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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, 2014
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)
Item 1. | Reports to Stockholders. |
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, 2014 | 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 | |||
Ticker Symbols: | |||
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 | |||
Ticker Symbols: | |||
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, 2014. 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 22, 2014 | August 22, 2014 | August 22, 2014 | |||
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, Baron Fifth Avenue Growth Fund and Baron Discovery Fund series, please visit the Funds’ website at www.BaronFunds.com or contact us at 1-800-99BARON. The Funds’ Proxy Voting Policy 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, 2014 |
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, 2014 |
Since | ||||||||||||||||||
Inception | ||||||||||||||||||
Six | One | Three | Five | Ten | (January 31, | |||||||||||||
Months* | Year | Years | Years | Years | 1992) | |||||||||||||
Baron Partners Fund — Retail Shares1, 2, 3 | 10.02 | % | 34.48 | % | 19.04 | % | 23.62 | % | 11.65 | % | 13.51 | % | ||||||
Baron Partners Fund — Institutional Shares1, 2, 3, 4 | 10.17 | % | 34.80 | % | 19.35 | % | 23.95 | % | 11.80 | % | 13.58 | % | ||||||
Russell Midcap Growth Index1 | 6.51 | % | 26.04 | % | 14.54 | % | 21.16 | % | 9.83 | % | 9.70 | % | ||||||
S&P 500 Index1 | 7.14 | % | 24.61 | % | 16.58 | % | 18.83 | % | 7.78 | % | 9.44 | % |
* | 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 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 for the Institutional Shares prior to May 29, 2009 did not reflect this fee, the returns would be higher. |
2
June 30, 2014 (Unaudited) | Baron Partners Fund |
TOP TEN HOLDINGS AS OF JUNE 30, 2014 | |||
Percent of Total | |||
Investments | |||
Tesla Motors Inc. | 7.6% | ||
Hyatt Hotels Corp. | 7.1% | ||
ITC Holdings Corp. | 7.0% | ||
Arch Capital Group Ltd. | 6.6% | ||
Air Lease Corp. | 5.4% | ||
Concho Resources, Inc. | 5.4% | ||
CarMax, Inc. | 4.9% | ||
Dick’s Sporting Goods, Inc. | 4.6% | ||
CoStar Group, Inc. | 4.6% | ||
The Charles Schwab Corp. | 4.5% | ||
57.7% | |||
SECTOR BREAKDOWN AS OF JUNE 30, 2014† (as a percentage of total investments) | |||
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE | |||
For the six-month period ended June 30, 2014, Baron Partners Fund gained 10.06%1, significantly outperforming the Russell Midcap Growth Index, which gained 6.51%. The Fund has also performed well since its conversion into an open end mutual fund on April 30, 2003. In the period since the Fund’s conversion through June 30, 2014, the Fund gained an annualized 15.06% versus an annualized 12.20% 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 13.51%* compared to an annualized 9.70% for its index. |
Baron Partners Fund invests primarily in U.S. companies of any size with significant long-term growth potential. We believe our process can identify investment opportunities that are attractively priced relative to future prospects. The Fund is nondiversified, so its top 10 holdings are expected to comprise a significant percentage of the portfolio, and the Fund uses leverage, both of which increase risk. |
The six-month period was marked by a rotation among sectors and sub-asset classes driven by profit taking. Last year, the best performers were small cap growth companies. This year to date, small cap growth performance has been more or less flat, as investors rotated into value and larger cap stocks. Likewise, subindustries that did well last year, like health care technology, Internet software & services, and Internet retail, lagged in the first half of this year. Other areas in which we also invest that underperformed in 2013 are now leading the market, including energy, emerging markets and real estate (REITs in particular). Since we invest based on fundamentals – open-ended growth opportunities, significant competitive advantages, and talented management teams – we used the sell-off as an opportunity to purchase or add to existing holdings at what we consider to be attractive prices. |
At the sector level, the Fund’s investments in Health Care, Energy and Consumer Discretionary were the largest contributors to performance. Information Technology was the only detractor in the period. |
The largest individual contributor was Illumina, Inc., the leader in next generation DNA sequencing platforms. The stock’s 61.4% return represented more than 28% of the Fund’s total six-month return. Performance was driven by strong financial results and 2014 guidance. The company’s announcement of multiple new product introductions, including a new ultra-high throughput sequencing platform that is the first to sequence a full human genome for less than $1,000, is generating momentum as well. We believe Illumina holds an effective monopoly on DNA sequencing at a time when demand is accelerating. |
Dick’s Sporting Goods, Inc., a sporting goods retailer, was the largest individual detractor. The company reported a sales shortfall in the hunting and golf categories, while other higher margin product segments had sales growth exceeding industry averages. A generally weak consumer outlook and increased competition from e-commerce are also feeding into investor concerns about the strength of the traditional retail sector. We believe the hunting and golf issues are temporary and have conviction based on the company’s ability to take market share from its competitors and grow its online presence. |
We expect to continue 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. | |
1 | Performance information reflects results of the Retail Shares. | |
* | Please see Footnote 2 on page 2. |
3
Baron Focused Growth Fund (Unaudited) | June 30, 2014 |
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, 2014 |
Since | ||||||||||||||||||
Inception | ||||||||||||||||||
Six | One | Three | Five | Ten | (May 31, | |||||||||||||
Months* | Year | Years | Years | Years | 1996) | |||||||||||||
Baron Focused Growth Fund — Retail Shares1, 2, 3 | 2.22 | % | 18.29 | % | 11.56 | % | 17.14 | % | 11.12 | % | 11.83 | % | ||||||
Baron Focused Growth Fund — Institutional Shares1, 2, 3, 4 | 2.34 | % | 18.60 | % | 11.84 | % | 17.43 | % | 11.26 | % | 11.91 | % | ||||||
Russell 2500 Growth Index1 | 3.97 | % | 26.26 | % | 14.88 | % | 21.65 | % | 9.94 | % | 7.63 | % | ||||||
S&P 500 Index1 | 7.14 | % | 24.61 | % | 16.58 | % | 18.83 | % | 7.78 | % | 8.10 | % |
† | 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. | |
* | 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 for the Institutional Shares prior to May 29, 2009 did not reflect this fee, the returns would be higher. |
4
June 30, 2014 (Unaudited) | Baron Focused Growth Fund |
TOP TEN HOLDINGS AS OF JUNE 30, 2014 | |||
Percent of Total | |||
Investments | |||
Colfax Corp. | 7.4% | ||
Hyatt Hotels Corp. | 7.3% | ||
Vail Resorts, Inc. | 5.2% | ||
Genesee & Wyoming, Inc. | 5.0% | ||
Pinnacle Entertainment, Inc. | 4.5% | ||
FactSet Research Systems, Inc. | 4.5% | ||
ITC Holdings Corp. | 4.4% | ||
Manchester United plc | 4.4% | ||
CarMax, Inc. | 4.2% | ||
Helmerich & Payne, Inc. | 4.1% | ||
51.0% | |||
SECTOR BREAKDOWN AS OF JUNE 30, 2014† (as a percentage of total investments) | |||
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE | |||
For the six-month period ended June 30, 2014, Baron Focused Growth Fund gained 2.22%1, while the Russell 2500 Growth Index gained 3.97%. Since its inception on May 31, 1996 through June 30, 2014, the Fund has significantly outperformed the Russell 2500 Growth Index, gaining an annualized 11.83%* compared to an annualized 7.63% for its index. |
Baron Focused Growth Fund invests in a non-diversified portfolio of companies that we believe are well-capitalized, have exceptional management, significant growth potential, and sustainable barriers to competition. The Fund is non-diversified, so the top ten holdings are expected to comprise a significant percentage of the Fund. |
The six-month period was marked by a rotation among sectors and sub-asset classes driven by profit taking. Last year, the best performers were small cap growth companies. This year to date, small cap growth performance has been more or less flat, as investors rotated into value and larger cap stocks. Likewise, sub-industries that did well last year, like health care technology, Internet software & services, and Internet retail, lagged in the first half of this year. Other areas in which we also invest that underperformed in 2013 are now leading the market, including energy, emerging markets and real estate (REITs in particular). Since we invest based on fundamentals – open-ended growth opportunities, significant competitive advantages, and talented management teams – we used the sell-off as an opportunity to purchase or add to existing holdings at what we consider to be attractive prices. |
At the sector level, the Fund’s investments in Industrials, Energy and Telecommunication Services were the largest contributors to performance. Information Technology and Consumer Discretionary were the biggest detractors. |
Hyatt Hotels Corp., a global lodging company, was the largest individual contributor to Fund performance during the period. Shares increased on reports of strong earnings growth driven by an uptick in group business bookings. Hyatt has also benefited from the sale of non-core assets, generating excess cash that Hyatt has used to accelerate share repurchases and purchase assets in new locations. We think the company has a long runway of future growth, given its under-penetration in certain markets, its hefty pipeline of projects, and a strong balance sheet. |
The biggest detractor during the period was Benefitfocus, Inc., the leading provider of cloud-based benefits software. After more than doubling in 2013, Benefitfocus shares gave back some gains, as investors digested higher planned investment spending. The company, which offers an integrated suite of solutions to help customers more efficiently shop, enroll, manage, and exchange benefits information, serves an addressable market that is more than 100 times larger than its current business, which we think should allow it to compound revenue at more than 30% annually. |
We expect to continue 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. | |
1 | Performance information reflects results of the Retail Shares. | |
* | Please see Footnote 2 on page 4. |
5
Baron International Growth Fund (Unaudited) | June 30, 2014 |
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, 2014 |
Since | ||||||||||||||||||
Inception | ||||||||||||||||||
Six | One | Three | Five | (December 31, | ||||||||||||||
Months* | Year | Years | Years | 2008) | ||||||||||||||
Baron International Growth Fund — Retail Shares1, 2 | 5.39 | % | 24.64 | % | 7.58 | % | 15.44 | % | 16.07 | % | ||||||||
Baron International Growth Fund — Institutional Shares1, 2, 3 | 5.51 | % | 25.01 | % | 7.85 | % | 15.73 | % | 16.35 | % | ||||||||
MSCI ACWI ex USA IMI Growth Index1 | 5.02 | % | 20.05 | % | 5.58 | % | 11.70 | % | 13.21 | % | ||||||||
MSCI ACWI ex USA Index1 | 5.56 | % | 21.75 | % | 5.73 | % | 11.11 | % | 12.69 | % |
* | Not annualized. | |
1 | The MSCI ACWI ex USA indexes cited are unmanaged, free float-adjusted market capitalization weighted indexes. The MSCI ACWI ex USA IMI Growth Index Net USD measures the 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 for the Institutional Shares prior to May 29, 2009 did not reflect this fee, the returns would be higher. |
6
June 30, 2014 (Unaudited) | Baron International Growth Fund |
TOP TEN HOLDINGS AS OF JUNE 30, 2014 | |||
Percent of | |||
Net Assets | |||
RIB Software AG | 3.0% | ||
Eurofins Scientific SE | 2.6% | ||
SoftBank Corp. | 2.5% | ||
Constellation Software, Inc. | 2.4% | ||
Grifols SA | 2.4% | ||
Kroton Educacional SA | 2.2% | ||
Agilent Technologies, Inc. | 2.1% | ||
Smiles SA | 2.1% | ||
Check Point Software Technologies Ltd. | 2.1% | ||
Steinhoff International Holdings Ltd. | 2.1% | ||
23.5% | |||
SECTOR BREAKDOWN AS OF JUNE 30, 2014† (as a percentage of net assets) | |||
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE | |||
For the six-month period ended June 30, 2014, Baron International Growth Fund gained 5.39%1, outperforming the MSCI ACWI ex USA IMI Growth Index, which gained 5.02%. 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%. The Fund may purchase securities of companies of any size. |
After a slow start, global equities picked up steam over the course of the first six months of 2014, driven partly by declining sovereign bond yields worldwide. While U.S. Federal Reserve tapering continues amidst a steady domestic economy and a tightening labor market, Japan remains on course with bold monetary stimulus and at least the possibility of market-friendly economic reform. The European Central Bank unveiled a long-term refinancing operation for non-financial private sector companies, and has indicated a willingness to engage in direct purchases of asset-backed securities if warranted, which we believe was a key driver of the recent record lows across most European sovereign bond yields. |
We are monitoring what appears to be a deteriorating geopolitical environment, where we have seen instability in a number of developing regions. Regardless of the risks to the current equilibrium, razor-thin sovereign bond yields have now moved below dividend yields in many markets, a fairly rare phenomenon that we believe is not likely to sustain in the long run. Therefore, we believe there is a strong likelihood that global equity values will continue to rise in the near term. |
On a sector basis, the largest contributors to performance were Consumer Discretionary, Information Technology, Health Care and Energy. Financials and Telecommunication Services detracted. On a country basis, the largest contributors to performance were Brazil, Germany and India. Top detractors included Japan, and to a lesser extent, China and Israel. |
RIB Software AG, a leading provider of construction and building information modeling software, was the Fund’s largest contributor. Shares rose significantly in the period, carrying forward RIB’s strong performance from 2013. Despite the superior product, adoption had been slow. In 2013, RIB began allowing new clients to try the software in a mobile lab, dramatically shortening the sales process from one year to just 100 days. Since then, the company has reported a sharp increase in the number of new contracts. |
The Fund’s largest detractor was Sina Corporation, an operator of a leading Chinese Internet portal that also controls the country’s biggest Twitter-like service, SINA Weibo. Performance was hurt by concerns over slowing user growth and the dilutive impact of the IPO of SINA Weibo, as well as the government’s revocation of two licenses that will impact Sina’s video and book publishing business in the coming months. We believe Sina is trading at a significant discount to asset value and SINA Weibo’s earnings potential is not reflected in the stock price. |
We expect to continue investing alongside visionary entrepreneurs running quality businesses with attractive growth potential, capital-efficient business models, and exemplary corporate governance. |
† | 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. | |
1 | Performance information reflects results of the Retail Shares. |
7
Baron Real Estate Fund (Unaudited) | June 30, 2014 |
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, 2014 |
Since | |||||||||||||
Inception | |||||||||||||
Six | One | Three | (December 31, | ||||||||||
Months* | Year | Years | 2009) | ||||||||||
Baron Real Estate Fund — Retail Shares1, 2 | 9.35 | % | 27.11 | % | 22.91 | % | 22.86 | % | |||||
Baron Real Estate Fund — Institutional Shares1, 2 | 9.50 | % | 27.45 | % | 23.21 | % | 23.16 | % | |||||
MSCI USA IMI Extended Real Estate Index1 | 8.29 | % | 16.22 | % | 14.86 | % | 16.27 | % | |||||
S&P 500 Index1 | 7.14 | % | 24.61 | % | 16.58 | % | 15.78 | % |
* | 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, 2014 (Unaudited) | Baron Real Estate Fund |
Our investments in REITs and senior housing operators and health care service providers contributed the most to returns in the period, followed by hotels & leisure and real estate service companies. Only homebuilders, land developers, and building products/services detracted slightly from performance. |
Following disappointing performance in 2013, REITs performed well in the first half of 2014 due primarily to historically low interest rates. We have increased the Fund’s investments in REITs by about 400 basis points since the beginning of 2014. Generally, we continue to hold the view that REITs will be relatively more vulnerable to an eventual rise in interest rates, and are therefore monitoring our REIT exposure accordingly. However, if interest rates remain low, REITs may continue to outperform. |
Performance of senior housing operators was driven largely by favorable industry consolidation developments. We believe these companies are poised to benefit from attractive demographic trends, our expectation for a cyclical economic and housing market recovery, modest construction activity, favorable valuations, and perhaps further industry consolidation. |
We believe our hotels & leisure investments remain well-positioned amid expectations of solid demand, low supply forecasts, and reasonable current stock valuations. In our opinion, as economic growth improves, hotels should benefit from higher occupancy and the opportunity to increase nightly rates, both resulting in strong cash flow growth. |
Real estate services companies benefited from the ongoing recovery of the commercial real estate market. We believe these companies offer strong open-ended growth potential at fair valuations, and that the current recovery cycle still has a long runway ahead. |
The Fund’s largest contributor was senior housing provider Emeritus Corp., whose shares climbed on the announcement of a planned merger with Brookdale Senior Living, Inc., in a deal valued at $2.8 billion, representing a 32% premium to Emeritus’ trading price. The deal, which is slated to close later in 2014, will create the largest and only nationally branded senior housing provider in the U.S. Given demographics and increasing consumer acceptance of senior housing, we believe prospects for the combined company are positive. |
The Fund’s largest detractor was Essent Group, Inc., which provides credit protection on residential mortgages. Shares declined because of a slowdown in mortgage originations due to cold weather, low housing inventory and higher mortgage rates. We believe Essent’s earnings growth will improve as the housing market recovers and the government pulls back from the mortgage finance market. |
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. | |
1 | Performance information reflects results of the Retail Shares. |
9
Baron Emerging Markets Fund (Unaudited) | June 30, 2014 |
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, 2014 |
Since | |||||||||||||
Inception | |||||||||||||
Six | One | Three | (December 31, | ||||||||||
Months* | Year | Years | 2010) | ||||||||||
Baron Emerging Markets Fund — Retail Shares1, 2 | 8.41 | % | 23.62 | % | 8.48 | % | 6.98 | % | |||||
Baron Emerging Markets Fund — Institutional Shares1, 2 | 8.48 | % | 23.91 | % | 8.72 | % | 7.21 | % | |||||
MSCI EM IMI Growth Index1 | 6.52 | % | 14.27 | % | 0.84 | % | 0.83 | % | |||||
MSCI EM IMI Index1 | 6.48 | % | 14.31 | % | -0.27 | % | -0.14 | % |
* | Not annualized. | |
1 | The MSCI EM (Emerging Markets) IMI indexes cited are unmanaged, free float-adjusted market capitalization indexes. 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, 2014 (Unaudited) | Baron Emerging Markets Fund |
After a slow start, emerging market equities picked up speed over the first half of 2014, driven in large part by declining sovereign bond yields worldwide. Razor-thin sovereign bond yields have now moved below dividend yields in many markets, a fairly rare phenomenon which we believe is not likely to sustain in the long run. As a result, we believe there is a strong likelihood that global equity values continue to rise in the near term. Indeed, the decline in sovereign yields extended to the emerging markets, which we believe was a key factor in the return of emerging market equity leadership. |
Further progress on the reform agenda, which is now broadening out beyond China and Mexico to include India, Indonesia, and possibly even Brazil, contributed to performance as well. A possible threat to this current equilibrium is what appears to be a deteriorating geopolitical environment, where we have seen instability in a number of developing regions. |
On a regional basis, the Fund’s investments in Brazil and India were the largest contributors to performance by a sizable margin. After outperforming in 2013, our investments in China pulled back in the first half of 2014. |
On a sector basis, the largest contributors were Consumer Discretionary, Financials, Industrials and Health Care. Consumer Staples detracted in the six-month period. |
The Fund’s largest contributor was Smiles SA, a Brazil-based frequent flyer program. Smiles posted solid volume growth and earnings results that beat consensus expectation, and announced plans for a special dividend, equivalent to a 20% dividend yield. We believe the company has a strong runway for growth, given the underpenetration of air transportation and loyalty programs in Brazil. |
Chinese infant formula company Biostime International Holdings Ltd. was the Fund’s biggest detractor in the period. The industry has experienced a marked slowdown due to a contamination scare associated with a New Zealand dairy cooperative in late 2013, from which Biostime does not source. As a fast growing player in China’s baby care industry, we believe Biostime will benefit from increased sales of infant formula and is well-positioned to double earnings in the next three-to-four years. |
We continue to believe that market friendly economic, labor and financial reform across many emerging market countries is the key long-term catalyst for sustainable growth and value creation in the developing world, and we are pleased to report that this theme seems to be gaining momentum as we progress through a heavy election year. |
† | 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. | |
1 | Performance information reflects results of the Retail Shares. |
11
Baron Energy and Resources Fund (Unaudited) | June 30, 2014 |
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 PERIODS ENDED JUNE 30, 2014 |
Since | ||||||||||
Inception | ||||||||||
Six | One | (December 31, | ||||||||
Months* | Year | 2011) | ||||||||
Baron Energy and Resources Fund — Retail Shares1, 2 | 20.95 | % | 43.24 | % | 15.50 | % | ||||
Baron Energy and Resources Fund — Institutional Shares1, 2 | 21.07 | % | 43.63 | % | 15.77 | % | ||||
S&P North American Natural Resources Sector Index1 | 16.43 | % | 33.14 | % | 13.95 | % | ||||
S&P 500 Index1 | 7.14 | % | 24.61 | % | 22.04 | % |
* | 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, including mining, energy, paper and forest products, and plantation owning companies. 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, 2014 (Unaudited) | Baron Energy and Resources Fund |
After two years of underperformance, the Energy sector came back strongly in March. Investor sentiment toward the industry became markedly more positive, driven by a surge in oil and gas prices, growth in U.S. oil and gas production, and signs that earnings and cash flow fundamentals for a broad range of Energy and Energy-related companies have turned more favorable in recent months. We think there is still a lot of potential liquidity in the market that could migrate toward Energy stocks in the months and years to come. |
We continue to focus on companies that we believe are well-positioned to benefit from the four key trends that we think will drive long-term growth in the industry: 1) the development of unconventional oil & gas resources such as shales; 2) the increasing service and capital intensity of the exploration and production process; 3) the long-term opportunity in deepwater oilfield development; and 4) the investment opportunities in the oil and gas transportation and processing infrastructure. |
The Fund’s investments in the oil & gas storage & transportation, oil & gas exploration & production, and oil & gas equipment & services sub-industries contributed the most to performance. The Industrials sector detracted in the six-month period. |
Flotek Industries, Inc., a leading supplier of specialized chemicals to the Oil & Gas industry, was the Fund’s largest contributor in the period. Its proprietary citrus oil based products are experiencing rapid growth related to the boom in shale oil drilling in the U.S. and Canada. Flotek shares were up as investors are increasingly recognizing the significant revenue and earnings growth potential of its products. Flotek is still early in penetrating the market for its products, and we expect to see continued strong upside in the shares over time. |
The Fund’s largest detractor was Chart Industries, Inc., a leading global manufacturer of highly engineered equipment used in production, storage and end-use of natural and industrial gases. Chart shares fell as the company saw some delays in large projects, which negatively impacted forward year results and 2014 guidance. As the global development of liquid natural gas (LNG) infrastructure continues to accelerate, Chart will have the opportunity to increase capacity and profitability. We still believe that LNG prices will climb over the long term and see Chart as a direct beneficiary. |
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. | |
1 | Performance information reflects results of the Retail Shares. |
13
Baron Global Advantage Fund (Unaudited) | June 30, 2014 |
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, 2014 |
Since | ||||||||||
Inception | ||||||||||
Six | One | (April 30, | ||||||||
Months* | Year | 2012) | ||||||||
Baron Global Advantage Fund — Retail Shares1, 2 | 6.14 | % | 34.65 | % | 18.10 | % | ||||
Baron Global Advantage Fund — Institutional Shares1, 2 | 6.27 | % | 34.93 | % | 18.37 | % | ||||
MSCI ACWI Growth Index Net1 | 5.41 | % | 23.06 | % | 14.62 | % | ||||
MSCI ACWI Index Net1 | 6.18 | % | 22.95 | % | 15.60 | % |
† | 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. | |
* | Not annualized. | |
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, 2014 (Unaudited) | Baron Global Advantage Fund |
After a slow start, the global markets picked up speed over the first six months of 2014. The upward trajectory was interrupted mid-period, with a market correction that lasted from March through May, producing significant stock price fluctuations. Typically, it is during these times that our investment theses and conviction levels truly get tested. We made significant changes to the portfolio. While most of our positions were left unchanged, we doubled down on a few investments where we had particularly high conviction and reduced the number of holdings from 50 to 39. |
On a sector basis, the Fund’s investments in Health Care, Consumer Discretionary and Financials contributed the most to performance. Information Technology and, to a lesser extent, Industrials, detracted. From a country perspective, our holdings in Brazil, Russia, India, and China were top contributors. Our U.S. holdings, which comprise close to half of the portfolio, also contributed. Our investments in the U.K., Hong Kong, and Israel detracted. |
The Fund’s top contributor in the period was Illumina, Inc., a leader in next generation DNA sequencing instruments and consumables. Performance was driven by better than expected financial results and strong 2014 financial guidance. The company’s announcement of multiple new product introductions, including a new ultra-high throughput sequencing platform called the HiSeq X Ten that is the first to sequence a full human genome for less than $1,000, is generating momentum as well. |
Acxiom Corp., the leading provider of database marketing solutions and IT outsourcing services to large enterprise customers, detracted the most in the period. Shares of Acxiom declined due to slower-than-expected customer adoption of the company’s new Audience Operating System (AOS) platform, and weaker revenue guidance on its core database solutions business. We expect AOS growth to accelerate through the year and a re-focus on sales execution on the core database sales to improve the pipeline. |
The portfolio is constructed on a bottom-up basis, with the quality of ideas and conviction level being the most important factors in determining the size of each individual investment. 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 in which we are invested 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. | |
1 | Performance information reflects results of the Retail Shares. |
15
Baron Partners Fund | June 30, 2014 |
STATEMENT OF NET ASSETS (Unaudited) |
JUNE 30, 2014 |
Shares | Cost | Value | ||||||||
Common Stocks (113.88%) | ||||||||||
Consumer Discretionary (33.60%) | ||||||||||
Automobile Manufacturers (8.82%) | ||||||||||
675,000 | Tesla Motors Inc.1 | $ | 139,824,903 | $ | 162,040,500 | |||||
Automotive Retail (5.66%) | ||||||||||
2,000,000 | CarMax, Inc.1 | 69,489,756 | 104,020,000 | |||||||
Broadcasting (1.62%) | ||||||||||
400,000 | Discovery Communications, Inc., Cl A1 | 8,755,655 | 29,712,000 | |||||||
Hotels, Resorts & Cruise Lines (8.29%) | ||||||||||
2,500,000 | Hyatt Hotels Corp., Cl A1 | 67,148,542 | 152,450,000 | |||||||
Leisure Facilities (3.89%) | ||||||||||
925,800 | Vail Resorts, Inc. | 27,801,851 | 71,453,244 | |||||||
Specialty Stores (5.32%) | ||||||||||
2,100,000 | Dick’s Sporting Goods, Inc. | 58,896,964 | 97,776,000 | |||||||
Total Consumer Discretionary | 371,917,671 | 617,451,744 | ||||||||
Energy (10.72%) | ||||||||||
Oil & Gas Drilling (4.43%) | ||||||||||
700,000 | Helmerich & Payne, Inc. | 24,104,765 | 81,277,000 | |||||||
Oil & Gas Exploration & Production (6.29%) | ||||||||||
800,000 | Concho Resources, Inc.1 | 66,533,353 | 115,600,000 | |||||||
Total Energy | 90,638,118 | 196,877,000 | ||||||||
Financials (22.67%) | ||||||||||
Asset Management & Custody Banks (5.93%) | ||||||||||
2,200,000 | The Carlyle Group | 53,572,667 | 74,712,000 | |||||||
407,200 | T. Rowe Price Group, Inc. | 33,934,696 | 34,371,752 | |||||||
87,507,363 | 109,083,752 | |||||||||
Investment Banking & Brokerage (5.20%) | ||||||||||
3,550,000 | The Charles Schwab Corp. | 42,624,454 | 95,601,500 | |||||||
Property & Casualty Insurance (7.66%) | ||||||||||
2,450,000 | Arch Capital Group Ltd.1,2 | 33,071,318 | 140,728,000 | |||||||
Specialized REITs (3.88%) | ||||||||||
2,097,245 | Gaming and Leisure Properties, Inc. | 68,376,557 | 71,243,413 | |||||||
Total Financials | 231,579,692 | 416,656,665 | ||||||||
Health Care (9.50%) | ||||||||||
Health Care Equipment (5.68%) | ||||||||||
400,000 | Edwards Lifesciences Corp.1 | 26,838,347 | 34,336,000 | |||||||
525,000 | IDEXX Laboratories, Inc.1 | 45,812,786 | 70,124,250 | |||||||
72,651,133 | 104,460,250 | |||||||||
Life Sciences Tools & Services (3.82%) | ||||||||||
393,000 | Illumina, Inc.1 | 21,587,710 | 70,166,220 | |||||||
Total Health Care | 94,238,843 | 174,626,470 | ||||||||
Shares | Cost | Value | ||||||||
Common Stocks (continued) | ||||||||||
Industrials (16.96%) | ||||||||||
Industrial Machinery (0.91%) | ||||||||||
201,687 | The Middleby Corp.1 | $ | 15,562,569 | $ | 16,683,549 | |||||
Research & Consulting Services (4.90%) | ||||||||||
1,500,000 | Verisk Analytics, Inc., Cl A1 | 40,826,579 | 90,030,000 | |||||||
Trading Companies & Distributors (11.15%) | ||||||||||
3,004,866 | Air Lease Corp. | 101,578,986 | 115,927,730 | |||||||
1,800,000 | Fastenal Co. | 31,516,561 | 89,082,000 | |||||||
133,095,547 | 205,009,730 | |||||||||
Total Industrials | 189,484,695 | 311,723,279 | ||||||||
Information Technology (12.29%) | ||||||||||
Application Software (4.48%) | ||||||||||
685,000 | FactSet Research Systems, Inc. | 39,877,102 | 82,391,800 | |||||||
Internet Software & Services (5.32%) | ||||||||||
617,542 | CoStar Group, Inc.1 | 38,009,600 | 97,676,618 | |||||||
IT Consulting & Other Services (2.49%) | ||||||||||
649,000 | Gartner, Inc.1 | 41,264,138 | 45,767,480 | |||||||
Total Information Technology | 119,150,840 | 225,835,898 | ||||||||
Utilities (8.14%) | ||||||||||
Electric Utilities (8.14%) | ||||||||||
4,100,000 | ITC Holdings Corp. | 41,833,832 | 149,568,000 | |||||||
Total Common Stocks | 1,138,843,691 | 2,092,739,056 | ||||||||
Private Equity Investments (2.40%) | ||||||||||
Financials (2.40%) | ||||||||||
Asset Management & Custody Banks (2.40%) | ||||||||||
7,579,130 | Windy City Investments Holdings, L.L.C.1,3,4,5 | 41,134,888 | 44,186,328 | |||||||
Total Investments (116.28%) | $ | 1,179,978,579 | 2,136,925,384 | |||||||
Liabilities Less Cash and Other Assets (-16.28%) | (299,255,712 | ) | ||||||||
Net Assets | $ | 1,837,669,672 | ||||||||
Retail Shares (Equivalent to $36.66 per share based on 36,432,189 shares outstanding) | $ | 1,335,522,774 | ||||||||
Institutional Shares (Equivalent to $37.15 per share based on 13,515,455 shares outstanding) | $ | 502,146,898 | ||||||||
% | Represents percentage of net assets. | |
1 | Non-income producing securities. | |
2 | Foreign corporation. | |
3 | At June 30, 2014, the market value of restricted and fair valued securities amounted to $44,186,328 or 2.40% of net assets. This security is not 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 3 security. See Note 7 regarding Fair Value Measurements. | |
All securities are Level 1, unless otherwise noted. |
16 | See Notes to Financial Statements. |
June 30, 2014 | Baron Focused Growth Fund |
STATEMENT OF NET ASSETS (Unaudited) |
JUNE 30, 2014 |
Shares | Cost | Value | ||||||||
Common Stocks (96.85%) | ||||||||||
Consumer Discretionary (37.80%) | ||||||||||
Automotive Retail (4.18%) | ||||||||||
160,000 | CarMax, Inc. 1 | $ | 4,693,294 | $ | 8,321,600 | |||||
Casinos & Gaming (4.56%) | ||||||||||
360,509 | Pinnacle Entertainment, Inc.1 | 7,020,464 | 9,077,617 | |||||||
Hotels, Resorts & Cruise Lines (10.91%) | ||||||||||
150,000 | Choice Hotels International, Inc. | 5,080,139 | 7,066,500 | |||||||
240,000 | Hyatt Hotels Corp., Cl A1 | 7,807,007 | 14,635,200 | |||||||
12,887,146 | 21,701,700 | |||||||||
Internet Retail (2.31%) | ||||||||||
1,044,377 | AO World plc (United Kingdom)1,2 | 5,364,779 | 4,602,418 | |||||||
Leisure Facilities (5.28%) | ||||||||||
136,230 | Vail Resorts, Inc. | 8,272,836 | 10,514,231 | |||||||
Leisure Products (2.60%) | ||||||||||
210,000 | BRP, Inc. (Canada)1,2 | 5,303,082 | 5,175,952 | |||||||
Movies & Entertainment (4.39%) | ||||||||||
500,000 | Manchester United plc, Cl A1,2,3 | 7,906,006 | 8,725,000 | |||||||
Specialty Stores (3.57%) | ||||||||||
152,500 | Dick’s Sporting Goods, Inc. | 4,219,565 | 7,100,400 | |||||||
Total Consumer Discretionary | 55,667,172 | 75,218,918 | ||||||||
Consumer Staples (4.98%) | ||||||||||
Household Products (1.76%) | ||||||||||
50,000 | Church & Dwight Co., Inc. | 1,274,171 | 3,497,500 | |||||||
Packaged Foods & Meats (3.22%) | ||||||||||
80,000 | TreeHouse Foods, Inc.1 | 5,584,620 | 6,405,600 | |||||||
Total Consumer Staples | 6,858,791 | 9,903,100 | ||||||||
Energy (4.08%) | ||||||||||
Oil & Gas Drilling (4.08%) | ||||||||||
70,000 | Helmerich & Payne, Inc. | 3,338,878 | 8,127,700 | |||||||
Financials (6.30%) | ||||||||||
Asset Management & Custody Banks (3.41%) | ||||||||||
200,000 | The Carlyle Group | 4,721,843 | 6,792,000 | |||||||
Property & Casualty Insurance (2.89%) | ||||||||||
100,000 | Arch Capital Group Ltd.1,2 | 1,800,056 | 5,744,000 | |||||||
Total Financials | 6,521,899 | 12,536,000 | ||||||||
Health Care (2.03%) | ||||||||||
Health Care Distributors (2.03%) | ||||||||||
34,000 | Henry Schein, Inc.1 | 1,353,700 | 4,034,780 | |||||||
Industrials (18.20%) | ||||||||||
Industrial Machinery (7.49%) | ||||||||||
200,000 | Colfax Corp.1 | 6,735,985 | 14,908,000 | |||||||
Railroads (5.01%) | ||||||||||
95,000 | Genesee & Wyoming, Inc., Cl A1 | 3,087,329 | 9,975,000 | |||||||
Research & Consulting Services (2.72%) | ||||||||||
90,000 | Verisk Analytics, Inc., Cl A1 | 2,549,137 | 5,401,800 | |||||||
Trading Companies & Distributors (2.98%) | ||||||||||
120,000 | Fastenal Co. | 3,138,162 | 5,938,800 | |||||||
Total Industrials | 15,510,613 | 36,223,600 | ||||||||
Shares | Cost | Value | ||||||||
Common Stocks (continued) | ||||||||||
Information Technology (14.55%) | ||||||||||
Application Software (8.73%) | ||||||||||
45,000 | Concur Technologies, Inc.1 | $ | 3,665,705 | $ | 4,200,300 | |||||
75,000 | FactSet Research Systems, Inc. | 5,828,282 | 9,021,000 | |||||||
101,870 | Guidewire Software, Inc.1 | 4,816,691 | 4,142,034 | |||||||
14,310,678 | 17,363,334 | |||||||||
Internet Software & Services (5.82%) | ||||||||||
106,934 | Benefitfocus, Inc.1 | 3,036,812 | 4,942,490 | |||||||
42,000 | CoStar Group, Inc.1 | 8,501,198 | 6,643,140 | |||||||
11,538,010 | 11,585,630 | |||||||||
Total Information Technology | 25,848,688 | 28,948,964 | ||||||||
Materials (4.51%) | ||||||||||
Construction Materials (2.59%) | ||||||||||
105,000 | CaesarStone Sdot-Yam Ltd.1,2 | 4,611,409 | 5,153,400 | |||||||
Industrial Gases (1.92%) | ||||||||||
35,000 | Airgas, Inc. | 2,176,188 | 3,811,850 | |||||||
Total Materials | 6,787,597 | 8,965,250 | ||||||||
Utilities (4.40%) | ||||||||||
Electric Utilities (4.40%) | ||||||||||
240,000 | ITC Holdings Corp. | 5,358,002 | 8,755,200 | |||||||
Total Common Stocks | 127,245,340 | 192,713,512 | ||||||||
Preferred Stocks (3.70%) | ||||||||||
Telecommunication Services (3.70%) | ||||||||||
Alternative Carriers (3.70%) | ||||||||||
22,300 | Iridium Communications Inc., Series B, 6.75% | 5,814,082 | 7,362,122 | |||||||
Short Term Investments (0.18%) | ||||||||||
Securities Lending Collateral (0.18%) | ||||||||||
365,000 | State Street Navigator Securities Lending Prime Portfolio4,5 | 365,000 | 365,000 | |||||||
Total Investments (100.73%) | $ | 133,424,422 | 200,440,634 | |||||||
Liabilities Less Cash and Other | ||||||||||
Assets (-0.73%) | (1,458,519 | ) | ||||||||
Net Assets | $ | 198,982,115 | ||||||||
Retail Shares (Equivalent to $14.28 per share based on 3,373,528 shares outstanding) | $ | 48,171,727 | ||||||||
Institutional Shares (Equivalent to $14.43 per share based on 10,453,829 shares outstanding) | $ | 150,810,388 | ||||||||
% | Represents percentage of net assets. | |
1 | Non-income producing securities. | |
2 | Foreign corporation. | |
3 | The value on loan at June 30, 2014 amounted to $349,000 or 0.18% of net assets. See Note 2d regarding Securities Lending. | |
4 | Represents investment of cash collateral received from securities lending transactions. See Note 2d regarding Securities Lending. | |
5 | 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, 2014 |
STATEMENT OF NET ASSETS (Unaudited) |
JUNE 30, 2014 |
Shares | Cost | Value | ||||||||
Common Stocks (95.72%) | ||||||||||
Australia (2.75%) | ||||||||||
105,000 | Brambles Ltd. | $ | 913,020 | $ | 909,899 | |||||
50,869 | Domino’s Pizza Enterprises Ltd. | 371,035 | 1,029,370 | |||||||
Total Australia | 1,284,055 | 1,939,269 | ||||||||
Brazil (8.89%) | ||||||||||
105,000 | Anhanguera Educacional Participações SA | 475,502 | 874,406 | |||||||
59,051 | Cetip SA - Mercados Organizados | 688,805 | 840,531 | |||||||
120,000 | GOL Linhas Aéreas Inteligentes SA, ADR1 | 693,354 | 657,600 | |||||||
54,000 | Kroton Educacional SA | 380,652 | 1,514,298 | |||||||
70,000 | Smiles SA | 876,903 | 1,488,391 | |||||||
52,000 | TOTVS SA | 343,786 | 894,320 | |||||||
Total Brazil | 3,459,002 | 6,269,546 | ||||||||
Canada (5.71%) | ||||||||||
6,600 | Constellation Software, Inc. | 965,153 | 1,682,148 | |||||||
25,000 | Crescent Point Energy Corp. | 1,063,398 | 1,107,961 | |||||||
29,000 | Suncor Energy, Inc. | 1,048,283 | 1,236,270 | |||||||
Total Canada | 3,076,834 | 4,026,379 | ||||||||
China (5.89%) | ||||||||||
21,000 | 21Vianet Group, Inc., ADR1 | 235,814 | 629,370 | |||||||
474,971 | Haitong Securities Co., Ltd., Cl H | 700,465 | 735,401 | |||||||
2,500,000 | Kingdee International Software Group Co. Ltd.1 | 340,555 | 819,313 | |||||||
20,000 | Perfect World Co. Ltd., ADR | 428,754 | 392,600 | |||||||
14,000 | Sina Corporation1 | 682,055 | 696,780 | |||||||
57,500 | Tencent Holdings Ltd. | 101,016 | 879,148 | |||||||
Total China | 2,488,659 | 4,152,612 | ||||||||
France (4.35%) | ||||||||||
6,000 | Eurofins Scientific SE | 363,491 | 1,845,269 | |||||||
14,000 | Ingenico SA | 224,422 | 1,218,267 | |||||||
Total France | 587,913 | 3,063,536 | ||||||||
Germany (11.46%) | ||||||||||
4,500 | Brenntag AG | 692,884 | 804,121 | |||||||
35,000 | Deutsche Post AG | 702,081 | 1,265,713 | |||||||
14,000 | Fuchs Petrolub SE | 567,653 | 597,631 | |||||||
77,660 | PATRIZIA Immobilien AG1 | 445,649 | 1,031,497 | |||||||
20,000 | ProSiebenSat.1 Media AG | 946,205 | 891,004 | |||||||
118,000 | RIB Software AG | 790,885 | 2,124,743 | |||||||
25,000 | Symrise AG | 313,128 | 1,362,283 | |||||||
Total Germany | 4,458,485 | 8,076,992 | ||||||||
Hong Kong (1.26%) | ||||||||||
225,400 | Wynn Macau Ltd. | 296,122 | 887,012 | |||||||
India (4.60%) | ||||||||||
25,000 | Axis Bank Ltd. | 581,281 | 797,593 | |||||||
210,000 | DEN Networks Ltd.1 | 546,278 | 834,658 | |||||||
72,067 | Hathway Cable and Datacom Ltd.1 | 210,644 | 379,117 | |||||||
30,000 | Larsen & Toubro Ltd. | 613,894 | 848,799 | |||||||
50,000 | Sun TV Network Ltd. | 357,194 | 381,536 | |||||||
Total India | 2,309,291 | 3,241,703 | ||||||||
Shares | Cost | Value | ||||||||
Common Stocks (continued) | ||||||||||
Indonesia (2.14%) | ||||||||||
350,000 | Matahari Department Store Tbk PT | $ | 432,994 | $ | 407,423 | |||||
1,250,000 | Sarana Menara Nusantara Tbk PT1 | 260,297 | 419,127 | |||||||
1,000,000 | Tower Bersama Infrastructure Tbk PT | 369,228 | 679,038 | |||||||
Total Indonesia | 1,062,519 | 1,505,588 | ||||||||
Ireland (1.35%) | ||||||||||
17,000 | Ryanair Holdings plc, ADR1 | 412,174 | 948,600 | |||||||
Israel (3.70%) | ||||||||||
22,000 | Check Point Software Technologies Ltd.1 | 1,072,479 | 1,474,660 | |||||||
18,000 | Mellanox Technologies Ltd.1 | 700,701 | 627,480 | |||||||
15,000 | SodaStream International Ltd.1 | 490,415 | 504,000 | |||||||
Total Israel | 2,263,595 | 2,606,140 | ||||||||
Japan (13.25%) | ||||||||||
25,000 | Bridgestone Corp. | 480,797 | 874,834 | |||||||
85,000 | Daiwa Securities Group, Inc. | 827,003 | 735,847 | |||||||
7,800 | FANUC Corp. | 708,043 | 1,345,106 | |||||||
30,000 | Kakaku.com, Inc. | 262,395 | 525,640 | |||||||
32,000 | Mitsui Fudosan Co. Ltd. | 614,419 | 1,079,039 | |||||||
80,000 | Rakuten, Inc. | 1,090,392 | 1,033,710 | |||||||
15,000 | Sanrio Co. Ltd. | 481,671 | 435,763 | |||||||
23,500 | SoftBank Corp. | 794,072 | 1,749,770 | |||||||
50,000 | Sony Financial Holdings, Inc. | 805,778 | 852,870 | |||||||
155,000 | Sumitomo Mitsui Trust Holdings, Inc. | 709,054 | 708,405 | |||||||
Total Japan | 6,773,624 | 9,340,984 | ||||||||
Mexico (0.24%) | ||||||||||
211,336 | Agrinos AS1 | 957,702 | 172,270 | |||||||
Norway (3.32%) | ||||||||||
30,000 | DNB ASA | 473,763 | 548,758 | |||||||
65,600 | Opera Software ASA | 421,332 | 874,831 | |||||||
27,624 | Seadrill Partners, LLC | 607,728 | 916,012 | |||||||
Total Norway | 1,502,823 | 2,339,601 | ||||||||
Russian Federation (1.26%) | ||||||||||
25,000 | Yandex N.V., Cl A1 | 688,424 | 891,000 | |||||||
South Africa (2.05%) | ||||||||||
260,000 | Steinhoff International Holdings Ltd. | 1,213,107 | 1,448,519 | |||||||
Spain (3.47%) | ||||||||||
38,000 | Grifols SA, ADR | 749,116 | 1,673,900 | |||||||
5,000 | Inditex SA | 745,728 | 769,547 | |||||||
Total Spain | 1,494,844 | 2,443,447 | ||||||||
Sweden (0.72%) | ||||||||||
25,000 | Lundin Petroleum AB1 | 355,350 | 505,871 | |||||||
18 | See Notes to Financial Statements. |
June 30, 2014 | Baron International Growth Fund |
STATEMENT OF NET ASSETS (Unaudited) (Continued) |
JUNE 30, 2014 |
Shares | Cost | Value | ||||||
Common Stocks (continued) | ||||||||
Switzerland (4.18%) | ||||||||
13,000 | Compagnie Financière Richemont SA | $ | 240,098 | $ | 1,364,062 | |||
22,067 | Julius Baer Group Ltd. | 562,219 | 909,753 | |||||
9,000 | Syngenta AG, ADR | 408,857 | 673,200 | |||||
Total Switzerland | 1,211,174 | 2,947,015 | ||||||
United Kingdom (9.97%) | ||||||||
209,738 | AO World plc1 | 995,050 | 924,285 | |||||
20,000 | Croda International plc | 825,408 | 753,358 | |||||
75,000 | Domino’s Pizza Group plc | 672,424 | 672,580 | |||||
30,000 | easyJet plc | 679,563 | 700,818 | |||||
40,000 | Experian plc | 242,809 | 676,345 | |||||
75,000 | Inchcape plc | 639,289 | 814,413 | |||||
16,000 | Intertek Group plc | 274,140 | 752,742 | |||||
220,028 | Just Eat plc1 | 948,611 | 960,218 | |||||
135,000 | Premier Oil plc | 660,385 | 771,439 | |||||
Total United Kingdom | 5,937,679 | 7,026,198 | ||||||
United States (5.16%) | ||||||||
26,000 | Agilent Technologies, Inc. | 710,610 | 1,493,440 | |||||
15,000 | Arch Capital Group Ltd.1 | 293,022 | 861,600 | |||||
3,000 | Core Laboratories N.V. | 127,140 | 501,180 | |||||
75,000 | Nomad Holdings Ltd.1 | 749,250 | 781,875 | |||||
Total United States | 1,880,022 | 3,638,095 | ||||||
Total Common Stocks | 43,713,398 | 67,470,377 | ||||||
Warrants (0.05%) | ||||||||
United States (0.05%) | ||||||||
75,000 | Nomad Holdings Ltd. Warrants Exp 4/10/20171 | 750 | 33,750 | |||||
Principal | ||||||||
Amount | ||||||||
Short Term Investments (4.02%) | ||||||||
$2,832,908 | Repurchase Agreement with Fixed Income Clearing Corp., dated 6/30/2014, 0.00% due 7/1/2014; Proceeds at maturity – $2,832,908; (Fully collateralized by $3,050,000 U.S. Treasury Note, 1.75% due 5/15/2023; Market value – $2,889,875)2 | 2,832,908 | 2,832,908 | |||||
Total Investments (99.79%) | $ | 46,547,056 | 70,337,035 | |||||
Cash and Other Assets Less Liabilities (0.21%) | 146,715 | |||||||
Net Assets | $ | 70,483,750 | ||||||
Retail Shares (Equivalent to $19.93 per share | ||||||||
based on 1,097,681 shares outstanding) | $ | 21,872,703 | ||||||
Institutional Shares (Equivalent to $20.10 per share | ||||||||
based on 2,418,604 shares outstanding) | $ | 48,611,047 | ||||||
% | 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. | |
All securities are Level 1, unless otherwise noted. |
Summary of Investments by Sector | Percentage of | |||
as of June 30,2014 | Net Assets | |||
Consumer Discretionary | 24.9 | % | ||
Information Technology | 20.8 | |||
Financials | 12.9 | |||
Industrials | 12.6 | |||
Energy | 7.2 | |||
Health Care | 7.1 | |||
Materials | 5.1 | |||
Telecommunication Services | 4.0 | |||
Unclassified | 1.2 | |||
Cash and Cash Equivalents* | 4.2 | |||
100.0 | % | |||
* | Includes short term investments. |
See Notes to Financial Statements. | 19 |
Baron Real Estate Fund | June 30, 2014 |
STATEMENT OF NET ASSETS (Unaudited) |
JUNE 30, 2014 |
Shares | Cost | Value | ||||||
Common Stocks (96.41%) | ||||||||
Consumer Discretionary (35.67%) | ||||||||
Casinos & Gaming (7.42%) | ||||||||
541,850 | Las Vegas Sands Corp. | $ | 31,290,930 | $ | 41,299,807 | |||
961,017 | Pinnacle Entertainment, Inc.1 | 16,290,835 | 24,198,408 | |||||
198,200 | Wynn Resorts Ltd. | 25,624,890 | 41,138,392 | |||||
73,206,655 | 106,636,607 | |||||||
Home Furnishings (2.18%) | ||||||||
226,520 | Mohawk Industries, Inc.1 | 30,312,517 | 31,336,777 | |||||
Home Improvement Retail (5.44%) | ||||||||
653,207 | Home Depot, Inc. | 51,825,757 | 52,883,639 | |||||
529,200 | Lowe’s Companies, Inc. | 21,535,101 | 25,396,308 | |||||
73,360,858 | 78,279,947 | |||||||
Homebuilding (2.28%) | ||||||||
1,349,400 | Brookfield Residential Properties, Inc.1,2 | 28,316,314 | 28,000,050 | |||||
130,200 | Toll Brothers, Inc.1 | 4,298,973 | 4,804,380 | |||||
32,615,287 | 32,804,430 | |||||||
Hotels, Resorts & Cruise Lines (18.35%) | ||||||||
1,364,999 | Diamond Resorts International, Inc.1 | 20,718,965 | 31,763,527 | |||||
818,886 | Extended Stay America, Inc. | 17,821,804 | 18,965,400 | |||||
898,900 | Hyatt Hotels Corp., Cl A1 | 38,946,993 | 54,814,922 | |||||
178,039 | Marriott Vacations Worldwide Corp.1 | 8,057,025 | 10,438,426 | |||||
722,400 | Norwegian Cruise Line Holdings Ltd.1,2 | 20,923,106 | 22,900,080 | |||||
887,350 | Starwood Hotels & Resorts | |||||||
Worldwide, Inc. | 60,366,597 | 71,715,627 | ||||||
704,700 | Wyndham Worldwide Corp. | 43,793,799 | 53,359,884 | |||||
210,628,289 | 263,957,866 | |||||||
Total Consumer Discretionary | 420,123,606 | 513,015,627 | ||||||
Energy (0.70%) | ||||||||
Oil & Gas Storage & Transportation (0.70%) | ||||||||
271,432 | Golar LNG Partners L.P.2 | 8,618,762 | 10,002,269 | |||||
Financials (33.46%) | ||||||||
Diversified Real Estate Activities (1.24%) | ||||||||
403,900 | Brookfield Asset Management, Inc., Cl A2 | 14,780,240 | 17,779,678 | |||||
Diversified REITs (1.10%) | ||||||||
148,600 | Vornado Realty Trust | 12,733,744 | 15,860,078 | |||||
Hotel & Resort REITs (4.22%) | ||||||||
433,500 | LaSalle Hotel Properties | 11,655,547 | 15,298,215 | |||||
1,947,450 | Strategic Hotels & Resorts, Inc.1 | 15,864,403 | 22,804,640 | |||||
1,515,600 | Sunstone Hotel Investors, Inc. | 18,156,530 | 22,627,908 | |||||
45,676,480 | 60,730,763 | |||||||
Mortgage REITs (1.43%) | ||||||||
706,757 | Blackstone Mortgage Trust, Inc., Cl A | 19,208,904 | 20,495,953 | |||||
Office REITs (3.47%) | ||||||||
943,386 | CyrusOne, Inc. | 20,156,937 | 23,490,311 | |||||
595,886 | Douglas Emmett, Inc. | 14,022,825 | 16,815,903 | |||||
87,100 | SL Green Realty Corp. | 7,457,121 | 9,529,611 | |||||
41,636,883 | 49,835,825 | |||||||
Real Estate Development (1.27%) | ||||||||
115,777 | The Howard Hughes Corp.1 | 14,011,053 | 18,273,084 | |||||
Real Estate Operating Companies (3.64%) | ||||||||
1,000,000 | Forest City Enterprises, Inc., Cl A1 | 18,559,663 | 19,870,000 | |||||
1,726,114 | Kennedy Wilson Europe Real Estate plc | |||||||
(United Kingdom)1,2,3 | 29,710,342 | 32,494,783 | ||||||
48,270,005 | 52,364,783 | |||||||
Real Estate Services (9.37%) | ||||||||
1,679,000 | CBRE Group, Inc., Cl A1 | 38,173,991 | 53,795,160 | |||||
390,430 | Jones Lang LaSalle, Inc. | 37,171,257 | 49,346,448 | |||||
1,180,700 | Kennedy-Wilson Holdings, Inc. | 19,285,994 | 31,666,374 | |||||
94,631,242 | 134,807,982 |
Shares | Cost | Value | ||||||
Common Stocks (continued) | ||||||||
Financials (continued) | ||||||||
Residential REITs (1.75%) | ||||||||
372,434 | American Campus Communities, Inc. | $ | 13,242,797 | $ | 14,241,876 | |||
1,016,888 | Education Realty Trust, Inc. | 9,912,699 | 10,921,377 | |||||
23,155,496 | 25,163,253 | |||||||
Retail REITs (2.33%) | ||||||||
108,600 | Simon Property Group, Inc. | 15,831,421 | 18,058,008 | |||||
442,800 | Tanger Factory Outlet Centers, Inc. | 14,535,649 | 15,484,716 | |||||
30,367,070 | 33,542,724 | |||||||
Specialized REITs (2.13%) | ||||||||
155,550 | Alexandria Real Estate Equities, Inc.3 | 10,306,502 | 12,076,902 | |||||
206,396 | American Tower Corp. | 16,026,272 | 18,571,512 | |||||
26,332,774 | 30,648,414 | |||||||
Thrifts & Mortgage Finance (1.51%) | ||||||||
1,083,659 | Essent Group, Ltd.1,2 | 23,040,989 | 21,770,709 | |||||
Total Financials | 393,844,880 | 481,273,246 | ||||||
Health Care (12.91%) | ||||||||
Health Care Facilities (12.91%) | ||||||||
2,073,000 | Brookdale Senior Living, Inc.1 | 56,069,206 | 69,113,820 | |||||
2,068,463 | Capital Senior Living Corp.1,4 | 44,782,144 | 49,312,158 | |||||
2,127,000 | Emeritus Corp.1 | 54,952,603 | 67,319,550 | |||||
Total Health Care | 155,803,953 | 185,745,528 | ||||||
Industrials (2.04%) | ||||||||
Building Products (2.04%) | ||||||||
2,062,300 | Builders FirstSource, Inc.1 | 14,077,133 | 15,426,004 | |||||
359,759 | Owens Corning | 13,443,960 | 13,915,478 | |||||
Total Industrials | 27,521,093 | 29,341,482 | ||||||
Information Technology (3.11%) | ||||||||
Application Software (0.89%) | ||||||||
569,700 | RealPage, Inc.1 | 11,937,386 | 12,806,856 | |||||
Internet Software & Services (0.18%) | ||||||||
16,164 | CoStar Group, Inc.1 | 2,952,063 | 2,556,660 | |||||
IT Consulting & Other Services (2.04%) | ||||||||
139,504 | Equinix, Inc.1,3 | 25,790,782 | 29,308,395 | |||||
Total Information Technology | 40,680,231 | 44,671,911 | ||||||
Materials (1.58%) | ||||||||
Construction Materials (1.58%) | ||||||||
463,700 | CaesarStone Sdot-Yam Ltd.1,2 | 12,140,817 | 22,758,396 | |||||
Telecommunication Services (4.62%) | ||||||||
Wireless Telecommunication Services (4.62%) | ||||||||
49,211,650 | Sarana Menara Nusantara | |||||||
Tbk PT (Indonesia)1,2 | 12,509,675 | 16,500,743 | ||||||
262,600 | SBA Communications Corp., Cl A1 | 20,853,350 | 26,863,980 | |||||
34,047,909 | Tower Bersama Infrastructure | |||||||
Tbk PT (Indonesia)2 | 17,742,224 | 23,119,837 | ||||||
Total Telecommunication Services | 51,105,249 | 66,484,560 | ||||||
20 | See Notes to Financial Statements. |
June 30, 2014 | Baron Real Estate Fund |
STATEMENT OF NET ASSETS (Unaudited) (Continued) |
JUNE 30, 2014 |
Shares | Cost | Value | ||||||
Common Stocks (continued) | ||||||||
Utilities (2.32%) | ||||||||
Electric Utilities (2.32%) | ||||||||
457,800 | Brookfield Infrastructure Partners L.P.2 | $ | 16,989,780 | $ | 19,099,416 | |||
391,300 | ITC Holdings Corp. | 11,965,190 | 14,274,624 | |||||
Total Utilities | 28,954,970 | 33,374,040 | ||||||
Total Common Stocks | 1,138,793,561 | 1,386,667,059 | ||||||
Principal | ||||||||
Amount | ||||||||
Short Term Investments (3.99%) | ||||||||
$57,345,407 | Repurchase Agreement with Fixed Income Clearing Corp., dated 6/30/2014, 0.00% due 7/1/2014; Proceeds at maturity – $57,345,407; (Fully collateralized by $61,815,000 U.S. Treasury Note, 1.625% due 11/15/2022; Market value – $58,492,444)5 | 57,345,407 | 57,345,407 | |||||
Total Investments (100.40%) | $ | 1,196,138,968 | 1,444,012,466 | |||||
Liabilities Less Cash and Other | ||||||||
Assets (-0.40%) | (5,723,891) | |||||||
Net Assets | $ | 1,438,288,575 | ||||||
Retail Shares (Equivalent to $24.33 per share | ||||||||
based on 29,388,081 shares outstanding) | $ | 715,039,195 | ||||||
Institutional Shares (Equivalent to $24.56 per share | ||||||||
based on 29,450,324 shares outstanding) | $ | 723,249,380 | ||||||
% | 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 | See Note 10 regarding “Affiliated” companies. | |
5 | 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, 2014 |
STATEMENT OF NET ASSETS |
JUNE 30, 2014 |
Shares | Cost | Value | ||||||
Common Stocks (90.21%) | ||||||||
Brazil (15.16%) | ||||||||
1,384,000 | Anhanguera Educacional Participações SA | $ | 8,879,903 | $ | 11,525,504 | |||
1,421,275 | Cetip SA - Mercados Organizados | 16,441,842 | 20,230,413 | |||||
651,000 | Estácio Participações SA | 6,178,316 | 8,618,126 | |||||
2,076,000 | GOL Linhas Aéreas Inteligentes SA, ADR1 | 11,914,683 | 11,376,480 | |||||
746,000 | Kroton Educacional SA | 13,446,764 | 20,919,738 | |||||
403,000 | Linx SA | 8,052,130 | 9,446,196 | |||||
351,000 | M. Dias Branco SA | 14,442,364 | 15,523,747 | |||||
914,000 | Multiplus SA | 11,789,862 | 15,094,755 | |||||
1,213,000 | Smiles SA | 18,821,095 | 25,791,690 | |||||
725,000 | TOTVS SA | 11,398,815 | 12,468,884 | |||||
Total Brazil | 121,365,774 | 150,995,533 | ||||||
Canada (0.44%) | ||||||||
645,000 | Africa Oil Corp.1 | 5,198,389 | 4,412,633 | |||||
Chile (2.32%) | ||||||||
34,340,642 | CFR Pharmaceuticals SA | 7,521,584 | 11,270,628 | |||||
2,615 | CFR Pharmaceuticals SA 144A, ADR2 | 47,627 | 85,485 | |||||
402,000 | Sociedad Química y Minera de Chile SA, ADR | 11,168,633 | 11,782,620 | |||||
Total Chile | 18,737,844 | 23,138,733 | ||||||
China (13.84%) | ||||||||
270,900 | 21Vianet Group, Inc., ADR1 | 5,181,778 | 8,118,873 | |||||
2,906,000 | Biostime International Holdings Ltd. | 21,592,857 | 16,122,781 | |||||
2,818,000 | China Mengniu Dairy Co. Ltd. | 13,292,850 | 13,016,670 | |||||
12,861,000 | Haitong Securities Co., Ltd., Cl H | 20,158,733 | 19,912,779 | |||||
30,480,000 | Kingdee International Software Group Co. Ltd.1 | 9,408,671 | 9,989,058 | |||||
520,000 | Perfect World Co. Ltd., ADR | 10,678,999 | 10,207,600 | |||||
50,000 | Qihoo 360 Technology Co. Ltd., ADR1 | 4,202,245 | 4,602,000 | |||||
8,759,000 | Shandong Weigao Group Medical Polymer Co. Ltd. | 9,845,629 | 8,532,521 | |||||
11,000,600 | Sihuan Pharmaceutical Holdings Group Ltd. | 4,507,007 | 6,699,374 | |||||
184,400 | Sina Corporation1 | 11,560,460 | 9,177,588 | |||||
275,000 | TAL Education Group, ADR1 | 7,081,595 | 7,562,500 | |||||
858,000 | Tencent Holdings Ltd. | 11,177,543 | 13,118,420 | |||||
201,500 | WuXi PharmaTech (Cayman) Inc., ADR1 | 6,383,375 | 6,621,290 | |||||
11,571,000 | Yashili International Holdings Ltd. | 5,351,536 | 4,210,134 | |||||
Total China | 140,423,278 | 137,891,588 | ||||||
Hong Kong (4.06%) | ||||||||
2,698,000 | Luk Fook Holdings International Ltd. | 9,077,656 | 7,902,121 | |||||
7,818,000 | Man Wah Holdings Ltd. | 13,112,537 | 12,487,980 | |||||
3,097,000 | Melco International Development Ltd. | 10,131,317 | 9,390,419 | |||||
2,698,000 | Wynn Macau Ltd. | 11,145,836 | 10,617,387 | |||||
Total Hong Kong | 43,467,346 | 40,397,907 | ||||||
India (16.61%) | ||||||||
1,962,000 | Amara Raja Batteries Ltd. | 12,261,649 | 15,358,045 | |||||
446,000 | Axis Bank Ltd. | 11,524,546 | 14,229,065 | |||||
2,941,000 | Crompton Greaves Ltd. | 8,067,247 | 9,813,928 | |||||
2,390,551 | DEN Networks Ltd.1 | 6,486,058 | 9,501,392 | |||||
10,063,000 | Dish TV India Ltd.1 | 9,268,200 | 9,980,180 | |||||
805,000 | Divi’s Laboratories Ltd. | 16,870,045 | 19,529,732 | |||||
1,154,000 | Hathway Cable and Datacom Ltd.1 | 5,093,897 | 6,070,756 | |||||
521,000 | Larsen & Toubro Ltd. | 11,847,413 | 14,740,805 |
Shares | Cost | Value | ||||||
Common Stocks (continued) | ||||||||
India (continued) | ||||||||
732,664 | Lupin Ltd. | $ | 12,037,496 | $ | 12,766,955 | |||
1,145,000 | PVR Ltd. | 10,358,816 | 12,735,971 | |||||
1,594,000 | Sun TV Network Ltd. | 10,284,101 | 12,163,377 | |||||
1,466,371 | Torrent Pharmaceuticals Ltd. | 13,496,197 | 17,311,443 | |||||
2,304,000 | Zee Entertainment Enterprises Ltd. | 9,921,790 | 11,241,313 | |||||
Total India | 137,517,455 | 165,442,962 | ||||||
Indonesia (4.43%) | ||||||||
13,792,000 | Bank Rakyat Indonesia (Persero) Tbk PT | 9,680,342 | 12,012,012 | |||||
10,401,000 | Matahari Department Store Tbk PT | 13,229,891 | 12,107,448 | |||||
4,131,350 | Sarana Menara Nusantara Tbk PT1 | 1,103,293 | 1,385,248 | |||||
27,500,000 | Tower Bersama Infrastructure Tbk PT | 14,605,402 | 18,673,556 | |||||
Total Indonesia | 38,618,928 | 44,178,264 | ||||||
Korea, Republic of (6.88%) | ||||||||
38,000 | CJ O Shopping Co., Ltd. | 13,694,046 | 13,723,266 | |||||
301,000 | Grand Korea Leisure Co., Ltd. | 12,690,525 | 12,375,568 | |||||
236,800 | KIA Motors Corp. | 12,477,046 | 13,246,570 | |||||
12,500 | Samsung Electronics Co., Ltd. | 16,666,319 | 16,332,279 | |||||
343,000 | WeMade Entertainment Co., Ltd.1 | 13,056,899 | 12,831,143 | |||||
Total Korea, Republic of | 68,584,835 | 68,508,826 | ||||||
Malaysia (0.19%) | ||||||||
1,000,300 | Hartalega Holdings Bhd | 2,102,619 | 1,934,557 | |||||
Mexico (1.79%) | ||||||||
90,042 | Agrinos AS1 | 344,476 | 73,398 | |||||
190,000 | Fomento Económico Mexicano S.A.B. de C.V., ADR | 17,645,948 | 17,793,500 | |||||
Total Mexico | 17,990,424 | 17,866,898 | ||||||
Norway (1.16%) | ||||||||
865,000 | Opera Software ASA | 10,809,174 | 11,535,496 | |||||
Philippines (4.12%) | ||||||||
14,105,000 | Ayala Land, Inc. | 9,116,472 | 9,855,727 | |||||
2,698,000 | BDO Unibank, Inc. | 5,604,806 | 5,779,221 | |||||
100,450,000 | Metro Pacific Investments Corp. | 10,599,712 | 11,529,313 | |||||
3,922,000 | Universal Robina Corp. | 11,110,488 | 13,864,023 | |||||
Total Philippines | 36,431,478 | 41,028,284 | ||||||
Russian Federation (1.07%) | ||||||||
300,000 | Yandex N.V., Cl A1 | 10,046,643 | 10,692,000 | |||||
Singapore (1.20%) | ||||||||
5,500,000 | Global Logistic Properties Ltd. | 12,236,771 | 11,909,536 | |||||
South Africa (5.36%) | ||||||||
560,000 | Aspen Pharmacare Holdings Ltd. | 14,378,245 | 15,738,448 | |||||
442,000 | Bidvest Group Ltd. | 12,096,415 | 11,744,275 | |||||
4,646,000 | Steinhoff International Holdings Ltd. | 20,713,125 | 25,883,921 | |||||
Total South Africa | 47,187,785 | 53,366,644 | ||||||
22 | See Notes to Financial Statements. |
June 30, 2014 | Baron Emerging Markets Fund |
STATEMENT OF NET ASSETS (Unaudited) (Continued) |
JUNE 30, 2014 |
Shares | Cost | Value | ||||||
Common Stocks (continued) | ||||||||
Taiwan, Province of China (8.76%) | ||||||||
6,371,000 | Far EasTone Telecommunications Co., Ltd. | $ | 13,617,082 | $ | 14,509,612 | |||
692,000 | Ginko International Co., Ltd. | 13,318,223 | 11,982,182 | |||||
1,256,000 | HIWIN Technologies Corp. | 11,481,343 | 15,501,239 | |||||
979,000 | MediaTek Inc. | 14,790,423 | 16,558,209 | |||||
2,511,000 | Novatek Microelectronics Corp. | 11,133,675 | 12,362,416 | |||||
767,000 | Taiwan Semiconductor Manufacturing Co. Ltd., ADR | 14,242,545 | 16,406,130 | |||||
Total Taiwan, Province of China | 78,583,291 | 87,319,788 | ||||||
Thailand (1.77%) | ||||||||
1,671,000 | Bangkok Bank Public Co., Ltd., NVDR | 9,432,162 | 9,936,928 | |||||
12,254,000 | L.P.N. Development PCL, Cl F | 6,479,333 | 7,664,649 | |||||
Total Thailand | 15,911,495 | 17,601,577 | ||||||
United Arab Emirates (0.45%) | ||||||||
16,062,000 | SHUAA Capital psc1 | 5,404,264 | 4,460,695 | |||||
United Kingdom (0.60%) | ||||||||
4,625,000 | Lekoil Ltd.1 | 5,426,900 | 6,015,570 | |||||
Total Common Stocks | 816,044,693 | 898,697,491 | ||||||
Preferred Stocks (0.04%) | ||||||||
India (0.04%) | ||||||||
30,983,400 | Zee Entertainment Enterprises Ltd., 6% due 3/5/2022 | 367,971 | 391,510 | |||||
Principal | ||||||||
Amount | ||||||||
Convertible Bonds (0.63%) | ||||||||
China (0.63%) | ||||||||
$50,000,000 | Biostime International Holdings Ltd., 0.00% due 2/20/20191 | 6,590,206 | 6,248,064 | |||||
Principal | |||||||||
Amount | Cost | Value | |||||||
Short Term Investments (11.33%) | |||||||||
$112,901,562 | Repurchase Agreement with Fixed Income Clearing Corp., dated 6/30/2014, 0.00% due 7/1/2014; Proceeds at maturity – $112,901,562; (Fully collateralized by $81,170,000 U.S. Treasury Bond, 7.625% due 11/15/2022; Market value – $115,159,938)2 | $ | 112,901,562 | $ | 112,901,562 | ||||
Total Investments (102.21%) | $ | 935,904,432 | 1,018,238,627 | ||||||
Liabilities Less Cash and Other Assets (-2.21%) | (21,970,706 | ) | |||||||
Net Assets | $ | 996,267,921 | |||||||
Retail Shares (Equivalent to $12.51 per share based on 45,014,998 shares outstanding) | $ | 562,986,327 | |||||||
Institutional Shares (Equivalent to $12.54 per share based on 34,542,809 shares outstanding) | $ | 433,281,594 | |||||||
% | 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, 2014, the market value of Rule 144A securities amounted to $85,485 or 0.01% of net assets. | |
All securities are Level 1, unless otherwise noted. |
Summary of Investments by Sector | Percentage of | ||
as of June 30, 2014 | Net Assets | ||
Consumer Discretionary | 27.0 | % | |
Information Technology | 17.5 | ||
Financials | 12.8 | ||
Health Care | 11.3 | ||
Consumer Staples | 8.7 | ||
Industrials | 7.9 | ||
Telecommunication Services | 3.5 | ||
Materials | 1.2 | ||
Energy | 1.0 | ||
Cash and Cash Equivalents* | 9.1 | ||
100.0 | % | ||
* | Includes short term investments. |
See Notes to Financial Statements. | 23 |
Baron Energy and Resources Fund | June 30, 2014 |
STATEMENT OF NET ASSETS (Unaudited) |
JUNE 30, 2014 |
Shares | Cost | Value | |||||||
Common Stocks (93.49%) | |||||||||
Energy (77.29%) | |||||||||
Oil & Gas Drilling (2.08%) | |||||||||
8,346 | Helmerich & Payne, Inc. | $ | 608,600 | $ | 969,054 | ||||
11,567 | Seadrill Partners, LLC2 | 314,470 | 383,562 | ||||||
923,070 | 1,352,616 | ||||||||
Oil & Gas Equipment & Services (18.11%) | |||||||||
10,039 | CARBO Ceramics, Inc. | 1,035,733 | 1,547,210 | ||||||
6,450 | Core Laboratories N.V.2 | 985,532 | 1,077,537 | ||||||
47,042 | Forum Energy Technologies, Inc.1 | 1,300,473 | 1,713,740 | ||||||
32,396 | Halliburton Co. | 1,653,572 | 2,300,440 | ||||||
5,943 | National Oilwell Varco, Inc. | 367,682 | 489,406 | ||||||
12,631 | Oil States International, Inc.1 | 688,976 | 809,521 | ||||||
15,090 | RigNet, Inc.1 | 554,019 | 812,144 | ||||||
45,557 | Superior Energy Services, Inc. | 1,252,654 | 1,646,430 | ||||||
64,800 | Tesco Corp.2 | 1,255,550 | 1,382,832 | ||||||
9,094,191 | 11,779,260 | ||||||||
Oil & Gas Exploration & Production (31.77%) | |||||||||
42,462 | Africa Oil Corp. (Canada)1,2 | 288,924 | 290,495 | ||||||
4,239 | Anadarko Petroleum Corporation | 347,084 | 464,043 | ||||||
14,500 | Antero Resources Corp.1 | 751,359 | 951,635 | ||||||
27,876 | Athlon Energy, Inc.1 | 780,356 | 1,329,685 | ||||||
44,948 | Bonanza Creek Energy, Inc.1 | 1,897,987 | 2,570,576 | ||||||
18,000 | Cabot Oil & Gas Corp. | 626,779 | 614,520 | ||||||
25,295 | Cobalt International Energy, Inc.1 | 538,257 | 464,163 | ||||||
16,999 | Concho Resources, Inc.1 | 1,695,120 | 2,456,356 | ||||||
6,068 | EOG Resources, Inc. | 492,744 | 709,106 | ||||||
29,136 | Gulfport Energy Corp.1 | 1,743,749 | 1,829,741 | ||||||
65,302 | Kodiak Oil & Gas Corp.1,2 | 638,948 | 950,144 | ||||||
375,400 | Lekoil Ltd. (United Kingdom)1,2 | 400,689 | 488,269 | ||||||
11,649 | Noble Energy, Inc. | 718,226 | 902,332 | ||||||
37,538 | Oasis Petroleum, Inc.1 | 1,593,276 | 2,097,999 | ||||||
48,800 | Parsley Energy, Inc., Cl A1 | 929,029 | 1,174,616 | ||||||
48,500 | RSP Permian, Inc.1 | 1,028,604 | 1,573,340 | ||||||
21,348 | SM Energy Co. | 1,449,073 | 1,795,367 | ||||||
15,920,204 | 20,662,387 | ||||||||
Oil & Gas Refining & Marketing (1.33%) | |||||||||
11,078 | Marathon Petroleum Corp. | 928,799 | 864,859 | ||||||
Oil & Gas Storage & Transportation (24.00%) | |||||||||
52,950 | Atlas Energy, L.P. | 2,412,797 | 2,376,396 | ||||||
18,935 | Golar LNG Ltd.2 | 701,499 | 1,137,993 | ||||||
36,921 | PBF Logistics LP1 | 938,027 | 1,016,066 | ||||||
11,340 | Phillips 66 Partners LP | 323,570 | 856,850 | ||||||
38,042 | Rose Rock Midstream, L.P. | 1,545,462 | 2,078,615 | ||||||
99,104 | Scorpio Tankers Inc.2 | 913,315 | 1,007,888 | ||||||
5,133 | Susser Petroleum Partners LP | 130,595 | 240,892 | ||||||
42,540 | Tallgrass Energy Partners, LP | 1,099,619 | 1,650,552 | ||||||
7,346 | Targa Resources Corp. | 461,634 | 1,025,281 | ||||||
8,428 | Tesoro Logistics LP | 413,807 | 618,615 | ||||||
15,500 | Valero Energy Partners LP | 364,033 | 779,805 | ||||||
9,176 | Western Gas Equity Partners LP | 332,717 | 575,335 | ||||||
7,937 | Western Gas Partners, LP | 459,572 | 607,022 | ||||||
50,139 | Western Refining Logistics, LP | 1,330,205 | 1,640,047 | ||||||
11,426,852 | 15,611,357 | ||||||||
Total Energy | 38,293,116 | 50,270,479 | |||||||
Industrials (7.83%) | |||||||||
Construction & Engineering (2.17%) | |||||||||
18,800 | Badger Daylighting Ltd. (Canada)2 | 630,212 | 619,296 | ||||||
27,502 | Primoris Services Corp. | 631,136 | 793,158 | ||||||
1,261,348 | 1,412,454 | ||||||||
Diversified Support Services (1.30%) | |||||||||
33,862 | Civeo Corporation1 | 697,322 | 847,566 | ||||||
Electrical Components & Equipment (0.47%) | |||||||||
6,363 | Polypore International, Inc.1 | 250,997 | 303,706 |
Shares | Cost | Value | |||||||
Common Stocks (continued) | |||||||||
Industrials (continued) | |||||||||
Industrial Machinery (2.95%) | |||||||||
15,194 | Chart Industries, Inc.1 | $ | 1,236,428 | $ | 1,257,151 | ||||
8,900 | Flowserve Corp. | 641,599 | 661,715 | ||||||
1,878,027 | 1,918,866 | ||||||||
Trading Companies & Distributors (0.94%) | |||||||||
21,600 | MRC Global, Inc.1 | 604,608 | 611,064 | ||||||
Total Industrials | 4,692,302 | 5,093,656 | |||||||
Information Technology (1.90%) | |||||||||
Internet Software & Services (0.34%) | |||||||||
11,809 | Opower, Inc.1 | 253,193 | 222,600 | ||||||
Semiconductor Equipment (1.56%) | |||||||||
44,700 | SunEdison, Inc.1 | 897,986 | 1,010,220 | ||||||
Total Information Technology | 1,151,179 | 1,232,820 | |||||||
Materials (6.07%) | |||||||||
Diversified Metals & Mining (0.63%) | |||||||||
11,237 | Freeport-McMoRan Copper & Gold, Inc. | 390,365 | 410,151 | ||||||
Specialty Chemicals (3.47%) | |||||||||
70,152 | Flotek Industries, Inc.1 | 1,585,355 | 2,256,088 | ||||||
Steel (1.97%) | |||||||||
30,217 | SunCoke Energy, Inc.1 | 571,703 | 649,666 | ||||||
20,977 | SunCoke Energy Partners LP | 482,370 | 633,505 | ||||||
1,054,073 | 1,283,171 | ||||||||
Total Materials | 3,029,793 | 3,949,410 | |||||||
Utilities (0.40%) | |||||||||
Renewable Electricity (0.40%) | |||||||||
6,948 | Abengoa Yield plc1,2 | 201,492 | 262,773 | ||||||
Total Common Stocks | 47,367,882 | 60,809,138 | |||||||
Principal | |||||||||
Amount | |||||||||
Short Term Investments (5.96%) | |||||||||
$3,874,970 | Repurchase Agreement with Fixed Income Clearing Corp., dated 6/30/2014, 0.00% due 7/1/2014; Proceeds at maturity – $3,874,970; (Fully collateralized by $4,180,000 U.S. Treasury Note, 1.625% due 11/15/2022; Market value - $3,955,325)3 | 3,874,970 | 3,874,970 | ||||||
Total Investments (99.45%) | $ | 51,242,852 | 64,684,108 | ||||||
Cash and Other Assets Less Liabilities (0.55%) | 354,553 | ||||||||
Net Assets | $ | 65,038,661 | |||||||
Retail Shares (Equivalent to $14.32 per share based on 3,813,770 shares outstanding) | $ | 54,621,393 | |||||||
Institutional Shares (Equivalent to $14.42 per share based on 722,586 shares outstanding) | $ | 10,417,268 | |||||||
% | 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. |
24 | See Notes to Financial Statements. |
June 30, 2014 | Baron Global Advantage Fund |
STATEMENT OF NET ASSETS (Unaudited) |
JUNE 30, 2014 |
Shares | Cost | Value | ||||||
Common Stocks (99.13%) | ||||||||
Brazil (7.46%) | ||||||||
18,367 | Cetip SA – Mercados Organizados | $ | 196,454 | $ | 261,436 | |||
12,663 | Smiles SA | 202,747 | 269,250 | |||||
Total Brazil | 399,201 | 530,686 | ||||||
Canada (3.44%) | ||||||||
2,056 | Brookfield Asset Management, Inc., Cl A | 67,930 | 90,505 | |||||
604 | Constellation Software, Inc. | 139,461 | 153,942 | |||||
Total Canada | 207,391 | 244,447 | ||||||
China (9.35%) | ||||||||
1,037 | Baidu, Inc., ADR1 | 143,994 | 193,722 | |||||
4,150 | Qunar Cayman Islands Ltd., ADR1 | 62,250 | 118,482 | |||||
9,490 | TAL Education Group, ADR1 | 216,236 | 260,975 | |||||
3,846 | Youku Tudou, Inc., ADR1 | 92,586 | 91,766 | |||||
Total China | 515,066 | 664,945 | ||||||
India (4.31%) | ||||||||
2,699 | ICICI Bank Limited, ADR | 95,316 | 134,680 | |||||
3,291 | Just Dial Ltd.1 | 49,159 | 79,984 | |||||
2,625 | MakeMyTrip, Ltd.1 | 52,793 | 92,216 | |||||
Total India | 197,268 | 306,880 | ||||||
Indonesia (8.55%) | ||||||||
1,116,770 | Sarana Menara Nusantara Tbk PT1 | 321,392 | 374,454 | |||||
343,836 | Tower Bersama Infrastructure Tbk PT | 157,981 | 233,478 | |||||
Total Indonesia | 479,373 | 607,932 | ||||||
Israel (2.70%) | ||||||||
5,499 | Mellanox Technologies Ltd.1 | 216,341 | 191,695 | |||||
Japan (4.35%) | ||||||||
4,156 | SoftBank Corp. | 324,658 | 309,449 | |||||
Netherlands (1.72%) | ||||||||
1,316 | ASML Holding N.V. | 91,106 | 122,554 | |||||
Norway (1.12%) | ||||||||
2,392 | Seadrill Partners, LLC | 54,857 | 79,319 | |||||
Russian Federation (2.83%) | ||||||||
2,417 | QIWI plc, ADR | 83,717 | 97,478 | |||||
2,921 | Yandex N.V., Cl A1 | 84,280 | 104,104 | |||||
Total Russian Federation | 167,997 | 201,582 | ||||||
Spain (2.97%) | ||||||||
4,800 | Grifols SA, ADR | 192,456 | 211,440 | |||||
Shares | Cost | Value | ||||||
Common Stocks (continued) | ||||||||
United Kingdom (7.42%) | ||||||||
35,617 | AO World plc1 | $ | 178,111 | $ | 156,959 | |||
6,934 | ARM Holdings plc | 113,571 | 104,547 | |||||
61,037 | Just Eat plc1 | 263,150 | 266,370 | |||||
Total United Kingdom | 554,832 | 527,876 | ||||||
United States (42.91%) | ||||||||
6,218 | Acxiom Corp.1 | 128,573 | 134,868 | |||||
853 | Amazon.com, Inc.1 | 231,846 | 277,037 | |||||
968 | Arista Networks, Inc.1 | 41,624 | 60,394 | |||||
4,765 | Atlas Energy, L.P. | 198,828 | 213,853 | |||||
2,969 | Benefitfocus, Inc.1 | 134,141 | 137,227 | |||||
5,026 | Coupons.com Incorporated1 | 80,416 | 132,234 | |||||
4,702 | Facebook Inc., Cl A1 | 126,568 | 316,398 | |||||
636 | Google, Inc., Cl C1 | 322,674 | 365,878 | |||||
1,710 | Illumina, Inc.1 | 74,766 | 305,303 | |||||
3,304 | Medidata Solutions, Inc.1 | 150,875 | 141,444 | |||||
689 | Monsanto Co. | 56,646 | 85,946 | |||||
2,020 | Pacira Pharmaceuticals, Inc.1 | 149,936 | 185,557 | |||||
5,126 | PBF Logistics LP1 | 120,443 | 141,068 | |||||
197 | The Priceline Group, Inc. (formerly, priceline.com, Inc.)1 | 167,416 | 236,991 | |||||
3,975 | Tallgrass Energy Partners, LP | 92,964 | 154,230 | |||||
6,216 | Xoom Corporation1 | 123,464 | 163,854 | |||||
Total United States | 2,201,180 | 3,052,282 | ||||||
Total Investments (99.13%) | $ | 5,601,726 | 7,051,087 | |||||
Cash and Other Assets Less Liabilities (0.87%) | 61,756 | |||||||
Net Assets | $ | 7,112,843 | ||||||
Retail Shares (Equivalent to $14.34 per share based on 223,045 shares outstanding) | $ | 3,198,864 | ||||||
Institutional Shares (Equivalent to $14.41 per share based on 271,627 shares outstanding) | $ | 3,913,979 | ||||||
% | 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 as | Percentage of | |||
as of June 30, 2014 | Net Assets | |||
Information Technology | 36.3 | % | ||
Consumer Discretionary | 21.7 | |||
Telecommunication Services | 12.9 | |||
Health Care | 11.9 | |||
Energy | 8.3 | |||
Financials | 6.8 | |||
Materials | 1.2 | |||
Cash and Cash Equivalents | 0.9 | |||
100.0 | % | |||
See Notes to Financial Statements. | 25 |
Baron Select Fund | June 30, 2014 |
STATEMENTS OF ASSETS AND LIABILITIES (Unaudited) |
JUNE 30, 2014 |
Baron | ||||||||||||||||
Baron Partners | Baron Focused | International | Baron Real | |||||||||||||
Fund | Growth Fund | Growth Fund | Estate Fund | |||||||||||||
Assets: | ||||||||||||||||
Investments in securities, at value* | ||||||||||||||||
Unaffiliated investments | $ | 2,136,925,384 | $ | 200,440,634 | $ | 67,504,127 | $ | 1,337,354,901 | ||||||||
“Affiliated” investments | — | — | — | 49,312,158 | ||||||||||||
Repurchase Agreements, at value** | — | — | 2,832,908 | 57,345,407 | ||||||||||||
Total investments, at value | 2,136,925,384 | 200,440,634 | 70,337,035 | 1,444,012,466 | ||||||||||||
Foreign currency, at value† | — | — | 17,519 | 125 | ||||||||||||
Cash | — | — | — | 274,674 | ||||||||||||
Receivable for shares sold | 5,961,293 | 1,024,595 | 53,300 | 6,732,914 | ||||||||||||
Dividends and interest receivable | 457,393 | 87,775 | 99,937 | 1,225,396 | ||||||||||||
Receivable for securities sold | — | — | 149,272 | — | ||||||||||||
Prepaid expenses | 13,063 | 1,734 | 536 | 9,059 | ||||||||||||
2,143,357,133 | 201,554,738 | 70,657,599 | 1,452,254,634 | |||||||||||||
Liabilities: | ||||||||||||||||
Payable for borrowings against line of credit | 300,000,000 | — | — | — | ||||||||||||
Due to custodian bank | 2,636,749 | 2,174,304 | — | — | ||||||||||||
Payable for securities purchased | 1,570,317 | — | 53,691 | 12,884,645 | ||||||||||||
Payable for shares redeemed | 1,034,458 | — | 12,535 | 990,953 | ||||||||||||
Investment advisory fees payable (Note 4) | 228 | 382 | 117 | 157 | ||||||||||||
Payable for collateral on loaned securities | — | 365,000 | — | — | ||||||||||||
Accrued capital gains taxes | — | — | 67,728 | — | ||||||||||||
Accrued expenses and other payables | 445,709 | 32,937 | 39,778 | 90,304 | ||||||||||||
305,687,461 | 2,572,623 | 173,849 | 13,966,059 | |||||||||||||
Net Assets | $ | 1,837,669,672 | $ | 198,982,115 | $ | 70,483,750 | $ | 1,438,288,575 | ||||||||
Net Assets consist of: | ||||||||||||||||
Paid-in capital | $ | 1,234,305,303 | $ | 131,617,742 | $ | 43,880,151 | $ | 1,190,010,582 | ||||||||
Undistributed net investment income | 16,833,894 | 1,369,240 | 220,961 | 3,405,303 | ||||||||||||
Undistributed (accumulated) net realized gain (loss) on investments and | ||||||||||||||||
foreign currency transactions | (370,416,330 | ) | (1,021,079 | ) | 2,660,021 | (3,000,811 | ) | |||||||||
Net unrealized appreciation on investments, foreign capital gains tax and | ||||||||||||||||
foreign currency translations | 956,946,805 | 67,016,212 | 23,722,617 | 247,873,501 | ||||||||||||
Net Assets | $ | 1,837,669,672 | $ | 198,982,115 | $ | 70,483,750 | $ | 1,438,288,575 | ||||||||
Retail Shares: | ||||||||||||||||
Net Assets | $ | 1,335,522,774 | $ | 48,171,727 | $ | 21,872,703 | $ | 715,039,195 | ||||||||
Shares Outstanding ($0.01 par value; indefinite shares authorized) | 36,432,189 | 3,373,528 | 1,097,681 | 29,388,081 | ||||||||||||
Net Asset Value and Offering Price Per Share | $ | 36.66 | $ | 14.28 | $ | 19.93 | $ | 24.33 | ||||||||
Institutional Shares: | ||||||||||||||||
Net Assets | $ | 502,146,898 | $ | 150,810,388 | $ | 48,611,047 | $ | 723,249,380 | ||||||||
Shares Outstanding ($0.01 par value; indefinite shares authorized) | 13,515,455 | 10,453,829 | 2,418,604 | 29,450,324 | ||||||||||||
Net Asset Value and Offering Price Per Share | $ | 37.15 | $ | 14.43 | $ | 20.10 | $ | 24.56 | ||||||||
*Investments in securities, at cost: | ||||||||||||||||
Unaffiliated investments | $ | 1,179,978,579 | $ | 133,424,422 | $ | 43,714,148 | $ | 1,094,011,417 | ||||||||
“Affiliated” investments | — | — | — | 44,782,144 | ||||||||||||
**Repurchase agreements, at cost | — | — | 2,832,908 | 57,345,407 | ||||||||||||
Total investments in securities, at cost | $ | 1,179,978,579 | $ | 133,424,422 | $ | 46,547,056 | $ | 1,196,138,968 | ||||||||
†Foreign currency, at cost: | $ | — | $ | — | $ | 17,503 | $ | 122 | ||||||||
26 | See Notes to Financial Statements. |
June 30, 2014 | Baron Select Funds |
STATEMENTS OF ASSETS AND LIABILITIES (Unaudited) (Continued) | ||
JUNE 30, 2014 |
Baron | Baron | Baron Global | ||||||||||
Emerging | Energy and | Advantage | ||||||||||
Markets Fund | Resources Fund | Fund | ||||||||||
Assets: | ||||||||||||
Investments in securities, at value* | $ | 905,337,065 | $ | 60,809,138 | $ | 7,051,087 | ||||||
Repurchase Agreements, at value** | 112,901,562 | 3,874,970 | — | |||||||||
Total investments, at value | 1,018,238,627 | 64,684,108 | 7,051,087 | |||||||||
Foreign currency, at value† | 1,644,310 | 67 | 18 | |||||||||
Receivable for shares sold | 14,526,618 | 673,116 | 135,698 | |||||||||
Dividends and interest receivable | 672,221 | 11,357 | 5,053 | |||||||||
Receivable for securities sold | 947,485 | 7,639 | 842,992 | |||||||||
Prepaid expenses | 343,858 | 293 | 9 | |||||||||
1,036,373,119 | 65,376,580 | 8,034,857 | ||||||||||
�� | ||||||||||||
Liabilities: | ||||||||||||
Due to custodian bank | — | — | 887,881 | |||||||||
Payable for securities purchased | 35,454,442 | 285,435 | 78 | |||||||||
Payable for shares redeemed | 357,446 | 11,535 | — | |||||||||
Investment advisory fees payable (Note 4) | 796 | — | — | |||||||||
Distribution fees payable (Note 4) | — | — | 107 | |||||||||
Accrued capital gains taxes | 4,265,454 | — | — | |||||||||
Accrued expenses and other payables | 27,060 | 40,949 | 33,948 | |||||||||
40,105,198 | 337,919 | 922,014 | ||||||||||
Net Assets | $ | 996,267,921 | $ | 65,038,661 | $ | 7,112,843 | ||||||
Net Assets consist of: | ||||||||||||
Paid-in capital | $ | 925,459,243 | $ | 52,031,997 | $ | 5,624,729 | ||||||
Undistributed (accumulated) net investment income (loss) | (407,276 | ) | 16,104 | 12,155 | ||||||||
Undistributed (accumulated) net realized gain (loss) on investments and | ||||||||||||
foreign currency transactions | (6,858,458 | ) | (450,435 | ) | 26,461 | |||||||
Net unrealized appreciation on investments, foreign capital gains tax and | ||||||||||||
foreign currency translations | 78,074,412 | 13,440,995 | 1,449,498 | |||||||||
Net Assets | $ | 996,267,921 | $ | 65,038,661 | $ | 7,112,843 | ||||||
Retail Shares: | ||||||||||||
Net Assets | $ | 562,986,327 | $ | 54,621,393 | $ | 3,198,864 | ||||||
Shares Outstanding ($0.01 par value; indefinite shares authorized) | 45,014,998 | 3,813,770 | 223,045 | |||||||||
Net Asset Value and Offering Price Per Share | $ | 12.51 | $ | 14.32 | $ | 14.34 | ||||||
Institutional Shares: | ||||||||||||
Net Assets | $ | 433,281,594 | $ | 10,417,268 | $ | 3,913,979 | ||||||
Shares Outstanding ($0.01 par value; indefinite shares authorized) | 34,542,809 | 722,586 | 271,627 | |||||||||
Net Asset Value and Offering Price Per Share | $ | 12.54 | $ | 14.42 | $ | 14.41 | ||||||
*Investments in securities, at cost | $ | 823,002,870 | $ | 47,367,882 | $ | 5,601,726 | ||||||
**Repurchase agreements, at cost | 112,901,562 | 3,874,970 | — | |||||||||
Total investments, at cost | $ | 935,904,432 | $ | 51,242,852 | $ | 5,601,726 | ||||||
†Foreign currency, at cost: | $ | 1,641,515 | $ | 66 | $ | 18 | ||||||
See Notes to Financial Statements. | 27 |
Baron Select Funds | June 30, 2014 |
STATEMENTS OF OPERATIONS (Unaudited) | ||
FOR THE SIX MONTHS ENDED JUNE 30, 2014 |
Baron | ||||||||||||||||
Baron Partners | Baron Focused | International | Baron Real | |||||||||||||
Fund | Growth Fund | Growth Fund | Estate Fund | |||||||||||||
Investment income: | ||||||||||||||||
Income: | ||||||||||||||||
Dividends — unaffiliated investments | $ | 26,048,057 | $ | 2,265,692 | $ | 695,647 | $ | 10,207,868 | ||||||||
Interest | — | — | — | 122 | ||||||||||||
Securities lending income | — | 3,489 | — | — | ||||||||||||
Foreign taxes withheld on dividends | — | — | (50,882 | ) | (48,012 | ) | ||||||||||
Total income | 26,048,057 | 2,269,181 | 644,765 | 10,159,978 | ||||||||||||
Expenses: | ||||||||||||||||
Investment advisory fees (Note 4) | 7,956,653 | 945,659 | 321,267 | 6,118,997 | ||||||||||||
Distribution fees — Retail Shares (Note 4) | 1,488,706 | 57,939 | 23,407 | 774,747 | ||||||||||||
Shareholder servicing agent fees and expenses — Retail Shares | 120,355 | 13,790 | 10,720 | 45,750 | ||||||||||||
Shareholder servicing agent fees and expenses — Institutional Shares | 16,260 | 7,153 | 5,696 | 22,620 | ||||||||||||
Line of credit fees | 152,296 | — | — | — | ||||||||||||
Reports to shareholders | 145,560 | 4,990 | 4,715 | 157,900 | ||||||||||||
Registration and filing fees | 64,120 | 30,091 | 19,910 | 67,285 | ||||||||||||
Professional fees | 61,094 | 14,879 | 29,477 | 20,885 | ||||||||||||
Custodian and fund accounting fees | 38,742 | 14,968 | 35,420 | 56,441 | ||||||||||||
Trustee fees and expenses | 37,231 | 4,506 | 1,516 | 28,529 | ||||||||||||
Administration fees | 13,229 | 13,240 | 13,240 | 13,194 | ||||||||||||
Insurance expense | 9,892 | 1,344 | 465 | 5,947 | ||||||||||||
Miscellaneous expenses | 1,111 | 1,121 | 1,519 | 1,455 | ||||||||||||
Total operating expenses | 10,105,249 | 1,109,680 | 467,352 | 7,313,750 | ||||||||||||
Interest expense on borrowings | 1,289,605 | — | — | — | ||||||||||||
Total expenses | 11,394,854 | 1,109,680 | 467,352 | 7,313,750 | ||||||||||||
Reimbursement of expenses by Adviser — Retail Shares (Note 4) | — | (11,479 | ) | (18,316 | ) | — | ||||||||||
Reimbursement of expenses by Adviser — Institutional Shares (Note 4) | — | — | (23,935 | ) | — | |||||||||||
Net expenses | 11,394,854 | 1,098,201 | 425,101 | 7,313,750 | ||||||||||||
Net investment income | 14,653,203 | 1,170,980 | 219,664 | 2,846,228 | ||||||||||||
Realized and unrealized gain (loss) on investments: | ||||||||||||||||
Net realized gain (loss) on | ||||||||||||||||
investments sold — unaffiliated investments | 5,374,114 | (16,935 | ) | 2,159,741 | 3,101,169 | |||||||||||
Net realized gain (loss) on | ||||||||||||||||
foreign currency transactions | — | (13,471 | ) | (21,908 | ) | (96,532 | ) | |||||||||
Net change in unrealized appreciation (depreciation) of: | ||||||||||||||||
Investments — unaffiliated investments | 136,807,775 | 3,336,139 | 1,245,149 | 1 | 108,080,498 | |||||||||||
Investments — “Affiliated” investments | — | — | — | (417,898 | ) | |||||||||||
Foreign currency translations | — | — | (65 | ) | 3 | |||||||||||
Net gain on investments | 142,181,889 | 3,305,733 | 3,382,917 | 110,667,240 | ||||||||||||
Net increase in net assets resulting from operations | $ | 156,835,092 | $ | 4,476,713 | $ | 3,602,581 | $ | 113,513,468 | ||||||||
1 Net of change in accrued foreign capital gains tax of $(67,728). |
28 | See Notes to Financial Statements. |
June 30, 2014 | Baron Select Funds |
STATEMENTS OF OPERATIONS (Unaudited) (Continued) | ||
FOR THE SIX MONTHS ENDED JUNE 30, 2014 |
Baron | Baron Energy | Baron Global | ||||||||||
Emerging | and Resources | Advantage | ||||||||||
Markets Fund | Fund | Fund | ||||||||||
Investment income: | ||||||||||||
Income: | ||||||||||||
Dividends — unaffiliated investments | $ | 4,697,759 | $ | 290,736 | $ | 76,510 | ||||||
Foreign taxes withheld on dividends | (306,470 | ) | (1,425 | ) | (2,455 | ) | ||||||
Total income | 4,391,289 | 289,311 | 74,055 | |||||||||
Expenses: | ||||||||||||
Investment advisory fees (Note 4) | 3,085,932 | 219,852 | 50,495 | |||||||||
Distribution fees — Retail Shares (Note 4) | 463,456 | 47,344 | 3,264 | |||||||||
Shareholder servicing agent fees and expenses — Retail Shares | 20,715 | 9,920 | 6,734 | |||||||||
Shareholder servicing agent fees and expenses — Institutional Shares | 12,300 | 5,026 | 4,856 | |||||||||
Reports to shareholders | 113,740 | 18,748 | 699 | |||||||||
Registration and filing fees | 227,270 | 84,640 | 30,692 | |||||||||
Professional fees | 44,121 | 18,400 | 26,960 | |||||||||
Custodian and fund accounting fees | 315,310 | 15,916 | 20,075 | |||||||||
Trustee fees and expenses | 13,410 | 983 | 221 | |||||||||
Administration fees | 13,240 | 13,262 | 13,228 | |||||||||
Insurance expense | 1,530 | 181 | 70 | |||||||||
Miscellaneous expenses | 2,275 | 1,409 | 1,410 | |||||||||
Total operating expenses | 4,313,299 | 435,681 | 158,704 | |||||||||
Interest expense on borrowings | — | — | — | |||||||||
Total expenses | 4,313,299 | 435,681 | 158,704 | |||||||||
Reimbursement of expenses by Adviser — Retail Shares (Note 4) | — | (122,653 | ) | (31,391 | ) | |||||||
Reimbursement of expenses by Adviser — Institutional Shares (Note 4) | — | (23,847 | ) | (60,930 | ) | |||||||
Net expenses | 4,313,299 | 289,181 | 66,383 | |||||||||
Net investment income | 77,990 | 130 | 7,672 | |||||||||
Realized and unrealized gain (loss) on investments: | ||||||||||||
Net realized gain (loss) on | ||||||||||||
investments sold — unaffiliated investments | (4,777,251 | ) | (3,483 | ) | 37,230 | |||||||
Net realized gain (loss) on | ||||||||||||
foreign currency transactions | (658,634 | ) | (2,066 | ) | 7,332 | |||||||
Net change in unrealized appreciation (depreciation) of: | ||||||||||||
Investments — unaffiliated investments | 68,537,026 | 1 | 9,534,964 | 176,445 | 2 | |||||||
Foreign currency translations | 3,895 | (249 | ) | 241 | ||||||||
Net gain on investments | 63,105,036 | 9,529,166 | 221,248 | |||||||||
Net increase in net assets resulting from operations | $ | 63,183,026 | $ | 9,529,296 | $ | 228,920 | ||||||
1 Net of change in accrued foreign capital gains tax of $(4,150,380). |
2 Net of change in accrued foreign capital gains tax of $5,121. |
See Notes to Financial Statements. | 29 |
Baron Select Funds | June 30, 2014 |
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, | |||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||||||||||||
Operations: | ||||||||||||||||||||||||||
Net investment income (loss) | $ | 14,653,203 | $ | (6,813,285 | ) | $ | 1,170,980 | $ | (544,326 | ) | $ | 219,664 | $ | 75,498 | ||||||||||||
Net realized gain (loss) | 5,374,114 | 64,954,592 | (30,406 | ) | 8,164,726 | 2,137,833 | 927,846 | |||||||||||||||||||
Net change in unrealized appreciation | 136,807,775 | 362,148,549 | 3,336,139 | 28,092,151 | 1,245,084 | 10,275,836 | ||||||||||||||||||||
Increase in net assets resulting from operations | 156,835,092 | 420,289,856 | 4,476,713 | 35,712,551 | 3,602,581 | 11,279,180 | ||||||||||||||||||||
Distributions to shareholders from: | ||||||||||||||||||||||||||
Net investment income — Retail Shares | — | — | — | (589,056 | ) | — | — | |||||||||||||||||||
Net investment income — Institutional Shares | — | — | — | (1,882,528 | ) | — | (3,362 | ) | ||||||||||||||||||
Decrease in net assets from distributions to shareholders | — | — | — | (2,471,584 | ) | — | (3,362 | ) | ||||||||||||||||||
Capital share transactions: | ||||||||||||||||||||||||||
Proceeds from the sale of shares — Retail Shares | 215,873,279 | 319,476,623 | 3,234,264 | 15,673,823 | 5,475,546 | 3,859,851 | ||||||||||||||||||||
Proceeds from the sale of shares — Institutional Shares | 146,469,766 | 135,710,008 | 9,173,987 | 36,524,526 | 923,786 | 1,218,416 | ||||||||||||||||||||
Net asset value of shares issued in reinvestment of | ||||||||||||||||||||||||||
distributions — Retail Shares | — | — | — | 542,020 | — | — | ||||||||||||||||||||
Net asset value of shares issued in reinvestment of | ||||||||||||||||||||||||||
distributions — Institutional Shares | — | — | — | 1,461,962 | — | 1,942 | ||||||||||||||||||||
Cost of shares redeemed — Retail Shares | (122,282,010 | ) | (178,070,535 | ) | (3,697,767 | ) | (8,626,273 | ) | (1,640,832 | ) | (5,517,299 | ) | ||||||||||||||
Cost of shares redeemed — Institutional Shares | (33,854,242 | ) | (22,934,509 | ) | (10,231,974 | ) | (2,042,457 | ) | (279,125 | ) | (3,055,312 | ) | ||||||||||||||
Increase (decrease) in net assets derived from | ||||||||||||||||||||||||||
capital share transactions | 206,206,793 | 254,181,587 | (1,521,490 | ) | 43,533,601 | 4,479,375 | (3,492,402 | ) | ||||||||||||||||||
Net increase in net assets | 363,041,885 | 674,471,443 | 2,955,223 | 76,774,568 | 8,081,956 | 7,783,416 | ||||||||||||||||||||
Net Assets: | ||||||||||||||||||||||||||
Beginning of period | 1,474,627,787 | 800,156,344 | 196,026,892 | 119,252,324 | 62,401,794 | 54,618,378 | ||||||||||||||||||||
End of period | $ | 1,837,669,672 | $ | 1,474,627,787 | $ | 198,982,115 | $ | 196,026,892 | $ | 70,483,750 | $ | 62,401,794 | ||||||||||||||
Undistributed net investment income at end of period | $ | 16,833,894 | $ | 2,180,691 | $ | 1,369,240 | $ | 198,260 | $ | 220,961 | $ | 1,297 | ||||||||||||||
Capital share transactions — Retail Shares | ||||||||||||||||||||||||||
Shares sold | 6,226,879 | 11,129,880 | 235,381 | 1,256,069 | 287,626 | 232,666 | ||||||||||||||||||||
Shares issued in reinvestment of distributions | — | — | — | 41,375 | — | — | ||||||||||||||||||||
Shares redeemed | (3,579,929 | ) | (6,312,005 | ) | (270,427 | ) | (676,961 | ) | (86,981 | ) | (339,698 | ) | ||||||||||||||
Net increase (decrease) | 2,646,950 | 4,817,875 | (35,046 | ) | 620,483 | 200,645 | (107,032 | ) | ||||||||||||||||||
Capital share transactions — Institutional Shares | ||||||||||||||||||||||||||
Shares sold | 4,161,740 | 4,721,060 | 659,414 | 2,837,634 | 47,701 | 71,324 | ||||||||||||||||||||
Shares issued in reinvestment of distributions | — | — | — | 110,671 | — | 104 | ||||||||||||||||||||
Shares redeemed | (994,152 | ) | (805,337 | ) | (734,323 | ) | (159,800 | ) | (14,565 | ) | (182,122 | ) | ||||||||||||||
Net increase (decrease) | 3,167,588 | 3,915,723 | (74,909 | ) | 2,788,505 | 33,136 | (110,694 | ) | ||||||||||||||||||
30 | See Notes to Financial Statements. |
June 30, 2014 | 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, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||||
Operations: | ||||||||||||||||||
Net investment income (loss) | $ | 2,846,228 | $ | (466,653 | ) | $ | 77,990 | $ | (84,387 | ) | ||||||||
Net realized gain (loss) | 3,004,637 | (5,794,140 | ) | (5,435,885 | ) | (855,798 | ) | |||||||||||
Net change in unrealized appreciation | 107,662,603 | 127,344,877 | 68,540,921 | 8,314,403 | ||||||||||||||
Increase in net assets resulting from operations | 113,513,468 | 121,084,084 | 63,183,026 | 7,374,218 | ||||||||||||||
Distributions to shareholders from: | ||||||||||||||||||
Net investment income — Institutional Shares | — | (39,020 | ) | ��� | — | |||||||||||||
Net realized gain on investments — Retail Shares | — | (428,314 | ) | — | — | |||||||||||||
Net realized gain on investments — Institutional Shares | — | (335,602 | ) | — | — | |||||||||||||
Return of capital — Institutional Shares | — | (673,756 | ) | — | — | |||||||||||||
Decrease in net assets from distributions to shareholders | — | (1,476,692 | ) | — | — | |||||||||||||
Capital share transactions: | ||||||||||||||||||
Proceeds from the sale of shares — Retail Shares | 193,124,968 | 626,959,201 | 308,870,873 | 257,250,002 | ||||||||||||||
Proceeds from the sale of shares — Institutional Shares | 237,424,320 | 450,764,807 | 305,240,535 | 108,017,552 | ||||||||||||||
Net asset value of shares issued in reinvestment of | ||||||||||||||||||
distributions — Retail Shares | — | 421,721 | — | — | ||||||||||||||
Net asset value of shares issued in reinvestment of | ||||||||||||||||||
distributions — Institutional Shares | — | 925,719 | — | — | ||||||||||||||
Cost of shares redeemed — Retail Shares | (74,208,281 | ) | (208,982,668 | ) | (41,495,595 | ) | (4,454,947 | ) | ||||||||||
Cost of shares redeemed — Institutional Shares | (57,211,698 | ) | (53,133,613 | ) | (15,120,152 | ) | (1,474,834 | ) | ||||||||||
Increase in net assets derived from capital share transactions | 299,129,309 | 816,955,167 | 557,495,661 | 359,337,773 | ||||||||||||||
Net increase in net assets | 412,642,777 | 936,562,559 | 620,678,687 | 366,711,991 | ||||||||||||||
Net Assets: | ||||||||||||||||||
Beginning of period | 1,025,645,798 | 89,083,239 | 375,589,234 | 8,877,243 | ||||||||||||||
End of period | $ | 1,438,288,575 | $ | 1,025,645,798 | $ | 996,267,921 | $ | 375,589,234 | ||||||||||
Undistributed (accumulated) net investment income (loss) | ||||||||||||||||||
at end of period | $ | 3,405,303 | $ | 559,075 | $ | (407,276 | ) | $ | (485,266 | ) | ||||||||
Capital share transactions — Retail Shares | ||||||||||||||||||
Shares sold | 8,394,142 | 31,615,177 | 26,047,448 | 22,605,570 | ||||||||||||||
Shares issued in reinvestment of distributions | — | 20,612 | — | — | ||||||||||||||
Shares redeemed | (3,252,480 | ) | (10,448,310 | ) | (3,525,693 | ) | (399,705 | ) | ||||||||||
Net increase | 5,141,662 | 21,187,479 | 22,521,755 | 22,205,865 | ||||||||||||||
Capital share transactions — Institutional Shares | ||||||||||||||||||
Shares sold | 10,242,783 | 22,205,732 | 25,789,488 | 9,571,296 | ||||||||||||||
Shares issued in reinvestment of distributions | — | 43,354 | — | — | ||||||||||||||
Shares redeemed | (2,466,984 | ) | (2,586,207 | ) | (1,275,665 | ) | (137,973 | ) | ||||||||||
Net increase | 7,775,799 | 19,662,879 | 24,513,823 | 9,433,323 | ||||||||||||||
See Notes to Financial Statements. | 31 |
Baron Select Funds | June 30, 2014 |
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 Year | |||||||||||||||
Months Ended | Ended | Months Ended | Ended | |||||||||||||||
June 30, | December 31, | June 30, | December 31, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||||
Operations: | ||||||||||||||||||
Net investment income (loss) | $ | 130 | $ | (3,486 | ) | $ | 7,672 | $ | (2,915 | ) | ||||||||
Net realized gain (loss) | (5,549 | ) | (355,260 | ) | 44,562 | 93,472 | ||||||||||||
Net change in unrealized appreciation | 9,534,715 | 3,916,849 | 176,686 | 1,009,873 | ||||||||||||||
Increase in net assets resulting from operations | 9,529,296 | 3,558,103 | 228,920 | 1,100,430 | ||||||||||||||
Distributions to shareholders from: | ||||||||||||||||||
Net investment income — Retail Shares | — | (26,290 | ) | — | — | |||||||||||||
Decrease in net assets from distributions to shareholders | — | (26,290 | ) | — | — | |||||||||||||
Capital share transactions: | ||||||||||||||||||
Proceeds from the sale of shares — Retail Shares | 20,770,478 | 27,881,735 | 837,501 | 758,547 | ||||||||||||||
Proceeds from the sale of shares — Institutional Shares | 5,336,358 | 2,765,215 | 9,010,393 | 985,124 | ||||||||||||||
Net asset value of shares issued in reinvestment of | ||||||||||||||||||
distributions — Retail Shares | — | 26,200 | — | — | ||||||||||||||
Cost of shares redeemed — Retail Shares | (3,563,302 | ) | (3,582,582 | ) | (148,090 | ) | (404,290 | ) | ||||||||||
Cost of shares redeemed — Institutional Shares | (242,554 | ) | (626,525 | ) | (8,372,050 | ) | (21,487 | ) | ||||||||||
Increase in net assets derived from capital share transactions | 22,300,980 | 26,464,043 | 1,327,754 | 1,317,894 | ||||||||||||||
Net increase in net assets | 31,830,276 | 29,995,856 | 1,556,674 | 2,418,324 | ||||||||||||||
Net Assets: | ||||||||||||||||||
Beginning of period | 33,208,385 | 3,212,529 | 5,556,169 | 3,137,845 | ||||||||||||||
End of period | $ | 65,038,661 | $ | 33,208,385 | $ | 7,112,843 | $ | 5,556,169 | ||||||||||
Undistributed net investment income at end of period | $ | 16,104 | $ | 15,974 | $ | 12,155 | $ | 4,483 | ||||||||||
Capital share transactions — Retail Shares | ||||||||||||||||||
Shares sold | 1,629,968 | 2,599,991 | 61,914 | 65,574 | ||||||||||||||
Shares issued in reinvestment of distributions | — | 2,306 | — | — | ||||||||||||||
Shares redeemed | (284,641 | ) | (326,102 | ) | (10,863 | ) | (35,958 | ) | ||||||||||
Net increase | 1,345,327 | 2,276,195 | 51,051 | 29,616 | ||||||||||||||
Capital share transactions — Institutional Shares | ||||||||||||||||||
Shares sold | 407,465 | 244,381 | 633,778 | 81,500 | ||||||||||||||
Shares redeemed | (18,761 | ) | (57,449 | ) | (600,568 | ) | (1,999 | ) | ||||||||||
Net increase | 388,704 | 186,932 | 33,210 | 79,501 | ||||||||||||||
32 | See Notes to Financial Statements. |
June 30, 2014 | Baron Select Funds |
STATEMENT OF CASH FLOWS (Unaudited) | |||||
FOR THE SIX MONTHS ENDED JUNE 30, 2014 | |||||
Baron Partners | |||||
Fund | |||||
Increase (Decrease) in Cash: | |||||
Cash Used from Operating Activities | |||||
Net increase in net assets resulting from operations | $ | 156,835,092 | |||
Adjustments to reconcile net increase in net assets resulting from operations to net cash used by operating activities: | |||||
Purchases of portfolio securities | (540,819,417 | ) | |||
Proceeds from sales of portfolio securities | 295,542,673 | ||||
Net purchases, sales and maturities of short-term investments | 202,064 | ||||
Increase in dividends and interest receivable | (265,289 | ) | |||
Increase in prepaid expenses | (11,162 | ) | |||
Decrease in accrued expenses | (9,909 | ) | |||
Net realized gain on investments | (5,374,114 | ) | |||
Net change in unrealized appreciation of investments | (136,807,775 | ) | |||
Net cash used by operating activities | $ | (230,707,837 | ) | ||
Cash Provided from Financing Activities | |||||
Proceeds from shares sold | $ | 363,327,004 | |||
Payment for shares redeemed | (156,255,916 | ) | |||
Increase in payable for borrowings against line of credit | 21,000,000 | ||||
Net cash provided in financing activities | $ | 228,071,088 | |||
Net decrease in cash | (2,636,749 | ) | |||
Cash at beginning of period | — | ||||
Cash at end of period | $ | (2,636,749 | ) | ||
Supplemental cash flow information: | |||||
Interest paid | $ | 1,304,489 | |||
See Notes to Financial Statements. | 33 |
Baron Select Funds | June 30, 2014 |
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 to purchase 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 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 series of the 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 the NYSE is open. Portfolio securities traded on any national stock exchange are valued based on the last sale price on the exchange where such shares are principally traded. For securities traded on NASDAQ, the Funds use the NASDAQ Official Closing Price. If there are no sales on a given day, the value of the security may be the average of the most recent bid and asked quotations on such exchange or the last sale price from a prior day. 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 security 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 may consider 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 may review 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 that utilizes a systematic methodology to provide the Adviser 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 the 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, 2014 | Baron Select Funds |
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 includes 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 under the terms of a master netting agreement. 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, 2014, Baron Focused Growth Fund had securities on loan with values of $349,000 and held $365,000 of short term investments, as collateral for these loans.
e) 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 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.
f) 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 substantially 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.
g) Restricted Securities. The Funds may invest in securities that 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.
h) 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.
i) 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.
j) 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.
k) Fund Diversification and Concentration. Certain of the Funds hold non-diversified or concentrated portfolios that may contain fewer securities or invest in fewer industries than the portfolios of other mutual funds. This may increase the risk that the value of a Fund could decrease because of the poor performance of one or a few investments or of a particular industry. Additionally, non-diversified funds may encounter difficulty liquidating securities.
3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than short term securities, for the six months ended June 30, 2014 were as follows:
Fund | Purchases | Sales | ||||
Baron Partners Fund | $537,521,894 | $289,674,943 | ||||
Baron Focused Growth Fund | 26,288,571 | 23,503,660 | ||||
Baron International Growth Fund | 13,887,202 | 10,727,622 | ||||
Baron Real Estate Fund | 396,176,705 | 90,074,641 | ||||
Baron Emerging Markets Fund | 576,823,928 | 60,157,741 | ||||
Baron Energy and Resources Fund | 23,086,528 | 4,046,857 | ||||
Baron Global Advantage Fund | 10,954,054 | 9,588,805 |
35
Baron Select Funds | June 30, 2014 |
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 limited purpose broker-dealer and the distributor of the Funds’ shares. The Funds are authorized to pay BCI a distribution fee payable monthly pursuant to a distribution plan under Rule 12b-1 of the 1940 Act 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 (“State Street”) to perform accounting and certain administrative services. State Street 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 State Street 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, 2014. 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 Overnight LIBOR Rate plus a margin of 0.85%. For the six months ended June 30, 2014, interest expense incurred on these loans amounted to $1,289,605.
During the six months ended June 30, 2014, Baron Partners Fund had an average daily balance on the line of credit of $272.1 million at a weighted average interest rate of 0.96%. At June 30, 2014, Baron Partners Fund had an outstanding balance in the amount of $300,000,000.
6. RESTRICTED SECURITIES
At June 30, 2014, 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, 2014, 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 | |||||||
Windy City Investments Holdings, L.L.C. | 11/13/2007 – 1/27/2011 | $ | 44,186,328 | ||||
Total Restricted Securities: | |||||||
(Cost $41,134,888) (2.40% of Net Assets) |
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 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.); |
36
June 30, 2014 | Baron Select Funds |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
7. FAIR VALUE MEASUREMENTS (Continued)
• | Level 3 — prices determined using 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, with markets that 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 that may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine its fair value. 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, 2014 in valuing the Funds’ investments carried at fair value:
Baron Partners Fund | ||||||||||||||||||
Quoted Prices in | ||||||||||||||||||
Active Markets | Other | |||||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||
Common Stocks† | $ | 2,092,739,056 | $ | — | $ | — | $ | 2,092,739,056 | ||||||||||
Private Equity Investments | — | — | 44,186,328 | 44,186,328 | ||||||||||||||
Total Investments | $ | 2,092,739,056 | $ | — | $ | 44,186,328 | $ | 2,136,925,384 | ||||||||||
Transfers between Levels 1, 2 or 3, if any, are recognized at ending value on June 30, 2014. There have been no transfers in and out of Level 1, 2 or 3 fair value measurements for the Fund for the six month period ended June 30, 2014.
Baron Focused Growth Fund | ||||||||||||||||||
Quoted Prices in | ||||||||||||||||||
Active Markets | Other | |||||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||
Common Stocks† | $ | 192,713,512 | $ | — | $ | — | $ | 192,713,512 | ||||||||||
Preferred Stocks | 7,362,122 | — | — | 7,362,122 | ||||||||||||||
Short Term Investments | — | 365,000 | — | 365,000 | ||||||||||||||
Total Investments | $ | 200,075,634 | $ | 365,000 | $ | — | $ | 200,440,634 | ||||||||||
Transfers between Levels 1, 2 or 3, if any, are recognized at ending value on June 30, 2014. There have been no transfers in and out of Level 1, 2 or 3 fair value measurements for the Fund for the six month period ended June 30, 2014.
Baron International Growth Fund | ||||||||||||||||||
Quoted Prices in | ||||||||||||||||||
Active Markets | Other | |||||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||
Common Stocks† | $ | 67,470,377 | $ | — | $ | — | $ | 67,470,377 | ||||||||||
Warrants | 33,750 | — | — | 33,750 | ||||||||||||||
Short Term Investments | — | 2,832,908 | — | 2,832,908 | ||||||||||||||
Total Investments | $ | 67,504,127 | $ | 2,832,908 | $ | — | $ | 70,337,035 | ||||||||||
$21,230,782 was transferred out of Level 2 into Level 1 at June 30, 2014 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.
† See Statements of Net Assets for additional detailed categorizations.
37
Baron Select Funds | June 30, 2014 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
7. FAIR VALUE MEASUREMENTS (Continued)
Baron Real Estate Fund | ||||||||||||||||||
Quoted Prices in | ||||||||||||||||||
Active Markets | Other | |||||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||
Common Stocks† | $ | 1,386,667,059 | $ | — | $ | — | $ | 1,386,667,059 | ||||||||||
Short Term Investments | — | 57,345,407 | — | 57,345,407 | ||||||||||||||
Total Investments | $ | 1,386,667,059 | $ | 57,345,407 | $ | — | $ | 1,444,012,466 | ||||||||||
$39,620,580 was transferred out of Level 2 into Level 1 at June 30, 2014 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 Emerging Markets Fund | ||||||||||||||||||
Quoted Prices in | ||||||||||||||||||
Active Markets | Other | |||||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||
Common Stocks† | $ | 898,612,006 | $ | 85,485 | $ | — | $ | 898,697,491 | ||||||||||
Preferred Stocks | 391,510 | — | — | 391,510 | ||||||||||||||
Convertible Bonds | 6,248,064 | — | — | 6,248,064 | ||||||||||||||
Short Term Investments | — | 112,901,562 | — | 112,901,562 | ||||||||||||||
Total Investments | $ | 905,251,580 | $ | 112,987,047 | $ | — | $ | 1,018,238,627 | ||||||||||
$152,590,209 was transferred out of Level 2 into Level 1 at June 30, 2014 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 Energy and Resources Fund | ||||||||||||||||||
Quoted Prices in | ||||||||||||||||||
Active Markets | Other | |||||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||
Common Stocks† | $ | 60,809,138 | $ | — | $ | — | $ | 60,809,138 | ||||||||||
Short Term Investments | — | 3,874,970 | — | 3,874,970 | ||||||||||||||
Total Investments | $ | 60,809,138 | $ | 3,874,970 | $ | — | $ | 64,684,108 | ||||||||||
Transfers between Levels 1, 2 or 3, if any, are recognized at ending value on June 30, 2014. There have been no transfers in and out of Level 1, 2 or 3 fair value measurements for the Fund for the six month period ended June 30, 2014.
Baron Global Advantage Fund | ||||||||||||||||||
Quoted Prices in | ||||||||||||||||||
Active Markets | Other | |||||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||
Common Stocks† | $ | 7,051,087 | $ | — | $ | — | $ | 7,051,087 | ||||||||||
Total Investments | $ | 7,051,087 | $ | — | $ | — | $ | 7,051,087 | ||||||||||
$917,381 was transferred out of Level 2 into Level 1 at June 30, 2014 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.
† See Statements of Net Assets for additional detailed categorizations.
38
June 30, 2014 | Baron Select Funds |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
7. FAIR VALUE MEASUREMENTS (Continued)
The following is a reconciliation of investments in which 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 | 2013 | Discounts | (Loss) | (Depreciation) | Purchases | Sales | Level 3 | Level 3 | 2014 | 2014 | ||||||||||||||||||||||||||||||||||||||||
Private Equity Investments | ||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||
Discretionary | $ | 13,923,000 | $ | — | $ | (23,400,00 | ) | $ | 25,077,000 | $ | — | $ | (15,600,000 | ) | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||||
Financials | 31,832,346 | — | — | 12,353,982 | — | — | — | — | 44,186,328 | 12,353,982 | ||||||||||||||||||||||||||||||||||||||||
Total | $ | 45,755,346 | $ | — | $ | (23,400,000 | ) | $ | 37,430,982 | $ | — | $ | (15,600,000 | ) | $ | — | $ | — | $ | 44,186,328 | $ | 12,353,982 | ||||||||||||||||||||||||||||
Unobservable valuation inputs developed by the Adviser for significant (greater than 1% of net assets) Level 3 investments as of June 30, 2014 were as follows:
Baron Partners Fund | ||||||||||||||||
Weighted Average | Range | |||||||||||||||
Fair Value as of | used on | used on | ||||||||||||||
Sector | Company | June 30, 2014 | Valuation Technique | Unobservable Input | June 30, 2014 | June 30, 2014 | ||||||||||
Probability of IPO scenario | 10 | % | 10% | |||||||||||||
Probability of acquisition scenario | 90 | % | 90% | |||||||||||||
Discount for lack of marketability under IPO scenario | 3.64 | % | 3.64% | |||||||||||||
Private Equity Investments: Financials | Windy City Investments Holdings, L.L.C. | $44,186,328 | Combination of scenario analysis, market comparables and option pricing methods | Discount for lack of marketability under acquisition scenario | 2.11 | % | 2.11 | |||||||||
Estimated volatility of the returns of the enterprise value(1) | 5.57 | % | 5.57% | |||||||||||||
EV/Run Rate EBITDA Multiple(2) | 10.69 | x | 8.10x to 12.78x | |||||||||||||
Adjustment to the EBITDA Multiple due to leverage(2) | 2.65 | % | 2.65% | |||||||||||||
Change in the composite equity index of comparable companies | 0.46 | % | 0.03% to 1.44% | |||||||||||||
Estimated price per share at acquisition closing(3) | $6.17 | $6.17 | ||||||||||||||
(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 10.97x. This increase adjusts for leverage, as Nuveen Investments, Inc. is more levered than its comparable companies. | |
(3) | The price was provided by the acquiree company. |
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.
39
Baron Select Funds | June 30, 2014 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
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, 2014, 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 | $ | 1,179,978,579 | $ | 133,424,422 | $ | 46,547,056 | $ | 1,196,138,968 | $ | 935,904,432 | $ | 51,242,852 | $ | 5,601,726 | ||||||||||||||
Gross tax unrealized appreciation | 956,946,805 | 70,438,419 | 25,141,642 | 249,855,445 | 103,766,049 | 13,669,459 | 1,529,643 | |||||||||||||||||||||
Gross tax unrealized depreciation | — | (3,422,207 | ) | (1,351,663 | ) | (1,981,947 | ) | (21,431,854 | ) | (228,203 | ) | (80,282 | ) | |||||||||||||||
Net tax unrealized appreciation | 956,946,805 | 67,016,212 | 23,789,979 | 247,873,498 | 82,334,195 | 13,441,256 | 1,449,361 | |||||||||||||||||||||
Net tax unrealized currency | ||||||||||||||||||||||||||||
appreciation (depreciation) | — | — | (67,362 | ) | 3 | (4,259,783 | ) | (261 | ) | 137 | ||||||||||||||||||
Undistributed (accumulated) net | ||||||||||||||||||||||||||||
investment income (loss) | 16,833,894 | 1,369,240 | 220,961 | 3,405,303 | (407,276 | ) | 16,104 | 12,155 | ||||||||||||||||||||
Undistributed (accumulated) | ||||||||||||||||||||||||||||
net realized gain (loss) | (370,416,330 | ) | (1,021,079 | ) | 2,660,021 | (3,000,811 | ) | (6,858,458 | ) | (450,435 | ) | 26,461 | ||||||||||||||||
Paid-in capital | 1,234,305,303 | 131,617,742 | 43,880,151 | 1,190,010,582 | 925,459,243 | 52,031,997 | 5,624,729 | |||||||||||||||||||||
Net Assets | $ | 1,837,669,672 | $ | 198,982,115 | $ | 70,483,750 | $ | 1,438,288,575 | $ | 996,267,921 | $ | 65,038,661 | $ | 7,112,843 | ||||||||||||||
As of December 31, 2013, 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 capital loss carryforwards: | ||||||||||||||||||||||||||||
December 31, 2016 | $ | 36,761,101 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
December 31, 2017 | 334,667,179 | 137,106 | — | — | — | — | — | |||||||||||||||||||||
No expiration date | — | — | — | 4,900,207 | 904,112 | 339,483 | — | |||||||||||||||||||||
$ | 371,428,280 | $ | 137,106 | $ | — | $ | 4,900,207 | $ | 904,112 | $ | 339,483 | $ | — | |||||||||||||||
Long term capital loss carryforwards: | ||||||||||||||||||||||||||||
No expiration date | $ | — | $ | — | $ | — | $ | — | $ | 474,916 | $ | 77,271 | $ | — | ||||||||||||||
The tax character of distributions paid during the six months ended June 30, 2014 and the fiscal year ended December 31, 2013 was as follows:
Six Months Ended | Year Ended | |||||||||||||||||||
June 30, 2014 | December 31, 2013 | |||||||||||||||||||
Long Term | Long Term | Return of | ||||||||||||||||||
Fund | Ordinary1 | Capital Gain | Ordinary1 | Capital Gain | Capital | |||||||||||||||
Baron Partners Fund | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Baron Focused Growth Fund | — | — | 2,471,584 | — | — | |||||||||||||||
Baron International Growth Fund | — | — | 3,362 | — | — | |||||||||||||||
Baron Real Estate Fund | — | — | 247,412 | 555,524 | 673,756 | |||||||||||||||
Baron Emerging Markets Fund | — | — | — | — | — | |||||||||||||||
Baron Energy and Resources Fund | — | — | 26,290 | — | — | |||||||||||||||
Baron Global Advantage Fund | — | — | — | — | — |
1 For tax purposes, short-term capital gains are considered ordinary income distributions.
The Funds follow the provisions of the Financial Accounting Standards Board (“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, 2014, 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.
40
June 30, 2014 | Baron Select Funds |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
9. OWNERSHIP CONCENTRATION
As of June 30, 2014, the officers, trustees, and portfolio managers owned, directly or indirectly, 29.80% of Baron Focused Growth Fund and 47.52% of Baron Global Advantage Fund. As of June 30, 2014, the officers, trustees, portfolio managers, and one other investor owned, directly or indirectly, 50.15% of Baron International Growth Fund. As a result of their ownership, these investors may be able to materially affect the outcome of matters presented to Baron Focused Growth Fund, Baron International Growth Fund and Baron Global Advantage Fund shareholders.
10. TRANSACTIONS IN “AFFILIATED” COMPANIES1
Net Change in | Shares | |||||||||||||||||||||||||||||||
Value at | Unrealized | Held at | Value at | |||||||||||||||||||||||||||||
December 31, | Purchase | Sales | Appreciation | Realized | Dividend | June 30, | June 30, | |||||||||||||||||||||||||
Name of Issuer | 2013 | Cost | Proceeds | (Depreciation) | Gains/(Losses) | Income | 2014 | 2014 | ||||||||||||||||||||||||
“Affiliated” Company as of June 30, 2014: | ||||||||||||||||||||||||||||||||
Capital Senior Living Corp. | $ | 38,730,775 | $ | 10,999,281 | $ | — | $ | (417,898 | ) | $ | — | $ | — | 2,068,463 | $ | 49,312,158 | ||||||||||||||||
1 An “Affiliated” company, as defined in the 1940 Act, is a company in which a Fund held 5% or more of the company’s outstanding voting securities at any time during the six month period ended June 30, 2014.
11. DISCLOSURES REGARDING OFFSETTING ASSETS AND LIABILITIES
In December 2011, the FASB issued an Accounting Standards Update (“ASU”) related to disclosures about offsetting assets and liabilities in financial statements. This ASU requires an entity to disclose both gross and net information for derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in the statement of assets and liabilities or subject to an enforceable master netting arrangement or similar agreement. In January 2013, the FASB issued an ASU to clarify the scope of disclosures about offsetting assets and liabilities. The ASU is effective for reporting periods beginning on or after January 1, 2013. The information required to be disclosed by the ASU for the Funds’ investments in repurchase agreements at June 30, 2014, including the fair value of the repurchase agreement and the amount of collateral, can be found in each respective Fund’s statement of net assets. The information required to be disclosed by the ASU for the Funds’ securities lending agreement at June 30, 2014 can be found in each respective Fund’s Statement of Assets and Liabilities. The Funds did not hold derivatives or participate in borrowing activities at June 30, 2014.
12. RECENT ACCOUNTING PRONOUNCEMENT
In June 2014, The Financial Accounting Standards Board (FASB) issued ASU 2014-11 Transfers & Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures to improve the financial reporting of repurchase agreements and other similar transactions. The guidance includes expanded disclosure requirements for entities that enter into repurchase agreements or securities lending transactions. The guidance is effective for financial statements with fiscal years beginning on or after January 1, 2015, and interim periods within those fiscal years. The Adviser is evaluating the impact, if any, of this guidance on the Funds’ financial statement disclosures.
41 |
Baron Select Funds | June 30, 2014 |
FINANCIAL HIGHLIGHTS (Unaudited) |
BARON PARTNERS FUND
Selected data for a share outstanding throughout each period:
RETAIL SHARES | Six Months | |||||||||||||||||||||||||||||||||||||||
Ended June 30, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 33.32 | $ | 22.56 | $ | 19.39 | $ | 20.57 | $ | 15.64 | $ | 12.20 | $ | 23.76 | $ | 22.34 | $ | 18.43 | $ | 16.85 | ||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.31 | 1 | (0.19 | )1 | (0.04 | )1 | (0.14 | )1 | (0.09 | )1 | (0.04 | )1 | (0.09 | )1 | (0.21 | )1 | (0.16 | )1 | (0.13 | ) | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 3.03 | 10.95 | 3.21 | (1.04 | ) | 5.02 | 3.48 | (10.74 | ) | 2.74 | 4.13 | 2.49 | ||||||||||||||||||||||||||||
Total from investment operations | 3.34 | 10.76 | 3.17 | (1.18 | ) | 4.93 | 3.44 | (10.83 | ) | 2.53 | 3.97 | 2.36 | ||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||
Net realized gain on investments | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | (0.73 | ) | (1.11 | ) | (0.06 | ) | (0.78 | ) | ||||||||||||||||||||||||||
Total distributions | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | (0.73 | ) | (1.11 | ) | (0.06 | ) | (0.78 | ) | ||||||||||||||||||||||||||
Net asset value, end of period | $ | 36.66 | $ | 33.32 | $ | 22.56 | $ | 19.39 | $ | 20.57 | $ | 15.64 | $ | 12.20 | $ | 23.76 | $ | 22.34 | $ | 18.43 | ||||||||||||||||||||
Total return | 10.02 | %4 | 47.69 | % | 16.35 | % | (5.74 | )% | 31.52 | % | 28.20 | % | (46.67 | )% | 11.34 | % | 21.55 | % | 14.37 | % | ||||||||||||||||||||
Ratios/Supplemental data: | ||||||||||||||||||||||||||||||||||||||||
Net assets (in millions), end of period | $ | 1,335.5 | $ | 1,125.6 | $ | 653.7 | $ | 970.4 | $ | 1,251.9 | $ | 1,249.3 | $ | 1,501.3 | $ | 3,384.1 | $ | 2,403.1 | $ | 1,403.0 | ||||||||||||||||||||
Ratio of total expenses to average net assets | 1.50 | %5 | 1.67 | % | 1.74 | % | 1.71 | % | 1.71 | % | 1.51 | % | 1.86 | %2 | 1.88 | %2 | 1.77 | % | 1.62 | % | ||||||||||||||||||||
Less: Ratio of interest expense to average net assets | (0.16 | )%5 | (0.29 | )% | (0.34 | )% | (0.36 | )% | (0.34 | )% | (0.10 | )% | (0.51 | )% | (0.57 | )% | (0.45 | )% | (0.27 | )% | ||||||||||||||||||||
Ratio of operating expenses to average net assets | 1.34 | %5 | 1.38 | % | 1.40 | % | 1.35 | % | 1.37 | % | 1.41 | % | 1.35 | % | 1.31 | % | 1.32 | % | 1.35 | % | ||||||||||||||||||||
Ratio of net investment income (loss) to average net assets | 1.82 | %5 | (0.66 | )% | (0.18 | )% | (0.69 | )% | (0.51 | )% | (0.30 | )% | (0.49 | )% | (0.86 | )% | (0.80 | )% | (0.85 | )% | ||||||||||||||||||||
Portfolio turnover rate | 15.35 | %4 | 18.57 | % | 13.04 | % | 16.96 | % | 15.85 | % | 32.43 | % | 38.02 | % | 32.95 | % | 35.92 | % | 37.62 | % | ||||||||||||||||||||
INSTITUTIONAL SHARES | Six Months | |||||||||||||||||||||||
Ended June 30, | Year Ended December 31, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | 20093 | |||||||||||||||||||
Net asset value, beginning of period | $ | 33.72 | $ | 22.78 | $ | 19.52 | $ | 20.66 | $ | 15.66 | $ | 12.66 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) | 0.33 | 1 | (0.12 | )1 | 0.04 | 1 | (0.08 | )1 | (0.06 | )1 | (0.03 | )1 | ||||||||||||
Net realized and unrealized gain (loss) on investments | 3.10 | 11.06 | 3.22 | (1.06 | ) | 5.06 | 3.03 | |||||||||||||||||
Total from investment operations | 3.43 | 10.94 | 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 | ||||||||||||||||||
Net realized gain on investments | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||||
Total distributions | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||||
Net asset value, end of period | $ | 37.15 | $ | 33.72 | $ | 22.78 | $ | 19.52 | $ | 20.66 | $ | 15.66 | ||||||||||||
Total return | 10.17 | %4 | 48.02 | % | 16.70 | % | (5.52 | )% | 31.93 | % | 23.70 | %4 | ||||||||||||
Ratios/Supplemental data: | ||||||||||||||||||||||||
Net assets (in millions), end of period | $ | 502.2 | $ | 349.0 | $ | 146.5 | $ | 123.7 | $ | 119.9 | $ | 158.5 | ||||||||||||
Ratio of total expenses to average net assets | 1.24 | %5 | 1.41 | % | 1.48 | % | 1.45 | % | 1.45 | % | 1.38 | %5 | ||||||||||||
Less: Ratio of interest expense to average net assets | (0.16 | )%5 | (0.30 | )% | (0.35 | )% | (0.36 | )% | (0.34 | )% | (0.21 | )%5 | ||||||||||||
Ratio of operating expenses to average net assets | 1.08 | %5 | 1.11 | % | 1.13 | % | 1.09 | % | 1.11 | % | 1.17 | %5 | ||||||||||||
Ratio of net investment income (loss) to average net assets | 1.92 | %5 | (0.41 | )% | 0.18 | % | (0.41 | )% | (0.36 | )% | (0.31 | )%5 | ||||||||||||
Portfolio turnover rate | 15.35 | %4 | 18.57 | % | 13.04 | % | 16.96 | % | 15.85 | % | 32.43 | % | ||||||||||||
1 | Based on average shares outstanding. | |
2 | Benefit of expense reduction rounds to less than 0.01%. | |
3 | For the period May 29, 2009 (initial offering of Institutional Shares) to December 31, 2009. | 4 | Not Annualized. |
5 | Annualized. |
42 | See Notes to Financial Statements. |
June 30, 2014 | Baron Select Funds |
FINANCIAL HIGHLIGHTS (Unaudited) |
BARON FOCUSED GROWTH FUND
Selected data for a share outstanding throughout each period:
RETAIL SHARES | Six Months | |||||||||||||||||||||||||||
Ended June 30, | Year Ended December 31, | |||||||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 20081 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 13.97 | $ | 11.26 | $ | 9.71 | $ | 9.85 | $ | 8.14 | $ | 6.27 | $ | 10.00 | ||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.07 | 2 | (0.07 | )2 | 0.24 | 2 | (0.07 | )2 | (0.01 | )2 | 0.12 | 2 | 0.00 | 2,3 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.24 | 2.95 | 1.31 | (0.07 | ) | 2.05 | 2.00 | (3.33 | ) | |||||||||||||||||||
Total from investment operations | 0.31 | 2.88 | 1.55 | (0.14 | ) | 2.04 | 2.12 | (3.33 | ) | |||||||||||||||||||
Less distributions to shareholders from: | ||||||||||||||||||||||||||||
Net investment income | 0.00 | (0.17 | ) | 0.00 | 0.00 | (0.33 | ) | (0.13 | ) | 0.00 | ||||||||||||||||||
Net realized gain on investments | 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 | 0.00 | (0.12 | ) | (0.40 | ) | |||||||||||||||||||
Total distributions | 0.00 | (0.17 | ) | 0.00 | 0.00 | (0.33 | ) | (0.25 | ) | (0.40 | ) | |||||||||||||||||
Net asset value, end of period | $ | 14.28 | $ | 13.97 | $ | 11.26 | $ | 9.71 | $ | 9.85 | $ | 8.14 | $ | 6.27 | ||||||||||||||
Total return | 2.22 | %4,5 | 25.69 | %5 | 15.96 | %5 | (1.42 | )%5 | 25.17 | %5 | 33.77 | %5 | (33.11 | )%4,5 | ||||||||||||||
Ratios/Supplemental data: | ||||||||||||||||||||||||||||
Net assets (in millions), end of period | $ | 48.2 | $ | 47.6 | $ | 31.4 | $ | 28.3 | $ | 46.4 | $ | 39.9 | $ | 59.3 | ||||||||||||||
Ratio of operating expenses to average net assets | 1.40 | %6 | 1.42 | % | 1.48 | % | 1.48 | % | 1.47 | % | 1.52 | % | 1.54 | %6 | ||||||||||||||
Less: Reimbursement of expenses by Adviser | (0.05 | )%6 | (0.07 | )% | (0.13 | )% | (0.13 | )% | (0.12 | )% | (0.17 | )% | (0.19 | )%6 | ||||||||||||||
Ratio of net operating expenses to average net assets | 1.35 | %6 | 1.35 | % | 1.35 | % | 1.35 | % | 1.35 | % | 1.35 | % | 1.35 | %6 | ||||||||||||||
Ratio of net investment income (loss) to average net assets | 1.04 | %6 | (0.53 | )% | 2.30 | % | (0.69 | )% | (0.16 | )% | 1.81 | % | 0.01 | %6 | ||||||||||||||
Portfolio turnover rate | 12.34 | %4 | 33.67 | % | 38.38 | % | 44.58 | % | 24.08 | % | 34.76 | % | 35.43 | %4 | ||||||||||||||
INSTITUTIONAL SHARES | Six Months | |||||||||||||||||||||||
Ended June 30, | Year Ended December 31, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | 20097 | |||||||||||||||||||
Net asset value, beginning of period | $ | 14.10 | $ | 11.35 | $ | 9.77 | $ | 9.88 | $ | 8.15 | $ | 6.88 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) | 0.09 | 2 | (0.04 | )2 | 0.26 | 2 | (0.04 | )2 | 0.01 | 2 | 0.07 | 2 | ||||||||||||
Net realized and unrealized gain (loss) on investments | 0.24 | 2.99 | 1.32 | (0.07 | ) | 2.05 | 1.45 | |||||||||||||||||
Total from investment operations | 0.33 | 2.95 | 1.58 | (0.11 | ) | 2.06 | 1.52 | |||||||||||||||||
Less distributions to shareholders from: | ||||||||||||||||||||||||
Net investment income | 0.00 | (0.20 | ) | 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 | ||||||||||||||||||
Return of capital | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | (0.12 | ) | |||||||||||||||||
Total distributions | 0.00 | (0.20 | ) | 0.00 | 0.00 | (0.33 | ) | (0.25 | ) | |||||||||||||||
Net asset value, end of period | $ | 14.43 | $ | 14.10 | $ | 11.35 | $ | 9.77 | $ | 9.88 | $ | 8.15 | ||||||||||||
Total return | 2.34 | %4 | 26.09 | %5 | 16.17 | %5 | (1.11 | )%5 | 25.39 | %5 | 22.06 | %4,5 | ||||||||||||
Ratios/Supplemental data: | ||||||||||||||||||||||||
Net assets (in millions), end of period | $ | 150.8 | $ | 148.4 | $ | 87.9 | $ | 63.6 | $ | 44.3 | $ | 36.6 | ||||||||||||
Ratio of operating expenses to average net assets | 1.10 | %6 | 1.12 | % | 1.16 | % | 1.18 | % | 1.19 | % | 1.25 | %6 | ||||||||||||
Less: Reimbursement of expenses by Adviser | 0.00 | % | (0.02 | )% | (0.06 | )% | (0.08 | )% | (0.09 | )% | (0.15 | )%6 | ||||||||||||
Ratio of net operating expenses to average net assets | 1.10 | %6 | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | %6 | ||||||||||||
Ratio of net investment income (loss) to average net assets | 1.30 | %6 | (0.28 | )% | 2.53 | % | (0.40 | )% | 0.08 | % | 1.63 | %6 | ||||||||||||
Portfolio turnover rate | 12.34 | %4 | 33.67 | % | 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 (initial offering of Institutional Shares) to December 31, 2009. |
See Notes to Financial Statements. | 43 |
Baron Select Funds | June 30, 2014 |
FINANCIAL HIGHLIGHTS (Unaudited) |
BARON INTERNATIONAL GROWTH FUND
Selected data for a share outstanding throughout each period:
RETAIL SHARES | Six Months | |||||||||||||||||||||||
Ended June 30, | Year Ended December 31, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||||||
Net asset value, beginning of period | $ | 18.91 | $ | 15.55 | $ | 13.20 | $ | 17.29 | $ | 14.11 | $ | 10.00 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) | 0.05 | 1 | (0.01 | )1 | (0.02 | )1 | (0.01 | )1 | 0.01 | 1 | 0.04 | 1 | ||||||||||||
Net realized and unrealized gain (loss) on investments | 0.97 | 3.37 | 2.37 | (2.78 | ) | 3.38 | 4.43 | |||||||||||||||||
Total from investment operations | 1.02 | 3.36 | 2.35 | (2.79 | ) | 3.39 | 4.47 | |||||||||||||||||
Less distributions to shareholders from: | ||||||||||||||||||||||||
Net investment income | 0.00 | 0.00 | 0.00 | (0.04 | ) | 0.00 | 0.00 | |||||||||||||||||
Net realized gain on investments | 0.00 | 0.00 | 0.00 | (1.26 | ) | (0.21 | ) | (0.36 | ) | |||||||||||||||
Total distributions | 0.00 | 0.00 | 0.00 | (1.30 | ) | (0.21 | ) | (0.36 | ) | |||||||||||||||
Net asset value, end of period | $ | 19.93 | $ | 18.91 | $ | 15.55 | $ | 13.20 | $ | 17.29 | $ | 14.11 | ||||||||||||
Total return | 5.39 | %2,4 | 21.61 | %2 | 17.80 | %2 | (16.35 | )%2 | 24.22 | %2 | 44.69 | %2 | ||||||||||||
Ratios/Supplemental data: | ||||||||||||||||||||||||
Net assets (in millions), end of period | $ | 21.9 | $ | 17.0 | $ | 15.6 | $ | 11.7 | $ | 15.3 | $ | 8.4 | ||||||||||||
Ratio of operating expenses to average net assets | 1.70 | %5 | 1.74 | % | 1.78 | % | 1.73 | % | 1.76 | % | 2.33 | % | ||||||||||||
Less: Reimbursement of expenses by Adviser | (0.20 | )%5 | (0.24 | )% | (0.28 | )% | (0.23 | )% | (0.26 | )% | (0.83 | )% | ||||||||||||
Ratio of net operating expenses to average net assets | 1.50 | %5 | 1.50 | % | 1.50 | % | 1.50 | % | 1.50 | % | 1.50 | % | ||||||||||||
Ratio of net investment income (loss) to average net assets | 0.56 | %5 | (0.05 | )% | (0.16 | )% | (0.05 | )% | 0.07 | % | 0.38 | % | ||||||||||||
Portfolio turnover rate | 17.29 | %4 | 40.60 | % | 39.02 | % | 53.20 | % | 32.70 | % | 53.94 | % | ||||||||||||
INSTITUTIONAL SHARES | Six Months | |||||||||||||||||||||||
Ended June 30, | Year Ended December 31, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | 20096 | |||||||||||||||||||
Net asset value, beginning of period | $ | 19.05 | $ | 15.63 | $ | 13.25 | $ | 17.36 | $ | 14.13 | $ | 11.13 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) | 0.07 | 1 | 0.03 | 1 | 0.01 | 1 | 0.03 | 1 | 0.05 | 1 | (0.02 | )1 | ||||||||||||
Net realized and unrealized gain (loss) on investments | 0.98 | 3.39 | 2.40 | (2.79 | ) | 3.39 | 3.38 | |||||||||||||||||
Total from investment operations | 1.05 | 3.42 | 2.41 | (2.76 | ) | 3.44 | 3.36 | |||||||||||||||||
Less distributions to shareholders from: | ||||||||||||||||||||||||
Net investment income | 0.00 | (0.00 | )3 | (0.03 | ) | (0.09 | ) | 0.00 | 0.00 | |||||||||||||||
Net realized gain on investments | 0.00 | 0.00 | 0.00 | (1.26 | ) | (0.21 | ) | (0.36 | ) | |||||||||||||||
Total distributions | 0.00 | (0.00 | )3 | (0.03 | ) | (1.35 | ) | (0.21 | ) | (0.36 | ) | |||||||||||||
Net asset value, end of period | $ | 20.10 | $ | 19.05 | $ | 15.63 | $ | 13.25 | $ | 17.36 | $ | 14.13 | ||||||||||||
Total return | 5.51 | %2,4 | 21.89 | %2 | 18.17 | %2 | (16.13 | )%2 | 24.54 | %2 | 30.18 | %2,4 | ||||||||||||
Ratios/Supplemental data: | ||||||||||||||||||||||||
Net assets (in millions), end of period | $ | 48.6 | $ | 45.4 | $ | 39.0 | $ | 30.5 | $ | 37.4 | $ | 22.1 | ||||||||||||
Ratio of operating expenses to average net assets | 1.36 | %5 | 1.37 | % | 1.40 | % | 1.38 | % | 1.40 | % | 1.89 | %5 | ||||||||||||
Less: Reimbursement of expenses by Adviser | (0.11 | )%5 | (0.12 | )% | (0.15 | )% | (0.13 | )% | (0.15 | )% | (0.64 | )%5 | ||||||||||||
Ratio of net operating expenses to average net assets | 1.25 | %5 | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | %5 | ||||||||||||
Ratio of net investment income (loss) to average net assets | 0.73 | %5 | 0.20 | % | 0.09 | % | 0.19 | % | 0.31 | % | (0.29 | )%5 | ||||||||||||
Portfolio turnover rate | 17.29 | %4 | 40.60 | % | 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 | Less than $0.01 per share. | |
4 | Not Annualized. | |
5 | Annualized. | |
6 | For the period May 29, 2009 (initial offering of Institutional Shares) to December 31, 2009. |
44 | See Notes to Financial Statements. |
June 30, 2014 | Baron Select Funds |
FINANCIAL HIGHLIGHTS (Unaudited) |
BARON REAL ESTATE FUND
Selected data for a share outstanding throughout each period:
RETAIL SHARES | Six Months | |||||||||||||||||||
Ended June 30, | Year Ended December 31, | |||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
Net asset value, beginning of period | $ | 22.25 | $ | 17.52 | $ | 12.51 | $ | 12.66 | $ | 10.00 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.04 | 1 | (0.05 | )1 | 0.01 | 1 | (0.01 | )1 | 0.02 | 1 | ||||||||||
Net realized and unrealized gain on investments | 2.04 | 4.80 | 5.31 | 0.07 | 2 | 2.64 | ||||||||||||||
Total from investment operations | 2.08 | 4.75 | 5.32 | 0.06 | 2.66 | |||||||||||||||
Less distributions to shareholders from: | ||||||||||||||||||||
Net investment income | 0.00 | 0.00 | 0.00 | (0.00 | )3 | 0.00 | ||||||||||||||
Net realized gain on investments | 0.00 | (0.02 | ) | (0.31 | ) | (0.21 | ) | 0.00 | ||||||||||||
Total distributions | 0.00 | (0.02 | ) | (0.31 | ) | (0.21 | ) | 0.00 | ||||||||||||
Net asset value, end of period | $ | 24.33 | $ | 22.25 | $ | 17.52 | $ | 12.51 | $ | 12.66 | ||||||||||
Total return | 9.35 | %5 | 27.12 | % | 42.60 | %4 | 0.63 | %4 | 26.60 | %4 | ||||||||||
Ratios/Supplemental data: | ||||||||||||||||||||
Net assets (in millions), end of period | $ | 715.0 | $ | 539.5 | $ | 53.6 | $ | 10.9 | $ | 5.5 | ||||||||||
Ratio of operating expenses to average net assets | 1.32 | %6 | 1.35 | % | 1.76 | % | 2.33 | % | 4.35 | % | ||||||||||
Less: Reimbursement of expenses by Adviser | 0.00 | % | 0.00 | % | (0.41 | )% | (0.98 | )% | (3.00 | )% | ||||||||||
Ratio of net operating expenses to average net assets | 1.32 | %6 | 1.35 | % | 1.35 | % | 1.35 | % | 1.35 | % | ||||||||||
Ratio of net investment income (loss) to average net assets | 0.34 | %6 | (0.23 | )% | 0.07 | % | (0.08 | )% | 0.14 | % | ||||||||||
Portfolio turnover rate | 7.57 | %5 | 19.36 | % | 30.14 | % | 70.99 | % | 58.03 | % | ||||||||||
INSTITUTIONAL SHARES | Six Months | |||||||||||||||||||
Ended June 30, | Year Ended December 31, | |||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
Net asset value, beginning of period | $ | 22.43 | $ | 17.64 | $ | 12.56 | $ | 12.69 | $ | 10.00 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | 0.07 | 1 | 0.03 | 1 | 0.06 | 1 | 0.02 | 1 | 0.04 | 1 | ||||||||||
Net realized and unrealized gain on investments | 2.06 | 4.81 | 5.33 | 0.07 | 2 | 2.65 | ||||||||||||||
Total from investment operations | 2.13 | 4.84 | 5.39 | 0.09 | 2.69 | |||||||||||||||
Less distributions to shareholders from: | ||||||||||||||||||||
Net investment income | 0.00 | (0.00 | )3 | 0.00 | (0.01 | ) | 0.00 | |||||||||||||
Net realized gain on investments | 0.00 | (0.02 | ) | (0.31 | ) | (0.21 | ) | 0.00 | ||||||||||||
Return of capital | 0.00 | (0.03 | ) | 0.00 | 0.00 | 0.00 | ||||||||||||||
Total distributions | 0.00 | (0.05 | ) | (0.31 | ) | (0.22 | ) | 0.00 | ||||||||||||
Net asset value, end of period | $ | 24.56 | $ | 22.43 | $ | 17.64 | $ | 12.56 | $ | 12.69 | ||||||||||
Total return | 9.50 | %5 | 27.48 | % | 42.99 | %4 | 0.80 | %4 | 26.90 | %4 | ||||||||||
Ratios/Supplemental data: | ||||||||||||||||||||
Net assets (in millions), end of period | $ | 723.3 | $ | 486.1 | $ | 35.5 | $ | 4.9 | $ | 3.2 | ||||||||||
Ratio of operating expenses to average net assets | 1.07 | %6 | 1.09 | % | 1.44 | % | 2.14 | % | 4.26 | % | ||||||||||
Less: Reimbursement of expenses by Adviser | 0.00 | % | 0.00 | % | (0.34 | )% | (1.04 | )% | (3.16 | )% | ||||||||||
Ratio of net operating expenses to average net assets | 1.07 | %6 | 1.09 | % | 1.10 | % | 1.10 | % | 1.10 | % | ||||||||||
Ratio of net investment income to average net assets | 0.60 | %6 | 0.15 | % | 0.36 | % | 0.17 | % | 0.36 | % | ||||||||||
Portfolio turnover rate | 7.57 | %5 | 19.36 | % | 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. |
See Notes to Financial Statements. | 45 |
Baron Select Funds | June 30, 2014 |
FINANCIAL HIGHLIGHTS (Unaudited) |
BARON EMERGING MARKETS FUND
Selected data for a share outstanding throughout each period:
RETAIL SHARES | Six Months | |||||||||||||||
Ended June 30, | Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | |||||||||||||
Net asset value, beginning of period | $ | 11.54 | $ | 10.06 | $ | 8.28 | $ | 10.00 | ||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment loss | (0.01 | )1 | (0.06 | )1 | (0.04 | )1 | (0.03 | )1 | ||||||||
Net realized and unrealized gain (loss) on investments | 0.98 | 1.54 | 1.94 | (1.69 | ) | |||||||||||
Total from investment operations | 0.97 | 1.48 | 1.90 | (1.72 | ) | |||||||||||
Less distributions to shareholders from: | ||||||||||||||||
Net investment income | 0.00 | 0.00 | (0.12 | ) | 0.00 | |||||||||||
Net realized gain on investments | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||
Total distributions | 0.00 | 0.00 | (0.12 | ) | 0.00 | |||||||||||
Net asset value, end of period | $ | 12.51 | $ | 11.54 | $ | 10.06 | $ | 8.28 | ||||||||
Total return | 8.41 | %3 | 14.71 | %2 | 22.98 | %2 | (17.20 | )%2 | ||||||||
Ratios/Supplemental data: | ||||||||||||||||
Net assets (in millions), end of period | $ | 563.0 | $ | 259.6 | $ | 2.9 | $ | 2.0 | ||||||||
Ratio of operating expenses to average net assets | 1.49 | %4 | 1.90 | % | 4.01 | % | 4.49 | % | ||||||||
Less: Reimbursement of expenses by Adviser | 0.00 | % | (0.40 | )% | (2.51 | )% | (2.99 | )% | ||||||||
Ratio of net operating expenses to average net assets | 1.49 | %4 | 1.50 | % | 1.50 | % | 1.50 | % | ||||||||
Ratio of net investment loss to average net assets | (0.09 | )%4 | (0.53 | )% | (0.39 | )% | (0.32 | )% | ||||||||
Portfolio turnover rate | 10.65 | %3 | 14.68 | % | 42.68 | % | 45.86 | % | ||||||||
INSTITUTIONAL SHARES | Six Months | |||||||||||||||
Ended June 30, | Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | |||||||||||||
Net asset value, beginning of period | $ | 11.56 | $ | 10.05 | $ | 8.30 | $ | 10.00 | ||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income (loss) | 0.01 | 1 | 0.01 | 1 | (0.01 | )1 | (0.01 | )1 | ||||||||
Net realized and unrealized gain (loss) on investments | 0.97 | 1.50 | 1.93 | (1.69 | ) | |||||||||||
Total from investment operations | 0.98 | 1.51 | 1.92 | (1.70 | ) | |||||||||||
Less distributions to shareholders from: | ||||||||||||||||
Net investment income | 0.00 | 0.00 | (0.17 | ) | 0.00 | |||||||||||
Net realized gain on investments | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||
Total distributions | 0.00 | 0.00 | (0.17 | ) | 0.00 | |||||||||||
Net asset value, end of period | $ | 12.54 | $ | 11.56 | $ | 10.05 | $ | 8.30 | ||||||||
Total return | 8.48 | %3 | 15.02 | %2 | 23.22 | %2 | (17.00 | )%2 | ||||||||
Ratios/Supplemental data: | ||||||||||||||||
Net assets (in millions), end of period | $ | 433.3 | $ | 116.0 | $ | 6.0 | $ | 4.3 | ||||||||
Ratio of operating expenses to average net assets | 1.25 | %4 | 1.80 | % | 3.37 | % | 3.83 | % | ||||||||
Less: Reimbursement of expenses by Adviser | 0.00 | % | (0.55 | )% | (2.12 | )% | (2.58 | )% | ||||||||
Ratio of net operating expenses to average net assets | 1.25 | %4 | 1.25 | % | 1.25 | % | 1.25 | % | ||||||||
Ratio of net investment income (loss) to average net assets | 0.21 | %4 | 0.05 | % | (0.14 | )% | (0.07 | )% | ||||||||
Portfolio turnover rate | 10.65 | %3 | 14.68 | % | 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. |
46 | See Notes to Financial Statements. |
June 30, 2014 | Baron Select Funds |
FINANCIAL HIGHLIGHTS (Unaudited) |
BARON ENERGY AND RESOURCES FUND
Selected data for a share outstanding throughout each period:
RETAIL SHARES | Six Months | Year Ended | ||||||||||
Ended June 30, | December 31, | |||||||||||
2014 | 2013 | 2012 | ||||||||||
Net asset value, beginning of period | $ | 11.84 | $ | 9.46 | $ | 10.00 | ||||||
Income (loss) from investment operations: | ||||||||||||
Net investment loss | (0.00 | )1,5 | (0.01 | )1 | (0.03 | )1 | ||||||
Net realized and unrealized gain (loss) on investments | 2.48 | 2.40 | (0.51 | ) | ||||||||
Total from investment operations | 2.48 | 2.39 | (0.54 | ) | ||||||||
Less distributions to shareholders from: | ||||||||||||
Net investment income | 0.00 | (0.01 | ) | 0.00 | ||||||||
Net realized gain on investments | 0.00 | 0.00 | 0.00 | |||||||||
Total distributions | 0.00 | (0.01 | ) | 0.00 | ||||||||
Net asset value, end of period | $ | 14.32 | $ | 11.84 | $ | 9.46 | ||||||
Total return | 20.95 | %2,3 | 25.32 | %2 | (5.40 | )%2 | ||||||
Ratios/Supplemental data: | ||||||||||||
Net assets (in millions), end of period | $ | 54.6 | $ | 29.2 | $ | 1.8 | ||||||
Ratio of operating expenses to average net assets | 2.00 | %4 | 2.25 | % | 9.07 | % | ||||||
Less: Reimbursement of expenses by Adviser | (0.65 | )%4 | (0.90 | )% | (7.72 | )% | ||||||
Ratio of net operating expenses to average net assets | 1.35 | %4 | 1.35 | % | 1.35 | % | ||||||
Ratio of net investment loss to average net assets | (0.04 | )%4 | (0.05 | )% | (0.36 | )% | ||||||
Portfolio turnover rate | 9.41 | %3 | 25.60 | % | 35.74 | % | ||||||
INSTITUTIONAL SHARES | Six Months | Year Ended | ||||||||||
Ended June 30, | December 31, | |||||||||||
2014 | 2013 | 2012 | ||||||||||
Net asset value, beginning of period | $ | 11.91 | $ | 9.48 | $ | 10.00 | ||||||
Income (loss) from investment operations: | ||||||||||||
Net investment income (loss) | 0.01 | 1 | 0.02 | 1 | (0.01 | )1 | ||||||
Net realized and unrealized gain (loss) on investments | 2.50 | 2.41 | (0.51 | ) | ||||||||
Total from investment operations | 2.51 | 2.43 | (0.52 | ) | ||||||||
Less distributions to shareholders from: | ||||||||||||
Net investment income | 0.00 | 0.00 | 0.00 | |||||||||
Net realized gain on investments | 0.00 | 0.00 | 0.00 | |||||||||
Total distributions | 0.00 | 0.00 | 0.00 | |||||||||
Net asset value, end of period | $ | 14.42 | $ | 11.91 | $ | 9.48 | ||||||
Total return | 21.07 | %2,3 | 25.63 | %2 | (5.20 | )%2 | ||||||
Ratios/Supplemental data: | ||||||||||||
Net assets (in millions), end of period | $ | 10.4 | $ | 4.0 | $ | 1.4 | ||||||
Ratio of operating expenses to average net assets | 1.88 | %4 | 2.84 | % | 8.65 | % | ||||||
Less: Reimbursement of expenses by Adviser | (0.78 | )%4 | (1.74 | )% | (7.55 | )% | ||||||
Ratio of net operating expenses to average net assets | 1.10 | %4 | 1.10 | % | 1.10 | % | ||||||
Ratio of net investment income (loss) to average net assets | 0.24 | %4 | 0.20 | % | (0.11 | )% | ||||||
Portfolio turnover rate | 9.41 | %3 | 25.60 | % | 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. | |
5 | Less than $0.01 per share. |
See Notes to Financial Statements. | 47 |
Baron Select Funds | June 30, 2014 |
FINANCIAL HIGHLIGHTS (Unaudited) |
BARON GLOBAL ADVANTAGE FUND
Selected data for a share outstanding throughout each period:
RETAIL SHARES | Six Months | Year Ended | ||||||||||
Ended June 30, | December 31, | |||||||||||
2014 | 2013 | 20121 | ||||||||||
Net asset value, beginning of period | $ | 13.51 | $ | 10.41 | $ | 10.00 | ||||||
Income (loss) from investment operations: | ||||||||||||
Net investment loss | (0.02 | )2 | (0.02 | )2 | (0.02 | )2 | ||||||
Net realized and unrealized gain on investments | 0.85 | 3.12 | 0.43 | |||||||||
Total from investment operations | 0.83 | 3.10 | 0.41 | |||||||||
Less distributions to shareholders from: | ||||||||||||
Net investment income | 0.00 | 0.00 | 0.00 | |||||||||
Net realized gain on investments | 0.00 | 0.00 | 0.00 | |||||||||
Total distributions | 0.00 | 0.00 | 0.00 | |||||||||
Net asset value, end of period | $ | 14.34 | $ | 13.51 | $ | 10.41 | ||||||
Total return | 6.14 | %4,5 | 29.78 | %4 | 4.10 | %4,5 | ||||||
Ratios/Supplemental data: | ||||||||||||
Net assets (in millions), end of period | $ | 3.2 | $ | 2.3 | $ | 1.5 | ||||||
Ratio of operating expenses to average net assets | 3.90 | %7 | 5.51 | % | 8.35 | %6,7 | ||||||
Less: Reimbursement of expenses by Adviser | (2.40 | )%7 | (4.01 | )% | (6.85 | )%6,7 | ||||||
Ratio of net operating expenses to average net assets | 1.50 | %7 | 1.50 | % | 1.50 | %6,7 | ||||||
Ratio of net investment loss to average net assets | (0.30 | )%7 | (0.20 | )% | (0.38 | )%6,7 | ||||||
Portfolio turnover rate | 101.88 | %5 | 32.78 | % | 24.64 | %5 | ||||||
INSTITUTIONAL SHARES | Six Months | Year Ended | ||||||||||
Ended June 30, | December 31, | |||||||||||
2014 | 2013 | 20121 | ||||||||||
Net asset value, beginning of period | $ | 13.56 | $ | 10.42 | $ | 10.00 | ||||||
Income (loss) from investment operations: | ||||||||||||
Net investment income (loss) | 0.02 | 2 | 0.00 | 2,3 | (0.02 | )2 | ||||||
Net realized and unrealized gain on investments | 0.83 | 3.14 | 0.44 | |||||||||
Total from investment operations | 0.85 | 3.14 | 0.42 | |||||||||
Less distributions to shareholders from: | ||||||||||||
Net investment income | 0.00 | 0.00 | 0.00 | |||||||||
Net realized gain on investments | 0.00 | 0.00 | 0.00 | |||||||||
Total distributions | 0.00 | 0.00 | 0.00 | |||||||||
Net asset value, end of period | $ | 14.41 | $ | 13.56 | $ | 10.42 | ||||||
Total return | 6.27 | %4,5 | 30.13 | %4 | 4.20 | %4,5 | ||||||
Ratios/Supplemental data: | ||||||||||||
Net assets (in millions), end of period | $ | 3.9 | $ | 3.3 | $ | 1.6 | ||||||
Ratio of operating expenses to average net assets | 2.88 | %7 | 4.91 | % | 7.33 | %6,7 | ||||||
Less: Reimbursement of expenses by Adviser | (1.63 | )%7 | (3.66 | )% | (6.08 | )%6,7 | ||||||
Ratio of net operating expenses to average net assets | 1.25 | %7 | 1.25 | % | 1.25 | %6,7 | ||||||
Ratio of net investment income (loss) to average net assets | 0.31 | %7 | 0.02 | % | (0.30 | )%6,7 | ||||||
Portfolio turnover rate | 101.88 | %5 | 32.78 | % | 24.64 | %5 | ||||||
1 | For the period April 30, 2012 (commencement of operations) to December 31, 2012. | |
2 | Based on average shares outstanding. | |
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 | Certain fixed expenses incurred by the Fund were not annualized for the period ended December 31, 2012. | |
7 | Annualized. |
48 | See Notes to Financial Statements. |
June 30, 2014 | 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, 2014 and held for the six months ended June 30, 2014.
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, 20141
Actual Total Return | Beginning Account Value January 1, 2014 | Ending Account Value June 30, 2014 | Annualized Expense Ratio | Expenses Paid During the Period3 | ||||||||||||||||||||
Baron Partners Fund — Retail Shares2 | 10.02 | % | $ | 1,000.00 | $ | 1,100.20 | 1.50 | %2 | $ | 7.81 | ||||||||||||||
Baron Partners Fund — Institutional Shares2 | 10.17 | % | $ | 1,000.00 | $ | 1,101.70 | 1.24 | %2 | $ | 6.46 | ||||||||||||||
Baron Focused Growth Fund — Retail Shares | 2.22 | % | $ | 1,000.00 | $ | 1,022.20 | 4 | 1.35 | %5 | $ | 6.77 | |||||||||||||
Baron Focused Growth Fund — Institutional Shares | 2.34 | % | $ | 1,000.00 | $ | 1,023.40 | 1.10 | % | $ | 5.52 | ||||||||||||||
Baron International Growth Fund — Retail Shares | 5.39 | % | $ | 1,000.00 | $ | 1,053.90 | 4 | 1.50 | %5 | $ | 7.64 | |||||||||||||
Baron International Growth Fund — Institutional Shares | 5.51 | % | $ | 1,000.00 | $ | 1,055.10 | 4 | 1.25 | %5 | $ | 6.37 | |||||||||||||
Baron Real Estate Fund — Retail Shares | 9.35 | % | $ | 1,000.00 | $ | 1,093.50 | 1.32 | % | $ | 6.85 | ||||||||||||||
Baron Real Estate Fund — Institutional Shares | 9.50 | % | $ | 1,000.00 | $ | 1,095.00 | 1.07 | % | $ | 5.56 | ||||||||||||||
Baron Emerging Markets Fund — Retail Shares | 8.41 | % | $ | 1,000.00 | $ | 1,084.10 | 1.49 | % | $ | 7.70 | ||||||||||||||
Baron Emerging Markets Fund — Institutional Shares | 8.48 | % | $ | 1,000.00 | $ | 1,084.80 | 1.25 | % | $ | 6.46 | ||||||||||||||
Baron Energy & Resources Fund — Retail Shares | 20.95 | % | $ | 1,000.00 | $ | 1,209.50 | 4 | 1.35 | %5 | $ | 7.40 | |||||||||||||
Baron Energy & Resources Fund — Institutional Shares | 21.07 | % | $ | 1,000.00 | $ | 1,210.70 | 4 | 1.10 | %5 | $ | 6.03 | |||||||||||||
Baron Global Advantage Fund — Retail Shares | 6.14 | % | $ | 1,000.00 | $ | 1,061.40 | 4 | 1.50 | %5 | $ | 7.67 | |||||||||||||
Baron Global Advantage Fund — Institutional Shares | 6.27 | % | $ | 1,000.00 | $ | 1,062.70 | 4 | 1.25 | %5 | $ | 6.39 |
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, 2014
Hypothetical Annualized Total Return | Beginning Account Value January 1, 2014 | Ending Account Value June 30, 2014 | Annualized Expense Ratio | Expenses Paid During the Period3 | ||||||||||||||||||||
Baron Partners Fund — Retail Shares2 | 5.00 | % | $ | 1,000.00 | $ | 1,017.36 | 1.50 | %2 | $ | 7.50 | ||||||||||||||
Baron Partners Fund — Institutional Shares2 | 5.00 | % | $ | 1,000.00 | $ | 1,018.65 | 1.24 | %2 | $ | 6.21 | ||||||||||||||
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 | 1.10 | % | $ | 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 | $ | 1,018.25 | 1.32 | % | $ | 6.61 | ||||||||||||||
Baron Real Estate Fund — Institutional Shares | 5.00 | % | $ | 1,000.00 | $ | 1,019.49 | 1.07 | % | $ | 5.36 | ||||||||||||||
Baron Emerging Markets Fund — Retail Shares | 5.00 | % | $ | 1,000.00 | $ | 1,017.41 | 1.49 | % | $ | 7.45 | ||||||||||||||
Baron Emerging Markets Fund — Institutional Shares | 5.00 | % | $ | 1,000.00 | $ | 1,018.60 | 1.25 | % | $ | 6.26 | ||||||||||||||
Baron Energy & Resources Fund — Retail Shares | 5.00 | % | $ | 1,000.00 | $ | 1,018.10 | 4 | 1.35 | %5 | $ | 6.76 | |||||||||||||
Baron Energy & Resources Fund — Institutional Shares | 5.00 | % | $ | 1,000.00 | $ | 1,019.34 | 4 | 1.10 | %5 | $ | 5.51 | |||||||||||||
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, 2014, includes 1.34% and 1.08% for net operating expenses and 0.16% and 0.16% 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 Select Funds | June 30, 2014 |
DISCLOSURE REGARDING THE APPROVAL OF THE INVESTMENT ADVISORY AGREEMENTS FOR EACH OF THE SERIES BY THE BOARD OF TRUSTEES (Unaudited) |
The Board of Trustees (the “Board”) of Baron Select Funds (the “Trust”) met on May 6, 2014 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 or prior to the Board meeting, their experience and knowledge gained from their service as Trustees and their experience generally and information they had considered in past years and remained, in their thinking, material to their consideration. In particular, the Board considered the following:
• Its confidence in the Adviser’s senior personnel and 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 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
• 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 considered for each Fund, among other information, the independent consultant’s comparisons of the expense ratio and contractual advisory fee with those of peer funds selected by the independent consultant, as noted below. The Board noted that long-term performance for the Funds was generally good compared to their peers. The Board noted that each Fund with performance data covering at least ten years was ranked in the first quintile for the ten-year period and in the first or second quintile for at least one of the shorter-term performance periods, except for Baron Focused Growth Fund (which ranked in the fourth or fifth quintiles in the one-, three- and five-year periods but was ranked first of 416 funds in the ten-year period). The Board further noted that Baron Real Estate Fund, Baron Emerging Markets Fund, Baron Energy and Resources Fund and Baron Global Advantage Fund all ranked in the first or second quintile for all applicable periods. For the Funds that underperformed relative to their peers during certain periods, representatives of the Adviser described the reasons for the lower relative performance and, as applicable, the steps the Adviser had taken to improve performance. For Baron International Growth Fund, whose performance ranked in the fourth or fifth quintile compared to its peers for all applicable periods, the Board also noted the Fund’s small asset size. The Board also considered the independent consultant’s risk-adjusted performance comparisons with comparable funds for Funds that have been in existence for more than three years and noted that Baron International Growth Fund’s low returns were also accompanied by relatively high risk. The Board also considered comparisons of each Fund’s annualized total return over one-, three-, five- and ten-year periods, where applicable, against expense group and performance universe averages and relevant securities market indices. 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.
3. COSTS OF SERVICES PROVIDED AND PROFITS TO BE REALIZED BY THE ADVISER
The Board considered benefits that accrue to the Adviser and its affiliates from their relationship with the Funds. Representatives of the Adviser said the Board should consider the advisory fee in the context of other fees paid to the Adviser’s affiliates, such as the distribution fee paid pursuant to the 12b-1 plan. 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 observed that, for most of the Funds, while the management fee was relatively high, the other expenses paid by the Funds generally were relatively low, when compared to their peers. They observed that other expenses were relatively high compared to their peers for Baron International Growth Fund, Baron Emerging Markets Fund, Baron Energy and Resources Fund and Baron Global Advantage Funds, but noted that these were newer or smaller funds and that total net expenses did not rank below the third quintile. They concluded that the Funds’ higher management fee was justified given the Adviser’s highly research intensive process and highly disciplined adherence to its process.
The Board considered comparisons of the advisory fees charged and services provided by the Adviser and its investment adviser affiliate to 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.
50
June 30, 2014 | Baron Select Funds |
DISCLOSURE REGARDING THE APPROVAL OF THE INVESTMENT ADVISORY AGREEMENTS FOR EACH OF THE SERIES BY THE BOARD OF TRUSTEES (Unaudited) (Continued) |
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, then, a recovery and appreciating that the economies of scale analysis is based generally on predictable increasing assets. The Board considered that the small- and mid-cap investment strategy require more attention by the Adviser than strategies that involve 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 it deemed relevant, the Board, including a majority of the Independent Trustees, approved the continuance of each Fund’s investment advisory agreement.
51
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1.800.99.BARON
212-583-2000
www.BaronFunds.com
JUNE 14
Item 2. | Code of Ethics. |
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. | |
SIGNATURES
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: | /s/ Ronald Baron | |
Ronald Baron | ||
Chief Executive Officer | ||
Date: August 29, 2014 |
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: | /s/ Ronald Baron | |
Ronald Baron | ||
Chief Executive Officer | ||
Date: August 29, 2014 | ||
By: | /s/ Peggy Wong | |
Peggy Wong | ||
Treasurer and Chief Financial Officer | ||
Date: August 29, 2014 | ||