November 26, 1997
Dear Shareholder:
We are pleased to present your September 30, 1997 annual shareholders' report
for the Bailard Biehl & Kaiser International Equity Fund. In this report we will
review the Fund's performance over the past year, discuss the movements in
international stock markets and present our outlook for the future.
Performance and Market Review
The Bailard Biehl & Kaiser International Equity Fund returned 14.74%(1) for the
six months and, 22.22%(1) for the year ended September 30 1997. The Fund's
holdings in the major European markets were the dominant contributors to this
performance. In addition the emerging markets of Latin America and Europe also
performed exceptionally well. The Japanese market, along with most of the stock
markets of the Far East, showed losses over the year. The notable exception to
the market and currency losses in the Far East was Hong Kong, where for the year
ended September 30th, the Hang Seng index returned over 25%.(2)
The investment strategy underlying the management of the Bailard Biehl & Kaiser
International Equity Fund has two important elements. First, to manage risk, we
are well diversified. We invest in the major markets of Europe, Asia, Canada and
Australia. We have also increased our participation (13.5% of total assets) in
many emerging markets in Latin America, Europe and the Far East. Second,
depending on the level of investor risk aversion or anxiety, we seek to add
value by tilting the portfolio toward a "value" or a "momentum" style. As a
proxy for investor anxiety we use global stock market volatility. When investors
are risk tolerant (global stock market volatility is low), we tilt our
portfolios towards those markets with improving fundamentals showing positive
momentum. Conversely, when investor anxiety is high (global stock market
volatility is high), we prefer those contrarian markets that rank highest in
terms of relative value measures such as price/book and price/earnings.
In the year ended September 30, 1997 both elements of our strategy served us
well. Through diversification we successfully spread our emerging markets
participation so that crises in individual markets did not drive our
performance. In addition, since global market volatility throughout the year to
September was very low, we tilted our portfolios towards markets showing
positive momentum and underweighted those with negative
<PAGE>
momentum. Thus, we placed our bets in Europe and Latin America rather than Japan
and the Far East.
Throughout much of the year, the dollar was generally strong and this reduced
returns. Thus, while the German stock market returned over 50% in local terms,
in U.S. dollars the return was only 31%.(2) The Fund's long-term strategy is to
be unhedged. In the shorter term we look for opportunities to add value by
hedging our foreign currency exposure. Last year, hedges proved successful.
Europe
A gradually improving European economic performance, particularly from Germany,
coupled with little inflationary pressure, set the stage for strong European
stock markets throughout the first three quarters of 1997. The progress towards
European Monetary Union suffered some moments of hesitation during the year but
remained on course. This continued to add fuel to the peripheral European
markets, like Spain and Portugal, all of whom are striving to bring their
economies into line with the core countries of Europe. Gains of 20% to 40%(2)
(in U.S. dollars) were made across most markets and the Fund's overweight
positions in Holland, Spain and Portugal served us well. The Fund's largest
single country exposure (between 16% to 20% of total assets over the year) was
to the U.K. where the stock market, helped by a strong pound, was up 40%(2) for
the year ended September 30, 1997.
Japan and the Far East
The Japanese stock market was volatile during the year ended September 30, 1997.
In the final quarter of 1996 concern about a stagnating economy sent the market
down sharply. The market remained depressed in the first few months of 1997.
Then, in the second quarter of 1997, Japanese stocks rose sharply as tentative
signs of better economic growth became apparent. By mid-summer, Japan was
sliding again as economic growth slowed, financial scandals broadened and
concerns spread about banking exposure to the "Tiger" economies. Over much of
the past year, the Japanese market has looked relatively attractive in terms of
value measures such as price/ book. The low level of volatility across world
markets suggested avoiding markets with poor momentum, correctly preventing us
from overweighting the poor performing Japanese market. We maintained our
exposure at neutral or slightly less for most of the year. The high level of
global market volatility experienced since September, combined with even lower
stock prices mean that we will be looking for opportunities to increase our
exposure to Japan over the next few months.
With the exception of Hong Kong, the year ended September 30, 1997 was an
exceptionally bad one for the smaller economies of Asia. Large trade imbalances,
overheated economies and overcapacity in key industries enabled speculators to
untie the
<PAGE>
financial knots that bound the currencies of the Tiger economies to the U.S.
dollar. The results have been higher interest rates and cutbacks in
infrastructure and investment spending, all of which imply a period of slower
economic growth ahead.
Emerging Markets
The year ended September 30, 1997 was a mixed one for the world's emerging stock
markets. The high growth economies of the Far East faltered. Beginning with
Thailand, then the Philippines, Indonesia, Malaysia and Korea in turn all faced
economic problems, exacerbated by the attention of currency speculators. As a
result, investor confidence has been damaged and economic growth will likely
slow over the next few years.
In contrast, the economies and the stock markets of Latin America enjoyed good
times. Inflation was brought down in Argentina and Brazil while their economies
grew at a moderate pace. In Mexico, the recovery from the peso crisis has
entered a healthier stage with strong economic growth. The spread of free market
ideology and a determination to put budget deficits in better order were evident
in Latin America with many large scale privatization programs.
In Europe the picture was mixed. The stock markets of Greece, Turkey and Hungary
performed well on the back of encouraging economic news. Countries that were
showing more significant balance of payments strains, such as the Czech
Republic, fared less well.
Market Outlook and Investment Strategy
In October and early November, global stock markets became more volatile.
Currency devaluation, which began in May in Thailand, has spread like a plague
across the smaller stock markets of Asia. By October, the hitherto invincible
Hong Kong dollar was under speculative attack and currency weakness spread
broadly across all emerging markets, undermining the stock markets of even those
countries like Brazil and Turkey that had performed well through September of
this year. Defending these currencies has meant higher interest rates, and
higher rates will slow economic growth throughout the Far East and across many
developing markets. The crisis in the Far East has hurt the already enfeebled
Japanese banking system and is likely to delay Japan's economic recovery.
The currency crisis, however, has some longer-term potential benefits for
investors. The slowdown in economic growth from the developing economies of the
Far East will help to curb some of their production excesses. On a longer time
horizon this will be beneficial to the region. Mired at one-third its peak level
of eight years ago, the Japanese stock market arguably already reflects the
problems of the local economy and region. However, the latest banking crisis,
may instill a greater sense of urgency from the Japanese authorities to
deregulate and, in the very near term, stimulate the economy, steps
<PAGE>
that are necessary to put both the economy and the stock market back on a
sounder footing for the future.
Europe, like the U.S., is only modestly exposed to the problems emanating from
the Far East. In Europe, economic growth continues to improve and inflation
remains generally subdued. European Monetary Union (EMU) is still on course for
1999 and, within EMU's stable financial and economic framework, corporate
earnings look likely to improve. Overall, the investment outlook for Europe
remains positive.
Increased volatility across world stock markets creates new opportunities.
Investors tend to oversell markets perceived as "risky" and push the prices in
perceived "safe" markets too high. During such periods, pursuing a disciplined
approach that focuses on the strongest relative value markets on the basis of
measures such as price/ book, price/earnings and earnings revisions, should
bring its best relative pay-off. Given the sell-off that has recently occurred,
in the months ahead there will likely be some "value" opportunities to pursue in
Japan and the markets of the Far East.
We appreciate your continued investment in the Bailard Biehl & Kaiser
International Equity Fund. If you have any questions concerning the Fund, please
do not hesitate to call us at 800-882-8383.
Sincerely,
Peter M. Hill Burnice E. Sparks, Jr., CFA
Chairman President
- --------------------------------
(1) Average annual total returns for investment periods ended September
30, 1997: 3 months: 2.98%; 6 months: 14.40%; 12 months: 22.22%; 5 years: 10.95%
annualized; 10 years: 2.73% annualized. As required by the Securities and
Exchange Commission, these figures reflect the average compounded return over
the period indicated that would equate an initial amount invested in shares of
the Fund to the ending redeemable value of such shares, assuming that all
dividends and distributions by the Fund were reinvested at net asset value.
These figures also reflect the deduction of an assumed 1% annual investment
management fee (0.25% quarterly) payable by clients of Bailard, Biehl & Kaiser
through 9/30/93. Actual fees varied during this period. As of 10/1/93, the Fund
charged a management fee of 0.95%. The performance data quoted represents past
performance, and the investment return and principal value of an investment in
the Bailard, Biehl & Kaiser International Equity Fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
(2) The performance data quoted represents past performance and is no
indication of future results.
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Shares Value
--------- -------------
Equity Securities (98.3%)
I. Argentina (1.0%)
Astra Corp. Argentina 45,500 $ 86,012
Banco De Galicia Spns'd. Class B ADR 2,547 75,455
Banco Frances Del Rio Plata ADR 2,200 71,913
*Comercial Del Plata 14,530 29,647
Ledesma SA Agricola Industrial 25,257 29,051
Perez Companc SA Spon ADR 5,200 82,550
Perez Companc SA 5,591 45,072
*Siderar SA A Shares 744 4,167
Siderca 28,952 86,584
Telecom Argentina Stet-France Telecom SA ADR 4,400 133,925
Telefon De Argentina ADR 4,700 172,138
Transp. Gas Del Sur. ADR 2,500 29,000
YPF SA ADR 14,100 519,937
------------
Total Argentina 1,365,451
------------
II. Australia (1.6%)
Australia & New Zealand Bank Group Ltd. 40,000 326,736
Brambles Industries Ltd. 8,500 176,964
Broken Hill Proprietary Ltd. 32,000 372,619
CSR Ltd. 42,100 172,555
Coca-Cola Amatil Ltd. 6,000 64,170
Coles Myer Ltd. 12,500 58,837
Fosters Brewing Group Ltd. 25,000 52,682
Goodman Fielder Ltd. 75,000 121,114
Lend Lease Corp. Ltd. 6,700 159,096
North Limited 75,000 264,767
QBE Insurance Group Ltd. 10,000 62,936
The News Corporation Ltd. 42,000 215,242
Westpac Banking Corp. 18,000 113,402
------------
Total Australia 2,161,120
------------
III. Belgium (1.6%)
D'Ieteren SA 530 113,434
Delhaize Le Lion NPV 1,400 69,147
Electrabel NPV 1,450 303,973
Fortis 2,103 421,246
Fortis Strip VVPR 133 15
Genarale Banque NPV 290 117,770
Koramic Building Products 1,600 104,928
Kredietbank NPV 750 309,207
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Shares Value
--------- -------------
Belgium-Continued
Petrofina SA NPV 610 $ 238,935
Powerfin NPV 350 47,395
Tessenderlo Chemie Parts Soc. 4,320 228,186
Tractebel NPV 400 162,715
Tractebel NPV Wts. (Ex. 11/15/99) 400 3,644
UCB NPV 20 71,342
Union Miniere NPV 850 69,621
------------
Total Belgium 2,261,558
------------
IV. Brazil (2.8%)
Companhia Cervejaria Brahma ADR 15,100 232,163
Companhia Energetica Spon ADR 3,000 162,750
Electrobras Pfd. B ADR 18,800 524,520
Iparanga Brasil De Petroleo Pfd. 5,400,000 86,751
Itaubanco Pfd. Reg'd. 445,000 287,582
Light Particpacoes 530,000 188,672
*Makro Atacadista SA GDR 23,400 327,600
Petrobras Pfd. Reg. 570,000 162,329
Petrobras Sponsored ADR 8,300 230,325
Siderurgica Nacional 7,000,000 268,294
Telebras Spon. ADR 10,200 1,313,250
Unibanco PN 4,800,000 170,917
------------
Total Brazil 3,955,153
------------
V. Canada (3.5%)
Abitibi Consolidated Inc. 7,500 126,921
Alcan Aluminum Ltd. 4,000 139,000
BCE Inc. 8,000 239,000
Bank of Nova Scotia 4,000 191,647
Bombardier Inc. Class B 14,000 283,493
Canadian Imperial Bank of Commerce 12,200 351,155
*Canadian Natural Resources 14,000 412,585
*Cott Corp. 15,000 152,414
Falconbridge Ltd. 2,500 46,646
Hudsons Bay Co. Ord. 7,500 199,873
Imasco Ltd. 6,300 190,674
Imperial Oil Ltd. 5,000 287,500
Ipsco Inc. 2,500 118,423
Maritime Teleg. & Telephone Ltd. 6,000 128,440
*Newbridge Networks Corp. 9,500 568,813
Noranda Inc. 6,000 119,761
Power Financial Corp. 4,000 120,051
Quebecor Inc. Class B 5,000 89,315
Royal Bank of Canada 8,900 437,035
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Shares Value
--------- -------------
Canada-Continued
Telus Corp. 4,500 $ 94,214
Thomson Corp. 10,000 242,632
Transcanada Pipelines Ltd. 10,000 193,750
*Wajax Ltd. 11,000 143,193
------------
Total Canada 4,876,535
------------
VI. Czech Republic (.1%)
*SPT Telecom AS 750 94,928
Tabak Bearer 150 42,660
------------
Total Czech 137,588
------------
VII. Denmark (1.1%)
Carlsberg Class B 1,400 77,028
D/S Svendborg Class B 7 499,643
Danisco 1,400 79,735
Den Danske Bank AF 2,200 239,799
FLS Industries Class B 1,500 44,611
Novo-Nordisk AS B 2,200 246,015
Sophus Berendsen Class B 700 112,195
Teledenmark Class B 3,500 184,243
------------
Total Denmark 1,483,269
------------
VIII. Finland (1.0%)
Nokia ADR 15,400 1,444,713
------------
IX. France (6.7%)
Air Liquide (L) SA 2,525 415,428
Alcatel Alsthom CGE SA 3,000 399,009
Altran Technologies SA 100 27,157
Axa SA 7,200 483,059
BIC 2,200 162,803
Carrefour Super Marche 1,475 919,233
Casino Guichard Perrachon 2,000 121,709
CIE Financiera De Paribas Br. 2,000 148,343
CLF Dexia France 3,000 284,212
Eridania Beghin Say SA 2,280 353,596
Eurafrance 300 126,429
Generale des Eaux 3,700 435,353
Generale des Eaux Wts. (Ex. 5/02/01) 3,700 1,996
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Shares Value
--------- -------------
France-Continued
L'Oreal 1,200 $ 480,429
LVMH Louis Vuitton Moet Hennessy 1,600 340,110
Michelin "B" Reg'd. 5,000 284,043
Peugeot SA 2,510 330,876
Rhone Poulenc SA Series A 6,500 258,589
Saint Gobain 2,600 401,032
Sanofi 5,460 507,141
Schneider SA 5,000 315,650
Seita 4,000 124,743
Soc. Nationale Elf Aquitaine 10,880 1,452,574
Societe Generale Paris 4,050 586,452
Technip SA 1,500 190,654
Thomson CSF 2,500 79,776
Usinor Sacilor 6,000 121,270
------------
Total France 9,351,666
------------
X. Germany (8.5%)
Allianz AG 1,000 241,372
AXA Colonia Konzern AG 8,100 724,627
BASF AG 23,500 848,909
Bayer AG 16,500 657,235
Commerzbank AG 28,500 1,027,914
Deutsche Bank AG 15,100 1,063,579
Deutsche Telekom AG 35,000 677,745
Douglas Holdings AG 10,000 392,379
Industrie Werke Karlsruhe (IWKA) AG 2,250 559,905
Porsche AG Non-Voting Preferred 300 522,323
Sap AG Pfd. 2,500 668,120
SGL Carbon AG 2,500 367,324
Siemens AG Bearer 12,000 810,916
Veba AG 22,800 1,332,899
Viag AG 900 402,978
Volkswagen AG 2,150 1,493,673
------------
Total Germany 11,791,898
------------
XI. Greece (.7%)
Alpha Credit Bank 3,750 275,597
Aluminum Co. of Greece Reg'd. 600 37,858
Athens Medical Center Reg'd. 5,200 62,264
Attica Enterprises SA 3,000 37,643
Ergo Bank 2,767 185,449
Goodys SA 2,200 38,173
Hellenic Bottling Co. 1,200 62,378
Hellenic Telecom Organ. 4,500 112,766
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Shares Value
--------- -------------
Greece-Continued
Lavipharm SA 7,000 $ 56,464
Proodeftiki 3,900 20,693
Titan Cement Ord. 1,000 60,407
------------
Total Greece 949,692
------------
XII. Hong Kong/China (3.9%)
Cheung Kong Holdings Ltd. 40,000 450,992
First Pacific Co. 340,000 340,505
FPB Bank Holding Company 261,000 130,694
Gold Peak Ind. 149,000 97,235
Gold Peak Ind. Wts (Ex.12/31/25) 29,800 3,196
HSBC Holdings Plc. 18,000 602,443
Hang Seng Bank 20,000 245,526
Henderson Land Development Ltd. 55,000 472,637
Hong Kong & China Gas 165,072 339,167
Hong Kong Electric 109,000 405,660
Hong Kong Telecommunications 63,000 142,469
*Huaneng Power Int'l. ADR 5,400 130,950
Hutchison Whampoa 71,000 697,293
New World Development Co. Ltd. 50,000 303,030
*New World Infrastructure 64,400 169,769
Peregrine Investment Wts. (Ex. 5/15/98) 4,500 1,337
Shanghai Industrial Holdings Ltd. 35,000 217,096
Swire Pacific Ltd. Class A 58,000 444,078
Tingyi Holding Corp. 454,000 90,348
Zhenhai Refining & Chem Co. Ltd. Class H 330,000 157,783
------------
Total Hong Kong / China 5,442,208
------------
XIII. Hungary (.7%)
**Borsodchem Rt. GDR 144A 1,850 74,000
*Danubius Hotel & Spa 1,500 48,474
EGIS Rt. 1,500 77,381
**Gedeon Richter GDR 144A 2,000 212,300
*Graboplast Rt. Reg'd. 1,450 85,764
Magyar Olay Es. Gazipari 10,600 232,531
OTP Bank 4,750 157,153
Pick Szeged Rt. Bearer 720 58,676
------------
Total Hungary 946,279
------------
XIV. Indonesia (.2%)
*Bank Danamon Pt. (Fgn. Reg'd.) 33,000 6,307
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Shares Value
--------- -------------
Indonesia-Continued
Bank International Indonesia (Fgn. Reg'd./ Wts.) 5,440 $ 464
Bank Niaga 45,600 22,312
Citra Marga Nusaphala Persada 70,000 21,407
Gudang Garam (Fgn. Reg'd.) 12,000 34,862
Indosat ADR 1,500 39,375
Kalbe Farma (Fgn. Reg'd.) 27,000 20,437
*Lippo Bank (Fgn. Reg'd.) 14,000 4,817
Matahari Putra Prima (Fgn. Reg'd.) 32,000 11,009
Mayorah Indah (Fgn. Reg'd.) 51,000 12,477
Sampoerna H.M. (Fgn. Reg'd.) 10,000 20,642
Semen Gresik (Fgn. Reg'd.) 17,000 16,636
Tambang Timah 5,500 8,115
Telekomunikasi Indonesia ADR 3,300 73,838
*Wicaksana Overseas 11,760 4,675
------------
Total Indonesia 297,373
------------
XV. Ireland (.4%)
Allied Irish Banks 22,500 198,785
CRH Plc. 10,000 113,966
DCC Plc. 2,500 15,645
Greencore Ord. 13,000 61,495
Irish Life Plc. 16,500 86,457
Irish Permanent Plc. 3,500 33,113
Smurfit (Jefferson) Plc. 25,000 83,691
Waterford Wedgewood Units 20,000 25,326
------------
Total Ireland 618,478
------------
XVI. Italy (3.1%)
Assicurazione Generali 4,000 90,401
Autostrade CEC Pfd. B Shares 55,000 122,707
Banca Popolare di Milano 15,000 87,793
Danieli & Co. 6,000 47,947
Danieli & Co. Di Risp 3,900 14,577
Edison SpA 11,000 59,218
ENI SpA 170,000 1,070,844
Fiat SpA 73,150 261,121
Fiat SpA di Risp. 49,500 96,955
Istituto Mobiliare Italiano 43,000 461,484
Istituto Nazionale delle Assicurazioni SpA (A) 264,200 421,795
*Luxottica Group ADR 1,100 62,631
Montedison SpA 150,000 109,524
Parmalat Finanziaria SpA 30,200 51,802
Pirelli SpA 50,000 146,611
Telecom Italia SpA Non Conv 58,139 226,236
Telecom Italia Mobile SpA 100,000 396,952
Telecom Italia SpA 82,222 547,940
------------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Shares Value
--------- -------------
Italy-Continued
Total Italy $ 4,276,538
------------
XVII. Japan (15.0%)
77th Bank 20,000 203,760
Aoyama Trading 15,000 429,885
Bank of Tokyo-Mitsubishi 35,000 666,777
Chugoku Bank 20,000 301,499
Dai Ichi Kangyo Bank 35,000 397,167
Daiichi Pharmaceutical 30,000 442,309
Fuji Heavy Industries 100,000 410,006
Fuji Photo Film Co. 16,000 659,985
Fujitsu 40,000 500,290
Hitachi Ltd. 125,000 1,087,137
Honda Motor Co. 70,000 2,440,984
Japan Tobacco Inc. 50 388,884
Kirin Brewery Co. Ltd. 36,000 296,397
Kyocera Corp. 26,000 1,699,163
Long Term Credit Bank of Japan 140,000 611,116
Matsushita Electric Industrial Ltd. 35,000 631,989
Mitsubishi Chemical 185,000 427,524
Mitsubishi Material 200,000 599,685
Mitsui & Co. 70,000 550,236
Nec. Corp. 40,000 487,037
Nippon Tel. and Tel. 102 937,795
Nissan Motor Co. 100,000 596,372
Omron Corp. 15,000 314,338
Promise Co. 35,200 1,836,826
Ricoh Co. 75,000 1,124,410
Sankyo Co. Ltd. 25,000 865,568
Sanwa Bank Ltd. 62,000 760,043
Sony Corp. 7,000 660,979
Sumitomo Metal Industries 300,000 623,706
Tokyo Electric Power 70 1,345
------------
Total Japan 20,953,212
------------
XVIII. Mexico (2.0%)
Alfa SA de CV Class A 6,500 61,025
Apasco SA De CV 11,000 84,175
Carso Global Telecom 19,726 84,480
Cemex Spon. ADR 25,200 296,887
*Comercial Mexicana SA de CV 21,000 26,738
Desc. SA de CV SPN ADR 1,515 63,251
*Empaques Ponderosa Ser. B 57,800 52,035
Empressa La Moderna ADR 5,500 120,313
Femsa B SA de CV Class B 16,000 137,869
**GRP Bancr Sp ADR 144A 6,000 81,000
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Shares Value
--------- -------------
Mexico-Continued
Grupo Carso A1 SA de CV 16,600 $ 132,791
Grupo Elektra SA de CV Class C GDR 3,700 119,325
Grupo Financiero Inbursa "Ser. B" 17,000 74,336
Grupo Ind'l. Maseca SA Spon. ADR 2,900 52,563
**Grupo Televisa GDR 144A 3,100 111,019
Kimberly Clark De Mexico ADR 10,500 267,750
Nacional De Drogas SA de CV L Shares 30,000 32,795
*Panamerican Beverages Class A ADR 2,000 78,125
Sigmab/Sigma Alimentos Class B 8,400 137,200
Telefonos de Mexico ADR 14,100 729,675
------------
Total Mexico 2,743,352
------------
XIX. Netherlands (5.3%)
ABN-AMRO Holdings NV 27,600 559,103
Aegon NV 2,600 208,324
Baan Co. NV 4,300 310,169
Fortis Amev NV CV A 6,000 250,628
Getronics NV 13,300 416,502
ING Groep NV 31,050 1,426,546
Nutricia Ver Bedrijven 19,000 571,127
OCE - Van Der Grinten NV 2,500 316,553
Royal Dutch Petroleum 39,600 2,217,473
Samas Groep NV 9,100 433,638
Van Ommeren NV CVA (Pt'g. Cert.) 3,900 164,281
Verenigd Bezit VNU Haarlem 20,000 464,462
------------
Total Netherlands 7,338,806
------------
XX. Norway (.6%)
Awilco AS B 4,500 62,826
Bona Shipholding Ltd. 167 2,237
Christiania Bank OG Kreditkasse 6,500 22,458
Den Norske Bank AS 5,000 20,942
Dyno Industrier 800 20,307
Elkem AS A 2,500 44,423
Kvaerner Industrier 1,000 59,089
Leif Hoegh & Co. 2,000 47,666
Norsk Hydro AS 5,400 322,507
Norske Skogindustier Class A 700 26,357
Nycomed ASA 2,000 45,410
Orkla A/S 1,200 106,276
*Petroleum Geo Service 600 40,573
*Storebrand 4,500 32,682
------------
Total Norway 853,753
------------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Shares Value
--------- -------------
XXI. Philippines (.1%)
Cosmos Bottling Corp. 158,400 $ 30,435
*DMCI Holdings Inc. 50,800 4,067
Davao Union Cement Corp. 37,138 2,054
*Empire East Land Inc. 225,596 4,860
Far East Bank & Trust 16,200 24,288
*Fortune Cement Corp. 46,350 6,544
Manila Electric Class B 5,343 18,510
*Mondragon Int'l. Philippines Inc. 100,800 8,803
Philippine Long Distance Telephone 3,400 92,054
*Philippine National Bank 1,500 3,231
*Robinsons Land Corp. Class B 78,000 4,496
------------
Total Philippines 199,342
------------
XXII. Poland (.5%)
*Agros Holdings Series C 960 28,078
Big Bank Gdanski SA 125,000 160,866
Bank Przemyslowo Handlowy (BPH), SA 500 30,418
Bank Slaski 400 30,184
Computerland Poland SA 2,500 55,572
Debica SA Class A 1,000 29,102
Elektrim SA 13,700 153,468
Mostostal Export SA 15,000 49,137
Mostostal Zabrze-Holding SA 7,000 40,948
*Okocimskie Zaklady Piwowarskie 3,500 21,498
Polifarb Cieszyn 6,000 32,817
Polifarb Cieszyn Rights 12/15/97 6,000 8,657
Rolimpex 5,000 16,672
Zaklady Piwowarski Bearer 1,100 88,476
------------
Total Poland 745,893
------------
XXIII. Portugal (2.9%)
Banco Commercial Portugues (Fgn. Reg'd.) 20,500 433,066
Banco Espirito Santo Reg'd. 21,000 583,139
Cimpor (Cimentos de Portugal) SA 5,500 148,721
*Colep (Cia Portuguesa de Embalagens) 12,400 220,454
Electric de Portugal Spon ADR 20,500 704,689
Engil Sociedade Gestora Part. Soc. 5,500 69,193
Est. Jeronimo Martins Filho 2,499 192,412
Est. Jeronimo Martins BNS 1 26
*Inparsa (Industrias Particiapcoes) 2,650 62,390
*Mundial Confianca 19,000 388,175
Portugal Telecom SA 15,700 681,224
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Shares Value
--------- -------------
Portugal-Continued
Portugal Telecom Spon. ADR 8,000 $ 347,500
*Somague SGPS 8,970 103,722
------------
Total Portugal 3,934,711
------------
XXIV. Singapore (.7%)
ACMA Ltd. 20,000 26,667
Creative Technology Ltd. 4,500 118,529
Cycle & Carriage Ltd. 3,000 18,137
DBS Land (Fgn. Reg'd.) 18,000 43,765
Development Bank of Singapore (Fgn. Reg'd.) 8,500 86,667
Elec. & Eltek International ADR 7,000 61,600
GP (Gold Peak) Batteries 15,000 46,471
Jardine Strategic ADR 16,000 62,720
Keppel Corp. 12,500 49,837
*Lindeteves Jacoberg Ltd. 54,000 86,471
Overseas Chinese Bank (Fgn. Reg'd.) 7,200 49,882
Prima Ltd. 9,000 26,587
Singapore Airlines Ltd. (Fgn. Reg'd.) 8,000 59,085
Singapore Telecom 58,000 98,183
United Overseas Land Wts. (Ex. 5/28/01) 10,000 3,922
Want Want Holdings ADR 35,000 88,900
*Want Want Holdings ADR Wts.6/97 7,000 16,660
------------
Total Singapore 944,083
------------
XXV. South Africa (.9%)
Anglo American Gold Corp. of South Africa 2,500 127,882
Billiton Plc. 28,000 107,796
De Beers Centenary Link Units 9,500 277,105
First National Bank Hld'g. 20,000 158,712
Gencor Ltd. 5,600 13,212
Goldfields South Africa 1,500 30,161
Liberty Life Association of America 4,000 116,676
Sasol Ltd. 12,000 165,362
South Africa Brews 7,000 203,056
South African Iron & Steel 60,000 38,220
Vaal Reefs Exploration & Mining 600 31,271
------------
Total South Africa 1,269,453
------------
XXVI. South Korea (.1%)
Daewoo Heavy Industries Ltd. 1,800 14,330
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Shares Value
--------- -------------
South Korea-Continued
Korea Long Term Credit Bank 1,963 $ 21,466
Samsung Electronics 406 38,678
------------
Total South Korea 74,474
------------
XXVII. Spain (3.8%)
Acerinox SA 1,300 245,760
Aumar (Fgn. Reg'd.) 6,000 97,339
Autopistas Cesa (Fgn. Reg'd.) 9,371 125,328
Banco de Santander (Fgn. Reg'd.) 18,000 590,065
BCO Bilbao Vizcaya Reg'd. 30,000 924,113
Endesa 40,000 854,059
Iberdrola SA 60,000 738,085
Repsol SA 12,000 518,871
Tabacalera SA Ser. A (Fgn. Reg'd.) 1,000 70,188
Telefonica de Espana SA 32,000 1,006,100
Vidrala SA 3,000 137,762
------------
Total Spain 5,307,670
------------
XXVIII. Sweden (3.2%)
ABB AB Series A 24,000 340,259
Astra AB Series A 35,466 654,833
Autoliv AB Free ADR 4,400 187,000
Electrolux AB Series B 4,600 359,752
Ericsson Telecom Series B 27,800 1,336,389
Granges AB 2,300 41,860
Hennes & Mauritz Series B 4,250 185,807
Netcom Systems AB B 14,200 215,366
Nordbanken 8,300 283,510
Scania AB Wts. (Ex. 6/4/99) 5,100 8,408
Stora Kopparbergs Series A 15,700 269,174
Svenska Handelsbanken Series A 6,000 208,112
Swedish Match AB Free 41,300 131,812
Volvo AB Class B Free 9,300 266,767
------------
Total Sweden 4,489,049
------------
XXIX. Switzerland (6.7%)
ABB AG Baden Bearer 100 147,495
Ciba Geigy AG (Reg'd.) 1,400 135,445
Clariant AG (Reg'd.) 1,000 805,646
Credit Suisse Group 8,100 1,095,989
Nestle SA (Reg'd.) 850 1,185,815
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Shares Value
--------- -------------
Switzerland-Continued
Novartis AG Reg'd. 1,750 $ 2,687,211
Roche Holdings AG (Ptg. Cert.) 160 1,421,243
Sairgroup Namen AKT 100 133,930
Swiss Bank Corp. (Reg'd.) 2,000 541,229
Swiss Reinsurance (Reg'd.) 400 600,723
Zurich Insurance (Reg'd.) 1,200 523,050
------------
Total Switzerland 9,277,776
------------
XXX. Taiwan (.8%)
*Acer Inc. 35,000 68,533
Asia Cement 30,240 44,515
*Bank Sinopac 46,872 39,334
*CMC Magnetics Corp. 27,500 87,502
Cathay Construction Co. 34,980 52,226
Cathay Life Insurance 33,350 152,175
China Development Corp. 43,500 154,382
China Steel 57,000 53,812
*China Trust Commercial Bank 110,400 160,585
Formosa Plastics Corp. 32,700 66,316
*Inventec Electronics Co. 8,800 58,770
*President Enterprises Corp. 37,200 55,021
*Tuntex Distinct 82,080 47,068
*Yue Loong Motor 37,800 81,285
------------
Total Taiwan 1,121,524
------------
XXXI. Turkey (.5%)
Brisa Bridgestone Sabanci 84,000 37,117
Cimsa Cimento Sanayi Tickaret As 435,000 81,129
Ege (Biraclik Ve Malt Sanayii) 500,000 57,386
Eregli Demir Ve Celik 720,000 128,084
Turkiye Garanti Bankasi AS 3,000,000 161,827
Sarkuysan Elektronk Bakir Sanayi 479,000 55,663
Vestel Electronik Sanayai 900,000 82,635
Yapi Kredi Bank 4,600,000 114,828
------------
Total Turkey 718,669
------------
XXXII. United Kingdom (18.3%)
Amvescap Plc. 50,000 334,792
Anglian Water Plc. 31,000 409,884
Bank of Scotland 200,000 1,657,400
BAT Industries Ord. 55,000 482,439
BG Plc. 86,600 376,314
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Shares Value
--------- -------------
United Kingdom-Continued
Bass Ord. 56,200 $ 758,967
Blue Circle Industries Ord. 50,000 324,695
Brammer Plc. 21,300 215,738
British Aerospace 20,000 537,282
British Petroleum Ord. 80,000 1,208,319
British Steel Ord. 150,000 431,918
British Telecom. Ord. 260,000 1,717,816
Burton Group 230,000 497,866
Carlton Communications 110,000 911,926
*Centrica Plc. 86,600 129,402
EMAP Publishing Plc. 25,000 357,811
General Accident Ord. 34,700 610,993
General Electric Ord. 44,500 281,790
Glaxo Wellcome Plc. 25,000 563,169
Great Universal Stores Plc. 70,000 774,584
Greene King Plc. 40,000 453,281
Lloyds TSB Group Ord. 249,989 3,361,903
Ladbroke Group Ord. 120,000 527,460
Land Securities 28,800 454,163
Peninsular & Oriental Steam Navagation Co. 25,000 267,551
Rolls - Royce Ord. 84,000 347,376
Royal & Sun Alliance Ins. 95,000 903,130
Scottish Power Plc. 66,000 511,653
Shell Transport & Trading Reg'd. 120,000 879,101
Smithkline Beecham Ord. 263,928 2,579,412
Taylor Woodrow Ord. 150,000 450,697
Tesco Ord. 100,000 756,007
Unigate Ord. 110,000 1,003,971
Zeneca Ord. 13,000 425,254
------------
Total United Kingdom 25,504,064
------------
Total Equity Securities (98.3%)
(Identified Cost $110,030,355) $136,835,350
------------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Short-Term Investments (1.6%)
Brown Brothers Harriman & Co. (Grand Cayman Branch)
5.00% Call Account
(Identified Costs $2,242,000) $ 2,242,000
------------
Total Investments (99.9%)
(Identified Cost $112,272,355) 139,077,350
Other Assets less Liabilities (.1%) 142,624
------------
Net Assets (100.0%) $139,219,974
============
--------------------------------------------------------
* Non-income producing security
** Exempt from registration under Rule 144A of the Securities Act of
1993. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. On
September 30, 1997, these securities were valued at $478,319, or
0.34% of Net Assets.
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY INDUSTRY
SEPTEMBER 30, 1997
UNAUDITED
- --------------------------------------------------------------------------------
Percent of
Industry Net Assets
-------- ----------
Aerospace 0.90%
Air Transportation 0.10
Appliances and Household Products 1.30
Automobile 4.70
Banking 18.30
Beverages and Tobacco 2.10
Building Materials & Components 1.40
Broadcasting and Publishing 1.10
Bussiness Services 2.20
Chemicals 2.80
Construction and Housing 0.50
Data Products 1.40
Electrical and Electronics 5.80
Electronic Components and Instruments 1.50
Energy Sources 6.60
Finance/Financial Services 2.40
Foods and Housing Products 2.80
Golds 0.10
Health and Personal Care 8.80
Industrial Components 0.60
Insurance 4.50
Leisure 1.60
Machinery 0.80
Materials 0.60
Merchandising 3.40
Multi-Industry 2.80
Other Industries 1.00
Paper & Allied Products 0.40
Real Estate 1.40
Recreation 0.90
Shipping 0.80
Steel 1.60
Telecommunication 7.50
Textiles 0.10
Utilities 4.90
Wholesale and International 0.90
Short-Term Investments 1.60
Liabilities less Other Assets (0.20)
-------
Net Assets 100.00%
=======
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets
Investments, at value
(Identified cost $112,272,355) $ 139,077,350
Cash 17,984
Receivables:
Dividends, interest and recoverable foreign taxes $ 397,649
Net for forward currency contracts (Note 5) 40,176
Portfolio securities sold 1,292
Fund shares sold 3,026 442,143
Prepaid expenses ------------ 4,850
---------------
Total assets 139,542,327
---------------
Liabilities
Payables:
Fund shares redeemed $ 20,000
Portfolio securities purchased 1,292 21,292
Accrued management fees (Note 3) ------------ 118,548
Other accrued expenses 182,513
----------------
Total liabilities 322,353
----------------
Net assets (equivalent to $6.91 per share of $.0001 par value
capital stock, representing the offering and redemption
price for 20,149,200 shares outstanding,
100,000,000 shares authorized) $ 139,219,974
===============
Net assets consist of:
Capital paid in $ 107,735,562
Accumulated undistributed net investment income 1,778,778
Accumulated net realized gain on investments
and foreign currency transactions 2,861,840
Unrealized appreciation on:
Investments $ 26,804,995
Foreign currency 38,799 26,843,794
------------ ---------------
$ 139,219,974
===============
</TABLE>
See "Notes to Financial Statements"
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
STATEMENT OF OPERATIONS
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income
Dividends (net of foreign taxes withheld of $333,620) $ 2,639,969
Interest 119,605
------------
2,759,574
Expenses
Advisory fees $ 1,176,349
Custodian fees 424,690
Audit and legal fees 62,676
Transfer agent fees 36,958
Administrative fees 30,008
Directors' fees and expenses 17,717
Insurance 8,281
Registration fees 7,822
Miscellaneous expenses 18,738
Total expenses ------------ 1,783,239
------------
Net investment income 976,335
------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Net realized gain on investments 3,125,965
Net unrealized gain on investments 20,077,608
------------
Net gain on investments 23,203,573
------------
Net realized gain on foreign currency 960,151
Net unrealized loss on foreign currency
and foreign currency denominated assets and
liabilities (108,499)
------------
Net gain on foreign currency 851,652
------------
Net gain on investments and foreign currency 24,055,225
------------
Net increase in net assets resulting from operations $ 25,031,560
============
</TABLE>
See "Notes to Financial Statements"
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year ended September 30,
-----------------------------------
Increase (Decrease) in Net Assets 1997 1996
-----------------------------------
<S> <C> <C>
Operations:
Net investment income $ 976,335 $ 804,695
Net realized gain on investments 3,125,965 6,873,079
Net unrealized gain (loss) on investments 20,077,608 (769,440)
Net realized gain on foreign currency 960,151 78,900
Net unrealized gain (loss) on foreign currency and
foreign currency denominated assets and liabilities (108,499) 123,385
-------------- --------------
Net increase resulting from operations 25,031,560 7,110,619
-------------- --------------
Distributions to shareholders:
From net investment income (953,051) (1,061,398)
From net realized gains (6,861,964) (5,483,889)
-------------- --------------
Total distributions (7,815,015) (6,545,287)
-------------- --------------
Fund share transactions:
Proceeds from shares sold 31,629,863 15,242,997
Net asset value of shares issued on
reinvestment of distributions 6,244,045 5,720,256
Cost of shares redeemed (16,252,271) (29,356,526)
-------------- --------------
Net increase (decrease) resulting from Fund share
transactions 21,621,637 (8,393,273)
-------------- --------------
Net increase (decrease) 38,838,182 (7,827,941)
Net Assets
Beginning of year 100,381,792 108,209,733
End of year (including undistributed -------------- --------------
net investment income of $1,778,778 and
$692,870, respectively) $ 139,219,974 $ 100,381,792
============== ==============
Number of Fund Shares
Sold 5,086,504 2,576,621
Issued on reinvestment of distributions 1,067,358 999,560
Redeemed (2,586,268) (5,035,947)
-------------- --------------
Net increase (decrease) 3,567,594 (1,459,766)
============== ==============
</TABLE>
See "Notes to Financial Statements"
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For a share outstanding throughout the year:
For the years ended September 30,
------------------------------------------------------------------------
1997 1996 1995 1994 1993(1)
----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 6.05 $ 6.00 $ 6.10 $ 5.66 $ 4.80
---------- ---------- ---------- ---------- ----------
Income from Investment Operations:
Net Investment Income 0.04(4) 0.05 0.06(2) 0.01 0.07
Net Realized/Unrealized Gain on
Securities and Foreign Currency 1.23 0.37 0.06(3) 0.43 0.79
---------- ---------- ---------- ---------- ----------
Total from Investment Operations 1.27 0.42 0.12 0.44 0.86
---------- ---------- ---------- ---------- ----------
Less Distributions:
Net Investment Income (0.05) (0.06) -- -- --
Capital Gains (0.36) (0.31) (0.22) -- --
---------- ---------- ---------- ---------- ----------
Total Distributions (0.41) (0.37) (0.22) -- --
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Year $ 6.91 $ 6.05 $ 6.00 $ 6.10 $ 5.66
========== ========== ========== ========== ==========
Total Return 22.22% 7.33% 2.13% 7.77% 17.92%
Ratios/Supplemental Data:
Net Assets, End of Year (000's) $ 139,220 $ 100,382 $ 108,210 $ 204,788 $ 182,894
Ratio of Expenses to Average Net Assets 1.44% 1.54% 1.53% 1.39% 0.68%
Ratio of Net Investment Income to
Average Net Assets 0.79% 0.78% 0.97% 0.29% 1.88%
Portfolio Turnover Rate 67% 103% 174% 176% 131%
Average Commission Rate Paid(5) $ 0.0150 $ 0.0268 -- -- --
</TABLE>
- -----------------------------------------------
(1) Prior to February, 1993, the investment managers of the Fund were
Nomura Capital Management, Inc. and certain affiliates (collectively, "Nomura"),
Acadian Asset Management, Inc. ("Acadian"), and, with respect to foreign
currency hedging transactions and allocation of Fund assets to the other
managers, Bailard, Biehl & Kaiser, Inc. The Fund paid Nomura and Acadian fees at
varying rates for their services. Effective February, 1993, Bailard, Biehl &
Kaiser, Inc. (the "Advisor") assumed full responsibility for investment
management services to the Fund.
On October 1, 1993, the Fund and the Advisor entered into a new Investment
Management Agreement pursuant to which the Fund pays management fees to the
Advisor. At all times prior to that date, the Advisor directly charged
management fees to clients and the Fund paid no fees to the Advisor. If fees
directly charged to clients were included as a Fund expense at an assumed 1%
annual rate payable quarterly, pro-forma total return was 16.74% (unaudited) for
the year ended September 30, 1993.
(2) 1995 amounts are computed on the basis of average shares outstanding.
(3) 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.
(4) Net investment income per share has been computed before adjustments
for book/tax differences.
(5) Represents average commission rate paid per share on purchases and
sales of equity securities by the Fund, as computed under SEC rule effective
with the Fund's 1996 fiscal year. Prior year rates have not been presented as
permitted by the rule.
See "Notes to Financial Statements"
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1 - Summary of Significant Accounting Policies
Bailard, Biehl & Kaiser International Equity Fund (the "Fund") is a
non-diversified series of the Bailard, Biehl & Kaiser International Fund Group,
Inc. (the "Group"), a Maryland corporation and an open-end management investment
company registered under the Investment Company Act of 1940. The following
significant accounting policies are followed by the Fund in the preparation of
its financial statements and are in conformity with generally accepted
accounting principles for investment companies.
Security Valuation
Each listed investment security is valued at the closing price thereof reported
by the principal securities exchange on which the issue is traded, or if no sale
is reported, the mean of the closing bid and asked prices. Securities which are
traded over-the-counter are normally valued at the mean of the closing bid and
asked prices quoted by major dealers of such securities, or in the absence of
such prices, as determined in good faith by, or under procedures determined by,
the Board of Directors of the Fund. Short-term obligations with a maturity of 60
days or less are valued at amortized cost which approximates market.
The Fund's investment in foreign securities may entail risks due to the
potential of political and economic instability in the countries in which
securities are offered or the issuers conduct their operations. It is the Fund's
policy to continuously monitor exposure to these risks.
Foreign Currency
Foreign currency amounts, other than the cost of investments, are translated
into U.S. dollar values at the mean of the bid and offer price of such currency
against U.S. dollars last quoted on the valuation date. The cost of investments
is translated at the rates of exchange prevailing on the dates the portfolio
securities were acquired.
The Fund includes foreign exchange gains and losses from dividends and interest
receivable and other foreign-currency denominated payables and receivables in
realized and unrealized gain (loss) on foreign currency. The Fund does not
isolate that portion of the results of operations resulting from changes in
foreign exchange rates on investments from fluctuations arising from changes in
the market price of securities for financial reporting purposes. Fluctuations in
foreign exchange rates on investments are included with net realized and
unrealized gain (loss) on investments.
Forward Foreign Currency Exchange Contracts
In connection with portfolio purchases and sales of securities denominated in a
foreign currency, the Fund may enter into forward foreign exchange contracts
("contracts"). Additionally, from time to time the Fund may enter into contracts
to sell foreign currencies to hedge certain foreign currency denominated assets.
All commitments are "marked-to-market" daily at the applicable translation rates
supplied by a quotation service and any resulting unrealized gains or losses are
included in unrealized appreciation (depreciation) on foreign currency
denominated assets and liabilities. The Fund records realized gains or losses at
the time the forward contract is settled. Risks may arise upon entering into
these contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
Federal Income Taxes
The Fund's policy is to comply with the requirements of the Internal Revenue
Code ("Code") applicable to regulated investment companies and to distribute all
of its taxable income to its shareholders. It is also the Fund's intention to
make distributions in amounts sufficient to avoid
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
imposition of excise tax under the Code. Therefore, no provision is made for
Federal income taxes.
Paid in capital, undistributed net investment income and undistributed realized
net gain have been adjusted for permanent book-tax differences.
Reclassifications between undistributed net investment income and undistributed
realized net gain arose principally from differing book and tax treatments for
foreign currency transactions.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Other
Investment security transactions are accounted for on the trade date. Dividend
income is recorded on the ex-dividend date or when the Fund first becomes aware
of such dividend. Interest income is recorded on the accrual basis.
Distributions to shareholders are recorded on the ex-dividend date. The Fund
uses the identified cost method for determining realized gain or loss on
investments. Certain expenses of the Group are allocated between the series of
the Group in such manner as the Directors deem appropriate.
Note 2 - Purchases and Sales of Securities
For the year ended September 30, 1997, purchases and sales of securities, other
than short-term investments, aggregated $95,940,309 and $79,216,775,
respectively. There were no purchases or sales of U.S. Government obligations.
Note 3 - Management Fee and Other Transactions with Affiliates
The Fund has entered into an Investment Management Agreement with Bailard, Biehl
& Kaiser, Inc. (the "Advisor") for investment advisory services, under which the
Advisor receives a fee, payable monthly, at the annual rate of 0.95% of the
average net assets of the Fund. Advisory fees paid on shares of the Fund are
taken into account in the computation of fees payable under individual advisory
agreements for advisory clients of the Advisor.
Each outside director is compensated by the Group at the rate of $8,000 per year
plus $1,333 for each meeting of the Board of Directors attended and travel
expenses incurred in attending such meetings.
Note 4 - Tax Basis Appreciation
Unrealized appreciation (depreciation) at September 30, 1997, based on the cost
of securities for federal income tax purposes of $113,398,160, consists of:
Gross unrealized appreciation $ 29,605,001
Gross unrealized depreciation (3,925,811)
------------
Net unrealized appreciation $ 25,679,190
============
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
Note 5 - Forward Foreign Currency Contracts
At September 30, 1997 the Fund had entered into forward foreign currency
contracts which obligated the Fund to exchange currencies at specified future
dates. At the maturity of a forward contract, the Fund may either make delivery
of the foreign currency from currency held, if any, or from the proceeds of
portfolio securities sold, or it may terminate its obligation to deliver the
foreign currency at any time by purchasing an offsetting contract. The forward
value of amounts due to the Fund under the contracts, including contracts which
have been offset but remained unsettled, has been netted against the forward
value of the currency to be delivered by the Fund and the remaining amount is
shown as receivable for forward currency contracts in the financial statements.
Open forward foreign currency exchange contracts outstanding at September 30,
1997 were as follows:
Currency Currency Delivery Unrealized
Receivable Deliverable Date Appreciation/(Depreciation)
---------- ----------- ---- ---------------------------
$ 700,000 A$ 927,521 10/02/97 $ 27,547
1,500,000 DKr 9,903,000 10/02/97 24,561
889,013 SEK 6,756,500 10/17/97 (2,914)
585,591 ITL 1,020,450,000 11/24/97 (5,215)
673,287 A$ 927,521 12/03/97 326
1,480,269 DKr 9,903,000 12/03/97 2,124
1,196,009 C$ 1,654,080 12/22/97 (6,253)
-------
$40,176
=======
Currency Legend:
A$ - Austrailian Dollar ITL - Italian Lira
C$ - Canadian Dollar SEK - Swedish Krona
DKr - Danish Krona
<PAGE>
(Unaudited)
Cumulative Total Return of a $10,000 Investment
October 1, 1987 - September 30, 1997
BB&K International Morgan Stanley EAFE Morgan Stanley EAFE
Equity Fund (local currency) (US$)
------------------ ------------------- -------------------
9/87 10,000 10,000 10,000
9/88 8,760 9,385 9,916
9/89 10,393 11,775 12,128
9/90 8,296 7,966 8,780
9/91 9,224 9,833 10,702
9/92 7,835 8,672 9,941
9/93 9,148 11,279 12,561
9/94 9,859 11,657 13,795
9/95 10,069 11,949 14,594
9/96 10,807 13,855 15,850
9/97 13,208 16,883 17,782
Average Annual Total Return*
1 Year 5 Year 10 Year
22.22% 10.95% 2.73%
This graph (as mandated by the Securities and Exchange Commission) shows the
historic growth of a $10,000 investment in the Bailard, Biehl & Kaiser
International Equity Fund since October 1, 1987. We compare this investment to
the growth in the Morgan Stanley EAFE stock index over the same time period. The
index, which measures the performance of the international equity markets, is
given in both U.S. dollar and local currency terms. As the graph indicates, a
$10,000 investment in the Bailard, Biehl & Kaiser International Equity Fund
would have grown to $13,208 over the ten-year period ended September 30, 1997.
* As required by the Securities and Exchange Commission, these figures
reflect the average annual compounded return over the period indicated that
would equate an initial amount invested in shares of the Fund to the ending
redeemable value of such shares, assuming that all dividends and
distributions by the Fund were reinvested at net asset value. These figures
also reflect the deduction of an assumed 1% annual investment management
fee (0.25% quarterly) through 9/30/93. Actual fees varied during this
period. As of 10/1/93, the Fund charged a management fee of 0.95%. The
performance data quoted represents past performance, and the investment
return and principal value of an investment in the Bailard, Biehl & Kaiser
International Equity Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and the Board of Directors of
Bailard, Biehl & Kaiser International Equity Fund
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Bailard, Biehl &
Kaiser International Equity Fund (the "Fund") (a series of Bailard, Biehl &
Kaiser International Fund Group, Inc.) at September 30, 1997, and the results
of its operations, the changes in its net assets and the financial highlights
for the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits,
which included confirmation of securities at September 30, 1997 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
November 18, 1997
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Federal Income Tax Information: (Unaudited)
For the fiscal year ended September 30, 1997, the Fund accrued foreign source
income of $2,639,969 and the Fund accrued foreign taxes amounting to $333,620,
which are expected to be passed through to shareholders as foreign tax credits
on Form 1099-DIV for the year ending December 31, 1997.
<PAGE>
November 26, 1997
Dear Shareholder:
We are pleased to present your September 30, 1997, annual shareholders' report
for the Bailard, Biehl & Kaiser International Bond Fund. It includes a review of
the Fund's performance and our outlook for the months ahead.
Performance and Market Review
International bond markets had another year of solid local returns amid a low
inflation environment. European bond yields converged as the market prepared for
European Monetary Union (EMU). This allowed higher yielding countries like Spain
and Italy to return approximately 15%(1) in local terms. Three bond markets
(U.K., Canada and Australia) that we overweighted during the year had returns
that exceeded 13%.(1) Many of these local returns were undermined by a surging
dollar. The dollar's strength wiped out the local market gains and translated
into negative dollar-based returns for many bond markets. Sterling was the one
exception. Rising short-term interest rates and speculation that the pound would
return to the Exchange Rate Mechanism (ERM) contributed to its gain. Our foreign
exchange hedging activity allowed us to reduce the negative impact of the
dollar's rise on the portfolio. For the year ended September 30, 1997, the
Bailard, Biehl & Kaiser International Bond Fund returned 5.75%.(2)
Market Outlook
European economic growth is on the mend following several sluggish quarters.
Nevertheless, weak employment and limited wage growth raise questions about the
durability of domestic demand within Europe. European fiscal policy will also
remain tight as countries struggle to meet the deficit criteria required for
EMU. The odds increasingly favor a timely and broad start for EMU. Even so,
perceived political risk would rise if German growth turns sluggish. Convergence
opportunities remain in European markets but they are typically found in the
short-end of the yield curve. Germany is unlikely to aggressively raise interest
rates in the first half of next year. Rather, the interest rates of other
EMU-qualified countries will fall towards prevailing German interest rates.
The Japanese financial and economic system remains fragile amid the volatile
situation in emerging Asia. The deeply rooted problems in the Japanese banking
system increase the risk for the entire economy and may require drastic action
from Japanese officials. Nominal Japanese
<PAGE>
bond yields are still close to historic lows and offer limited capital
appreciation potential. Real yields remain low as well. We expect to the
portfolio to maintain an underweight position in Japanese bonds going forward.
Conclusion
We expect the sources of the Fund's 1998 return to differ materially from 1997.
Even with continued low inflation, local international bond returns are unlikely
to match last year's numbers. Bond yields are starting off at much lower levels
than last year and thus bonds have less room for capital appreciation. The
relative yield spread of bond markets has also narrowed considerably. Finally,
fewer countries will be aggressively lowering short-term interest rates this
year. On the positive side, the dollar should not be nearly as strong as it was
in 1997. Persistent global market volatility, flatter foreign bond yield curves
relative to the U.S. and rising short-term foreign interest rates would
eventually pressure the dollar lower and boost the Fund's return. The
composition of the International Bond Fund has changed slightly as well. We have
incrementally added exposure to investment grade emerging market bonds to
diversify the portfolio and increase its yield.
We appreciate the opportunity to manage your international bond investments and
look forward to continued success. If you have any questions, please call us at
(800) 882-8383.
Sincerely,
Peter M. Hill Burnice E. Sparks, Jr., CFA
Chairman President
- ------------------
(1) The performance data quoted represents past performance and is no
indication of future results.
(2) Average annual total returns for investment periods ended September 30,
1997: 3 months: 2.12%; 6 months: 4.18%; 12 months: 5.75%; 5 years: 4.00%
annualized; Since Inception (10/1/90): 6.07% annualized. As required by the
Securities and Exchange Commission, these figures reflect the average compounded
return over the period indicated that would equate an initial amount invested in
shares of the Fund to the ending redeemable value of such shares, assuming that
all dividends and distributions by the Fund were reinvested at net asset value.
These figures also reflect the deduction of an assumed 1% annual investment
management fee (0.25% quarterly) payable by clients of Bailard, Biehl & Kaiser
through 9/30/93. Actual fees varied during this period. As of 10/1/93, the Fund
charged a management fee of 0.75%. The performance data quoted represents past
performance, and the investment return and principal value of an investment in
the Bailard, Biehl & Kaiser International Bond Fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Par Value Value
------------ ----------
Senior Securities (89.4%)
Australian Dollar (3.7%)
FNMA Mtn.
6.500% 07/10/02 A$ 1,400,000 $ 1,047,232
KFW International Finance Inc.
9.125% 07/26/05 A$ 1,000,000 847,572
-----------
Total Australian Dollar 1,894,804
-----------
Belgium Franc (3.1%)
Government of Belgium
8.750% 06/25/02 BEF 14,000,000 445,269
Government of Belgium
9.000% 03/28/03 BEF 36,000,000 1,172,045
-----------
Total Belgium Franc 1,617,314
-----------
British Pound (10.6%)
Glaxo Wellcome
8.750% 12/01/05 (pound) 800,000 1,437,497
Republic of Austria
9.000% 07/22/04 (pound) 1,750,000 3,170,628
United Kingdom Treasury
9.750% 08/27/02 (pound) 500,000 913,332
-----------
Total British Pound 5,521,457
-----------
Canadian Dollar (8.4%)
British Columbia
7.750% 06/16/03 C$ 1,150,000 922,673
Government of Canada
6.500% 06/01/04 C$ 3,000,000 2,290,644
KFW International Finance
10.000% 03/05/01 C$ 825,000 682,275
Kingdom of Sweden
8.000% 05/12/03 C$ 600,000 481,916
-----------
Total Canadian Dollar 4,377,508
-----------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Par Value Value
----------- -----------
Danish Kroner (3.3%)
Kingdom of Denmark
9.000% 11/15/00 DKr 3,750,000 $ 622,825
Kingdom of Denmark
8.000% 05/15/03 DKr 6,400,000 1,072,282
-----------
Total Danish Kroner 1,695,107
-----------
Finnish Markka (.9%)
Republic of Finland
9.500% 03/15/04 FIM 2,000,000 460,292
-----------
French Franc (12.2%)
McDonalds
6.750% 07/24/06 FF 10,000,000 1,830,055
Government of France (O.A.T.)
7.750% 04/12/00 FF 7,700,000 1,404,430
Government of France (O.A.T.)
6.750% 10/25/03 FF 8,500,000 1,563,821
Government of France (O.A.T.)
5.500% 10/25/07 FF 9,000,000 1,520,026
-----------
Total French Franc 6,318,332
-----------
German Mark (15.7%)
European Investment Bank
7.500% 11/04/02 DM 1,300,000 815,559
German Federal Republic
8.375% 05/21/01 DM 3,700,000 2,354,203
German Federal Republic
8.250% 09/20/01 DM 1,500,000 956,755
International Bank for Reconstruction
& Development
5.875% 11/10/03 DM 2,000,000 1,180,307
LKB Baden Wurttemburg
6.625% 08/20/03 DM 1,100,000 666,909
Republic of Germany
6.875% 05/12/05 DM 3,500,000 2,169,578
-----------
Total German Mark 8,143,311
-----------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Par Value Value
------------- -----------
Italian Lira (8.1%)
American International Group Inc.
11.700% 12/04/01 ITL 3,500,000,000 $ 2,474,430
Italian Republic
10.500% 04/01/00 ITL 2,650,000,000 1,706,955
-----------
Total Italian Lira 4,181,385
-----------
Japanese Yen (10.7%)
Asian Development Bank
5.625% 02/18/02 (Y) 235,000,000 2,311,946
International Bank For Reconstruction
& Development
4.750% 12/20/04 (Y) 113,000,000 1,128,315
Japan Development Bank
6.500% 09/20/01 (Y) 158,000,000 1,581,374
Kingdom of Spain
4.625% 07/22/04 (Y) 55,000,000 539,044
-----------
Total Japanese Yen 5,560,679
-----------
Netherlands Guilder (5.1%)
Government of Netherlands
8.500% 03/15/01 NLG 1,500,000 844,853
Government of Netherlands
7.750% 03/01/05 NLG 3,150,000 1,818,842
-----------
Total Netherlands Guilder 2,663,695
-----------
Spanish Peseta (3.2%)
Government of Spain
7.400% 07/30/99 ESP 90,000,000 630,851
Government of Spain
10.000% 02/28/05 ESP 125,000,000 1,054,837
-----------
Total Spanish Peseta 1,685,688
-----------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Par Value Value
--------- -----------
Swedish Krona (3.5%)
Kingdom of Sweden
10.250% 05/05/00 SEK 2,600,000 $ 383,930
Kingdom of Sweden
10.250% 05/05/03 SEK 8,900,000 1,426,275
-----------
Total Swedish Kroner 1,810,205
-----------
SwItzerland (.9%)
Inter-American Development Bank
7.250% 01/21/02 CHF 600,000 484,937
-----------
Total Senior Securities
(Identified Cost $47,927,596) 46,414,714
-----------
Short-Term Investments (8.2%)
Brown Brothers Harriman & Co. (Grand Cayman Branch)
5.00% Call Account
(Identified Cost $4,230,000)
4,230,000
-----------
Total Investments (97.6%)
(Identified Cost $52,157,596) 50,644,714
Other Assets Less Liabilities (2.4%) 1,257,867
-----------
Net Assets 100.0% $51,902,581
===========
Currency Legend:
A$ - Australian Dollar DM - German Mark
BEF - Belgium Franc ITL - Italian Lira
(pound) - British Pound (Y) - Japanese Yen
C$ - Canadian Dollar NLG - Netherlands Guilder
DKr - Danish Kroner ESP - Spanish Peseta
FIM - Finnish Markka SEK - Swedish Krona
FF - French Franc CHF - Swiss Franc
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets
Investments, at value
(Identified cost $52,157,596) $ 50,644,714
Receivable for interest and recoverable foreign taxes 1,501,841
Prepaid expenses 9,920
----------------
Total assets 52,156,475
----------------
Liabilities
Cash overdraft due to custodian 25,742
Net payable for forward currency contracts open (Note 5) 92,915
Accrued management fees (Note 3) 31,673
Other accrued expenses 103,564
----------------
Total liabilities 253,894
----------------
Net assets (equivalent to $8.20 per share,
representing the offering and redemption
price for 6,330,348 shares outstanding,
100,000,000 shares authorized) $ 51,902,581
================
Net assets consist of:
Capital paid in $ 66,774,558
Accumulated undistributed net investment income 2,464,716
Accumulated net realized loss on investments
and foreign currency transactions (15,714,916)
Unrealized depreciation on:
Investments (1,512,882)
Foreign currency (108,895) (1,621,777)
-------------- ----------------
$ 51,902,581
================
</TABLE>
See "Notes to Financial Statements"
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
STATEMENT OF OPERATIONS
SEPTEMBER 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income
Interest (net of foreign taxes withheld of $39,917) $ 3,061,772
Expenses
Advisory fees $ 376,061
Custodian fees 109,974
Audit and legal fees 75,437
Transfer agent fees 41,497
Administrative fees 28,999
Directors' fees and expenses 16,265
Insurance 6,904
Registration fees 5,981
Miscellaneous expenses 18,086
------------
Total expenses 679,204
---------------
Net investment income 2,382,568
---------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Net realized loss on investments (126,786)
Net unrealized loss on investments (2,533,114)
---------------
Net loss on investments (2,659,900)
---------------
Net realized gain on foreign currency 3,827,614
Net unrealized loss on foreign currency
and foreign currency denominated assets and
liabilities (562,309)
---------------
Net gain on foreign currency 3,265,305
---------------
Net gain on investments and foreign currency 605,405
---------------
FOREIGN CURRENCY
Net increase in net assets resulting from operations $ 2,987,973
===============
</TABLE>
See "Notes to Financial Statements"
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
STATEMENT OF OPERATIONS SEPTEMBER 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year ended September 30,
----------------------------------------
Increase (Decrease) in Net Assets 1997 1996
----------------------------------------
<S> <C> <C>
Operations:
Net investment income $ 2,382,568 $ 3,453,883
Net realized gain (loss) on investments (126,786) 1,650,647
Net unrealized loss on investments (2,533,114) (979,859)
Net realized gain on foreign currency 3,827,614 425,210
Net unrealized gain (loss) on foreign currency and
foreign currency denominated assets and liabilities (562,309) 1,192,632
----------------- ------------------
Net increase resulting from operations 2,987,973 5,742,513
----------------- ------------------
Distributions to shareholders:
From net investment income (1,067,736) (3,453,883)
For tax purposes in excess of
net investment income (2,957,718) (4,924,771)
----------------- ------------------
Total distributions (4,025,454) (8,378,654)
----------------- ------------------
Fund share transactions:
Proceeds from shares sold 5,969,520 8,593,553
Net asset value of shares issued on
reinvestment of distributions 2,919,000 6,776,337
Cost of shares redeemed (21,329,162) (11,993,072)
----------------- ------------------
Net increase (decrease) resulting from
Fund share transactions (12,440,642) 3,376,818
----------------- ------------------
Net increase (decrease) (13,478,123) 740,677
Net Assets
Beginning of year 65,380,704 64,640,027
----------------- ------------------
End of year (including undistributed
net investment income of $2,464,716 and
$1,149,884, respectively) $ 51,902,581 $ 65,380,704
================= ==================
Number of Fund Shares
Sold 739,040 1,041,195
Issued on reinvestment of distributions 359,632 828,660
Redeemed (2,568,863) (1,430,146)
----------------- ------------------
Net increase (decrease) (1,470,191) 439,709
================= ==================
</TABLE>
See "Notes to Financial Statements"
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For a share outstanding throughout the year:
Year Ended September 30,
-----------------------------------------------------------------------------
(2) (2) (2) (1)
1997 1996 1995 1994 1993
---- ---- ---- ----- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 8.38 $ 8.78 $ 8.02 $ 10.85 $ 11.29
------------- ---------- ---------- ----------- -----------
Income from Investment Operations:
Net Investment Income 0.42 0.59 0.47 0.61 0.67
Net Realized/Unrealized Gain (Loss) on
Securities and Foreign Currency 0.04 0.16 0.86 (2.39) 0.39
------------- ---------- ---------- ----------- -----------
Total from Investment Operations 0.46 0.75 1.33 (1.78) 1.06
------------- ---------- ---------- ----------- -----------
Less Distributions:
Net Investment Income (0.17) (0.45) (0.45) (0.26) (1.08)
For Tax Purposes in Excess of Book
Net Investment Income (0.47) (0.70) (0.12) -- --
Capital Gains -- -- -- (0.27) (0.42)
Return of Capital -- -- -- (0.52) --
------------- ---------- ---------- ----------- -----------
Total Distributions (0.64) (1.15) (0.57) (1.05) (1.50)
------------- ---------- ---------- ----------- -----------
Net Asset Value, End of Year $ 8.20 $ 8.38 $ 8.78 $ 8.02 $ 10.85
============= ========== ========== =========== ===========
Total Return 5.75% 9.32% 17.33% (17.90%) 10.65%
Ratios/Supplemental Data:
Net Assets, End of Year (000's) $ 51,903 $ 65,381 $ 64,640 $ 136,366 $ 165,484
Ratio of Expenses to Average Net Assets 1.35% 1.22% 1.16% 1.12% 0.42%
Ratio of Net Investment Income to
Average Net Assets 4.72% 5.41% 5.66% 5.87% 6.25%
Portfolio Turnover Rate 33% 61% 179% 319% 157%
</TABLE>
- ------------------------------------
(1.) On October 1, 1993, the Fund and the Advisor entered into a new
Investment Management Agreement pursuant to which the Fund is required
to pay certain management fees to the Advisor. 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. If such
directly charged fees were included as Fund expense at an assumed 1%
annual rate payable quarterly, pro-forma total return (unaudited) was
9.55% for the year ended September 30, 1993.
(2.) Net investment income per share has been computed before adjustments for
book/tax differences. "Distributions 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.
(See "Notes to Financial Statements)
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1 - Summary of Significant Accounting Policies
The Bailard, Biehl & Kaiser International Bond Fund (the "Fund") is a series of
the Bailard, Biehl & Kaiser International Fund Group, Inc. (the "Group"), which
was organized as a Maryland corporation in June 1990 and is registered under the
Investment Company Act of 1940 as a non-diversified, open-end management
investment company. The following significant accounting policies are followed
by the Fund in the preparation of its financial statements and are in conformity
with generally accepted accounting principles.
Security Valuation
Investments in securities traded on an exchange or quoted on the
over-the-counter market are valued at the last transaction price reported on the
principal exchange or market on which the issue is traded, or, if no transaction
occurred during the day, at the mean between the current closing bid and asked
prices, except U.S. Government obligations which in all cases are stated at the
mean between the current closing bid and asked price, as last reported by a
pricing service approved by the Board of Directors.
When market quotations are not readily available, or when restricted securities
or other assets are being valued, such assets are valued at fair value as
determined in good faith by or under procedures established by the Board of
Directors. Short-term investments denominated in U.S. dollars that will mature
in 60 days or less are stated at amortized cost; such investments denominated in
foreign currencies are stated at amortized cost as determined in the foreign
currency and translated to U.S. dollars at the current day's exchange rate.
The Fund's investment in foreign securities may entail risks due to the
potential of political and economic instability in the countries in which the
securities are offered or the issuers conduct their operations. It is the Fund's
policy to continuously monitor exposure to these risks.
Foreign Currency
Foreign currency amounts, other than the cost of investments, are translated
into U.S. dollar values at the mean of the bid and offer price of such currency
against U.S. dollars last quoted on the valuation date. The cost of investments
is translated at the rates of exchange prevailing on the dates the portfolio
securities were acquired.
The Fund includes foreign exchange gains and losses from interest receivable and
other foreign-currency denominated payables and receivables in realized and
unrealized gain (loss) on foreign currency. The Fund does not isolate that
portion of realized and unrealized gain (loss) on investments resulting from
changes in foreign exchange rates on investments from fluctuations arising from
changes in the market price of securities for financial reporting purposes.
Fluctuations in foreign exchange rates on investments are thus included with net
realized and unrealized gain (loss) on investments.
Forward Foreign Currency Exchange Contracts
In connection with purchases and sales of securities denominated in a foreign
currency the Fund may enter into forward foreign currency exchange contracts
("contracts"). Additionally, from time to time the Fund may enter into contracts
to sell foreign currencies to hedge certain foreign currency denominated assets.
All commitments are "marked-to-market" daily at the applicable translation rates
supplied by a quotation service and any resulting unrealized gains or losses are
included as unrealized appreciation (depreciation) on foreign currency
denominated assets and liabilities. The Fund records realized gains or losses at
the time the forward contract is settled. Risks may arise upon entering into
these contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
Federal Income Taxes
The Fund's policy is to comply with the requirements of the Internal Revenue
Code ("Code") applicable to regulated investment companies and to distribute all
of its income to its shareholders. It is also the Fund's intention to make
distributions in amounts sufficient to avoid imposition of excise tax under the
Code. Therefore, no provision is made for Federal income or excise taxes.
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
NOTE 1 - Continued
At September 30, 1997, the Fund had a capital loss carryforward of approximately
$16,401,000, which may be carried forward through the fiscal year ending
September 30, 2003.
Paid in capital, undistributed net investment income and accumulated net
realized loss have been adjusted for permanent book-tax differences.
Reclassifications between undistributed net investment income and accumulated
net realized loss arose principally from differing book and tax treatments for
foreign currency transactions.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Other
Investment security transactions are accounted for on the trade date (the date
the order to buy or sell is executed). Interest income is recorded on the
accrual basis. Distributions to shareholders are recorded on the ex-dividend
date. The Fund uses the identified cost method for determining realized gain or
loss on investments. Certain expenses of the Group are allocated between the
series of the Group in such manner as the Directors deem appropriate.
Note 2 - Purchases and Sales of Securities
For the year ended September 30, 1997, purchases and sales of investment
securities other than short-term investments aggregated $16,932,375 and
$29,334,838, respectively. There were no purchases and sales of U.S. Government
obligations during the year ended September 30, 1997.
Note 3 - Management Agreement and Other Transactions with Affiliates
The Fund has entered into an Investment Management Agreement with Bailard, Biehl
& Kaiser, Inc. (the "Advisor") for investment advisory services. Under the
agreement, the Advisor receives a fee, payable monthly, at the annual rate of
0.75% of the average net assets of the Fund. Advisory fees paid on shares of the
Fund owned are taken into account in the computation of fees payable under
individual advisory agreements for advisory clients of the Advisor.
Each outside director is compensated by the Group at the total rate of $8,000
per year plus $1,333 for each meeting of the Board of Directors attended and
travel expenses incurred for such meetings.
Note 4 - Unrealized Appreciation (Depreciation) on a Tax Basis
Unrealized appreciation (depreciation) on September 30, 1997, based on the cost
of securities of $52,157,596 for federal income tax purposes, consists of the
following:
Gross unrealized appreciation $ 1,308,959
Gross unrealized depreciation (2,821,841)
-------------
Net unrealized depreciation $ (1,512,882)
=============
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
Note 5 - Forward Foreign Currency Contracts
At September 30, 1997 the Fund had entered into forward foreign currency
contracts which obligated the Fund to exchange currencies at specified future
dates. At the maturity of a forward contract, the Fund may either make delivery
of the foreign currency from currency held, if any, or from the proceeds of
portfolio securities sold, or it may terminate its obligation to deliver the
foreign currency at any time by purchasing an offsetting contract. The forward
value of amounts due to the Fund under the contracts, including contracts which
have been offset but remained unsettled, has been netted against the forward
value of the currency to be delivered by the Fund and the remaining amount is
shown as payable for forward currency contracts in the financial statements.
Open forward foreign currency exchange contracts outstanding at September 30,
1997 were as follows:
Currency Currency Delivery Unrealized
Receivable Deliverable Date Appreciation/(Depreciation)
- ---------- ----------- -------- ---------------------------
$500,000 A$ 662,515 10/02/97 $19,677
450,000 FIM 2,320,200 10/02/97 9,651
291,512 CHF 431,730 10/10/97 (6,088)
3,212,141 DM 5,794,703 10/10/97 (62,704)
2,846,761 FF 17,275,284 10/10/97 (67,642)
637,115 BEF 23,140,000 10/17/97 1,159
2,412,777 (pound) 1,505,163 10/17/97 (17,786)
1,562,152 NLG 3,093,060 10/17/97 5,290
1,398,495 DKr 9,730,733 10/29/97 (51,135)
1,000,000 (Y) 116,400,000 10/31/97 31,239
1,800,000 (Y) 203,661,000 11/12/97 102,236
727,116 ESP 108,703,800 11/19/97 (2,269)
2,147,165 ITL 3,741,650,000 11/24/97 (19,120)
952,042 A$ 1,284,027 11/28/97 20,550
1,159,074 SEK 9,075,550 11/28/97 (40,845)
480,920 A$ 662,515 12/03/97 233
441,943 FIM 2,320,200 12/03/97 1,087
1,000,000 DM 1,758,200 12/18/97 (815)
2,990,022 C$ 4,135,200 12/22/97 (15,633)
---------
$ (92,915)
=========
Currency Legend:
A$ - Australian Dollar FF - French Franc
BEF - Belgian Franc FIM - Finnish Markka
C$ - Canadian Dollar ITL - Italian Lira
CHF - Swiss Franc NLG - Netherlands Guilder
DKr - Danish Kroner (pound) - British Sterling
DM - German Mark SEK - Swedish Krona
ESP - Spanish Peseta (Y) - Japanese Yen
<PAGE>
(Unaudited)
Cumulative Total Return of a $10,000 Investment
October 1, 1990 - September 30, 1997
Salomon Bros.
BB&K Int'l Bond Fund World Govt Bond
-------------------- ---------------
Sep 90 10,000 10,000
Sep 91 11,012 11,409
Sep 92 12,381 12,338
Sep 93 13,563 13,736
Sep 94 11,135 13,544
Sep 95 13,066 15,758
Sep 96 14,284 17,500
Sep 97 15,105 19,602
Average Annual Total Return*
1 Year 5 Year Since Inception
------ ------ ---------------
5.75% 4.00% 6.07%
The above graph shows the historic growth of a $10,000 investment in the
Bailard, Biehl & Kaiser International Bond Fund since October 1, 1990. The graph
shows the cumulative return of the Bailard, Biehl & Kaiser International Bond
Fund and the Salomon Brothers Worled Government 10 country, non-U.S. bond index,
fully hedged. The index, which measures the performance of the government bonds
of ten countries, is given on a fully hedged basis. As the graph indicates, a
$10,000 investment in the Bailard, Biehl & Kaiser International Bond Fund would
have grown to $15,105 by September 30, 1997.
* These figures reflect the average annual compounded return over the period
indicated that would equate an initial amount invested in shares of the
Fund to the ending redeemable value of such shares, assuming that all
dividends and distributions by the Fund were reinvested at net asset value.
These figures also reflect the deduction of an assumed 1% annual investment
management fee (0.25% quarterly) through September 30, 1993. Actual fees
varied during this period. As of 10/1/93, the Fund charged a management fee
of 0.75%. The performance data quoted represents past performance, and the
investment return and principal value of an investment in the Bailard,
Biehl & Kaiser International Bond Fund will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and the Board of Directors of
Bailard, Biehl & Kaiser International Bond Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Bailard, Biehl & Kaiser
International Bond Fund (the "Fund") (a series of Bailard, Biehl & Kaiser
International Fund Group, Inc.); formerly Bailard, Biehl & Kaiser International
Fixed-Income Fund, at September 30, 1997, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
September 30, 1997 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
November 18, 1997
