November 30, 1998
Dear Shareholder,
With this letter, we present your Bailard Biehl & Kaiser International Equity
Fund annual shareholders' report for the year ending September 30, 1998. This
was an exceptionally highly volatile year for the global financial markets and
certainly a difficult year for international equity managers to navigate.
REVIEW OF THE MARKETS
The past year has been one of huge stock market swings. It started with a
downswing when, in the final quarter of 1997, the crisis of the Far East "Tiger"
economies roiled all the world's markets. In contrast, over the first quarter of
calendar 1998, the global stock markets generally rose sharply, particularly in
Europe, as investors became more confident that the Asian disease would be
contained. By the end of June, it was becoming evident that this market upswing
was not sustainable. The contagion was spreading and infecting emerging stock
markets in Europe and South America and even developed markets like Portugal and
Spain. For example, the stock markets of Argentina, Brazil and Mexico showed
declines in the region of 10% between March 31 and June 30th. In the same
period, the stock markets of Poland, the Czech Republic and Hungary experienced
more modest setbacks. Asia itself relapsed and Thailand, Malaysia and India
dropped by more than 40%. Only Turkey and Greece amongst the world's emerging
markets showed positive returns. However, the performance of the major developed
markets of Europe maintained positive momentum and contrasted sharply with the
markets of the Far East.(1)
By the end of July, doubts about the containment of the Asian crisis began to
undermine the U.S. and the developed markets of Europe, creating a global
financial crisis. In August, the Russian government defaulted on its bond
obligations and sent all the world's markets, including the U.S., into a
tailspin. In the fury of such an all-encompassing storm, no amount of
diversification, even that as high as in your Fund's strategy, proved enough.
There were no ports that escaped this storm.
HOW HAS YOUR FUND PERFORMED?
For the twelve months ended September 30, 1998, the Fund's return was
- -10.61%.(2) In the first six months of the Fund's year (i.e. the six months
ending March 31, 1998), the Fund was ahead 8.87%.(2) In August and September,
the global financial storm broke, causing sweeping declines across all of the
world's stock markets. As a result, the Fund returned B17.89%(2) over the final
six months of the year. However, we are pleased to report the Fund has since
risen dramatically, achieving a total return of 7.8%(2) for the month of
October.
<PAGE>
Although the Fund experienced an absolute decline over the year ended September
1998, your manager was generally successful in overweighting the markets that
performed relatively better and underweighting the markets that did relatively
worse. During the first three fiscal quarters and through July, the Fund was
relatively well positioned: overweight developed continental Europe (where
market momentum and earnings revisions were still very positive) and underweight
Japan (where the attractive relative valuations were undermined by ongoing
negative earnings revisions). Emerging markets as a group, too, were correctly
underweighted relative to longer-term strategic targets. Underweighting the U.K.
stock market, which looked overvalued relative to other developed markets, did
not add value.
In August, there was a regional reversal of relative performance. The high
flying markets of Europe came dramatically back to earth, while the markets of
the Far East, where expectations were already low, declined more modestly. In
the turmoil of August and September, large capitalization, already overvalued
(i.e. high book-to-price) markets and stocks generally did better as investors
made a flight to quality. As a result, our value-oriented stock selection
resulted in performance slightly lagging the market indices in the U.K., France
and Switzerland.
In August and September, the U.S. dollar declined sharply against the
Deutschmark and more modestly against the yen. The Fund was almost entirely
unhedged and therefore total return benefitted from the dollar's setback.
However, our emphasis on Japanese exporters with strong balance sheets caused us
to lag the market index there.
WHAT ACTIONS HAVE WE TAKEN?
Periods of high volatility provide an opportunity to realign the Fund towards
the markets that represent the most attractive value. Throughout 1998, on the
basis of fundamental value measures such as book-to-price ratios, the markets of
the Far East have looked attractive. Yet we have remained cautious about the
outlook for the Far East given the continued negative earnings revisions. In
September, there were some signs that forecast earnings were stabilizing. As a
result, we began shifting our portfolio towards modest overweight positions in
Japan and the markets of the Far East and reduced our European exposure. We
continue to take a generally cautious approach to the emerging markets of the
world. Low stock prices in these markets represent some excellent opportunities
for the longer term, but the currencies and economies of the emerging markets
remain fragile at this stage. We also continue to view the U.K. market as highly
overvalued and maintain our underweight position there.
WHAT LIES AHEAD?
The world's stock markets have rebounded significantly since the end of
September. The financial panics unleashed by the debt crisis of the emerging
markets, overstretched hedge funds, possible impeachment of the President in the
U.S. and the demise of Japan's economy have been calmed by a steady trickle of
more positive news. The Fed has signaled a possible shift towards easing in
monetary policy through two interest rate cuts. The G7 countries are also
cooperating in their efforts to combat the problems of the emerging markets.
Japan's leaders are yet again attempting to revive their economy. Global
inflation remains subdued, helped by low commodity prices, a general oversupply
of industrial goods and fierce global competition. Lower U.S. interest rates
increase the odds that the U.S. dollar will weaken in the months ahead, making
foreign assets more attractive.
<PAGE>
If the U.S. economy can achieve a "soft landing" and avoid recession, then the
global economy may recover strength sooner rather than later. In these
circumstances, stock markets outside the U.S. have considerable upside
potential. After all, Japan and nearly all the emerging markets of the world are
already in recession! As a result, the markets of the Far East are now at very
attractive valuations and expectations for the future are starting from a
potentially undervalued base. In Europe, monetary union remains on course and
could mark the emergence of a more powerful, more efficient European economy.
Corporations in Europe are still playing catch up with their American peers in
streamlining their operations. The emerging markets will likely show a rebound
in fortunes as the current crises pass their worst. Investors in international
equities will further benefit if the dollar maintains its recent relative
weakness.
Of course there are many uncertainties ahead. The third world debt and hedge
fund crises are still reverberating around the world's major banks. A tightening
of global credit could drag both developed Europe and the U.S. into recession.
To the extent that world problems today are, at least in part, the result of
global oversupply, there is a serious risk of deflation that could slow global
economic growth for a number of years to come.
Despite the uncertainties ahead, we remain confident that the Fund's investment
strategy will be rewarded over the long term. We are committed to being fully
invested in international stocks. Through the disciplined application of our
well-tested and insightful quantitative models, we will continue to seek to
search out and exploit the most attractive relative return opportunities
throughout the international equity markets. Importantly, we will also remain
well diversified across international stock markets in order to reduce the risks
that any single market or region may pose for your Fund.
We appreciate your continued investment in the Bailard Biehl & Kaiser
International Equity Fund. Please feel free to contact one of our client service
counselors at 1-800-882-8383 if you have any questions or would like to discuss
the Fund in greater detail.
Sincerely,
/s/ Peter M. Hill /s/ Burnice E. Sparks, Jr.
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. The data is based on the respective ING Barings ($) indices
for the emerging market countries mentioned, and the Morgan Stanley Capital
International ($) indices for the developed market countries.
(2) Total returns for investment periods ended September 30, 1998: 3 months:
- -4.21%; 6 months: -17.89%; 12 months: -10.61%; 5 years: 5.18% annualized; 10
years: 2.94% 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 Equity Fund will fluctuate so that an investor's shares when redeemed,
may be worth more or less than their original cost.
<PAGE>
(Unaudited)
Cumulative Total Return of a $10,000 Investment
October 1, 1998 - September 30, 1998
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
BB&K International Morgan Stanley MS EAFE
Equity Fund EAFE (Local Currency) (US$)
------------------ --------------------- -------
Sep-88 $10,000 $10,000 $10,000
Sep-89 $11,864 $12,546 $12,231
Sep-90 $9,470 $8,487 $8,855
Sep-91 $10,529 $10,476 $10,793
Sep-92 $8,944 $8,880 $10,025
Sep-93 $10,442 $11,548 $12,667
Sep-94 $11,255 $11,935 $13,912
Sep-95 $11,494 $12,236 $14,718
Sep-96 $12,337 $14,187 $15,985
Sep-97 $15,076 $17,285 $17,933
Sep-98 $13,476 $15,885 $16,437
AVERAGE ANNUAL TOTAL RETURN *
1 Year 5 Year 10 Year
------ ------ -------
-10.61% 5.18% 2.94%
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, 1988. 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 $13,476 over the ten-year period ended September 30, 1998.
* 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
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
SHARES VALUE
-------- ---------
EQUITY SECURITIES (95.3%)
I ARGENTINA (0.2%)
Banco De Galicia Spns'd. ADR Class B 2,992 $ 47,498
* Comercial Del Plata 14,530 6,975
Perez Companc SA Spon ADR 2,600 21,288
Siderca 15,952 19,144
Telecom Argentina Stet-France Telecom SA ADR 900 26,719
Telefon De Argentina Spns'd ADR 1,100 32,381
Transp. Gas Del Sur. Spns'd ADR 2,500 24,375
----------
Total Argentina 178,380
----------
II AUSTRALIA (1.9%)
Australia & New Zealand Bank Group Ltd. 104,500 558,063
Brambles Industries Ltd. 8,500 183,383
CSR Ltd. 62,100 130,601
Coles Myer Ltd. 12,500 53,303
Fosters Brewing Group Ltd. 25,000 54,487
Goodman Fielder Ltd. 75,000 98,166
Lend Lease Corp. Ltd. 13,200 281,437
North Limited 78,308 146,647
QBE Insurance Group Ltd. 12,500 45,529
Southcorp Ltd. 20,000 55,636
The News Corporation Ltd. 51,700 333,138
Westpac Banking Corp. 18,000 98,994
----------
Total Australia 2,039,384
----------
III AUSTRIA (0.5%)
Bank Austria AG 3,733 159,994
Bau Holdings AG Pfd. 750 35,078
EVN Energ-Versorg AG 600 89,592
Flughafen Wien AG 900 36,698
Mayr-Melnhof Karton AG 1,000 45,028
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
SHARES VALUE
-------- ---------
AUSTRIA- CONTINUED
OMV AG 800 $ 71,643
VA Technologie AG 650 58,923
Voest-Alpine Stahl AG 900 24,154
Weinerberger Baustoffindustrie 300 57,911
---------
Total Austria 579,021
---------
IV BELGIUM (1.9%)
Delhaize "Le Lion" SA NPV 1,400 105,741
Electrabel NPV 1,450 571,760
Fortis 2,103 518,281
Fortis Strip VVPR 133 8
Genarale Banque NPV 290 100,899
KBS Bancassurance Holding SA 6,000 387,938
Tractebel NPV 1,720 279,269
Tractebel NPV Wts. (Ex. 11/30/99) 400 81
UCB NPV 20 102,117
---------
Total Belgium 2,066,094
---------
V BRAZIL (0.5%)
Companhia Cervejaria Brahma Spns'd ADR 2,600 20,313
Companhia Energetica Spns'd ADR 3,671 79,844
* Centrais Geradoras Sul Spns'd ADR 1,880 8,460
Centrais Electricas Pf'd. B ADR 9,000 90,000
Gerdau SA Pf'd ,200,000 19,119
Itaubanco Pfd. Reg'd 200,000 94,499
Telebras Spns'd. ADR 3,400 234,600
---------
Total Brazil 546,835
---------
VI CANADA (2.7%)
Abitibi Consolidated Inc. 7,500 65,850
Alcan Aluminum Ltd. 4,000 93,750
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
SHARES VALUE
-------- ---------
CANADA- CONTINUED
BCE Inc. 8,000 $ 223,500
Bank of Nova Scotia 8,000 131,044
Bombardier Inc. Class B 16,000 176,124
Canadian Imperial Bank of Commerce 14,500 271,245
* Canadian Natural Resources 7,000 114,664
Cott Corp. Quebec 15,000 81,084
Hudsons Bay Co. 7,500 103,935
Imasco Ltd. 12,600 234,052
Ipsco Inc. 3,750 67,078
Maritime Teleg. & Telephone Ltd. 11,000 223,431
Northern Telecom 5,000 160,000
Quebecor Inc. Class B 5,000 95,826
Royal Bank of Canada 8,900 360,968
Shell Canada Ltd. Class A 13,000 203,152
Telus Corp. 4,500 89,045
Transcanada Pipelines Ltd. 10,000 145,625
* Wajax Ltd. 11,000 76,759
---------
Total Canada 2,917,132
---------
VII. DENMARK (1.2%)
Aarhus Oliefabrik Class A 2,700 99,843
Carlsberg Class B 1,400 85,917
D/S Svendborg Class B 20 185,680
Den Danske Bank AF 2,200 249,252
FLS Industries Class B 1,500 31,629
Novo-Nordisk AS Class B 2,200 264,831
Teledenmark Class B 3,500 347,521
Tryg Baltica Forsikring 1,800 46,735
---------
Total Denmark 1,311,408
---------
VIII. FINLAND (2.2%)
Nokia Class A ADR 30,800 2,415,875
---------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
SHARES VALUE
-------- ----------
IX FRANCE (8.3%)
Accor 2,600 $ 545,069
AXA- UAP SA 5,000 457,643
Banque Paribas Class A 11,000 592,706
Cap Gemini SA 2,000 306,166
Casino Guichard Perrachon et Cie 10,000 1,008,065
Eridania Beghin Say SA 2,280 425,914
Essilor Int'l 1,000 367,542
Eura France 300 146,232
France Telecom SA 15,000 887,186
L'Oreal 1,000 464,780
* PSA Peugeot Citroen 2,510 428,126
Renault SA 10,000 399,658
Sanofi 5,000 735,084
Scor 6,000 356,480
Societe Nationale Elf Aquitaine 4,880 601,641
Elf Aquitane Spns'd ADR 1,800 111,937
St. Gobain 4,000 530,260
Vivendi 3,400 676,991
Vivendi Wts ( Ex. 5/2/2001) 3,700 5,677
----------
Total France 9,047,157
----------
X GERMANY (10.6%)
Aachener Und Munchener Beteil 1,458 184,065
Agiv AG 24,000 560,026
Allianz AG 3,029 938,775
BASF AG 23,500 890,029
Bayerische Motoren Werke AG 600 385,916
BHF Bank 14,500 468,484
Deutsche Bank AG 7,000 361,444
Deutsche Pfandrief & Hypo Bank 3,500 251,294
Deutsche Telekom AG 34,000 1,055,793
Douglas Holdings New Shs 1,000 57,558
Douglas Holdings AG 10,000 575,583
Hannover Rueckversicherung 3,500 435,576
Mannesmann AG 9,000 823,885
Phoenix AG 30,000 630,030
* Sap AG Pf'd 3,000 1,423,400
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
SHARES VALUE
-------- -----------
GERMANY- CONTINUED
Viag AG 1,100 $ 755,557
Volkswagenwerk AG 14,000 1,009,364
Vossloh AG 27,000 715,649
-----------
Total Germany 11,522,428
-----------
XI GREECE (0.8%)
Alpha Credit Bank 3,611 268,313
Athens Medical Center 4,200 69,999
Attica Enterprises SA 7,200 51,624
Ergo Bank 2,367 190,672
Goodys SA 2,200 53,395
Hellenic Bottling Co. 1,800 44,405
Hellenic Telecom Organ 5,000 119,789
Proodeftiki 3,900 8,856
Titan Cement 1,000 59,739
-----------
Total Greece 866,792
-----------
XII HONG KONG / CHINA (1.5%)
CLP Holdings Ltd. 65,000 317,094
* China Telecom Ltd. Class H 250,000 392,011
Dao Heng Bank 100,000 128,412
Gold Peak Ind 299,000 50,936
Gold Peak Ind. Wts (Ex.12/31/25) 29,800 377
Hong Kong & China Gas Wts. Exp. (Ex. 9/30/99) 3 0
Hong Kong Electric 55,000 188,811
Hong Kong Telecommunications 95,000 186,358
Hutchison Whampoa 36,000 190,024
* JCG Holdings Ltd. 300,000 53,817
Vtech Holdings Ltd. 30,000 119,636
-----------
Total Hong Kong / China 1,627,476
-----------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
SHARES VALUE
--------- ---------
XIII HUNGARY (0.2%)
** Borsodchem Rt. GDR 144A 1,100 $ 21,863
Magyar Olay Es. Gazipari 5,600 108,618
Matav Rt. Regd Shs 15,000 66,011
** OTP Bank Ltd. Spons GDR 144A 1,500 42,938
---------
Total Hungary 239,430
---------
XIV IRELAND (1.7%)
Allied Irish Banks 54,500 798,212
CRH Plc 30,000 378,856
* Elan Corp Plc 4,000 288,250
Greencore ADR 13,000 47,600
Irish Life Plc 16,500 122,063
Irish Permanent Plc 8,500 103,532
Smurfit (Jefferson) Plc 40,000 59,780
---------
Total Ireland 1,798,293
---------
XV ISRAEL (0.7%)
* Bank Hapoalim 50,700 123,806
* DSP Group Inc. ADR 4,700 69,325
* ECI Telecom ADR 3,800 93,100
* Formula Systems 1985 Ltd. ADR 2,200 44,000
* Gilat Satellite Networks Ltd. ADR 2,800 126,000
Koor Industries Ltd. ADR 1,900 31,112
* Nice Systems Ltd. Sponsored ADR 1,500 22,125
* PEC Israel Economic Corp. ADR 3,500 89,688
Tadiran Ltd. Sponsored ADR 1,800 50,175
Teva Pharmaceutical Industry Spns'd. ADR 2,900 109,838
---------
Total Israel 759,169
---------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
SHARES VALUE
--------- ----------
XVI ITALY (5.3%)
Assicurazione Generali 10,000 $ 324,972
Autostrade CEC Pf'd. B 55,000 249,463
BCA Communication Italiana 60,000 360,374
Danieli & Co. 10,000 62,059
Danieli & Co. di Risp 3,900 13,217
Edison SpA 11,000 83,609
ENI SpA 180,000 1,102,363
Fiat SpA 98,650 251,931
Fiat SpA di Risp 49,500 80,730
* Instituto Banca San Paolo 30,000 376,714
Istituto Mobilaire Italiano 34,000 448,546
Instituto Nazionale delle Assicurazioni SpA 264,400 672,020
* Luxottica Group Spns'd ADR 5,500 61,531
Montedison SpA 125,000 119,368
Telecom Italia SpA 90,022 619,686
Telecom Italia SpA Non Conv 58,139 277,774
Telecom Italia Mobile SpA 100,000 582,166
----------
Total Italy 5,686,523
----------
XVII JAPAN (10.6%)
Alpine Electronics 35,000 358,948
Bank of Tokyo-Mitsubishi 55,000 353,548
Daiichi Pharmaceutical 15,000 201,220
Daiwa House Ind. Co. 40,000 364,384
Fuji Photo Film Co. 8,000 276,227
* Honda Motor Co. 56,000 1,707,317
Kirin Brewery Co. Ltd. 50,000 401,117
Kyocera Corp. 10,000 437,849
Makino Milling Machine 75,000 435,278
* Matsushita Communications 10,000 359,976
Mitsui Chemicals 150,000 430,870
Mos Food Services 30,000 363,650
Nichicon Corp. 25,000 305,796
Nintendo Co. 5,000 471,643
* Nippon Tel. and Tel 92 672,495
Nissho Iwai 220,000 142,227
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
SHARES VALUE
--------- ----------
JAPAN- CONTINUED
Sankyo Co. Ltd. 15,000 $ 332,795
Sanwa Bank Ltd. 85,000 446,481
Snow Brand Milk 115,000 348,920
SoftBank Corp. 5,000 205,701
* Sony Corp. 13,000 906,333
SunDrug Co. Ltd. 400 5,142
Takefuji Corp. 7,000 353,805
Tokyo Electric Power 30,070 576,570
Tostem Corp. 25,000 341,610
Uniden Corp. 80,000 662,357
----------
Total Japan 11,462,259
----------
XVIII MALAYSIA (0.1%)***
Genting Berhad 15,000 27,829
Malayan Banking Berhad 16,000 16,590
Telekom Malaysia 35,000 55,263
Tenaga Nasional 21,000 20,226
----------
Total Malaysia 119,908
----------
XIX MEXICO (1.0%)
Alfa SA de CV Class A 6,500 15,947
* Carso Global Telecom 19,726 46,073
Cemex Spns'd. ADR 9,200 46,000
* Cifra SA de CV ADR 4,216 50,329
Desc. SA de CV Spns'd ADR 1,515 20,831
Empresas ICA Soc. Controladora 50,000 47,105
* Empressa La Moderna ADR 5,500 133,719
Nacional De Drogas SA de CV Class L 20,000 8,047
Panamerican Beverages Class A ADR 2,000 35,625
Sistema Argos B 43,000 34,602
* Soriana SA Series B 65,000 156,281
Telefonos de Mexico Series L ADR 10,600 469,050
----------
Total Mexico 1,063,609
----------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
SHARES VALUE
--------- -----------
XX NETHERLANDS (7.1%)
ABN-AMRO Holdings NV 30,000 $ 510,862
Aegon NV 7,700 609,857
Fortis Amev NV 6,000 336,755
* Getronics NV 10,300 467,176
Heineken NV 7,000 337,922
ING Groep NV 22,050 993,101
Koninklijke Numico NV 13,000 442,057
OCE - Van Der Grinten NV 15,000 505,292
Royal Dutch Petroleum 29,600 1,468,184
Samas Groep NV 24,100 1,192,822
Verenigd Bezit VNU Haarlem 20,000 825,442
-----------
Total Netherlands 7,689,470
-----------
NEW ZEALAND (0.1%)
Flecther Challenge Buildings 15,000 14,414
Telecom Corp. of New Zealand 23,000 88,063
-----------
Total New Zealand 102,477
-----------
XXI NORWAY (0.7%)
Bergesen dy AS A 4,000 56,742
Den Norske Bank AS 38,100 119,418
Elkem A/S 2,500 27,696
Kvaerner Industrier 1,900 24,129
Norsk Hydro AS 3,300 120,151
Norske Skogindustier Class A 3,000 75,183
Nycomed Amersham AS A 18,350 117,261
Orkla A/S 3,200 43,665
* Petroleum Geo Service 3,200 52,311
Saga Petroleum Class A 5,600 57,499
* Storebrand A/S 4,500 31,005
-----------
Total Norway 725,060
-----------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
SHARES VALUE
------- --------
XXII PHILIPPINES (0.1%)
* Cosmos Bottling Corp. 316,800 $ 23,896
* DMCI Holdings Inc. 50,800 1,022
Davao Union Cement Corp. 37,138 416
* Empire East Land Inc. 225,600 1,057
Far East Bank & Trust 16,200 12,775
* Fortune Cement Corp. 57,937 1,986
Manila Electric Class B 5,343 10,197
* Mondragon Int'l. Philippines Inc. 120,960 650
Philippine Long Distance Telephone 3,400 71,497
* Philippine National Bank 1,500 1,046
--------
Total Philippines 124,542
--------
XXIII POLAND (0.7%)
Big Bank Gdanski SA 430,000 373,076
Debica SA Class A 1,000 17,353
Elektrim SA 13,700 138,802
Mostostal Export SA 25,000 23,090
Mostostal Zabrze-Holding SA 7,000 26,448
* Okocimskie Zaklady Piwowarskie 3,500 24,489
Polifarb Cieszyn 14,300 20,011
* Stalex Port A Shares 20,000 102,435
--------
Total Poland 725,704
--------
XXIV PORTUGAL (1.1%)
Banco Pinto & Sotto Mayor 12,485 202,619
BPI SGPS SA 7,000 192,847
Electric de Portugal Spns'd ADR 7,000 316,750
Jeronimo Martins, SGPS, SA 3,996 135,223
Estabel Jeronimo Bonus Rights (No Expiration) 1 51
* Mundial Confianca 7,500 154,114
Portugal Telecom Spns'd ADR 900 32,400
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
SHARES VALUE
--------- ---------
PORTUGAL- CONTINUED
Portugal Telecom SA 1,800 $ 65,444
Somague 2,343 14,341
---------
Total Portugal 1,113,789
---------
XXV SINGAPORE (0.8%)
* Creative Technology Ltd. 4,500 41,402
Development Bank of Singapore (Fgn. Reg'd.) 12,450 50,252
Elec. & Eltek International 7,700 38,192
GP (Gold Peak) Batteries Int'l 15,000 19,410
* Jardine Strategic 16,000 17,600
Keppel Land Ltd. 60,000 25,999
Lindeteves Jacoberg Ltd. 54,000 34,297
* Natsteel Electronics 35,000 76,868
Omni Industries Ltd. 155,000 33,121
Overseas Chinese Bank (Fgn. Reg'd.) 20,200 50,839
Singapore Airlines Ltd. (Fgn. Reg'd.) 8,000 43,925
Singapore Technologies Engineering Ltd. 150,539 144,757
Singapore Telecom 102,000 170,737
United Overseas Land Wts. (Ex. 5/28/01) 10,000 475
Want Want Holdings 50,400 39,060
Wong Circuits Ltd. 100,000 46,000
---------
Total Singapore 832,934
---------
XXVI SOUTH KOREA (0.6%)
* Daeho Construction 125 222
* Dongwon Securities 11,200 42,360
Korea Electric Power Corp. 9,000 124,897
Hankook Tire Manufacturing 24,000 45,040
* Nhong Shim 2,000 79,094
Pohang Iron & Steel 5,520 175,036
Pusan City Gas 3,010 51,943
Samsung Electronics 4,000 109,294
---------
Total South Korea 627,886
---------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
SHARES VALUE
-------- ------------
XXVII SPAIN (4.2%)
Aceralia SA 12,500 $ 105,146
Argentaria Corporation 40,000 795,411
Autopistas C.E.S.A 9,371 143,139
Banco de Santander SA 30,000 454,018
Corporation Mapfre Reg'd 5,000 99,426
Iberdrola SA 40,000 667,300
Repsol SA 12,000 506,810
Sevillana de Electricidad 86,000 1,004,892
Telefonica de Espana SA 20,209 736,864
-----------
Total Spain 4,513,006
-----------
XXVIII SWEDEN (1.4%)
Astra AB Series A 13,716 234,596
Electrolux AB Series B Free 10,000 131,470
Ericsson (L M) Telecom Series B Free 22,800 430,710
* Netcom Systems AB B 7,100 238,343
Nordbanken Holdings AB 33,600 192,992
Scania AB Wts. (Ex. 6/4/99) 5,100 1,595
Svenska Handelsbanken Series A 5,200 195,137
Volvo AB Class B Free 4,650 113,958
-----------
Total Sweden 1,538,801
-----------
XXIX SWITZERLAND (7.6%)
Credit Suisse Group 1,600 176,840
Danzas Holding AG 1,800 450,553
Julius Baer Holdings 470 1,103,446
Nestle SA (Reg'd.) 500 994,727
Novartis AG (Reg'd.) 650 1,041,934
Roche Holdings Genusscheine 248 2,669,364
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
SHARES VALUE
-------- ----------
SWITZERLAND- CONTINUED
Swiss Reinsurance (Reg'd.) 449 $ 890,345
UBS AG (Reg'd.) 4,601 897,399
----------
Total Switzerland 8,224,608
----------
XXX TAIWAN (0.0%)
Bank Sinopac 3,609 1,543
* China Development Corp. 15,225 27,018
----------
Total Taiwan 28,561
----------
XXXI THAILAND (0.4%)
Advanced Information Services (Fgn. Reg'd) 6,500 37,162
* Bangchak Petroleum (Fgn. Reg'd) 150,000 21,629
Bangkok Bank (Fgn. Reg'd) 38,900 36,902
Electricity Generating (Fgn. Reg'd) 30,000 71,718
Industrial Finance (Fgn. Reg'd) 120,400 23,757
Krung Thai Bank Pub Co. Ltd. (Fgn. Reg'd) 216,600 36,164
* Lanna Lignite PCL Ltd. (Fgn. Reg'd) 29,000 23,109
PTT Exploration (Fgn. Reg'd) 5,500 48,419
* Shinawatra Comp & Comm Pcl (Fgn. Reg'd) 6,900 21,295
* Siam Cement PCL (Fgn. Reg'd) 9,400 90,362
* Tipco Asphalt Public Co. (Fgn. Reg'd) 21,000 14,742
* United Communication Industries (Fgn. Reg'd) 41,500 12,860
----------
Total Thailand 438,119
----------
XXXII TURKEY (0.5%)
Adana Cimento Sanayi 13,680,000 55,436
Akbank 2,400,000 33,716
Carsi Buyuk Magazacilik 1,298,000 66,626
* Dogan Holdings 3,000,000 108,063
* Eczacibasi Ilac 1,000,000 18,191
* Eregli Demir Ve Celik 520,000 38,867
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
SHARES VALUE
---------- ----------
TURKEY- CONTINUED
Finansbank 12,708,587 $ 76,678
* Hurriyet Gazette 750 11
* Netas Telekomunik 200,000 5,547
* Net Holdings AS 5,100,000 22,504
* Vestel Electronik Sanayai 1,579,000 145,037
Yapi Kredi Bank 2,600,000 29,501
Yapi Kredi Bankasi Receipts 2,054,000 20,347
----------
Total Turkey 620,524
----------
XXXIII UNITED KINGDOM (18.1%)
Allied Zurich Plc 37,500 383,640
BG Plc 176,411 1,226,153
British Airways 60,000 367,070
British American Tobacco 37,500 279,286
British Petroleum 80,000 1,220,849
British Telecom 210,000 2,781,476
CGU 42,785 662,743
Diageo Plc 97,000 892,618
Glaxo Wellcome Plc 43,000 1,270,030
Great Universal Stores Plc 30,000 341,579
HSBC Holdings 70,000 1,310,917
Ladbroke Group 120,000 446,602
Lloyds TSB Group 90,000 1,000,267
National Westminster Bank 85,000 1,140,540
Norwich Union Plc 90,000 696,669
Prudential Corp. 45,000 653,944
Reuters Group Plc 42,000 353,305
Rolls-Royce Ord 165,000 569,214
Scottish Power Plc 60,000 582,857
Shell Transport & Trading (Reg'd) 120,000 726,494
Smithkline Beecham Plc 130,928 1,455,655
Unilever 150,000 1,283,472
----------
Total United Kingdom 19,645,380
----------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY COUNTRY
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (95.3%)
(IDENTIFIED COST $98,325,179) $ 103,198,034
OTHER ASSETS LESS LIABILITIES (4.7%) 5,099,060
------------
NET ASSETS (100.0%) $ 108,297,094
============
- --------------------------------------------------------
* 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, 1998, these
securities were valued at $64,801, or 0.06% of Net Assets.
*** Proceeds from the sale of these securities are restircted from repatriation
by the government of Malaysia for a period of one year and have been deemed
to be illiquid securities.
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS BY INDUSTRY
SEPTEMBER 30, 1998
UNAUDITED
- --------------------------------------------------------------------------------
PERCENT OF
INDUSTRY NET ASSETS
- -------- ----------
Aerospace 0.69%
Airline 0.38
Appliances and Household Products 1.12
Automobile 3.32
Banking 15.74
Beverages and Tobacco 2.30
Broadcasting and Publishing 1.16
Building Materials & Components 1.58
Business Services 4.44
Chemicals 1.61
Construction and Housing 0.40
Data Products 0.77
Electrical and Electronics 4.74
Electronic Components and Instruments 1.91
Energy Sources 6.01
Finance/Financial Services 1.81
Food and Housing Products 2.34
Health and Personal Care 9.06
Industrial Components 0.70
Insurance 7.45
Leisure 0.96
Machinery 0.74
Materials 0.04
Merchandising 2.39
Multi-Industry 3.50
Oil 0.25
Other Industries 0.07
Paper & Allied Products 0.19
Real Estate 0.29
Recreation 0.26
Retail 0.06
Shipping 0.57
Steel 0.51
Telecommunications 11.38
Textiles 0.44
Utilities 5.43
Wholesale and International 0.69
Other Assets Less Liabilities 4.70
-------
NET ASSETS 100.00 %
=======
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
ASSETS
Investments, at value
(Identified cost $98,325,179) $103,198,034
Foreign currency, at value
(Identified cost $149,072) 150,784
Cash 3,856,407
Receivables:
Investment securities sold $12,142,910
Dividend, interest and recoverable
foreign taxes receivable 379,542
Fund shares sold 3,288 12,525,740
-----------
Prepaid expenses 6,802
------------
Total assets 119,737,767
------------
LIABILITIES
Payables:
Portfolio securities purchased 10,649,767
Unrealized loss on forward currency
contracts (Note 5) 500,285 11,150,052
----------
Accrued management fees (Note 3) 98,403
Other accrued expenses 192,218
------------
Total liabilities 11,440,673
------------
Net assets (equivalent to $5.92 per share of $.0001
par value capital stock, representing the
offering and redemption price for 18,296,820
shares outstanding, 100,000,000 shares authorized) $108,297,094
============
Net assets consist of:
Capital paid in $ 94,681,431
Distributions of net investment income 838,984
Accumulated net realized gain on investments
and foreign currency transactions 8,345,516
Unrealized appreciation (depreciation) on:
Investments $ 4,872,855
Foreign currency (441,692) 4,431,163
----------- ------------
$108,297,094
============
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
STATEMENT OF OPERATIONS
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $304,493) $ 2,501,724
Interest 75,042
------------
2,576,766
EXPENSES
Advisory fees (See note 3) $ 1,280,698
Custodian fees 466,363
Audit and legal fees 80,294
Transfer agent fees 39,384
Administrative fees (See note 3) 32,109
Directors' fees and expenses 20,045
Insurance 6,468
Printing fees 2,104
Registration fees 8,145
Miscellaneous expenses 12,231
-----------
Total expenses 1,947,841
------------
Less: Fees paid indirectly (See note 1) (39,091)
Net expenses 1,908,750
------------
Net investment income 668,016
------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS AND FOREIGN CURRENCY
Net realized gain on investments 9,273,505
Net change in unrealized gain/(loss) on investments (21,932,140)
------------
Net loss on investments (12,658,635)
------------
Net realized gain on foreign currency 116,379
Net change in unrealized loss on foreign currency
and foreign currency denominated assets and
liabilities (480,491)
------------
Net loss on foreign currency (364,112)
------------
Net loss on investments and foreign currency (13,022,747)
------------
Net decrease in net assets resulting from operations $(12,354,731)
============
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year ended For the year ended
INCREASE (DECREASE) IN NET ASSETS September 30, 1998 September 30, 1997
------------------ ------------------
<S> <C> <C>
Operations:
Net investment income $ 668,016 $ 976,335
Net realized gain on investments 9,273,505 3,125,965
Net unrealized gain (loss) on investments (21,932,140) 20,077,608
Net realized gain on foreign currency 116,379 960,151
Net unrealized (loss) on foreign currency and
foreign currency denominated assets and liabilities (480,491) (108,499)
------------- -------------
Net increase (decrease) resulting from operations (12,354,731) 25,031,560
------------- -------------
Distributions to shareholders:
From net investment income (2,726,489) (953,051)
From net realized gains (2,787,529) (6,861,964)
------------- -------------
Total distributions (5,514,018) (7,815,015)
------------- -------------
Fund share transactions:
Proceeds from shares sold 11,431,649 31,629,863
Net asset value of shares issued on
reinvestment of distributions 4,451,069 6,244,045
Cost of shares redeemed (28,936,849) (16,252,271)
------------- -------------
Net increase (decrease) resulting from Fund share
transactions (13,054,131) 21,621,637
------------- -------------
Net increase (decrease) (30,922,880) 38,838,182
NET ASSETS
Beginning of period 139,219,974 100,381,792
------------- -------------
End of period (including undistributed
net investment income of $838,984 and
$1,778,778 respectively) $ 108,297,094 $ 139,219,974
============= =============
NUMBER OF FUND SHARES
Sold 1,676,106 5,086,504
Issued on reinvestment of distributions 712,171 1,067,358
Redeemed (4,240,657) (2,586,268)
------------- -------------
Net increase (decrease) (1,852,380) 3,567,594
============= =============
</TABLE>
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding throughout the period:
<TABLE>
<CAPTION>
For the years ended September 30,
----------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 6.91 $ 6.05 $ 6.00 $ 6.10 $ 5.66
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
3 3 1
Net Investment Income 0.09 0.04 0.05 0.06 0.01
Net Realized/Unrealized Gain (Loss) on 2
Securities and Foreign Currency (0.81) 1.23 0.37 0.06 0.43
-------- -------- -------- -------- --------
Total from Investment Operations (0.72) 1.27 0.42 0.12 0.44
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Net Investment Income (0.13) (0.05) (0.06) -- --
Capital Gains (0.14) (0.36) (0.31) (0.22) --
-------- -------- -------- -------- --------
Total Distributions (0.27) (0.41) (0.37) (0.22) --
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 5.92 $ 6.91 $ 6.05 $ 6.00 $ 6.10
======== ======== ======== ======== ========
TOTAL RETURN -10.61% 22.22% 7.33% 2.13% 7.77%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000's) $108,297 $139,220 $100,382 $108,210 $204,788
Ratio of Expenses to Average Net Assets:
Before Expenses Paid Indirectly 1.44% 1.44% 1.54% 1.53% 1.39%
After Expenses Paid Indirectly 1.41% 1.44% 1.54% 1.53% 1.39%
Ratio of Net Investment Income to
Average Net Assets 0.49% 0.79% 0.78% 0.97% 0.29%
Portfolio Turnover Rate 78% 67% 103% 174% 176%
</TABLE>
- ---------------------------
1. 1995 amounts are computed on the basis of average shares outstanding.
2. The amount shown for each share outstanding may not accord with the change
in the aggregate gains and losses in the portfolio securities during the period
because of the timing of purchases and redemptions of shares in relation to the
fluctuating market value of the portfolio.
3. Net investment income per share has been computed before adjustments for
book/tax differences.
(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.
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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 imposition of excise tax under
the Code. Therefore, no provision is made for Federal income or excise taxes.
Paid in capital, undistributed net investment income and undistributed realized
net gain have been adjusted for permanent book-tax differences.
Reclassifications between undistributed net investment income and undistributed
realized net gain arose principally from differing book and tax treatments for
foreign currency transactions.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
OTHER
Investment security transactions are accounted for on the trade date. 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.
The Fund had entered into an agreement with Brown Brothers Harriman & Co. (the
"Custodian") where the daily interest earned from the Fund's cash balance would
be applied as a credit to the custody fees for the Fund on a quarterly basis.
For the year ended September 30, 1998, the Fund earned $39,091 in such credits.
NOTE 2 - PURCHASES AND SALES OF SECURITIES
For the year ended September 30, 1998, purchases and sales of securities, other
than short-term investments, aggregated $102,993,040 and $123,963,327,
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.
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 4 - TAX BASIS APPRECIATION
Unrealized appreciation (depreciation) at September 30, 1998, based on the cost
of securities for federal income tax purposes of $98,962,844, consists of:
Gross unrealized appreciation $ 16,335,444
Gross unrealized depreciation (12,100,254)
--------------
Net unrealized appreciation $ 4,235,190
==============
NOTE 5 - FORWARD FOREIGN CURRENCY CONTRACTS
At September 30, 1998 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,
1998 were as follows:
Currency Currency Delivery Unrealized
Receivable Deliverable Date Appreciation/(depreciation)
---------- ----------- -------- ---------------------------
(pound)1,516,190 $ 2,500,000 10/06/98 $75,275
529,703 (Y) 74,007,500 10/06/98 (14,338)
1,970,297 (Y) 275,280,000 10/06/98 (29,703)
2,500,000 FF 15,131,500 10/08/98 (172,513)
2,060,490 BEF 75,620,000 10/23/98 (113,123)
1,237,083 CHF 1,855,625 10/23/98 (107,187)
1,400,000 (Y) 197,624,000 11/04/98 (85,448)
500,000 MEX 5,442,500 11/09/98 (20,067)
3,000,000 DM 5,361,780 11/17/98 (13,420)
421,850 DKr 2,800,917 12/03/98 (19,761)
---------
($500,285)
=========
CURRENCY LEGEND:
BEF - Belgian Franc FF - French Franc
CHF - Swiss Franc MEX - Mexican Peso
Dkr - Danish Krona (pound) - British Sterling
DM - Deutsche Mark (y) - Japanese Yen
$ - U.S. Dollars
<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, 1998, and the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
September 30, 1998 by correspondence with the custodian and brokers and
application of alternative procedures where broker confirmations were not
received, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
San Francisco, California
November 18, 1998
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Federal Income Tax Information: (Unaudited)
For the fiscal year ended September 30, 1998, the Fund accrued foreign source
income of $2,807,188 and the Fund accrued foreign taxes amounting to $304,493,
which are expected to be passed through to shareholders as foreign tax credits
on Form 1099-DIV for the year ending December 31, 1998.
<PAGE>
November 30, 1998
Dear Shareholder:
We are pleased to present your September 30, 1998, 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
The fiscal year ended on a volatile note as global bonds rallied and the dollar
declined during a tumultuous 1998 third quarter. The catalyst for much of the
market volatility was Russia's declaration of a debt moratorium and effective
ruble devaluation on August 17th. Other emerging markets were not immune to the
fallout from Russia. Malaysia imposed capital controls to combat growing
pressure on its currency. Both Hong Kong and Brazil endured significant
pressures to devalue their respective currencies. Investors shunned high-risk
investments, particularly emerging markets and equities, in favor of the bonds
and cash of the developed markets.
Foreign bonds performed well over the year. European bonds, in particular,
posted strong local currency returns over the period. U.K. bonds returned almost
18%. The rest of Europe had returns close to 11%. Japan returned (8%) and the
dollar-bloc countries, Canada (9%) and Australia (10%), lagged behind the
European returns.(1) On a dollar basis, the return differential was even wider.
Most European currencies gained between 5% and 6% against the dollar. However,
the dollar rose sharply against the Japanese yen, Canadian dollar and Australia
dollar, creating significantly negative dollar-based returns. For the year ended
September 30, 1998, the Bailard, Biehl & Kaiser International Bond Fund returned
8.75%.(2)
The Fund benefitted from overweighting the U.K. market, as it had the strongest
currency and bond returns over the year. Conversely, our overweight positions in
Australia and Canada, two other high real-yield countries, subtracted from our
relative performance. The general widening of credit spreads in August and
September extended to some of the high-quality bonds we own and was a modest
drag on performance as well.
<PAGE>
MARKET OUTLOOK
Once convergence to the Euro is completed, the European Central Bank (ECB) may
well have economic justification to lower rates. Even with the uncertain impact
of recent global developments, there are already increasing signs of slowing
growth. Rapid inventory building has contributed to growth recently but will
limit future growth prospects. Inflation remains subdued. The deflationary
impulses from Asia are evident in Europe as well. Still, European central
bankers are eager to establish their independence and will avoid even the
perception of government interference. Thus, they may well delay rate lowering
interest rates to underscore this independence.
Despite yet another fiscal stimulus package, the Japanese economy shows little
sign of improvement. Against a soft economic backdrop, deflation remains a
greater risk than inflation. The banking crisis urgently needs to be resolved.
Unfortunately, the Japanese government has yet to tackle the problem. Nominal
yields of less than 1% continue to make Japanese bonds unattractive relative to
other bond markets. We expect to maintain an underweight position in Japanese
bonds.
The debut of the single European currency (Euro) should not have a significant
impact on how we manage the European bonds in our portfolio. We have expected
the Euro to go off as planned and have already been managing the bonds of the
Euro-qualified countries from a single currency perspective. The emergence of
the Euro will likely be greeted by optimism initially. The Euro may not become a
prominent reserve currency as soon as some hope. Nevertheless, such expectations
will bolster underlying support for the Euro and limit dollar strength.
CONCLUSION
Going forward, we again expect moderate international bond returns. Bond yields
are already low enough that it is unlikely that we will see dramatic capital
gains. Real yields (nominal yield less inflation) are also low relative to
historic levels. However, the current inflation environment is favorable and
declining inflation expectations could eventually justify lower nominal and real
yields.
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,
/s/ Peter M. Hill /s/ Burnice E. Sparks, Jr.
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,
1998: 3 months: 5.55%; 6 months: 6.67%; 12 months: 8.75%; 5 years: 3.90%
annualized; Since Inception (10/1/90): 6.40% 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>
(Unaudited)
Cumulative Total Return of a $10,000 Investment
October 1, 1990 - September 30, 1998
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
BB&K International Salomon Bros. World
Bond Fund Government 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
Sep-98 $16,427 $22,294
Average Annual Total Return *
1 Year 5 Year Since Inception
------ ------ ---------------
8.75% 3.91% 6.40%
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 World 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 $16,427 by September 30, 1998.
* As required by the Securities & Exchange Commission, these figures reflect
the average annual compounded return over the period indicated that would
equate an initial amount invested in shares of the Fund to the ending
redeemable value of such shares, assuming that all dividends and
distributions by the Fund were reinvested at net asset value. These figures
also reflect the deduction of an assumed 1% annual investment management
fee (0.25% quarterly) through September 30, 1993. Actual fees varied during
this period. As of 10/1/93, the Fund charged a management fee of 0.75%. The
performance data quoted represents past performance, and the investment
return and principal value of an investment in the Bailard, Biehl & Kaiser
International Bond Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
PAR VALUE VALUE
----------- ---------
SENIOR SECURITIES (94.5%)
AUSTRALIAN DOLLAR (1.3%)
KFW International Finance Inc.
9.125% 07/26/05 A$ 1,000,000 $ 708,638
----------
BELGIUM FRANC (3.4%)
Kingdom of Belgium
8.750% 06/25/02 BEF 14,000,000 476,552
Kingdom of Belgium
7.000% 05/15/06 BEF 40,000,000 1,380,841
----------
Total Belgium Franc 1,857,393
----------
BRITISH POUND (13.1%)
United Kingdom Treasury
9.750% 08/27/02 (pound) 500,000 980,341
Republic of Austria
9.000% 07/22/04 (pound) 1,750,000 3,415,599
Glaxo Wellcome Plc.
8.750% 12/01/05 (pound) 800,000 1,550,812
Tesco Plc.
7.500% 07/30/07 (pound) 300,000 554,891
Quebec Province
8.625% 11/04/11 (pound) 350,000 707,209
----------
Total British Pound 7,208,852
----------
CANADIAN DOLLAR (5.3%)
Kingdom of Sweden
8.000% 05/12/03 C$ 600,000 437,620
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
PAR VALUE VALUE
--------- -----------
CANADIAN- CONTINUED
Province of British Columbia
7.750% 06/16/03 C$ 1,150,000 $ 836,941
Government of Canada
6.000% 06/01/08 C$ 2,300,000 1,627,421
-----------
Total Canadian Dollar 2,901,982
-----------
CZECH CROWN (1.0%)
Generale Electric
13.500% 10/01/99 CZK 16,000,000 529,739
-----------
DANISH KRONER (3.4%)
Kingdom of Denmark
9.000% 11/15/00 DKr 3,750,000 643,489
Kingdom of Denmark
8.000% 03/15/06 DKr 6,400,000 1,219,273
-----------
Total Danish Kroner 1,862,762
-----------
FINNISH MARKKA (0.9%)
Republic of Finland
9.500% 03/15/04 FIM 2,000,000 498,314
-----------
FRENCH FRANC (12.8%)
Government of France (O.A.T.)
7.750% 04/12/00 FF 7,700,000 1,459,579
Government of France (O.A.T.)
6.750% 10/25/03 FF 8,500,000 1,730,544
McDonalds
6.750% 07/24/06 FF 10,000,000 2,086,381
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
PAR VALUE VALUE
--------- -----------
FRENCH FRANC- CONTINUED
Government of France (O.A.T.)
5.500% 10/25/07 FF 9,000,000 $ 1,782,722
-----------
Total French Franc 7,059,226
-----------
GERMAN MARK (17.2%)
Federal Republic of Germany
8.375% 05/21/01 DM 3,700,000 2,479,234
European Investment Bank
7.500% 11/04/02 DM 1,300,000 886,631
LKB Baden Wurttemburg
6.625% 08/20/03 DM 1,100,000 734,555
Republic of Germany
6.875% 05/12/05 DM 3,500,000 2,453,654
Germany/Deutschland Bundsrepublk
5.250% 01/04/08 DM 2,300,000 1,512,783
Federal Republic of Germany
6.000% 06/20/16 DM 2,000,000 1,408,442
-----------
Total German Mark 9,475,299
-----------
ITALIAN LIRA (9.4%)
Abbey National Treasury Services Plc.
6.000% 08/08/02 ITL 3,600,000,000 2,349,929
Republic of Italy
9.500% 02/01/06 ITL 3,500,000,000 2,811,734
-----------
Total Italian Lira 5,161,663
-----------
JAPANESE YEN (9.0%)
Japan Development Bank
6.500% 09/20/01 (Y) 158,000,000 1,362,941
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
PAR VALUE VALUE
----------- -----------
JAPANESE YEN- CONTINUED
Kingdom of Spain
4.625% 07/22/04 (Y) 55,000,000 $ 493,069
International Bank For
Reconstruction & Development
4.750% 12/20/04 (Y) 113,000,000 1,031,295
Asian Development Bank
3.125% 06/29/05 (Y) 250,000,000 2,099,618
-----------
Total Japanese Yen 4,986,923
-----------
NETHERLANDS GUILDER (5.3%)
Government of the Netherlands
8.500% 03/15/01 NLG 1,500,000 886,107
Government of the Netherlands
7.750% 03/01/05 NLG 3,150,000 2,035,147
-----------
Total Netherlands Guilder 2,921,254
-----------
NEW ZEALAND DOLLAR (2.5%)
International Bank For
Reconstruction & Development
7.250% 04/09/01 NZD 1,250,000 639,914
International Bank For
Reconstruction & Development
7.250% 05/27/03 NZD 1,400,000 726,255
-----------
Total New Zealand Dollar 1,366,169
-----------
NORWEGIAN KRONER (1.9%)
Kingdom of Norway
5.750% 11/30/04 NOK 7,500,000 1,031,340
-----------
SPANISH PESETA (3.3%)
Government of Spain
7.400% 07/30/99 ESP 90,000,000 653,152
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
PAR VALUE VALUE
----------- ------------
SPANISH PESETA- CONTINUED
Government of Spain
10.000% 02/28/05 ESP 125,000,000 $ 1,174,286
------------
Total Spanish Peseta 1,827,438
------------
SOUTH AFRICAN RAND (0.6%)
SBC Jersey Branch Euro
15.000% 03/10/99 ZAR 2,000,000 329,966
------------
SWEDISH KRONA (3.2%)
Kingdom of Sweden
10.250% 05/05/00 SEK 2,600,000 361,360
Kingdom of Sweden
6.500% 10/25/06 SEK 10,000,000 1,432,006
------------
Total Swedish Krona 1,793,366
------------
SWISS FRANC (0.9%)
Inter-American Development Bank
7.250% 01/21/02 CHF 600,000 502,239
------------
TOTAL SENIOR SECURITIES (94.5%)
(Identified Cost $49,549,105) 52,022,563
------------
SHORT-TERM INVESTMENTS (1.5%)
Mexican Cetes TBill
0.00% 05/06/99
(Identified Cost $829,383) MEX 10,000,000 797,743
------------
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (96.0%)
(IDENTIFIED COST $50,378,488) $ 52,820,306
OTHER ASSETS LESS LIABILITIES (4.0%) 2,208,058
------------
NET ASSETS 100.0% $ 55,028,364
============
CURRENCY LEGEND:
A$ - Australian Dollar ITL - Italian Lira
BEF - Belgium Franc (Y) - Japanese Yen
(pound) - British Pound NLG - Netherlands Guilder
C$ - Canadian Dollar NZD - New Zealand Dollar
CZK - Czech Crown NOK - Norwegian Kroner
DKr - Danish Kroner ESP - Spanish Peseta
FIM - Finnish Markka ZAR - South African Rand
FF - French Franc SEK - Swedish Krona
DM - German Mark CHF - Swiss Franc
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
ASSETS
Investments, at value
(Identified cost $50,378,488) $ 52,820,306
Cash 1,880,155
Receivables:
Interest and recoverable foreign
taxes receivable $ 1,481,001
Fund shares sold 52 1,481,053
Prepaid expenses 11,666
------------
Total assets 56,193,180
------------
LIABILITIES
Unrealized loss on forward currency
contracts open (Note 5) 1,029,518
Accrued management fees (Note 3) 32,477
Other accrued expenses 102,821
------------
Total liabilities 1,164,816
------------
Net assets (equivalent to $7.99 per share,
representing the offering and redemption
price for 6,884,896 shares outstanding,
100,000,000 shares authorized) $ 55,028,364
============
Net assets consist of:
Capital paid in $ 70,954,723
Distributions in excess of net
investment income (1,542,528)
Accumulated net realized loss on investments
and foreign currency transactions (15,863,339)
Unrealized appreciation:
Investments $ 2,441,818
Foreign currency (962,310) 1,479,508
----------- ------------
$ 55,028,364
============
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
STATEMENT OF OPERATIONS
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $ 3,080,451
EXPENSES
Advisory fees (See note 3) $ 391,334
Audit and legal fees 80,829
Custodian fees 109,602
Transfer agent fees 38,836
Administrative fees 32,733
Directors' fees and expenses (See note 3) 20,046
Registration fees 7,929
Insurance 3,117
Miscellaneous expenses 12,893
-----------
Total expenses 697,319
-----------
Less: Fees paid indirectly (See note 1) (39,790)
Net expenses 657,529
-----------
Net investment income 2,422,922
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
Net realized gain on investments 1,394,398
Net change in unrealized gain on investments 3,954,700
-----------
Net gain on investments 5,349,098
-----------
Net realized loss on foreign currency (2,455,379)
Net change in unrealized loss on foreign currency
and foreign currency denominated assets and
liabilities (853,415)
-----------
Net loss on foreign currency (3,308,794)
-----------
Net gain on investments and foreign currency 2,040,304
-----------
Net increase in net assets resulting from operations $ 4,463,226
===========
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year ended For the year ended
INCREASE (DECREASE) IN NET ASSETS September 30, 1998 September 30, 1997
------------------ ------------------
<S> <C> <C>
Operations:
Net investment income $ 2,422,922 $ 2,382,568
Net realized gain (loss) on investments 1,394,398 (126,786)
Net unrealized gain (loss) on investments 3,954,700 (2,533,114)
Net realized gain (loss) on foreign currency (2,455,379) 3,827,614
Net unrealized gain (loss) on foreign currency
and foreign currency denominated assets
and liabilities (853,415) (562,309)
------------ ------------
Net increase resulting from operations 4,463,226 2,987,973
------------ ------------
Distributions to shareholders:
From net investment income (5,517,608) (1,067,736)
For tax purposes in excess of
net investment income -- (2,957,718)
------------ ------------
Total distributions (5,517,608) (4,025,454)
------------ ------------
Fund share transactions:
Proceeds from shares sold 4,758,355 5,969,520
Net asset value of shares issued on
reinvestment of distributions 4,342,236 2,919,000
Cost of shares redeemed (4,920,426) (21,329,162)
------------ ------------
Net increase (decrease) resulting from
Fund share transactions 4,180,165 (12,440,642)
------------ ------------
Net increase (decrease) 3,125,783 (13,478,123)
NET ASSETS
Beginning of period 51,902,581 65,380,704
------------ ------------
End of period (including undistributed
(distributions in excess of) net
investment income of ($1,542,528) and
$2,464,716, respectively) $ 55,028,364 $ 51,902,581
============ ============
NUMBER OF FUND SHARES
Sold 620,554 739,040
Issued on reinvestment of distributions 573,511 359,632
Redeemed (639,517) (2,568,863)
------------ ------------
Net increase (decrease) 554,548 (1,470,191)
============ ============
</TABLE>
(See "Notes to Financial Statements")
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding throughout the period:
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------------------------
1 1 1 1
1998 1997 1996 1995 1994
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 8.20 $ 8.38 $ 8.78 $ 8.02 $ 10.85
--------- --------- --------- --------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.25 0.42 0.59 0.47 0.61
Net Realized/Unrealized Gain (Loss) on
Securities and Foreign Currency 0.40 0.04 0.16 0.86 (2.39)
--------- --------- --------- --------- ----------
Total from Investment Operations 0.65 0.46 0.75 1.33 (1.78)
--------- --------- --------- --------- ----------
LESS DISTRIBUTIONS:
Net Investment Income (0.86) (0.17) (0.45) (0.45) (0.26)
For Tax Purposes in Excess of Book
Net Investment Income -- (0.47) (0.70) (0.12) --
Capital Gains -- -- -- -- (0.27)
Return of Capital -- -- -- -- (0.52)
--------- --------- --------- --------- ----------
Total Distributions (0.86) (0.64) (1.15) (0.57) (1.05)
--------- --------- --------- --------- ----------
Net Asset Value, End of Period $ 7.99 $ 8.20 $ 8.38 $ 8.78 $ 8.02
========= ========= ========= ========= ==========
TOTAL RETURN 8.75% 5.75% 9.32% 17.33% (17.90%)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Year (000's) $ 55,028 $ 51,903 $ 65,381 $ 64,640 $ 136,366
Ratio of Expenses to Average Net Assets
Before Expenses Paid Indirectly 1.33% 1.35% 1.22% 1.16% 1.12%
After Expenses Paid Indirectly 1.26% 1.35% 1.22% 1.16% 1.12%
Ratio of Net Investment Income to
Average Net Assets 4.63% 4.72% 5.41% 5.66% 5.87%
Portfolio Turnover Rate 40% 33% 61% 179% 319%
</TABLE>
- --------------------------------
1. 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, 1998, the Fund had a capital loss carryforward of approximately
$15,863,000, which may be carried forward through the fiscal year ending
September 30, 2003. During the year ended September 30, 1998, the Fund utilized
previously deferred capital losses of approximately $56,000. The Fund does not
intend to make any capital gains distributions until the capital loss
carryforwards have been extinguished.
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.
The Fund had entered into an agreement with Brown Brothers Harriman & Co. (the
"Custodian") where the daily interest earned from the Fund's cash balance would
be applied as a credit to the custody fees for the Fund on a quarterly basis.
For the year ended September 30, 1998, the Fund earned $39,790 in such credits.
NOTE 2 - PURCHASES AND SALES OF SECURITIES
For the year ended September 30, 1998, purchases and sales of investment
securities other than short-term investments aggregated $24,222,371 and
$19,840,161, respectively. There were no purchases and sales of U.S. Government
obligations during the year ended September 30, 1998.
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, 1998, based on the cost
of securities of $51,048,034 for federal income tax purposes, consists of the
following:
Gross unrealized appreciation $ 3,330,393
Gross unrealized depreciation (1,558,121)
-------------
Net unrealized appreciation $ 1,772,272
============
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 5 - FORWARD FOREIGN CURRENCY CONTRACTS
At September 30, 1998 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,
1998 were as follows:
Currency Currency Delivery Unrealized
Receivable Deliverable Date Appreciation/(depreciation)
---------- ----------- -------- ---------------------------
$1,258,902 DM 2,270,430 10/01/98 $(95,931)
404,530 DM 729,570 10/01/98 (4,376)
465,933 (Y) 65,170,000 10/01/98 (21,502)
1,030,848 BEF 37,828,000 10/23/98 (67,883)
600,000 (Y) 84,696,000 11/04/98 (25,254)
426,903 (Y) 60,680,000 11/09/98 (21,369)
500,000 MEX 5,442,500 11/09/98 (20,067)
1,414,313 (Y) 203,661,000 11/12/98 (90,855)
1,000,000 A$ 1,673,220 11/13/98 8,065
400,000 NZD 796,020 11/13/98 1,003
1,800,000 DM 3,217,068 11/17/98 (8,053)
716,476 ESP 108,703,800 11/19/98 (50,048)
2,115,122 ITL 3,741,650,000 11/27/98 (151,305)
500,000 CZK 17,202,500 11/30/98 (61,376)
500,000 NOK 4,216,000 11/30/98 (67,392)
1,750,000 SEK 14,534,100 11/30/98 (109,122)
3,518,038 FF 20,263,900 12/10/98 (110,565)
2,102,574 DM 3,529,381 12/17/98 (17,729)
664,962 DM 1,116,205 12/17/98 (5,608)
3,983,301 (pound) 2,388,070 12/17/98 (59,383)
1,039,125 DM 1,758,200 12/18/98 (17,178)
2,005,910 C$ 3,071,850 12/23/98 (7,098)
1,513,216 DKr 9,730,733 12/23/98 (22,206)
1,360,843 DM 2,270,430 01/04/99 (4,286)
------------
$ (1,029,518)
============
<PAGE>
BAILARD, BIEHL & KAISER
INTERNATIONAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 5 - CONTINUED
CURRENCY LEGEND:
A$ - Australian Dollar ITL - Italian Lira
BEF - Belgian Franc MEX - Mexican Peso
C$ - Canadian Dollar NOK - Norwegian Kroner
CZK - Czech Crown NZD - New Zealand Dollar
DKr - Danish Kroner (pound) - British Sterling
DM - German Mark SEK - Swedish Krona
ESP - Spanish Peseta (Y) - Japanese Yen
FF - French Franc
<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
(FORMERLY BAILARD, BIEHL & KAISER INTERNATIONAL FIXED-INCOME 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.) at September 30, 1998, and the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
September 30, 1998 by correspondence with the custodian and brokers and
application of alternative procedures where broker confirmations were not
received, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
San Francisco, California
November 18, 1998
