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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-21296
New York, NY 10153
(Address of Principal Executive Offices) (Zip Code)
c/o Baron Select Funds
767 Fifth Avenue, 49th Floor
New York, NY 10153
(Name and Address of Agent for Service)
Date of fiscal year end: December 31
Date of reporting period: June 30, 2013
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17CRF 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 5th Street, NW, Washington, D.C. 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507.
SEC 2569 (5-07)
Baron Select Funds Trust Semi-Annual Report for the period ended June 30, 2013
Baron Partners Fund | Baron Funds® | |||
Baron Focused Growth Fund | ||||
Baron International Growth Fund | ||||
Baron Real Estate Fund | ||||
Baron Emerging Markets Fund | ||||
Baron Energy and Resources Fund | ||||
Baron Global Advantage Fund | ||||
June 30, 2013 | Semi-Annual Financial Report | |||
Baron Partners Fund | |||
Ticker Symbols: | |||
Retail Shares: BPTRX | |||
Institutional Shares: BPTIX | |||
Performance | 2 | ||
Top Ten Holdings | 3 | ||
Sector Breakdown | 3 | ||
Management’s Discussion of Fund Performance | 3 | ||
Baron Focused Growth Fund | |||
Ticker Symbols: | |||
Retail Shares: BFGFX | |||
Institutional Shares: BFGIX | |||
Performance | 4 | ||
Top Ten Holdings | 5 | ||
Sector Breakdown | 5 | ||
Management’s Discussion of Fund Performance | 5 | ||
Baron International Growth Fund | |||
Ticker Symbols: | |||
Retail Shares: BIGFX | |||
Institutional Shares: BINIX | |||
Performance | 6 | ||
Top Ten Holdings | 7 | ||
Sector Breakdown | 7 | ||
Management’s Discussion of Fund Performance | 7 | ||
Baron Real Estate Fund | |||
Retail Shares: BREFX | |||
Institutional Shares: BREIX | |||
Performance | 8 | ||
Top Ten Holdings | 9 | ||
Sector Breakdown | 9 | ||
Management’s Discussion of Fund Performance | 9 | ||
Baron Emerging Markets Fund | |||
Retail Shares: BEXFX | |||
Institutional Shares: BEXIX | |||
Performance | 10 | ||
Top Ten Holdings | 11 | ||
Sector Breakdown | 11 | ||
Management’s Discussion of Fund Performance | 11 | ||
Baron Energy and Resources Fund | |||
Ticker Symbols: | |||
Retail Shares: BENFX | |||
Institutional Shares: BENIX | |||
Performance | 12 | ||
Top Ten Holdings | 13 | ||
Sector Breakdown | 13 | ||
Management’s Discussion of Fund Performance | 13 | ||
Baron Global Advantage Fund | |||
Ticker Symbols: | |||
Retail Shares: BGAFX | |||
Institutional Shares: BGAIX | |||
Performance | 14 | ||
Top Ten Holdings | 15 | ||
Sector Breakdown | 15 | ||
Management’s Discussion of Fund Performance | 15 | ||
Financial Statements | |||
Statements of Net Assets | 16 | ||
Statements of Assets and Liabilities | 26 | ||
Statements of Operations | 28 | ||
Statements of Changes in Net Assets | 30 | ||
Statement of Cash Flows | 33 | ||
Notes to Financial Statements | 34 | ||
Financial Highlights | 42 | ||
Fund Expenses | 49 | ||
Disclosure Regarding the Approval of the Investment Advisory Agreements for each of the Series by the Board of Trustees | 50 | ||
DEAR BARON SELECT FUNDS SHAREHOLDER: In this report you will find unaudited financial statements for Baron Partners Fund, Baron Focused Growth Fund, Baron International Growth Fund, Baron Real Estate Fund, Baron Emerging Markets Fund, Baron Energy and Resources Fund and Baron Global Advantage Fund (the “Funds”) for the six months ended June 30, 2013. The U.S. Securities and Exchange Commission (the “SEC”) requires mutual funds to furnish these statements semi-annually to their shareholders. We hope you find these statements informative and useful. We thank you for choosing to join us as fellow shareholders in Baron Funds. We will continue to work hard to justify your confidence. Sincerely, | |||||
Ronald Baron | Linda S. Martinson | Peggy Wong | |||
Chief Executive Officer and | Chairman, President and | Treasurer and | |||
Chief Investment Officer | Chief Operating Officer | Chief Financial Officer | |||
August 21, 2013 | August 21, 2013 | August 21, 2013 | |||
This Semi-Annual Financial Report is for the Baron Select Funds which currently has seven series: Baron Partners Fund, Baron Focused Growth Fund, Baron International Growth Fund, Baron Real Estate Fund, Baron Emerging Markets Fund, Baron Energy and Resources Fund and Baron Global Advantage Fund. If you are interested in Baron Investment Funds Trust, which contains the Baron Asset Fund, Baron Growth Fund, Baron Small Cap Fund, Baron Opportunity Fund and Baron Fifth Avenue Growth Fund series, please visit the Funds’ website at www.BaronFunds.com or contact us at 1-800-99BARON. A description of the Funds’ proxy voting policies and procedures is available without charge on the Funds’ website at www.BaronFunds.com, or by calling 1-800-99BARON and on the SEC’s website at www.sec.gov. The Funds’ most current proxy voting record, Form N-PX, is also available on the Funds’ website and on the SEC’s website. The Funds file their complete schedules of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at www.sec.gov. The Funds’ Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC; information on the operation of the SEC’s Public Reference Room may be obtained by calling 1-202-551-8090. A copy of the Funds’ Forms N-Q may also be obtained upon request by contacting Baron Funds at 1-800-99BARON. Schedules of portfolio holdings current to the most recent quarter are also available on the Funds’ website. Some of the comments are based on current management expectations and are considered “forward-looking statements.” Actual future results, however, may prove to be different from our expectations. You can identify forward-looking statements by words such as “estimate,” “may,” “expect,” “should,” “could,” “believe,” “plan” and other similar terms. We cannot promise future returns and our opinions are a reflection of our best judgment at the time this report is compiled. The views expressed in this report reflect those of BAMCO, Inc. (“BAMCO” or the “Adviser”) only through the end of the period stated in this report. The views are not intended as recommendations or investment advice to any person reading this report and are subject to change at any time without notice based on market and other conditions. | |||||
Past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate; an investor’s shares, when redeemed, may be worth more or less than their original cost. For more complete information about Baron Funds, including charges and expenses, call or write for a prospectus. Read it carefully before you invest or send money. This report is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of Baron Funds, unless accompanied or preceded by the Funds’ current prospectus. |
Baron Partners Fund (Unaudited) | June 30, 2013 |
COMPARISON OF THE CHANGE IN VALUE OF $10,000 INVESTMENT IN BARON PARTNERS FUND (RETAIL SHARES) IN RELATION TO THE RUSSELL MIDCAP GROWTH INDEX AND THE S&P 500 INDEX | |||||||||||||||||
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2013 |
Since | ||||||||||||||||||
Inception | ||||||||||||||||||
Six | One | Three | Five | Ten | (January 31, | |||||||||||||
Months* | Year | Years | Years | Years | 1992) | |||||||||||||
Baron Partners Fund — Retail Shares1, 2, 3 | 20.78 | % | 32.07 | % | 20.24 | % | 7.07 | % | 12.40 | % | 12.62 | % | ||||||
Baron Partners Fund — Institutional Shares1, 2, 3, 4 | 20.98 | % | 32.44 | % | 20.58 | % | 7.31 | % | 12.52 | % | 12.68 | % | ||||||
Russell Midcap Growth Index1 | 14.70 | % | 22.88 | % | 19.53 | % | 7.61 | % | 9.94 | % | 8.99 | % | ||||||
S&P 500 Index1 | 13.82 | % | 20.60 | % | 18.45 | % | 7.01 | % | 7.30 | % | 8.77 | % |
* | Not annualized. | |
1 | The indexes are unmanaged. The Russell Midcap® Growth Index measures the performance of medium-sized U.S. companies that are classified as growth and the S&P 500 Index measures the performance of 500 widely held large-cap U.S. companies. The indexes and Baron Partners Fund are with dividends, which positively impact the performance results. | |
2 | Reflects the actual fees and expenses that were charged when the Fund was a partnership. The predecessor partnership charged a 20% performance fee after reaching a certain performance benchmark. If the annual returns for the Fund did not reflect the performance fees for the years the predecessor partnership charged a performance fee, returns would be higher. The Fund’s shareholders will not be charged a performance fee. The predecessor partnership’s performance is only for periods before the Fund’s registration statement was effective, which was April 30, 2003. During those periods, the predecessor partnership was not registered under the Investment Company Act of 1940 and was not subject to its requirements or the requirements of the Internal Revenue Code relating to regulated investment companies, which, if it were, might have adversely affected its performance. | |
3 | Past performance is not predictive of future performance. The performance data does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares. The Fund’s transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower. | |
4 | Performance for the Institutional Shares prior to May 29, 2009 is based on the performance of the Retail Shares, which have a distribution fee. The Institutional Shares do not have a distribution fee. If the annual returns prior to May 29, 2009 did not reflect this fee, the returns would be higher. |
2
June 30, 2013 (Unaudited) | Baron Partners Fund |
TOP TEN HOLDINGS AS OF JUNE 30, 2013 | |||
Percent of Total | |||
Investments | |||
ITC Holdings Corp. | 9.2% | ||
Arch Capital Group Ltd. | 8.7% | ||
Hyatt Hotels Corp. | 6.9% | ||
Verisk Analytics, Inc. | 6.6% | ||
Fastenal Co. | 5.7% | ||
FactSet Research Systems, Inc. | 4.8% | ||
Edwards Lifesciences Corp. | 4.5% | ||
Dick’s Sporting Goods, Inc. | 4.5% | ||
The Charles Schwab Corp. | 4.4% | ||
CoStar Group, Inc. | 4.4% | ||
59.7% | |||
SECTOR BREAKDOWN AS OF JUNE 30, 2013† (as a percentage of total investments) | |||
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE | |||
For the six-month period ended June 30, 2013, Baron Partners Fund‡ gained 20.78%, significantly outperforming the Russell Midcap Growth Index, which gained 14.70%. The Fund has also performed well since it converted into an open-end mutual fund on April 30, 2003. In the period since the Fund’s conversion on April 30, 2003 through June 30, 2013, the Fund gained an annualized 13.31% versus an annualized 10.92% for the Russell Midcap Growth Index. The Fund also has meaningfully outperformed the Russell Midcap Growth Index since its inception on January 31, 1992, gaining an annualized 12.62%* compared to an annualized 8.99% for the index. |
Baron Partners Fund invests primarily in U.S. companies of any size with significant long-term growth potential. We believe that our investment process can identify investment opportunities that are attractively priced relative to their future prospects. Baron Partners Fund is non-diversified, so the Fund’s top 10 holdings are expected to comprise a significant percentage of the Fund and the Fund uses leverage, both of which increase risk. |
Strength in corporate fourth quarter earnings propelled several U.S. equity indexes to all-time highs in the first quarter of 2013. Home prices and home construction were on the rise, and automobile sales were rebounding from their recession lows. These positive economic signs helped offset fears over higher taxes and sequestration. Upward movement of U.S. equity markets continued until May 22nd when Federal Reserve (the “Fed”) Chairman Bernanke’s comments suggested that the Fed would begin tapering its bond purchasing program (QE) sooner than most investors anticipated. From May 21st through the end of the quarter, the S&P 500 Index lost about 4%, interest rates spiked, the bond market sold off, and investors pulled record assets out of bond funds. |
We believe that investors overreacted to the Fed’s comments. It is critical to note that Bernanke emphasized the timeline for gradually exiting QE was conditioned upon developments in the economic outlook and that the pace of QE could even go back up if economic conditions were to weaken. In addition, we understand the tapering would be a multi-year process that we expect businesses will be able to take in stride. |
At the sector level, the Fund’s investments in the Financials, Consumer Discretionary, and Information Technology sectors were the largest contributors to performance. |
The largest contributor to Fund performance during the period was ITC Holdings Corp., the nation’s largest independent transmission company. The stock’s 19.8% six-month return represented over 12% of the Fund’s total six-month return. The change in interest rates during the period was one of the factors that led to ITC’s strong performance. Due to its corporate structure and growth strategy, ITC pays out less in the form of dividends relative to other regulated utilities. This makes the company less interest rate sensitive. As a result, we expect ITC to outperform regulated utilities when interest rates rise as they did in the latter part of the second quarter. Other factors contributing to performance were its superior growth prospects relative to other regulated utilities, multiple expansion, and a substantial reduction in the short interest. |
While C.H. Robinson Worldwide, Inc. was the largest detractor during the period, its impact on the portfolio was minor. Edwards Lifesciences Corp. was the only other security in the portfolio that detracted from performance year-to-date. We seek to establish long positions in securities that, in our opinion, have favorable price-to-value characteristics based on our assessment of their prospects for future growth and profitability. |
† | Industry sector levels are provided from the Global Industry Classification Standard (“GICS”), developed and exclusively owned by MSCI, Inc. and Standard & Poor’s Financial Services LLC, unless otherwise stated that they have been reclassified or classified by the Adviser. All GICS data is provided “as is” with no warranties. | |
‡ | Performance information reflects results of the Retail Shares. | |
* | Please see Footnote 2 on page 2. |
3
Baron Focused Growth Fund (Unaudited) | June 30, 2013 |
COMPARISON OF THE CHANGE IN VALUE OF $10,000 INVESTMENT IN BARON FOCUSED GROWTH FUND (RETAIL SHARES) IN RELATION TO THE RUSSELL 2500 GROWTH INDEX AND THE S&P 500 INDEX | |||||||||||||||||
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2013 |
Since | ||||||||||||||||||
Inception | ||||||||||||||||||
Six | One | Three | Five | Ten | (May 31, | |||||||||||||
Months* | Year | Years | Years | Years | 1996) | |||||||||||||
Baron Focused Growth Fund — Retail Shares1, 2, 3 | 8.61 | % | 24.42 | % | 16.12 | % | 6.82 | % | 13.42 | % | 11.47 | % | ||||||
Baron Focused Growth Fund — Institutional Shares1, 2, 3, 4 | 8.81 | % | 24.62 | % | 16.40 | % | 7.03 | % | 13.53 | % | 11.53 | % | ||||||
Russell 2500 Growth Index1 | 15.82 | % | 24.03 | % | 20.22 | % | 8.94 | % | 10.27 | % | 6.63 | % | ||||||
S&P 500 Index1 | 13.82 | % | 20.60 | % | 18.45 | % | 7.01 | % | 7.30 | % | 7.20 | % |
* | Not annualized. | |
1 | The indexes are unmanaged. The Russell 2500TM Growth Index measures the performance of small to medium-sized companies that are classified as growth and the S&P 500 Index of 500 widely held large-cap U.S. companies. The indexes and Baron Focused Growth Fund are with dividends, which positively impact the performance results. | |
2 | Reflects the actual fees and expenses that were charged when the Fund was a partnership. The predecessor partnership charged a 15% performance fee through 2003 after reaching a certain performance benchmark. If the annual returns for the Fund did not reflect the performance fees for the years the predecessor partnership charged a performance fee, the returns would be higher. The Fund’s shareholders will not be charged a performance fee. The predecessor partnership’s performance is only for periods before the Fund’s registration statement was effective, which was June 30, 2008. During those periods, the predecessor partnership was not registered under the Investment Company Act of 1940 and was not subject to its requirements or the requirements of the Internal Revenue Code relating to regulated investment companies, which, if it were, might have adversely affected its performance. | |
3 | Past performance is not predictive of future performance. The performance data does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares. The Adviser has reimbursed certain Fund expenses (by contract as long as BAMCO, Inc. is the Adviser to the Fund) and the Fund’s transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower. | |
4 | Performance for the Institutional Shares prior to May 29, 2009 is based on the performance of the Retail Shares, which have a distribution fee. The Institutional Shares do not have a distribution fee. If the annual returns prior to May 29, 2009 did not reflect this fee, the returns would be higher. |
4
June 30, 2013 (Unaudited) | Baron Focused Growth Fund |
TOP TEN HOLDINGS AS OF JUNE 30, 2013 | |||
Percent of | |||
Net Assets | |||
Hyatt Hotels Corp. | 6.5% | ||
FactSet Research Systems, Inc. | 6.2% | ||
ITC Holdings Corp. | 5.8% | ||
Genesee & Wyoming, Inc. | 5.7% | ||
Vail Resorts, Inc. | 5.6% | ||
Colfax Corp. | 5.5% | ||
Verisk Analytics, Inc. | 5.1% | ||
CarMax, Inc. | 5.0% | ||
Dick’s Sporting Goods, Inc. | 4.0% | ||
Choice Hotels International, Inc. | 4.0% | ||
53.4% | |||
SECTOR BREAKDOWN AS OF JUNE 30, 2013† (as a percentage of net assets) | |||
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE | |||
For the six-month period ended June 30, 2013, Baron Focused Growth Fund‡ gained 8.61% while the Russell 2500 Growth Index rose 15.82%. Since its inception on May 31, 1996, through June 30, 2013, the Fund has significantly outperformed the Russell 2500 Growth Index, gaining an annualized 11.47%* compared to an annualized 6.63% for the index. |
The Fund invests in a non-diversified portfolio of companies that we believe are well capitalized, and have exceptional management, significant growth potential, and sustainable barriers to competition. The Fund is non-diversified, which is a riskier investment strategy. |
Strength in corporate fourth quarter earnings propelled several U.S. equity indexes to all-time highs in the first quarter of 2013. Home prices and home construction were on the rise, and automobile sales were rebounding from their recession lows. These positive economic signs helped offset fears over higher taxes and sequestration. Upward movement of U.S. equity markets continued until May 22nd when Federal Reserve (the “Fed”) Chairman Bernanke’s comments suggested that the Fed would begin tapering its bond purchasing program (QE) sooner than most investors anticipated. From May 21st through the end of the quarter, the S&P 500 Index lost about 4%, interest rates spiked, the bond market sold off, and investors pulled record assets out of bond funds. |
We believe that investors overreacted to the Fed’s comments. It is critical to note that Bernanke emphasized the timeline for gradually exiting QE was conditioned upon developments in the economic outlook and that the pace of QE could even go back up if economic conditions were to weaken. In addition, we understand the tapering would be a multi-year process that we expect businesses will be able to take in stride. |
During the period, the Fund’s investments in the Industrials, Consumer Discretionary, and Financials sectors were the strongest contributors to performance, while the Fund’s investments in the Materials sector were the largest detractors. |
The greatest contributor to performance during the period was diversified global industrial manufacturing and engineering company, Colfax Corp. Over the past six months, the stock has benefited from multiple expansion, signs that the company will achieve significant synergies following its acquisition of Charter International plc, and execution of a secondary offering, which signals additional acquisitions may be on the horizon. |
The biggest detractor from Fund performance for the period was Agrinos AS, a green technology company with a unique microbial product that enhances crop yields. Shares of Agrinos declined 58% during the period due to a delay in receivables collection that led to a change in accounting policy, with no revenue booked for Mexico in the fourth quarter. We continue to hold Agrinos because we believe it has disruptive and exciting long-term growth prospects. We seek to establish positions in small and mid-sized businesses that, in our opinion, have favorable price-to-value characteristics based on our assessment of prospects for future growth and profitability. |
† | Industry sector levels are provided from the Global Industry Classification Standard (“GICS”), developed and exclusively owned by MSCI, Inc. and Standard & Poor’s Financial Services LLC, unless otherwise stated that they have been reclassified or classified by the Adviser. All GICS data is provided “as is” with no warranties. | |
‡ | Performance information reflects results of the Retail Shares. | |
* | Please see Footnote 2 on page 4. |
5
Baron International Growth Fund (Unaudited) | June 30, 2013 |
COMPARISON OF THE CHANGE IN VALUE OF $10,000 INVESTMENT IN BARON INTERNATIONAL GROWTH FUND† (RETAIL SHARES) IN RELATION TO THE MSCI ACWI EX USA IMI GROWTH INDEX AND THE MSCI ACWI EX USA INDEX | |||||||||||||||||
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2013 |
Since | ||||||||||||
Inception | ||||||||||||
Six | One | Three | (December 31, | |||||||||
Months* | Year | Years | 2008) | |||||||||
Baron International Growth Fund — Retail Shares1, 2 | 2.89 | % | 12.04 | % | 9.92 | % | 14.28 | % | ||||
Baron International Growth Fund — Institutional Shares1, 2, 3 | 2.94 | % | 12.32 | % | 10.19 | % | 14.54 | % | ||||
MSCI ACWI ex USA IMI Growth Index1 | 1.35 | % | 14.31 | % | 8.77 | % | 11.74 | % | ||||
MSCI ACWI ex USA Index1 | –0.04 | % | 13.63 | % | 7.99 | % | 10.77 | % |
* | Not annualized. | |
† | If the Fund’s historical performance was impacted by gains from IPOs and/or secondary offerings, there is no guarantee that these results can be repeated or that the Fund’s level of participation in IPOs and secondary offerings will be the same in the future. | |
1 | The MSCI ACWI ex USA indexes cited are unmanaged, free float-adjusted market capitalization weighted indexes reflected in US dollars. The MSCI ACWI ex USA IMI Growth Index Net USD measures the equity market performance of large-, mid- and small-cap growth securities across developed and emerging markets, excluding the United States. The MSCI ACWI ex USA Index Net USD measures the equity market performance of large and mid-cap securities across developed and emerging markets, excluding the United States. The indexes and Baron International Growth Fund include reinvestment of dividends, net of foreign withholding taxes, which positively impact the performance results. | |
2 | Past performance is not predictive of future performance. The performance data does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares. The Adviser has reimbursed certain Fund expenses (by contract as long as BAMCO, Inc. is the Adviser to the Fund) and the Fund’s transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower. | |
3 | Performance for the Institutional Shares prior to May 29, 2009 is based on the performance of the Retail Shares, which have a distribution fee. The Institutional Shares do not have a distribution fee. If the annual returns prior to May 29, 2009 did not reflect this fee, the returns would be higher. |
6
June 30, 2013 (Unaudited) | Baron International Growth Fund |
TOP TEN HOLDINGS AS OF JUNE 30, 2013 | |||
Percent of | |||
Net Assets | |||
Ryanair Holdings plc | 3.8% | ||
Eurofins Scientific SE | 3.2% | ||
Softbank Corp. | 3.0% | ||
SodaStream International Ltd. | 2.7% | ||
Sina Corporation | 2.6% | ||
Mitsui Fudosan Co. Ltd. | 2.5% | ||
Compagnie Financière Richemont SA | 2.2% | ||
FANUC Corp. | 2.1% | ||
Agilent Technologies, Inc. | 2.1% | ||
Kakaku.com, Inc. | 2.1% | ||
26.3% | |||
SECTOR BREAKDOWN AS OF JUNE 30, 2013† (as a percentage of net assets) | |||
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE | |||
For the six-month period ended June 30, 2013, Baron International Growth Fund‡ gained 2.89%, outperforming the MSCI ACWI ex USA IMI Growth Index, which gained 1.35%. Baron International Growth Fund is a diversified fund that invests for the long term primarily in securities of non-U.S. growth companies. The Fund expects to diversify among several developed countries and developing countries throughout the world, although the Fund’s total exposure to developing countries will not exceed 30%. Even though the Fund and its benchmark index did not advance significantly over the past six months, much has happened and the Fund’s positioning and performance |
reflect these events. Europe, for example, made progress towards fiscal and banking union and the European Union’s (EU’s) financial system stabilized. We expect the major unresolved policy decisions to remain in a holding pattern until after the German elections in late September. |
Notwithstanding a significant correction beginning in late May, Japan remained the top performing major equity market in the world year-to-date. Prime Minister Abe’s radical shift in policy should show increased signs of success in coming months, and we expect more specifics on important reforms subsequent to parliamentary elections in July. In our opinion, the Bank of Japan is now by far the most aggressive central bank in the world, and there are increasing signs of improving consumer confidence and industrial activity. We are invested in several Japanese companies positioned to benefit from this phenomenon and continue our research in this area. |
It is also interesting to note the unusual divergence between global equity and commodity prices. This trend, if sustained, signals a multi-year downturn in the global commodity cycle, which would have lasting implications for future value creation. Such an outcome would favor commodity consuming countries (and industries), such as the U.S., China, India and Japan, while creating headwinds for exporters such as Australia, Brazil/Latin America and Russia. We believe the shift in China from an investment-led to a consumption-led economy supports such a phenomenon. We further believe the Fund is well-positioned over the long term for such a scenario. |
As fundamentals and policy continue to evolve across many countries and markets, we observe capital flows and wealth moving from the developing world to the developed world and from commodity producers to commodity consumers. As a consequence of these developments, we have increased exposure to several companies and countries which we view as beneficiaries, and likewise have reduced our holdings in companies where we perceive increased risk. |
Most recently, concerns over the likelihood and timing of the Federal Reserve (the “Fed”) tapering its government bond purchases emerged with sudden impact to equity, bond, currency, and commodity markets worldwide. While we recognize that tapering is not an explicit monetary tightening, we believe this recent signal is meaningful, suggesting that the point of maximum credit easing has likely passed. The good news is that the Fed would not send such a signal without confidence in the improving U.S. economy; nevertheless, we believe we are entering a period of increased global volatility. |
With this context, it is not surprising that the Fund’s investments in Japan contributed the most to performance over the period, and that its investments in emerging market countries modestly detracted. On a sector basis, the largest contributors to performance were in the Consumer Discretionary, Health Care, and Telecommunications Services sectors, while investments in Materials and Energy detracted the most. Ryanair Holdings plc, Europe’s ultra-low cost airline, was the Fund’s largest contributor to returns for the period. Shares of Ryanair increased just over 50% during the period, after reporting financial results, a large aircraft order, and a share buyback program. The Fund’s largest detractor during the period was Financial Technologies Ltd. Financial Technologies operates financial exchanges and owns 26% of MCX, the largest commodity exchange in India. In March, India’s government announced a new tax on commodity transactions to take effect in June. This news has led to uncertainty about the effect on commodity-related trading volumes and, given Financial Technologies’ interest in MCX, the stock sold off. We reiterate that in the longer term, we think the developing world, particularly the developing world consumer, remains the primary engine of global growth. |
† | Industry sector levels are provided from the Global Industry Classification Standard (“GICS”), developed and exclusively owned by MSCI, Inc. and Standard & Poor’s Financial Services LLC, unless otherwise stated that they have been reclassified or classified by the Adviser. All GICS data is provided “as is” with no warranties. | |
‡ | Performance information reflects results of the Retail Shares. |
7
Baron Real Estate Fund (Unaudited) | June 30, 2013 |
COMPARISON OF THE CHANGE IN VALUE OF $10,000 INVESTMENT IN BARON REAL ESTATE FUND (RETAIL SHARES) IN RELATION TO THE MSCI USA IMI EXTENDED REAL ESTATE INDEX AND THE S&P 500 INDEX | |||||||||||||||||
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2013 |
Since | ||||||||||||
Inception | ||||||||||||
Six | One | Three | (December 31, | |||||||||
Months* | Year | Years | 2009) | |||||||||
Baron Real Estate Fund — Retail Shares1, 2 | 9.36 | % | 32.35 | % | 26.39 | % | 21.67 | % | ||||
Baron Real Estate Fund — Institutional Shares1, 2 | 9.52 | % | 32.63 | % | 26.70 | % | 21.96 | % | ||||
MSCI USA IMI Extended Real Estate Index1 | 9.43 | % | 21.20 | % | 19.18 | % | 16.28 | % | ||||
S&P 500 Index1 | 13.82 | % | 20.60 | % | 18.45 | % | 13.37 | % |
* | Not annualized. | |
1 | The MSCI USA IMI Extended Real Estate Index is a custom index calculated by MSCI for, and as requested by, BAMCO, Inc. The index includes real estate and real estate-related GICS classification securities. MSCI makes no express or implied warranties or representation and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indexes or any securities or financial products. This report is not approved, reviewed or produced by MSCI. The S&P 500 Index measures the performance of 500 widely held large-cap U.S. companies. The indexes and Baron Real Estate Fund are with dividends,which positively impact the performance results. | |
2 | Past performance is not predictive of future performance. The performance data does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares. The Adviser has reimbursed certain Fund expenses (by contract as long as BAMCO, Inc. is the Adviser to the Fund) and the Fund’s transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower. |
8
June 30, 2013 (Unaudited) | Baron Real Estate Fund |
Quantitative easing and potential lack of it had a significant impact on most real estate-related equities during the period. The broad stock market, including real estate-related assets, performed strongly in the first quarter, buoyed by a combination of aggressive interventionist policies of the world’s central banks, the continuation of positive economic performance, most notably in the U.S., and the perceived lower risk of significant sovereign systematic risks. Many equities, and particularly real estate-related stocks, corrected in the second quarter mostly due, in our opinion, to the sharp increase in interest rates from historically low levels and concerns that higher borrowing costs would impact real estate more adversely than other industry groups. In contrast, we remain optimistic. We believe the key ingredients remain in place for both commercial and residential real estate to continue to perform well. The ingredients include rising demand such as increases in occupancy and new home sales, low construction activity, improving credit availability, and still extraordinarily low interest rates. |
We continue to advocate a broad and balanced approach to investing in real estate. During the period, we favored four real estate categories: hotels & leisure, residential housing, real estate services, and casino and gaming operators. |
We believe our hotel & leisure investments are well-positioned due to their attractive valuations, low supply forecasts, and solid demand expectations. It was our view that all of our hotel investments traded at discounts to their intrinsic value, so during the period we added to all of our hotel investments. |
We continue to believe that the most notable development in real estate is the rebound in the U.S. housing market. Continued increases in home sales and prices, attractive mortgage rates, improving credit conditions, and modest construction activity support our positive stance. During the period, we increased our investments in building products/services companies and senior housing operators, while decreasing slightly our investments in homebuilders and land developers. |
We increased the Fund’s real estate services investments in the second quarter as we believe they have superior and more open-ended growth potential and more attractive valuations than most REITs. |
It is also our view that our casino & gaming investments should perform well when economic growth improves, and we believe many of our investments have significant embedded real estate value not currently reflected in their share prices. We continue to limit our non-hotel REIT exposure. We believe more favorable valuation and growth prospects exist in most other real estate categories. Further, we believe that REITs may be more vulnerable to a rising interest rate environment in the next few years than many other real estate-related categories. We believe the Fund’s flexibility to emphasize and/or deemphasize certain real estate categories is a competitive advantage that we hope leads to strong performance for the long term. Over the past six months, investments in Consumer Discretionary, Financials and Materials contributed the most to performance, representing approximately 80% of the Fund’s total return during the period. Our investments in the IT sector detracted slightly. CaesarStone Sdot-Yam Ltd. was the Fund’s largest contributor during the period. CaesarStone is a global manufacturer of quartz surfaces for kitchens and bathrooms. Strong performance was driven by steady earnings growth, as quartz has taken market share from granite and marble countertop materials. Ply Gem Holdings, Inc., whose IPO was in May was the Fund’s largest detractor during the period. Ply Gem is a leading manufacturer of exterior building products in North America, including vinyl and aluminum siding, windows, and patio doors. Performance was driven by concerns that rising interest rates would hurt the U.S. housing recovery. We believe cash flow can more than double as U.S. construction activity returns to normal levels. We seek to establish positions in real estate and real estate-related companies that we believe have exceptional management, sustainable competitive advantages, and compelling valuations. |
† | Industry sector levels are provided from the Global Industry Classification Standard (“GICS”), developed and exclusively owned by MSCI, Inc. and Standard & Poor’s Financial Services LLC, unless otherwise stated that they have been reclassified or classified by the Adviser. All GICS data is provided “as is” with no warranties. | |
‡ | Performance information reflects results of the Retail Shares. |
9
Baron Emerging Markets Fund (Unaudited) | June 30, 2013 |
COMPARISON OF THE CHANGE IN VALUE OF $10,000 INVESTMENT IN BARON EMERGING MARKETS FUND (RETAIL SHARES) IN RELATION TO THE MSCI EM IMI GROWTH INDEX AND THE MSCI EM IMI INDEX | |||||||||||||||||
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2013 |
Since | |||||||||
Inception | |||||||||
Six | One | (December 31, | |||||||
Months* | Year | 2010) | |||||||
Baron Emerging Markets Fund — Retail Shares1, 2 | 0.60 | % | 15.75 | % | 0.97 | % | |||
Baron Emerging Markets Fund — Institutional Shares1, 2 | 0.70 | % | 15.97 | % | 1.18 | % | |||
MSCI EM IMI Growth Index1 | –6.69 | % | 7.44 | % | –4.10 | % | |||
MSCI EM IMI Index1 | –8.89 | % | 3.66 | % | –5.40 | % |
* | Not annualized. | |
1 | The MSCI EM (Emerging Markets) IMI indexes cited are unmanaged, free float-adjusted market capitalization weighted indexes reflected in US dollars. The MSCI EM (Emerging Markets) IMI Growth Index Net USD and the MSCI EM (Emerging Markets) IMI Index Net USD are designed to measure equity market performance of large-, mid- and small-cap securities in the emerging markets. The MSCI EM (Emerging Markets) IMI Growth Index Net USD screens for growth-style securities. The indexes and Baron Emerging Markets Fund include reinvestment of dividends, net of foreign withholding taxes, which positively impact the performance results. | |
2 | Past performance is not predictive of future performance. The performance data does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares. The Adviser has reimbursed certain Fund expenses (by contract as long as BAMCO, Inc. is the Adviser to the Fund) and the Fund’s transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent without which performance would have been lower. |
10
June 30, 2013 (Unaudited) | Baron Emerging Markets Fund |
Economic activity and government policies in China have a significant impact on global capital markets. Weakness in China’s growth expectations, its stock market, and global commodity prices is being driven partially by the new leadership’s resolve to do the right thing; this suggests tough medicine in the near term, as reforms include vigilance against corruption, a slowdown in credit growth, controls on shadow financing, and increased flexibility of interest rate and currency movements. We believe this is a necessary and favorable adjustment that presents several potential new investible themes. While risks remain, we continue to hold several Chinese investments, many of which have performed well this year. |
While aggressive quantitative easing (QE) and a weaker yen are positives for Japan, the success of this policy will hinder the competitiveness of many neighboring Asian countries and businesses. Recently, concerns over the likelihood and timing of the U.S. Federal Reserve tapering its government bond purchases emerged with sudden impact to markets worldwide. A consequence of QE-driven excess liquidity and momentum has been, in our opinion, that emerging market and high yield bonds likely became overvalued. The recent selloff of these securities was swift and severe. |
Another meaningful development that impacted the Fund occurred in India. India’s finance minister disappointed market expectations for business-friendly fundamental reforms in unveiling a populist-leaning fiscal budget, leading to a complete reversal of the stock market’s fourth quarter gains. |
We note the unusual divergence between global equity and commodity prices. This trend, if sustained, signals a multi-year downturn in the global commodity cycle, which would have lasting implications for future value creation. Such an outcome would favor commodity consuming countries (and industries), such as the U.S., China, India, and Japan, while creating headwinds for exporters such as Australia, Brazil/Latin America, and Russia. |
As fundamentals and policy continue to evolve across many countries and markets, we observe capital flows and wealth moving from the developing world to the developed world and from commodity producers to commodity consumers. As a consequence of these developments, we have increased exposure to several companies and countries which we view as beneficiaries and likewise have reduced our holdings in companies where we perceive increased risk. |
During the period, the Fund’s investments in Asia Pacific ex-Japan contributed the most to performance over the period, while its investments in Latin America and India detracted the most. On a sector basis, the largest contributors to performance were in the Consumer Staples, Consumer Discretionary, and Health Care sectors, while investments in Materials and Energy detracted the most. Biostime International Holdings Ltd. was the largest single contributor to performance during the period. Based in China, Biostime produces baby food, and its primary product is infant formula. Biostime’s 53% appreciation in the first half can be attributed to its strong brand and to its ability to capitalize on surging sales of infant formula in China and to grow market share in its key markets. The Fund’s largest detractor during the period was Financial Technologies Ltd. Financial technologies operates financial exchanges and owns 26% of MCX, the largest commodity exchange in India. In March, India’s government announced a new tax on commodity transactions to take effect in June. This news has led to uncertainty about the effect on commodity-related trading volumes and, given Financial Technologies interest in MCX, the stock sold off. We reiterate that in the longer term, we think the developing world, particularly the developing world consumer, remains the primary engine of global growth. |
† | Industry sector levels are provided from the Global Industry Classification Standard (“GICS”), developed and exclusively owned by MSCI, Inc. and Standard & Poor’s Financial Services LLC, unless otherwise stated that they have been reclassified or classified by the Adviser. All GICS data is provided “as is” with no warranties. | |
‡ | Performance information reflects results of the Retail Shares. |
11
Baron Energy and Resources Fund (Unaudited) | June 30, 2013 |
COMPARISON OF THE CHANGE IN VALUE OF $10,000 INVESTMENT IN BARON ENERGY AND RESOURCES FUND (RETAIL SHARES) IN RELATION TO THE S&P NORTH AMERICAN NATURAL RESOURCES SECTOR INDEX AND THE S&P 500 INDEX | |||||||||||||||||
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED JUNE 30, 2013 |
Since | |||||||||
Inception | |||||||||
Six | One | (December 31, | |||||||
Months* | Year | 2011) | |||||||
Baron Energy and Resources Fund — Retail Shares1, 2 | 5.81 | % | 14.93 | % | 0.07 | % | |||
Baron Energy and Resources Fund — Institutional Shares1, 2 | 5.91 | % | 15.14 | % | 0.27 | % | |||
S&P North American Natural Resources Sector Index1 | 1.87 | % | 10.62 | % | 2.72 | % | |||
S&P 500 Index1 | 13.82 | % | 20.60 | % | 20.36 | % |
* | Not annualized. | |
1 | The indexes are unmanaged. The S&P 500 North American Natural Resources Sector Index measures the performance of U.S.-traded natural resources-related stocks. The S&P 500 Index measures the performance of 500 widely held large-cap U.S. companies. The indexes and Baron Energy and Resources Fund are with dividends, which positively impact the performance results. | |
2 | Past performance is not predictive of future performance. The performance data does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares. The Adviser has reimbursed certain Fund expenses (by contract as long as BAMCO, Inc. is the Adviser to the Fund) and the Fund’s transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower. |
12
June 30, 2013 (Unaudited) | Baron Energy and Resources Fund |
and resources industries have been weak, such as mineral extraction, international exploration & production, oil services, and industrials, competitively advantaged businesses held up better than average. MLP/Midstream-related equities performed well in the first quarter but gave up some gains when interest rates spiked toward the end of the second. Nonetheless, the Fund benefited from several of its MLP-related investments. |
The Fund outperformed as we continued to focus on companies that we believe are well-positioned to benefit from the three key trends that we think will drive long-term growth in the industry: 1) the development of unconventional oil & gas resources from shales and tight sands; 2) the increasing global exploration & development activity in deeper water; and 3) the need to dramatically enhance, upgrade, and expand the industry’s midstream and transportation capacity for oil & gas in North America and around the world. |
When we look at the development of unconventional resources, we see multiple opportunities to invest in both exploration & production companies and oilfield service & equipment stocks as growing production from developing plays like the Bakken in North Dakota, the Eagle Ford in South Texas, and multiple formations in the Permian Basin drive cash flow and profit growth over the next several years. |
Despite the setback that the industry experienced with the BP oil spill three years ago, the deepwater offshore industry has rebounded and is poised for significant growth over the next three to five years. Many businesses stand to benefit from a combination of strong exploration success, improving technology for accessing these resources, and increased availability of the necessary equipment. |
One of the things that we believe differentiates Baron Energy and Resources Fund from other diversified energy and resource funds is its large exposure to midstream and MLP businesses. The need for new infrastructure to process and transport oil & gas from the many new unconventional sources, along with growing global trade in liquified natural gas and oil-related products, is spurring significant growth opportunities for companies that can fill these needs. We see this as a long-term trend that will provide stable and visible growth, and we also believe that our investments in these sectors help to balance some of the risk in the rest of the portfolio. One of the Fund’s MLP investments, Tesoro Logistics LP, was the largest contributor to Fund performance during the period. Tesoro is a fee-based, growth-oriented publicly traded MLP formed by Tesoro Corporation in 2011 to own, operate, develop, and acquire crude oil and refined products logistics assets. The company outperformed during the period as management continued to execute on growth projects such as buying a pipeline asset from Chevron and refining assets from BP on the west coast. The largest detractor over the same time frame was resource investment Agrinos AS. Agrinos, a green technology company with a unique microbial product that enhances crop yields, declined over 50% during the period. Performance was weak, particularly in the first three months of the year, because a delay in receivables collection led to a change in accounting policy, with no revenue booked for Mexico in the fourth quarter. We continue to hold Agrinos because we believe it has disruptive technology and exciting long-term growth prospects. We are confident in the long-term growth opportunities within Energy and think the portfolio is well-positioned given our assessment of commodity prices, economic factors, and valuations. |
† | Industry sector levels are provided from the Global Industry Classification Standard (“GICS”), developed and exclusively owned by MSCI, Inc. and Standard & Poor’s Financial Services LLC, unless otherwise stated that they have been reclassified or classified by the Adviser. All GICS data is provided “as is” with no warranties. | |
‡ | Performance information reflects results of the Retail Shares. |
13
Baron Global Advantage Fund (Unaudited) | June 30, 2013 |
COMPARISON OF THE CHANGE IN VALUE OF $10,000 INVESTMENT IN BARON GLOBAL ADVANTAGE FUND† (RETAIL SHARES) IN RELATION TO THE MSCI ACWI GROWTH INDEX AND THE MSCI ACWI INDEX | |||||||||||||||||
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED JUNE 30, 2013 |
Since | |||||||||
Inception | |||||||||
Six | One | (April 30, | |||||||
Months* | Year | 2012) | |||||||
Baron Global Advantage Fund — Retail Shares1, 2 | 2.31 | % | 16.14 | % | 5.55 | % | |||
Baron Global Advantage Fund — Institutional Shares1, 2 | 2.50 | % | 16.47 | % | 5.80 | % | |||
MSCI ACWI Growth Index1 | 5.51 | % | 15.40 | % | 7.85 | % | |||
MSCI ACWI Index1 | 6.05 | % | 16.57 | % | 9.66 | % |
* | Not annualized. | |
† | If the Fund’s historical performance was impacted by gains from IPOs and/or secondary offerings, there is no guarantee that these results can be repeated or that the Fund’s level of participation in IPOs and secondary offerings will be the same in the future. | |
1 | The MSCI ACWI indexes cited are unmanaged, free float-adjusted market capitalization weighted indexes reflected in US dollars. The MSCI ACWI Growth Index Net USD measures the equity market performance of large- and mid-cap growth securities across developed and emerging markets. The MSCI ACWI Index Net USD measures the equity market performance of large- and mid-cap securities across developed and emerging markets. The indexes and the Baron Global Advantage Fund include reinvestment of dividends, net of foreign withholding taxes, which positively impact the performance results. | |
2 | Past performance is not predictive of future performance. The performance data does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares. The Adviser has reimbursed certain Fund expenses (by contract as long as BAMCO, Inc. is the Adviser to the Fund) and the Fund’s transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower. |
14
June 30, 2013 (Unaudited) | Baron Global Advantage Fund |
investment. Sector weights tend to be an outcome of the portfolio construction process and do not indicate a “view,” positive or negative. |
Concerns over the likelihood and timing of the Federal Reserve (the “Fed”) tapering its government bond purchases emerged at the end of the period with sudden impact to equity, bond, currency, and commodity markets worldwide. While we recognize that tapering is not an explicit monetary tightening, we believe this recent signal is meaningful, suggesting that the point of maximum credit easing has likely passed. The good news is that the Fed would not send such a signal without confidence in the improving U.S. economy; nevertheless, we believe we are entering a period of increased global volatility. |
Over the past six months, Europe has made progress towards fiscal and banking union and the European Union’s (EU’s) financial system stabilized. Notwithstanding a significant correction beginning in late May, Japan remained the top performing major equity market in the world year-to-date. While policy shifts have benefited Japanese equities, they also represent a loss of export competitiveness for many neighboring Asian companies, particularly in a relatively slow growth global economy. We believe recent events in Japan are at least partially responsible for the relative weakness in certain developing market equities. |
It is also interesting to note the unusual divergence between global equity and commodity prices. This trend favors commodity consuming countries (and industries), such as the U.S., China, India and Japan, while creating headwinds for exporters such as Australia, Brazil/Latin America and Russia. |
With this backdrop, it is understandable that the Fund’s North American investments contributed the most to performance during the period, while its investments in Latin America and Asia Pacific ex-Japan detracted. Part of the Fund’s lagging performance can also be explained by not having any exposure to Japan. On a sector basis, the Fund’s investments in the Consumer Discretionary, Energy, and Health Care sectors contributed the most to Fund performance. Partially offsetting these top contributing sectors were the Fund’s investments in Financials, Materials, and Telecommunication Services. The Fund’s largest single contributor and detractor were both Internet software and services businesses. Google, Inc., the largest search and online display advertising company in the world, was the Fund’s largest contributor to performance during the period. Shares of Google were up 24.1% year-to-date based on its smooth transition to mobile advertising. We believe the shift to mobile by consumers will ultimately be positive for Google, and the company will have the ability to lower its operating expenses. Google is also being rewarded by investors for YouTube’s success as an advertising platform, and early investments it is making in products like Google Glass. Velti plc, also a global mobile marketing company, was the largest detractor from performance during the period. Shares of Velti declined sharply in the first quarter as a result of missing fourth quarter expectations and reducing its 2013 outlook. While the company is focused on improving free cash flow generation in 2013, we believe it will take time before the company passes its low point on cash generation. Due to this lack of free cash flow visibility, we exited the position. This Ireland-based company was also largely responsible for the Fund’s investments in Europe detracting from performance. We continue to focus on identifying and investing in unique companies with sustainable competitive advantages and the ability to redeploy capital at high rates of return. We are optimistic about the long-term opportunities of the companies we are invested in and continue to search for new ideas and investments. |
† | Industry sector levels are provided from the Global Industry Classification Standard (“GICS”), developed and exclusively owned by MSCI, Inc. and Standard & Poor’s Financial Services LLC, unless otherwise stated that they have been reclassified or classified by the Adviser. All GICS data is provided “as is” with no warranties. | |
‡ | Performance information reflects results of the Retail Shares. |
15
Baron Partners Fund | June 30, 2013 |
STATEMENT OF NET ASSETS (Unaudited) |
JUNE 30, 2013 |
Shares | Cost | Value | ||||||||
Common Stocks (133.51%) | ||||||||||
Consumer Discretionary (34.08%) | ||||||||||
Automotive Retail (5.41%) | ||||||||||
1,250,000 | CarMax, Inc.1 | $ | 35,894,857 | $ | 57,700,000 | |||||
Broadcasting (2.89%) | ||||||||||
400,000 | Discovery Communications, Inc., Cl A1 | 8,755,655 | 30,884,000 | |||||||
Casinos & Gaming (4.90%) | ||||||||||
988,500 | Penn National Gaming, Inc.1 | 29,535,349 | 52,252,110 | |||||||
Hotels, Resorts & Cruise Lines (9.45%) | ||||||||||
2,500,000 | Hyatt Hotels Corp., Cl A1 | 67,148,542 | 100,900,000 | |||||||
Leisure Facilities (5.34%) | ||||||||||
925,800 | Vail Resorts, Inc. | 27,801,851 | 56,955,216 | |||||||
Specialty Stores (6.09%) | ||||||||||
1,299,500 | Dick’s Sporting Goods, Inc. | 22,168,362 | 65,052,970 | |||||||
Total Consumer Discretionary | 191,304,616 | 363,744,296 | ||||||||
Energy (9.98%) | ||||||||||
Oil & Gas Drilling (4.10%) | ||||||||||
700,000 | Helmerich & Payne, Inc. | 24,104,765 | 43,715,000 | |||||||
Oil & Gas Exploration & Production (5.88%) | ||||||||||
750,000 | Concho Resources, Inc.1 | 62,326,273 | 62,790,000 | |||||||
Total Energy | 86,431,038 | 106,505,000 | ||||||||
Financials (24.43%) | ||||||||||
Asset Management & Custody Banks (4.02%) | ||||||||||
1,670,000 | The Carlyle Group | 37,003,451 | 42,919,000 | |||||||
Investment Banking & Brokerage (6.07%) | ||||||||||
3,050,000 | The Charles Schwab Corp. | 26,953,509 | 64,751,500 | |||||||
Property & Casualty Insurance (11.92%) | ||||||||||
2,475,000 | Arch Capital Group Ltd.1,2 | 33,641,980 | 127,239,750 | |||||||
Specialized Finance (2.42%) | ||||||||||
775,000 | MSCI, Inc.1 | 16,938,378 | 25,784,250 | |||||||
Total Financials | 114,537,318 | 260,694,500 | ||||||||
Health Care (15.46%) | ||||||||||
Health Care Equipment (10.55%) | ||||||||||
975,000 | Edwards Lifesciences Corp.1 | 67,119,494 | 65,520,000 | |||||||
525,000 | IDEXX Laboratories, Inc.1 | 45,812,786 | 47,134,500 | |||||||
112,932,280 | 112,654,500 | |||||||||
Life Sciences Tools & Services (4.91%) | ||||||||||
700,000 | Illumina, Inc.1 | 39,883,681 | 52,388,000 | |||||||
Total Health Care | 152,815,961 | 165,042,500 | ||||||||
Industrials (24.35%) | ||||||||||
Air Freight & Logistics (4.48%) | ||||||||||
850,000 | C.H. Robinson Worldwide, Inc. | 34,012,109 | 47,863,500 | |||||||
Airlines (3.19%) | ||||||||||
660,100 | Ryanair Holdings plc, ADR1,2 | 26,238,973 | 34,014,953 | |||||||
Research & Consulting Services (8.95%) | ||||||||||
1,600,000 | Verisk Analytics, Inc., Cl A1 | 43,772,936 | 95,520,000 | |||||||
Trading Companies & Distributors (7.73%) | ||||||||||
1,800,000 | Fastenal Co. | 31,516,561 | 82,530,000 | |||||||
Total Industrials | 135,540,579 | 259,928,453 | ||||||||
Shares | Cost | Value | ||||||||
Common Stocks (continued) | ||||||||||
Information Technology (12.59%) | ||||||||||
Application Software (6.54%) | ||||||||||
685,000 | FactSet Research Systems, Inc. | $ | 39,877,102 | $ | 69,828,900 | |||||
Internet Software & Services (6.05%) | ||||||||||
500,000 | CoStar Group, Inc.1 | 19,068,649 | 64,535,000 | |||||||
Total Information Technology | 58,945,751 | 134,363,900 | ||||||||
Utilities (12.62%) | ||||||||||
Electric Utilities (12.62%) | ||||||||||
1,475,000 | ITC Holdings Corp. | 46,426,984 | 134,667,500 | |||||||
Total Common Stocks | 786,002,247 | 1,424,946,149 | ||||||||
Private Equity Investments (3.12%) | ||||||||||
Consumer Discretionary (0.58%) | ||||||||||
Hotels, Resorts & Cruise Lines (0.58%) | ||||||||||
3,900,000 | Kerzner International Holdings, Ltd., Cl A1,2,3,4,6 | 39,000,000 | 6,162,000 | |||||||
Financials (2.54%) | ||||||||||
Asset Management & Custody Banks (2.54%) | ||||||||||
7,579,130 | Windy City Investments Holdings, L.L.C.1,3,4,6 | 41,134,888 | 27,133,286 | |||||||
Total Private Equity Investments | 80,134,888 | 33,295,286 | ||||||||
Principal | ||||||||||
Amount | ||||||||||
Short Term Investments (0.05%) | ||||||||||
$492,114 | Repurchase Agreement with Fixed Income Clearing Corp., dated 6/28/2013, 0.01% due 7/1/2013; Proceeds at maturity – $492,115; (Fully collateralized by $535,000 U.S. Treasury Note, 1.625% due 8/15/2022; Market value – $506,244)5 | 492,114 | 492,114 | |||||||
Total Investments (136.68%) | $ | 866,629,249 | 1,458,733,549 | |||||||
Liabilities Less Cash and Other Assets (-36.68%) | (391,440,984 | ) | ||||||||
Net Assets | $ | 1,067,292,565 | ||||||||
Retail Shares (Equivalent to $27.26 per share based on 30,686,227 shares outstanding) | $ | 836,488,617 | ||||||||
Institutional Shares (Equivalent to $27.56 per share based on 8,375,979 shares outstanding) | $ | 230,803,948 | ||||||||
% | Represents percentage of net assets. | |
1 | Non-income producing securities. | |
2 | Foreign corporation. | |
3 | At June 30, 2013, the market value of restricted and fair valued securities amounted to $33,295,286 or 3.12% of net assets. None of these securities are deemed liquid. See Note 6 regarding Restricted Securities. | |
4 | The Adviser has reclassified/classified certain securities in or out of this sub-industry. Such reclassifications/classifications are not supported by S&P or MSCI. | |
5 | Level 2 security. See Note 7 regarding Fair Value Measurements. | |
6 | Level 3 security. See Note 7 regarding Fair Value Measurements. | |
ADR | American Depositary Receipt. | |
All securities are Level 1, unless otherwise noted. |
16 | See Notes to Financial Statements. |
June 30, 2013 | Baron Focused Growth Fund |
STATEMENT OF NET ASSETS (Unaudited) |
JUNE 30, 2013 |
Shares | Cost | Value | ||||||||
Common Stocks (99.10%) | ||||||||||
Consumer Discretionary (35.10%) | ||||||||||
Automotive Retail (4.96%) | ||||||||||
160,000 | CarMax, Inc.1 | $ | 4,693,294 | $ | 7,385,600 | |||||
Casinos & Gaming (5.44%) | ||||||||||
61,975 | Penn National Gaming, Inc.1 | 3,308,460 | 3,275,998 | |||||||
245,509 | Pinnacle Entertainment, Inc.1 | 4,674,808 | 4,829,162 | |||||||
7,983,268 | 8,105,160 | |||||||||
Hotels, Resorts & Cruise Lines (10.50%) | ||||||||||
150,000 | Choice Hotels International, Inc. | 5,080,138 | 5,953,500 | |||||||
240,000 | Hyatt Hotels Corp., Cl A1 | 7,807,007 | 9,686,400 | |||||||
12,887,145 | 15,639,900 | |||||||||
Leisure Facilities (5.62%) | ||||||||||
136,230 | Vail Resorts, Inc. | 8,272,836 | 8,380,870 | |||||||
Leisure Products (0.78%) | ||||||||||
50,000 | BRP, Inc. (Canada)1,2 | 1,210,986 | 1,164,781 | |||||||
Movies & Entertainment (3.77%) | ||||||||||
352,670 | Manchester United plc, Cl A1,2 | 5,439,325 | 5,614,506 | |||||||
Specialty Stores (4.03%) | ||||||||||
120,000 | Dick’s Sporting Goods, Inc. | 2,576,869 | 6,007,200 | |||||||
Total Consumer Discretionary | 43,063,723 | 52,298,017 | ||||||||
Consumer Staples (2.07%) | ||||||||||
Household Products (2.07%) | ||||||||||
50,000 | Church & Dwight Co., Inc. | 1,274,171 | 3,085,500 | |||||||
Energy (3.14%) | ||||||||||
Oil & Gas Drilling (3.14%) | ||||||||||
75,000 | Helmerich & Payne, Inc. | 3,656,041 | 4,683,750 | |||||||
Financials (15.32%) | ||||||||||
Asset Management & Custody Banks (5.75%) | ||||||||||
187,384 | The Carlyle Group | 4,378,148 | 4,815,769 | |||||||
100,000 | Eaton Vance Corp. | 2,267,846 | 3,759,000 | |||||||
6,645,994 | 8,574,769 | |||||||||
Property & Casualty Insurance (3.45%) | ||||||||||
100,000 | Arch Capital Group Ltd.1,2 | 1,800,056 | 5,141,000 | |||||||
Residential REITs (3.55%) | ||||||||||
130,000 | American Campus Communities, Inc. | 5,389,265 | 5,285,800 | |||||||
Specialized Finance (2.57%) | ||||||||||
115,000 | MSCI, Inc.1 | 3,240,133 | 3,826,050 | |||||||
Total Financials | 17,075,448 | 22,827,619 | ||||||||
Health Care (5.00%) | ||||||||||
Health Care Distributors (2.18%) | ||||||||||
34,000 | Henry Schein, Inc.1 | 1,353,700 | 3,255,500 | |||||||
Health Care Facilities (0.79%) | ||||||||||
25,000 | Community Health Systems, Inc.1 | 1,187,505 | 1,172,000 | |||||||
Life Sciences Tools & Services (2.03%) | ||||||||||
15,000 | Mettler-Toledo International, Inc.1 | 702,213 | 3,018,000 | |||||||
Total Health Care | 3,243,418 | 7,445,500 | ||||||||
Shares | Cost | Value | ||||||||
Common Stocks (continued) | ||||||||||
Industrials (21.63%) | ||||||||||
Air Freight & Logistics (1.59%) | ||||||||||
42,000 | C.H. Robinson Worldwide, Inc. | $ | 1,780,867 | $ | 2,365,020 | |||||
Industrial Machinery (5.53%) | ||||||||||
158,000 | Colfax Corp.1 | 4,291,986 | 8,233,380 | |||||||
Railroads (5.69%) | ||||||||||
99,930 | Genesee & Wyoming, Inc., Cl A1 | 3,378,911 | 8,478,061 | |||||||
Research & Consulting Services (5.13%) | ||||||||||
128,050 | Verisk Analytics, Inc., Cl A1 | 3,651,694 | 7,644,585 | |||||||
Trading Companies & Distributors (3.69%) | ||||||||||
120,000 | Fastenal Co. | 3,138,162 | 5,502,000 | |||||||
Total Industrials | 16,241,620 | 32,223,046 | ||||||||
Information Technology (7.39%) | ||||||||||
Application Software (7.39%) | ||||||||||
25,000 | ANSYS, Inc.1 | 548,887 | 1,827,500 | |||||||
90,000 | FactSet Research Systems, Inc. | 7,258,984 | 9,174,600 | |||||||
Total Information Technology | 7,807,871 | 11,002,100 | ||||||||
Materials (3.63%) | ||||||||||
Fertilizers & Agricultural Chemicals (0.42%) | ||||||||||
214,021 | Agrinos AS (Mexico)1,2 | 1,651,382 | 630,681 | |||||||
Industrial Gases (3.21%) | ||||||||||
50,000 | Airgas, Inc. | 3,153,564 | 4,773,000 | |||||||
Total Materials | 4,804,946 | 5,403,681 | ||||||||
Utilities (5.82%) | ||||||||||
Electric Utilities (5.82%) | ||||||||||
95,000 | ITC Holdings Corp. | 6,531,964 | 8,673,500 | |||||||
Total Common Stocks | 103,699,202 | 147,642,713 | ||||||||
Principal | ||||||||||
Amount | ||||||||||
Short Term Investments (0.99%) | ||||||||||
$1,474,538 | Repurchase Agreement with Fixed Income Clearing Corp., dated 6/28/2013, 0.01% due 7/1/2013; Proceeds at maturity – $1,474,539; (Fully collateralized by $1,530,000 U.S. Treasury Note, 0.625% due 5/31/2017; Market value – $1,505,630)3 | 1,474,538 | 1,474,538 | |||||||
Total Investments (100.09%) | $ | 105,173,740 | 149,117,251 | |||||||
Liabilities Less Cash and Other Assets (-0.09%) | (139,137 | ) | ||||||||
Net Assets | $ | 148,978,114 | ||||||||
Retail Shares (Equivalent to $12.23 per share based on 3,378,713 shares outstanding) | $ | 41,313,486 | ||||||||
Institutional Shares (Equivalent to $12.35 per share based on 8,720,511 shares outstanding) | $ | 107,664,628 | ||||||||
% | Represents percentage of net assets. | |
1 | Non-income producing securities. | |
2 | Foreign corporation. | |
3 | Level 2 security. See Note 7 regarding Fair Value Measurements. | |
All Securities are Level 1, unless otherwise noted. |
See Notes to Financial Statements. | 17 |
Baron International Growth Fund | June 30, 2013 |
STATEMENT OF NET ASSETS (Unaudited) |
JUNE 30, 2013 |
Shares | Cost | Value | ||||||||
Common Stocks (96.59%) | ||||||||||
Australia (2.94%) | ||||||||||
100,000 | Brambles Ltd. | $ | 868,115 | $ | 854,190 | |||||
50,000 | Domino’s Pizza Enterprises Ltd. | 337,354 | 510,776 | |||||||
50,000 | Wotif.com Holdings Ltd. | 174,246 | 207,145 | |||||||
Total Australia | 1,379,715 | 1,572,111 | ||||||||
Brazil (3.87%) | ||||||||||
95,000 | Anhanguera Educacional Participações SA | 409,927 | 556,031 | |||||||
64,000 | Kroton Educacional SA | 458,670 | 885,993 | |||||||
40,000 | TOTVS SA | 164,560 | 622,941 | |||||||
Total Brazil | 1,033,157 | 2,064,965 | ||||||||
Canada (3.10%) | ||||||||||
14,000 | Alaris Royalty Corp. | 423,399 | 424,380 | |||||||
4,500 | Constellation Software, Inc. | 542,191 | 620,424 | |||||||
18,000 | Crescent Point Energy Corp. | 794,569 | 610,497 | |||||||
Total Canada | 1,760,159 | 1,655,301 | ||||||||
China (8.05%) | ||||||||||
50,000 | 21Vianet Group, Inc., ADR1 | 564,194 | 566,500 | |||||||
350,000 | Haitong Securities Co., Ltd., Cl H | 505,980 | 424,185 | |||||||
3,200,000 | Kingdee International Software Group Co. Ltd.1 | 530,531 | 589,991 | |||||||
108,000 | NQ Mobile, Inc., ADR1 | 749,879 | 872,640 | |||||||
25,000 | Sina Corporation1 | 1,274,441 | 1,393,250 | |||||||
11,500 | Tencent Holdings Ltd. | 101,016 | 451,042 | |||||||
Total China | 3,726,041 | 4,297,608 | ||||||||
France (4.91%) | ||||||||||
8,000 | Eurofins Scientific SE | 485,043 | 1,690,062 | |||||||
14,000 | Ingenico SA | 224,422 | 933,022 | |||||||
Total France | 709,465 | 2,623,084 | ||||||||
Germany (8.52%) | ||||||||||
3,000 | Brenntag AG | 433,834 | 455,707 | |||||||
35,000 | Deutsche Post AG | 702,081 | 869,925 | |||||||
31,000 | Deutsche Wohnen AG | 457,782 | 526,381 | |||||||
70,600 | PATRIZIA Immobilien AG1 | 445,649 | 709,533 | |||||||
20,000 | Qiagen N.V.1 | 333,143 | 398,200 | |||||||
110,000 | RIB Software AG | 681,608 | 574,873 | |||||||
25,000 | Symrise AG | 313,128 | 1,012,358 | |||||||
Total Germany | 3,367,225 | 4,546,977 | ||||||||
Hong Kong (1.52%) | ||||||||||
300,000 | Wynn Macau Ltd. | 430,018 | 814,203 | |||||||
India (5.40%) | ||||||||||
210,000 | DEN Networks Ltd.1 | 546,278 | 648,288 | |||||||
64,000 | Financial Technologies Ltd. | 1,295,990 | 839,297 | |||||||
72,067 | Hathway Cable and Datacom Ltd.1 | 210,644 | 335,929 | |||||||
150,000 | Mytrah Energy Ltd.1 | 274,801 | 241,831 | |||||||
50,000 | Sun TV Network Ltd. | 357,194 | 319,394 | |||||||
125,000 | Zee Entertainment Enterprises Ltd. | 303,172 | 496,529 | |||||||
Total India | 2,988,079 | 2,881,268 | ||||||||
Shares | Cost | Value | ||||||||
Common Stocks (continued) | ||||||||||
Indonesia (1.41%) | ||||||||||
125,000 | Sarana Menara Nusantara Tbk PT1 | $ | 260,297 | $ | 308,564 | |||||
850,000 | Tower Bersama Infrastructure Tbk PT1 | 274,403 | 445,340 | |||||||
Total Indonesia | 534,700 | 753,904 | ||||||||
Ireland (3.76%) | ||||||||||
39,000 | Ryanair Holdings plc, ADR1 | 1,045,243 | 2,009,670 | |||||||
Israel (5.87%) | ||||||||||
20,000 | Check Point Software Technologies Ltd.1 | 957,292 | 993,600 | |||||||
50,000 | Radware Ltd.1 | 885,144 | 689,500 | |||||||
20,000 | SodaStream International Ltd.1 | 667,719 | 1,453,000 | |||||||
Total Israel | 2,510,155 | 3,136,100 | ||||||||
Italy (0.84%) | ||||||||||
90,000 | Amplifon SpA | 453,824 | 450,553 | |||||||
Japan (17.20%) | ||||||||||
25,000 | Bridgestone Corp. | 480,797 | 851,986 | |||||||
7,800 | FANUC Corp. | 708,043 | 1,130,913 | |||||||
175,000 | The Japan Steel Works Ltd. | 1,233,752 | 963,400 | |||||||
36,000 | Kakaku.com, Inc. | 629,749 | 1,098,004 | |||||||
45,000 | Mitsui Fudosan Co. Ltd. | 908,465 | 1,323,503 | |||||||
18,000 | Sanrio Co. Ltd. | 623,311 | 837,568 | |||||||
27,500 | Softbank Corp. | 945,833 | 1,605,414 | |||||||
50,000 | Sony Financial Holdings, Inc. | 805,778 | 789,978 | |||||||
125,000 | Sumitomo Mitsui Trust Holdings, Inc. | 554,919 | 583,535 | |||||||
Total Japan | 6,890,647 | 9,184,301 | ||||||||
Korea, Republic of (1.42%) | ||||||||||
23,000 | KT Skylife Co. Ltd. | 722,447 | 759,249 | |||||||
Mexico (0.75%) | ||||||||||
135,329 | Agrinos AS1 | 859,424 | 398,790 | |||||||
Norway (4.30%) | ||||||||||
40,000 | DNB ASA | 633,304 | 579,157 | |||||||
117,000 | Opera Software ASA | 695,877 | 905,282 | |||||||
27,624 | Seadrill Partners, LLC | 607,728 | 810,764 | |||||||
Total Norway | 1,936,909 | 2,295,203 | ||||||||
Russian Federation (1.55%) | ||||||||||
210,000 | Exillon Energy plc1 | 414,640 | 412,025 | |||||||
15,000 | Yandex N.V., Cl A1 | 401,372 | 414,450 | |||||||
Total Russian Federation | 816,012 | 826,475 | ||||||||
Spain (1.44%) | ||||||||||
27,000 | Grifols SA, ADR | 283,852 | 768,960 | |||||||
18 | See Notes to Financial Statements. |
June 30, 2013 | Baron International Growth Fund |
STATEMENT OF NET ASSETS (Unaudited) (Continued) |
JUNE 30, 2013 |
Shares | Cost | Value | ||||||||
Common Stocks (continued) | ||||||||||
Sweden (0.74%) | ||||||||||
20,000 | Lundin Petroleum AB1 | $ | 251,953 | $ | 396,654 | |||||
Switzerland (6.41%) | ||||||||||
13,000 | Compagnie Financière Richemont SA | 240,098 | 1,149,912 | |||||||
18,000 | Credit Suisse Group AG, ADR | 540,687 | 476,280 | |||||||
22,067 | Julius Baer Group Ltd. | 562,219 | 861,841 | |||||||
12,000 | Syngenta AG, ADR | 556,426 | 934,320 | |||||||
Total Switzerland | 1,899,430 | 3,422,353 | ||||||||
United Kingdom (8.21%) | ||||||||||
21,000 | Aggreko plc | 714,330 | 524,454 | |||||||
100,000 | bwin.party digital entertainment plc | 329,683 | 171,563 | |||||||
50,000 | Experian plc | 306,563 | 869,223 | |||||||
70,000 | Inchcape plc | 590,036 | 533,397 | |||||||
18,000 | Intertek Group plc | 309,910 | 800,232 | |||||||
135,000 | Premier Oil plc | 660,385 | 683,948 | |||||||
37,000 | Standard Chartered PLC | 802,672 | 803,046 | |||||||
Total United Kingdom | 3,713,579 | 4,385,863 | ||||||||
United States (4.38%) | ||||||||||
26,000 | Agilent Technologies, Inc. | 710,610 | 1,111,760 | |||||||
15,000 | Arch Capital Group Ltd.1 | 293,022 | 771,150 | |||||||
3,000 | Core Laboratories N.V. | 127,140 | 454,980 | |||||||
Total United States | 1,130,772 | 2,337,890 | ||||||||
Total Common Stocks | 38,442,806 | 51,581,482 | ||||||||
Private Equity Investments (0.00%) | ||||||||||
Israel (0.00%) | ||||||||||
60,573 | Better Place, Inc., Series C Preferred1,2,3,5 | 275,001 | 0 | |||||||
Subscription Receipts (0.47%) | ||||||||||
Canada (0.47%) | ||||||||||
8,600 | Alaris Royalty Corp.1,2,5 | 252,773 | 252,677 | |||||||
Principal | ||||||||||
Amount | Cost | Value | ||||||||
Short Term Investments (3.87%) | ||||||||||
$2,063,537 | Repurchase Agreement with Fixed Income Clearing Corp., dated 6/28/2013, 0.01% due 7/1/2013; Proceeds at maturity – $2,063,539; (Fully collateralized by $2,140,000 U.S. Treasury Note, 0.625% due 5/31/2017; Market value – $2,105,914)4 | $ | 2,063,537 | $ | 2,063,537 | |||||
Total Investments (100.93%) | $ | 41,034,117 | 53,897,696 | |||||||
Liabilities Less Cash and Other Assets (-0.93%) | (496,086 | ) | ||||||||
Net Assets | $ | 53,401,610 | ||||||||
Retail Shares (Equivalent to $16.00 per share based on 892,358 shares outstanding) | $ | 14,273,831 | ||||||||
Institutional Shares (Equivalent to $16.09 per share based on 2,431,436 shares outstanding) | $ | 39,127,779 | ||||||||
% | Represents percentage of net assets. | |
1 | Non-income producing securities. | |
2 | At June 30, 2013, the market value of restricted and fair valued securities amounted to $252,677 or 0.47% of net assets. None of these securities are deemed liquid. See Note 6 regarding Restricted Securities. | |
3 | The Adviser has reclassified/classified certain securities in or out of this sub-industry. Such reclassifications/classifications are not supported by S&P or MSCI. | |
4 | Level 2 security. See Note 7 regarding Fair Value Measurements. | |
5 | Level 3 security. See Note 7 regarding Fair Value Measurements. | |
ADR | American Depositary Receipt. | |
All securities are Level 1, unless otherwise noted. |
Summary of Investments by Sector | Percentage of | ||
as of June 30, 2013 | Net Assets | ||
Information Technology | 21.7 | % | |
Consumer Discretionary | 19.7 | ||
Financials | 16.0 | ||
Industrials | 15.9 | ||
Health Care | 8.3 | ||
Energy | 6.3 | ||
Telecommunication Services | 4.4 | ||
Materials | 4.4 | ||
Utilities | 0.4 | ||
Cash and Cash Equivalents* | 2.9 | ||
100.0 | % | ||
* | Includes short term investments. |
See Notes to Financial Statements. | 19 |
Baron Real Estate Fund | June 30, 2013 |
STATEMENT OF NET ASSETS (Unaudited) |
JUNE 30, 2013 |
Shares | Cost | Value | ||||||||
Common Stocks (97.44%) | ||||||||||
Consumer Discretionary (29.71%) | ||||||||||
Casinos & Gaming (9.64%) | ||||||||||
314,500 | Las Vegas Sands Corp. | $ | 16,442,089 | $ | 16,646,485 | |||||
49,350 | Penn National Gaming, Inc.1 | 2,012,351 | 2,608,641 | |||||||
840,447 | Pinnacle Entertainment, Inc.1 | 13,472,091 | 16,531,592 | |||||||
145,250 | Wynn Resorts Ltd. | 17,452,855 | 18,592,000 | |||||||
49,379,386 | 54,378,718 | |||||||||
Home Improvement Retail (2.94%) | ||||||||||
405,900 | Lowe’s Companies, Inc. | 15,055,390 | 16,601,310 | |||||||
Homebuilding (3.29%) | ||||||||||
346,633 | Brookfield Residential Properties, Inc.1,2 | 7,315,400 | 7,646,724 | |||||||
98,000 | Toll Brothers, Inc.1 | 3,262,732 | 3,197,740 | |||||||
464,800 | TRI Pointe Homes, Inc.1 | 8,720,665 | 7,706,384 | |||||||
19,298,797 | 18,550,848 | |||||||||
Hotels, Resorts & Cruise Lines (13.84%) | ||||||||||
542,200 | Hyatt Hotels Corp., Cl A1 | 21,963,600 | 21,883,192 | |||||||
169,852 | Marriott Vacations Worldwide Corp.1 | 7,030,575 | 7,344,400 | |||||||
126,868 | Norwegian Cruise Line Holdings Ltd.1,2 | 2,410,492 | 3,845,369 | |||||||
385,150 | Starwood Hotels & Resorts Worldwide, Inc. | 23,375,733 | 24,337,629 | |||||||
361,100 | Wyndham Worldwide Corp. | 21,151,804 | 20,665,753 | |||||||
75,932,204 | 78,076,343 | |||||||||
Total Consumer Discretionary | 159,665,777 | 167,607,219 | ||||||||
Energy (2.31%) | ||||||||||
Oil & Gas Storage & Transportation (2.31%) | ||||||||||
169,250 | Golar LNG Partners L.P.2 | 5,201,328 | 5,771,425 | |||||||
105,473 | Rose Rock Midstream L.P. | 3,111,214 | 3,862,421 | |||||||
115,250 | Susser Petroleum Partners LP | 3,002,348 | 3,376,825 | |||||||
Total Energy | 11,314,890 | 13,010,671 | ||||||||
Financials (30.66%) | ||||||||||
Diversified Real Estate Activities (2.01%) | ||||||||||
314,900 | Brookfield Asset Management, Inc., Cl A2 | 11,420,812 | 11,342,698 | |||||||
Diversified REITs (1.44%) | ||||||||||
33,436 | American Assets Trust, Inc. | 750,140 | 1,031,835 | |||||||
85,500 | Vornado Realty Trust | 7,097,871 | 7,083,675 | |||||||
7,848,011 | 8,115,510 | |||||||||
Office REITs (3.18%) | ||||||||||
2,200 | Alexander’s, Inc3 | 826,544 | 646,162 | |||||||
320,922 | CyrusOne, Inc. | 6,717,702 | 6,655,922 | |||||||
248,386 | Douglas Emmett, Inc. | 5,917,681 | 6,197,231 | |||||||
50,200 | SL Green Realty Corp. | 4,082,248 | 4,427,138 | |||||||
17,544,175 | 17,926,453 | |||||||||
Real Estate Development (2.85%) | ||||||||||
802,800 | Forestar Group, Inc.1 | 17,848,644 | 16,104,168 | |||||||
Real Estate Services (10.93%) | ||||||||||
1,092,900 | CBRE Group, Inc., Cl A1 | 24,954,455 | 25,530,144 | |||||||
231,000 | Jones Lang LaSalle, Inc. | 21,751,352 | 21,053,340 | |||||||
905,750 | Kennedy-Wilson Holdings, Inc. | 14,388,102 | 15,071,680 | |||||||
61,093,909 | 61,655,164 | |||||||||
Residential REITs (1.86%) | ||||||||||
158,534 | American Campus Communities, Inc. | 6,895,944 | 6,445,993 | |||||||
395,188 | Education Realty Trust, Inc. | 4,272,190 | 4,042,773 | |||||||
11,168,134 | 10,488,766 | |||||||||
Specialized REITs (8.39%) | ||||||||||
84,950 | Alexandria Real Estate Equities, Inc.3 | 5,964,431 | 5,582,914 | |||||||
51,196 | American Tower Corp. | 3,782,172 | 3,746,011 | |||||||
674,600 | Ashford Hospitality Trust, Inc. | 7,911,804 | 7,724,170 |
Shares | Cost | Value | ||||||||
Common Stocks (continued) | ||||||||||
Financials (continued) | ||||||||||
Specialized REITs (continued) | ||||||||||
285,900 | LaSalle Hotel Properties | $ | 7,442,803 | $ | 7,061,730 | |||||
1,178,250 | Strategic Hotels & Resorts, Inc.1 | 9,016,701 | 10,439,295 | |||||||
1,056,550 | Sunstone Hotel Investors, Inc.1 | 12,331,778 | 12,763,124 | |||||||
46,449,689 | 47,317,244 | |||||||||
Total Financials | 173,373,374 | 172,950,003 | ||||||||
Health Care (11.49%) | ||||||||||
Health Care Facilities (11.49%) | ||||||||||
858,600 | Brookdale Senior Living, Inc.1 | 21,932,349 | 22,701,384 | |||||||
931,350 | Capital Senior Living Corp.1 | 18,744,455 | 22,259,265 | |||||||
856,500 | Emeritus Corp.1 | 21,995,554 | 19,853,670 | |||||||
Total Health Care | 62,672,358 | 64,814,319 | ||||||||
Industrials (7.65%) | ||||||||||
Building Products (5.14%) | ||||||||||
1,169,630 | Builders FirstSource, Inc.1 | 6,511,205 | 6,994,387 | |||||||
94,100 | Owens Corning1 | 3,266,676 | 3,677,428 | |||||||
913,900 | Ply Gem Holdings, Inc.1 | 20,373,573 | 18,332,834 | |||||||
30,151,454 | 29,004,649 | |||||||||
Industrial Machinery (2.38%) | ||||||||||
173,700 | Stanley Black & Decker, Inc. | 13,176,879 | 13,427,010 | |||||||
Office Services & Supplies (0.13%) | ||||||||||
43,800 | Interface, Inc. | 547,462 | 743,286 | |||||||
Total Industrials | 43,875,795 | 43,174,945 | ||||||||
Information Technology (3.68%) | ||||||||||
Application Software (1.88%) | ||||||||||
576,819 | RealPage, Inc.1 | 12,111,362 | 10,578,861 | |||||||
IT Consulting & Other Services (1.80%) | ||||||||||
55,095 | Equinix, Inc.1,3 | 10,467,149 | 10,177,148 | |||||||
Total Information Technology | 22,578,511 | 20,756,009 | ||||||||
Materials (5.38%) | ||||||||||
Construction Materials (3.74%) | ||||||||||
774,598 | CaesarStone Sdot-Yam Ltd.1,2 | 16,022,314 | 21,092,304 | |||||||
Forest Products (1.64%) | ||||||||||
364,800 | Boise Cascade Company1 | 9,995,112 | 9,269,568 | |||||||
Total Materials | 26,017,426 | 30,361,872 | ||||||||
Telecommunication Services (3.51%) | ||||||||||
Wireless Telecommunication Services (3.51%) | ||||||||||
4,212,515 | Sarana Menara Nusantara Tbk PT (Indonesia)1,2 | 10,741,127 | 10,398,652 | |||||||
126,600 | SBA Communications Corp., Cl A1 | 8,318,537 | 9,383,592 | |||||||
Total Telecommunication Services | 19,059,664 | 19,782,244 | ||||||||
Utilities (3.05%) | ||||||||||
Electric Utilities (3.05%) | ||||||||||
264,100 | Brookfield Infrastructure Partners L.P.2 | 9,740,807 | 9,644,932 | |||||||
82,480 | ITC Holdings Corp. | 7,148,464 | 7,530,424 | |||||||
Total Utilities | 16,889,271 | 17,175,356 | ||||||||
Total Common Stocks | 535,447,066 | 549,632,638 | ||||||||
20 | See Notes to Financial Statements. |
June 30, 2013 | Baron Real Estate Fund |
STATEMENT OF NET ASSETS (Unaudited) (Continued) |
JUNE 30, 2013 |
Principal | ||||||||||
Amount | Cost | Value | ||||||||
Short Term Investments (2.67%) | ||||||||||
$15,073,916 | Repurchase Agreement with Fixed Income Clearing Corp., dated 6/28/2013, 0.01% due 7/1/2013; Proceeds at maturity – $15,073,928; (Fully collateralized by $15,625,000 U.S. Treasury Note, 0.625% due 5/31/2017; Market value – $15,376,125)4 | $ | 15,073,916 | $ | 15,073,916 | |||||
Total Investments (100.11%) | $ | 550,520,982 | 564,706,554 | |||||||
Liabilities Less Cash and Other Assets (-0.11%) | (629,963 | ) | ||||||||
Net Assets | $ | 564,076,591 | ||||||||
Retail Shares (Equivalent to $19.16 per share based on 19,284,514 shares outstanding) | $ | 369,559,764 | ||||||||
Institutional Shares (Equivalent to $19.32 per share based on 10,066,627 shares outstanding) | $ | 194,516,827 | ||||||||
% | Represents percentage of net assets. | |
1 | Non-income producing securities. | |
2 | Foreign corporation. | |
3 | The Adviser has reclassified/classified certain securities in or out of this sub-industry. Such reclassifications/classifications are not supported by S&P or MSCI. | |
4 | Level 2 security. See Note 7 regarding Fair Value Measurements. All securities are Level 1, unless otherwise noted. |
See Notes to Financial Statements. | 21 |
Baron Emerging Markets Fund | June 30, 2013 |
STATEMENT OF NET ASSETS (Unaudited) |
JUNE 30, 2013 |
Shares | Cost | Value | ||||||||
Common Stocks (88.09%) | ||||||||||
Brazil (9.12%) | ||||||||||
35,000 | Anhanguera Educacional Participações SA | $ | 205,816 | $ | 204,854 | |||||
53,000 | BM&FBOVESPA SA | 357,814 | 290,967 | |||||||
20,000 | Estácio Participações SA | 116,841 | 144,666 | |||||||
30,000 | Kroton Educacional SA | 281,351 | 415,309 | |||||||
20,000 | Linx SA | 293,188 | 333,789 | |||||||
7,500 | M. Dias Branco SA | 225,356 | 283,685 | |||||||
17,000 | TOTVS SA | 328,693 | 264,750 | |||||||
Total Brazil | 1,809,059 | 1,938,020 | ||||||||
Canada (0.63%) | ||||||||||
20,000 | Africa Oil Corp.1 | 100,307 | 134,069 | |||||||
Chile (1.88%) | ||||||||||
722,211 | CFR Pharmaceuticals SA | 166,461 | 163,050 | |||||||
2,615 | CFR Pharmaceuticals SA 144A, ADR2 | 47,627 | 59,047 | |||||||
4,400 | Sociedad Química y | |||||||||
Minera de Chile SA, ADR | 247,304 | 177,760 | ||||||||
Total Chile | 461,392 | 399,857 | ||||||||
China (17.02%) | ||||||||||
30,000 | 21Vianet Group, Inc., ADR1 | 310,806 | 339,900 | |||||||
75,000 | Biostime International Holdings Ltd. | 314,095 | 418,705 | |||||||
175,000 | Dah Chong Hong Holdings Ltd. | 192,446 | 139,214 | |||||||
63,000 | Great Wall Motor Co. Ltd. | 183,797 | 270,486 | |||||||
275,000 | Haitong Securities Co., Ltd., Cl H | 388,553 | 333,288 | |||||||
24,000 | Hollysys Automation Technologies Ltd.1 | 258,728 | 297,840 | |||||||
1,600,000 | Kingdee International Software Group Co. Ltd.1 | 382,959 | 294,996 | |||||||
48,029 | NQ Mobile, Inc., ADR1 | 334,054 | 388,074 | |||||||
12,000 | Sina Corporation1 | 622,920 | 668,760 | |||||||
6,000 | Tencent Holdings Ltd. | 169,495 | 235,326 | |||||||
11,000 | WuXi PharmaTech (Cayman), Inc., ADR1 | 224,875 | 231,000 | |||||||
Total China | 3,382,728 | 3,617,589 | ||||||||
Hong Kong (3.74%) | ||||||||||
40,000 | Luk Fook Holdings International Ltd. | 134,411 | 92,831 | |||||||
150,000 | Man Wah Holdings Ltd. | 166,519 | 187,982 | |||||||
100,000 | Melco International Development Ltd. | 149,344 | 189,530 | |||||||
120,000 | Wynn Macau Ltd. | 321,572 | 325,681 | |||||||
Total Hong Kong | 771,846 | 796,024 | ||||||||
India (14.57%) | ||||||||||
55,000 | Amara Raja Batteries Ltd. | 203,612 | 237,678 | |||||||
5,000 | Blue Dart Express Ltd. | 186,582 | 204,985 | |||||||
124,866 | DEN Networks Ltd.1 | 391,873 | 385,472 | |||||||
200,000 | Dish TV India Ltd.1 | 243,545 | 205,133 | |||||||
42,000 | Financial Technologies Ltd. | 769,867 | 550,788 | |||||||
27,800 | Hathway Cable and Datacom Ltd.1 | 81,256 | 129,585 | |||||||
25,000 | Lupin Ltd. | 253,964 | 328,755 | |||||||
60,000 | Mytrah Energy Ltd.1 | 100,832 | 96,732 | |||||||
6,500 | Shriram City Union Finance Ltd. | 137,947 | 110,333 | |||||||
24,000 | Sun TV Network Ltd. | 170,451 | 153,309 | |||||||
23,000 | Torrent Pharmaceuticals Ltd. | 311,915 | 318,246 | |||||||
95,000 | Zee Entertainment Enterprises Ltd. | 313,885 | 377,362 | |||||||
Total India | 3,165,729 | 3,098,378 | ||||||||
Shares | Cost | Value | ||||||||
Common Stocks (continued) | ||||||||||
Indonesia (7.39%) | ||||||||||
450,000 | Bank Rakyat Indonesia (Persero) Tbk PT | $ | 326,092 | $ | 351,385 | |||||
2,800,000 | Clipan Finance Indonesia Tbk PT | 158,932 | 115,668 | |||||||
1,500,000 | Lippo Karawaci Tbk PT | 153,616 | 229,723 | |||||||
400,000 | Media Nusantara Citra Tbk PT | 67,242 | 125,945 | |||||||
600,000 | MNC Sky Vision Tbk PT1 | 125,197 | 142,065 | |||||||
149,785 | Sarana Menara Nusantara Tbk PT1 | 258,497 | 369,746 | |||||||
450,000 | Tower Bersama Infrastructure Tbk PT1 | 141,208 | 235,768 | |||||||
Total Indonesia | 1,230,784 | 1,570,300 | ||||||||
Korea, Republic of (7.49%) | ||||||||||
3,400 | Daum Communications Corp. | 308,350 | 234,893 | |||||||
9,000 | KIA Motors Corp. | 443,808 | 489,383 | |||||||
17,000 | KT Skylife Co. Ltd. | 534,618 | 561,184 | |||||||
6,500 | WeMade Entertainment Co., Ltd.1 | 341,786 | 306,204 | |||||||
Total Korea, Republic of | 1,628,562 | 1,591,664 | ||||||||
Malaysia (1.84%) | ||||||||||
110,000 | Hartalega Holdings Bhd | 210,386 | 222,820 | |||||||
85,000 | Top Glove Corporation Bhd | 178,972 | 167,875 | |||||||
Total Malaysia | 389,358 | 390,695 | ||||||||
Mexico (2.95%) | ||||||||||
55,941 | Agrinos AS1 | 300,934 | 164,848 | |||||||
2,800 | Fomento Econ´omico Mexicano | |||||||||
S.A.B. de C.V., ADR | 237,984 | 288,932 | ||||||||
60,000 | Grupo México S.A.B. de C.V., Series B | 228,926 | 173,645 | |||||||
Total Mexico | 767,844 | 627,425 | ||||||||
Norway (1.64%) | ||||||||||
45,000 | Opera Software ASA | 293,147 | 348,185 | |||||||
Philippines (4.97%) | ||||||||||
300,000 | Ayala Land, Inc. | 147,648 | 211,111 | |||||||
165,000 | Cebu Air, Inc. | 283,348 | 254,375 | |||||||
2,000,000 | Metro Pacific Investments Corp. | 185,566 | 244,445 | |||||||
120,000 | Universal Robina Corp. | 171,524 | 347,222 | |||||||
Total Philippines | 788,086 | 1,057,153 | ||||||||
Russian Federation (3.09%) | ||||||||||
110,000 | Exillon Energy plc1 | 280,582 | 215,823 | |||||||
16,000 | Yandex N.V., Cl A1 | 366,701 | 442,080 | |||||||
Total Russian Federation | 647,283 | 657,903 | ||||||||
Singapore (0.92%) | ||||||||||
90,000 | Global Logistic Properties Ltd. | 189,413 | 195,266 | |||||||
South Africa (1.03%) | ||||||||||
9,500 | Aspen Pharmacare Holdings Ltd. | 130,753 | 218,225 | |||||||
22 | See Notes to Financial Statements. |
Baron Emerging Markets Fund | June 30, 2013 |
STATEMENT OF NET ASSETS (Unaudited) (Continued) |
JUNE 30, 2013 |
Shares | Cost | Value | ||||||||
Common Stocks (continued) | ||||||||||
Taiwan, Province of China (5.98%) | ||||||||||
25,000 | Far EasTone Telecommunications Co., Ltd. | $ | 66,316 | $ | 67,148 | |||||
18,000 | Ginko International Co., Ltd. | 224,107 | 303,894 | |||||||
30,000 | HIWIN Technologies Corp. | 243,604 | 179,173 | |||||||
23,000 | MediaTek Inc. | 255,705 | 267,442 | |||||||
48,000 | Novatek Microelectronics Corp. | 195,404 | 233,025 | |||||||
12,000 | Taiwan Semiconductor | |||||||||
Manufacturing Co. Ltd., ADR | 213,036 | 219,840 | ||||||||
Total Taiwan, Province of China | 1,198,172 | 1,270,522 | ||||||||
Thailand (3.04%) | ||||||||||
35,000 | Bangkok Bank Public Co., Ltd., NVDR | 227,104 | 230,211 | |||||||
275,000 | L.P.N. Development PCL, Cl F | 123,936 | 213,687 | |||||||
300,000 | Major Cineplex Group Public Co. Ltd. | 204,058 | 203,128 | |||||||
Total Thailand | 555,098 | 647,026 | ||||||||
United Arab Emirates (0.79%) | ||||||||||
900,000 | SHUAA Capital psc1,2 | 206,396 | 169,079 | |||||||
Total Common Stocks | 17,715,957 | 18,727,380 | ||||||||
Principal | ||||||||||
Amount | ||||||||||
Short Term Investments (12.01%) | ||||||||||
$ 2,552,006 | Repurchase Agreement with Fixed Income Clearing Corp., dated 6/28/2013, 0.01% due 7/1/2013; Proceeds at maturity – $2,552,008; (Fully collateralized by $2,650,000 U.S. Treasury Note, 0.625% due 5/31/2017; Market value – $2,607,791)2 | 2,552,006 | 2,552,006 | |||||||
Total Investments (100.10%) | $ | 20,267,963 | 21,279,386 | |||||||
Liabilities Less Cash and Other Assets (-0.10%) | (20,988 | ) | ||||||||
Net Assets | $ | 21,258,398 | ||||||||
Retail Shares (Equivalent to $10.12 per share based on 362,993 shares outstanding) | $ | 3,673,370 | ||||||||
Institutional Shares (Equivalent to $10.12 per share based on 1,737,070 shares outstanding) | $ | 17,585,028 | ||||||||
% | Represents percentage of net assets. | |
1 | Non-income producing securities. | |
2 | Level 2 security. See Note 7 regarding Fair Value Measurements. | |
ADR | American Depositary Receipt. | |
NVDR | Non-Voting Depositary Receipt. | |
144A | Security is exempt from registration pursuant to Rule 144A under the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid pursuant to policies and procedures approved by the Board of Trustees, unless otherwise noted. At June 30, 2013, the market value of Rule 144A securities amounted to $59,047 or 0.28% of net assets. | |
All securities are Level 1, unless otherwise noted. |
Summary of Investments by Sector | Percentage of | |||
as of June 30, 2013 | Net Assets | |||
Information Technology | 25.5 | % | ||
Consumer Discretionary | 22.3 | |||
Financials | 12.7 | |||
Health Care | 9.5 | |||
Consumer Staples | 6.3 | |||
Industrials | 4.1 | |||
Telecommunication Services | 3.2 | |||
Materials | 2.4 | |||
Energy | 1.6 | |||
Utilities | 0.5 | |||
Cash and Cash Equivalents* | 11.9 | |||
100.0 | % | |||
* | Includes short term investments. |
See Notes to Financial Statements. | 23 |
Baron Energy and Resources Fund | June 30, 2013 |
STATEMENT OF NET ASSETS (Unaudited) (Continued) |
JUNE 30, 2013 |
Shares | Cost | Value | ||||||||
Common Stocks (99.33%) | ||||||||||
Energy (86.16%) | ||||||||||
Oil & Gas Drilling (5.43%) | ||||||||||
6,276 | Ensco plc, Cl A2 | $ | 370,502 | $ | 364,761 | |||||
5,346 | Helmerich & Payne, Inc. | 323,162 | 333,858 | |||||||
11,867 | Seadrill Partners, LLC2 | 323,369 | 348,297 | |||||||
1,017,033 | 1,046,916 | |||||||||
Oil & Gas Equipment & Services (24.51%) | ||||||||||
5,596 | CARBO Ceramics, Inc. | 460,159 | 377,338 | |||||||
3,350 | Core Laboratories N.V.2 | 462,092 | 508,061 | |||||||
26,259 | Forum Energy Technologies, Inc.1 | 718,912 | 799,061 | |||||||
13,596 | Halliburton Co. | 552,023 | 567,225 | |||||||
7,411 | National Oilwell Varco, Inc. | 519,494 | 510,618 | |||||||
7,993 | Oil States International, Inc.1 | 719,774 | 740,472 | |||||||
7,790 | RigNet, Inc.1 | 172,914 | 198,489 | |||||||
15,860 | Subsea 7 SA (Norway)1,2 | 348,684 | 278,069 | |||||||
28,957 | Superior Energy Services, Inc.1 | 773,643 | 751,145 | |||||||
4,727,695 | 4,730,478 | |||||||||
Oil & Gas Exploration & Production (30.87%) | ||||||||||
26,162 | Africa Oil Corp. (Canada)1,2 | 156,639 | 175,375 | |||||||
4,099 | Anadarko Petroleum Corporation | 351,909 | 352,227 | |||||||
19,195 | Bonanza Creek Energy, Inc.1 | 702,806 | 680,655 | |||||||
10,795 | Cobalt International Energy, Inc.1 | 295,190 | 286,823 | |||||||
10,199 | Concho Resources, Inc.1 | 867,550 | 853,860 | |||||||
22,908 | Exillon Energy plc (Russian Federation)1,2 | 71,783 | 44,946 | |||||||
2,704 | Gulfport Energy Corp.1 | 139,422 | 127,277 | |||||||
69,848 | Halcon Resources Corp.1 | 485,440 | 396,038 | |||||||
44,756 | Kodiak Oil & Gas Corp.1,2 | 394,131 | 397,881 | |||||||
8,961 | Lundin Petroleum AB (Sweden)1,2 | 201,454 | 177,721 | |||||||
9,649 | Noble Energy, Inc. | 575,492 | 579,326 | |||||||
19,225 | Oasis Petroleum, Inc.1 | 701,266 | 747,276 | |||||||
12,748 | SM Energy Co. | 784,329 | 764,625 | |||||||
10,209 | Southwestern Energy Co.1 | 377,610 | 372,935 | |||||||
6,105,021 | 5,956,965 | |||||||||
Oil & Gas Refining & Marketing (2.26%) | ||||||||||
2,468 | Marathon Petroleum Corp. | 201,711 | 175,376 | |||||||
4,997 | Tesoro Corp. | 293,382 | 261,443 | |||||||
495,093 | 436,819 | |||||||||
Oil & Gas Storage & Transportation (23.09%) | ||||||||||
7,426 | Atlas Energy LP | 389,470 | 363,800 | |||||||
11,387 | Golar LNG Ltd.2 | 410,786 | 363,131 | |||||||
5,642 | Golar LNG Partners L.P.2 | 184,653 | 192,392 | |||||||
10,304 | MPLX LP | 334,086 | 379,290 | |||||||
9,942 | Rose Rock Midstream L.P. | 341,913 | 364,076 | |||||||
42,504 | Scorpio Tankers Inc.2 | 361,409 | 381,686 | |||||||
15,588 | Susser Petroleum Partners LP | 457,290 | 456,728 | |||||||
22,840 | Tallgrass Energy Partners LP1 | 499,678 | 479,640 | |||||||
7,146 | Targa Resources Corp. | 442,199 | 459,702 | |||||||
10,014 | Tesoro Logistics LP | 547,565 | 605,447 | |||||||
4,976 | Western Gas Equity Partners LP | 155,431 | 204,862 | |||||||
3,176 | Western Gas Partners LP | 179,238 | 206,091 | |||||||
4,303,718 | 4,456,845 | |||||||||
Total Energy | 16,648,560 | 16,628,023 | ||||||||
Shares | Cost | Value | ||||||||
Common Stocks (continued) | ||||||||||
Industrials (8.13%) | ||||||||||
Construction & Engineering (1.87%) | ||||||||||
18,259 | Primoris Services Corp. | $ | 387,477 | $ | 360,067 | |||||
Diversified Support Services (0.60%) | ||||||||||
7,875 | TMS International Corp., Cl A | 120,753 | 116,786 | |||||||
Electrical Components & Equipment (1.02%) | ||||||||||
4,863 | Polypore International, Inc.1 | 192,127 | 195,979 | |||||||
Industrial Machinery (2.56%) | ||||||||||
5,256 | Chart Industries, Inc.1 | 413,096 | 494,537 | |||||||
Trading Companies & Distributors (2.08%) | ||||||||||
14,543 | MRC Global, Inc.1 | 419,214 | 401,678 | |||||||
Total Industrials | 1,532,667 | 1,569,047 | ||||||||
Materials (5.04%) | ||||||||||
Diversified Metals & Mining (0.65%) | ||||||||||
4,537 | Freeport-McMoRan Copper & Gold, Inc. | 151,293 | 125,267 | |||||||
Fertilizers & Agricultural Chemicals (0.15%) | ||||||||||
10,176 | Agrinos AS (Mexico)1,2 | 58,502 | 29,987 | |||||||
Forest Products (0.80%) | ||||||||||
6,068 | Boise Cascade Company1 | 170,851 | 154,188 | |||||||
Specialty Chemicals (0.76%) | ||||||||||
1,995 | Cytec Industries, Inc. | 143,744 | 146,134 | |||||||
Steel (2.68%) | ||||||||||
12,717 | SunCoke Energy, Inc.1 | 198,922 | 178,292 | |||||||
15,377 | SunCoke Energy Partners LP | 328,522 | 339,831 | |||||||
527,444 | 518,123 | |||||||||
Total Materials | 1,051,834 | 973,699 | ||||||||
Total Investments (99.33%) | $ | 19,233,061 | 19,170,769 | |||||||
Cash and Other Assets Less Liabilities (0.67%) | 128,409 | |||||||||
Net Assets | $ | 19,299,178 | ||||||||
Retail Shares (Equivalent to $10.01 per share based on 1,767,435 shares outstanding) | $ | 17,691,971 | ||||||||
Institutional Shares (Equivalent to $10.04 per share based on 160,104 shares outstanding) | $ | 1,607,207 | ||||||||
% | Represents percentage of net assets. | |
1 | Non-income producing securities. | |
2 | Foreign corporation. | |
All securities are Level 1, unless otherwise noted. |
24 | See Notes to Financial Statements. |
June 30, 2013 | Baron Global Advantage Fund |
STATEMENT OF NET ASSETS (Unaudited) |
JUNE 30, 2013 |
Shares | Cost | Value | |||||||||
Common Stocks (99.55%) | |||||||||||
Brazil (5.67%) | |||||||||||
14,925 | BM&FBOVESPA SA | $ | 82,055 | $ | 81,937 | ||||||
6,011 | Cetip SA - Mercados Organizados | 77,560 | 61,151 | ||||||||
1,320 | M. Dias Branco SA | 37,607 | 49,929 | ||||||||
Total Brazil | 197,222 | 193,017 | |||||||||
Canada (2.99%) | |||||||||||
2,824 | Brookfield Asset Management, Inc., Cl A | 96,385 | 101,721 | ||||||||
China (4.04%) | |||||||||||
520 | Baidu, Inc., ADR1 | 64,751 | 49,156 | ||||||||
3,236 | New Oriental Education & Technology Group, ADR | 73,889 | 71,677 | ||||||||
878 | Youku Tudou, Inc.1 | 20,677 | 16,849 | ||||||||
Total China | 159,317 | 137,682 | |||||||||
Germany (2.78%) | |||||||||||
1,058 | BASF SE | 83,704 | 94,513 | ||||||||
Hong Kong (3.85%) | |||||||||||
975 | Jardine Matheson Holdings Ltd. | 49,872 | 58,988 | ||||||||
26,622 | Wynn Macau Ltd. | 78,458 | 72,252 | ||||||||
Total Hong Kong | 128,330 | 131,240 | |||||||||
India (0.72%) | |||||||||||
2,249 | Just Dial Ltd.1 | 21,423 | 24,606 | ||||||||
Indonesia (7.92%) | |||||||||||
389,586 | Global Mediacom Tbk PT | 84,061 | 84,394 | ||||||||
177,358 | MNC Sky Vision Tbk PT1 | 39,149 | 41,994 | ||||||||
30,747 | Sarana Menara Nusantara Tbk PT1 | 70,433 | 75,899 | ||||||||
128,836 | Tower Bersama Infrastructure Tbk PT1 | 43,064 | 67,501 | ||||||||
Total Indonesia | 236,707 | 269,788 | |||||||||
Israel (1.99%) | |||||||||||
1,361 | Check Point Software Technologies Ltd.1 | 61,646 | 67,614 | ||||||||
Mexico (0.23%) | |||||||||||
2,682 | Agrinos AS1 | 20,694 | 7,903 | ||||||||
Netherlands (2.65%) | |||||||||||
1,145 | ASML Holding N.V. | 75,398 | 90,347 | ||||||||
Norway (4.00%) | |||||||||||
2,354 | Golar LNG Ltd. | 83,449 | 75,069 | ||||||||
2,083 | Seadrill Partners, LLC | 45,826 | 61,136 | ||||||||
Total Norway | 129,275 | 136,205 | |||||||||
Russian Federation (0.77%) | |||||||||||
947 | Yandex N.V., Cl A1 | 24,857 | 26,166 | ||||||||
Shares | Cost | Value | ||||||||
Common Stocks (continued) | ||||||||||
United Kingdom (1.87%) | ||||||||||
1,436 | Intertek Group plc | $ | 59,577 | $ | 63,841 | |||||
United States (60.07%) | ||||||||||
4,586 | Acxiom Corp.1 | 92,308 | 104,011 | |||||||
474 | Amazon.com, Inc.1 | 107,779 | 131,625 | |||||||
258 | Apple, Inc. | 146,462 | 102,189 | |||||||
2,578 | CyrusOne, Inc. | 48,982 | 53,468 | |||||||
312 | Equinix, Inc.1 | 50,130 | 57,633 | |||||||
5,397 | EVERTEC, Inc.1 | 107,940 | 118,572 | |||||||
4,460 | Facebook, Inc., Cl A1 | 130,229 | 110,876 | |||||||
209 | Google, Inc., Cl A1 | 133,137 | 183,997 | |||||||
5,580 | Greenlight Capital Re Ltd., Cl A1 | 136,086 | 136,877 | |||||||
1,727 | HomeAway, Inc.1 | 44,967 | 55,851 | |||||||
2,117 | ICICI Bank Limited, ADR | 69,519 | 80,975 | |||||||
1,773 | Illumina, Inc.1 | 77,685 | 132,691 | |||||||
145 | MasterCard, Inc., Cl A | 64,694 | 83,303 | |||||||
566 | Monsanto Co. | 43,298 | 55,921 | |||||||
902 | MPLX LP | 21,412 | 33,203 | |||||||
141 | priceline.com, Inc.1 | 99,522 | 116,625 | |||||||
1,684 | Susser Petroleum Partners LP | 37,993 | 49,341 | |||||||
3,462 | Tallgrass Energy Partners LP1 | 74,433 | 72,702 | |||||||
1,521 | Tesoro Logistics LP | 68,289 | 91,960 | |||||||
769 | Verisk Analytics, Inc., Cl A1 | 37,775 | 45,909 | |||||||
391 | Visa, Inc., Cl A | 47,519 | 71,455 | |||||||
2,537 | Xoom Corp.1 | 40,592 | 58,148 | |||||||
1,422 | YUM! Brands, Inc. | 99,510 | 98,601 | |||||||
Total United States | 1,780,261 | 2,045,933 | ||||||||
Total Investments (99.55%) | $ | 3,074,796 | 3,390,576 | |||||||
Cash and Other Assets Less Liabilities (0.45%) | 15,416 | |||||||||
Net Assets | $ | 3,405,992 | ||||||||
Retail Shares (Equivalent to $10.65 per share based on 144,002 shares outstanding) | $ | 1,533,974 | ||||||||
Institutional Shares (Equivalent to $10.68 per share based on 175,268 shares outstanding) | $ | 1,872,018 | ||||||||
% | Represents percentage of net assets. | |
1 | Non-income producing securities. | |
ADR | American Depositary Receipt. | |
All securities are Level 1, unless otherwise noted. |
Summary of Investments by Sector | Percentage of | |||
as of June 30, 2013 | Net Assets | |||
Information Technology | 34.2 | % | ||
Consumer Discretionary | 19.8 | |||
Financials | 15.1 | |||
Energy | 11.3 | |||
Industrials | 4.9 | |||
Materials | 4.6 | |||
Telecommunication Services | 4.2 | |||
Health Care | 3.9 | |||
Consumer Staples | 1.5 | |||
Cash and Cash Equivalents | 0.5 | |||
100.0 | % | |||
See Notes to Financial Statements. | 25 |
Baron Select Funds | June 30, 2013 |
STATEMENTS OF ASSETS AND LIABILITIES (Unaudited) |
JUNE 30, 2013 |
Baron | ||||||||||||||||
Baron Partners | Baron Focused | International | Baron Real | |||||||||||||
Fund | Growth Fund | Growth Fund | Estate Fund | |||||||||||||
Assets: | ||||||||||||||||
Investments in securities, at value* | $ | 1,458,241,435 | $ | 147,642,713 | $ | 51,834,159 | $ | 549,632,638 | ||||||||
Repurchase agreements, at value** | 492,114 | 1,474,538 | 2,063,537 | 15,073,916 | ||||||||||||
Total investments, at value | 1,458,733,549 | 149,117,251 | 53,897,696 | 564,706,554 | ||||||||||||
Foreign currency, at value† | — | — | 19,722 | — | ||||||||||||
Receivable for securities sold | 7,088,001 | 820,236 | 376,376 | — | ||||||||||||
Receivable for shares sold | 2,611,110 | 205,466 | 40,460 | 4,928,846 | ||||||||||||
Dividends and interest receivable | 192,104 | 56,019 | 35,127 | 474,208 | ||||||||||||
Prepaid expenses | 43,336 | 1,302 | 602 | 2,107 | ||||||||||||
1,468,668,100 | 150,200,274 | 54,369,983 | 570,111,715 | |||||||||||||
Liabilities: | ||||||||||||||||
Payable for borrowings against line of credit | 365,500,000 | — | — | — | ||||||||||||
Payable for securities purchased | 34,505,745 | 1,187,505 | 898,793 | 5,628,546 | ||||||||||||
Payable for shares redeemed | 960,495 | 288 | 18,335 | 355,442 | ||||||||||||
Distribution fees payable (Note 4) | 716 | 528 | 975 | 853 | ||||||||||||
Investment advisory fees payable (Note 4) | 363 | 749 | 715 | 740 | ||||||||||||
Accrued capital gains taxes | — | — | 10,013 | — | ||||||||||||
Accrued expenses and other payables | 408,216 | 33,090 | 39,542 | 49,543 | ||||||||||||
401,375,535 | 1,222,160 | 968,373 | 6,035,124 | |||||||||||||
Net Assets | $ | 1,067,292,565 | $ | 148,978,114 | $ | 53,401,610 | $ | 564,076,591 | ||||||||
Net Assets consist of: | ||||||||||||||||
Paid-in capital | $ | 879,681,589 | $ | 109,637,680 | $ | 40,085,682 | $ | 549,713,968 | ||||||||
Undistributed (accumulated) net investment income (loss) | (1,243,091 | ) | 2,341,768 | 131,831 | 293,640 | |||||||||||
Undistributed (accumulated) net realized gain (loss) on investments and foreign currency transactions | (403,250,233 | ) | (6,944,845 | ) | 331,283 | (116,589 | ) | |||||||||
Net unrealized appreciation on investments, foreign capital gains tax and foreign currency transactions | 592,104,300 | 43,943,511 | 12,852,814 | 14,185,572 | ||||||||||||
Net Assets | $ | 1,067,292,565 | $ | 148,978,114 | $ | 53,401,610 | $ | 564,076,591 | ||||||||
Retail Shares: | ||||||||||||||||
Net Assets | $ | 836,488,617 | $ | 41,313,486 | $ | 14,273,831 | $ | 369,559,764 | ||||||||
Shares Outstanding ($ 0.01 par value; indefinite shares authorized) | 30,686,227 | 3,378,713 | 892,358 | 19,284,514 | ||||||||||||
Net Asset Value and Offering Price Per Share | $ | 27.26 | $ | 12.23 | $ | 16.00 | $ | 19.16 | ||||||||
Institutional Shares: | ||||||||||||||||
Net Assets | $ | 230,803,948 | $ | 107,664,628 | $ | 39,127,779 | $ | 194,516,827 | ||||||||
Shares Outstanding ($ 0.01 par value; indefinite shares authorized) | 8,375,979 | 8,720,511 | 2,431,436 | 10,066,627 | ||||||||||||
Net Asset Value and Offering Price Per Share | $ | 27.56 | $ | 12.35 | $ | 16.09 | $ | 19.32 | ||||||||
*Investments in securities, at cost | $ | 866,137,135 | $ | 103,699,202 | $ | 38,970,580 | $ | 535,447,066 | ||||||||
**Repurchase agreements, at cost | 492,114 | 1,474,538 | 2,063,537 | 15,073,916 | ||||||||||||
Total investments, at cost | $ | 866,629,249 | $ | 105,173,740 | $ | 41,034,117 | $ | 550,520,982 | ||||||||
†Foreign currency, at cost: | $ | — | $ | — | $ | 19,875 | $ | — | ||||||||
26 | See Notes to Financial Statements. |
June 30, 2013 | Baron Select Funds |
STATEMENTS OF ASSETS AND LIABILITIES (Unaudited) (Continued) |
JUNE 30, 2013 |
Baron | Baron | Baron Global | ||||||||||
Emerging | Energy and | Advantage | ||||||||||
Markets Fund | Resources Fund | Fund | ||||||||||
Assets: | ||||||||||||
Investments in securities, at value* | $ | 18,727,380 | $ | 19,170,769 | $ | 3,390,576 | ||||||
Repurchase agreements, at value** | 2,552,006 | — | — | |||||||||
Total investments, at value | 21,279,386 | 19,170,769 | 3,390,576 | |||||||||
Foreign currency, at value† | 69,926 | 60 | 17 | |||||||||
Cash | — | 71,534 | 45,038 | |||||||||
Receivable for securities sold | 103,145 | — | — | |||||||||
Receivable for shares sold | 30,417 | 87,613 | — | |||||||||
Dividends and interest receivable | 7,800 | 5,176 | 621 | |||||||||
Prepaid expenses | 203 | — | — | |||||||||
21,490,877 | 19,335,152 | 3,436,252 | ||||||||||
Liabilities: | ||||||||||||
Payable for securities purchased | 179,722 | — | — | |||||||||
Payable for shares redeemed | — | 4,324 | — | |||||||||
Distribution fees payable (Note 4) | 814 | 164 | 451 | |||||||||
Investment advisory fees payable (Note 4) | 426 | 829 | — | |||||||||
Accrued capital gains taxes | 14,902 | — | 698 | |||||||||
Accrued expenses and other payables | 36,615 | 30,657 | 29,111 | |||||||||
232,479 | 35,974 | 30,260 | ||||||||||
Net Assets | $ | 21,258,398 | $ | 19,299,178 | $ | 3,405,992 | ||||||
Net Assets consist of: | ||||||||||||
Paid-in capital | $ | 21,445,021 | $ | 19,605,592 | $ | 3,172,219 | ||||||
Undistributed (accumulated) net investment income (loss) | (115,031 | ) | 4,828 | 6,856 | ||||||||
Accumulated net realized loss on investments and foreign currency transactions | (1,066,759 | ) | (248,949 | ) | (88,168 | ) | ||||||
Net unrealized appreciation (depreciation) on investments, foreign capital gains tax and foreign currency transactions | 995,167 | (62,293 | ) | 315,085 | ||||||||
Net Assets | $ | 21,258,398 | $ | 19,299,178 | $ | 3,405,992 | ||||||
Retail Shares: | ||||||||||||
Net Assets | $ | 3,673,370 | $ | 17,691,971 | $ | 1,533,974 | ||||||
Shares Outstanding ($ 0.01 par value; indefinite shares authorized) | 362,993 | 1,767,435 | 144,002 | |||||||||
Net Asset Value and Offering Price Per Share | $ | 10.12 | $ | 10.01 | $ | 10.65 | ||||||
Institutional Shares: | ||||||||||||
Net Assets | $ | 17,585,028 | $ | 1,607,207 | $ | 1,872,018 | ||||||
Shares Outstanding ($ 0.01 par value; indefinite shares authorized) | 1,737,070 | 160,104 | 175,268 | |||||||||
Net Asset Value and Offering Price Per Share | $ | 10.12 | $ | 10.04 | $ | 10.68 | ||||||
*Investments in securities, at cost | $ | 17,715,957 | $ | 19,233,061 | $ | 3,074,796 | ||||||
**Repurchase agreements, at cost | 2,552,006 | — | — | |||||||||
Total investments, at cost | $ | 20,267,963 | $ | 19,233,061 | $ | 3,074,796 | ||||||
†Foreign currency, at cost: | $ | 70,288 | $ | 61 | $ | 17 | ||||||
See Notes to Financial Statements. | 27 |
Baron Select Funds | June 30, 2013 |
STATEMENTS OF OPERATIONS (Unaudited) |
FOR THE SIX MONTHS ENDED JUNE 30, 2013 |
Baron | ||||||||||||||||
Baron Partners | Baron Focused | International | Baron Real | |||||||||||||
Fund | Growth Fund | Growth Fund | Estate Fund | |||||||||||||
Investment income: | ||||||||||||||||
Income: | ||||||||||||||||
Dividends | $ | 5,819,523 | $ | 661,292 | $ | 502,923 | $ | 2,557,620 | ||||||||
Interest | 16 | 334 | 95 | 946 | ||||||||||||
Securities lending income | — | — | 18,171 | — | ||||||||||||
Foreign taxes withheld on dividends | — | — | (29,426 | ) | (51,084 | ) | ||||||||||
Total income | 5,819,539 | 661,626 | 491,763 | 2,507,482 | ||||||||||||
Expenses: | ||||||||||||||||
Investment advisory fees (Note 4) | 4,843,309 | 693,254 | 273,548 | 1,794,244 | ||||||||||||
Distribution fees — Retail Shares (Note 4) | 963,867 | 46,644 | 19,218 | 312,395 | ||||||||||||
Shareholder servicing agent fees and expenses — Retail Shares | 117,089 | 13,352 | 10,980 | 32,234 | ||||||||||||
Shareholder servicing agent fees and expenses — Institutional Shares | 11,700 | 7,150 | 5,703 | 11,590 | ||||||||||||
Line of credit fees | 149,508 | — | — | — | ||||||||||||
Reports to shareholders | 76,800 | 4,115 | 3,872 | 55,448 | ||||||||||||
Trustee fees and expenses | 42,809 | 6,239 | 2,551 | 13,673 | ||||||||||||
Professional fees | 41,860 | 18,352 | 21,449 | 27,515 | ||||||||||||
Registration and filing fees | 41,216 | 28,248 | 21,838 | 36,203 | ||||||||||||
Custodian and fund accounting fees | 26,214 | 13,562 | 41,175 | 38,364 | ||||||||||||
Administration fees | 13,295 | 13,276 | 13,295 | 13,295 | ||||||||||||
Insurance expense | 10,910 | 1,378 | 550 | 1,304 | ||||||||||||
Miscellaneous expenses | 1,410 | 1,391 | 1,348 | 1,221 | ||||||||||||
Total operating expenses | 6,339,987 | 846,961 | 415,527 | 2,337,486 | ||||||||||||
Interest expense on borrowings | 1,497,724 | — | — | — | ||||||||||||
Total expenses | 7,837,711 | 846,961 | 415,527 | 2,337,486 | ||||||||||||
Reimbursement of expenses by Adviser — Retail Shares (Note 4) | — | (18,114 | ) | (21,361 | ) | (35,886 | ) | |||||||||
Reimbursement of expenses by Adviser — Institutional Shares (Note 4) | — | (19,623 | ) | (32,921 | ) | (15,537 | ) | |||||||||
Net expenses | 7,837,711 | 809,224 | 361,245 | 2,286,063 | ||||||||||||
Net investment income (loss) | (2,018,172 | ) | (147,598 | ) | 130,518 | 221,419 | ||||||||||
Realized and unrealized gain (loss) on investments: | ||||||||||||||||
Net realized gain (loss) on: | ||||||||||||||||
Investments sold | 37,755,157 | 2,254,963 | 855,442 | (748,756 | ) | |||||||||||
Foreign currency transactions | — | 20,011 | (46,349 | ) | 34,547 | |||||||||||
Net change in unrealized appreciation (depreciation) of: | ||||||||||||||||
Investments | 134,113,819 | 8,355,589 | 651,055 | 1 | 1,320,007 | |||||||||||
Foreign currency translations | — | — | 62 | (456 | ) | |||||||||||
Net gain on investments | 171,868,976 | 10,630,563 | 1,460,210 | 605,342 | ||||||||||||
Net increase in net assets resulting from operations | $ | 169,850,804 | $ | 10,482,965 | $ | 1,590,728 | $ | 826,761 | ||||||||
1 Net of change in accrued foreign capital gains tax of $69,102.
28 | See Notes to Financial Statements. |
June 30, 2013 | Baron Select Funds |
STATEMENTS OF OPERATIONS (Unaudited) (Continued) |
FOR THE SIX MONTHS ENDED JUNE 30, 2013 |
Baron | Baron Energy | Baron Global | ||||||||||
Emerging | and Resources | Advantage | ||||||||||
Markets Fund | Fund | Fund | ||||||||||
Investment income: | ||||||||||||
Income: | ||||||||||||
Dividends | $ | 116,592 | $ | 54,263 | $ | 29,426 | ||||||
Interest | 104 | 31 | 1 | |||||||||
Securities lending income | 917 | — | 2,015 | |||||||||
Foreign taxes withheld on dividends | (8,561 | ) | (87 | ) | (1,836 | ) | ||||||
Total income | 109,052 | 54,207 | 29,606 | |||||||||
Expenses: | ||||||||||||
Investment advisory fees (Note 4) | 92,134 | 43,084 | 16,682 | |||||||||
Distribution fees — Retail Shares (Note 4) | 4,641 | 8,854 | 1,926 | |||||||||
Shareholder servicing agent fees and expenses — Retail Shares | 7,591 | 7,830 | 6,315 | |||||||||
Shareholder servicing agent fees and expenses — Institutional Shares | 5,216 | 4,589 | 4,534 | |||||||||
Line of credit fees | — | — | — | |||||||||
Reports to shareholders | 2,192 | 860 | 248 | |||||||||
Trustee fees and expenses | 890 | 268 | 152 | |||||||||
Professional fees | 21,104 | 20,166 | 18,447 | |||||||||
Registration and filing fees | 16,068 | 14,070 | 27,434 | |||||||||
Custodian and fund accounting fees | 52,806 | 15,533 | 16,220 | |||||||||
Administration fees | 13,262 | 13,233 | 13,265 | |||||||||
Insurance expense | 137 | 68 | 63 | |||||||||
Miscellaneous expenses | 1,281 | 1,762 | 1,066 | |||||||||
Total operating expenses | 217,322 | 130,317 | 106,352 | |||||||||
Interest expense on borrowings | — | — | — | |||||||||
Total expenses | 217,322 | 130,317 | 106,352 | |||||||||
Reimbursement of expenses by Adviser — Retail Shares (Note 4) | (25,101 | ) | (51,248 | ) | (39,767 | ) | ||||||
Reimbursement of expenses by Adviser — Institutional Shares (Note 4) | (72,276 | ) | (22,490 | ) | (43,806 | ) | ||||||
Net expenses | 119,945 | 56,579 | 22,779 | |||||||||
Net investment income (loss) | (10,893 | ) | (2,372 | ) | 6,827 | |||||||
Realized and unrealized gain (loss) on investments: | �� | |||||||||||
Net realized gain (loss) on: | ||||||||||||
Investments sold | (56,496 | )1 | (148,170 | ) | 20,223 | |||||||
Foreign currency transactions | (24,262 | ) | 1,361 | (4,216 | ) | |||||||
Net change in unrealized appreciation (depreciation) of: | ||||||||||||
Investments | (221,855 | )2 | (51,721 | ) | 52,144 | 3 | ||||||
Foreign currency translations | (2,066 | ) | (3 | ) | 2 | |||||||
Net gain (loss) on investments | (304,679 | ) | (198,533 | ) | 68,153 | |||||||
Net increase (decrease) in net assets resulting from operations | $ | (315,572 | ) | $ | (200,905 | ) | $ | 74,980 | ||||
1 Net of foreign capital gains tax of $5,884.
2 Net of change in accrued foreign capital gains tax of $39,051.
3 Net of change in accrued foreign capital gains tax of $(698).
See Notes to Financial Statements. | 29 |
Baron Select Funds | June 30, 2013 |
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited) |
Baron Partners Fund | Baron Focused Growth Fund | Baron International Growth Fund | ||||||||||||||||||||||
For the Six | For the Year | For the Six | For the Year | For the Six | For the Year | |||||||||||||||||||
Months Ended | Ended | Months Ended | Ended | Months Ended | Ended | |||||||||||||||||||
June 30, | December 31, | June 30, | December 31, | June 30, | December 31, | |||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||||||||||
Operations: | ||||||||||||||||||||||||
Net investment income (loss) | $ | (2,018,172 | ) | $ | (1,075,171 | ) | $ | (147,598 | ) | $ | 2,488,615 | $ | 130,518 | $ | 12,241 | |||||||||
Net realized gain | 37,755,157 | 135,642,574 | 2,274,974 | 4,449,288 | 809,093 | 508,930 | ||||||||||||||||||
Net change in unrealized appreciation | 134,113,819 | 5,737,661 | 8,355,589 | 8,659,287 | 651,117 | 7,233,636 | ||||||||||||||||||
Increase in net assets resulting from operations | 169,850,804 | 140,305,064 | 10,482,965 | 15,597,190 | 1,590,728 | 7,754,807 | ||||||||||||||||||
Distributions to shareholders from: | ||||||||||||||||||||||||
Net investment income — Institutional Shares | — | — | — | — | — | (66,030 | ) | |||||||||||||||||
Decrease in net assets from distributions to shareholders | — | — | — | — | — | (66,030 | ) | |||||||||||||||||
Capital share transactions: | ||||||||||||||||||||||||
Proceeds from the sale of shares — Retail Shares | 134,891,320 | 42,020,006 | 10,936,214 | 5,232,804 | 2,478,102 | 5,745,684 | ||||||||||||||||||
Proceeds from the sale of shares — Institutional Shares | 63,077,228 | 59,510,090 | 12,932,487 | 18,943,568 | 516,751 | 2,985,048 | ||||||||||||||||||
Net asset value of shares issued in reinvestment of distributions — Institutional Shares | — | — | — | — | — | 38,679 | ||||||||||||||||||
Cost of shares redeemed — Retail Shares | (88,601,929 | ) | (476,365,509 | ) | (3,727,057 | ) | (6,518,703 | ) | (4,256,153 | ) | (3,821,525 | ) | ||||||||||||
Cost of shares redeemed — Institutional Shares | (12,081,202 | ) | (59,363,298 | ) | (898,819 | ) | (5,869,485 | ) | (1,546,196 | ) | (198,599 | ) | ||||||||||||
Increase (decrease) in net assets derived from capital share transactions | 97,285,417 | (434,198,711 | ) | 19,242,825 | 11,788,184 | (2,807,496 | ) | 4,749,287 | ||||||||||||||||
Increase (decrease) in net assets | 267,136,221 | (293,893,647 | ) | 29,725,790 | 27,385,374 | (1,216,768 | ) | 12,438,064 | ||||||||||||||||
Net Assets: | ||||||||||||||||||||||||
Beginning of period | 800,156,344 | 1,094,049,991 | 119,252,324 | 91,866,950 | 54,618,378 | 42,180,314 | ||||||||||||||||||
End of period | $ | 1,067,292,565 | $ | 800,156,344 | $ | 148,978,114 | $ | 119,252,324 | $ | 53,401,610 | $ | 54,618,378 | ||||||||||||
Undistributed (accumulated) net investment income (loss) at end of period | $ | (1,243,091 | ) | $ | 775,081 | $ | 2,341,768 | $ | 2,489,366 | $ | 131,831 | $ | 1,313 | |||||||||||
Capital share transactions—Retail Shares | ||||||||||||||||||||||||
Shares sold | 5,126,688 | 1,993,487 | 894,671 | 502,457 | 155,549 | 386,734 | ||||||||||||||||||
Shares redeemed | (3,407,825 | ) | (23,075,591 | ) | (304,049 | ) | (630,241 | ) | (267,259 | ) | (265,758 | ) | ||||||||||||
Net increase (decrease) | 1,718,863 | (21,082,104 | ) | 590,622 | (127,784 | ) | (111,710 | ) | 120,976 | |||||||||||||||
Capital share transactions — Institutional Shares | ||||||||||||||||||||||||
Shares sold | 2,400,399 | 2,893,607 | 1,052,996 | 1,789,884 | 32,169 | 203,315 | ||||||||||||||||||
Shares issued in reinvestment of distributions | — | — | — | — | — | 2,518 | ||||||||||||||||||
Shares redeemed | (456,564 | ) | (2,796,855 | ) | (72,718 | ) | (558,808 | ) | (96,895 | ) | (13,454 | ) | ||||||||||||
Net increase (decrease) | 1,943,835 | 96,752 | 980,278 | 1,231,076 | (64,726 | ) | 192,379 | |||||||||||||||||
30 | See Notes to Financial Statements. |
June 30, 2013 | Baron Select Funds |
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited) (Continued) |
Baron Real Estate Fund | Baron Emerging Markets Fund | |||||||||||||||
For the Six | For the Year | For the Six | For the Year | |||||||||||||
Months Ended | Ended | Months Ended | Ended | |||||||||||||
June 30, | December 31, | June 30, | December 31, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income (loss) | $ | 221,419 | $ | 72,166 | $ | (10,893 | ) | $ | (16,488 | ) | ||||||
Net realized gain (loss) | (714,209 | ) | 2,195,965 | (80,758 | ) | (536,166 | ) | |||||||||
Net change in unrealized appreciation (depreciation) | 1,319,551 | 11,694,320 | (223,921 | ) | 2,053,462 | |||||||||||
Increase (decrease) in net assets resulting from operations | 826,761 | 13,962,451 | (315,572 | ) | 1,500,808 | |||||||||||
Distributions to shareholders from: | ||||||||||||||||
Net investment income — Retail Shares | — | — | — | (32,676 | ) | |||||||||||
Net investment income — Institutional Shares | — | — | — | (101,665 | ) | |||||||||||
Net realized gain on investments — Retail Shares | — | (800,487 | ) | — | — | |||||||||||
Net realized gain on investments — Institutional Shares | — | (554,089 | ) | — | — | |||||||||||
Decrease in net assets from distributions to shareholders | — | (1,354,576 | ) | — | (134,341 | ) | ||||||||||
Capital share transactions: | ||||||||||||||||
Proceeds from the sale of shares — Retail Shares | 395,560,179 | 43,568,003 | 1,896,517 | 1,070,469 | ||||||||||||
Proceeds from the sale of shares — Institutional Shares | 174,368,773 | 25,544,119 | 12,752,627 | 757,617 | ||||||||||||
Net asset value of shares issued in reinvestment of distributions — Retail Shares | — | 753,087 | — | 31,548 | ||||||||||||
Net asset value of shares issued in reinvestment of distributions — Institutional Shares | — | 536,025 | — | 77,446 | ||||||||||||
Cost of shares redeemed — Retail Shares | (80,797,410 | ) | (8,815,007 | ) | (1,125,131 | ) | (599,084 | ) | ||||||||
Cost of shares redeemed — Institutional Shares | (14,964,951 | ) | (918,781 | ) | (827,286 | ) | (47,266 | ) | ||||||||
Increase in net assets derived from capital share transactions | 474,166,591 | 60,667,446 | 12,696,727 | 1,290,730 | ||||||||||||
Increase in net assets | 474,993,352 | 73,275,321 | 12,381,155 | 2,657,197 | ||||||||||||
Net Assets: | ||||||||||||||||
Beginning of period | 89,083,239 | 15,807,918 | 8,877,243 | 6,220,046 | ||||||||||||
End of period | $ | 564,076,591 | $ | 89,083,239 | $ | 21,258,398 | $ | 8,877,243 | ||||||||
Undistributed (accumulated) net investment income (loss) at end of period | $ | 293,640 | $ | 72,221 | $ | (115,031 | ) | $ | (104,138 | ) | ||||||
Capital share transactions — Retail Shares | ||||||||||||||||
Shares sold | 20,355,292 | 2,716,738 | 180,829 | 112,447 | ||||||||||||
Shares issued in reinvestment of distributions | — | 44,800 | — | 3,213 | ||||||||||||
Shares redeemed | (4,129,718 | ) | (572,143 | ) | (105,214 | ) | (64,076 | ) | ||||||||
Net increase | 16,225,574 | 2,189,395 | 75,615 | 51,584 | ||||||||||||
Capital share transactions — Institutional Shares | ||||||||||||||||
Shares sold | 8,813,003 | 1,643,761 | 1,221,802 | 78,850 | ||||||||||||
Shares issued in reinvestment of distributions | — | 31,680 | — | 7,894 | ||||||||||||
Shares redeemed | (758,022 | ) | (56,483 | ) | (80,395 | ) | (5,122 | ) | ||||||||
Net increase | 8,054,981 | 1,618,958 | 1,141,407 | 81,622 | ||||||||||||
See Notes to Financial Statements. | 31 |
Baron Select Funds | June 30, 2013 |
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited) (Continued) |
Baron Energy and Resources Fund | Baron Global Advantage Fund | |||||||||||||||
For the Six | For the Year | For the Six | For the Period | |||||||||||||
Months Ended | Ended | Months Ended | Ended | |||||||||||||
June 30, | December 31, | June 30, | December 31, | |||||||||||||
2013 | 2012 | 2013 | 20121 | |||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income (loss) | $ | (2,372 | ) | $ | (5,846 | ) | $ | 6,827 | $ | (5,871 | ) | |||||
Net realized gain (loss) | (146,809 | ) | (89,768 | ) | 16,007 | (101,985 | ) | |||||||||
Net change in unrealized appreciation (depreciation) | (51,724 | ) | (10,569 | ) | 52,146 | 262,939 | ||||||||||
Increase (decrease) in net assets resulting from operations | (200,905 | ) | (106,183 | ) | 74,980 | 155,083 | ||||||||||
Capital share transactions: | ||||||||||||||||
Proceeds from the sale of shares — Retail Shares | 16,800,894 | 2,526,351 | 297,937 | 2,282,183 | ||||||||||||
Proceeds from the sale of shares — Institutional Shares | 379,993 | 1,448,127 | 200,650 | 1,535,360 | ||||||||||||
Cost of shares redeemed — Retail Shares | (649,077 | ) | (640,910 | ) | (283,933 | ) | (834,781 | ) | ||||||||
Cost of shares redeemed — Institutional Shares | (244,256 | ) | (14,856 | ) | (21,487 | ) | — | |||||||||
Increase in net assets derived from capital share transactions | 16,287,554 | 3,318,712 | 193,167 | 2,982,762 | ||||||||||||
Increase in net assets | 16,086,649 | 3,212,529 | 268,147 | 3,137,845 | ||||||||||||
Net Assets: | ||||||||||||||||
Beginning of period | 3,212,529 | — | 3,137,845 | — | ||||||||||||
End of period | $ | 19,299,178 | $ | 3,212,529 | $ | 3,405,992 | $ | 3,137,845 | ||||||||
Undistributed net investment income at end of period | $ | 4,828 | $ | 7,200 | $ | 6,856 | $ | 29 | ||||||||
Capital share transactions — Retail Shares | ||||||||||||||||
Shares sold | 1,639,197 | 260,108 | 27,836 | 231,416 | ||||||||||||
Shares redeemed | (64,010 | ) | (67,860 | ) | (26,212 | ) | (89,038 | ) | ||||||||
Net increase | 1,575,187 | 192,248 | 1,624 | 142,378 | ||||||||||||
Capital share transactions — Institutional Shares | ||||||||||||||||
Shares sold | 36,966 | 148,547 | 18,351 | 158,916 | ||||||||||||
Shares redeemed | (23,812 | ) | (1,597 | ) | (1,999 | ) | — | |||||||||
Net increase | 13,154 | 146,950 | 16,352 | 158,916 | ||||||||||||
32 | See Notes to Financial Statements. |
June 30, 2013 | Baron Select Funds |
STATEMENT OF CASH FLOWS (Unaudited) |
FOR THE SIX MONTHS ENDED JUNE 30, 2013 |
Baron Partners | |||||
Fund | |||||
Increase (Decrease) in Cash: | |||||
Cash Used from Operating Activities | |||||
Net increase in net assets resulting from operations | $ | 169,850,804 | |||
Adjustments to reconcile net increase in net assets resulting from operations to net cash used by operating activities: | |||||
Purchases of portfolio securities | (270,271,626 | ) | |||
Proceeds from sales of portfolio securities | 102,797,598 | ||||
Net purchases, sales and maturities of short-term investments | (59,802 | ) | |||
Increase in dividends and interest receivable | (192,104 | ) | |||
Decrease in prepaid expenses | 76,378 | ||||
Decrease in accrued expenses | (78,728 | ) | |||
Net realized gain on investments | (37,755,157 | ) | |||
Net change in unrealized appreciation of investments | (134,113,819 | ) | |||
Net cash used by operating activities | $ | (169,746,456 | ) | ||
Cash Provided from Financing Activities | |||||
Proceeds from shares sold | $ | 195,800,514 | |||
Payment for shares redeemed | (102,054,058 | ) | |||
Increase in payable for borrowings against line of credit | 76,000,000 | ||||
Net cash provided in financing activities | $ | 169,746,456 | |||
Net increase in cash | — | ||||
Cash at beginning of period | — | ||||
Cash at end of period | $ | — | |||
Supplemental cash flow information: | |||||
Interest paid | $ | 1,474,285 | |||
See Notes to Financial Statements. | 33 |
Baron Select Funds | June 30, 2013 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) |
1. ORGANIZATION
Baron Select Funds (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company established as a Delaware statutory trust on April 30, 2003.The Trust currently offers seven series (individually, a “Fund” and collectively, the “Funds”): Baron Partners Fund, Baron Focused Growth Fund, Baron Real Estate Fund and Baron Energy and Resources Fund, which are non-diversified; and Baron International Growth Fund, Baron Emerging Markets Fund, and Baron Global Advantage Fund, which are diversified. The Funds’ investment objective is to seek capital appreciation. Baron Partners Fund may employ “leverage” by borrowing money and using it for the purchase of additional securities. Borrowing for investment increases both investment opportunity and investment risk. Baron International Growth Fund, Baron Emerging Markets Fund and Baron Global Advantage Fund invest their assets primarily in non-U.S. companies. Baron Real Estate Fund invests its assets primarily in U.S. and non-U.S. real estate and real estate-related companies. Baron Energy and Resources Fund invests its assets primarily in common stock of U.S. and non-U.S. energy and resources companies and related companies and energy and resources master limited partnerships (“MLPs”) of any market capitalization.
Each Fund offers two classes of shares, Retail Shares and Institutional Shares, which differ only in their ongoing fees, expenses and eligibility requirements. Retail Shares are offered to all investors. Institutional Shares are for investments in the amount of $1 million or more per Fund. Institutional Shares are intended for certain financial intermediaries that offer shares of Baron Funds through fee based platforms, retirement platforms or other platforms. Each class of shares has equal rights to earnings and assets except that each class bears different expenses for distribution and shareholder servicing. Each Fund’s investment income, realized and unrealized gains or losses on investments and foreign currency, and expenses other than those attributable to a specific class are allocated to each class based on its relative net assets. Each class of shares has exclusive voting rights with respect to matters that affect just that class.
Baron Partners Fund was organized originally as a limited partnership in January 1992, under the laws of the State of Delaware. Effective as of the close of business on April 30, 2003, the predecessor partnership was reorganized into a Delaware statutory trust. Baron Partners Fund commenced operations on April 30, 2003 with a contribution of assets and liabilities, including securities-in-kind from the predecessor partnership.
Baron Focused Growth Fund was organized originally as a limited partnership in May 1996, under the laws of the State of Delaware. Effective as of the close of business on June 30, 2008, the predecessor partnership was reorganized into a series of the Trust. Baron Focused Growth Fund commenced operations on June 30, 2008 with a contribution of assets and liabilities, including securities-in-kind from the predecessor partnership.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the Funds. The policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the period. Actual results could differ from those estimates. Events occurring subsequent to the date of the Statements of Assets and Liabilities and through the date of issuance of the financial statements have been evaluated for adjustment to or disclosure in the financial statements.
a) Security Valuation. The Funds’ share prices or net asset values are calculated as of the close of the regular trading session (usually 4 p.m. E.T.) on the New York Stock Exchange (“NYSE”) on any day on which the NYSE is open. Portfolio securities traded on any national stock exchange are valued based on the last sale price. For securities traded on NASDAQ, the Funds use the NASDAQ Official Closing Price. Where market quotations are not readily available, or, if in BAMCO, Inc.’s (the “Adviser”) judgment, they do not accurately reflect the fair value of a security, or an event occurs after the market close but before the Funds are priced that materially affects the value of a security, the securities will be valued by the Adviser using policies and procedures approved by the Board of Trustees (the “Board”). The Adviser has a Fair Valuation Committee (the “Committee”) comprised of senior executives and the Committee reports to the Board every quarter. Factors the Committee considers when valuing a security include whether a current price is stale, there is recent news, the security is thinly traded, transactions are infrequent or quotations are genuine. There can be no guarantee, however, that a fair valuation used by the Funds on any given day will more accurately reflect the market value of an investment than the closing price of such investment in its market. Debt instruments having a remaining maturity greater than 60 days will be valued on the basis of prices obtained from a pricing service approved by the Board or at the mean of the bid and ask prices from the dealer maintaining an active market in that security. Money market instruments held by the Funds with a remaining maturity of 60 days or less are valued at amortized cost, which approximates fair value.
Non-U.S. equity securities are valued on the basis of their most recent closing market prices and translated into U.S. dollars at 4 p.m. E.T., except under the circumstances described below. Most foreign markets close before 4 p.m. E.T. For securities primarily traded in the Far East, for example, the most recent closing prices may be as much as fifteen hours old at 4 p.m. E.T. If the Adviser determines that developments between the close of the foreign markets and 4 p.m. E.T. will, in its judgment, materially affect the value of some or all of the Funds’ non-U.S. securities, the Adviser will adjust the previous closing prices to reflect what it believes to be the fair value of the securities as of 4 p.m. E.T. In deciding whether to make these adjustments, the Adviser reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent non-U.S. securities and baskets of non-U.S. securities. The Adviser may also fair value securities in other situations, for example, when a particular foreign market is closed but the Funds are open. The Adviser uses an outside pricing service which utilizes a systematic methodology to provide it with closing market prices and information used for adjusting those prices. The Adviser cannot predict how often it will use closing prices or how often it will adjust those prices. As a means of evaluating its fair value process, the Adviser routinely compares closing market prices, the next day’s opening prices in the same markets, and adjusted prices. Other mutual funds may adjust the prices of their securities by different amounts.
b) Securities Transactions, Investment Income and Expense Allocation. Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on an identified cost basis for financial reporting and federal income tax purposes. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis which includes the accretion of discounts and amortization of premiums. Certain dividends from foreign securities will be recorded as soon as the Funds are informed of the dividend if such information is obtained subsequent to the ex-dividend date. Distributions received from certain investments held by the Funds may be comprised of dividends, realized gains and returns of capital. The Funds originally estimate the expected classification of such payments. The amounts may subsequently be reclassified upon receipt of information from the issuer. The Funds are charged for those expenses of the Trust that are directly attributable to each Fund, such as advisory and custodian fees. Expenses that are not directly attributable to a Fund are typically allocated among the Funds in proportion to their respective net assets.
34
June 30, 2013 | Baron Select Funds |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
c) Foreign Currency Translations. Values of assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the price of such currencies at the time the net asset value is determined. Purchases and sales of investments and dividend income are converted at the prevailing rate of exchange on the respective dates of such transactions. Net realized gain (loss) on foreign currency transactions include gain (loss) arising from the fluctuation in the exchange rates between trade and settlement dates on security transactions and currency gain (loss) between the accrual and payment dates on dividends and foreign withholding taxes. The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments and foreign currency transactions. The Funds may invest in foreign securities and foreign currency transactions that may involve risks not associated with domestic investments as a result of the level of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability, among others.
Pursuant to U.S. federal income tax regulations, gains and losses from certain foreign currency transactions and the foreign currency portion of gains and losses realized on sales and maturities of foreign denominated debt securities are generally treated as ordinary income for U.S. federal income tax purposes.
d) Securities Lending. The Funds may lend securities to certain brokers. Upon such loans, the Funds receive collateral which is maintained by the custodian. The Funds earn interest on such collateral and earn income in the form of negotiated lenders’ fees, both of which are included in securities lending income in the Statements of Operations. Securities loaned are required to be secured at all times by collateral equal to at least 102% of the market value of the securities loaned. Risks may arise upon entering into securities lending to the extent that the value of the collateral is less than the value of the securities loaned due to the changes in the value of collateral or the loaned securities. The Funds may receive collateral in the form of cash or other eligible securities, such as a letter of credit issued by a U.S. bank or securities issued or guaranteed by the U.S. government. Securities purchased with cash collateral are subject to the risks inherent in investing in these securities.
At June 30, 2013, the Funds did not have any securities on loan.
e) Short Sales. The Funds may sell securities short. When the Funds sell short, the Funds record a liability for securities sold short and record an asset equal to the proceeds received. The amount of the liability is subsequently marked to market to reflect the market value of the securities sold short.The Funds may incur dividend expense if a security that has been sold short declares a dividend. The Funds are exposed to market risk based on the amount, if any, that the market value of the securities sold short exceeds the proceeds received. The Funds are required to maintain collateral in a segregated account for the outstanding short sales. Short sales involve elements of market risks and exposure to loss in excess of the amount recognized in the Statements of Assets and Liabilities. The Funds’ risk of loss in these types of short sales is unlimited because there is no limit to the cost of replacing the borrowed security. During the six months ended June 30, 2013, the Funds did not engage in short selling.
f) Repurchase Agreements. The Funds may invest in repurchase agreements, which are short-term investments whereby the Funds acquire ownership of a debt security and the seller agrees to repurchase the security at a future date at a specified price. When entering into repurchase agreements, it is the Funds’ policy that their custodian or a third party custodian take possession of the underlying collateral securities, the market value of which, at all times, equals at least 102% of the principal amount of the repurchase transaction. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market to ensure the adequacy of the collateral. If the seller defaults and the market value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Funds may be delayed or limited.
g) Federal and Foreign Income Taxes. The Trust treats each Fund as a separate entity for federal income tax purposes. Each Fund intends to meet the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute to its shareholders substantially all of its net investment income and any net realized capital gains at least annually. None of the Funds will be subject to federal or state income taxes to the extent that they qualify as regulated investment companies and all of their income is distributed.
The Funds may be subject to foreign taxes on income and gains on investments that are accrued based upon the Funds’ understanding of the tax rules and regulations that exist in the countries in which the Funds invest. Foreign governments may also impose taxes or other payments on investments with respect to foreign securities. Such taxes are accrued as applicable.
h) Restricted Securities. The Funds may invest in securities which are restricted as to public sale in accordance with the Securities Act of 1933. Such assets are valued by the Adviser pursuant to policies and procedures approved by the Board.
i) Distributions to Shareholders. Income and capital gain distributions to shareholders are determined in accordance with income tax regulations which may differ from GAAP. These differences are primarily due to differing treatments for net investment loss, foreign currency gains and losses, reclassification of distributions, partnership basis adjustments, income from passive foreign investment corporations and wash sale losses deferred.
j) Commitments and Contingencies. In the normal course of business, the Funds may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnification. The maximum exposure to the Funds under these agreements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.
k) Cash and Cash Equivalents. The Funds consider all short term liquid investments with a maturity of three months or less when purchased to be cash equivalents.
l) Fund Concentration. Certain of the Funds hold relatively concentrated portfolios that may contain fewer securities or industries than the portfolios of other mutual funds. Holding a relatively concentrated portfolio may increase the risk that the value of a Fund could decrease because of the poor performance of one or a few investments. Additionally, these Funds may encounter some difficulty in liquidating securities of concentrated positions.
3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than short term securities, for the six months ended June 30, 2013 were as follows:
Fund | Purchases | Sales | ||||
Baron Partners Fund | $304,777,371 | $101,421,376 | ||||
Baron Focused Growth Fund | 38,843,388 | 12,390,088 | ||||
Baron International Growth Fund | 12,229,681 | 14,255,621 | ||||
Baron Real Estate Fund | 483,839,584 | 20,729,434 | ||||
Baron Emerging Markets Fund | 14,259,213 | 3,546,393 | ||||
Baron Energy and Resources Fund | 17,146,264 | 843,675 | ||||
Baron Global Advantage Fund | 901,150 | 678,336 |
35
Baron Select Funds | June 30, 2013 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
4. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
a) Investment Advisory Fees. The Adviser, a wholly owned subsidiary of Baron Capital Group, Inc. (“BCG”), serves as investment adviser to the Funds. As compensation for services rendered, the Adviser receives a fee payable monthly equal to 1% per annum of the average daily net assets of the respective Funds.The Adviser has contractually agreed to reduce its fee, to the extent required to limit the net annual operating expense ratio (excluding portfolio transaction costs, interest, dividend and extraordinary expenses), as follows:
Annual Operating | ||||||||
Expense Ratio Cap | ||||||||
Retail | Institutional | |||||||
Fund | Shares | Shares | ||||||
Baron Partners Fund | 1.45 | % | 1.20 | % | ||||
Baron Focused Growth Fund | 1.35 | % | 1.10 | % | ||||
Baron International Growth Fund | 1.50 | % | 1.25 | % | ||||
Baron Real Estate Fund | 1.35 | % | 1.10 | % | ||||
Baron Emerging Markets Fund | 1.50 | % | 1.25 | % | ||||
Baron Energy and Resources Fund | 1.35 | % | 1.10 | % | ||||
Baron Global Advantage Fund | 1.50 | % | 1.25 | % |
b) Distribution Fees. Baron Capital, Inc. (“BCI”), a wholly owned subsidiary of BCG, is a registered broker-dealer and the distributor of the Retail Shares pursuant to a distribution plan under Rule 12b-1 of the 1940 Act. The Funds are authorized to pay BCI a distribution fee payable monthly equal to 0.25% per annum of the Retail Shares’ average daily net assets of the respective Funds.
c) Trustee Fees. Certain Trustees of the Trust may be deemed to be affiliated with, or interested persons (as defined by the 1940 Act) of the Funds’Adviser or of BCI. None of the Trustees so affiliated received compensation for his or her services as a Trustee of the Trust. None of the Funds’ officers received compensation from the Funds for their services as an officer.
d) Fund Accounting and Administration Fees. The Funds have entered into an agreement with State Street Bank and Trust Company (the “Custodian”) to perform accounting and certain administrative services.The Custodian is compensated for fund accounting services based on a percentage of the Funds’ net assets, subject to certain minimums plus fixed annual fees for the administrative services.
5. LINE OF CREDIT
Baron Partners Fund participates in a committed line of credit agreement with the Custodian in the amount of $475 million.A commitment fee of 0.15% per annum is incurred on the unused portion of the line of credit. The line of credit is used for investment purposes and expires on September 19, 2013. Baron Partners Fund may borrow up to the lesser of $475 million or the maximum amount Baron Partners Fund may borrow under the 1940 Act, the limitations included in Baron Partners Fund’s prospectus, or any limit or restriction under any law or regulation to which Baron Partners Fund is subject or any agreement to which Baron Partners Fund is a party. Interest is charged to Baron Partners Fund, based on its borrowings, at a rate per annum equal to the higher of the Federal Funds Rate or the Libor rate plus a margin of 0.90%. For the six months ended June 30, 2013, interest expense incurred on these loans amounted to $1,497,724.
During the six months ended June 30, 2013, Baron Partners Fund had an average daily balance on the line of credit of $280.8 million at a weighted average interest rate of 1.08%. At June 30, 2013, Baron Partners Fund had an outstanding loan in the amount of $365,500,000.
6. RESTRICTED SECURITIES
At June 30, 2013, investments in securities included securities that are restricted and/or illiquid. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale and are valued pursuant to the policies and procedures for fair value pricing approved by the Board. A security may be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time.The Funds may receive more or less than this valuation in an actual sale and that difference could be material. At June 30, 2013, the Funds held investments in restricted and/or illiquid securities that were valued pursuant to policies and procedures for fair value pricing as follows:
Baron Partners Fund | |||||||
Acquisition | |||||||
Name of Issuer | Date(s) | Value | |||||
Private Equity Investments | |||||||
Kerzner International Holdings Ltd., Cl A | 9/27/2006 | $ | 6,162,000 | ||||
Windy City Investments Holdings, L.L.C. | 11/13/2007 – 1/27/2011 | 27,133,286 | |||||
Total Restricted Securities: | |||||||
(Cost $80,134,888)†(3.12% of Net Assets) | $ | 33,295,286 | |||||
Baron International Growth Fund | |||||||
Acquisition | |||||||
Name of Issuer | Date | Value | |||||
Subscription Receipts | |||||||
Alaris Royalty Corp. | 6/25/2013 | $ | 252,677 | ||||
Private Equity Investments | |||||||
Better Place, Inc., Series C Preferred | 12/1/2011 | 0 | |||||
Total Restricted Securities: | |||||||
(Cost $527,774)†(0.47% of Net Assets) | $ | 252,677 | |||||
† See Statements of Net Assets for cost of individual securities.
36
June 30, 2013 | Baron Select Funds |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
7. FAIR VALUE MEASUREMENTS
Fair value is defined by GAAP as the price that the Funds would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market for the investment. GAAP provides a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable or unobservable. Observable inputs are based on market data obtained from sources independent of the Funds. Unobservable inputs are inputs that reflect the Funds’ own assumptions based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
• | Level 1 — quoted prices in active markets for identical assets or liabilities; | ||
• | Level 2 — prices determined using other significant inputs that are observable either directly, or indirectly through corroboration with observable market data (which could include quoted prices for similar assets or liabilities, interest rates, credit risk, etc.); | ||
• | Level 3 — prices determined using significant unobservable inputs when quoted prices or observable inputs are unavailable such as when there is little or no market activity for an asset or liability (unobservable inputs reflect each Fund’s own assumptions in determining the fair value of assets or liabilities and would be based on the best information available). |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, non-U.S. securities, whose markets close hours before the Funds value their holdings, may require revised valuations due to significant movement in the U.S. markets. Since these values are not obtained from quoted prices in an active market such securities are reflected as Level 2.
The Funds have procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Funds primarily employ a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. The Funds may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
The following is a summary of the inputs used as of June 30, 2013 in valuing the Funds’ investments carried at fair value:
Baron Partners Fund | ||||||||||||||||||
Quoted Prices in | Other | |||||||||||||||||
Active Markets | Significant | Significant | ||||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||||
Assets | Inputs | Inputs | �� | |||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||
Common Stocks† | $ | 1,424,946,149 | $ | — | $ | — | $ | 1,424,946,149 | ||||||||||
Private Equity Investments† | — | — | 33,295,286 | 33,295,286 | ||||||||||||||
Short Term Investments | — | 492,114 | — | 492,114 | ||||||||||||||
Total Investments | $ | 1,424,946,149 | $ | 492,114 | $ | 33,295,286 | $ | 1,458,733,549 | ||||||||||
Transfers between Levels 1, 2 or 3, if any, are recognized at ending value on June 30, 2013. There have been no transfers in and out of Level 1, 2 or 3 fair value measurements for the Fund for the six months ended June 30, 2013.
Baron Focused Growth Fund | ||||||||||||||||||
Quoted Prices in | Other | |||||||||||||||||
Active Markets | Significant | Significant | ||||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||
Common Stocks† | $ | 147,642,713 | $ | — | $ | — | $ | 147,642,713 | ||||||||||
Short Term Investments | — | 1,474,538 | — | 1,474,538 | ||||||||||||||
Total Investments | $ | 147,642,713 | $ | 1,474,538 | $ | — | $ | 149,117,251 | ||||||||||
Transfers between Levels 1, 2 or 3, if any, are recognized at ending value on June 30, 2013. There have been no transfers in and out of Level 1, 2 or 3 fair value measurements for the Fund for the six months ended June 30, 2013.
† See Statements of Net Assets for additional detailed categorizations.
37
Baron Select Funds | June 30, 2013 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
7. FAIR VALUE MEASUREMENTS (Continued)
Baron International Growth Fund | ||||||||||||||||||
Quoted Prices in | Other | |||||||||||||||||
Active Markets | Significant | Significant | ||||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||
Common Stocks† | $ | 51,581,482 | $ | — | $ | — | $ | 51,581,482 | ||||||||||
Private Equity Investments† | — | — | 0 | 0 | ||||||||||||||
Subscription Receipts† | — | — | 252,677 | 252,677 | ||||||||||||||
Short Term Investments | — | 2,063,537 | — | 2,063,537 | ||||||||||||||
Total Investments | $ | 51,581,482 | $ | 2,063,537 | $ | 252,677 | $ | 53,897,696 | ||||||||||
The fair value of Level 2 investments at December 31, 2012 was $31,732,361. $27,629,271 was transferred out of Level 2 into Level 1 at June 30, 2013 as a result of no longer adjusting closing prices for certain securities (as described in Note 2a), due to significant market movements between the time at which the Fund valued its securities and the earlier closing of foreign markets. It is the Fund’s policy to recognize transfers in and transfers out at the fair value as of the end of the period.
Baron Real Estate Fund | ||||||||||||||||||
Quoted Prices in | Other | |||||||||||||||||
Active Markets | Significant | Significant | ||||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||
Common Stocks† | $ | 549,632,638 | $ | — | $ | — | $ | 549,632,638 | ||||||||||
Short Term Investments | — | 15,073,916 | — | 15,073,916 | ||||||||||||||
Total Investments | $ | 549,632,638 | $ | 15,073,916 | $ | — | $ | 564,706,554 | ||||||||||
Transfers between Levels 1, 2 or 3, if any, are recognized at ending value on June 30, 2013. There have been no transfers in and out of Level 1, 2 or 3 fair value measurements for the Fund for the six months ended June 30, 2013.
Baron Emerging Markets Fund | ||||||||||||||||||
Quoted Prices in | Other | |||||||||||||||||
Active Markets | Significant | Significant | ||||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||
Common Stocks† | $ | 18,499,254 | $ | 228,126 | $ | — | $ | 18,727,380 | ||||||||||
Short Term Investments | — | 2,552,006 | — | 2,552,006 | ||||||||||||||
Total Investments | $ | 18,499,254 | $ | 2,780,132 | $ | — | $ | 21,279,386 | ||||||||||
The fair value of Level 2 investments at December 31, 2012 was $4,441,324. $169,079 was transferred out of Level 1 into Level 2 at June 30, 2013 as a result of adjusting closing prices for certain securities (as described in Note 2a), due to significant market movements between the time at which the Fund valued its securities and the earlier closing of foreign markets. $6,987,158 was transferred out of Level 2 into Level 1 at June 30, 2013 as a result of no longer adjusting closing prices for certain securities and the earlier closing of foreign markets. It is the Fund’s policy to recognize transfers in and transfers out at the fair value as of the end of the period.
Baron Energy and Resources Fund | ||||||||||||||||||
Quoted Prices in | Other | |||||||||||||||||
Active Markets | Significant | Significant | ||||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||
Common Stocks† | $ | 19,170,769 | $ | — | $ | — | $ | 19,170,769 | ||||||||||
Total Investments | $ | 19,170,769 | $ | — | $ | — | $ | 19,170,769 | ||||||||||
The fair value of Level 2 investments at December 31, 2012 was $303,006. $500,736 was transferred out of Level 2 into Level 1 at June 30, 2013 as a result of no longer adjusting closing prices for certain securities and the earlier closing of foreign markets. It is the Fund’s policy to recognize transfers in and transfers out at the fair value as of the end of the period.
† See Statements of Net Assets for additional detailed categorizations.
38
June 30, 2013 | Baron Select Funds |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
7. FAIR VALUE MEASUREMENTS (Continued)
Baron Global Advantage Fund | ||||||||||||||||||
Quoted Prices in | Other | |||||||||||||||||
Active Markets | Significant | Significant | ||||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||
Common Stocks† | $ | 3,390,576 | $ | — | $ | — | $ | 3,390,576 | ||||||||||
Total Investments | $ | 3,390,576 | $ | — | $ | — | $ | 3,390,576 | ||||||||||
The fair value of Level 2 investments at December 31, 2012 was $654,163. $531,836 was transferred out of Level 2 into Level 1 at June 30, 2013 as a result of no longer adjusting closing prices for certain securities and the earlier closing of foreign markets. It is the Fund’s policy to recognize transfers in and transfers out at the fair value as of the end of the period.
† See Statements of Net Assets for additional detailed categorizations.
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
Baron Partners Fund | ||||||||||||||||||||||||||||||||||||||||||||||||||
Change in Net | ||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized | ||||||||||||||||||||||||||||||||||||||||||||||||||
Appreciation | ||||||||||||||||||||||||||||||||||||||||||||||||||
(Depreciation) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net | Net Change in | from Investments | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of | Accrued | Realized | Unrealized | Transfers | Transfers | Balance as of | still held at | |||||||||||||||||||||||||||||||||||||||||||
Investments in | December 31, | Premiums/ | Gain | Appreciation | Into | Out of | June 30, | June 30, | ||||||||||||||||||||||||||||||||||||||||||
Securities | 2012 | Discounts | (Loss) | (Depreciation) | Purchases | Sales | Level 3 | Level 3 | 2013 | 2013 | ||||||||||||||||||||||||||||||||||||||||
Private Equity Investments | ||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||
Discretionary | $ | 5,265,000 | $ | — | $ | — | $ | 897,000 | $ | — | $ | — | $ | — | $ | — | $ | 6,162,000 | $ | 897,000 | ||||||||||||||||||||||||||||||
Financials | 23,646,886 | — | — | 3,486,400 | — | — | — | — | 27,133,286 | 3,486,400 | ||||||||||||||||||||||||||||||||||||||||
Total | $ | 28,911,886 | $ | — | $ | — | $ | 4,383,400 | $ | — | $ | — | $ | — | $ | — | $ | 33,295,286 | $ | 4,383,400 | ||||||||||||||||||||||||||||||
Baron International Fund | ||||||||||||||||||||||||||||||||||||||||||||||||||
Change in Net | ||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized | ||||||||||||||||||||||||||||||||||||||||||||||||||
Appreciation | ||||||||||||||||||||||||||||||||||||||||||||||||||
(Depreciation) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net | Net Change in | from Investments | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of | Accrued | Realized | Unrealized | Transfers | Transfers | Balance as of | still held at | |||||||||||||||||||||||||||||||||||||||||||
Investments in | December 31, | Premiums/ | Gain | Appreciation | Into | Out of | June 30, | June 30, | ||||||||||||||||||||||||||||||||||||||||||
Securities | 2012 | Discounts | (Loss) | (Depreciation) | Purchases | Sales | Level 3 | Level 3 | 2013 | 2013 | ||||||||||||||||||||||||||||||||||||||||
Private Equity Investments | ||||||||||||||||||||||||||||||||||||||||||||||||||
Utilities | $ | 2,423 | $ | — | $ | — | $ | (2,423 | ) | $ | — | $ | — | $ | — | $ | — | $ | 0 | $ | (2,423 | ) | ||||||||||||||||||||||||||||
Subscription Receipts | ||||||||||||||||||||||||||||||||||||||||||||||||||
Financials | — | — | — | (96 | ) | 252,773 | — | — | — | 252,677 | (96 | ) | ||||||||||||||||||||||||||||||||||||||
Total | $ | 2,423 | $ | — | $ | — | $ | (2,519 | ) | $ | 252,773 | $ | — | $ | — | $ | — | $ | 252,677 | $ | (2,519 | ) | ||||||||||||||||||||||||||||
39
Baron Select Funds | June 30, 2013 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
7. FAIR VALUE MEASUREMENTS (Continued)
Significant unobservable valuation inputs developed by the Adviser for significant (greater than 1% of net assets) Level 3 investments as of June 30, 2013, were as follows:
Baron Partners Fund | ||||||||||||||||
Weighted Average | Range | |||||||||||||||
Fair Value as of | used on | used on | ||||||||||||||
Sector | Company | June 30, 2013 | Valuation Technique | Unobservable Input | June 30, 2013 | June 30, 2013 | ||||||||||
Estimated volatility of the returns of the enterprise value(1) | 5.28 | % | 5.28% | |||||||||||||
Discount for lack of marketability | 4.04 | % | 4.04% | |||||||||||||
Private Equity Investments: Financials | Windy City Investments Holdings, L.L.C. | $27,133,286 | Combination of Market Comparables and Option Pricing methods | EV/Run Rate EBITDA Multiple(2) | 11.29x | 8.73x to 13.67x | ||||||||||
Adjustment to the EBITDA Multiple due to leverage(2) | 2.65 | % | 2.65% | |||||||||||||
Change in the composite equity index of comparable companies | -1.63 | % | -2.34% to -0.62% | |||||||||||||
(1) | The volatility was derived using the historical returns of the publicly traded debt of Nuveen Investments, Inc., historical returns of the SMI 100 Index and the historical returns of the equity of comparable public companies. Nuveen Investments, Inc. is the sole asset of Windy City Investments Holdings, L.L.C. | |
(2) | The multiple was derived as a simple average of the multiples of comparable companies. The derived EBITDA multiple was increased by 2.65% to 11.29x. This increase adjusts for leverage, as Nuveen Investments, Inc. is more levered than its comparable companies. |
A significant change in the EV/EBITDA multiple ratio may result in a directionally similar significant change in the fair value measurement, while a significant change in the discount for lack of marketability and equity index of comparable companies may not result in a materially higher or lower fair value measurement.
8. INCOME TAXES AND DISTRIBUTIONS TO SHAREHOLDERS
Federal income tax regulations differ from GAAP. Therefore, distributions determined in accordance with tax regulations may differ in amount or character from net investment income and net realized gain for financial reporting purposes. Net investment income (loss) and net realized and unrealized gain (loss) differ for financial statement and tax purposes due to differing treatments of net investment loss, foreign currency gains and losses, reclassification of distributions, partnership basis adjustments, income from passive foreign investment corporations and wash sale losses deferred. Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences.
As of June 30, 2013, the components of net assets on a tax basis were as follows:
Baron | Baron | Baron | Baron | |||||||||||||||||||||||||
Baron Partners | Baron Focused | International | Baron Real | Emerging | Energy and | Global | ||||||||||||||||||||||
Fund | Growth Fund | Growth Fund | Estate Fund | Markets Fund | Resources Fund | Advantage Fund | ||||||||||||||||||||||
Cost of investments | $ | 866,629,249 | $ | 105,173,740 | $ | 41,034,117 | $ | 550,520,982 | $ | 20,267,963 | $ | 19,233,061 | $ | 3,074,796 | ||||||||||||||
Gross tax unrealized appreciation | 640,543,396 | 45,161,849 | 15,524,173 | 27,443,036 | 2,318,096 | 641,909 | 447,584 | |||||||||||||||||||||
Gross tax unrealized depreciation | (48,439,096 | ) | (1,218,338 | ) | (2,660,594 | ) | (13,257,464 | ) | (1,306,673 | ) | (704,201 | ) | (131,804 | ) | ||||||||||||||
Net tax unrealized appreciation (depreciation) | 592,104,300 | 43,943,511 | 12,863,579 | 14,185,572 | 1,011,423 | (62,292 | ) | 315,780 | ||||||||||||||||||||
Net tax unrealized currency depreciation | — | — | (10,765 | ) | — | (16,256 | ) | (1 | ) | (695 | ) | |||||||||||||||||
Undistributed (accumulated) net investment income (loss) | (1,243,091 | ) | 2,341,768 | 131,831 | 293,640 | (115,031 | ) | 4,828 | 6,856 | |||||||||||||||||||
Accumulated net realized gain (loss) | (403,250,233 | ) | (6,944,845 | ) | 331,283 | (116,589 | ) | (1,066,759 | ) | (248,949 | ) | (88,168 | ) | |||||||||||||||
Paid-in capital | 879,681,589 | 109,637,680 | 40,085,682 | 549,713,968 | 21,445,021 | 19,605,592 | 3,172,219 | |||||||||||||||||||||
Net Assets | $ | 1,067,292,565 | $ | 148,978,114 | $ | 53,401,610 | $ | 564,076,591 | $ | 21,258,398 | $ | 19,299,178 | $ | 3,405,992 | ||||||||||||||
As of December 31, 2012, the Funds had capital loss carryforwards expiring as follows:
Baron | Baron | Baron | Baron | |||||||||||||||||||||||||
Baron Partners | Baron Focused | International | Baron Real | Emerging | Energy and | Global | ||||||||||||||||||||||
Fund | Growth Fund | Growth Fund | Estate Fund | Markets Fund | Resources Fund | Advantage Fund | ||||||||||||||||||||||
Short term: | ||||||||||||||||||||||||||||
December 31, 2016 | $ | 105,867,166 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
December 31, 2017 | 334,667,179 | 8,833,765 | — | — | — | — | — | |||||||||||||||||||||
No expiration date | — | — | 399,735 | — | 967,939 | 94,737 | 79,973 | |||||||||||||||||||||
| $ | 440,534,345 | $ | 8,833,765 | $ | 399,735 | $ | — | $ | 967,939 | $ | 94,737 | $ | 79,973 | ||||||||||||||
40
June 30, 2013 | Baron Select Funds |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
8. INCOME TAXES AND DISTRIBUTIONS TO SHAREHOLDERS (Continued)
The tax character of distributions paid during the six months ended June 30, 2013 and fiscal year ended December 31, 2012 was as follows:
Six Months Ended | Year Ended | ||||||||||||||
June 30, 2013 | December 31, 2012 | ||||||||||||||
Long Term | Long Term | ||||||||||||||
Fund | Ordinary1 | Capital Gain | Ordinary1 | Capital Gain | |||||||||||
Baron Partners Fund | $ | — | $ | — | $ | — | $ | — | |||||||
Baron Focused Growth Fund | — | — | — | — | |||||||||||
Baron International Growth Fund | — | — | 66,030 | — | |||||||||||
Baron Real Estate Fund | — | — | 854,357 | 500,219 | |||||||||||
Baron Emerging Markets Fund | — | — | 134,341 | — | |||||||||||
Baron Energy and Resources Fund | — | — | — | — | |||||||||||
Baron Global Advantage Fund | — | — | — | — |
1 For tax purposes, short-term capital gains are considered ordinary income distributions.
The Funds follow the provisions of the FASB Codification Section 740 (“ASC Section 740”) “Accounting for Uncertainty in Income Taxes” which clarifies the accounting for uncertainty in tax positions taken or expected to be taken on a tax return. ASC Section 740 sets forth a threshold for financial statement recognition, measurement and disclosure of tax positions taken or expected to be taken on a tax return. The Funds are required to recognize the tax effects of certain tax positions under a “more likely than not” standard, that based on their technical merits, have more than 50 percent likelihood of being sustained upon examination. Management has analyzed the tax positions taken on the Funds’ federal income tax returns for all open years (current and prior three years), and has concluded that no provision for federal income tax is required in the Funds’ financial statements. At June 30, 2013, the Funds did not have any uncertain tax benefits that require recognition, de-recognition or disclosure. The Funds’ federal, state and local income and federal excise tax returns for which the applicable statutes of limitations have not expired (current and prior three years) are subject to examination by the Internal Revenue Service and state departments of revenue.
9. MANAGEMENT OWNERSHIP
As of June 30, 2013, the officers and trustees owned, directly or indirectly, 32.90% of Baron Focused Growth Fund, 53.56% of Baron International Growth Fund, 17.88% of Baron Emerging Markets Fund and 50.95% of Baron Global Advantage Fund. As a result of their ownership, the officers and the trustees may be able to materially affect the outcome of matters presented to Baron Focused Growth Fund, Baron International Growth Fund, Baron Emerging Markets Fund and Baron Global Advantage Fund shareholders.
41
Baron Select Funds | June 30, 2013 |
FINANCIAL HIGHLIGHTS (Unaudited) |
BARON PARTNERS FUND
Selected data for a share outstanding throughout each period:
RETAIL SHARES | INSTITUTIONAL SHARES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six Months | Six Months | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ended | Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 30, | Year Ended December 31, | June 30, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2013 | 2012 | 2011 | 2010 | 20091 | ||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 22.56 | $ | 19.39 | $ | 20.57 | $ | 15.64 | $ | 12.20 | $ | 23.76 | $ | 22.34 | $ | 18.43 | $ | 16.85 | $ | 12.17 | $ | 22.78 | $ | 19.52 | $ | 20.66 | $ | 15.66 | $ | 12.66 | ||||||||||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | (0.06 | )2 | (0.04 | )2 | (0.14 | )2 | (0.09 | )2 | (0.04 | )2 | (0.09 | )2 | (0.21 | )2 | (0.16 | )2 | (0.13 | ) | (0.06 | ) | (0.03 | )2 | 0.04 | 2 | (0.08 | )2 | (0.06 | )2 | (0.03 | )2 | ||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 4.76 | 3.21 | (1.04 | ) | 5.02 | 3.48 | (10.74 | ) | 2.74 | 4.13 | 2.49 | 5.17 | 4.81 | 3.22 | (1.06 | ) | 5.06 | 3.03 | ||||||||||||||||||||||||||||||||||||||||||
Total from investment operations | 4.70 | 3.17 | (1.18 | ) | 4.93 | 3.44 | (10.83 | ) | 2.53 | 3.97 | 2.36 | 5.11 | 4.78 | 3.26 | (1.14 | ) | 5.00 | 3.00 | ||||||||||||||||||||||||||||||||||||||||||
Less distributions to shareholders from: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||||||||||||||||||||||||||||
Net realized gain on investments | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | (0.73 | ) | (1.11 | ) | (0.06 | ) | (0.78 | ) | (0.43 | ) | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||||||||||||||||||||||||||
Total distributions | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | (0.73 | ) | (1.11 | ) | (0.06 | ) | (0.78 | ) | (0.43 | ) | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||||||||||||||||||||||||||
Net asset value, end of period | $ | 27.26 | $ | 22.56 | $ | 19.39 | $ | 20.57 | $ | 15.64 | $ | 12.20 | $ | 23.76 | $ | 22.34 | $ | 18.43 | $ | 16.85 | $ | 27.56 | $ | 22.78 | $ | 19.52 | $ | 20.66 | $ | 15.66 | ||||||||||||||||||||||||||||||
Total return | 20.78 | %3 | 16.35 | % | (5.74 | )% | 31.52 | % | 28.20 | % | (46.67 | )% | 11.34 | % | 21.55 | % | 14.37 | % | 42.35 | % | 20.98 | %3 | 16.70 | % | (5.52 | )% | 31.93 | % | 23.70 | %3 | ||||||||||||||||||||||||||||||
Ratios/Supplemental data: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets (in millions), end of period | $ | 836.5 | $ | 653.7 | $ | 970.4 | $ | 1,251.9 | $ | 1,249.3 | $ | 1,501.3 | $ | 3,384.1 | $ | 2,403.1 | $ | 1,403.0 | $ | 632.7 | $ | 230.8 | $ | 146.5 | $ | 123.7 | $ | 119.9 | $ | 158.5 | ||||||||||||||||||||||||||||||
Ratio of total expenses to average net assets | 1.67 | %4 | 1.74 | % | 1.71 | % | 1.71 | % | 1.51 | % | 1.86 | %5 | 1.88 | %5 | 1.77 | % | 1.62 | % | 1.46 | % | 1.40 | %4 | 1.48 | % | 1.45 | % | 1.45 | % | 1.38 | %4 | ||||||||||||||||||||||||||||||
Less: Ratio of interest expense to average net assets | (0.31 | )%4 | (0.34 | )% | (0.36 | )% | (0.34 | )% | (0.10 | )% | (0.51 | )% | (0.57 | )% | (0.45 | )% | (0.27 | )% | (0.12 | )% | (0.30 | )%4 | (0.35 | )% | (0.36 | )% | (0.34 | )% | (0.21 | )%4 | ||||||||||||||||||||||||||||||
Ratio of operating expenses to average net assets | 1.36 | %4 | 1.40 | % | 1.35 | % | 1.37 | % | 1.41 | % | 1.35 | % | 1.31 | % | 1.32 | % | 1.35 | % | 1.34 | % | 1.10 | %4 | 1.13 | % | 1.09 | % | 1.11 | % | 1.17 | %4 | ||||||||||||||||||||||||||||||
Ratio of net investment income (loss) to average net assets | (0.47 | )%4 | (0.18 | )% | (0.69 | )% | (0.51 | )% | (0.30 | )% | (0.49 | )% | (0.86 | )% | (0.80 | )% | (0.85 | )% | (0.83 | )% | (0.21 | )%4 | 0.18 | % | (0.41 | )% | (0.36 | )% | (0.31 | )%4 | ||||||||||||||||||||||||||||||
Portfolio turnover rate | 8.04 | %3 | 13.04 | % | 16.96 | % | 15.85 | % | 32.43 | % | 38.02 | % | 32.95 | % | 35.92 | % | 37.62 | % | 57.77 | % | 8.04 | %3 | 13.04 | % | 16.96 | % | 15.85 | % | 32.43 | % | ||||||||||||||||||||||||||||||
1 | For the period May 29, 2009 (commencement of operations) to December 31, 2009. | |
2 | Based on average shares outstanding. | |
3 | Not Annualized. | |
4 | Annualized. | |
5 | Benefit of expense reduction rounds to less than 0.01%. |
42 |
June 30, 2013 | Baron Select Funds |
FINANCIAL HIGHLIGHTS (Unaudited) (Continued) |
BARON FOCUSED GROWTH FUND
Selected data for a share outstanding throughout each period:
RETAIL SHARES | INSTITUTIONAL SHARES | |||||||||||||||||||||||||||||||||||||||||||
Six Months | Six Months | |||||||||||||||||||||||||||||||||||||||||||
Ended | Ended | |||||||||||||||||||||||||||||||||||||||||||
June 30, | Year Ended December 31, | June 30, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | 2008 1 | 2013 | 2012 | 2011 | 2010 | 20097 | ||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 11.26 | $ | 9.71 | $ | 9.85 | $ | 8.14 | $ | 6.27 | $ | 10.00 | $ | 11.35 | $ | 9.77 | $ | 9.88 | $ | 8.15 | $ | 6.88 | ||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | (0.02 | )2 | 0.24 2 | (0.07 | )2 | (0.01 | )2 | 0.12 | 2 | 0.00 | 2,3 | (0.01 | )2 | 0.26 | 2 | (0.04 | )2 | 0.01 | 2 | 0.07 | 2 | |||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.99 | 1.31 | (0.07 | ) | 2.05 | 2.00 | (3.33 | ) | 1.01 | 1.32 | (0.07 | ) | 2.05 | 1.45 | ||||||||||||||||||||||||||||||
Total from investment operations | 0.97 | 1.55 | (0.14 | ) | 2.04 | 2.12 | (3.33 | ) | 1.00 | 1.58 | (0.11 | ) | 2.06 | 1.52 | ||||||||||||||||||||||||||||||
Less distributions to shareholders from: | ||||||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.00 | 0.00 | 0.00 | (0.33 | ) | (0.13 | ) | 0.00 | 0.00 | 0.00 | 0.00 | (0.33 | ) | (0.13 | ) | |||||||||||||||||||||||||||||
Net realized gain on investments | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||||||||||||||||
Return of capital | 0.00 | 0.00 | 0.00 | 0.00 | (0.12 | ) | (0.40 | ) | 0.00 | 0.00 | 0.00 | 0.00 | (0.12 | ) | ||||||||||||||||||||||||||||||
Total distributions | 0.00 | 0.00 | 0.00 | (0.33 | ) | (0.25 | ) | (0.40 | ) | 0.00 | 0.00 | 0.00 | (0.33 | ) | (0.25 | ) | ||||||||||||||||||||||||||||
Net asset value, end of period | $ | 12.23 | $ | 11.26 | $ | 9.71 | $ | 9.85 | $ | 8.14 | $ | 6.27 | $ | 12.35 | $ | 11.35 | $ | 9.77 | $ | 9.88 | $ | 8.15 | ||||||||||||||||||||||
Total return | 8.61 | %4,5 | 15.96 | %5 | (1.42 | )%5 | 25.17 | %5 | 33.77 | %5 | (33.11 | )%4,5 | 8.81 | %4,5 | 16.17 | %5 | (1.11 | )%5 | 25.39 | %5 | 22.06 | %4,5 | ||||||||||||||||||||||
Ratios/Supplemental data: | ||||||||||||||||||||||||||||||||||||||||||||
Net assets (in millions), end of period | $ | 41.3 | $ | 31.4 | $ | 28.3 | $ | 46.4 | $ | 39.9 | $ | 59.3 | $ | 107.7 | $ | 87.9 | $ | 63.6 | $ | 44.3 | $ | 36.6 | ||||||||||||||||||||||
Ratio of operating expenses to average net assets | 1.45 | %6 | 1.48 | % | 1.48 | % | 1.47 | % | 1.52 | % | 1.54 | %6 | 1.14 | %6 | 1.16 | % | 1.18 | % | 1.19 | % | 1.25 | %6 | ||||||||||||||||||||||
Less: Reimbursement of expenses by Adviser | (0.10 | )%6 | (0.13 | )% | (0.13 | )% | (0.12 | )% | (0.17 | )% | (0.19 | )%6 | (0.04 | )%6 | (0.06 | )% | (0.08 | )% | (0.09 | )% | (0.15 | )%6 | ||||||||||||||||||||||
Ratio of net operating expenses to average net assets | 1.35 | %6 | 1.35 | % | 1.35 | % | 1.35 | % | 1.35 | % | 1.35 | %6 | 1.10 | %6 | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | %6 | ||||||||||||||||||||||
Ratio of net investment income (loss) to average net assets | (0.39 | )%6 | 2.30 | % | (0.69 | )% | (0.16 | )% | 1.81 | % | 0.01 | %6 | (0.15 | )%6 | 2.53 | % | (0.40 | )% | 0.08 | % | 1.63 | %6 | ||||||||||||||||||||||
Portfolio turnover rate | 9.27 | %4 | 38.38 | % | 44.58 | % | 24.08 | % | 34.76 | % | 35.43 | %4 | 9.27 | %4 | 38.38 | % | 44.58 | % | 24.08 | % | 34.76 | % | ||||||||||||||||||||||
1 | For the period June 30, 2008 (commencement of operations) to December 31, 2008. | |
2 | Based on average shares outstanding. | |
3 | Less than $0.01 per share. | |
4 | Not Annualized. | |
5 | The total returns would have been lower had certain expenses not been reduced during the period shown. | |
6 | Annualized. | |
7 | For the period May 29, 2009 (commencement of operations) to December 31, 2009. |
43 |
Baron Select Funds | June 30, 2013 |
FINANCIAL HIGHLIGHTS (Unaudited) (Continued) |
BARON INTERNATIONAL GROWTH FUND
Selected data for a share outstanding throughout each period:
RETAIL SHARES | INSTITUTIONAL SHARES | |||||||||||||||||||||||||||||||||||||||
Six Months | Six Months | |||||||||||||||||||||||||||||||||||||||
Ended | Ended | |||||||||||||||||||||||||||||||||||||||
June 30, | Year Ended December 31, | June 30, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | 2013 | 2012 | 2011 | 2010 | 20095 | |||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 15.55 | $ | 13.20 | $ | 17.29 | $ | 14.11 | $ | 10.00 | $ | 15.63 | $ | 13.25 | $ | 17.36 | $ | 14.13 | $ | 11.13 | ||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.02 | 1 | (0.02 | )1 | (0.01 | )1 | 0.01 | 1 | 0.04 | 1 | 0.04 | 1 | 0.01 | 1 | 0.03 | 1 | 0.05 | 1 | (0.02 | )1 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.43 | 2.37 | (2.78 | ) | 3.38 | 4.43 | 0.42 | 2.40 | (2.79 | ) | 3.39 | 3.38 | ||||||||||||||||||||||||||||
Total from investment operations | 0.45 | 2.35 | (2.79 | ) | 3.39 | 4.47 | 0.46 | 2.41 | (2.76 | ) | 3.44 | 3.36 | ||||||||||||||||||||||||||||
Less distributions to shareholders from: | ||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.00 | 0.00 | (0.04 | ) | 0.00 | 0.00 | 0.00 | (0.03 | ) | (0.09 | ) | 0.00 | 0.00 | |||||||||||||||||||||||||||
Net realized gain on investments | 0.00 | 0.00 | (1.26 | ) | (0.21 | ) | (0.36 | ) | 0.00 | 0.00 | (1.26 | ) | (0.21 | ) | (0.36 | ) | ||||||||||||||||||||||||
Total distributions | 0.00 | 0.00 | (1.30 | ) | (0.21 | ) | (0.36 | ) | 0.00 | (0.03 | ) | (1.35 | ) | (0.21 | ) | (0.36 | ) | |||||||||||||||||||||||
Net asset value, end of period | $ | 16.00 | $ | 15.55 | $ | 13.20 | $ | 17.29 | $ | 14.11 | $ | 16.09 | $ | 15.63 | $ | 13.25 | $ | 17.36 | $ | 14.13 | ||||||||||||||||||||
Total return | 2.89 | %2,3 | 17.80 | %2 | (16.35 | )%2 | 24.22 | %2 | 44.69 | %2 | 2.94 | %2,3 | 18.17 | %2 | (16.13 | )%2 | 24.54 | %2 | 30.18 | %2,3 | ||||||||||||||||||||
Ratios/Supplemental data: | ||||||||||||||||||||||||||||||||||||||||
Net assets (in millions), end of period | $ | 14.3 | $ | 15.6 | $ | 11.7 | $ | 15.3 | $ | 8.4 | $ | 39.1 | $ | 39.0 | $ | 30.5 | $ | 37.4 | $ | 22.1 | ||||||||||||||||||||
Ratio of operating expenses to average net assets | 1.78 | %4 | 1.78 | % | 1.73 | % | 1.76 | % | 2.33 | % | 1.42 | %4 | 1.40 | % | 1.38 | % | 1.40 | % | 1.89 | %4 | ||||||||||||||||||||
Less: Reimbursement of expenses by Adviser | (0.28 | )%4 | (0.28 | )% | (0.23 | )% | (0.26 | )% | (0.83 | )% | (0.17 | )%4 | (0.15 | )% | (0.13 | )% | (0.15 | )% | (0.64 | )%4 | ||||||||||||||||||||
Ratio of net operating expenses to average net assets | 1.50 | %4 | 1.50 | % | 1.50 | % | 1.50 | % | 1.50 | % | 1.25 | %4 | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | %4 | ||||||||||||||||||||
Ratio of net investment income (loss) to average net assets | 0.27 | %4 | (0.16 | )% | (0.05 | )% | 0.07 | % | 0.38 | % | 0.56 | %4 | 0.09 | % | 0.19 | % | 0.31 | % | (0.29 | )%4 | ||||||||||||||||||||
Portfolio turnover rate | 23.02 | %3 | 39.02 | % | 53.20 | % | 32.70 | % | 53.94 | % | 23.02 | %3 | 39.02 | % | 53.20 | % | 32.70 | % | 53.94 | % | ||||||||||||||||||||
1 | Based on average shares outstanding. | |
2 | The total returns would have been lower had certain expenses not been reduced during the period shown. | |
3 | Not Annualized. | |
4 | Annualized. | |
5 | For the period May 29, 2009 (commencement of operations) to December 31, 2009. |
44 |
June 30, 2013 | Baron Select Funds |
FINANCIAL HIGHLIGHTS (Unaudited) (Continued) |
BARON REAL ESTATE FUND
Selected data for a share outstanding throughout each period:
RETAIL SHARES | INSTITUTIONAL SHARES | |||||||||||||||||||||||||||||||
Six Months | Six Months | |||||||||||||||||||||||||||||||
Ended | Ended | |||||||||||||||||||||||||||||||
June 30, | Year Ended December 31, | June 30, | Year Ended December 31, | |||||||||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||||||||
Net asset value, beginning of period | $ | 17.52 | $ | 12.51 | $ | 12.66 | $ | 10.00 | $ | 17.64 | $ | 12.56 | $ | 12.69 | $ | 10.00 | ||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.01 | 1 | 0.01 | 1 | (0.01 | )1 | 0.02 | 1 | 0.03 | 1 | 0.06 | 1 | 0.02 | 1 | 0.04 | 1 | ||||||||||||||||
Net realized and unrealized gain on investments | 1.63 | 5.31 | 0.07 | 2 | 2.64 | 1.65 | 5.33 | 0.07 | 2 | 2.65 | ||||||||||||||||||||||
Total from investment operations | 1.64 | 5.32 | 0.06 | 2.66 | 1.68 | 5.39 | 0.09 | 2.69 | ||||||||||||||||||||||||
Less distributions to shareholders from: | ||||||||||||||||||||||||||||||||
Net investment income | 0.00 | 0.00 | (0.00 | )3 | 0.00 | 0.00 | 0.00 | (0.01 | ) | 0.00 | ||||||||||||||||||||||
Net realized gain on investments | 0.00 | (0.31 | ) | (0.21 | ) | 0.00 | 0.00 | (0.31 | ) | (0.21 | ) | 0.00 | ||||||||||||||||||||
Total distributions | 0.00 | (0.31 | ) | (0.21 | ) | 0.00 | 0.00 | (0.31 | ) | (0.22 | ) | 0.00 | ||||||||||||||||||||
Net asset value, end of period | $ | 19.16 | $ | 17.52 | $ | 12.51 | $ | 12.66 | $ | 19.32 | $ | 17.64 | $ | 12.56 | $ | 12.69 | ||||||||||||||||
Total return | 9.36 | %4,5 | 42.60 | %4 | 0.63 | %4 | 26.60 | %4 | 9.52 | %4,5 | 42.99 | %4 | 0.80 | %4 | 26.90 | %4 | ||||||||||||||||
Ratios/Supplemental data: | ||||||||||||||||||||||||||||||||
Net assets (in millions), end of period | $ | 369.6 | $ | 53.6 | $ | 10.9 | $ | 5.5 | $ | 194.5 | $ | 35.5 | $ | 4.9 | $ | 3.2 | ||||||||||||||||
Ratio of operating expenses to average net assets | 1.38 | %6 | 1.76 | % | 2.33 | % | 4.35 | % | 1.13 | %6 | 1.44 | % | 2.14 | % | 4.26 | % | ||||||||||||||||
Less: Reimbursement of expenses by Adviser | (0.03 | )%6 | (0.41 | )% | (0.98 | )% | (3.00 | )% | (0.03 | )%6 | (0.34 | )% | (1.04 | )% | (3.16 | )% | ||||||||||||||||
Ratio of net operating expenses to average net assets | 1.35 | %6 | 1.35 | % | 1.35 | % | 1.35 | % | 1.10 | %6 | 1.10 | % | 1.10 | % | 1.10 | % | ||||||||||||||||
Ratio of net investment income (loss) to average net assets | 0.06 | %6 | 0.07 | % | (0.08 | )% | 0.14 | % | 0.27 | %6 | 0.36 | % | 0.17 | % | 0.36 | % | ||||||||||||||||
Portfolio turnover rate | 5.95 | %5 | 30.14 | % | 70.99 | % | 58.03 | % | 5.95 | %5 | 30.14 | % | 70.99 | % | 58.03 | % | ||||||||||||||||
1 | Based on average shares outstanding. | |
2 | The amount shown for a share outstanding does not correspond with the aggregate realized and unrealized gain (loss) on investments for the period due to the timing of sales and redemptions of fund shares in relation to fluctuating market values of investments of the Fund. | |
3 | Less than $0.01 per share. | |
4 | The total returns would have been lower had certain expenses not been reduced during the period shown. | |
5 | Not Annualized. | |
6 | Annualized. |
45 |
Baron Select Funds | June 30, 2013 |
FINANCIAL HIGHLIGHTS (Unaudited) (Continued) |
BARON EMERGING MARKETS FUND
Selected data for a share outstanding throughout each period:
RETAIL SHARES | INSTITUTIONAL SHARES | |||||||||||||||||||||||
Six Months | Six Months | |||||||||||||||||||||||
Ended | Year Ended | Ended | Year Ended | |||||||||||||||||||||
June 30, | December 31, | June 30, | December 31, | |||||||||||||||||||||
2013 | 2012 | 2011 | 2013 | 2012 | 2011 | |||||||||||||||||||
Net asset value, beginning of period | $ | 10.06 | $ | 8.28 | $ | 10.00 | $ | 10.05 | $ | 8.30 | $ | 10.00 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment loss | (0.02 | )1 | (0.04 | )1 | (0.03 | )1 | (0.00 | )1,5 | (0.01 | )1 | (0.01 | )1 | ||||||||||||
Net realized and unrealized gain (loss) on investments | 0.08 | 1.94 | (1.69 | ) | 0.07 | 1.93 | (1.69 | ) | ||||||||||||||||
Total from investment operations | 0.06 | 1.90 | (1.72 | ) | 0.07 | 1.92 | (1.70 | ) | ||||||||||||||||
Less distributions to shareholders from: | ||||||||||||||||||||||||
Net investment income | 0.00 | (0.12 | ) | 0.00 | 0.00 | (0.17 | ) | 0.00 | ||||||||||||||||
Net realized gain on investments | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||||
Total distributions | 0.00 | (0.12 | ) | 0.00 | 0.00 | (0.17 | ) | 0.00 | ||||||||||||||||
Net asset value, end of period | $ | 10.12 | $ | 10.06 | $ | 8.28 | $ | 10.12 | $ | 10.05 | $ | 8.30 | ||||||||||||
Total return | 0.60 | %2,3 | 22.98 | %2 | (17.20 | )%2 | 0.70 | %2,3 | 23.22 | %2 | (17.00 | )%2 | ||||||||||||
Ratios/Supplemental data: | ||||||||||||||||||||||||
Net assets (in millions), end of period | $ | 3.7 | $ | 2.9 | $ | 2.0 | $ | 17.6 | $ | 6.0 | $ | 4.3 | ||||||||||||
Ratio of operating expenses to average net assets | 2.85 | %4 | 4.01 | % | 4.49 | % | 2.23 | %4 | 3.37 | % | 3.83 | % | ||||||||||||
Less: Reimbursement of expenses by Adviser | (1.35 | )%4 | (2.51 | )% | (2.99 | )% | (0.98 | )%4 | (2.12 | )% | (2.58 | )% | ||||||||||||
Ratio of net operating expenses to average net assets | 1.50 | %4 | 1.50 | % | 1.50 | % | 1.25 | %4 | 1.25 | % | 1.25 | % | ||||||||||||
Ratio of net investment loss to average net assets | (0.37 | )%4 | (0.39 | )% | (0.32 | )% | (0.06 | )%4 | (0.14 | )% | (0.07 | )% | ||||||||||||
Portfolio turnover rate | 21.58 | %3 | 42.68 | % | 45.86 | % | 21.58 | %3 | 42.68 | % | 45.86 | % | ||||||||||||
1 | Based on average shares outstanding. | |
2 | The total returns would have been lower had certain expenses not been reduced during the period shown. | |
3 | Not Annualized. | |
4 | Annualized. | |
5 | Less than $0.01 per share. |
46 |
June 30, 2013 | Baron Select Funds |
FINANCIAL HIGHLIGHTS (Unaudited) (Continued) |
BARON ENERGY AND RESOURCES FUND
Selected data for a share outstanding throughout each period:
RETAIL SHARES | INSTITUTIONAL SHARES | |||||||||||||||
Six Months | Six Months | |||||||||||||||
Ended | Year Ended | Ended | Year Ended | |||||||||||||
June 30, | December 31, | June 30, | December 31, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Net asset value, beginning of period | $ | 9.46 | $ | 10.00 | $ | 9.48 | $ | 10.00 | ||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income (loss) | (0.01 | )1 | (0.03 | )1 | 0.01 | 1 | (0.01 | )1 | ||||||||
Net realized and unrealized gain (loss) on investments | 0.56 | (0.51 | ) | 0.55 | (0.51 | ) | ||||||||||
Total from investment operations | 0.55 | (0.54 | ) | 0.56 | (0.52 | ) | ||||||||||
Less distributions to shareholders from: | ||||||||||||||||
Net investment income | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||
Net realized gain on investments | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||
Total distributions | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||
Net asset value, end of period | $ | 10.01 | $ | 9.46 | $ | 10.04 | $ | 9.48 | ||||||||
Total return | 5.81 | %2,3 | (5.40 | )%2 | 5.91 | %2,3 | (5.20 | )%2 | ||||||||
Ratios/Supplemental data: | ||||||||||||||||
Net assets (in millions), end of period | $ | 17.7 | $ | 1.8 | $ | 1.6 | $ | 1.4 | ||||||||
Ratio of operating expenses to average net assets | 2.80 | %4 | 9.07 | % | 4.04 | %4 | 8.65 | % | ||||||||
Less: Reimbursement of expenses by Adviser | (1.44 | )%4 | (7.72 | )% | (2.93 | )%4 | (7.55 | )% | ||||||||
Less: Ratio of interest expense to average net assets | (0.01 | )%4 | 0.00 | % | (0.01 | )%4 | 0.00 | % | ||||||||
Ratio of net operating expenses to average net assets | 1.35 | %4 | 1.35 | % | 1.10 | %4 | 1.10 | % | ||||||||
Ratio of net investment income (loss) to average net assets | (0.11 | )%4 | (0.36 | )% | 0.18 | %4 | (0.11 | )% | ||||||||
Portfolio turnover rate | 9.85 | %3 | 35.74 | % | 9.85 | %3 | 35.74 | % | ||||||||
1 | Based on average shares outstanding. | |
2 | The total returns would have been lower had certain expenses not been reduced during the period shown. | |
3 | Not Annualized. | |
4 | Annualized. |
47 |
Baron Select Funds | June 30, 2013 |
FINANCIAL HIGHLIGHTS (Unaudited) (Continued) |
BARON GLOBAL ADVANTAGE FUND
Selected data for a share outstanding throughout each period:
RETAIL SHARES | INSTITUTIONAL SHARES | |||||||||||||||
Six Months | Six Months | |||||||||||||||
Ended | Period Ended | Ended | Period Ended | |||||||||||||
June 30, | December 31, | June 30, | December 31, | |||||||||||||
2013 | 20121 | 2013 | 20121 | |||||||||||||
Net asset value, beginning of period | $ | 10.41 | $ | 10.00 | $ | 10.42 | $ | 10.00 | ||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income (loss) | 0.01 | 2 | (0.02 | )2 | 0.03 | 2 | (0.02 | )2 | ||||||||
Net realized and unrealized gain on investments | 0.23 | 0.43 | 0.23 | 0.44 | ||||||||||||
Total from investment operations | 0.24 | 0.41 | 0.26 | 0.42 | ||||||||||||
Less distributions to shareholders from: | ||||||||||||||||
Net investment income | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||
Net realized gain on investments | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||
Total distributions | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||
Net asset value, end of period | $ | 10.65 | $ | 10.41 | $ | 10.68 | $ | 10.42 | ||||||||
Total return | 2.31 | %3,4 | 4.10 | %3,4 | 2.50 | %3,4 | 4.20 | %3,4 | ||||||||
Ratios/Supplemental data: | ||||||||||||||||
Net assets (in millions), end of period | $ | 1.5 | $ | 1.5 | $ | 1.9 | $ | 1.6 | ||||||||
Ratio of operating expenses to average net assets | 6.66 | %6 | 8.35 | %5,6 | 6.13 | %6 | 7.33 | %5,6 | ||||||||
Less: Reimbursement of expenses by Adviser | (5.16 | )%6 | (6.85 | )%5,6 | (4.88 | )%6 | (6.08 | )%5,6 | ||||||||
Ratio of net operating expenses to average net assets | 1.50 | %6 | 1.50 | %5,6 | 1.25 | %6 | 1.25 | %5,6 | ||||||||
Ratio of net investment income (loss) to average net assets | 0.28 | %6 | (0.38 | )%5,6 | 0.52 | %6 | (0.30 | )%5,6 | ||||||||
Portfolio turnover rate | 20.53 | %4 | 24.64 | %4 | 20.53 | %4 | 24.64 | %4 | ||||||||
1 | For the period April 30, 2012 (commencement of operations) to December 31, 2012. | |
2 | Based on average shares outstanding. | |
3 | The total returns would have been lower had certain expenses not been reduced during the period shown. | |
4 | Not Annualized. | |
5 | Certain fixed expenses incurred by the Fund were not annualized for the period ended December 31, 2012. | |
6 | Annualized. |
48 |
June 30, 2013 | Baron Select Funds |
FUND EXPENSES (Unaudited) |
As a shareholder of the Funds, you may incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include advisory fees, distribution and service (12b-1) fees and other Fund expenses. Due to the payment of Rule 12b-1 fees, long-term shareholders may indirectly pay more than the maximum permitted front-end sales charge. The information on this page is intended to help you understand your ongoing costs of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The information in the following table is based on an investment of $1,000 invested on January 1, 2013 and held for the six months ended June 30, 2013.
ACTUAL EXPENSES
The table below titled “Based on Actual Total Return” provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading titled “Expenses Paid During the Period”.
BASED ON ACTUAL TOTAL RETURN FOR THE SIX MONTHS ENDED JUNE 30, 20131
Actual | Beginning | Ending | Annualized | Expenses | ||||||||||||||||||||
Total | Account Value | Account Value | Expense | Paid During | ||||||||||||||||||||
Return | January 1, 2013 | June 30, 2013 | Ratio | the Period3 | ||||||||||||||||||||
Baron Partners Fund — Retail Shares | 20.78 | % | $ | 1,000.00 | $ | 1,207.80 | 1.67 | %2 | $ | 9.14 | ||||||||||||||
Baron Partners Fund — Institutional Shares | 20.98 | % | $ | 1,000.00 | $ | 1,209.80 | 1.40 | %2 | $ | 7.67 | ||||||||||||||
Baron Focused Growth Fund — Retail Shares | 8.61 | % | $ | 1,000.00 | $ | 1,086.10 | 4 | 1.35 | %5 | $ | 6.98 | |||||||||||||
Baron Focused Growth Fund — Institutional Shares | 8.81 | % | $ | 1,000.00 | $ | 1.088.10 | 4 | 1.10 | %5 | $ | 5.70 | |||||||||||||
Baron International Growth Fund — Retail Shares | 2.89 | % | $ | 1,000.00 | $ | 1,028.90 | 4 | 1.50 | %5 | $ | 7.55 | |||||||||||||
Baron International Growth Fund — Institutional Shares | 2.94 | % | $ | 1,000.00 | $ | 1,029.40 | 4 | 1.25 | %5 | $ | 6.29 | |||||||||||||
Baron Real Estate Fund — Retail Shares | 9.36 | % | $ | 1,000.00 | $ | 1,093.60 | 4 | 1.35 | %5 | $ | 7.01 | |||||||||||||
Baron Real Estate Fund — Institutional Shares | 9.52 | % | $ | 1,000.00 | $ | 1,095.20 | 4 | 1.10 | %5 | $ | 5.71 | |||||||||||||
Baron Emerging Markets Fund — Retail Shares | 0.60 | % | $ | 1,000.00 | $ | 1,006.00 | 4 | 1.50 | %5 | $ | 7.46 | |||||||||||||
Baron Emerging Markets Fund — Institutional Shares | 0.70 | % | $ | 1,000.00 | $ | 1,007.00 | 4 | 1.25 | %5 | $ | 6.22 | |||||||||||||
Baron Energy & Resources Fund — Retail Shares | 5.81 | % | $ | 1,000.00 | $ | 1,058.10 | 4 | 1.36 | %5 | $ | 6.94 | |||||||||||||
Baron Energy & Resources Fund — Institutional Shares | 5.91 | % | $ | 1,000.00 | $ | 1,059.10 | 4 | 1.11 | %5 | $ | 5.67 | |||||||||||||
Baron Global Advantage Fund — Retail Shares | 2.31 | % | $ | 1,000.00 | $ | 1,023.10 | 4 | 1.50 | %5 | $ | 7.52 | |||||||||||||
Baron Global Advantage Fund — Institutional Shares | 2.50 | % | $ | 1,000.00 | $ | 1,025.00 | 4 | 1.25 | %5 | $ | 6.28 |
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below titled “Based on Hypothetical Total Return” provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account values and expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Funds and other funds. To do so, compare the 5% hypothetical example relating to the Funds with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table below are meant to highlight your ongoing costs and do not reflect any transactional costs, such as redemption fees, if any. Therefore, the table is useful in comparing ongoing costs only and will not help you determine your relative total costs of owning different mutual funds. In addition, if these transactional costs were included, your costs would have been higher.
BASED ON HYPOTHETICAL TOTAL RETURN FOR THE SIX MONTHS ENDED JUNE 30, 2013
Hypothetical | Beginning | Ending | Annualized | Expenses | ||||||||||||||||||||
Annualized | Account Value | Account Value | Expense | Paid During | ||||||||||||||||||||
Total Return | January 1, 2013 | June 30, 2013 | Ratio | the Period3 | ||||||||||||||||||||
Baron Partners Fund — Retail Shares | 5.00 | % | $ | 1,000.00 | $ | 1,016.51 | 1.67 | %2 | $ | 8.35 | ||||||||||||||
Baron Partners Fund — Institutional Shares | 5.00 | % | $ | 1,000.00 | $ | 1,017.85 | 1.40 | %2 | $ | 7.00 | ||||||||||||||
Baron Focused Growth Fund — Retail Shares | 5.00 | % | $ | 1,000.00 | $ | 1,018.10 | 4 | 1.35 | %5 | $ | 6.76 | |||||||||||||
Baron Focused Growth Fund — Institutional Shares | 5.00 | % | $ | 1,000.00 | $ | 1,019.34 | 4 | 1.10 | %5 | $ | 5.51 | |||||||||||||
Baron International Growth Fund — Retail Shares | 5.00 | % | $ | 1,000.00 | $ | 1,017.36 | 4 | 1.50 | %5 | $ | 7.50 | |||||||||||||
Baron International Growth Fund — Institutional Shares | 5.00 | % | $ | 1,000.00 | $ | 1,018.60 | 4 | 1.25 | %5 | $ | 6.26 | |||||||||||||
Baron Real Estate Fund — Retail Shares | 5.00 | % | $ | 1,000.00 | $ | 1,018.10 | 4 | 1.35 | %5 | $ | 6.76 | |||||||||||||
Baron Real Estate Fund — Institutional Shares | 5.00 | % | $ | 1,000.00 | $ | 1,019.34 | 4 | 1.10 | %5 | $ | 5.51 | |||||||||||||
Baron Emerging Markets Fund — Retail Shares | 5.00 | % | $ | 1,000.00 | $ | 1,017.36 | 4 | 1.50 | %5 | $ | 7.50 | |||||||||||||
Baron Emerging Markets Fund — Institutional Shares | 5.00 | % | $ | 1,000.00 | $ | 1,018.60 | 4 | 1.25 | %5 | $ | 6.26 | |||||||||||||
Baron Energy & Resources Fund — Retail Shares | 5.00 | % | $ | 1,000.00 | $ | 1,018.05 | 4 | 1.36 | %5 | $ | 6.80 | |||||||||||||
Baron Energy & Resources Fund — Institutional Shares | 5.00 | % | $ | 1,000.00 | $ | 1,019.29 | 4 | 1.11 | %5 | $ | 5.56 | |||||||||||||
Baron Global Advantage Fund — Retail Shares | 5.00 | % | $ | 1,000.00 | $ | 1,017.36 | 4 | 1.50 | %5 | $ | 7.50 | |||||||||||||
Baron Global Advantage Fund — Institutional Shares | 5.00 | % | $ | 1,000.00 | $ | 1,018.60 | 4 | 1.25 | %5 | $ | 6.26 |
1 | Assumes reinvestment of all dividends and capital gain distributions, if any. | |
2 | Annualized expense ratio for Baron Partners Fund for the six months ended June 30, 2013, includes 1.36% and 1.10% for net operating expenses and 0.31% and 0.30% for interest expense for the Retail and Institutional Shares, respectively. | |
3 | Expenses are equal to each Share Class’ respective annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365. | |
4 | Ending account value assumes the return earned after waiver and would have been lower if a portion of the expenses had not been waived. | |
5 | Annualized expense ratios are adjusted to reflect fee waiver. |
49 |
Baron Funds | June 30, 2013 |
DISCLOSURE REGARDING THE APPROVAL OF THE INVESTMENT ADVISORY AGREEMENTS FOR BARON PARTNERS FUND, BARON FOCUSED GROWTH FUND, BARON INTERNATIONAL GOWTH FUND, BARON REAL ESTATE FUND, BARON EMERGING MARKETS FUND, BARON ENERGY AND RESOURCES FUND AND BARON GLOBAL ADVANTAGE FUND, BY THE BOARD OF TRUSTEES (Unaudited) |
The Board of Trustees (the “Board”) of Baron Select Funds (the “Trust”) met on May 7, 2013 to discuss the selection of BAMCO, Inc. (the “Adviser”) as the investment adviser and the approval of the investment advisory agreements for Baron Partners Fund, Baron Focused Growth Fund, Baron International Growth Fund, Baron Real Estate Fund, Baron Emerging Markets Fund, Baron Energy and Resources Fund and Baron Global Advantage Fund, (each a “Fund” and collectively, the “Funds”). The members of the Board who are not affiliated with the Trust (the “Independent Trustees”) met in a separate session to discuss and consider the renewal of the advisory agreement for the Funds. An independent consultant provided reports to the Board and attended the Board meeting. The Trustees received a substantial amount of information from the Adviser and from the consultant, and were advised by independent counsel. Based on its evaluation of this and other information, the Board, including a majority of the Independent Trustees, approved the continuation of the advisory agreements for the Funds for an additional one-year period.
In reaching its determination, the Board considered various factors that it deemed relevant, including the factors listed below.
1. NATURE, EXTENT AND QUALITY OF SERVICES
As part of their consideration of the nature, extent and quality of services provided by the Adviser, the Independent Trustees relied on the information they received at the Board meeting, as well as on the information they had considered in past years. In particular, the Board considered the following:
• | Its confidence in the Adviser’s senior personnel, portfolio management, the financial condition of the Adviser and its affiliates and the Adviser’s available resources; | |
• | The nature, quality and the level of long-term performance of the services provided by the Adviser, including: intensive devotion to research, selection of broker/dealers for Fund portfolio transactions, relationships with and supervision of third party service providers, such as the Funds’ custodian and transfer agent, the quality of shareholder reports, the ability to monitor adherence to investment guidelines and restrictions, the legal, accounting and compliance services provided to the Funds and the support services provided to the Board; | |
• | The Adviser’s investment principles and processes and the historical performance of the Funds as compared to similar funds managed by other advisers and other funds managed by the Adviser over comparable periods; | |
• | The total expense ratio of the Funds and comparisons to similar funds managed by other advisers over comparable periods: The Board observed that the management fee was relatively high, but the other expenses paid by the Funds generally were relatively low, when compared to their peers. They concluded that the higher management fee was justified given the Adviser’s highly research intensive process and highly disciplined adherence to its process; | |
• | The costs of portfolio management, including the types of investments made for the Funds, the personnel and systems necessary for implementation of investment strategies, and the pre-tax profits realized by the Adviser and its affiliates from their relationship with the Funds; and | |
• | Any additional services provided by the Adviser. |
The Board concluded that the nature, extent and quality of the services provided by the Adviser to each Fund were appropriate and that each Fund was likely to continue to benefit from those services provided under the relevant advisory agreement with the Adviser.
2. INVESTMENT PERFORMANCE OF THE FUNDS AND THE ADVISER
As part of its consideration of the investment performance of the Funds and the Adviser, the Board took into account the analyses performed by and discussed with the independent consultant. The Board also considered the independent consultant’s risk-adjusted performance comparisons with comparable funds and comparisons of each Fund’s annualized total return over one-, three-, five- and ten-year periods, where applicable, against expense group and performance of universe averages. After considering all the information, the Board concluded that the Adviser continued to invest in accordance with its long-standing principles and that each Fund’s more recent relative performance was consistent with expectations for the Adviser’s investment style under recent market conditions. The Board considered benefits that accrue to the Adviser and its affiliates from their relationship with the Funds.
3. COSTS OF SERVICES PROVIDED AND PROFITS TO BE REALIZED BY THE ADVISER
The Board was provided with information from the Adviser and the independent consultant regarding the fees charged by the Adviser as compared to the fees charged by comparable funds. This information compared various fees and expenses, as well as the total expense ratios, of the Funds against the same fees, expenses and total expense ratios of other funds of similar size, character and investment strategies.
The Board considered comparisons of the advisory fees charged and services provided by the Adviser and its investment adviser affiliate to proprietary mutual funds, sub-advised accounts and separately managed accounts and a profitability analysis prepared by the Adviser. The Board considered that, while the advisory fees for the other clients are the same as, or lower than, the fees for the Funds, the Adviser or its affiliate performs significantly fewer services for those clients compared with those provided by the Adviser to the Funds.
4. ECONOMIES OF SCALE AND BENEFITS TO INVESTORS
The Board considered the extent to which each Fund’s management fee reflected economies of scale for the benefit of Fund shareholders, noting the sharp decline in assets from their highs in 2007 and appreciating that the economies of scale analysis is predicated on increasing assets. The Board considered that the Funds’ fee schedules do not have break points. The Board considered that small- and mid-cap investment strategies require more attention by the Adviser than a strategy that involves other types of investing, particularly as asset size increases. The Board considered that the Adviser was continuing to grow and upgrade its staff and invest in its business even during this recent period of declining assets and reduced revenues. The Board members reiterated their intention to continue to scrutinize the extent of economies of scale, asset growth and the Adviser’s plans to invest further to support the Funds. The Board concluded that approval of the management fee for each Fund was supportable in light of the services provided as discussed at the meeting, including the Adviser’s investments in resources to support the Funds.
After due consideration of the above-enumerated factors and other factors in deemed relevant, the Board, including a majority of the Independent Trustees, approved the continuance of each Fund’s investment advisory agreement.
50 |
Notes |
Notes |
Notes |
Notes |
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JUNE 13
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Included herein under Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures. | |
(a) The Registrant’s principal executive officer and principal financial officer have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “1940 Act”)) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report. | |
(b) There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the Registrant’s second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting. | |
Item 12. Exhibits. | |
(a)(1) Not applicable. | |
(a)(2) Certification of each of the principal executive officers and principal financial officers of the Registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2) is attached hereto as a part of EX-99.CERT. | |
(b) Certification of each of the principal executive officers and principal financial officers of the Registrant as required by Section 906 of the Sarbanes-Oxley Act of 2002 is attached hereto as a part of EX-99.906CERT. |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BARON SELECT FUNDS | ||
By: | ||
Ronald Baron | ||
Chief Executive Officer | ||
Date: | August 28, 2013 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | ||
Ronald Baron | ||
Chief Executive Officer | ||
Date: | August 28, 2013 | |
By: | ||
Peggy Wong | ||
Treasurer and Chief Financial Officer | ||
Date: | August 28, 2013 |