SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, For Use of the
[ ] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
BAILARD, BIEHL & KAISER INTERNATIONAL FUND GROUP, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
PRELIMINARY COPY DATED OCTOBER 17, 2000
(COVER LETTER TO BE SENT TO ALL STOCKHOLDERS)
_____________, 2000
Re: Bailard, Biehl & Kaiser International Bond Fund ("Bond Fund")
Bailard, Biehl & Kaiser International Equity Fund ("Equity Fund")
Dear Stockholder:
A special meeting of all stockholders of the Bond Fund and the Equity Fund will
be held at 10:00 a.m. on December 14, 2000. The main purpose for the stockholder
meeting is to vote on a proposal to change the investment objective of the Bond
Fund. However, the Board of Directors is also taking this opportunity to present
some other proposals that require stockholder approval. PLEASE REVIEW THE
ENCLOSED PROXY STATEMENT CAREFULLY FOR A DETAILED DESCRIPTION OF THE ISSUES, AND
RETURN YOUR SIGNED PROXY AS SOON AS POSSIBLE TO THE FUNDS IN THE ENVELOPE
PROVIDED BUT NO LATER THAN THE CLOSE OF BUSINESS ON DECEMBER 13TH. Your vote is
very important to us.
To aid your review, we have prepared the following summary of the seven
proposals presented in the Proxy Statement:
PROPOSALS AFFECTING ONLY THE BOND FUND
CHANGE OF FUND OBJECTIVE AND FEES. This proposal changes the investment
objective of the Bond Fund from an international bond fund to a FUND THAT
FOCUSES PRIMARILY ON THE U.S. BOND MARKET WITH A SECONDARY EMPHASIS ON
INTERNATIONAL BONDS. Bailard, Biehl & Kaiser (the "Adviser") believes the new
objective will allow the Bond Fund to take advantage of a wider set of
investment opportunities in a changing global bond environment. To reflect this
new strategy, the name of the Bond Fund will be changed to the BAILARD, BIEHL &
KAISER BOND OPPORTUNITY FUND.
The structural changes transforming today's global bond markets have created new
opportunities and new challenges for investors. For the past twenty years, a
long-term trend of generally declining interest rates gave global bond investors
the opportunity to benefit from both capital appreciation and income. Now that
global interest rates appear to be bottoming, income is likely to play a more
important role in determing total return both here and abroad. European Monetary
Union has reduced the diversification benefits of investing in many
international markets, even as the U.S. bond market has grown in size and
diversity, creating real opportunities for adding value by sector investing.
All of these considerations have led the Adviser to recommend the Bond Fund
adopt a U.S.- based approach that will allow the Fund to take advantage of a
wider set of opportunities such as higher yielding corporate and agency bonds,
taxable municipal bonds, convertible bonds and preferred stock. The Bond Fund
will invest in international bonds opportunistically to add value through return
enhancement or risk reduction. Since the general marketplace of
domestic-oriented bond funds typically has lower investment advisory fees than
<PAGE>
international bond funds, the new Bond Fund's internal investment advisory fee
will be reduced from 0.75% to 0.60% of its average daily net assets. Clients of
Bailard, Biehl & Kaiser's investment advisory services, who invest in the Bond
Fund as part of their overall portfolio allocation strategy, will continue to
see this fee credited to their overall account fee, in an amount approximating
the advisory fee paid by the Bond Fund to the Adviser.
PROPOSALS AFFECTING ONLY THE EQUITY FUND
SECURITIES LENDING: This proposal delegates the decision as to whether the
Equity Fund may participate in a securities lending program to its Board of
Directors. To increase income, many mutual funds lend a small portion of the
securities in their portfolios to creditworthy broker-dealers or institutional
investors. Currently, the Equity Fund may do so only with stockholder approval.
While the Equity Fund has no immediate plans to engage in securities lending,
this proposal would give the Board of Directors the flexibility to authorize
participation in such a program if the Board deems that to be in the best
interest of stockholders.
PROPOSALS AFFECTING BOTH THE BOND FUND AND THE EQUITY FUND
ELECTION OF BOARD OF DIRECTORS. This proposal elects all five existing Directors
to the Board until any successors are elected.
RATIFY AUDITORS. This proposal ratifies the selection of PricewaterhouseCoopers
LLP , to once again act as the independent accountants for the Bond Fund and the
Equity Fund.
UNSEASONED COMPANIES. This proposal removes a restriction preventing the Bond
Fund and the Equity Fund from investing in companies with less than three years
of operating history. This state-imposed restriction is no longer required by
law. It is difficult to apply to certain bond investments. Removing this
restriction would also allow the Equity Fund to invest in early stage companies,
particularly technology companies, that are maturing more rapidly than in the
past.
OFFICER/DIRECTOR OWNERSHIP. This proposal removes a restriction preventing the
Bond Fund and the Equity Fund from investing in certain securities which are
also held by officers or directors of the Funds and the Adviser. This
state-imposed restriction is no longer required by law. Moreover, the Funds and
the Adviser have adopted personal securities trading policies designed to
prevent the conflicts of interest addressed by this restriction.
RECOMMENDATION
BAILARD, BIEHL & KAISER AND THE BOARD OF DIRECTORS RECOMMEND THAT STOCKHOLDERS
VOTE FOR ALL PROPOSALS. IT IS IMPORTANT THAT WE RECEIVE YOUR SIGNED PROXY BY THE
CLOSE OF BUSINESS On DECEMBER 13, 2000. If you have any questions regarding any
of the proposals, please contact Sofi Kyriakidis at 650-571-5800. Stockholders
who are clients of Bailard, Biehl & Kaiser can also discuss this matter with
their investment counselor.
Sincerely,
Peter M. Hill
Chairman, Board of Directors
Enclosure
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BAILARD, BIEHL & KAISER INTERNATIONAL FUND GROUP, INC.
950 Tower Lane, Suite 1900, Foster City, California 94404
(650) 571-5800
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 14, 2000
TO THE STOCKHOLDERS OF BAILARD, BIEHL & KAISER
INTERNATIONAL FUND GROUP, INC.
NOTICE IS HEREBY GIVEN that, by order of the Board of Directors, a Special
Meeting of Stockholders of Bailard, Biehl & Kaiser International Fund Group,
Inc., a Maryland corporation (the "Company"), will be held at the offices of the
Company, 950 Tower Lane, Suite 1900, Foster City, California, on December 14,
2000, at 10:00 a.m. (Pacific Time), for the following purposes, each as more
fully described in the accompanying Proxy Statement:
* To elect five Directors to hold office until their successors shall be duly
elected and qualified. (Proposal 1)
* To ratify or reject the selection by the Board of Directors of
PricewaterhouseCoopers LLP as independent accountants for the Company for
the fiscal year ending September 30, 2001. (Proposal 2)
* To eliminate the Funds' fundamental investment policy restricting
investments in companies with less than three years of operating history.
(Proposal 3)
* To eliminate the Funds' fundamental investment policy prohibiting
investments in companies in whose securities one or more officers or
directors of the Company have certain percentage interests. (Proposal 4)
* To act upon any other matters that may properly come before the meeting at
the scheduled time and place or any adjourned meeting or meetings.
Stockholders of the Bailard, Biehl & Kaiser International Bond Fund series
of the Company (the "Bond Fund") will also be asked to approve or disapprove the
following matter, as more fully described in the accompanying Proxy Statement:
* To amend the Bond Fund's investment objective to seek total return, from
income and long-term growth of capital, by investing primarily in U.S.
dollar-denominated debt securities, with a secondary emphasis on non-U.S.
dollar-denominated debt securities. (Proposal 5)
* To amend the Investment Management Agreement between the Company and
Bailard, Biehl & Kaiser, Inc., to reduce the annual management fee paid by
the Bond Fund to 0.60% of average daily net assets. (Proposal 6)
Stockholders of the Bailard, Biehl & Kaiser International Equity Fund
series of the Company (the "Equity Fund") will also be asked to approve or
disapprove the following matter, as more fully described in the accompanying
Proxy Statement:
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* To amend the Funds' fundamental investment policies to permit the Equity
Fund to lend its portfolio securities, subject to applicable law and the
adoption of procedures by the Board of Directors. (Proposal 7)
The Board of Directors has fixed the close of business on October 25, 2000,
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the meeting. Only stockholders of record at the close of
business on such date are entitled to vote. The stock transfer books of the
Company will not be closed. A complete listing of stockholders entitled to vote
at the meeting, including the address and the number of shares registered in the
name of each such stockholder, will be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for the ten days prior to the meeting, at the offices of the Company
specified above, and will be available for inspection by any stockholder at the
time and place of the meeting.
Please mark, date, sign and return the enclosed Proxy promptly in the
enclosed envelope, whether or not you intend to be present at the meeting. If
you are not able to attend, it is important that your shares be represented by
proxy. You may revoke your Proxy at any time before it is voted.
By Order of the Board of Directors
Janis M. Horne
Secretary
Foster City, California
November 3, 2000
<PAGE>
BAILARD, BIEHL & KAISER INTERNATIONAL FUND GROUP, INC.
950 Tower Lane, Suite 1900, Foster City, California 94404
(650) 571-5800
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of the Bailard, Biehl & Kaiser International Fund Group,
Inc., a Maryland corporation (the "Company"), of proxies ("Proxies") to be used
at a Special Meeting of stockholders, and any adjournment thereof, of its two
series, the Bailard, Biehl & Kaiser International Bond Fund (the "Bond Fund")
and the Bailard, Biehl & Kaiser International Equity Fund (the "Equity Fund").
The Special Meeting will be held at the Company's offices at 950 Tower Lane,
Suite 1900, Foster City, California, at 10:00 a.m. (Pacific Time) on December
14, 2000, for action on the following matters:
Proposal Stockholders Solicited
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1. Election of five Directors. Bond Fund and Equity Fund
voting together.
2. Ratification of PricewaterhouseCoopers Bond Fund and Equity Fund
LLP as the Company's independent voting together.
accountants for the fiscal year ending
September 30, 2001.
3. Elimination of the Fund's fundamental Bond Fund and Equity Fund
investment policy restricting investments voting separately.
in companies with less than three years
of operating history.
4. Elimination of the Fund's fundamental Bond Fund and Equity Fund
investment policy prohibiting investments voting separately.
in companies in whose securities one or
more officers or directors of the Company
have certain percentage interests.
5. Amendment of the Bond Fund's investment Bond Fund only.
objective to seek total return, from
income and long-term growth of capital,
by investing primarily in U.S.
dollar-denominated debt securities, with
a secondary emphasis on non-U.S.
dollar-denominated debt securities.
6. Amendment of the Investment Management Bond Fund only.
Agreement between the Company and Bailard,
Biehl & Kaiser, Inc., to reduce the annual
management fee paid by the Bond Fund to
0.60% of average daily net assets.
7. Amendment of the Funds' fundamental Equity Fund only.
investment policies to permit the Equity
Fund to lend its portfolio securities,
subject to applicable law and the adoption
of procedures by the Board of Directors.
<PAGE>
All shares represented by each properly signed Proxy received prior to the
Special Meeting will be voted at the meeting. If a stockholder specifies how the
Proxy is to be voted on any of the business to come before the meeting, it will
be voted in accordance with such specification. If no specification is made, the
Proxy will be voted FOR the election of each person named herein as a nominee
for the Board of Directors, and FOR Proposals 2, 3, 4, 5, 6 and 7. A Proxy may
be revoked by a stockholder, at any time prior to its use, by written notice to
the Company, by submission of a subsequent Proxy or by voting in person at the
meeting.
The representation in person or by proxy of at least a majority of the
shares entitled to vote is necessary to constitute a quorum for voting on each
Proposal. For purposes of determining the presence of a quorum, abstentions,
withheld votes and broker "non-votes" will be counted as present. Broker
non-votes occur when the Company receives a Proxy from a broker or nominee who
does not have discretionary power to vote on a particular matter and has not
received instructions from the beneficial owner or other person entitled to vote
the shares represented by the Proxy.
If a vote is taken on adjournment of the Special Meeting or any other
procedural matters, Proxies may be voted at the discretion of the persons voting
the Proxies in a manner consistent with any fiduciary duties of such persons.
Accordingly, absent contrary instructions on the Proxy card, Proxies withholding
votes on Proposal 1 or abstaining on or opposing Proposals 2, 3, 4, 5, 6 or 7
may be voted on procedural matters, such as adjournment, to facilitate an
opposite result.
The cost of solicitation, including postage, printing and handling and the
expenses incurred by brokerage houses, custodians, nominees and fiduciaries in
forwarding proxy materials to beneficial owners, will be borne by the Company.
The solicitation is to be made primarily by mail, but may be supplemented by
telephone calls, telegrams and personal interviews. This Proxy Statement and the
enclosed form of Proxy were first mailed to stockholders on or about November 3,
2000.
At the close of business on October 25, 2000, the record date (the "Record
Date") for the determination of stockholders entitled to vote at the Special
Meeting, there were outstanding __________ shares of Common Stock of the Bond
Fund and ______ shares of Common Stock of the Equity Fund. Each share is
entitled to one vote.
Bailard, Biehl & Kaiser, Inc., is the investment adviser (the "Adviser"),
and BB&K Fund Services, Inc. is the distributor (the "Distributor"), of the Bond
Fund and the Equity Fund. The address of the Adviser and the Distributor is 950
Tower Lane, Suite 1900, Foster City, California 94404. Investment Company
Administration LLC, 2020 E. Financial Way, Suite 100, Glendora, California
91741, provides certain administrative services to the Company.
2
<PAGE>
THE COMPANY WILL FURNISH, WITHOUT CHARGE, COPIES OF THE 1999 ANNUAL REPORT
AND 2000 SEMI-ANNUAL REPORT OF THE BOND FUND AND THE EQUITY FUND TO ANY
STOCKHOLDER UPON REQUEST BY TELEPHONE AT 1-800-882-8383 OR IN WRITING DIRECTED
TO: BB&K FUND SERVICES, INC., 950 TOWER LANE, SUITE 1900, FOSTER CITY, CA
94404-2131.
RECOMMENDATIONS OF BOARD OF DIRECTORS
Each proposal to be voted upon has been independently considered by the
Board of Directors. The Board of Directors recommends that stockholders vote FOR
the election of the persons named below as nominees for the Board of Directors
(Proposal 1) and FOR Proposals 2, 3, 4, 5, 6 and 7.
ELECTION OF DIRECTORS
PROPOSAL 1
All stockholders of the Bond Fund and the Equity Fund, as of the Record
Date, are entitled to vote for the election of the persons named below as
nominees for the Board of Directors. Stockholders of the Bond Fund and the
Equity Fund will cast votes for the Board of Directors as a single class.
INFORMATION CONCERNING THE NOMINEES
Unless instructions to the contrary are given, all Proxies, in the form
enclosed, received by the Company will be voted for the election of the nominees
named on the following pages as the Directors of the Company, to hold office
until their respective successors shall be duly elected and qualified. All of
such nominees are currently Directors of the Company and have indicated their
willingness to continue to serve as Directors if elected. Should any of the
nominees not be a candidate at the Special Meeting of stockholders, all such
Proxies so received will be voted in favor of the remainder of those nominated
and for such substitute nominees (if any) as shall be designated by the
proxyholders named in the enclosed form of Proxy, or the number of Directors may
be reduced by the Board of Directors. The names, ages, principal occupations and
five-year employment histories of the nominees are indicated below:
PETER M. HILL(1) (50) Chairman of the Board and Director since 1992
Director and Chief Investment Officer of the Adviser. Director of the
Distributor. President and Director of the Bailard, Biehl & Kaiser Technology
Exchange Fund, LLC (the "Tech Fund") (since March 2000). President and Director
of both the Bailard, Biehl & Kaiser New Leaders Technology Exchange Fund, LLC
(the "New Leaders Fund") and the Bailard, Biehl & Kaiser Decathlon Exchange
Fund, LLC (the "Decathlon Fund") (since August 2000).
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(1) An "interested person" of the Company, as that term is defined in the
Investment Company Act of 1940, as amended. Messrs. Hill and Sparks are
interested persons because they are officers of the Company, and Directors
and officers of the Adviser and of the Distributor, a registered
broker-dealer.
3
<PAGE>
BURNICE E. SPARKS, JR.(1) (52) Director and President since 1993
Director and President of the Adviser. Director and Chief Executive Officer of
the Distributor. President of Bailard, Biehl & Kaiser Fund Group (the "Fund
Group").
SHIRLEY L. CLAYTON(2) (63) Director since 1988
President of Raven Biotechnologies, a biotechnology firm, since January 1999.
Chief Financial Officer of Orquest, a biotechnology firm, from May 1998 to
January 1999. President and Chief Operating Officer of TopoMetrix, a
manufacturer of scanning probe microscopes, from 1993 to 1998. Trustee of the
Fund Group.
JAMES C. VAN HORNE(2) (65) Director since 1979
A.P. Giannini Professor of Finance at the Graduate School of Business of
Stanford University since September 1976. Director of Sanwa Bank California and
Montgomery Street Income Securities, Inc., a registered investment company.
Trustee of the Fund Group.
SCOTT F. WILSON(2) (56) Director since 1997
General Partner of Venture Management Associates, an investment banking firm.
Shareholder of Milbank Winthrop & Co., an investment adviser. Trustee of the
Fund Group.
Unless otherwise indicated, all positions indicated have been held for more than
five years.
MEETINGS OF DIRECTORS AND THE AUDIT COMMITTEE
During the fiscal year ended September 30, 2000, the Board of Directors
held 4 meetings, at which each Director was present. The Board of Directors
established an Audit Committee in 1980, the current members of which are Ms.
Clayton, and Messrs. Van Horne and Wilson, the three Directors who are not
interested persons of the Company ("Interested Persons"), as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"). The Audit Committee
held one meeting during the year ended September 30, 2000, at which each member
of the committee was present. The Audit Committee reviews the Company's annual
audited financial statements with the independent accountants of the Company,
considers any comments that the independent accountants may have regarding the
Company's financial statements or books of account and considers the adequacy of
the Company's internal accounting controls. The Board of Directors does not have
a nominating committee or compensation committee.
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(2) Member of the Audit Committee.
4
<PAGE>
OFFICERS OF THE COMPANY
The present officers of the Company are Peter M. Hill, Chairman of the
Board of Directors; Burnice E. Sparks, Jr., President; Barbara V. Bailey,
Treasurer; Janis M. Horne, Secretary and Chief Compliance Officer; and Sofi
Kyriakidis, Assistant Treasurer and Assistant Secretary. A description of the
principal occupations and employment histories of Mr. Hill and Mr. Sparks is set
forth above. A similar description of Ms. Bailey, Ms. Horne and Ms. Kyriakidis
is set forth below.
Ms. Bailey (age 42) has been Treasurer of the Company since September 1996.
She is also the Treasurer of BB&K Holdings, Inc., the parent of the Adviser and
the Distributor; Executive Vice President and Treasurer/Secretary of the Adviser
(since December 1995); Secretary of the Distributor; Treasurer and Secretary of
the Bailard, Biehl & Kaiser REIT (the "REIT") (since January 1996); Treasurer of
the Fund Group (since September 1996): Treasurer of the Tech Fund (since March
2000); and Treasurer of both the New Leaders Fund and Decathlon Fund (since
August 2000).
Ms. Horne (age 45) is Secretary of the Company. She is also Senior Vice
President and Investment Counselor of the Adviser, and Secretary of the Fund
Group. She has also been Chief Compliance Officer of the Adviser (since June
1996) and of the Fund Group (since September 1996).
Ms. Kyriakidis (age 28) has been Assistant Secretary and Assistant
Treasurer of the Company since September 1996. Ms. Kyriakidis has been an
employee of the Adviser since November 1995, most recently as Senior Vice
President; Treasurer of the Distributor (since January 1996); Assistant
Treasurer of the REIT (since June 1996); Assistant Secretary and Assistant
Treasurer of the Fund Group (since September 1996); Secretary of the Tech Fund
(since March 2000); and Secretary of both the New Leaders Fund and Decathlon
Fund (since August 2000).
Unless otherwise indicated, all positions indicated have been held for more
than five years.
COMPENSATION OF DIRECTORS
The following table sets forth the compensation paid by the Company to
Directors of the Company for the fiscal year ended September 30, 2000:
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COMPENSATION TABLE
<TABLE>
<CAPTION>
Pension or
Retirement
Aggregate Benefits Accrued Estimated Total Compensation
Compensation as Part of Annual Benefits From Company and
from Company Company Fund Complex (1)
Name and Position Company Expenses Upon Retirement Paid to Directors
----------------- ------- -------- --------------- -----------------
<S> <C> <C> <C> <C>
Peter M. Hill $ 0 (2) $ 0 $ 0 $ 0 (2)
Chairman of the Board
and Director
Burnice E. Sparks, Jr. $ 0 (2) $ 0 $ 0 $ 0 (2)
President and Director
Shirley L. Clayton $13,333 (3) $ 0 $ 0 $20,000
Director
Scott F. Wilson $13,333 (3) $ 0 $ 0 $20,000
Director
James C. Van Horne $13,333 (3) $ 0 $ 0 $20,000
Director
</TABLE>
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(1) A Fund Complex consists of investment companies that hold themselves out to
investors as related companies for purposes of investment and investor
services, have a common investment adviser or have an investment adviser
that is an affiliated person of the investment adviser of any of the other
related investment companies. The Company and the Fund Group are considered
to be part of the same Fund Complex.
(2) Does not include fees paid to the Adviser pursuant to the Investment
Management Agreement between the Company and the Adviser.
(3) Consists of a $8,000 annual Director fee plus $1,333 for each Board meeting
attended in person.
The Company and the Fund Group reimburse each Director and Trustee for
travel and other out-of-pocket disbursements incurred in connection with
attending Board meetings. The Company and the Fund Group also reimburse other
travel expenses of Directors, Trustees and officers, including international
travel expenses, incurred incident to the performance of duties as a Director,
Trustee or officer.
VOTE ON PROPOSAL 1
On October 17, 2000, the Board of Directors voted unanimously to recommend
to the stockholders that they vote for the election of each of the nominees
named above. Votes with respect to this proposal will be cast as specified in
the Proxy. If no specification is made, votes represented by the Proxy will be
cast FOR approval of each nominee listed above. A nominee will be elected to the
Board of Directors of the Company by a plurality, that is, if such nominee
receives at least the fifth highest number of votes cast for all nominees for
Director where five directors are to be elected. If no specification is made in
the Proxy, votes represented by Proxy will be cast FOR the nominees. Withheld
votes and broker non-votes will not be counted in favor of or against, but will
have no other effect on, the vote on Proposal 1.
6
<PAGE>
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
PROPOSAL 2
All stockholders of the Bond Fund and the Equity Fund, as of the Record
Date, are entitled to vote on Proposal 2. Stockholders of the Bond Fund and the
Equity Fund will cast votes on Proposal 2 as a single class.
On October 17, 2000, the Directors who are not Interested Persons of the
Company selected PricewaterhouseCoopers LLP ("PwC") to be the independent
accountants of the Company, to carry out the audit of the Company's financial
statements for the fiscal year ending September 30, 2001, and to perform such
other services as may be requested from time to time by the Company. PwC has no
connection with the Company except in such capacity and has no direct or
indirect financial interest in the Company, the Adviser or the Distributor,
except that PwC also audits the financial statements of and provides certain
non-audit services to the Adviser, the Distributor and their parent company. PwC
acted as the independent accountants to the Company for the fiscal year ended
September 30, 2000. If requested by a stockholder in advance of the Special
Meeting, a representative of PwC will be present in person or by conference
telephone at the Special Meeting to respond to appropriate questions and will
have the opportunity to make a statement if such representative desires to do
so.
Approval of PricewaterhouseCoopers LLP requires the affirmative vote of a
majority of the shares of the Bond Fund and Equity Fund cast at the meeting.
Votes with respect to Proposal 2 will be cast as specified in the Proxy. If no
specification is made in the Proxy, votes represented by Proxy will be cast FOR
Proposal 2. An abstention will have the effect of a vote against Proposal 2. A
broker non-vote will not be counted in favor of or against, but will have no
other effect on, the vote for Proposal 2.
ELIMINATION OF FUNDAMENTAL INVESTMENT POLICY WITH RESPECT
TO UNSEASONED COMPANIES
PROPOSAL 3
Under Fundamental Policy No. 9, neither the Bond Fund nor the Equity Fund
currently may "[i]nvest in securities of an issuer, which, together with any
predecessor, has been in operation for less than 3 years if, as a result, more
than 5% of each Fund's total assets would then be invested in such securities."
Fundamental Policy No. 9 is based on requirements imposed by the
administrators of securities laws in various states. Federal legislation passed
in 1996 preempted substantive state regulation of mutual funds and the sale of
their shares, and the 1940 Act does not require the current fundamental policy.
The Adviser has recommended that this policy on "unseasoned" issuers be
eliminated to give it more flexibility in investing the Funds' assets.
The assumption underlying the state law restriction is that investments in
younger companies tend to be riskier or more speculative because of their
limited operating histories. Today many early stage companies, particularly
technology companies, are maturing more rapidly than in the past and present
7
<PAGE>
unique investment opportunities. In addition, in the case of the Bond Fund, the
restriction may not be relevant and is difficult to apply to securities issued
by governments and their agencies and by special purpose entities, such as
private issuers of mortgage and asset-backed securities. In making investments
in unseasoned companies for the Funds, the Adviser will take into account the
potential risks and opportunities of such investments.
VOTE ON PROPOSAL 3
On October 17, 2000, the Board of Directors voted unanimously to approve
the elimination of the fundamental investment policy described in this Proposal
3 and to recommend that the stockholders approve the change at the Special
Meeting. Approval of changes to the Funds' fundamental investment policies
requires the affirmative vote of a majority ("Majority") of each Fund's
outstanding shares. In this context, Majority means (i) 67% of each Fund's
outstanding shares present at the meeting if the holders of more than 50% of the
outstanding shares are present or represented by proxy, or (ii) 50% of each
Fund's outstanding shares, whichever is less. Votes with respect to Proposal 3
will be cast as specified in the Proxy. If no specification is made in the
Proxy, votes represented by Proxy will be cast FOR Proposal 3. Abstentions and
broker non-votes will have the effect of a vote against Proposal 3.
If stockholders approve Proposal 3, the proposed change will be implemented
upon the effectiveness of a post-effective amendment to the Company's Form N-1A
registration statement disclosing the change. If stockholders do not approve
Proposal 3, the proposed change will not be implemented.
ELIMINATION OF FUNDAMENTAL INVESTMENT POLICY WITH RESPECT
TO INVESTMENTS IN SECURITIES OWNED BY OFFICERS AND
DIRECTORS
PROPOSAL 4
Under Fundamental Policy No. 13, neither the Bond Fund nor the Equity Fund
currently may "[p]urchase or retain securities of an issuer if a Fund has
knowledge that one or more of the officers or directors of the Company, or one
or more of the officers or directors of the Adviser, individually own
beneficially more than 1/2 of 1% of the securities of such issuer or together
own beneficially more than 5% of such securities."
Fundamental Policy No. 13 is based on requirements imposed by the
administrators of securities laws in various states. Federal legislation passed
in 1996 preempted substantive state regulation of mutual funds and the sale of
their shares, and the 1940 Act does not require the current fundamental policy.
The Adviser has recommended that this policy on officer and director ownership
be eliminated to give it more flexibility in investing the Funds' assets.
The purpose of the state law restriction is to help protect against the
potential conflicts of interest that may arise when a fund invests in securities
in which the officers and directors of the fund or its adviser also have a
8
<PAGE>
significant ownership interest. This restriction is difficult to monitor, and
the Company is not aware of any instance in the past in which the restriction
has been applied. Moreover, the Company and the Adviser currently maintain a
written Code of Ethics that restricts certain of the personal trading activities
of their officers and directors and requires regular reporting of certain of
their securities transactions and accounts pursuant to Rule 17j-1 under the 1940
Act. The Company and the Adviser believe that this Code of Ethics is adequate to
protect against the types of conflicts addressed by Fundamental Policy No. 13.
VOTE ON PROPOSAL 4
On October 17, 2000, the Board of Directors voted unanimously to approve
this proposed change to the Funds' fundamental investment policies and to
recommend that the stockholders approve the change at the Special Meeting. The
proposed change requires the affirmative vote of a Majority of each Fund's
outstanding shares. Votes with respect to Proposal 4 will be cast as specified
in the Proxy. If no specification is made in the Proxy, votes represented by
Proxy will be cast FOR Proposal 4. Abstentions and broker non-votes will have
the effect of a vote against Proposal 4.
If stockholders approve Proposal 4, the proposed change will be implemented
upon the effectiveness of a post-effective amendment to the Company's Form N-1A
registration statement disclosing the change. If stockholders do not approve
Proposal 4, the proposed change will not be implemented.
AMENDMENT OF INVESTMENT OBJECTIVE
PROPOSAL 5
(BOND FUND ONLY)
Only stockholders of the Bond Fund, as of the Record Date, are entitled to
vote on Proposal 5.
PROPOSED CHANGES TO INVESTMENT OBJECTIVE AND RELATED INVESTMENT STRATEGIES
The current investment objective of the Bond Fund is to seek total return,
from income and long-term growth of capital, on its investments in international
bonds. The Bond Fund invests primarily in the debt securities of issuers based
in developed countries around the world and, to a lesser extent, in the debt
securities of issuers based in emerging market countries. At least 65% of the
Bond Fund's assets must ordinarily be invested in at least three foreign
countries. The Bond Fund can invest in U.S. issuers having foreign operations or
issuing non-dollar-denominated securities and can invest in other U.S. debt
securities for defensive purposes. The Bond Fund was intended as a specialized
vehicle for longer-term investors seeking to add international exposure to their
bond portfolios. The Adviser has generally followed a tax-aware strategy in
managing the Bond Fund's assets.
9
<PAGE>
The Bond Fund now proposes to amend its investment objective and related
investment strategies to seek total return, from income and from long-term
growth of capital, by investing primarily in U.S. dollar-denominated debt
securities, with a secondary emphasis on non-U.S. dollar-denominated debt
securities. Under this proposal, the Bond Fund would be permitted to invest up
to 100% of its assets in the dollar-denominated securities, and up to 50% of its
assets in the non-dollar-denominated securities, of U.S. and foreign issuers.
The Bond Fund would continue to invest in bonds, notes and other obligations of
governments, agencies, supra-national entities and companies, both U.S. and
foreign, including mortgage and asset-backed obligations, indexed bonds and
emerging market securities. It would also be permitted to invest in lower-rated
obligations, preferred stock, convertible bonds, municipal debt and 144A
securities.
PURPOSE OF PROPOSED CHANGES
The primary purpose of the proposed changes is to refocus the Bond Fund on
a new, broader set of opportunities. While retaining many of the benefits of
international bond investments, the new focus recognizes the breadth and depth
of the U.S. bond market and puts the U.S. market at the center of the global
stage. This will allow the Bond Fund to take advantage of a wider set of
opportunities, such as U.S. dollar- denominated corporate bonds, higher-yielding
bonds and convertible bonds. Building on this broad U.S. base, international
bonds will be used opportunistically to add value through return enhancement or
risk reduction.
Over the past twenty years, interest rates in the U.S. and other developed
economies have trended downwards from levels well into double digits to today's
modest single digit zone. An investor in international bonds benefited from this
broad trend not only through interest income but also through the opportunity
for capital gains as interest rates declined. In addition, investing in many
countries provided excellent portfolio diversification.
Looking ahead, it is the Adviser's view that these trends have changed.
Global interest rates, already low by historical standards, appear likely to
remain in this lower trading range. As a result, interest income is expected to
play a more important role in the future returns from bonds. In addition, as
most European markets have joined together to become one large market, the
diversification benefits of investing in many international markets have been
reduced.
Since income is likely to play a greater role in total return, taxable
investors in higher income brackets may find the Bond Fund less attractive than
tax-exempt investors. However, taxable investors, particularly those in lower
income brackets, may find other features of the Bond Fund attractive. For
example, since the Bond Fund carries forward some unused realized and unrealized
capital losses, it is likely that for some time ahead the Bond Fund will not be
required to pay capital gains tax on realized profits. In addition, for
investment advisory clients of the Adviser using a global approach within the
Bond Fund, the proposed changes will widen the range of domestic opportunities
and help make reallocations between international bonds and domestic bonds
faster, smoother and cheaper to execute.
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<PAGE>
IMPLEMENTATION OF PROPOSED CHANGES
Currently approximately 99% of the Bond Fund assets are held by clients of
the Adviser. If Proposal 5 is approved by stockholders, the Adviser intends to
recommend that certain of its clients redeem shares from the Bond Fund and that
certain of its clients purchase shares of the Bond Fund. After these
transactions, it is expected that the net assets of the Bond Fund will be equal
to or greater than the [$67] million in net assets currently in the Bond Fund.
The cost of the proposed changes, including legal and accounting fees, will
be borne by the Bond Fund. Redemptions by the Adviser's clients may be funded by
the sale of the Bond Fund's portfolio securities. The sale of these securities
to fund the redemptions will cause the Bond Fund to incur transaction costs and
may cause the Bond Fund to liquidate portfolio positions and realize gains and
losses at inopportune times for non-redeeming stockholders.
The Adviser's clients will be permitted to purchase Bond Fund shares in
cash or by contributing to the Bond Fund marketable debt securities issued by
U.S. governmental agencies and by U.S. companies. These debt securities will
generally be valued at the mean between the bid and asked quotations for the
securities provided by one or more bona fide market makers. The Adviser believes
that this valuation method will benefit both the Bond Fund and the Adviser's
clients. The Bond Fund will pay a price for the contributed securities that is
lower than the asked price, and the clients will receive a price that is higher
than the bid price for those securities. Additionally, both the Bond Fund and
the clients will avoid incurring any brokerage costs. The contribution of
securities in effect permits the Bond Fund and the Adviser's clients to split
the benefit gained from avoiding the cost of identical purchase and sale
transactions. If current bid and asked quotations are not available, the
contributed securities will be valued by the pricing service used to value the
securities in the Bond Fund's portfolio.
The Adviser will accept only contributed securities that are suitable
investments under the Bond Fund's new investment policies. This process should
assist the Adviser in effecting the transition of the Bond Fund from a portfolio
of international bonds to a global bond portfolio. Depending on market and other
factors, the Adviser expects to complete this transition within 6 months after
stockholder approval is obtained.
OTHER PROPOSED CHANGES
In connection with the changes to the investment objective and strategies
described above, the Bond Fund proposes to make the following related changes:
11
<PAGE>
* NAME. The name of the Bond Fund will change from "Bailard, Biehl &
Kaiser International Bond Fund" to "Bailard, Biehl & Kaiser Bond
Opportunity Fund."
* FEES. The investment advisory fee paid to the Adviser will be reduced
from 0.75% to 0.60% of the average daily net assets of the Bond Fund.
* CREDIT QUALITY. The Bond Fund will be permitted to invest in U.S. and
foreign debt securities (other than emerging market debt, preferred
stock and convertible bonds) rated (or equivalent to) at least Baa3
and BBB-, respectively, by Moody's Investors Services, Inc.
("Moody's") and Standard & Poor's Corporation ("S&P"). Up to 20% of
the Bond Fund's assets may also be invested in debt of lesser quality,
emerging market debt, preferred stock and convertible bonds.
Currently, the Bond Fund may invest in securities rated or equivalent
to at least A by Moody's or S&P, with the exception that up to 5% of
the Bond Fund's assets, and up to 50% of the Bond Fund's emerging
market bonds, may be invested in securities rated Baa or BBB,
respectively.
Bonds rated lower than Baa3 and BBB-, commonly referred to as "junk
bonds," are riskier than higher grade bonds. Lower-rated bonds are
generally unsecured and are often subordinated to other obligations of
the issuer, and the issuers of such bonds usually have high levels of
indebtedness. Lower-rated bonds may also be redeemable by the issuer,
causing the holder to replace the bond with a lower yielding security
in a declining interest rate environment. Investment in lower-rated
securities may make achievement of the Bond Fund's investment
objective more dependent on the Adviser's credit analysis than is the
case for higher-rated securities. Ratings attempt to evaluate the
safety of the principal and interest payments on a bond, but not the
risk of a decline in its market value. Ratings are also subject to
change and may fail to reflect recent events in a timely manner. The
growth in the market for lower-rated debt securities has paralleled a
long economic expansion. An economic downturn or rise in interest
rates is likely to have a greater negative effect on this market and
on the ability of issuers to repay principal and interest, meet
projected business goals and obtain additional financing than on
higher-rated securities. It may also result in a higher incidence of
default than with higher-rated securities. The market for lower-rated
securities is typically thinner and less active than for higher-rated
securities, resulting in price volatility and limited liquidity.
Adverse publicity and investor perceptions may further decrease the
value and liquidity of lower-rated securities. In addition, because of
their price volatility and limited liquidity, lower-rated securities
may be more difficult to value accurately.
* PREFERRED STOCK. The Bond Fund will be permitted to invest in
preferred stock of U.S. and foreign companies. Preferred stock is an
equity security that entitles the holder to certain preferences over
the common stock of the issuer. Preferred stock is not a debt
12
<PAGE>
instrument and is junior to debt in regard to recoverability in the
case of default by the issuer. Preferred stock is generally callable,
is less liquid than common stock and ordinarily carries limited or no
voting rights.
* CONVERTIBLE DEBT. The Bond Fund will be permitted to invest in
convertible debt obligations of U.S. and foreign companies.
Convertible bonds typically offer lower coupon rates and stated yields
to maturity than nonconvertible bonds. However, a convertible bond
also gives the bondholder an option to exchange the bond for a
specified number of common shares at a specified price or ratio and,
thus, to share in the price appreciation in the common stock. In
general, a convertible security performs more like a stock when the
underlying stock's price is high (because it is assumed that it will
be converted) and more like a bond when the underlying stock's price
is low (because it is assumed that it will mature without being
converted). Most convertible bonds are callable at the option of the
issuer and, if the issuer exercises its right to call the bond,
bondholders typically are given a limited time in which to convert.
Convertible debt obligations are generally less liquid, more difficult
to price and have higher transaction costs than non-convertible bonds.
Furthermore, the value of convertible debt obligations may be affected
by fluctuations in the market value of the underlying common stock.
* MUNICIPAL DEBT. The Bond Fund will be permitted to invest in taxable
municipal debt securities of U.S. and foreign jurisdictions. Municipal
securities are issued to raise money for a variety of public and
private purposes, including general financing for state and local
governments and financing for a specific project or public facility.
Municipal securities may be fully or partially backed by the local
government, by the credit of a private issuer, by the current or
anticipated revenues from a specific project or specific assets, or by
domestic or foreign entities providing credit support such as letters
of credit, guarantees, or insurance. The municipal market is volatile
and can be significantly affected by adverse tax, legislative or
political changes and the financial condition of the issuers and
issuers of municipal securities. Because many municipal securities are
issued to finance similar projects, especially those relating to
education, health care, transportation, and utilities, conditions in
those sectors can also affect the overall municipal market.
* RULE 144A SECURITIES. The Bond Fund will be permitted to invest in
Rule 144A debt securities issued by U.S. and foreign companies. Rule
144A securities are securities issued in private placements that are
subject to resale restrictions and may be resold only to qualified
institutional buyers. The market for Rule 144A securities may be less
liquid than the market for publicly traded debt securities,
particularly during adverse market conditions. Accordingly, the Bond
Fund may be unable to sell such securities at a time or a price that
would otherwise be desirable.
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<PAGE>
* HEDGING. Currently, investment decisions for the Bond Fund are made
relative to a benchmark whose exposure to foreign currency risk is 50%
hedged. With the proposed changes, it is expected that the Bond Fund
will be measured initially against a 100% hedged benchmark. However,
the Bond Fund will be permitted to maintain an exposure to foreign
currencies of up to 50%.
TEXT OF PROPOSED CHANGES
It is proposed that the investment objective and related investment
strategies of the Bond Fund be amended to provide in full as follows (change in
bold):
The Bond Fund seeks total return, from income and long-term growth of
capital, BY INVESTING PRIMARILY IN U.S. DOLLAR-DENOMINATED DEBT SECURITIES,
WITH A SECONDARY EMPHASIS ON NON-U.S. DOLLAR-DENOMINATED DEBT SECURITIES.
VOTE ON PROPOSAL 5
On October 17, 2000, the Board of Directors voted unanimously to approve
the proposed changes to the Bond Fund's investment objective and principal
investment strategies and to recommend that its stockholders approve the changes
at the Special Meeting. The proposed changes require the affirmative vote of a
majority of the shares of the Bond Fund cast at the meeting. Votes with respect
to Proposal 5 will be cast as specified in the Proxy. If no specification is
made in the Proxy, votes represented by Proxy will be cast FOR Proposal 5. An
abstention will have the effect of a vote against Proposal 5. A broker non-vote
will not be counted in favor of or against, but will have no other effect on,
the vote for Proposal 5.
The investment objectives, investment strategies and non-fundamental
investment policies of the Bond Fund may be changed by the Board of Directors
without shareholder approval. Proposal 5 is being submitted to a stockholder
vote due to the nature and extent of the proposed changes. If stockholders
approve Proposal 5, the proposed changes will be implemented upon the
effectiveness of a post-effective amendment to the Company's Form N-1A
registration statement disclosing the changes. If stockholders do not approve
Proposal 5, the Board of Directors will consider what action to take depending
on the circumstances at that time.
14
<PAGE>
AMENDMENT OF
INVESTMENT MANAGEMENT AGREEMENT
PROPOSAL 6
(BOND FUND ONLY)
Only stockholders of the Bond Fund, as of the Record Date, are entitled to
vote on Proposal 6.
PROPOSED CHANGE TO INVESTMENT MANAGEMENT AGREEMENT
Under the current Investment Management Agreement between the Company and
the Adviser, dated October 1, 1993 (the "Management Agreement"), the Adviser is
paid a monthly fee calculated at an annual rate equal to 0.75% of the average
daily net assets of the Bond Fund. In connection with the changes in investment
objective and principal investment strategies of the Bond Fund described in
Proposal 5 above, and since the domestic-oriented bond funds typically charge
lower investment advisory fees than international bond funds, the Bond Fund
proposes to amend the Management Agreement so that the management fee paid to
the Adviser is reduced to an annual rate equal to 0.60% of the Bond Fund's
average daily net assets. Except for the reduction in the management fee, the
amended Investment Management Agreement (the "Amended Management Agreement")
will not differ in any material respect from the Management Agreement.
THE MANAGEMENT AGREEMENT
The Management Agreement provides that, subject to the general supervision
of the Company's Board of Directors, the Adviser is responsible for the overall
management of the Bond Fund's portfolio in accordance with the Bond Fund's
investment objective, policies and restrictions. The Adviser is also responsible
for making investment recommendations as to securities to be acquired, purchased
or sold, for selecting firms to effect the execution of portfolio transactions
and for reviewing the execution of such transactions to ensure their overall
reasonableness. In addition, the Adviser provides certain administration
services to the Bond Fund, including the oversight of the various agents,
records and reports of the Bond Fund.
For the fiscal year ended September 30, 2000, the Bond Fund paid management
fees of $556,934 to the Adviser. Had the proposed reduced annual rate of 0.60%
been in effect over the last fiscal year, the Bond Fund would have paid
management fees of $447,654. The new rate is approximately 20% lower than the
current rate.
Under the Management Agreement, the Bond Fund pays all of its own expenses
(except for those expressly to be paid by the Adviser), including without
limitation the following: (a) all costs and expenses incident to (i) the
registration or exemption of the Company and the Bond Fund's shares under
applicable securities laws, and (ii) the printing and distribution of the
Company's registration statement, prospectuses and any other necessary documents
15
<PAGE>
incident to such registration; (b) charges and expenses of the Bond Fund's
custodians, auditors and bookkeepers; (c) any investment management fees payable
to the Adviser; (d) charges of any transfer agent, dividend agent or registrar
of the Bond Fund; (e) broker's commissions; (f) taxes, including securities
issuance and transfer taxes, and organization fees; (g) costs of engraving or
printing certificates representing the Bond Fund's shares; (h) expenses of
meetings of stockholders and the Board of Directors; (i) expenses of preparing,
printing and mailing proxy statements and reports to stockholders; (j) fees and
travel expenses of Board members and officers of the Company; (k) expenses
incident to any dividend or distribution reinvestment program; (l) charges and
expenses of legal counsel; (m) association dues; (n) interest payable on Bond
Fund borrowings; (o) fees and expenses incurred obtaining any advice from the
U.S. Internal Revenue Service or other taxing authority; (p) costs of
information relating to the pricing and valuation of securities; and (q)
postage.
The Adviser pays certain expenses incurred in the Bond Fund's day-to-day
management, including the costs of office space and other facilities used by the
Adviser, and salaries and expenses of personnel of the Adviser. As an
accommodation to the Bond Fund, from time to time, the Adviser directly pays
certain expenses of the Bond Fund (such as insurance premiums, Directors' fees,
and fees relating to state securities law filings) for which the Adviser is
later reimbursed by the Bond Fund. Disbursements by the Adviser on behalf of the
Bond Fund and their subsequent reimbursement by the Bond Fund are effected only
upon the prior approval of an officer of the Company. For the fiscal year ended
September 30, 2000, the Bond Fund reimbursed the Adviser approximately $49,480.
The Management Agreement was approved by the stockholders of the Bond Fund
on September 30, 1993, in connection with the sale of shares of the Bond Fund to
the general public. The Management Agreement was last continued by the Board of
Directors, including a majority of the Directors who were not parties to the
agreement or "interested persons" of any such party as defined in the Investment
Company Act of 1940 ("Interested Persons"), on December 14, 1999.
The Management Agreement is effective with respect to the Bond Fund until
December 31, 2000 and will continue from year to year thereafter, provided its
continuance is specifically approved at least annually (i) by either the Board
of Directors or by a vote of a Majority of the outstanding voting securities of
the Bond Fund, and (ii) in either event by the vote of a majority of the
Directors of the Company who are not parties to the agreement or Interested
Persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval. The Management Agreement may be terminated with respect
to the Bond Fund at any time, without penalty, upon 60 days' written notice, by
the Board of Directors of the Company or by a vote of a Majority of the
outstanding voting securities of the Bond Fund, or by the Adviser upon not less
than 180 days' written notice to the Company. The Management Agreement
automatically terminates upon its assignment.
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<PAGE>
The Adviser has granted the Company the right to use the designation
"Bailard, Biehl & Kaiser" in its name and in its business. The Adviser has
reserved the right to withdraw its consent to the use of such designation by the
Company under certain conditions and to grant the use of such name to others,
including other investment companies.
DESCRIPTION OF THE ADVISER. The Adviser commenced business as a registered
investment adviser in 1970 and was organized as a California corporation in
1972. The Adviser has been managing international equity portfolios since 1984
and international fixed-income portfolios since 1987. At September 30, 2000, the
Adviser managed total assets of approximately $1.4 billion. The Adviser is a
wholly owned subsidiary of BB&K Holdings, Inc. ("Holdings").
The principal occupation and position with the Adviser of the principal
executive officer and each director of the Adviser are as follows:
Principal Occupation and
Name Position with the Adviser
---- -------------------------
Thomas E. Bailard Chairman of the Board and Chief
Executive Officer (principal
executive officer)
Peter M. Hill Chief Investment Officer and
Director
Burnice E. Sparks, Jr. President and Director
Mr. Bailard owns of record or beneficially 10% or more of the common stock of
Holdings. The address of Messrs. Bailard, Hill and Sparks is 950 Tower Lane,
Suite 1900, Foster City, California.
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<PAGE>
The following table sets forth, as of September 30, 2000, the positions
with the Adviser and the Distributor of each officer and Director of the Company
having such positions:
Positions with the
Name Position with the Company Adviser and the Distributor
---- ------------------------- ---------------------------
Peter M. Hill Chairman of the Board Director and Chief
Investment Officer of the
Adviser; Director of the
Distributor
Burnice E. Sparks, Jr. Director and President Director and President of
the Adviser; Director and
Chief Executive Officer of
the Distributor
Barbara V. Bailey Treasurer Executive Vice President
and Treasurer/Secretary of
the Adviser; Secretary of
the Distributor
Janis M. Horne Secretary and Chief Senior Vice President,
Compliance Officer Chief Compliance Officer
and an Investment Counselor
of the Adviser
Sofi Kyriakidis Assistant Treasurer and Senior Vice President of
Assistant Secretary the Adviser; Treasurer of
the Distributor
RECOMMENDATION OF THE BOARD OF DIRECTORS AND REQUIRED VOTE
The Board of Directors of the Company met in person on September 12, 2000,
and by telephone on October 17, 2000, to review the proposed changes to the Bond
Fund and the Amended Management Agreement. In reviewing the Amended Management
Agreement, the Board considered, among other factors, (a) the proposed changes
to the investment objective, strategies, policies and restrictions of the Bond
Fund, (b) the terms of the Amended Management Agreement, (c) the future
requirements of the Bond Fund for advisory and administrative services, (d) the
quality of the advisory and administrative services rendered, and the investment
results achieved, to date by the Adviser, (e) the services to be performed by
the Distributor, (f) the fees to be paid to the Adviser, as compared to those
paid by other funds and the Adviser's other accounts, (g) the other benefits
(including any soft dollar benefits) to be received by the Adviser, (h) the
expenses and expense ratios of the Bond Fund, (i) the financial condition and
results of the Adviser, and (j) the effects of the proposed changes on the
existing and new stockholders of the Bond Fund.
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<PAGE>
At the October 17, 2000 meeting, the Board of Directors, including those
Directors who are not parties to the Amended Management Agreement, or Interested
Persons of any such party, unanimously approved the Amended Management Agreement
as being in the best interests of the Bond Fund and its stockholders and
recommended that stockholders vote FOR the Proposal. As required by the 1940
Act, the Board of Directors will meet in person prior to the Special Meeting to
confirm its approval of the Amended Management Agreement. The Amended Management
Agreement will be effective until December 31, 2001, and may be continued from
year to year thereafter in accordance with its terms.
Approval of the Amended Management Agreement requires the affirmative vote
of a Majority of the Bond Fund's outstanding shares. Votes with respect to the
Proposal will be cast as specified in the Proxy. If no specification is made in
the Proxy, votes represented by Proxy will be cast FOR the Proposal. Abstentions
and broker non-votes will have the effect of a vote against the Proposal.
If the stockholders of the Bond Fund approve Proposals 5 and 6, the
Management Agreement will terminate and the Amended Management Agreement will
commence upon the effectiveness of a post-effective amendment to the Company's
Form N-1A registration statement disclosing the change. If the stockholders of
the Bond Fund do not approve the Amended Management Agreement, the Management
Agreement will continue and the Board of Directors will consider what further
action, if any, should be taken in the best interests of the stockholders of the
Bond Fund.
AMENDMENT OF FUNDAMENTAL INVESTMENT POLICY WITH RESPECT
TO SECURITIES LENDING
PROPOSAL 7
(EQUITY FUND ONLY)
Only stockholders of the Equity Fund, as of the Record Date, are entitled
to vote on Proposal 7.
Under Fundamental Policy No. 11, neither the Bond Fund nor the Equity Fund
may "[m]ake loans of money or securities to any person or firm, except through
the purchase of debt securities in accordance with each Fund's investment
objectives and policies." The Adviser has recommended that this policy be
amended to permit the Equity Fund to loan its portfolio securities subject to
any restrictions imposed by applicable law and to the adoption of appropriate
procedures by the Board of Directors.
The Equity Fund would engage in securities lending with the primary
objective of increasing its income through fees and through investment of cash
collateral in short-term, interest-bearing obligations. The Fund would do so
only to the extent that it would not lose the tax treatment available to
regulated investment companies. Lending portfolio securities involves the risk
that the borrower may fail to return the securities in a timely manner or at
all, or to provide additional collateral. The Adviser proposes to loan portfolio
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<PAGE>
securities only to broker-dealers and other institutional investors it deems
creditworthy. In addition, the Adviser would require that each loan be secured
by collateral consisting of U.S. Government securities, letters of credit, cash
or cash equivalents maintained daily in an amount at least equal to the current
market value of the securities loaned, that the Fund be able to call the loan at
any time, that the Fund receive any interest or dividends paid and retain any
voting rights with respect to the securities loaned, and that the aggregate
market value of securities loaned not exceed one-third of the total assets of
the Fund.
The 1940 Act requires all funds to adopt a fundamental investment policy
regarding lending and prohibits funds from making loans to persons who control
or are under common control with the fund. The Adviser will not engage in any
securities lending for the Equity Fund until specific policies and procedures
relating to this practice are reviewed and approved by the Board of Directors.
TEXT OF PROPOSED CHANGE
It is proposed that Fundamental Policy No. 11 be amended to provide in full
as follows (change in bold):
[E]ach Fund will not:
11. Make loans of money or securities to any person or firm, except through
the purchase of debt securities in accordance with each Fund's investment
objectives and policies; PROVIDED THAT THE EQUITY FUND MAY LEND ITS
PORTFOLIO SECURITIES SUBJECT TO ANY RESTRICTIONS IMPOSED BY APPLICABLE LAW
AND THE ADOPTION OF PROCEDURES BY THE BOARD OF DIRECTORS.
VOTE ON PROPOSAL 7
On October 17, 2000, the Board of Directors voted unanimously to approve
this proposed change to the Equity Fund's fundamental investment policies and to
recommend that its stockholders approve the change at the Special Meeting. The
proposed change requires the affirmative vote of a Majority of the Equity Fund's
outstanding shares. Votes with respect to Proposal 7 will be cast as specified
in the Proxy. If no specification is made in the Proxy, votes represented by
Proxy will be cast FOR Proposal 7. Abstentions and broker non-votes will have
the effect of a vote against Proposal 7.
If stockholders approve Proposal 7, the proposed change will be implemented
upon the effectiveness of a post-effective amendment to the Company's Form N-1A
registration statement disclosing the change. If stockholders do not approve
Proposal 7, the proposed change will not be implemented.
PRINCIPAL STOCKHOLDERS
So far as is known to the management of the Company, at September 30, 2000,
no stockholder of record held or beneficially owned more than 5% of the shares
of the Equity Fund or the Bond Fund. At such date, shares of the Equity Fund and
the Bond Fund were held by the Directors and the Chief Executive Officer of the
Company as follows:
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<PAGE>
<TABLE>
<CAPTION>
Equity Fund Bond Fund
----------------------------- ----------------------------
Number of Percentage of Number of Percentage of
Name and Address Position Shares Held(1) Shares Held Shares Held(1) Shares Held
---------------- -------- -------------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Peter M. Hill Chairman of the 7,886.359 (2) (2)
950 Tower Lane, Suite 1900 Board and Director
Foster City, CA 94404
Burnice E. Sparks, Jr. Director and 11,002.342 (2) 1,000.891 (2)
950 Tower Lane, Suite 1900 President (Chief
Foster City, CA 94404 Executive Officer)
Shirley L. Clayton Director (2) (2)
122 Campo Bello Lane
Menlo Park, CA 94025
James C. Van Horne Director 6,571.985 (2) (2)
Graduate School of Business
Stanford University
Stanford, CA 94305
Scott F. Wilson Director (2) (2)
Venture Management Associates
540 Cowper Street, Ste. 200
Palo Alto, CA 94301
</TABLE>
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(1) Beneficially owned, with sole voting and investment power.
(2) Less than 1%.
STOCKHOLDER PROPOSALS
It is not presently anticipated that the Company will hold regular meetings
of stockholders and, thus, no anticipated date for the next meeting (or for the
receipt of stockholder proposals for such meeting) can be provided.
OTHER BUSINESS
As of the date of this Proxy Statement, management of the Company is
unaware of any business to come before the meeting other than as set forth in
the Notice of Special Meeting of Stockholders. If any other business is properly
brought before the meeting or any adjournment thereof, all Proxies will be voted
in accordance with the best judgment of the persons voting such Proxies as to
such business.
21
<PAGE>
November 3, 2000
BAILARD, BIEHL & KAISER INTERNATIONAL FUND GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby appoints Barbara V. Bailey, Janis M. Horne, and Sofi
Kyriakidis, and each of them, with full power of substitution, as proxies for
the undersigned, to vote, act and consent with respect to any and all shares of
Common Stock of the Bailard, Biehl & Kaiser International Fund Group, Inc. (the
"Company"), that the undersigned is entitled to vote at the Special Meeting of
Stockholders of the Company to be held at 10:00 a.m. (Pacific Time), on December
14, 2000, and at any continuation or adjournment thereof, with all powers the
undersigned would possess if personally present, upon such business as may
properly come before the meeting, including the following:
ALL STOCKHOLDERS (PROPOSALS 1 AND 2)
1. Election of five Directors.
FOR all of the nominees listed below [ ]
(except as marked to the contrary below):
WITHHOLD AUTHORITY to vote for all of the nominees listed below: [ ]
Peter M. Hill Burnice E. Sparks, Jr. Shirley L. Clayton
James C. Van Horne Scott F. Wilson
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in this space _________________________.)
FOR AGAINST ABSTAIN
--- ------- -------
2. Ratification of PricewaterhouseCoopers [ ] [ ] [ ]
LLP as the Company's independent
accountants for the fiscal year ending
September 30, 2001.
<PAGE>
BOND FUND STOCKHOLDERS ONLY (PROPOSALS 3, 4, 5 AND 6)
FOR AGAINST ABSTAIN
--- ------- -------
3. Elimination of the Fund's fundamental [ ] [ ] [ ]
investment policy restricting
investments in companies with less than
three years of operating history.
4. Elimination of the Fund's fundamental [ ] [ ] [ ]
investment policy prohibiting
investments in companies in whose
securities one or more officers or
directors of the Company have certain
percentage interests.
5. Amendment of the Fund's investment [ ] [ ] [ ]
objective to seek total return, from
income and long-term growth of capital,
by investing primarily in U.S.
dollar-denominated debt securities, with
a secondary emphasis on non-U.S.
dollar-denominated debt securities.
6. Amendment of the Investment Management [ ] [ ] [ ]
Agreement between the Fund and Bailard,
Biehl & Kaiser, Inc., to reduce the
annual management fee paid by the Bond
Fund to 0.60% of average daily net
assets.
<PAGE>
EQUITY FUND STOCKHOLDERS ONLY (PROPOSALS 3, 4 AND 7)
FOR AGAINST ABSTAIN
--- ------- -------
3. Elimination of the Fund's fundamental [ ] [ ] [ ]
investment policy restricting
investments in companies with less than
three years of operating history.
4. Elimination of the Fund's fundamental [ ] [ ] [ ]
investment policy prohibiting
investments in companies in whose
securities one or more officers or
directors of the Company have certain
percentage interests.
7. Amendment of the Funds' fundamental [ ] [ ] [ ]
investment policies to permit the Equity
Fund to lend its portfolio securities,
subject to applicable law and the
adoption of procedures by the Board of
Directors.
<PAGE>
THIS PROXY WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF
DIRECTION, THIS PROXY WILL BE VOTED FOR EACH NOMINEE FOR
DIRECTOR AND FOR PROPOSALS 2, 3, 4, 5, 6 AND 7.
The undersigned hereby acknowledges receipt of (i) the Notice of Special
Meeting of Stockholders and (ii) the accompanying Proxy Statement.
Dated: ______________, 2000 ________________________________________
________________________________________
(Please date and sign exactly as
addressed to you. Joint owners should
each sign. If signing as executor,
administrator, attorney, trustee or
guardian, give title as such. If a
corporation, sign in full corporate name
by authorized officer. If a partnership,
sign in the name of the authorized
person.)
STOCKHOLDERS ARE URGED TO MARK, DATE, SIGN AND RETURN THIS
PROXY PROMPTLY IN THE ENVELOPE PROVIDED. PLEASE DO NOT
FORGET TO DATE THIS PROXY.
