adverse changes in currency exchange and interest rates and as a
substitute for an underlying investment ("Options on Futures Contracts").
A call Option on a Futures Contract written by the Fund constitutes a partial
hedge against declining prices of the securities or currency that are
deliverable upon exercise of the Futures Contract. If the price of the Futures
Contract at expiration of the Option is below the exercise price, the Fund will
retain the full amount of the Option premium, which provides a partial hedge
against any decline that may have occurred in the Fund's portfolio holdings. A
put Option on a Futures Contract written by the Fund constitutes a partial hedge
against increasing prices of the securities or currency that are deliverable
under the Futures Contract. If the price of the Futures Contract at expiration
of the Option is higher than the exercise price, the Fund will retain the full
amount of the Option premium, which provides a partial hedge against an increase
in the price of securities that the Fund intends to purchase.
If a put or call option on a Futures Contract that the Fund has written is
exercised, the Fund will incur a loss, which will be reduced by the amount of
the premium the Fund received. Depending on the degree of correlation between
changes in the value of its portfolio securities and changes in the value of its
futures positions, the Fund's losses from Options on Futures contracts may be
reduced or increased by changes in the value of its portfolio securities.
All Options on Futures Contracts written by the Fund will be covered. In the
case of the sale of a call Option on a Futures Contract, the Fund may cover by
(i) entering into a long position on the same Futures Contract at a price no
higher than the strike price of the call Option on the Futures Contract (or if
higher, the Fund may segregate Liquid Assets equal to the difference), (ii)
owning the security or currency underlying the Futures Contract on which the
Fund holds the Option, or (iii) holding a separate call Option permitting the
Fund to purchase the same Futures Contract at a price no higher than the strike
price of the call Option on the Futures Contract sold by the Fund (or, if
higher, the Fund may segregate Liquid Assets equal to the difference.)
In the case of the sale of a put Option on a Futures Contract obligating the
Fund to buy a Futures Contract, the Fund may establish a segregated account
containing Liquid Assets equal to the settlement value of the Futures Contract
underlying the Option on a Futures Contract. Alternatively, the Fund may cover
the Option on a Futures Contract by holding a put Option permitting the Fund to
sell the same Futures Contract at a price the same as or higher than the strike
price of the put Option sold by the Fund (or, if lower, the Fund may segregate
Liquid Assets equal to the difference).
The amount of risk the Fund assumes when it purchases an Option on a Futures
Contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of such an
option also entails the risk that changes in the value of the underlying Futures
Contract will not be fully reflected in the value of the option purchased.
Swaps and Related Caps, Floors and Collars
The Fund may enter into interest rate and foreign currency swaps and related
caps, floors and collars to minimize the risk to the Fund from adverse changes
in currency exchange and interest rates and as a substitute for an underlying
investment (collectively, "Swaps").
An interest rate Swap is an agreement between two borrowers to exchange a stream
of interest payments on an agreed hypothetical or "notional" principal amount.
No principal amount is exchanged between the counterparties to an interest rate
Swap. In the typical Swap, one party agrees to pay a fixed rate on a notional
principal amount, while the counterparty pays a floating rate based on one or
more reference interest rates such as the London Interbank Offered Rate
("LIBOR"), a specified bank's prime rate, or U.S. Treasury Bill rates. Interest
rate Swaps also permit counterparties to exchange a floating rate obligation
based upon one reference interest rate (such as LIBOR) for a floating rate
obligation based upon another reference interest rate (such as U.S. Treasury
Bill rates).
A currency Swap is an agreement to exchange fixed or floating rate interest
obligations -- and, in some transactions, principal obligations -- in different
currencies on the basis of (i) the actual principal amount or a notional
principal amount and (ii) one or more reference interest rates.
For example, the Fund may have the right to receive interest at fixed rates on
some of its portfolio securities. If interest rates were rising (and therefore
the value of portfolio securities were declining), the Fund could hedge the
value of such securities by swapping its right to receive a fixed rate of
interest for a counterparty's right to receive a floating rate. Similarly, the
Fund may have the right to receive interest payments on its portfolio securities
denominated in the French Franc. If the Franc were suffering an adverse movement
of its exchange rate, the Fund could hedge the value of such securities by
swapping its right to receive Francs for the right to receive U.S. Dollars or
another currency.
The Fund will usually enter into Swaps on a net basis, i.e., where the two
parties make net payments, with the Fund recei`ving or paying, as the case may
be, only the net amount of the two payments. The net amount of the excess, if
any, of the Fund's obligations over its entitlements, with respect to each Swap
will be accrued, and an amount of Liquid Assets having an aggregate net asset
value at least equal to the accrued excess will be maintained in a segregated
account. If the Fund enters into a Swap on other than a net basis, the Fund will
maintain in the segregated account the full amount of the Fund's obligations
under the Swap. Neither a Swap nor any margin or collateral arrangement with
respect to a Swap is deemed to involve a pledge of the Fund's assets, the
issuance of a senior security or a borrowing.
The Swap market has grown substantially in recent years with a significant
number of banks and financial services firms acting both as principals and as
agents utilizing standardized Swap documentation. Caps, floors and collars are
more recent innovations, and they are less liquid than other Swaps. There can be
no assurance that the Fund will be able to enter into or offset Swaps at any
specific time or at prices or on other terms that are advantageous. In addition,
although the terms of Swaps may provide for termination under certain
circumstances, there can be no assurance that the Fund will be able to terminate
or offset a Swap on favorable terms.
Additional Risks of Forward Contracts, Options, Futures Contracts, Options on
Futures Contracts and Swaps. Hedging transactions may be effective to protect
the Fund against certain changes in interest and currency exchange rates.
However, such transactions do not eliminate fluctuations in the prices of
portfolio securities or prevent losses if the prices of such securities decline.
The Fund's ability to hedge all or a portion of its portfolio through
transactions in Forward Contracts, Options, Futures Contracts, Options on
Futures Contracts and Swaps depends on the degree to which price movements in
underlying debt securities or currencies correlate with price movements in the
relevant portion of the Fund's portfolio. In addition, the use of Futures
Contracts and Options on Futures Contracts involves the risk of imperfect
correlation of movements in the prices of Futures Contracts and Options on
Futures Contracts, and movements in the prices of the underlying assets. If the
price of a Futures Contracts or an Option on a Futures Contract moves more or
less than the price of the hedged debt securities or currency, the Fund will
experience a gain or loss that may not be completely offset by movements in the
price of the asset that is the subject of the hedge.
The Fund's ability to engage in transactions involving Options, Futures
Contracts, Options on Futures Contracts and Swaps will depend on the degree to
which liquid secondary markets in such instruments exist. Reasons for the
absence of a liquid market include the following: (i) there may be insufficient
trading interest in a particular instrument; (ii) restrictions may be imposed by
an exchange on opening transactions or closing transactions or both; (iii)
trading halts, suspensions or other restrictions may be imposed with respect to
particular classes or series of Options, Futures Contracts or Options on Futures
Contracts; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation ("OCC"), which effects the settlement of exchange traded
Options, may not at all times be adequate to handle current trading volume; or
(vi) one or more exchanges could, for economic or other reasons, decide or be
compelled at some future date to discontinue the trading of a particular
instrument (or a particular class or series of such instrument). There can be no
assurance that a liquid secondary market will exist for any particular
investment at any specific time. Thus it may not be possible for the Fund to
close certain of its positions.
The costs to the Fund of hedging transactions vary among the various hedging
techniques and also depend on such factors as the security or currency involved,
market conditions and the length of the contract or option period. Forward
Contracts and Swaps are usually conducted on a principal basis, and no brokerage
fees or commissions are therefore involved. However, the Fund will incur
brokerage commissions and related transaction costs when it purchases, writes or
invests in Options, Futures Contracts and Options on Futures Contracts.
Furthermore, the Fund's ability to engage in hedging transactions may be limited
by tax considerations.
Forward Contracts and Options on foreign currencies and Swaps are not traded on
markets regulated by the Commodity Futures Trading Commission ("CFTC") or (with
the exception of certain Options traded on national securities exchanges) by the
Securities and Exchange Commission ("SEC"), but are traded through financial
institutions acting as principals or agents. In an over-the-counter trading
environment, many of the protections afforded to exchange participants are not
available. For example, there are no daily price fluctuation limits, and adverse
market movements could therefore continue to an unlimited extent over a period
of time. Although the purchaser of an Option cannot lose more than the amount of
the premium plus related transaction costs, this entire amount could be lost.
Moreover, because the performance of over-the-counter Options, Forward Contracts
or Swaps is not guaranteed by the OCC or any other settlement agency, there is a
risk of counterparty default. Option writers and traders of Forward Contracts
and Swaps could also lose amounts substantially in excess of his or her initial
investments, due to the margin and collateral requirements associated with such
positions.
Options traded on national securities exchanges are within the jurisdiction of
the SEC, as are other securities traded on such exchanges. As a result, many of
the protections provided to traders on organized exchanges are available with
respect to such transactions. In particular, all Options entered into on a
national securities exchange are cleared and guaranteed by the OCC, thereby
reducing the risk of counterparty default. Further, a liquid secondary market in
such Options may be more readily available than in the over-the-counter market,
potentially permitting the Fund to liquidate open positions at a profit prior to
exercise or expiration, or to limit losses in the event of adverse market
movements.
Exchange-traded Options involve certain risks not presented by the
over-the-counter market. For example, exercise and settlement of such Options
must be made exclusively through the OCC, which has established banking
relationships in certain foreign countries for that purpose. As a result, the
OCC may, if it determines that foreign governmental restrictions or taxes would
prevent the orderly exercise or settlement of such Options, or would result in
undue burdens on the OCC or its clearing members, impose special procedures on
exercise and settlement, such as technical changes in the mechanics of delivery,
the fixing of dollar settlement prices or prohibitions on exercise.
The exchanges on which Options, Futures Contracts and Options on Futures
Contracts are traded may impose additional limitations governing the maximum
number of positions on the same side of the market and involving the same
underlying instrument that may be held by a single investor, whether acting
alone or in concert with others (regardless of whether such positions are held
or written on the same or different exchanges or held or written in one or more
accounts or through one or more brokers). In addition, the CFTC and the various
markets have established limits, referred to as "speculative position limits,"
on the maximum net long or net short positions that any person may hold or
control in a particular Futures Contract or Option on a Futures Contract. An
exchange may order the liquidation of positions found to be in violation of
these limits and it may impose other sanctions or restrictions. The Fund does
not believe that these trading and position limits will have an adverse impact
on the strategies for hedging the portfolio of the Fund.
Forward Contracts, Options, Futures Contracts, Options on Futures Contracts and
Swaps may be traded in foreign markets or on foreign exchanges. Such
transactions are subject to the risk of governmental actions affecting trading
in or the prices of foreign currencies. The value of such positions also could
be adversely affected by, among other things, (i) other foreign political and
economic factors, (ii) lesser availability than in the United States of data on
which to make trading decisions, (iii) delays in the Fund's ability to act upon
economic events occurring in foreign markets during non-business hours in the
United States, (iv) the imposition of different exercise and settlement terms
and procedures and margin requirements than in the United States and (v) lesser
trading volume.
Future Developments. The Fund proposes to take advantage of investment
opportunities in the area of Forward Contracts, Options, Future Contracts,
Options on Futures Contracts and Swaps that are not presently contemplated for
use by the Fund or that are not currently available but that may be developed,
to the extent such opportunities are both consistent with the Fund's investment
objectives and legally permissible investments for the Fund. Such opportunities,
if they arise, may involve risks that differ from or exceed those involved in
the activities described above. The Fund will not invest in such opportunities
without prior disclosure to investors.
<PAGE>
Investment Adviser
Bailard, Biehl & Kaiser, Inc.
2755 Campus Drive
San Mateo, California 94403
Transfer Agent
Chase Global Funds Services Company
Boston, Massachusetts
Custodian and Accountant
Brown Brothers Harriman & Co.
Boston, Massachusetts
Counsel
Howard, Rice, Nemerovski, Canady, Falk & Rabkin
San Francisco, California
Distributor
BB&K Fund Services, Inc.
2755 Campus Drive
San Mateo, California 94403
Independent Accountants
Price Waterhouse LLP
Boston, Massachusetts
IRA Custodian
The Chase Manhattan Bank, N.A.
New York, New York
International Bond Fund Officers and Directors
Peter M. Hill, Chairman, Director
Burnice E. Sparks, Jr., President, Director
Tina Thomas, Treasurer
Janis M. Horne, Secretary
Shirley L. Clayton, Director
David B. Shippey, Director
James C. Van Horne, Director
Investor Services Department
(800) 882-8383
<PAGE>
As filed with the Securities and Exchange
Commission on January 26, 1996
Registration No. 2-63270
File No. 811-6146
================================================================================
Part B
of
Form N-1A
REGISTRATION STATEMENT
BAILARD, BIEHL & KAISER INTERNATIONAL FUND GROUP, INC.
================================================================================
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
BAILARD, BIEHL & KAISER INTERNATIONAL EQUITY FUND
2755 Campus Drive
San Mateo, California 94403
This Statement of Additional Information is not a Prospectus,
but contains information in addition to that contained in the Prospectus which
may be of interest to some investors. This Statement of Additional Information
should be read in conjunction with the Prospectus dated January 26, 1996. You
can request the Prospectus by writing directly to us at the address above or by
calling us at (800) 882-8383.
CONTENTS
Page
----
1. Investment Objectives and Policies....................................B-2
2. Directors and Officers................................................B-5
3. Right to Use Name.....................................................B-8
4. Investment Advisory and Other Services................................B-8
5. Brokerage.............................................................B-10
6. Net Asset Value for Purchase, Exchange
and Redemption of Shares..............................................B-11
7. Tax Aspects...........................................................B-12
8. Stockholder Information...............................................B-13
9. Performance Data......................................................B-13
10. Financial Statements..................................................B-13
---------------------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT
CONSTITUTE AN OFFER TO SELL SECURITIES.
---------------------------------------------------
The date of this Statement of Additional Information
is January 26, 1996.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Bailard, Biehl & Kaiser International Equity Fund (the "Fund")
is a non-diversified series of the Bailard, Biehl & Kaiser International Fund
Group, Inc., an open-end management investment company (the "Company"). The
Fund's primary investment objective is to seek capital appreciation. Current
income, while a factor in portfolio selection, is a secondary objective and will
be pursued only when consistent with the Fund's primary objective. The Fund
seeks to achieve its objectives by investing in foreign equity securities,
principally common stocks, preferred stocks and convertible securities. Foreign
securities include securities issued by U.S. companies whose assets are
primarily located or whose operations are primarily conducted outside of the
United States. The remainder of the portfolio is invested in short-term
obligations of U.S. and foreign companies and governments pending investment or
for protection against market declines.
While there is no limitation on the countries in which the
Fund may invest, other than such restrictions as may be imposed from time to
time by the Company's Board of Directors, investments will ordinarily be
concentrated in companies based in the Far East, Europe, the United Kingdom,
Canada and Australia and in governmental entities within those geographic areas.
The Fund may engage in certain hedging techniques to protect
against the effects of changes in currency exchange rates and market conditions.
Such techniques consist of forward foreign currency exchange contracts and
transactions in options, futures contracts and options on futures contracts on
foreign currencies and stock indices.
The Fund's investment activities are subject to certain
restrictions that are deemed "fundamental policies." These fundamental policies
may not be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities, defined to mean the vote of (A) 67% or
more of the voting securities present at a meeting of the stockholders, if the
holders of more than 50% of the outstanding voting securities of the Fund are
present or represented by proxy at such meeting; or (B) more than 50% of the
outstanding voting securities of the Fund, whichever is less. These fundamental
policies provide that the Fund will not:
1. Invest more than 25% of the value of its total assets in
the securities of companies primarily engaged in any one industry (other
than the United States Government and its agencies and instrumentalities),
except as indicated below; for this purpose, water, communications,
electric and gas utilities shall each be considered a separate industry,
and neither all national, regional or local governments (United States or
foreign), as a group, nor all international organizations (government or
private), as a group, nor all finance companies, as a group, shall be
considered as within a single industry.
2. Acquire more than 10% of the outstanding voting securities
of any one issuer.
3. Invest in companies for the purpose of exercising control
or management.
4. Purchase or sell real estate; provided that the Fund may
invest in securities secured by real estate or interests therein or issued
by companies which invest in real estate or interests therein.
5. Purchase or sell commodities or commodity contracts or
invest in put, call, straddle or spread options, or in interests in oil,
gas or other mineral exploration or development programs; provided,
however, that this policy will not prevent the purchase, ownership or sale
of warrants or other rights where the grantor of the warrants is the issuer
of the underlying securities ("grantor warrants"); provided, that the Fund
will not purchase a grantor warrant if, as a result thereof, the aggregate
market value of all purchased grantor warrants then owned exceeds 10% of
the total assets of the Fund taken at market value at the time of the
purchase of such grantor warrant. (Accordingly, this 10% limitation will
not apply to the acquisition or ownership of grantor warrants acquired
other than as a result of a purchase.) Moreover, and notwithstanding this
restriction, the Fund may purchase and sell foreign currencies on a current
basis and may engage in foreign currency and market hedging transactions,
including investing in, writing and purchasing forward contracts on foreign
currencies, and options, futures contracts and options on futures contracts
on foreign currencies and stock indices.
6. Issue senior securities, borrow money or pledge its assets,
except that the Fund may borrow from a bank as a temporary measure for
extraordinary or emergency purposes in amounts not exceeding 5% of its
total assets and except that the Fund may obtain such credit as may be
necessary for the clearance of purchases or sales of securities. For the
purpose of this restriction, margin or collateral arrangements with respect
to forward contracts, options, futures contracts and options on futures
contracts, are not deemed to be a pledge of assets and neither such
arrangements nor the purchase or sale of forward contracts, options,
futures contracts or options on futures contracts are deemed to be the
issuance of a senior security or a borrowing.
7. Purchase any securities on margin or effect short sales,
except that the Fund may obtain such credit as may be necessary for the
clearance of purchases and sales of portfolio securities. The deposit by
the Fund of initial or variation margin in connection with forward
contracts, options, futures contracts and options on futures contracts will
not be considered the purchase of a security on margin.
8. Engage in the business of underwriting securities issued by
others, or knowingly purchase securities subject to contractual
restrictions or legal restrictions on disposition in all of the principal
markets where traded if such purchase will result in more than 10% of the
value of its total assets (taken at market value) then being invested in
such securities1. This restriction also applies to repurchase agreements
maturing in over seven days. This restriction will not, however, preclude
the Fund from buying securities which are not registered for sale with the
Securities and Exchange Commission or otherwise marketable in the United
States, if marketable elsewhere.
9. Invest in securities of an issuer which, together with any
predecessor, has been in operation for less than three years if, as a
result, more than 5% of the Fund's total assets would then be invested in
such securities.
10. Participate on a joint or a joint and several basis in any
trading account in securities. (The "bunching" or combining of orders for
the sale or purchase of marketable portfolio securities with other accounts
under the management of the Fund's investment adviser to save brokerage
costs or achieve an average price among them is not deemed to result in a
securities trading account.)
- ------------------------
(1)If through (i) the appreciation of portfolio securities which are not readily
marketable, (ii) the depreciation of other investments of the Fund, or (iii) the
sale of assets to meet redemptions, the Fund should be in a position in which
more than 10% of the value of its assets are invested in securities which are
not readily marketable, the Fund will consider what steps, if any, to take to
protect against the resulting illiquidity.
11. Make loans of money or securities to any person or firm,
except through the purchase of debt securities in accordance with the
Fund's investment objectives and policies.
12. Purchase from or sell portfolio securities to its
officers, directors or other "interested persons" of the Fund as defined in
the Investment Company Act of 1940 (the "1940 Act").
13. Purchase or retain the securities of an issuer if, to the
Fund's knowledge, one or more of the officers or directors of the Company,
or one or more of the officers or directors of the Fund's investment
adviser, individually own beneficially more than 1/2 of 1% of the
securities of such issuer or together own beneficially more than 5% of such
securities.
For purposes of the 25% limit in paragraph 1 above, the Fund
deems each national government and such government's agencies and
instrumentalities to be a single industry. Similarly, the Fund deems a
particular regional government or local government (including the agencies and
instrumentalities of such government) to be a separate industry so long as
securities issued by such government are backed by the assets and revenues of
such government. The Fund treats all international organizations (government or
private) that have been assigned the same Standard Industrial Classification
Code as a single industry.
In determining the issuer of a foreign security, each national
government and each political subdivision, agency and instrumentality of each
nation and each supra-national entity of which such nation is a member is
considered a separate issuer. Issuers representing more than one nation will be
excluded in determining the percentage of any individual nation. Where foreign
securities are backed only by assets and revenues of a particular political
subdivision, agency or instrumentality, only such entity is considered to be the
issuer.
Unless otherwise specified, if a percentage restriction on
investment or utilization of assets set forth above is adhered to at the time an
investment is made, a later change in percentage resulting from changing values
or a similar type of event (such as a reduction in the size of the Fund
occasioned by the redemption of shares) will not be considered a violation of
the Fund's investment policies or restrictions.
In addition, the Investment Company Act of 1940 (the "1940
Act") and applicable state law prohibits the Fund from (i) purchasing the
securities of any registered open-end investment company and (ii) unless the
security is acquired pursuant to a plan of reorganization or a Securities and
Exchange Commission approved offer of exchange, investing its assets in more
than 3% or, together with other investment companies having the same investment
adviser, more than 10%, of the outstanding voting stock of any closed-end
investment company, more than 5% of its total value in any closed-end investment
company, or more than 10% of its total value in closed-end investment companies
as a group.
<PAGE>
DIRECTORS AND OFFICERS
The management of the Company, including the general overall
supervision of the Fund's portfolio transactions, is the responsibility of the
Board of Directors. The names and business addresses of the directors and
officers of the Company and their principal occupations and other affiliations
during the past five years are set forth below:
Principal Occupations
Office(s) Held and Other Affiliations
Name and Address With the Fund During the Past 5 Years
- ---------------- -------------- -----------------------
Peter M. Hill(1) Director and Director and officer of
2755 Campus Drive Chairman Bailard, Biehl & Kaiser,
San Mateo, CA 94403 Inc. (the "Adviser"),
currently Co-President and
Chief Investment Officer.
Director of BB&K Fund
Services, Inc. an NASD
registered broker dealer
("Fund Services"), since
June 1992.
Burnice E. Sparks, Jr.(1) Director and Director and officer of the
2755 Campus Drive President Adviser, currently Co-
San Mateo, CA 94403 President. Director and
Chief Executive Officer of
Fund Services since June
1992. Trustee and President
of Bailard, Biehl & Kaiser
Fund Group, a registered
investment company (the
"Fund Group").
Janis M. Horne(1) Secretary and Vice President and Portfolio
2755 Campus Drive Assistant Treasurer Manager of the Adviser,
San Mateo, CA 94403 Secretary of the Fund Group.
Assistant Treasurer of the
Fund Group since June 1993.
Tina Thomas(1) Treasurer and Vice President of the
2755 Campus Drive Assistant Secretary Adviser since June 1992.
San Mateo, CA 94403 Treasurer of Fund Services
since July 1993. Assistant
Secretary of the Fund Group
since June 1992. Treasurer
of the Fund Group since June
1993; Assistant Treasurer of
the Fund Group from June
1992 to June 1993. Joined
the Adviser in 1988 as
Director of Shareholder
Services.
- -------------------------
(1) "Interested person" of the Company, as defined in the 1940 Act.
Principal Occupations
Office(s) Held and Other Affiliations
Name and Address With the Fund During the Past 5 Years
- ---------------- -------------- -----------------------
Shirley L. Clayton(2) Director President and Chief Operating
TopoMetrix Officer of TopoMetrix, a
5403 Betsy Ross Drive manufacturer of scanning
Santa Clara, CA 95054-1162 probe microscopes, since
January 1996; Chief
Financial Officer from
June 1993 to January 1996.
Chief Financial Officer of
Cygnus Therapeutic Systems,
Inc., a biotechnology
company, from March 1990 to
June 1993. Chief Financial
Officer of Protein Design
Labs, Inc., a biotechnology
company, from October 1988
to March 1990. Trustee of
the Fund Group.
David B. Shippe(2) Director Prior to September 1983
5130 Enterprise Road associated with Saga
Santa Rosa, CA 95404 Corporation, a restaurant
and contract food service
business, his last position
being Vice President and
Treasurer. Trustee of the
Fund Group.
James C. Van Horne(2) Director A.P. Giannini Professor of
Graduate School of Business Finance at Graduate School
Stanford University of Business of Stanford
Stanford, CA 94305 University from September
1976 to the present. Deputy
Assistant Secretary of the
United States Treasury
Department from September
1975 to August 1976.
Director of Sanwa Bank
California and Montgomery
Street Income Securities,
Inc., a registered
investment company. Trustee
of the Fund Group.
- ------------------------------
(2)Member of the Audit Committee.
<PAGE>
The following table sets forth the compensation paid to the Company's
Directors during the fiscal year ended September 30, 1995.
<TABLE>
Compensation Table
<CAPTION>
Pension or Retirement Estimated Total Compensation
Aggregate Benefits Accrued as Annual From Company and Fund
Name of Person Compensation Part of Company Benefits Upon Complex(1)
and Position from Company Expenses Retirement Paid to Directors
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Peter M. Hill $500 (2),(3) $0 $0 $1,000
Director
Burnice E. Sparks, Jr. $500 (2),(3) $0 $0 $1,000
Director
Shirley L. Clayton $9,000 (6) $0 $0 $18,000
Director
David B. Shippey $10,000 (4) $0 $0 $20,000
Director
James C. Van Horne $10,000 (4) $0 $0 $20,000
Director
</TABLE>
The Company and the Fund Group reimburse each Director and Trustee
for travel and other out-of-pocket disbursements incurred in connection with
attending Board meetings. The Company and the Fund Group also reimburse other
travel expenses of Directors, Trustees and officers, including international
travel expenses, incurred incident to the performance of duties as a Director,
Trustee or officer.
- ---------------------------------
(1)A Fund Complex consists of investment companies that hold themselves out to
investors as related companies for purposes of investment and investor services,
have a common investment adviser or have an investment adviser that is an
affiliated person of the investment adviser of any other investment companies.
The company and the Fund Group are considered to be part of the same Fund
Complex
(2)Does not include fees paid to the Adviser pursuant to the Management
Agreement as described below under "INVESTMENT ADVISORY AND OTHER SERVICES".
(3)Consists of a $500 annual director fee.
(4)Consists of a $6,000 annual director fee plus $1,000 for each Board meeting
attended in person
<PAGE>
RIGHT TO USE NAME
Bailard, Biehl & Kaiser, Inc., a California corporation (the
"Adviser" or "Bailard, Biehl & Kaiser"), has granted the Company the right to
use the designation "Bailard, Biehl & Kaiser" in its name and has reserved the
right to withdraw its consent to the use of such designation by the Company
under certain conditions, including the condition that Bailard, Biehl & Kaiser
ceases to act as the Company's investment adviser, and to grant the use of such
name to others, including any other investment company.
INVESTMENT ADVISORY AND OTHER SERVICES
Management Agreement
The Fund has entered into an Investment Management Agreement
(the "Management Agreement") with Bailard, Biehl & Kaiser for investment
advisory and certain portfolio transaction and administrative services. The
Adviser, subject to the general supervision of the Company's Board of Directors,
is responsible for the overall management of the Fund's portfolio in accordance
with the Fund's investment objectives, policies and restrictions. The Adviser is
also responsible for making investment recommendations as to securities to be
acquired, purchased or sold, for reviewing and selecting firms to effect the
execution of portfolio transactions and for reviewing the execution of such
transactions to ensure their overall reasonableness. In addition, the Adviser
provides certain administrative services to the Fund, including the oversight of
the various agents, records and reports of the Fund. The Adviser receives a
monthly fee calculated at an annual rate equal to .95% of the average daily net
assets of the Fund.
The Management Agreement may be terminated at any time,
without penalty upon 60 days' written notice, by majority vote of the Board of
Directors of the Company or by a vote of the holders of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Fund. The
Management Agreement may also be terminated by the Adviser upon not less than
180 days' written notice to the Fund and terminates automatically upon its
assignment (as defined in the 1940 Act).
Expenses of the Fund
The Fund pays all of its own expenses (except for those
expressly to be paid by Bailard, Biehl & Kaiser), including without limitation
the following: organization costs, taxes, investment management fees, expenses
for legal and auditing services, costs of printing proxies, stock certificates,
stockholder reports, prospectuses and statements of additional information,
charges of the Fund's custodian, any sub-custodian and transfer and dividend
disbursing agent, expenses of redemption of the Fund's shares, Securities and
Exchange Commission fees, expenses of registering the Fund's shares under
federal, state and foreign laws, fees and actual out-of-pocket expenses of
Directors, accounting and pricing costs (including the daily calculation of the
net asset value), insurance, interest, brokerage costs, litigation and other
extraordinary or non-recurring expenses, and other similar expenses.
For the period October 1, 1992 to January 31, 1993, the Fund
paid investment management fees totaling $142,079 to Nomura Capital Management,
Inc. and Acadian Asset Management, Inc. For the fiscal years ended September 30,
1994 and 1995, the Fund paid investment management fees of $1,971,857 and
$1,092,804 to the Adviser, respectively.
The Adviser pays certain expenses incurred in the Fund's
day-to-day management, including the costs of office space and other facilities
used by the Adviser, and salaries and expenses of personnel of the Adviser. As
an accommodation to the Fund, from time to time, the Adviser directly pays
certain expenses of the Fund (such as insurance premiums, Directors' fees, and
fees relating to state securities law filings) for which the Adviser is later
reimbursed by the Fund. Disbursements by the Adviser on behalf of the Fund and
their subsequent reimbursement by the Fund are effected only upon the prior
approval of an officer of the Company. For the fiscal year ended September 30,
1995, the Fund reimbursed the Adviser approximately $54,734.
The Adviser has agreed to reduce the investment management
fee payable to it in any fiscal year by the amount by which the expenses of the
Fund exceed the most stringent limits prescribed by any state in which the
Fund's shares are offered for sale. Of the states in which the Fund's shares are
currently offered for sale, only California imposes an expense limitation.
California law requires reimbursement of expenses if in any fiscal year the
aggregate annual expenses of the Fund (determined in accordance with generally
accepted accounting principles), exclusive of interest, taxes, brokerage and
excess custodian costs attributable to investments in foreign securities (as
compared to custodian costs that would have been incurred had the investments
been in domestic securities), exceed 2.5% of the first $30 million of the
average net assets of the Fund, or 2% of the next $70 million, or 1.5% of the
remaining average net assets of the Fund. (Expenditures which are capitalized in
accordance with generally accepted accounting principles applicable to
investment companies, including costs generally incurred in connection with the
purchase or sale of portfolio securities, are not deemed expenses for purposes
of the foregoing reimbursement provisions.) For the fiscal years ended September
30, 1993, 1994 and 1995, no expense reimbursement was required.
BB&K Fund Services, Inc., 2755 Campus Drive, San Mateo,
California 94403 ("Fund Services"), serves as the sole Distributor for the
Fund's shares pursuant to an agreement with the Fund. Fund Services receives no
commission or compensation for acting as the Fund's agent in the continuous
public offering of the Fund's shares. The Fund's shares may also be purchased
directly from the Fund.
The Adviser and the Distributor are wholly owned
subsidiaries of BB&K Holdings, Inc. ("Holdings"), which may be deemed to be a
controlling person of the Adviser and the Distributor. In addition, Thomas E.
Bailard and his spouse, Terri, may be deemed to be controlling persons of the
Adviser and the Distributor, by virtue of their beneficial ownership of more
than 25% of the securities of Holdings, as individuals or trustees.
As part of the Custodian Agreement, the Fund's Custodian has
agreed to act as the Fund's financial agent, and will maintain certain books and
records for the Fund, perform the calculations necessary to compute the value of
the Fund's investment securities and other assets and the net asset value of the
Fund's shares, confirm all share purchases and redemptions to the Fund's
Transfer Agent, provide financial reports to the Fund necessary to prepare its
financial statements, and provide additional services of a similar nature. For
services performed by the Custodian during the 1993, 1994 and 1995 fiscal years,
the Fund paid the Custodian $424,696, $641,115 and $436,737, respectively.
The Company, on behalf of the Fund, has entered into an
Administration Agreement dated as of October 1, 1991, as amended, with
Investment Company Administration Corporation.
Personal Securities Transactions
Officers, directors and employees of the Company and the
Adviser are permitted to engage in personal securities transactions. To address
potential conflicts with the interests of the Fund that might arise from these
transactions, both the Company and the Adviser have adopted codes of ethics
pursuant to Rule 17j-1 under the 1940 Act. These codes also incorporate, in
substantial part, the recommendations made in May 1994 by the Investment Company
Institute Advisory Group on Personal Investing, including certain preclearance
and reporting procedures and certain restrictions on contemporaneous and
short-term trading and on purchases of securities in private placements and
initial public offerings.
BROKERAGE
The Adviser is responsible for the allocation of brokerage
and reviews the efficiency of execution and reasonableness of the commissions
charged. In effecting portfolio transactions, the Adviser seeks to obtain the
best net results for the Fund, taking into account such factors as price, size
of order, difficulty of execution and operational facilities of the firm
involved. The Adviser generally seeks reasonably competitive commission rates in
domestic and foreign transactions. Ordinarily, the Adviser purchases securities
from the primary market, whether over-the-counter or listed, and listed
securities may be purchased in the over-the-counter market if, in the judgment
of the Adviser, it is the primary market.
Within the framework of the above policies, the Adviser may
also consider research, investment information and other related services, such
as price quotations, provided by brokers. In recognition of research services,
the Adviser has the authority to cause the Fund to pay brokerage commissions
(which are negotiated in the case of domestic stock exchange transactions, but
which are often fixed in the case of foreign stock exchange transactions) in
excess of that which other brokers might charge for effecting the same
transaction. As a consequence, the Fund could pay a broker that furnishes
research services for the Adviser a higher commission than that which might be
paid to another broker that does not furnish research services, or that
furnishes research services deemed to be of lesser value, if such commission is
deemed reasonable in relation to the value of the brokerage and research
services provided by the broker, viewed in terms of either that particular
transaction or the overall responsibilities of the Adviser with respect to the
Fund. Research services that could be provided could include analyses of
industries, statistical or economic information or analyses of issuers. The Fund
may also place orders for securities transactions with its Custodian in return
for a discount on the Fund's custodial fees. This practice will have the effect
of reducing the amount of expenses reported in the Fund's financial statements.
It is not contemplated that there will be any set formula or allocation with
respect to brokerage. The Adviser will review, from time to time, brokerage
commissions paid on behalf of the Fund with a view to determining their
reasonableness in relation to brokerage commissions paid by other similarly
situated investors.
The extent to which commissions charged by brokers may
reflect an element of value for research services cannot be determined. To the
extent that research services of value are provided by brokers through whom the
Fund places portfolio transactions, the Adviser may be relieved of expenses that
it might otherwise bear. Research services furnished by brokers could be useful
and of value to the Adviser in serving its other clients as well as the Fund. On
the other hand, certain research services obtained by the Adviser as a result of
the placement of portfolio brokerage of other clients could be useful and of
value to it in serving the Fund. It is not the Fund's practice to allocate
portfolio securities business on the basis of sales of its shares.
There are occasions on which portfolio transactions for the
Fund may be executed as part of concurrent authorizations to purchase or sell
the same security for other accounts served by the Adviser, some of which
accounts have investment objectives similar to the Fund's investment objectives.
Although such concurrent authorizations potentially could be either advantageous
or disadvantageous to the Fund, they will be effected only when the Adviser
believes that to do so will be in the best interest of the Fund. When such
concurrent authorizations occur, the objective will be to allocate the
executions in a manner that is deemed equitable by the Adviser to the accounts
involved, including the Fund.
No brokerage commissions will be paid to any broker that was
at the time of the transaction an "affiliated person" of the Fund or indirectly
affiliated with the Fund through a common "affiliated person" as that term is
defined in the 1940 Act. Neither the Adviser nor any of its affiliates receives
any brokerage commissions from portfolio transactions.
During the Fund's fiscal years ended September 30, 1993,
1994 and 1995, the Fund paid brokerage commissions on portfolio transactions of
approximately $1,562,995, $2,641,388 and $1,646,286, respectively. For the 1993,
1994 and 1995 fiscal years, the Fund paid no brokerage commissions to any
affiliate of the Fund. The Fund's portfolio turnover rate for the fiscal years
ended September 30, 1993, 1994 and 1995 is set forth in the Fund's Prospectus
under "Financial Highlights". The increase in brokerage commissions paid by, and
the portfolio turnover rate of, the Fund in 1994 were principally due to
volatile market conditions. The increased turnover rate in 1995 was caused
primarily by a change in the Fund's investment approach and an asset allocation
shift by the Adviser's clients during the period. Although the turnover rate
remained relatively high in 1995, brokerage commissions declined largely as a
result of trading cost studies.
NET ASSET VALUE FOR PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
The net asset value per share, on which purchase, exchange
and redemption prices are based, is calculated in accordance with the formula
and at the times set forth in the Prospectus. As of the date of this Statement
of Additional Information, the Fund understands that the New York Stock Exchange
will be closed (and, thus, no net asset value will be calculated) on the
following U.S. holidays: New Year's Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Equity securities traded on an exchange or on the NASDAQ
National Market System are valued at the closing price. If there has been no
sale on such date or if the closing price is not the last sale price, then the
security is valued at the mean of the closing bid and asked prices on such day.
Equity securities that are not traded on an exchange or on the NASDAQ National
Market System are valued at the mean of the closing bid and asked prices.
Short-term debt obligations with a remaining maturity of 60
days or less are valued at amortized cost. Other debt securities are valued at
prices provided by one or more bona fide market-makers as of the closing of the
relevant market.
Options and options on futures contracts are valued at the
last sale price on the exchange on which they are listed, unless no sales of
such options have taken place that day, in which case they will be valued at the
mean between their closing bid and asked prices. Options traded over-the-counter
are valued at the most recent bid quotation in the case of purchased options and
at the most recent asked quotation in the case of written options. When the Fund
writes an option, an amount equal to the premium received is included as an
asset, and an equivalent deferred credit is included as a liability and marked
to market on a daily basis. If a call option written by a Fund is exercised, the
proceeds are increased by the premium received. If a call option written by the
Fund expires, the Fund has a gain in the amount of the premium. If the Fund
enters into a closing purchase transaction, the Fund will have a gain or loss
depending on whether the premium was more or less than the cost of the closing
transaction. If a put option held by the Fund is exercised, the amount the Fund
receives on sale of the underlying investment is reduced by the amount of the
premium paid by the Fund.
Futures contracts are valued at the last settlement price as
of the close of the commodities exchange on which they are traded. Forward
currency contracts are valued based on their amortized forward points and the
closing spot price of their underlying currencies as of 12:00 P.M. New York
time. Foreign securities and cash are converted into U.S. dollar values at the
mean of the bid and asked prices for the underlying currencies as of the same
time.
All prices are taken from the primary market in which the
portfolio security or other asset is traded.
The Board of Directors has delegated to the Fund's Custodian
and the Adviser the authority to make valuations of marketable securities and
rate of exchange determinations in accordance with the standards described
above. If market quotations are not readily available for valuation purposes,
portfolio securities and other assets will be valued by, or under the direction
of, the Board of Directors in such manner as the Board of Directors in good
faith deems appropriate to reflect the fair value thereof.
The procedures for purchasing, exchanging and redeeming
shares are described in the Prospectus.
TAX ASPECTS
The Fund believes that it has qualified for "pass-through"
tax treatment as a regulated investment company for its fiscal year ended
September 30, 1995, and intends to be able to continue to so qualify. To qualify
as a regulated investment company, the Fund must, among other things, (a) derive
in each taxable year at least 90% of its gross income from dividends, interest,
gains from the sale or other disposition of stock, securities or foreign
currencies, or certain other sources, (b) derive in each taxable year less than
30% of its gross income from the sale or other disposition of certain assets,
including stock, securities, and certain foreign currency positions, held for
less than three months, (c) diversify its holdings so that, at the end of each
quarter of the taxable year, (i) at least 50% of the market value of the Fund's
assets is represented by cash, U.S. government obligations and other securities
limited in respect of any one issuer to an amount not greater than 5% of the
Fund's assets and 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of its assets is invested in the securities
of any one issuer (other than U.S. government obligations or the securities of
other regulated investment companies), and (d) distribute in each year at least
90% of its investment company taxable income.
For any year in which it does not qualify as a regulated
investment company, (a) the Fund will be taxed as an ordinary corporation, (b)
distributions to its stockholders will not be deductible by the Fund in
computing its taxable income, (c) the Fund's distributions, to the extent made
out of the Fund's current or accumulated earnings and profits, will be taxable
to its stockholders as dividends (regardless of whether they would otherwise
have been considered long-term capital gains), and (d) stockholders will not be
entitled to claim U.S. foreign tax credits. Should the Fund be deemed a personal
holding company, its undistributed income would be taxed at the highest marginal
rate applicable to corporations and it could be subject to an additional
personal holding company tax generally equal to 39.6% of its net undistributed
dividend and interest income.
Backup Tax Withholding Requirement
Certain stockholders may be subject to backup tax
withholding at a 31% rate. Generally, a stockholder will be subject to backup
withholding if the stockholder fails to provide the Fund with its correct
taxpayer identification number, or if the IRS notifies the Fund that the
stockholder has underreported interest or dividends. In addition, stockholders
who fail to certify that they are not subject to backup withholding (on the
grounds only of underreporting and notice from the IRS) will be subject to
backup withholding. Accordingly, to avoid being subject to backup withholding,
investors who acquire shares in the Fund must certify that they have provided
their correct taxpayer identification numbers and that they are not subject to
backup withholding in the appropriate spaces on the Purchase Application
accompanying the Prospectus.
Other Tax Consequences
Dividends and interest received by the Fund may give rise to
withholding and other taxes imposed by foreign countries, generally at rates
from 10% to 35%. Tax conventions between certain countries and the United States
may reduce or eliminate such taxes. Investors may be entitled to claim U.S.
foreign tax credits with respect to such taxes, subject to the limitations of
the Code. Foreign countries generally do not impose taxes on capital gains in
respect of investments by foreign investors.
Some investments made by the Fund may be treated as "passive
foreign investment companies" ("PFICs") for U.S. income tax purposes. Investment
by the Fund in PFICs could alter the timing or characterization of certain
distributions to shareholders or subject the Fund to federal income tax or other
charges in certain circumstances.
The discussion in the Prospectus, together with the
foregoing, is a general and abbreviated summary of the tax consequences of
investment in the Fund. Investors are urged to consult their own tax advisers to
determine the effect of investment in the Fund upon their individual tax
situations.
STOCKHOLDER INFORMATION
As of December 31, 1995 all officers and Directors of the
Company as a group held of record and beneficially less than 1% of the
outstanding shares of the Fund. No stockholders held of record or, to the Fund's
knowledge, beneficially in excess of 5% of the outstanding shares of the Fund on
that date.
PERFORMANCE DATA
The Fund may compute its average annual compounded rate of
total return during specified periods that would equate a hypothetical initial
investment of $1,000 to the ending redeemable value of such investment by (a)
adding one to the computed average annual total return, (b) raising the sum to a
power equal to the number of years covered by the computation and (c)
multiplying the result by $1,000 (which represents the hypothetical initial
investment). The ending redeemable value is determined by assuming a complete
redemption at the end of the periods covered by the average annual total return
computation. The annual compounded rate of total return for the Fund for the one
year period ended September 30, 1995 was 2.13%. The average annual compounded
rate of total return for the Fund for the five year period from October 1, 1990
to September 30, 1995 was 3.95%. The average annual compounded rate of total
return for the Fund for the ten year period from October 1, 1985 to September
30, 1995 was 8.58%. These figures assume that all dividends and distributions by
the Fund were reinvested at net asset value on the reinvestment dates. Periods
prior to October 1, 1993 include an assumed 1% annual advisory fee, payable
quarterly, charged by the Adviser to its clients.
These figures represent past performance and an investor
should be aware that the investment return and principal value of an investment
in the Fund will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. In addition, the Fund's advisers,
advisory fees and investment objectives have changed over the periods covered by
these figures. Therefore, there is no assurance that this performance will be
repeated in the future.
FINANCIAL STATEMENTS
Incorporated by reference herein are portions of the Fund's
annual report to stockholders for the fiscal year ended September 30, 1995 under
the headings: "REPORT OF INDEPENDENT ACCOUNTANTS," "SCHEDULE OF INVESTMENTS BY
COUNTRY," "SCHEDULE OF INVESTMENTS BY INDUSTRY," "STATEMENT OF ASSETS AND
LIABILITIES," "STATEMENT OF OPERATIONS," "STATEMENT OF CHANGES IN NET ASSETS,"
and "NOTES TO FINANCIAL STATEMENTS." Copies of the annual report are available
upon request and without charge by contacting Bailard, Biehl & Kaiser
International Fund Group, Inc., 2755 Campus Drive, San Mateo, California 94403,
(800) 882-8383.
--------------------------------
The Prospectus and this Statement of Additional Information,
together, do not contain all of the information set forth in our registration
statement filed with the Securities and Exchange Commission. Certain information
is omitted in accordance with rules and regulations of the Commission. The
registration statement may be inspected at the Public Reference Room of the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549, and copies thereof may be obtained from the Commission at prescribed
rates.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
BAILARD, BIEHL & KAISER INTERNATIONAL BOND FUND
2755 Campus Drive
San Mateo, California 94403
This Statement of Additional Information is not a
Prospectus, but contains information in addition to that contained in the
Prospectus which may be of interest to some investors. This Statement of
Additional Information should be read in conjunction with the Prospectus dated
January 26, 1996. You can request the Prospectus by writing directly to us at
the address above or by calling us at (800) 882-8383.
CONTENTS
Page
1. Investment Objectives and Policies.................................B-2
2. Directors and Officers.............................................B-5
3. Right to Use Name..................................................B-8
4. Investment Advisory and Other Services.............................B-8
5. Brokerage..........................................................B-10
6. Net Asset Value for Purchase, Exchange
and Redemption of Shares...........................................B-11
7. Tax Aspects........................................................B-12
8. Stockholder Information............................................B-13
9. Performance Data...................................................B-13
10. Financial Statements...............................................B-13
-------------------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT
CONSTITUTE AN OFFER TO SELL SECURITIES.
--------------------------------------------------
The date of this Statement of Additional Information
is January 26, 1996
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Bailard, Biehl & Kaiser International Bond Fund (the
"Fund") is a non-diversified series of the Bailard, Biehl & Kaiser International
Fund Group, Inc. an open-end management investment company (the "Company"). The
Fund's investment objective is to seek a total return on its assets from
long-term growth of capital and from income through investment. To help achieve
this objective, the Fund invests its assets primarily in debt securities of
foreign issuers, consisting of foreign governments, supra-national entities,
foreign corporations and banks and U.S. issuers whose assets are primarily
located or whose operations are primarily conducted outside the United States or
whose securities are denominated in foreign currencies. When the Fund's
investment adviser believes that international markets for debt securities may
experience excessive volatility or instability, or are otherwise unfavorable,
the Fund may invest in domestic debt securities. The Fund may also invest in
short or medium-term debt obligations as a defensive measure.
While there is no limitation on the countries in which the
Fund may invest, other than such restrictions as may be imposed from time to
time by the Company's Board of Directors, investments will ordinarily be
concentrated in companies based in the Far East, Europe, the United Kingdom,
Canada and Australia and in governmental entities within those geographic areas.
The Fund may engage in certain hedging techniques to protect
against the effects of changes in interest and currency exchange rates. Such
techniques consist of forward foreign currency exchange transactions;
transactions in options, futures contracts and options on futures contracts on
debt securities and foreign currencies; and interest rate and foreign currency
swaps, and related caps, floors and collars.
The Fund's investment activities are subject to certain
restrictions that are deemed "fundamental policies." These fundamental policies
may not be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities, defined to mean the vote of (A) 67% or
more of the voting securities present at a meeting of the stockholders, if the
holders of more than 50% of the outstanding voting securities of the Fund are
present or represented by proxy at such meeting; or (B) more than 50% of the
outstanding voting securities of the Fund, whichever is less. These fundamental
policies provide that the Fund will not:
1. Invest more than 25% of the value of its total assets in
the securities of companies primarily engaged in any one industry (other
than the United States Government and its agencies and instrumentalities),
except as indicated below; for this purpose, water, communications,
electric and gas utilities shall each be considered a separate industry,
and neither all national, regional or local governments (United States or
foreign), as a group, nor all international organizations (government or
private), as a group, nor all finance companies, as a group, shall be
considered as within a single industry.
2. Acquire more than 10% of the outstanding voting securities
of any one issuer.
3. Invest in companies for the purpose of exercising control
or management.
4. Purchase or sell real estate; provided that the Fund may
invest in securities secured by real estate or interests therein or issued
by companies which invest in real estate or interests therein.
5. Purchase or sell commodities or commodity contracts or
invest in put, call, straddle or spread options, or in interests in oil,
gas or other mineral exploration or development programs; provided,
however, that this policy will not prevent the purchase, ownership or sale
of warrants or other rights where the grantor of the warrants is the issuer
of the underlying securities ("grantor warrants"); provided that the Fund
will not purchase a grantor warrant if, as a result thereof, the aggregate
market value of all purchased grantor warrants then owned exceeds 10% of
the total assets of the Fund taken at market value at the time of the
purchase of such grantor warrant. (Accordingly, this 10% limitation will
not apply at all to the acquisition or ownership of grantor warrants
acquired other than as a result of a purchase.) Moreover, and
notwithstanding this restriction, the Fund may purchase and sell foreign
currencies on a current basis and may engage in interest rate and foreign
currency hedging transactions, including investing in, writing and
purchasing forward contracts, options, futures contracts, and options on
futures contracts, swaps and related caps, floors and collars, and other
similar instruments involving debt securities and foreign currencies.
6. Issue senior securities, borrow money or pledge its assets,
except that the Fund may borrow from a bank as a temporary measure for
extraordinary or emergency purposes in amounts not exceeding 5% of its
total assets and except that the Fund may obtain such credit as may be
necessary for the clearance of purchases or sales of securities. For the
purpose of this restriction, margin or collateral arrangements with respect
to forward contracts, options, futures contracts, options on futures
contracts and swaps, are not deemed to be a pledge of assets and neither
such arrangements nor the purchase or sale of forward contracts, options,
futures contracts, options on futures contracts or swaps are deemed to be
the issuance of a senior security or a borrowing.
7. Purchase any securities on margin or effect short sales,
except that the Fund may obtain such credit as may be necessary for the
clearance of purchases and sales of portfolio securities. The deposit by
the Fund of initial or variation margin in connection with forward
contracts, options, futures contracts or options on futures contracts will
not be considered the purchase of a security on margin.
8. Engage in the business of underwriting securities issued by
others, or knowingly purchase securities subject to contractual or legal
restrictions on disposition in all of the principal markets where traded if
such purchase will result in more than 10% of the value of its total assets
If through (i) the appreciation of portfolio securities which are not
readily marketable, (ii) the depreciation of other investments of the Fund,
or (iii) the sale of assets to meet redemptions, the Fund should be in a
position in which more than 10% of the value of its assets are invested in
securities which are not readily marketable, the Fund will consider what
steps, if any, to take to protect against the resulting illiquidity. . This
restriction also applies to repurchase agreements maturing in over seven
days. This restriction will not, however, preclude the Fund from buying
securities which are not registered for sale with the Securities and
Exchange Commission or otherwise marketable in the United States, if
marketable elsewhere.
9. Invest in securities of an issuer which, together with any
predecessor, has been in operation for less than three years if, as a
result, more than 5% of the Fund's total assets would then be invested in
such securities.
10. Participate on a joint or a joint and several basis in any
trading account in securities. (The "bunching" or combining of orders for
the sale or purchase of marketable portfolio securities with other accounts
under the management of the Fund's Adviser to save brokerage costs or
achieve an average price among them is not deemed to result in a securities
trading account.)
- ----------------------------------
(1)If through (i) the appreciation of portfolio securities which are not
readily marketable, (ii) the depreciation of other investments of the Fund, or
(iii) the sale of assets to meet redemptions, the Fund should be in a position
in which more than 10% of the value of its assets are invested in securities
which are not readily marketable, the Fund will consider what steps, if any, to
take to protect against the resulting illiquidity.
11. Make loans of money or securities to any person or firm,
except through the purchase of debt securities in accordance with the
Fund's investment objectives and policies.
12. Purchase from or sell portfolio securities to its
officers, directors or other "interested persons" of the Fund as defined in
the Investment Company Act of 1940 (the "1940 Act").
13. Purchase or retain the securities of an issuer if, to the
Fund's knowledge, one or more of the officers or directors of the Company,
or one or more of the officers or directors of the Fund's Adviser,
individually own beneficially more than 1/2 of 1% of the securities of such
issuer or together own beneficially more than 5% of such securities.
For purposes of the 25% limit in paragraph 1 above, the Fund
deems each national government and such government's agencies and
instrumentalities to be a single industry. Similarly, the Fund deems a
particular regional government or local government (including the agencies and
instrumentalities of such government) to be a separate industry so long as the
securities issued by such government are backed by the assets and revenues of
such government. The Fund treats all international organizations (government or
private) that have been assigned the same Standard Industrial Classification
Code as a single industry.
In determining the issuer of a foreign security, each
national government and each political subdivision, agency and instrumentality
of each nation, and each supra-national entity of which such nation is a member
is considered a separate issuer. Issuers representing more than one nation will
be excluded in determining the percentage of any individual nation. Where
foreign securities are backed only by assets and revenues of a particular
political subdivision, agency or instrumentality, only such entity is considered
to be the issuer.
Unless otherwise specified, if a percentage restriction on
investment or utilization of assets set forth above is adhered to at the time an
investment is made, a later change in percentage resulting from changing values
or a similar type of event (such as a reduction in the size of the Fund
occasioned by the redemption of shares) will not be considered a violation of
the Fund's investment policies or restrictions.
In addition, the Investment Company Act of 1940 (the "1940
Act") and applicable state law prohibits the Fund from (i) purchasing the
securities of any registered open-end investment company and (ii) unless the
security is acquired pursuant to a plan of reorganization or a Securities and
Exchange Commission approved offer of exchange, investing its assets in more
than 3% or, together with other investment companies having the same investment
adviser, more than 10%, of the outstanding voting stock of any closed-end
investment company, more than 5% of its total value in any closed-end investment
company, or more than 10% of its total value in closed-end investment companies
as a group.
<PAGE>
DIRECTORS AND OFFICERS
The management of the Company, including the general overall
supervision of the Fund's portfolio transactions, is the responsibility of the
Board of Directors. The names and business addresses of the directors and
officers of the Company and their principal occupations and other affiliations
during the past five years are set forth below:
Principal Occupations
Office(s) Held and Other Affiliations
Name and Address With the Fund During the Past 5 Years
- ---------------- -------------- -----------------------
Peter M. Hill(1) Director and Director and officer of
2755 Campus Drive Chairman Bailard, Biehl & Kaiser,
San Mateo, CA 94403 Inc. (the "Adviser")
currently Co-President and
Chief Investment Officer.
Director of BB&K Fund
Services, Inc., an NASD
registered broker dealer
("Fund Services"), since
June 1992.
Burnice E. Sparks, Jr.(1) Director and Director and officer of the
2755 Campus Drive President Adviser, currently Co-
San Mateo, CA 94403 President. Director and
Chief Executive Officer of
Fund Services since June
1992. Trustee and President
of Bailard, Biehl & Kaiser
Fund Group, a registered
investment company (the
"Fund Group").
Janis M. Horne(1) Secretary and Vice President and Portfolio
2755 Campus Drive Assistant Treasurer Manager of the Adviser.
San Mateo, CA 94403 Secretary of Fund Group.
Assistant Treasurer of the
Fund Group since June 1993.
Tina Thomas(1) Treasurer and Vice President of the
2755 Campus Drive Assistant Secretary Adviser since June 1992.
San Mateo, CA 94403 Treasurer of Fund Services
since July 1993. Assistant
Secretary of the Fund Group
since June 1992. Treasurer
of the Fund Group since June
1993; Assistant Treasurer of
the Fund Group from June
1992 to June 1993. Joined
the Adviser in 1988 as
Director of Shareholder
Services.
- -------------------------
(1)"Interested person" of the Company, as defined in the 1940 Act.
Principal Occupations
Office(s) Held and Other Affiliations
Name and Address With the Fund During the Past 5 Years
- ---------------- -------------- -----------------------
Shirley L. Clayton(2) Director President and Chief Operating
TopoMetrix Officer of TopoMetrix, a
5403 Betsy Ross Drive manufacturer of scanning
Santa Clara, CA 95054-1162 probe microscopes, since
January 1996; Chief Financial
Officer from June 1993 to
January 1996. Chief Financial
Officer of Cygnus Therapeutic
Systems, Inc., a biotechnology
company, from March 1990 to
June 1993. Chief Financial
Officer of ProteinD esign
Labs, Inc., a biotechnology
company, from October 1988 to
March 1990. Trustee of the
Fund Group.
David B. Shippey(2) Director Prior to September 1983 with
5130 Enterprise Road Saga Corporation, a restaurant
Santa Rosa, CA 95404 and contract food service
business, his last position
being Vice President and
Treasurer. Trustee of the
Fund Group.
James C. Van Horne(2) Director A.P. Giannini Professor of
Graduate School of Business Finance at Graduate School of
Stanford University Business of Stanford
Stanford, CA 94305 University from September 1976
to the present. Deputy
Assistant Secretary of the
United States Treasury
Department from September 1975
to August 1976. Director of
Sanwa Bank California and
Montgomery Street Income
Securities, Inc., a registered
investment company. Trustee
of the Fund Group.
------------------------
(2)Member of the Audit Committee
<PAGE>
The following table sets forth the compensation paid to the Company's
Directors during the fiscal year ended September 30, 1995.
<TABLE>
Compensation Table
<CAPTION>
Name of Person Aggregate Pension or Retirement Estimated Total Compensation
and Position Compensation Benefits Accrued as Annual From Company and
from Company Part of Company Benefits Upon Fund Complex(1)
Expenses Retirement Paid to Directors
- --------------------------- ---------------- ----------------------- ------------------- -----------------------
<S> <C> <C> <C> <C>
Peter M. Hill $500(2)(3) $0 $0 $1,000
Director
Burnice E. Sparks, Jr. $500(2)(3) $0 $0 $1,000
Director
19Shirley L. Clayton $9,000(4) $0 $0 $18,000
Director
David B. Shippey $10,000(4) $0 $0 $20,000
Director
James C. Van Horne $10,000(4) $0 $0 $20,000
Director
</TABLE>
The Company and the Fund Group reimburse each Director and
Trustee for travel and other out-of-pocket disbursements incurred in connection
with attending Board meetings. The Company and the Fund Group also reimburse
other travel expenses of Directors, Trustees and officers, including
international travel expenses, incurred incident to the performance of duties as
a Director, Trustee or officer.
- ---------------------------
(1)A Fund Complex consists of investment companies that hold themselves out
to investors as related companies for purposes of investment and investor
services, have a common investment adviser or have an investment adviser that is
an affiliated person of the investment adviser of any other investment
companies. The Company and the Fund Group are considered to be part of the same
Fund Complex.
(2)Does not include fees paid to the Adviser pursuant to the Management
Agreement as described below under "INVESTMENT ADVISORY AND OTHER SERVICES".
5Consists of a $500 annual director fee.
(3)Consists of a $500 annual director fee.
(4)Consists of a $6,000 annual director fee plus $1,000 for each Board
meeting attended in person.
<PAGE>
RIGHT TO USE NAME
Bailard, Biehl & Kaiser, Inc., a California corporation (the
"Adviser" or "Bailard, Biehl & Kaiser"), has granted the Company the right to
use the designation "Bailard, Biehl & Kaiser" in its name and has reserved the
right to withdraw its consent to the use of such designation by the Company
under certain conditions, including the condition that Bailard, Biehl & Kaiser
ceases to act as the Company's investment adviser, and to grant the use of such
name to others, including any other investment company.
INVESTMENT ADVISORY AND OTHER SERVICES
Management Agreement
--------------------
The Fund has entered into an Investment Management Agreement
(the "Management Agreement") with Bailard, Biehl & Kaiser for investment
advisory and certain portfolio transaction and administrative services. The
Adviser, subject to the general supervision of the Company's Board of Directors,
is responsible for the overall management of the Fund's portfolio in accordance
with the Fund's investment objectives, policies, and restrictions. The Adviser
is also responsible for making investment recommendations as to securities to be
acquired, purchased or sold, for reviewing and selecting firms to effect the
execution of portfolio transactions and for reviewing the execution of such
transactions to ensure their overall reasonableness. In addition, the Adviser
provides certain administrative services to the Fund, including the oversight of
the various agents, records and reports of the Fund. The Adviser receives a
monthly fee calculated at an annual rate equal to .75% of the average daily net
assets of the Fund.
The Management Agreement may be terminated at any time,
without penalty upon 60 days' written notice, by majority vote of the Board of
Directors of the Company or by a vote of the holders of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Fund. The
Management Agreement may also be terminated by the Adviser upon not less than
180 days' written notice to the Fund and terminates automatically upon its
assignment (as defined in the 1940 Act).
Expenses of the Fund
--------------------
The Fund pays all of its own expenses (except for those
expressly to be paid by the Adviser), including without limitation the
following: organization costs, taxes, investment management fees, expenses for
legal and auditing services, costs of printing proxies, stock certificates,
stockholder reports, prospectuses and statements of additional information,
charges of the Fund's custodian, any sub-custodian and transfer and dividend
disbursing agent, expenses of redemption of the Fund's shares, Securities and
Exchange Commission fees, expenses of registering the Fund's shares under
federal, state and foreign laws, fees and actual out-of-pocket expenses of
Directors, accounting and pricing costs (including the daily calculation of the
net asset value), insurance, interest, brokerage costs, litigation and other
extraordinary or non-recurring expenses, and other similar expenses.
For the fiscal years ended September 30, 1994 and 1995, the
Fund paid investment management fees of $1,183,513 and $768,079 to the Adviser,
respectively.
The Adviser pays certain expenses incurred in the Fund's
day-to-day management, including the costs of office space and other facilities
used by the Adviser, and salaries and expenses of personnel of the Adviser. As
an accommodation to the Fund, from time to time the Adviser directly pays
certain expenses of the Fund (such as insurance premiums, Directors' fees, and
fees relating to state securities law filings) for which the Adviser is later
reimbursed by the Fund. Disbursements by the Adviser on behalf of the Fund and
their subsequent reimbursement by the Fund are effected only upon the prior
approval of an officer of the Company. For the fiscal year ended September 30,
1995, the Fund reimbursed the Adviser approximately $37,174.
The Adviser has agreed to reduce the investment management fee
payable to it in any fiscal year by the amount by which the expenses of the Fund
exceed the most stringent limits prescribed by any state in which the Fund's
shares are offered for sale. Of the states in which the Fund's shares are
currently offered for sale, only California imposes an expense limitation.
California law requires reimbursement of expenses if in any fiscal year the
annual aggregate expenses of the Fund (determined in accordance with generally
accepted accounting principles), exclusive of interest, taxes, brokerage and
excess custodian costs attributable to investments in foreign securities (as
compared to custodian costs that would have been incurred had the investments
been in domestic securities), exceed 2.5% of the first $30 million of the
average net assets of the Fund, or 2% of the next $70 million, or 1.5% of the
remaining average net assets of the Fund. (Expenditures which are capitalized in
accordance with generally accepted accounting principles applicable to
investment companies, including costs generally incurred in connection with the
purchase or sale of portfolio securities, are not deemed expenses for purposes
of the foregoing reimbursement provisions.) For the fiscal years ended September
30, 1993, 1994 and 1995, no expense reimbursement was required.
BB&K Fund Services, Inc., 2755 Campus Drive, San Mateo,
California 94403 ("Fund Services"), serves as the sole Distributor for the
Fund's shares pursuant to an agreement with the Fund. Fund Services receives no
commission or compensation for acting as the Fund's agent in the continuous
public offering of the Fund's shares. The Fund's shares may also be purchased
directly from the Fund.
The Adviser and the Distributor are wholly owned subsidiaries
of BB&K Holdings, Inc. ("Holdings"), which may be deemed to be a controlling
person of the Adviser and the Distributor. In addition, Thomas E. Bailard and
his spouse, Terri, may be deemed to be controlling persons of the Adviser and
the Distributor, by virtue of their beneficial ownership of more than 25% of the
securities of Holdings, as individuals or trustees.
As part of the Custodian Agreement, the Fund's Custodian has
agreed to act as the Fund's financial agent, and will maintain certain books and
records for the Fund, perform the calculations necessary to compute the value of
the Fund's investment securities and other assets and the net asset value of the
Fund's shares, confirm all share purchases and redemptions to the Fund's
Transfer Agent, provide financial reports to the Fund necessary to prepare its
financial statements, and provide additional services of a similar nature. As
compensation for its services, the Fund paid the Custodian $254,672, $265,166
and $197,993 during the 1993, 1994 and 1995 fiscal years, respectively.
The Company, on behalf of the Fund, has entered into an
Administration Agreement (the "Administration Agreement") dated as of October 1,
1991, as amended, with Investment Company Administration Corporation.
Personal Securities Transactions
--------------------------------
Officers, directors and employees of the Company and the
Adviser are permitted to engage in personal securities transactions. To address
potential conflicts with the interests of the Fund that might arise from these
transactions, both the Company and the Adviser have adopted codes of ethics
pursuant to Rule 17j-1 under the 1940 Act. These codes also incorporate, in
substantial part, the recommendations made in May 1994 by the Investment Company
Institute Advisory Group on Personal Investing, including certain preclearance
and reporting procedures and certain restrictions on contemporaneous and
short-term trading and on purchases of securities in private placements and
initial public offerings.
BROKERAGE
The Adviser is responsible for the allocation of brokerage and
reviews the efficiency of execution and reasonableness of the commissions
charged. In effecting portfolio transactions, the Adviser seeks to obtain the
best net results for the Fund, taking into account such factors as price, size
of order, difficulty of execution and operational facilities of the firm
involved. The Adviser generally seeks reasonably competitive commission rates in
domestic and foreign transactions. Ordinarily, the Adviser purchases securities
from the primary market, whether over-the-counter or listed, and listed
securities may be purchased in the over-the-counter market if, in the judgment
of the Adviser, it is the primary market.
The Fund's purchases and sales of debt securities will
generally be made with an issuer or primary market maker on a net basis, without
any brokerage commission being paid by the Fund. Trading does, however, involve
transaction costs. Transactions with dealers serving as primary market makers
reflect the spread between the bid and asked prices. Transaction costs may also
include fees paid to third parties for information as to potential purchasers or
sellers of securities but only for the purpose of seeking the most favorable net
results, including such fee, on a particular transaction. Purchases of
underwritten issues may include an underwriting fee paid to the underwriter.
Within the framework of the above policies, the Adviser may
also consider research, investment information and other related services, such
as price quotations, provided by brokers. In recognition of research services,
the Adviser has the authority to cause the Fund to pay brokerage commissions
(which are negotiated in the case of domestic stock exchange transactions, but
which are often fixed in the case of foreign stock exchange transactions) in
excess of that which other brokers might charge for effecting the same
transaction. As a consequence, the Fund could pay a broker that furnishes
research services for the Adviser a higher commission than that which might be
paid to another broker that does not furnish research services, or that
furnishes research services deemed to be of lesser value, if such commission is
deemed reasonable in relation to the value of the brokerage and research
services provided by the broker, viewed in terms of either the particular
transaction or the overall responsibilities of the Adviser with respect to the
Fund. Research services that could be provided could include analyses of
industries, statistical or economic information or analyses of issuers. It is
not contemplated that there will be any set formula or allocation with respect
to brokerage. The Adviser will review, from time to time, brokerage commissions
paid on behalf of the Fund with a view to determining their reasonableness in
relation to brokerage commissions paid by other similarly situated investors.
The extent to which commissions charged by brokers may reflect
an element of value for research services cannot presently be determined. To the
extent that research services of value are provided by brokers through whom the
Fund places portfolio transactions, the Adviser may be relieved of expenses
which it might otherwise bear. Research services furnished by brokers could be
useful and of value to the Adviser in serving its other clients as well as the
Fund. On the other hand, certain research services obtained by the Adviser as a
result of the placement of portfolio brokerage of other clients could be useful
and of value to it in serving the Fund. It is not the Fund's practice to
allocate portfolio securities business on the basis of sales of its shares.
There are occasions on which portfolio transactions for the
Fund may be executed as part of concurrent authorizations to purchase or sell
the same security for other accounts served by the Adviser, some of which
accounts have investment objectives similar to the Fund's investment objectives.
Although such concurrent authorizations potentially could be either advantageous
or disadvantageous to the Fund, they will be effected only when the Adviser
believes that to do so will be in the best interest of the Fund. When such
concurrent authorizations occur, the objective will be to allocate the
executions in a manner that is deemed equitable by the Adviser to the accounts
involved, including the Fund.
No brokerage commissions will be paid to any broker that was
at the time of the transaction an "affiliated person" of the Fund or indirectly
affiliated with the Fund through a common "affiliated person" as that term is
defined in the 1940 Act. Neither the Adviser nor any of its affiliates receives
any brokerage commissions from portfolio transactions.
The Fund paid no brokerage commissions during the fiscal years
ended September 30, 1993, 1994 and 1995. The Fund's portfolio turnover rate for
the fiscal years ended September 30, 1993, 1994 and 1995 is set forth in the
Fund's Prospectus under "Financial Highlights". The increase in the turnover
rate in 1994 was principally due to volatile market conditions.
NET ASSET VALUE FOR PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
The net asset value per share, on which purchase, exchange and
redemption prices are based, is calculated in accordance with the formula and at
the times set forth in the Prospectus. As of the date of this Statement of
Additional Information, the Fund understands that the New York Stock Exchange
will be closed (and, thus, no net asset value will be calculated) on the
following U.S. holidays: New Year's Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Short-term debt obligations with a remaining maturity of 60
days or less are valued at amortized cost. Other debt securities are valued at
prices provided by one or more bona fide market-makers as of the closing of the
relevant market.
Options and options on futures contracts are valued at the
last sale price on the exchange on which they are listed, unless no sales of
such options have taken place that day, in which case they will be valued at the
mean between their closing bid and asked prices. Options traded over-the-counter
are valued at the most recent bid quotation in the case of purchased options and
at the most recent asked quotation in the case of written options. When the Fund
writes an option, an amount equal to the premium received is included as an
asset, and an equivalent deferred credit is included as a liability and marked
to market on a daily basis. If a call option written by a Fund is exercised, the
proceeds are increased by the premium received. If a call option written by the
Fund expires, the Fund has a gain in the amount of the premium. If the Fund
enters into a closing purchase transaction, the Fund will have a gain or loss
depending on whether the premium was more or less than the cost of the closing
transaction. If a put option held by the Fund is exercised, the amount the Fund
receives on sale of the underlying investment is reduced by the amount of the
premium paid by the Fund.
Futures contracts are valued at the last settlement price as
of the close of the commodities exchange on which they are traded. Forward
currency contracts are valued based on their amortized forward points and the
closing spot price of their underlying currencies as of 12:00 P.M. New York
time. Foreign securities and cash are converted into U.S. dollar values at the
mean of the bid and asked prices for the underlying currencies as of the same
time.
All prices are taken from the primary market in which the
portfolio security or other asset is traded.
The Board of Directors has delegated to the Fund's Custodian and the Adviser the
authority to make valuations of marketable securities and rate of exchange
determinations in accordance with the standards described above. If market
quotations are not readily available for valuation purposes, portfolio
securities and other assets will be valued by, or under the direction of, the
Board of Directors in such manner as the Board of Directors in good faith deems
appropriate to reflect the fair value thereof.
The procedures for purchasing, exchanging and redeeming shares are
described in the Prospectus.
TAX ASPECTS
For the fiscal year ended September 30, 1995, the Fund
believes that it qualified for "pass-through" tax treatment as a regulated
investment company and intends to be able to so qualify in subsequent fiscal
years. To qualify as a regulated investment company, the Fund must, among other
things, (a) derive in each taxable year at least 90% of its gross income from
dividends, interest, gains from the sale or other disposition of stock,
securities or foreign currencies, or certain other sources, (b) derive in each
taxable year less than 30% of its gross income from the sale or other
disposition of stock, securities, certain foreign currency positions, and
certain other assets held for less than 3 months, (c) diversify its holdings so
that, at the end of each quarter of the taxable year, (i) at least 50% of the
market value of the Fund's assets is represented by cash, U.S. government
obligations and other securities limited in respect of any one issuer to an
amount not greater than 5% of the Fund's assets and 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other than U.S.
government obligations or the securities of other regulated investment
companies), and (d) distribute in each year at least 90% of its investment
company taxable income.
For any year in which it does not qualify as a regulated
investment company, (a) the Fund will be taxed as an ordinary corporation, (b)
distributions to its stockholders will not be deductible by the Fund in
computing its taxable income, (c) the Fund's distributions, to the extent made
out of the Fund's current or accumulated earnings and profits, will be taxable
to its stockholders as dividends (regardless of whether they would otherwise
have been considered long-term capital gains), and (d) stockholders will not be
entitled to claim U.S. foreign tax credits. Should the Fund be deemed a personal
holding company, its undistributed income would be taxed at the highest marginal
rate applicable to corporations and it could be subject to an additional
personal holding company tax generally equal to 39.6% of its net undistributed
dividend and interest income.
Backup Tax Withholding Requirement
----------------------------------
Certain stockholders may be subject to backup tax withholding
at a 31% rate. Generally, a stockholder will be subject to backup withholding if
the stockholder fails to provide the Fund with its correct taxpayer
identification number, or if the IRS notifies the Fund that the stockholder has
underreported interest or dividends. In addition, stockholders who fail to
certify that they are not subject to backup withholding (on the grounds only of
underreporting and notice from the IRS) will be subject to backup withholding.
Accordingly, to avoid being subject to backup withholding, investors who acquire
shares in the Fund must certify that they have provided their correct taxpayer
identification numbers and that they are not subject to backup withholding in
the appropriate spaces on the Purchase Application accompanying the Prospectus.
Other Tax Consequences
----------------------
Dividends and interest received by the Fund may give rise to
withholding and other taxes imposed by foreign countries, generally at rates
from 10% to 35%. Tax conventions between certain countries and the United States
may reduce or eliminate such taxes. Investors may be entitled to claim U.S.
foreign tax credits with respect to such taxes, subject to the limitations of
the Code. Foreign countries generally do not impose taxes on capital gains in
respect of investments by foreign investors.
The discussion in the Prospectus, together with the foregoing,
is a general and abbreviated summary of the tax consequences of investment in
the Fund. Investors are urged to consult their own tax advisers to determine the
effect of investment in the Fund upon their individual tax situations.
STOCKHOLDER INFORMATION
As of December 31, 1995 all officers and Directors of the
Company as a group held of record and beneficially less than 1% of the
outstanding shares of the Fund. No stockholders held of record or, to the Fund's
knowledge, beneficially in excess of 5% of the outstanding shares of the Fund on
that date.
PERFORMANCE DATA
The Fund may compute its average annual compounded rate of
total return during specified periods that would equate a hypothetical initial
investment of $1,000 to the ending redeemable value of such investment by (a)
adding one to the computed average annual total return, (b) raising the sum to a
power equal to the number of years covered by the computation and (c)
multiplying the result by $1,000 (which represents the hypothetical initial
investment). The ending redeemable value is determined by assuming a complete
redemption at the end of the periods covered by the average annual total return
computation. The annual compounded rate of total return for the one year period
ended September 30, 1995 was 17.33%. The average annual compounded rate of total
return from October 1, 1990 (inception) to September 30, 1995 was 5.49%. These
rates assume that all dividends and distributions by the Fund were reinvested at
net asset value on the reinvestment dates. Periods prior to October 1, 1993
include an assumed 1% annual advisory fee, payable quarterly, charged by the
Adviser to its clients.
These figures represent past performance and an investor
should be aware that the investment return and principal value of an investment
in the Fund will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. In addition, the advisory fees paid
by the Fund have changed over the periods covered by these figures. Therefore,
there is no assurance that this performance will be repeated in the future.
FINANCIAL STATEMENTS
Incorporated by reference herein are portions of the Fund's
annual report to stockholders for the fiscal year ended September 30, 1995 under
the headings: "REPORT OF INDEPENDENT ACCOUNTANTS," "PORTFOLIO OF INVESTMENTS,"
"STATEMENT OF ASSETS AND LIABILITIES," "STATEMENT OF OPERATIONS," "STATEMENT OF
CHANGES IN NET ASSETS," and "NOTES TO FINANCIAL STATEMENTS." Copies of the
annual report are available upon request and without charge by contacting
Bailard, Biehl & Kaiser International Fund Group, Inc., 2755 Campus Drive, San
Mateo, California 94403, (800) 882-8383. The Board of Directors have approved a
change in the name of the Fund from "Bailard, Biehl & Kaiser International
Fixed-Income Fund" to "Bailard, Biehl & Kaiser International Bond Fund" upon the
effectiveness of this Registration Statement.
-----------------------------------
The Prospectus and this Statement of Additional Information,
together, do not contain all of the information set forth in our registration
statement filed with the Securities and Exchange Commission. Certain information
is omitted in accordance with rules and regulations of the Commission. The
registration statement may be inspected at the Public Reference Room of the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549, and copies thereof may be obtained from the Commission at prescribed
rates.
<PAGE>
As filed with the Securities and Exchange
Commission on January 26, 1996
Registration No. 2-63270
File No. 811-6146
- --------------------------------------------------------------------------------
Part C
of
Form N-1A
REGISTRATION STATEMENT
BAILARD, BIEHL & KAISER INTERNATIONAL FUND GROUP, INC.
- --------------------------------------------------------------------------------
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
(incorporated by reference in Part B
(Statement of Additional Information)
under the heading "Financial Statements")
Financial Highlights:
Included in Part A (Prospectus)
(b) Exhibits:
Exhibit Number and Description
------------------------------
1. Articles of Incorporation of Registrant (incorporated
by reference to Exhibit No. 1 of Post-Effective
Amendment No. 14, dated July 26, 1990).
2. By-laws of Registrant (incorporated by reference
to Exhibit No. 2 of Post-Effective Amendment No.
14, dated July 26, 1990).
3. Inapplicable.
4.1 Specimen of the share certificate representing
shares of common stock of Bailard, Biehl &
Kaiser International Equity Fund (incorporated
by reference to Exhibit No. 4 of Post-Effective
Amendment No. 14, dated July 26, 1990).
4.2 Specimen of the share certificate representing shares of common stock
of Bailard, Biehl & Kaiser International Bond Fund.
5. Investment Management Agreement between
Registrant and Bailard, Biehl & Kaiser, Inc.
dated as of October 1, 1993 (incorporated by
reference to Exhibit No. 5 of Post-Effective
Amendment No. 20, dated July 16, 1993)
6. Distribution Agreement between Registrant
and BB&K Fund Services, Inc. dated as of
October 1, 1993 (incorporated by reference to Exhibit
No. 6 of Post-Effective Amendment No. 20, dated
July 16, 1993)
7. Inapplicable.
8. Custodian Agreement between Registrant and
Brown Brothers Harriman & Co. (incorporated by
reference to Exhibit 8 of Post-Effective Amendment
No. 14, dated July 26, 1990).
9. Administration Agreement between Registrant
and Investment Company Administration Corporation,
as amended.
10.1 Opinion and Consent of Orrick, Herrington &
Sutcliffe (incorporated by reference to Exhibit
10.1 of Post-Effective Amendment No. 14, dated
July 26, 1990).
10.2 Opinion and Consent of Piper & Marbury (incorporated
by reference to Exhibit 10.2 of Post-Effective
Amendment No. 14, dated July 26, 1990).
11. Consent of Price Waterhouse LLP.
12. Inapplicable.
13. Copies of investment letters provided in connection
with the shares issued to raise initial capital
(incorporated by reference to Exhibit 13 of
Pre-Effective Amendment No. 2 to Registrant's
Form N-1 Registration Statement).
14. Inapplicable.
15. Inapplicable.
16.1 Schedule for computation of performance quotations
of the Bailard, Biehl & Kaiser International Equity Fund.
16.2 Schedule for computation of performance quotations of the Bailard,
Biehl & Kaiser International Bond Fund (formerly Fixed-Income Fund).
17. Financial Data Schedule.
Item 25. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
Registrant's organization has been sponsored by Bailard, Biehl
& Kaiser, Inc. (the "Adviser"), a California corporation and a wholly owned
subsidiary of BB&K Holdings, Inc., a California corporation ("Holdings"). Peter
M. Hill, Burnice E. Sparks, Jr., Janis M. Horne and Tina Thomas, who are
Directors and/or officers of Registrant, are also Directors and/or officers of
the Adviser and/or BB&K Fund Services, Inc. (the "Distributor"), a California
corporation and a wholly owned subsidiary of Holdings. Messrs. Hill and Sparks
currently serve as Co-Presidents and directors of the Adviser. Messrs. Hill and
Sparks are also Directors and Mr. Sparks is the Chief Executive Officer of the
Distributor. Ms. Horne and Ms. Thomas are Vice Presidents of the Adviser. Ms.
Thomas is also Treasurer of the Distributor. Mr. Hill, Mr. Sparks, Ms. Horne and
Ms. Thomas are also each shareholders of Holdings. As a result, Holdings, the
Adviser and/or the Distributor may be deemed to be directly or indirectly under
common control with Registrant.
Additionally, Mr. Sparks is a Trustee and President of
Bailard, Biehl & Kaiser Fund Group, a Massachusetts business trust and
registered investment company (the "Fund Group"). Ms. Horne is Secretary and
Assistant Treasurer and Ms. Thomas is Treasurer and Assistant Secretary of the
Fund Group. Shirley L. Clayton, David B. Shippey and James C. Van Horne,
Directors of Registrant, are also Trustees of the Fund Group. The Adviser serves
as the investment adviser to the Fund Group and the Distributor as the
distributor of the Fund Group. As a result, the Fund Group may be deemed to be
directly or indirectly under common control with Registrant.
Item 26. Number of Holders of Securities
-------------------------------
As of September 30, 1995:
Number of
Title of Class Shares Outstanding Record Holders
- -------------- ------------------ --------------
Equity Fund Series 18,041,372 463
Bond Fund Series (formerly
Fixed-Income Fund Series) 7,360,830 418
Item 27. Indemnification
---------------
Registrant participates in a policy of insurance that insures
the Fund and its directors, officers and employees against any liability arising
by reason of any actual or alleged breach of duty, neglect, error, misstatement,
misleading statement or other act or omission within the scope of their duties.
The By-laws of Registrant provide for indemnification of
Registrant's directors, officers, employees and agents under certain
circumstances as permitted by Section 2-418 of the Maryland General Corporation
Law, and such provisions may be sufficiently broad to permit indemnification for
liabilities arising under the Securities Act of 1933 (the "1933 Act") and the
Investment Company Act of 1940, but only to the extent permitted under Section
17(h) of the 1940 Act.
Insofar as indemnification for liabilities arising under the
1933 Act may be permitted for directors, officers and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification by Registrant is against public policy, as expressed in the 1933
Act, and therefore may be unenforceable. In the event that a claim for such
indemnification (except insofar as it provides for the payment by Registrant of
expenses incurred or paid by a director, officer or controlling person in the
successful defense of any action, suit or proceeding) is asserted against
Registrant by such director, officer or controlling person and the Securities
and Exchange Commission is still of the same opinion, Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
The principal business of the Adviser is investment
management, and the principal business address of the Adviser and each of its
officers and Directors is 2755 Campus Drive, San Mateo, California 94403. Set
forth below is a list of each other business, profession, vocation or employment
of a substantial nature during the past two fiscal years of each director and
executive officer of the Adviser and of each other officer of the Adviser who is
a Director or officer of Registrant:
Position(s) Held Other
Name with the Adviser Employment
- ---- ---------------- ----------
Thomas E. Bailard Chairman of the Board and Chairman of the Board,
Chief Executive Officer Chief Executive Officer
and President of
Holdings; Chairman of
the Board of the
Distributor; Chairman
and Trustee of the Fund
Group; Chairman of
Bailard, Biehl & Kaiser
REIT
Peter M. Hill Co-President, Chief Director of the
Investment Officer and Distributor; Chairman
Director of Registrant
Burnice E. Sparks, Jr. Co-President and Director Chief Executive Officer
Distributor; President
and Trustee of the Fund
Group; President and
Director of Registrant
Barbara V. Bailey Senior Vice President Senior Vice President
and Treasurer/Secretary and Treasurer of
Holdings; Treasurer and
Secretary of Bailard,
Biehl & Kaiser REIT.
Janis M. Horne Vice President Secretary and Assistant
Treasurer of the Fund
Group and Registrant
Tina Thomas Vice President, Chief Treasurer of the
Compliance Officer Distributor; Assistant
Secretary and Treasurer
of the Fund Group and
Registrant; Assistant
Treasurer of Bailard,
Biehl & Kaiser REIT
Item 29. Principal Underwriters
----------------------
The Distributor, located at 2755 Campus Drive, San Mateo,
California 94403, is the principal underwriter for the Registrant and for the
Fund Group. Certain information with respect to the officers and Directors of
the Distributor is set forth below. The principal business address of each such
person is 2755 Campus Drive, San Mateo, California, 94403.
Position(s) With Other
Name the Distributor Employment
- ---- --------------- ----------
Thomas E. Bailard Chairman of the Board Chairman of the Board,
Chief Executive Officer and
President of Holdings;
Chairman of the Board and
Chief Executive Officer of
the Adviser; Chairman of
the Board and Trustee of
the Fund Group; Chairman of
Bailard, Biehl & Kaiser
REIT
Peter M. Hill Director Director, Co-President,
Chief Investment Officer
of the Adviser; Chairman of
the Board of Registrant
Burnice E. Sparks, Jr. Chief Executive Director and Co-President
Officer and Director of the Adviser; President
Registrant and Trustee of the Fund
Group; President and
Director of Registrant
Tina Thomas Treasurer and Chief Vice President of the
Compliance Officer Adviser; Assistant
Secretary and Treasurer of
the Fund Group and
Registrant; Assistant
Treasurer of Bailard, Biehl
& Kaiser REIT
Barbara V. Bailey Secretary Senior Vice President and
Treasurer/Secretary of the
Advisor; Senior Vice
President and Treasurer of
Holdings; Treasurer and
Secretary of Bailard,
Biehl & Kaiser REIT.
Item 30. Location of Accounts and Records
--------------------------------
Name and Address
Maintaining Records, Books and
Physical Possession Accounts Required By:
------------------- ---------------------
Brown Brothers Rule 31a-1(b)(1), (2) (i)-
Harriman & Co. (iii), (3), (7) and (8).
40 Water Street
Boston, MA 92109
Tina Thomas Rule 31a-1(b)(4)(5), (6),
Bailard, Biehl & (9), (10) and (11)
Kaiser, Inc.
2755 Campus Drive
San Mateo, CA 94403
Chase Global Funds Services Company Rule 31a-1(b)(2)(iv)
73 Tremont St.
Boston, MA 02108-3913
Item 31. Management Services
-------------------
Inapplicable.
Item 32. Undertakings
------------
Registrant undertakes to call a stockholders meeting, if
requested to do so by the holders of at least 10% of
Registrant's outstanding shares, for the purpose of voting
upon the question of removal of a director or directors
and to assist in communications with other stockholders as
required by Section 16(c) of the 1940 Act.
Registrant undertakes to furnish each person to whom a
Prospectus is delivered with a copy of Registrant's latest
annual report to stockholders, upon request and without
charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, Registrant certifies that this
Amendment meets all of the requirements for effectiveness pursuant to Rule
485(b) under the Securities Act of 1933 and that it has duly caused this
Amendment to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Mateo, State of California, on the 23 day of
January, 1996.
BAILARD, BIEHL & KAISER
INTERNATIONAL FUND GROUP, INC.
By /s/Peter M. Hill
----------------------------
Peter M. Hill
Chief Executive Officer
Pursuant to the requirements of the Securities Act of
1933, this Amendment to Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/Peter M. Hill
- ------------------------ Chairman; January 23, 1996
Peter M. Hill(1) Director
/s/Burnice E. Sparks, Jr.
- ------------------------ President; January 23, 1996
Burnice E. Sparks, Jr. Director
/s/Tina Thomas
- ------------------------ Treasurer January 23, 1996
Tina Thomas(2)
/s/Shirley L. Clayton
- ------------------------ Director January 19, 1996
Shirley L. Clayton
/s/David B. Shippey
- ------------------------ Director January 19, 1996
David B. Shippey
/s/James C. Van Horne
- ------------------------ Director January 18, 1996
James C. Van Horne
- --------
(1)Principal Executive Officer
(2)Principal Financial and Accounting Officer
<PAGE>
As filed with the Securities and Exchange
Commission on January 26, 1996
Registration No. 2-63270
File No. 811-6146
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
EXHIBITS TO
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 24 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 26 [x]
BAILARD, BIEHL & KAISER INTERNATIONAL FUND GROUP, INC.
(Exact name of registrant as specified in charter)
2755 Campus Drive
San Mateo, California 94403
(Address of principal executive offices)
Registrant's telephone number, including area code:
(800) 882-8383
Exhibits 4.2, 9, 11, 16.1, 16.2 and 17
================================================================================
<PAGE>
INDEX TO EXHIBITS
Sequentially
Numbered
Exhibit Number Exhibit Page
- -------------- ------- --------
4.2 Specimen of the share certificate representing
shares of common stock of Bailard, Biehl & Kaiser
International Bond Fund
9 Administration Agreement between Registrant and
Investment Company Administration Corporation,
as amended.
11 Consent of Price Waterhouse LLP
16.1 Schedule for Computation of
Performance Quotations of the
Bailard, Biehl & Kaiser
International Equity Fund
16.2 Schedule for Computation of
Performance Quotations of the
Bailard, Biehl & Kaiser
International Bond Fund
(formerly Fixed-Income Fund)
27.1 Financial Data Schedule
International Equity Fund, Series 1
27.2 Financial Data Schedule
International Bond Fund, Series 2
INCORPORATED UNDER THE LAWS OF
THE STATE OF MARYLAND
NUMBER SHARES
------ ------
BAILARD, BIEHL, & KAISER INTERNATIONAL FUND GROUP, INC.
BAILARD, BIEHL, & KAISER INTERNATIONAL BOND FUND
SERIES
COMMON STOCK
This Certifies that_______________________________________________________is the
registered holder of______________________________________________________Shares
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
IN WITNESS WHEREOF, The said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this __________Day of ____________A.D. 19____
_________________________ _______________________
JANIS M. HORNE, Secretary PETER M. HILL, Chairman
COUNTERSIGNED & REGISTERED
Chase Global Funds Services Company
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS
ON TRANSFER: SEE REVERSE SIDE.
- --------------------------------------------------------------------------------
A FULL STATEMENT OF THE DESIGNATIONS AND ANY PREFERENCES, CONVERSION AND OTHER
RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS,
QUALIFICATIONS, AND TERMS AND CONDITIONS OF REDEMPTION OF THE SHARES OF EACH
SERIES OF STOCK THAT THE COMPANY IS AUTHORIZED TO ISSUE AND THE DIFFERENCES IN
THE RELATIVE RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH SERIES TO THE
EXTENT THAT THEY HAVE BEEN SET, AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO
SET IN RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES, WILL BE FURNISHED
BY THE COMPANY TO ANY STOCKHOLDER, WITHOUT CHARGE, UPON REQUEST TO THE SECRETARY
OF THE COMPANY AT ITS PRINCIPAL OFFICE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR
QUALIFIED IN ALL STATES WHERE SOLD AND MAY NOT BE TRANSFERRED UNLESS REGISTERED
OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS OR UNLESS EXEMPT FROM SUCH
REGISTRATION OR QUALIFICATION.
CERTIFICATE
FOR
------
SHARES
OF
BAILARD, BIEHL & KAISER INTERNATIONAL BOND FUND SERIES OF THE BAILARD, BIEHL &
KAISER INTERNATIONAL FUND GROUP, A MARYLAND CORPORATION.
ISSUED TO
_______________________________
DATED
_______________________________
For Value Received;______hereby will assign and transfer unto___________________
________________________________________________________________________________
__________________________________________________________________________Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint ________________________________________________________________Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated ________________, 19__
In presence of ___________________________________
EXHIBIT 9
Addendum to Administration Agreements
-------------------------------------
Effective July 1, 1995, the Administration Agreements between
Investment Company Administration Corporation and Bailard Biehl & Kaiser Fund
Group and Bailard, Biehl & Kaiser International Fund Group, Inc., dated April 1,
1994 and October 1, 1991, respectively, are hereby amended as follows:
1. Paragraph 7 of the Agreements.
7. Compensation. As compensation for services rendered by
the Administrator during the term of this agreement, each Fund will
pay to the Administrator an annual fee equal to $32,500, payable
monthly by the fifth day of the next month.
2. Schedule 1 of the Agreements.
A. Administration
1. Legal
Paragraphs b., d., e., f., g. and I. are omitted from the
schedule of services to be provided. Paragraph c. is revised to read
as follows:
c. Maintain corporate calendars covering the matters
referred to herein.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
executed by their officers designated below on the day and year first written
above.
BAILARD, BIEHL & KAISER FUND GROUP and BAILARD, BIEHL & KAISER INTERNATIONAL
FUND GROUP, INC.
By: /s/ Tina Thomas
----------------
Tina Thomas
Title: Treasurer
--------------
INVESTMENT COMPANY ADMINISTRATION CORPORATION
By: /s/ Eric M. Banhazl
-------------------
Eric M. Banhazl
Title: Senior Vice President
-------------------------
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses and
Statements of Additional Information constituting parts of this Post-Effective
Amendment No. 24 to the registration statement on Form N-1A (the "Registration
Statement") of our reports dated November 17, 1995, relating to the financial
statements and financial highlights appearing in the September 30, 1995 Annual
Reports to Shareholders of Bailard, Biehl & Kaiser International Equity Fund and
Bailard, Biehl & Kaiser International Bond Fund (formerly Fixed-Income Fund),
portions of which are incorporated by reference in the Registration Statement.
We also consent to the references to us under the headings "Financial
Highlights" and "Experts" in the Prospectuses of each Fund constituting parts of
the Registration Statement.
/s/PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Boston, Massachusetts
January 24, 1996
SCHEDULE FOR COMPUTATION OF
PERFORMANCE QUOTATIONS OF THE
BAILARD, BIEHL & KAISER INTERNATIONAL EQUITY FUND
TOTAL RETURN FORMULA
n
P(1+T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
1, 5 or 10 year periods at the end of each
such period (or fractional portion thereof)
For the 1 year period ended September 30, 1995:
$1,000(1+T)1 = $1,021.13 or an annual compounded
rate of 2.13%
For the 5 year period ended September 30, 1995:
$1,000(1+T)5 = $1,213.60 or an average annual compounded
rate of 3.95%
For the 10 year period ended September 30, 1995:
$1,000(1+T)10 = $2,276.70 or an average annual compounded
rate of 8.58%
SCHEDULE FOR COMPUTATION OF
PERFORMANCE QUOTATIONS OF THE
BAILARD, BIEHL & KAISER INTERNATIONAL BOND FUND
(Formerly Fixed-Income)
TOTAL RETURN FORMULA
n
P(1+T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
1 or 5 year periods at the end of each such
period (or fractional portion thereof)
For the 1 year period ended September 30, 1995:
$1,000(1+T)1 = $1,173.30 or an annual compounded
rate of 17.33%
For the period from October 1, 1990 (inception) to September 30, 1995:
$1,000(1+T)5 = $1,306.60 or an average annual compounded
rate of 5.49%
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> INTERNATIONAL EQUITY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 104,852,544
<INVESTMENTS-AT-VALUE> 112,349,659
<RECEIVABLES> 5,670,132
<ASSETS-OTHER> 11,105
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 118,030,896
<PAYABLE-FOR-SECURITIES> 9,603,565
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 217,598
<TOTAL-LIABILITIES> 9,821,163
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 94,357,280
<SHARES-COMMON-STOCK> 18,041,372
<SHARES-COMMON-PRIOR> 33,558,287
<ACCUMULATED-NII-CURRENT> 906,195
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5,425,518
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,520,740
<NET-ASSETS> 108,209,733
<DIVIDEND-INCOME> 2,403,503
<INTEREST-INCOME> 479,456
<OTHER-INCOME> 0
<EXPENSES-NET> 1,763,073
<NET-INVESTMENT-INCOME> 1,119,886
<REALIZED-GAINS-CURRENT> 5,246,627
<APPREC-INCREASE-CURRENT> (11,502,739)
<NET-CHANGE-FROM-OPS> (5,136,226)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 3,077,445
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,030,952
<NUMBER-OF-SHARES-REDEEMED> 21,996,752
<SHARES-REINVESTED> 448,885
<NET-CHANGE-IN-ASSETS> (96,578,414)
<ACCUMULATED-NII-PRIOR> (8,700,869)
<ACCUMULATED-GAINS-PRIOR> 1,138,212
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,092,804
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,763,073
<AVERAGE-NET-ASSETS> 115,166,662
<PER-SHARE-NAV-BEGIN> 6.10
<PER-SHARE-NII> 0.06
<PER-SHARE-GAIN-APPREC> 0.06
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.22
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.00
<EXPENSE-RATIO> 1.53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> INTERNATIONAL BOND FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 61,290,218
<INVESTMENTS-AT-VALUE> 63,290,309
<RECEIVABLES> 2,170,921
<ASSETS-OTHER> 82,686
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 65,543,916
<PAYABLE-FOR-SECURITIES> 721,834
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 182,055
<TOTAL-LIABILITIES> 903,889
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 75,831,797
<SHARES-COMMON-STOCK> 7,360,830
<SHARES-COMMON-PRIOR> 16,998,966
<ACCUMULATED-NII-CURRENT> 5,239,089
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (17,691,932)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,260,873
<NET-ASSETS> 64,640,027
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,998,025
<OTHER-INCOME> 0
<EXPENSES-NET> 1,192,857
<NET-INVESTMENT-INCOME> 5,805,168
<REALIZED-GAINS-CURRENT> 9,379,630
<APPREC-INCREASE-CURRENT> 2,377,657
<NET-CHANGE-FROM-OPS> 17,562,455
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,401,052
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,780,250
<NUMBER-OF-SHARES-REDEEMED> 15,069,674
<SHARES-REINVESTED> 651,288
<NET-CHANGE-IN-ASSETS> (71,725,883)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 20,015
<OVERDISTRIB-NII-PRIOR> 229,900
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 768,079
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,192,857
<AVERAGE-NET-ASSETS> 102,530,865
<PER-SHARE-NAV-BEGIN> 8.02
<PER-SHARE-NII> 0.47
<PER-SHARE-GAIN-APPREC> 0.86
<PER-SHARE-DIVIDEND> 0.57
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.78
<EXPENSE-RATIO> 1.16
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
