Professional Documents
Culture Documents
Asset
December
31,Fund
2010
Baron Growth Fund
Baron Small Cap Fund
Baron Opportunity Fund
Baron Partners Fund
Baron Fifth Avenue Growth Fund
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
Baron Discovery Fund
Baron Funds
Quarterly Report
RONALD BARON
CEO AND CHIEF INVESTMENT OFFICER
TABLE OF CONTENTS
Letter from Ron
Letter from Linda
Baron Funds Performance
Baron Asset Fund
Baron Growth Fund
Baron Small Cap Fund
Baron Opportunity Fund
Baron Partners Fund
Baron Fifth Avenue Growth Fund
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
Baron Discovery Fund
Portfolio Holdings
1
4
9
14
18
22
26
31
35
39
42
46
52
56
61
65
69
Introduction
Ronald Baron
CEO and Chief Investment Officer
April 30, 2015
P.S. If you are a shareholder and would like a
Built to Last, Baron Funds 2014, Under Armour
T-shirt autographed by Paul McCartney and
Carrie Underwood, our surprise performers last
year, please let us know, including your size, and
we will send you one with no charge.
Introduction
Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary
prospectuses contain this and other information about the Funds. You may obtain them from the Funds distributor, Baron Capital, Inc., by calling
1-800-99BARON or visiting www.BaronFunds.com. Please read them carefully before investing.
Investing in the stock market is always risky.
Portfolio holdings may change over time.
Portfolio Holdings
As a Percentage of Net Assets
As of March 31, 2015
Baron
Asset Fund
Baron
Growth Fund
3.6
3.8
2.6
Baron
Opportunity
Fund
2.3
1.0
Baron
Partners Fund
6.7*
0.1*
4.1*
Baron
Focused
Growth Fund
7.7
7.0
* % of Long Positions
Baron Funds
Net Realized and Unrealized Gain ($ in millions)
As of March 31, 2015
Baron
Asset Fund
$38.2
Baron
Growth Fund
$153.7
Baron
Partners Fund
$69.9
Baron
Focused
Growth Fund
$5.6
Baron
Real Estate
Fund
$**
The first quarter of 2015 is in the books, the snow finally melted, and baseball
season has begun. Happily, and to no ones surprise, spring has arrived.
But less predictable and more surprising things have occurred too. The New
York Knicks, the most valuable NBA sports franchise, finished its season
with a .207 win percentage, the second worst record in the NBA. Tim Tebow
will get a chance to wear an NFL uniform again. Seventh seed Michigan
State made it to the NCAA final four. Kentucky did not make it to the final
round of the NCAA championship.
Also surprising to many, on March 9, the bull market celebrated its sixth
anniversary. During this period, the stock market more than tripled,
delivering outstanding annualized returns of 23.2%, more than double its
long-term historical average.
As the stock market has grown, so have the market capitalizations of many
of the companies that comprise the market. Six years ago, Apples market
capitalization was about $94 billion. At its current market cap of about
$725 billion, Apples market cap is higher than the gross domestic product
of all but 19 of the worlds countries, coming in just behind Saudi Arabia
(GDP of $745 billion) and ahead of Switzerland ($650 billion), according to
data compiled by the World Bank.
Market capitalization is typically used as a measure of a companys size.
While neither perfect nor exhaustive, it is widely used by index providers,
data providers, investors and asset managers who make asset allocation
decisions. (Other ways include revenues, number of employees, book value,
for example.) Small cap companies tend to be, on average, a more volatile
investment than established large businesses. The market capitalization of a
company is a quick, short-hand way of defining the size of a company and
its risk profile. Small companies are typically in the earlier stages of their
growth, mid-cap companies have matured beyond the start-up phase, and
larger companies are more established.
LINDA MARTINSON
CHAIRMAN, PRESIDENT AND COO
The definitions of small, mid, and large cap companies have naturally
evolved over time. For example, in 1950, a company that had a market cap
of $1 billion was considered to be a large cap company. Today a $1 billion
company is practically a micro-cap.
Virtually all of the major index providers update their market cap
definitions periodically to reflect this evolution. For example, since the
1980s, the average largest market cap in the Russell 2000 Growth Index at
reconstitution has typically more than doubled every 10 years.
U.S. Stock Market Indices - Performance Since The Bottom Of The Financial Crisis
Cumulative Total Returns for the Period 3/9/2009 - 3/31/2015
327%
259%
264%
Russell
3000
Russell
3000
Growth
All Cap
Source: FactSet.
248%
256%
260%
S&P
500
Russell
1000
Russell
1000
Growth
Large Cap
Russell
Mid
Cap
313%
Russell
Mid
Cap
Growth
Mid Cap
319%
296%
Russell
2000
Russell
2000
Growth
Small Cap
$4.51
$29.87
$13.25
$1.92
$0.26
$0.76
$2.63
$4.85
Like index providers, asset managers adjust their market cap definitions to
maintain style consistency.
In February, Baron Funds established new market cap limits for some of our
mutual funds. In the past, we have adjusted our market cap limits when our
market cap definitions became materially mis-aligned with those of the
markets, which we believed unfairly handicapped our portfolio managers. Its
like asking Alex Rodriguez to hit with a 12 bat instead of a regulation size
bat. The change made this February was made for the same reason.
Historically, our market cap-based Funds have used fixed dollar amount
limits to determine the stocks in which they could invest. Under the new
methodology, Baron is floating the market cap limits using the Russell
indexes at reconstitution to define the investment universe for these Funds.
We think this change will benefit Baron Growth Fund, Baron Small Cap
Fund, Baron Discovery Fund, Baron Focused Growth Fund, Baron Asset Fund,
and Baron Fifth Avenue Growth Fund.
In addition, Baron Opportunity Fund, which previously invested in
companies with market caps between $1.5 and $15 billion, is now
permitted to invest in high growth businesses of any size.
The table below provides a summary of the changes.
Fund Ticker
(Institutional)
BDFIX
Up to $1.5 Bn at purchase
BGRIX
Up to $2.5 Bn at purchase
BSFIX
SMid Cap
Baron Focused
Growth Fund
BFGIX
Up to $10 Bn at purchase
Mid Cap
BARIX
Large Cap
BFTIX
All Cap
BIOIX
Small Cap
Effective Limit
as of 3/31/2015
up to $1.77 Bn
up to $4.51 Bn
up to $4.51 Bn
up to $29.87 Bn
between
$2.5 Bn and
$29.87 Bn
above $10 Bn
N/A
20,000
15,000
11,420
10,000
5,000
Mar-15
Mar-13
Mar-11
Mar-09
Mar-07
Mar-05
Mar-03
Mar-01
Mar-99
Mar-97
Mar-95
Mar-93
Mar-91
Mar-89
Mar-87
Mar-85
Mar-83
4,510
3,380
Mar-81
25,000
Source: Russell Indices and The Bank of New York Mellon Corporation
60,000
50,000
40,000
39,062
30,000
29,872
25,490
20,000
Mar-15
Mar-13
Mar-11
Mar-09
Mar-07
Mar-05
Mar-03
Mar-01
Mar-99
Mar-97
Mar-95
Mar-93
10,000
Baron Asset Funds last market cap limit revision, from $10.0 billion to
$12.0 billion, was in January of 2010. At the time, the largest market cap in
the Russell Midcap Growth Index at reconstitution was $13.0 billion. Since
then, the largest market cap in the Russell Midcap Growth Index has more
than doubled to $29.87 billion as of the latest reconstitution in June 2014.
70,000
Source: Russell Indices and The Bank of New York Mellon Corporation
Mar-91
In May of 2013, the Russell 3000 Indexs small cap breakpoint, the lowest
of the small cap metrics used in the industry, surpassed, for the first time,
the $2.5 billion level that we used as our small cap limit. The chart below
shows the evolution of the definition of small cap over the past three
decades and the significant variation in the size of small companies over
time. Today, the Russell small cap breakpoint stands at $3.4 billion, and the
largest market cap in the index at its last reconstitution in June of 2014 was
$4.51 billion. As of March 31, 2015, it was $11.42 billion. Other small cap
metrics, such as the small cap Morningstar and Lipper breakpoints, were
$3.8 billion and $6.0 billion, respectively, as of March 31, 2015.
Mar-89
Baron's new market cap limits and guidelines are based on Russell
Investment thresholds. Russell Investments is the most widely used market
cap based index provider in the U.S. Russells total market cap indices are
constructed based on the descending market caps of each of the eligible
stocks in the U.S. equity market, which approximate 4,000 securities. These
indices are reconstituted once a year in June, establishing new thresholds
for determining market capitalization size segmentation. While the
constituents in the market cap based indices change only once a year,
Russell recalculates and publishes monthly the different market cap
breakpoints (small, smid, midcap, large, etc.), applying the reconstitution
methodology on the Russell 3000 Index.
The case for our mid cap portfolios is not much different. The chart below
shows meaningful variations in the mid cap market cap metrics.
Mar-87
Raising the market cap limit to the largest market cap in the Russell 2000
Growth Index at the last reconstitution would give our small cap portfolio
managers access to the full small cap investable universe, adding 417
potential investment ideas as of March 31, 2015. While we have increased
the investable universe considerably, we have at the same time imposed
internal guidelines based on the monthly Russell 3000 small cap breakpoint
to prevent style drift.
The key objective of these changes is to allow our market cap-based Funds
to be able to take advantage of their respective full investment universes in
their ever-changing market segments. This can now be accomplished
without the necessity of prospectus amendments.
For Baron Opportunity Fund, the change gives the Fund more flexibility to
execute its investment strategy of investing in high-growth businesses
benefiting from innovation through pioneering, transformative or
technologically advanced products and services. Baron believes clients and
shareholders will benefit by investing in innovative companies across the
market capitalization spectrum.
These changes are not an attempt to make our portfolios look closer to
their respective peers or benchmarks. Our consistently high active share
confirms that we are significantly different from the relevant market
indices, and we dont expect this to change.
Small Cap
Fund Name
Primary Benchmark
Active Share
as of 3/31/2015
96.95%
93.75%
91.25%
SMid Cap
98.25%
Mid Cap
89.06%
Large Cap
81.60%
93.14%
96.23%
95.37%
All Cap
International
Specialty
94.91%
88.59%
87.33%
74.14%
Source: FactSet
* excluding leverage
Baron will continue to differentiate itself from the pack with its long-term
investment approach, focused on companies that we believe have
open-ended growth opportunities, significant competitive advantages,
exceptional management, and attractive valuations. Baron remains
committed to our seasoned, long-term investment process. We are focused
on building portfolios of what we believe are the most exciting growth
businesses in the appropriate investable universe.
Sincerely,
Linda S. Martinson
Chairman, President and COO
April 30, 2015
Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary
prospectuses contain this and other information about the Funds. You may obtain them from the Funds distributor, Baron Capital, Inc., by calling
1-800-99BARON or visiting www.BaronFunds.com. Please read them carefully before investing.
Portfolio holdings as a percentage of net assets as of March 31, 2015 for securities mentioned are as follows: Apple, Inc. Baron Fifth Avenue Growth Fund
(5.0%).
The index performance shown is not fund performance; one cannot invest directly into an index.
Definitions (provided by BAMCO, Inc.): The S&P 500 Index measures the performance of 500 widely held large-cap U.S. companies. The Russell 1000
Index measures the performance of large-sized U.S. companies. The Russell 1000 Growth Index measures the performance of large-sized U.S. companies
that are classified as growth. The Russell 3000 Index measures the performance of the broad segment of the U.S. equity universe comprised of the largest
3000 U.S. companies representing approximately 98% of the investable U.S. equity market. The Russell 3000 Growth Index measures the performance
of the broad growth segment of the U.S. equity universe comprised of the largest 3000 U.S. companies representing approximately 98% of the investable
U.S. equity market. The Russell Midcap Index measures the performance of medium-sized U.S. companies. The Russell Midcap Growth Index measures
the performance of medium-sized U.S. companies that are classified as growth. The Russell 2000 Index measures the performance of small-sized U.S.
companies. The indexes are with dividends, which positively impact the performance results. Active Share is a term used to describe the share of a portfolios
holdings that differ from that portfolios benchmark index. It is calculated by comparing the weight of each holding in the Fund to that holdings weight in
the benchmark. Positions with either a positive or negative weighting versus the benchmark have Active Share. An Active Share of 100% implies zero overlap
with the benchmark. Active Share was introduced in 2006 in a study by Yale academics, M. Cremers and A. Petajisto, as a measure of active portfolio
management.
$211,323
$149,570
$128,334
9/90
9/92
9/94
9/98
9/96
9/00
9/02
9/04
9/06
9/08
9/10
9/12
9/14 3/15
Baron Asset Funds annualized returns as of March 31, 2015: 1-year, 12.57%; 3-year, 16.63%; 5-year, 14.98%; 10-year, 9.06%; and Since Inception, 11.60%.
$136,591
$66,098
$48,136
9/96
9/98
9/00
9/02
9/04
9/06
9/08
9/10
9/12
9/14 3/15
Baron Growth Funds annualized returns as of March 31, 2015: 1-year, 9.07%; 3-year, 17.31%; 5-year, 15.69%; 10-year, 8.76%; and Since Inception, 13.78%.
$30,000
$20,000
$10,000
$0
9/97
9/99
9/01
9/03
9/05
9/07
9/09
9/11
9/13
3/15
3,4
Baron Small Cap Funds annualized returns as of March 31, 2015: 1-year, 8.49%; 3-year, 15.48%; 5-year, 15.02%; 10-year, 8.73%; and Since Inception, 10.29%.
1
2
3
4
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 Asset Fund are with dividends, which positively impact the performance results.
The indexes are unmanaged. The Russell 2000 Growth Index measures the performance of small-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 Growth Fund are with dividends, which positively impact the performance results.
The indexes are unmanaged. The Russell 2000 Growth Index measures the performance of small-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 Small Cap Fund are with dividends, which positively impact the performance results.
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
redemptions of Fund shares.
$21,775
$20,203
$18,073
$14,556
9/06
9/08
9/12
9/14 3/15
Baron Opportunity Fund1,4
9/10
Baron Opportunity Funds annualized returns as of March 31, 2015: 1-year, 3.21%; 3-year, 11.03%; 5-year, 12.46%; 10-year, 10.35%; and Since Inception, 5.29%.
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
$180,000
$170,000
$160,000
$150,000
$140,000
$130,000
$120,000
$110,000
$100,000
$90,000
$80,000
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0
1/92
$176,144
$88,161
$80,844
12/93
12/95
12/97
12/99
12/01
12/03
12/05
12/07
12/09
12/11
12/13
3/15
2,4,5
Baron Partners Funds annualized returns as of March 31, 2015: 1-year, 7.32%; 3-year, 19.50%; 5-year, 16.98%; 10-year, 9.89%; and Since Inception, 13.18%.
Comparison of the change in value of $10,000 investment in Baron Fifth Avenue Growth Fund (Retail Shares)
in relation to the Russell 1000 Growth Index and the S&P 500 Index
$30,000
$25,036
$23,424
$22,185
$25,000
$20,000
$15,000
$10,000
$5,000
$0
4/04 9/04
9/05
9/06
9/07
9/08
9/09
9/10
9/11
9/12
9/13
9/14
3/15
Baron Fifth Avenue Growth Funds annualized returns as of March 31, 2015: 1-year, 13.14%; 3-year, 14.81%; 5-year, 13.89%; 10-year, 7.82% and Since Inception, 7.57%.
1
2
3
4
5
10
The indexes are unmanaged. The Russell 3000 Growth Index measures the performance of those companies classified as growth among the largest 3,000 U.S. companies, 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 Baron Opportunity
Fund no longer considers the Russell Midcap Growth Index an appropriate benchmark index. The Russell Midcap Growth Index is included in the table above for comparison purposes for the
period before the Fund converted to an all-cap fund. Prior to February 20, 2015, the Fund invested in companies with market capitalizations between $1 billion and $15 billion at the time of
purchase. Since then, the Fund may invest in companies of all market capitalizations. The Adviser believes that the Russell 3000 Growth Index is more representative of the Funds current investable
universe. The indexes and the Fund are with dividends, which positively impact the performance results.
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.
The indexes are unmanaged. The Russell 1000 Growth Index measures the performance of large-sized U.S. companies that are classified as growth and the S&P 500 Index of 500 widely held
large cap U.S. companies. On January 1, 2015, the Fund changed its primary benchmark from the S&P 500 Index to the Russell 1000 Growth Index. The indexes and Baron Fifth Avenue Growth
Fund are with dividends, which positively impact the performance results.
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.
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 Funds
shareholders will not be charged a performance fee. The predecessor partnerships performance is only for periods before the Funds 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 registered investment companies, which, if it were, might have adversely affected its performance.
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
$80,000
$78,213
$70,000
$60,000
$50,000
$43,805
$41,824
$40,000
$30,000
$20,000
$10,000
$0
5/96
12/97
12/99
12/01
12/03
12/05
12/07
12/09
12/11
12/13
3/15
1,4,5
Baron Focused Growth Funds annualized returns as of March 31, 2015: 1-year, 6.27%; 3-year, 12.17%; 5-year, 12.52%; 10-year, 9.30%; and Since Inception, 11.54%.
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
$25,000
$21,635
$20,000
$19,189
$18,180
$15,000
$10,000
$5,000
$0
12/08
12/09
12/10
12/13
12/12
12/11
12/14 3/15
2,5
Baron International Growth Funds annualized returns as of March 31, 2015: 1-year, (1.07)%; 3-year, 7.48%; 5-year, 7.41%; and Since Inception, 13.14%.
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
$30,000
$28,147
$25,000
$22,561
$20,709
$20,000
$15,000
$10,000
$5,000
$0
12/09
6/10
12/10
6/11
12/11
6/12
12/12
6/13
12/13
6/14
12/14 3/15
Baron Real Estate Funds annualized returns as of March 31, 2015: 1-year, 16.19%; 3-year, 24.10%; 5-year, 21.34%; and Since Inception, 21.79%.
1
2
The indexes are unmanaged. The Russell 2500 Growth Index measures the performance of small to 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 Focused Growth Fund are with dividends, which positively impact the performance results.
The MSCI ACWI ex USA indexes cited are unmanaged, free float-adjusted market capitalization weighted indexes reflected in US dollars. The MSCI ACWI ex USA IMI Growth Index Net USD
measures the 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.
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 representations 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 performance results.
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 Funds shareholders will not be charged a performance fee. The predecessor partnerships performance is only for the periods before the Funds 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 registered investment companies, which, if it were, might have adversely affected its performance.
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.
11
$10,000
$5,000
$0
12/10
6/11
12/11
6/12
12/12
6/13
12/13
6/14
12/14 3/15
Baron Emerging Markets Funds annualized returns as of March 31, 2015: 1-year, 1.28%; 3-year, 8.02%; and Since Inception, 4.46%.
$10,000
$5,000
$0
12/11
3/12
6/12
9/12
12/12
3/13
6/13
9/13
12/13
3/14
6/14
9/14
12/14
3/15
2,3
Baron Energy and Resources Funds annualized returns as of March 31, 2015: 1-year, (16.67)%; 3-year, 1.55%; and Since Inception, 1.55%.
12
The MSCI EM (Emerging Markets) indexes cited are unmanaged, free float-adjusted market capitalization weighted indexes reflected in US dollars. The MSCI EM (Emerging Markets) IMI Growth
Index Net USD and the MSCI EM (Emerging Markets) IMI Index Net USD are designed to measure equity market performance of large, mid and small cap securities in the emerging markets. The
MSCI EM (Emerging Markets) IMI Growth Index Net USD screens for growth-style securities. The indexes and Baron Emerging Markets Fund include reinvestment of dividends, net of foreign
withholding taxes, which positively impact the performance results.
The S&P indexes cited 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.
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.
$15,000
$14,561
$14,029
$13,741
$10,000
$5,000
$0
4/12
6/12
9/12
12/12
3/13
6/13
9/13
12/13
3/14
6/14
9/14
12/14
3/15
1,3
Baron Global Advantage Funds annualized returns as of March 31, 2015: 1-year, 6.67%; and Since Inception, 13.75%.
$15,000
$14,130
$12,683
$12,181
$10,000
$5,000
$0
9/13
12/13
3/14
6/14
9/14
12/14
Baron Discovery Fund
3/15
2,3
Baron Discovery Funds annualized returns as of March 31, 2015: 1-year, 11.17%; and Since Inception, 25.92%.
2
3
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.
The indexes are unmanaged. The Russell 2000 Growth Index measures the performance of small-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 Discovery Fund are with dividends, which positively impact the performance results.
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.
13
ANDREW PECK
PORTFOLIO MANAGER
Table II.
Top contributors to performance for the quarter ended March 31, 2015
Year
Acquired
Three Months4
One Year
Three Years
Five Years
Ten Years
Since Inception (June 12, 1987)
3.44%
12.57%
16.63%
14.98%
9.06%
11.60%
Russell
Midcap
Growth
Index1
5.38%
15.56%
17.41%
16.43%
10.19%
10.24%3
S&P 500
Index1
0.95%
12.73%
16.11%
14.47%
8.01%
9.61%
1997
2009
2006
2005
2014
Percent
Impact
0.45%
0.36
0.36
0.31
0.28
Shares of Vail Resorts, Inc., the largest operator of U.S. ski resorts, increased
after reporting strong earnings results this past ski season. These results
were particularly impressive, given the very poor snow accumulation at the
Lake Tahoe properties that comprise 20% of its skier visitation. Vail also
benefitted from its recent acquisition of the Park City, Utah ski resort, which
it plans to interconnect with the Canyons resort that it also owns. The deal
further diversifies the companys revenue streams into the attractive Utah
ski market, while also leveraging its overhead costs. We believe this deal will
generate meaningful accretion for the company over time. Lastly, the
company increased its dividend by 50% during the quarter.
Shares of Verisk Analytics, Inc. rose after the data and analytics company
reported stellar quarterly financial results. Overall organic revenue growth
Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares as of September 30, 2014 was 1.31%.
The performance data quoted represents past performance. Past performance is no guarantee of future results. The investment return and principal value of an
investment will fluctuate; an investors shares, when redeemed, may be worth more or less than their original cost. The Funds transfer agency expenses may be
reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower. Current performance may be lower or higher
than the performance data quoted. For performance information current to the most recent month end, visit www.BaronFunds.com or call 1-800-99BARON.
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 the Fund are with dividends, which positively impact the performance results. Russell Investment Group
is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell is a trademark of Russell Investment Group.
The performance data in the table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
For the period June 30,1987 to March 31, 2015.
Not annualized.
3
4
14
improved, with its core Insurance businesses growing around 12% and its
newer Financial Services and Health Care business units growing 25% and
22%, respectively. Stock performance was also driven by the companys
accelerating share repurchase program. Finally, Verisk announced the
$2.8 billion acquisition of Wood Mackenzie, a leading provider of data and
analytics to the energy industry, which we expect to be accretive to
earnings.
Shares of financial market data vendor FactSet Research Systems, Inc.
gained after announcing accelerating organic revenue growth, an enhanced
number of new subscription sales, and meaningful earnings growth. We
believe that FactSet is continuing to gain share across all its markets, as it
offers a compelling value relative to Bloomberg and other incumbent
market data providers. In addition, we anticipate continued purchasing
strength among the companys buy side customer base and improving
conditions on Wall Streets sell side, which should provide an added
tailwind to growth.
The shares of CBRE Group, Inc., a leading commercial real estate services
company, increased during the quarter. Amidst a healthy global backdrop
for real estate, the company reported good results across nearly all its
geographies and business lines, including leasing, investment sales, property
management outsourcing, and real estate investment management. CBRE
also announced the $1.5 billion acquisition of Johnson Controls Global
Workplace Solutions unit, which provides commercial real estate
management to major owners and occupiers globally. We expect this deal
to be meaningfully accretive to CBREs earnings, while also increasing the
companys exposure to this units highly-recurring, non-cyclical revenue
stream.
Professional services company Towers Watson & Co. reported robust
results, including 10% growth in its core Benefits segment and 40% growth
in its segment focused on administering private health care exchanges.
During the next several years, we believe that the opportunity in private
corporate exchanges has the potential to double the companys business,
while also meaningfully enhancing its margins. Towers has a dominant
market share in health care exchanges for corporate retirees, and it is also
a leader in exchanges for active employees, as highlighted by its recent
high-profile business wins from Starwood Hotels & Resorts and Time, Inc.
Table III.
Top detractors from performance for the quarter ended March 31, 2015
Year
Acquired
Percent
Impact
1997
2005
2006
2001
2012
0.45%
0.25
0.25
0.21
0.16
Shares of Ralph Lauren Corp. came under pressure after the company
reported disappointing holiday results and offered a muted outlook for
2015. Ralph Laurens soft earnings were the result of several challenges
impacting their business and global consumer brands more broadly that we
15
Portfolio Structure
At March 31, 2015, Baron Asset Fund held 64 positions. The Funds 10
largest holdings represented 34.6% of assets, and the 20 largest
represented 54.8% of assets. The Funds largest weighting was the
Information Technology sector at 21.5% of assets. This sector includes
software companies, IT consulting firms, and credit card processors. The
Fund held 20.9% of its assets in the Health Care sector, which includes
investments in life sciences companies, health care equipment and supplies
companies, and health care technology companies. The Fund held 19.2% of
its assets in the Industrials sector, which includes investments in
manufacturers, distributors, and information services firms. The Fund also
had significant weightings in Consumer Discretionary at 16.0% of assets
and Financials at 11.5% of assets.
Table IV.
Top 10 holdings as of March 31, 2015
Market Quarter
Cap
End
When
Market
Percent
Year
Acquired
Cap
Amount of Net
Acquired (billions) (billions) (millions) Assets
Gartner, Inc.
IDEXX Laboratories, Inc.
Vail Resorts, Inc.
Illumina, Inc.
Verisk Analytics, Inc.
FleetCor Technologies, Inc.
Mettler-Toledo
International, Inc.
SBA Communications Corp.
FactSet Research
Systems, Inc.
Arch Capital Group Ltd.
2007
2006
1997
2012
2009
2012
$2.9
2.5
0.2
5.3
4.0
2.9
$ 7.3
7.2
3.8
26.7
11.3
13.8
$134.2
125.9
103.4
100.2
96.4
90.6
4.7%
4.4
3.6
3.5
3.4
3.2
2008
2007
2.4
3.8
9.2
15.2
90.4
86.1
3.2
3.0
2006
2003
2.5
0.9
6.6
7.7
81.2
80.1
2.8
2.8
Recent Activity
During the past quarter, the Fund established four new positions and added
to six others. The Fund also sold three positions and reduced its holdings of
18 others.
Table V.
help insurers identify gaps in care, quality, data integrity and financial
performance. Clients can act on these analytical insights by leveraging
Inovalons intervention platforms, which help drive improvement in clinical
and quality outcomes, utilization, and financial performance across the
health care landscape. Inovalons platforms are also used for regulatory,
compliance, and internal reporting.
Inovalons growth is being driven by powerful secular drivers. Most notable
are the urgent national need to reduce inexorable health care cost inflation,
and the evolution of our health care system to value-based delivery from
consumption-based delivery. We believe that Inovalon already plays an
important role in helping payors reduce costs, improve utilization, and
transition to a value based environment, and we expect that the companys
data and analytic platforms will ultimately play a broader role across the
health care ecosystem over time. Additionally, we believe that enhanced
health care reporting requirements, growth in the number and complexity
of diseases, diagnostics, and treatments, and growth in digital health care
data will require the broader health care ecosystem to depend more heavily
on Inovalons data analytics and workflow tools.
Inovalon serves a vast addressable market. According to a McKinsey study,
using data analytics could drive improvements in health care cost,
efficiency, and fraud reduction worth $300-$450 billion annually. In general,
we believe that analytics vendors can capture around 1/8-1/10 of value
delivered, which implies a total market opportunity of $33-$50 billion
annually. Management estimates that its core payor market represents a
$14 billion annual revenue opportunity, implying that the company is less
than 3% penetrated. Over time, we expect the company to expand its focus
to serve providers, global pharma and life science companies, and
consumers, which have the potential to increase the opportunity by 3-4
times.
The company has an enviable financial model. Inovalon boasts 98%
retention rates and enjoys high levels of recurring revenue, most of which
is generated via multi-year contracts. The company generates EBITDA
margins that are approaching 40%, and embedded operating leverage
coupled with a positive mix shift towards analytics from manual processes
should drive margins higher over time. Finally, the company offers robust
conversion of its earnings to free cash flow. When coupled with a strong
balance sheet, we see ample liquidity for the company to re-invest heavily
in its own organic growth profile while making strategic acquisitions to help
expand its range of services.
Top net purchases for the quarter ended March 31, 2015
Quarter End Amount
Market Cap Purchased
(billions)
(millions)
$4.5
7.2
9.2
5.2
5.3
$33.6
13.4
12.0
10.4
10.0
The Fund initiated a position in Inovalon Holdings, Inc., a health care data
and analytics company that came public during the quarter. The foundation
of the company is its proprietary data set called Medical Outcomes
Research for Effectiveness and Economics (MORE2), which contains records
of 9.2 billion medical events collected from 120 million unique patients.
This data is used to power Inovalons suite of advanced analytics, which
16
Table VI.
Top net sales for the quarter ended March 31, 2015
Amount Sold
(millions)
$24.0
15.3
13.6
12.9
12.4
Outlook
We believe that mid-sized growth stocks continue to represent an
attractive investment opportunity. The U.S. economy remains among the
worlds healthiest, its equity market multiples remain within the range of
their long-term historic averages, and interest rates continue to be quite
low by historic standards. The recent drop in energy prices should generate
ongoing corollary benefits for many domestic companies. We believe that
our portfolio of well-managed, competitively advantaged, fast growing
companies will continue to perform well in this environment.
Andrew Peck
Portfolio Manager
April 30, 2015
Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary
prospectus contains this and other information about the Funds. You may obtain them from its distributor, Baron Capital, Inc., by calling 1-800-99BARON or
visiting www.BaronFunds.com. Please read them carefully before investing.
The Adviser believes that there is more potential for capital appreciation in mid-sized companies, but there also may be more risk. Specific risks associated
with investing in mid-sized companies include that the securities may be thinly traded and they may be more difficult to sell during market downturns. Prior
to February 15, 2007, the Funds strategy was to invest primarily in small and mid-sized growth companies. Since then, the Funds investment strategy has
shifted to mid-sized companies. The Fund may not achieve its objectives. Portfolio holdings are subject to change. Current and future portfolio holdings are
subject to risk.
The discussions of the companies herein are not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of the
respective portfolio managers only through the end of the period stated in this report. The portfolio managers views are not intended as recommendations or investment advice to any person reading
this report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.
This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Asset Fund by anyone in any jurisdiction where it would be unlawful under the laws of that
jurisdiction to make such offer or solicitation.
17
Three Months3
One Year
Three Years
Five Years
Ten Years
Fifteen Years
Since Inception (December 31, 1994)
Baron
Growth
Fund1,2
Russell
2000
Growth
Index1
S&P 500
Index1
4.68%
9.07%
17.31%
15.69%
8.76%
9.00%
13.78%
6.63%
12.06%
17.74%
16.58%
10.02%
4.17%
8.07%
0.95%
12.73%
16.11%
14.47%
8.01%
4.15%
9.77%
Much like the fourth quarter of 2014, U.S. stock markets experienced broad
swings during the first quarter of 2015. Underpinning this volatility were
further declines in oil prices, fears of interest rate hikes, and the negative
impact of a rapidly strengthening dollar on U.S. trade.
Regardless, U.S. companies domestic profits reached a record high during
the period. We believe that is an important reason fast growing small and
mid-cap companies, which are less dependent on exports, outperformed.
The Funds investments are focused on such companies.
The Fund does not change its investment approach because certain types of
stocks are in or out of favor in the short term. We take a long-term view,
investing in companies with significant growth opportunities, durable
competitive advantages, exceptional managements, and strong balance
sheets, at prices we believe are attractive. We continue to believe the growth
businesses in which we have invested could double in size within five years.
These investments consist primarily of companies with higher operating
profit margins, more favorable returns on capital, and significantly lower
RONALD BARON
CEO AND PORTFOLIO MANAGER
Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares as of September 30, 2014 was 1.29%.
The performance data quoted represents past performance. Past performance is no guarantee of future results. The investment return and principal value of an
investment will fluctuate; an investors shares, when redeemed, may be worth more or less than their original cost. The Funds transfer agency expenses may be
reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower. Current performance
may be lower or higher than the performance data quoted. For performance information current to the most recent month end, visit
www.BaronFunds.com or call 1-800-99BARON.
1
2
3
The indexes are unmanaged. The Russell 2000 Growth Index measures the performance of small-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 the Fund are with dividends, which positively impact the performance results. Russell Investment Group is the
source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell is a trademark of Russell Investment Group.
The performance data in the table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
Not annualized.
18
similar, we expect the Fund to outperform over the long term. In the past,
when the Fund has underperformed, it has significantly outperformed in
following periods and for the long term. See Table III. Any Time at All. We can
obviously not assure you this will again be the case.
Table II.
Tastes greatless filling. Miller Lite. 1974. Better alpha (better return adjusted
for risk)less beta (less risk defined as volatility). Baron Growth Fund. 2015.
Performance Based
Characteristics as of
March 31, 2015
Time Interval
3 Years
5 Years
10 Years
Since
Inception
Alpha (%)
Beta
Upside Capture (%)
Downside Capture (%)
4.77
0.69
79.65
59.00
2.81
0.76
80.11
68.88
0.55
0.80
79.62
77.14
7.71
0.68
82.47
60.55
Standard Deviation
of YoY Earnings Growth
Quality Characteristics
95.6
172.5
76.9
Table III.
Table V.
Baron Growth
Fund
Russell 2000
Growth Index
S&P 500 Index
29.90%
2.46%
19.00%
13.78%
18.99%
28.56%
4.71%
3.60%
19.94%
16.65%
8.07%
9.77%
Table IV.
Top contributors to performance for the quarter ended March 31, 2015
Year
Acquired
Market
Cap
Quarter
When
End Market
Acquired
Cap
Total
(billions) (billions) Return
2005
2011
$1.0
1.2
$17.4
4.4
2013
2007
0.9
1.8
2004
1.4
Percent
Impact
18.92%
21.83
0.62%
0.45
2.2
6.9
62.20
29.64
0.43
0.39
6.8
15.06
0.39
Top detractors from performance for the quarter ended March 31, 2015
Quarter
Market End Market
Cap
Cap or
When Market Cap
Year
Acquired When Sold Total
Acquired (billions) (billions) Return
Lumber Liquidators
Holdings, Inc.
AO World plc
ITC Holdings Corp.
DeVry Education
Group, Inc.
Targa Resources Corp.
2010
2014
2005
$0.6
2.0
0.8
$1.0
1.1
5.8
1995
2010
0.4
0.9
2.4
5.4
Percent
Impact
44.97% 0.48%
37.52 0.44
7.04 0.22
25.25
9.12
0.20
0.18
19
Recent Purchases
During the quarter, we took advantage of market volatility and added
opportunistically to several new and existing investments. Since the
beginning of the year, the Fund has invested nearly $150 million in 12
companies with average market capitalizations of $1.6 billion.
The Fund invests only in small cap businesses with significant competitive
advantages that possess large addressable market opportunities. We
monitor their progress closely. We sell them after theyve become larger,
successful companies and reinvest the proceeds in small cap growth
businesses. We sell sooner if we believe weve made a mistake in judgement
or fundamentals of a business become less favorable.
robust growth driven by its focus on specialty pharmacy, high touch model,
strong clinical capabilities, scalable infrastructure, lack of channel conflicts
and national footprint. Diplomat is also benefiting from the industry trend
towards limited distribution - 40% of its revenue now comes from its
portfolio of 80+ limited distribution drugs. (Susan Robbins)
Foundation Medicine, Inc. offers proprietary genomic tests for patients
with cancer. These tests use next generation DNA sequencing to analyze
over 300 cancer genes for genomic alterations, enabling physicians to
match the alterations with targeted therapies and clinical trials. Foundation
has also developed a web-based portal that links pharmaceutical companies
to oncologists, and provides all constituents with broad-based information
about discovered alterations and the effectiveness of drugs used to treat
them. In January, Roche Holdings announced a broad strategic relationship
with Foundation, which included a $1 billion investment in Foundation
shares, plans to co-market Foundations tests overseas, development of
additional genomic tests, and use of Roches US sales force to educate
physicians about the advantages of Foundations technology. We believe
the company is well positioned to take share in the emerging multi-billion
dollar complex cancer diagnostics market. (Neal Kaufman)
AO World plc
Diplomat Pharmacy, Inc.
Foundation Medicine, Inc.
Oaktree Capital Group, LLC
The Container Store
Group, Inc.
Year
Acquired
Market
Cap
When
Acquired
(billions)
Quarter
End
Market
Cap
(billions)
Amount
Purchased
(millions)
2014
2015
2015
2012
$2.0
2.0
1.3
1.5
$1.1
2.0
1.4
2.5
$37.8
27.5
25.5
10.5
2015
0.9
0.9
9.4
20
The Fund owns 88 stocks. The top 10 holdings comprise 29.1% of the Fund.
We believe this diversified Fund offers investors potentially better than
market returns with less risk. Risk is defined as volatility and is called
beta. The Funds beta since inception is 0.68. This means our portfolio has
been 68% as volatile as its benchmark while significantly outperforming its
benchmark. Our strategy to accomplish this is to invest for the long term in
a diversified portfolio of appropriately capitalized, well-managed, growing,
small cap businesses at attractive prices. The Funds average portfolio
turnover rate for the past three years is 9.13%. This means the Fund has an
average holding period for its investments of over 10 years. This contrasts
sharply with the average small cap mutual fund which typically turns over
its portfolio every 15 months. We invest in small cap companies at time of
purchase that we believe have the potential to double in size within four to
five years. We believe that a portfolio of investments diversified among
several industries all of which are dependent upon different, non-correlated
fundamentals will likely reduce portfolio volatility. In addition, many of the
companies in which the Fund invests have significant recurring revenue,
which makes their earnings less volatile than the Russell 2000 Growth Index.
We find all these businesses through our dedicated research effort. Our
holdings significant barriers to competitive threats provide pricing power.
Most of our companies reinvest in their businesses to increase their revenues
and margins over the long term. We believe the Fund has an opportunity to
meet its objectives, although there is no guarantee that it will do so.
While we do not try to predict short-term macro developments or current
events, we believe conditions remain favorable for the economy and stocks.
U.S. economic growth is accelerating and we believe stocks remain
attractively valued, trading around 16.9 times earnings, roughly in-line with
the markets long-term average vaulation.
U.S. GDP ended last year with the strongest growth since the financial crisis.
Job growth is strong and disposable income and net worth are increasing.
During the quarter, the unemployment rate fell to 5.5%, a post-recession
low. Consumer confidence now stands at a multi-year high. Auto and
housing sales are up and home prices continue to increase. The decline in
oil prices, while challenging for the energy sector, is a positive for the U.S.
economy and non-energy-related stocks. Money saved on energy-related
costs can be spent elsewhere.
Table VII.
Top 10 holdings as of March 31, 2015
Market Quarter
Cap
End
When
Market
Percent
Year
Acquired
Cap
Amount of Net
Acquired (billions) (billions) (millions) Assets
2005
2011
$1.0
1.6
$17.4
5.9
$310.9
261.8
3.8%
3.2
2006
2005
2002
2007
2.5
0.8
0.4
2.3
6.6
5.8
7.7
7.3
254.7
246.1
243.3
236.9
3.1
3.0
2.9
2.9
2004
1997
2011
2004
1.4
0.2
1.2
0.7
6.8
3.8
4.4
6.4
228.0
213.5
200.3
197.8
2.8
2.6
2.4
2.4
Ronald Baron
CEO and Portfolio Manager
April 30, 2015
Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary
prospectus contains this and other information about the Funds. You may obtain them from its distributor, Baron Capital, Inc., by calling 1-800-99BARON or
visiting www.BaronFunds.com. Please read them carefully before investing.
The Adviser believes that there is more potential for capital appreciation in smaller companies, but there also may be more risk. Specific risks associated with
investing in smaller companies include that the securities may be thinly traded and they may be more difficult to sell during market downturns. The Fund
may not achieve its objectives. Portfolio holdings are subject to change. Current and future portfolio holdings are subject to risk.
The discussions of the companies herein are not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of the
respective portfolio managers only through the end of the period stated in this report. The portfolio managers views are not intended as recommendations or investment advice to any person reading
this report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.
This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Growth Fund by anyone in any jurisdiction where it would be unlawful under the laws of that
jurisdiction to make such offer or solicitation.
Beta: measures a funds sensitivity to market movements. The beta of the market (Russell 2000 Growth Index) is 1.00 by definition.
P/E: the price earnings ratio is a valuation ratio of a companys current stock price to its actual earnings per share.
Upside Capture: explains how well a fund performs in time periods where the benchmarks returns are greater than zero.
Downside Capture: explains how well a fund performs in time periods where the benchmarks returns are less than zero.
Standard Deviation of YOY EPS Growth: is calculated by taking the 5-year standard deviation of year-over-year (YOY) LTM EPS growth. The standard deviation is used to measure the spread around
the average or mean. In other words, it indicates whether the values being considered differ greatly from each other. The smaller the standard deviation, the smaller the spread. Standard deviation is
determined by first finding the average of the data set. Each data item is then subtracted from the average, and the difference is squared. The sum of the squared values is divided by the number of
data items minus one. The function returns the square root of that value.
21
CLIFF GREENBERG
PORTFOLIO MANAGER
Table II.
Top contributors to performance for the quarter ended March 31, 2015
Percent
Impact
Table I.
Performance (Retail Shares)
Annualized for periods ended March 31, 2015
Baron
Small Cap
Fund1, 2
Three Months3
5.64%
One Year
8.49%
Three Years
15.48%
Five Years
15.02%
Ten Years
8.73%
Since Inception (September 30, 1997) 10.29%
Russell
2000
Growth
Index1
6.63%
12.06%
17.74%
16.58%
10.02%
5.80%
S&P 500
Index1
0.95%
12.73%
16.11%
14.47%
8.01%
6.51%
0.57%
0.51
0.46
0.44
0.42
Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares as of September 30, 2014 was 1.30%.
The performance data quoted represents past performance. Past performance is no guarantee of future results. The investment return and principal value of an
investment will fluctuate; an investors shares, when redeemed, may be worth more or less than their original cost. The Funds transfer agency expenses may be
reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower. Current performance may be lower or higher
than the performance data quoted. For performance information current to the most recent month end, visit www.BaronFunds.com or call
1-800-99BARON.
1
2
3
The indexes are unmanaged. The Russell 2000 Growth Index measures the performance of small-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 the Fund are with dividends, which positively impact the performance results. Russell Investment Group is the
source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell is a trademark of Russell Investment Group.
The performance data in the table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
Not annualized.
22
0.46%
0.33
0.23
0.17
0.15
believe sales will be hampered by the debut of the Apple watch, so we have
reduced our holdings. We still respect the company as a category-killer, see
great opportunity for it to expand sales globally, and believe the company
will benefit from the trend in wearables over time.
FEI Company, maker of electron microscopes, lowered guidance primarily
because of currency issues that will dampen earnings growth for this year.
We like the long-term growth opportunities, which we do not think are
reflected in the present stock price.
Del Friscos Restaurant Group, Inc., the operator of three steakhouse
concepts, lowered earnings guidance as near-term margins were pressured
by one-off sales shortfalls. We believe this is temporary, and that the
company is on the verge of significant long-lasting growth, so we increased
our position on weakness.
Other stocks that declined about 20% or more in the quarter include
Flotek Industries, Inc., The KEYW Holding Corp. and SunCoke Energy
Partners LP.
Portfolio Structure
As of March 31, 2015, the Fund had $5.49 billion under management and
was invested in 99 common stocks. At the end of the quarter, the top 10
positions represented 26.6% of the Funds assets. Most of these biggest
positions have been long time holdings of the Fund.
Table IV.
Top 10 holdings as of March 31, 2015
Quarter End
Investment Percent
Year
Value
of Net
Acquired (millions)
Assets
2004
2006
2007
2012
2011
2005
2013
2009
2008
2010
$193.2
191.4
167.7
162.9
138.7
132.1
120.4
120.4
119.0
113.2
3.5%
3.5
3.0
3.0
2.5
2.4
2.2
2.2
2.2
2.1
23
proclivity to hold onto our stocks for a longer term than most others. We
plan to continue to fund our purchases of small caps by harvesting gains in
our larger companies, which we believe will enable us to continue to
manage the overall market cap of the Fund appropriately, even if we can
buy into a bit larger company to start with. Another benefit to having the
somewhat higher threshold is that it will allow us to scale up position sizes
more easily. We expect our turnover to increase somewhat with the change,
which was the case in the first quarter.
Recent Activity
Table V.
Top net purchases for the quarter ended March 31, 2015
Year
Acquired
Catalent, Inc.
Diplomat Pharmacy, Inc.
Summit Materials, Inc.
The Spectranetics Corporation
Electronics For Imaging, Inc.
2014
2015
2015
2015
2015
$3.9
2.0
2.0
1.5
2.0
$25.2
25.1
23.1
21.0
20.1
24
at double digits, with the benefit of debt repayment and share repurchases.
We expect this to be supplemented by acquisitions, and we believe, as the
largest player in its industry, the company is a great platform and an
accomplished integrator.
The company came public at nine times projected current year EBITDA and
ten times earnings. We participated in its IPO last July. We think the stock
should trade closer to 12 times future cash flow and 20 times earnings. We
bought more stock recently to beef up our position which we were only
able to do because of the expansion of market cap parameters for the Fund.
Diplomat Pharmacy, Inc., is the largest independent specialty pharmacy
and fifth largest overall. The company provides customized patient care
management programs (including dispensing of medications) for specialty
drugs, which are typically high cost products that treat chronic conditions
and require specialized administration and handling. The company is
operated by the founding family, which started as a simple retail pharmacy
in the Midwest in 1975, went national in 2005 (when it did $27 million in
revenues) and has grown to a business now doing over $2 billion in
revenues. Pretty extraordinary.
The specialty pharmacy market is large and growing rapidly, as more
complex drugs are introduced by biotechs and in need of special services.
Industry spending was $50 billion in 2012 and is expected to grow to $120
billion in 2018, or roughly a 20% compound growth rate. Specialty drug
approvals comprised 50% plus of all FDA drug approvals in 2014, and there
are 3,000 plus oncology and immunology drugs, Diplomats sweet spot about 75% of revenues, in the global drug development pipeline.
As an independent operator (not part of a large Pharmacy Benefit Manager
or PBM), Diplomat has a unique competitive position, singularly focused
on specialty with a high touch model and entrepreneurial culture. They have
built strong relationships with both payors and pharmaceutical companies,
and are well situated as drug companies move more to limited
distribution, providing Diplomat exclusive or preferred dispensing rights to
certain newly approved drugs.
All this bodes well for Diplomat to continue to take market share and grow
considerably faster than the industry. Since going public, revenues have
grown 49% organically relative to industry growth of 25%. As the top line
expands, we expect EBITDA margins to improve from the present level of
1.8% towards 2.5% and beyond. And we expect the company to make
strategic and accretive acquisitions to enhance growth. The company
recently announced the acquisition of a specialty infusion company, which
cements Diplomats leadership position in this niche and expands potential
channels to new disease states and therapeutic categories. All in all, a very
exciting high growth business. We purchased at a $1.7 billion enterprise
value (and a high multiple of recent earnings) but we envision the
possibility of it being worth multiples of that in time.
In the quarter, we also bought positions in aggregates company, Summit
Materials, Inc.; in a medical device manufacturer, The Spectranetics
Corporation (thank you Baron Discovery Fund for the idea); and digital
printer, Electronics for Imaging, Inc.
Table VI.
Top net sales for the quarter ended March 31, 2015
Year
Acquired
MWI Veterinary
Supply, Inc.
SBA Communications
Corp.
Rexnord Corp.
Gartner, Inc.
Lumber
Liquidators Holdings, Inc.
Market
Quarter End
Cap
Market Cap or
When
Market Cap Amount
Acquired
When Sold
Sold
(billions)
(billions)
(millions)
2014
$1.8
$2.5
$59.9
2004
2012
2007
0.2
1.6
2.2
15.2
2.7
7.3
28.6
26.3
20.7
2010
0.6
0.8
16.4
Outlook
Thanks very much for investing in the Fund and giving us the privilege of
managing some of your assets.
As we are six years into a bull market that is up 200%, the rally lost steam
in the first quarter with the broad indexes flat. . . (though we are pleased to
have made nice absolute returns). By quarters end, domestic economic
momentum seemed to have slowed, highlighted by a weak employment
report for March. Many companies are foreshadowing that corporate
earnings reports will be constrained by the rise in the dollar. Interestingly,
some of the things that were most concerning earlier in the year have
reversed. European economies are improving and the U.S. no longer seems
decoupled (meaning doing well while all others struggle) from the rest of
the world; inflation seems to be perking up as seen in the recent wage
Cliff Greenberg
Portfolio Manager
April 30, 2015
Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary
prospectus contains this and other information about the Funds. You may obtain them from its distributor, Baron Capital, Inc., by calling 1-800-99BARON or
visiting www.BaronFunds.com. Please read them carefully before investing.
The Adviser believes that there is more potential for capital appreciation in smaller companies, but there also may be more risk. Specific risks associated with
investing in smaller companies include that the securities may be thinly traded and they may be more difficult to sell during market downturns. The Fund
may not achieve its objectives. Portfolio holdings are subject to change. Current and future portfolio holdings are subject to risk.
The discussions of the companies herein are not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of the
respective portfolio manager only through the end of the period stated in this report. The portfolio managers views are not intended as recommendations or investment advice to any person reading
this report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.
This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Small Cap Fund by anyone in any jurisdiction where it would be unlawful under the laws of that
jurisdiction to make such offer or solicitation.
25
Three Months3
One Year
Three Years
Five Years
Ten Years
Since Inception
(February 29, 2000)
Russell
Midcap
Growth
Index1
S&P 500
Index1
4.06%
3.21%
11.03%
12.46%
10.35%
4.05%
15.76%
16.45%
15.71%
9.41%
5.38%
15.56%
17.41%
16.43%
10.19%
0.95%
12.73%
16.11%
14.47%
8.01%
5.29%
2.52%
4.00%
4.77%
MICHAEL A. LIPPERT
PORTFOLIO MANAGER
any material changes in the growth opportunities good or bad for our
businesses. And, for those companies that are facing challenges of one form
or another competitive, economic, internal, investor communications,
etc. we try to assess whether these challenges are normal growing pains
or stumbles, so to speak, or instead thesis-changers and a reason to exit our
investment. This earnings season, not only did the vast majority of our
companies report solid operational metrics and show themselves to be on
path, but, while a few are dealing with stumbles, we did not identify a single
thesis-changer.
Second, the long-term secular themes that we focus on for the Fund
continue to gain strength and play a bigger role in society. This is what gave
us confidence in the Funds strategy last year, even when our stocks were
underperforming in the short term. And it continues to bolster our belief
that a portfolio of well-managed, higher-growth businesses capitalizing on
innovative and longer-term secular growth themes should outperform the
broader market and passive indexes across market cycles. As we attend
conferences, visit companies, listen to a wide range of earnings calls, it
becomes more and more clear to us that the world is changing fast, that
legacy business models and technologies are being left behind, and that
consumers and enterprises alike are quickly adopting new ways of doing
things. By way of example:
Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares as of September 30, 2014 was 1.35%.
The performance data quoted represents past performance. Past performance is no guarantee of future results. The investment return and principal value of an
investment will fluctuate; an investors shares, when redeemed, may be worth more or less than their original cost. The Adviser has reimbursed certain Fund
expenses (by contract as long as BAMCO, Inc. is the adviser to the Fund) and the Funds transfer agency expenses may be reduced by expense offsets from an
unaffiliated transfer agent, without which performance would have been lower. Current performance may be lower or higher than the performance data quoted.
For performance information current to the most recent month-end, visit www.BaronFunds.com or call 1-800-99BARON.
2
3
The Funds 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 Funds level of participation in
IPOs and secondary offerings will be the same in the future.
The indexes are unmanaged. The Russell 3000 Growth Index measures the performance of those companies classified as growth among the largest 3,000 U.S. companies, 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. Baron Opportunity Fund
no longer considers the Russell Midcap Growth Index an appropriate benchmark index. The Russell Midcap Growth Index is included in the table above for comparison
purposes for the period before the Fund converted to an all-cap fund. Prior to February 20, 2015, the Fund invested in companies with market capitalizations between $1
billion and $15 billion at the time of purchase. Since then, the Fund may invest in companies of all market capitalizations. The Adviser believes that the Russell 3000 Growth
Index is more representative of the Funds current investable universe. The indexes and the Fund are with dividends, which positively impact the performance results. Russell
Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell is a trademark of Russell Investment Group.
The performance data in the table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
Not annualized.
26
Twitter, Inc.
JUST EAT plc
Netflix, Inc.
Concho Resources, Inc.
SunEdison, Inc.
0.54%
0.50
0.46
0.43
0.37
Three of our top contributors Twitter, Inc., Netflix, Inc. and Concho
Resources, Inc. were top detractors last quarter, proving once again that
quarterly stock performance is largely irrelevant for long-term investors. As
Warren Buffet wrote in his recent investor letter, [m]onthly or yearly
movements of stocks are often erratic and not indicative of changes in
intrinsic value. Over time, however, stock prices and intrinsic value
invariably converge.
Twitter is an online social broadcasting and micro-blogging service. Shares
of Twitter were up due to strong fourth quarter results and a positive
outlook. In the past few months, the company has launched several new
efforts and product initiatives to increase both user growth and
engagement on the platform. While it is likely to take some time for these
efforts to gain greater traction, we believe that Twitter is in the early stages
of monetization and evolution as a platform. (Ashim Mehra)
Shares of JUST EAT plc, an online restaurant delivery marketplace in Europe,
Latin America, and Canada, rose during the first quarter. JUST EAT reported
solid results for the back half of 2014, guided toward sales slightly above
Street estimates for 2015, and demonstrated execution across its European
footprint. In our view, this provided further evidence that its #1 position
across most of its markets is defensible and sustainable. We believe JUST EAT
will benefit from the trend toward online delivery ordering and its large lead
in a winner-take-all industry. (Eric Guzman)
Shares of on-demand video service Netflix were up during the first quarter
based on stronger-than-expected fourth quarter subscriber additions and a
robust outlook for the first quarter of 2015. Because of the success of its
original content (House of Cards, Orange is the New Black, etc.) across all of
its markets and the solid growth experienced with its slate of international
launches, the company has decided to accelerate its international
expansion plans, with a goal of achieving near global coverage by the end
of 2016. In addition, the company is continuing to invest aggressively in
original content. While quarterly fluctuations in net additions will likely
continue, we believe Netflix will benefit from the growing global demand
for high-quality, ad-free online video content to ultimately reach 60 million
U.S. subscribers and over 100 million subscribers overseas. (Ashim Mehra)
Concho Resources is an independent exploration and production oil
company operating in the Permian Basin in West Texas and New Mexico.
Shares rebounded from the fourth quarter drubbing even as oil prices
remained weak. Concho prudently cut its spending rate, raised additional
capital, and positioned itself well, in our view, to survive the downturn and
emerge as a stronger company when oil prices recover. Strong results from
its Delaware Basin drilling program are enhancing an asset we believe to be
undervalued within the current share price. (Jamie Stone)
27
Shares of renewable energy company SunEdison, Inc. rose during the first
quarter on increased investor confidence in its strategy to develop cashgenerating assets and drop them down to its yieldco, TerraForm Power (also
a Fund investment). We believe SunEdisons recent acquisition of First Wind
will help accelerate SunEdisons development pipeline and TerraForms
portfolio. Over time, we think the yieldco structure will allow SunEdison to
monetize the value of its solar assets and raise capital at a low rate, creating
a cycle of growth and value creation. (Jamie Stone)
Table III.
Top detractors from performance for the quarter ended March 31, 2015
Percent
Impact
AO World plc
Alibaba Group Holding Ltd.
Tesla Motors Inc.
athenahealth, Inc.
Flotek Industries, Inc.
0.58%
0.43
0.41
0.32
0.27
28
Portfolio Structure
Baron Opportunity Fund invests in high growth, innovative businesses
across all market capitalizations. As of the end of the first quarter, the
largest market cap holding in the Fund was $231 billion and the smallest
was $517 million. The median market cap of the Fund was $5.8 billion. The
Fund had $386.5 million of assets under management. The Fund had
investments in 56 securities. The Funds top 10 positions accounted for
32.9% of the portfolio. The Funds cash position was 0.3% at quarter end.
Table IV.
Top 10 holdings as of March 31, 2015
Quarter End
Quarter End Investment Percent
Market Cap
Value
of Total
(billions)
(millions) Investments
$ 3.7
7.3
6.4
26.7
11.3
13.9
2.4
1.0
13.1
14.5
$19.3
15.5
13.5
11.6
11.6
11.4
11.3
11.1
11.1
10.9
5.0%
4.0
3.5
3.0
3.0
2.9
2.9
2.9
2.9
2.8
Recent Activity
Table V.
Top net purchases for the quarter ended March 31, 2015
Quarter End Amount
Market Cap Purchased
(billions)
(millions)
FireEye, Inc.
MasterCard, Inc.
WEX, Inc.
Mobileye N.V.
Aerie Pharmaceuticals, Inc.
$ 6.1
99.8
4.2
9.1
0.8
$4.7
4.0
3.8
3.6
3.4
comScore, Inc.
Qualys, Inc.
Liberty Media Corp.
Illumina, Inc.
Discovery Communications, Inc.
$ 1.7
1.6
11.9
26.7
11.7
$6.6
5.6
4.8
4.5
4.2
comScore, Inc., Qualys, Inc. and Liberty Media Corp. were all, in our view,
successful investments for the Fund. We sold them due to our views that
they stocks offered less long-term return potential and to recycle capital
into other investments.
We further trimmed our Illumina, Inc. position on strength. As of the end
of the first quarter, Illumina remained a Top five position in the Fund.
While we have very high regard for the Discovery Communications, Inc.
management team, particularly its CEO, David Zaslav, we decided to exit
our Discovery investment because of our concerns (alluded to above) about
the secular declines in the traditional TV ecosystem.
29
Thank you for your support and for trusting us with your assets. We
look forward to updating you in future letters.
Sincerely,
Michael A. Lippert
Portfolio Manager
April 30, 2015
Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary
prospectus contains this and other information about the Funds. You may obtain them from its distributor, Baron Capital, Inc., by calling 1-800-99BARON or
visiting www.BaronFunds.com. Please read them carefully before investing.
The Adviser believes that there is more potential for capital appreciation in securities of high growth businesses benefiting from innovation through
development of pioneering, transformative or technologically advanced products or services, but there also is more risk. Companies propelled by innovation,
including technological advances and new business models, may present the risk of rapid change and product obsolescence and their successes may be difficult
to predict for the long term. Securities issued by small and medium sized companies may be thinly traded and may be more difficult to sell during market
downturns. The Fund may not achieve its objectives. Portfolio holdings are subject to change. Current and future portfolio holdings are subject to risk.
The discussions of the companies herein are not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of the
respective portfolio managers only through the end of the period stated in this report. The portfolio managers views are not intended as recommendations or investment advice to any person reading
this report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.
This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Opportunity Fund by anyone in any jurisdiction where it would be unlawful under the laws of that
jurisdiction to make such offer or solicitation.
30
RONALD BARON
CEO AND PORTFOLIO MANAGER
Table I.
Performance (Retail Shares)
Annualized for periods ended March 31, 2015
Three Months4
One Year
Three Years
Five Years
Ten Years
Since Conversion (April 30, 2003)
Fifteen Years
Twenty Years
Since Inception (January 31, 1992)
Baron
Partners
Fund1,2,3
Russell
Midcap
Growth
Index2
S&P 500
Index2
2.56%
7.32%
19.50%
16.98%
9.89%
14.31%
7.21%
12.21%
13.18%
5.38%
15.56%
17.41%
16.43%
10.19%
12.34%
4.02%
10.05%
9.85%
0.95%
12.73%
16.11%
14.47%
8.01%
9.28%
4.15%
9.39%
9.44%
After collapsing during the fourth quarter, oil prices remained at multi-year
lows during the first quarter, which pressured energy stocks. We think lower
oil prices is a positive for the U.S. economy and non-energy-related U.S.
stocks. This is because energy-intensive manufacturers will have lower
energy costs, resulting in higher cash flow, and consumers will have higher
disposable income to spend on goods and services. However, the current
Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares as of December 31, 2014 was 1.51%
(comprised of operating expenses of 1.32% and interest expense of 0.19%). The performance data quoted represents past performance. Past performance is
no guarantee of future results. The investment return and principal value of an investment will fluctuate; an investors shares, when redeemed, may be worth more
or less than their original cost. The Funds transfer agency expenses may be reduced by expenses offsets from an unaffiliated transfer agent, without which
performance would have been lower. Current performance may be lower or higher than the performance data quoted. For performance information current to
the most recent month end, visit www.BaronFunds.com or call 1-800-99BARON.
1
3
4
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, the returns would be higher. The Funds
shareholders will not be charged a performance fee. The predecessor partnerships performance is only for periods before the Funds 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 registered investment companies, which, if it were, might have adversely affected its performance.
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 Russell Midcap Growth Index, the S&P 500 Index and the Fund are with dividends, which positively impact the
performance results. Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell is a trademark
of Russell Investment Group.
The performance data in the table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
Not annualized.
31
31.71% produced double digit returns, 50.72% advanced by single digits and
33.67% declined. On average, 44.12% of the Funds net assets outperformed
the benchmark.
We try to explain the reasons certain stocks outperformed or
underperformed during the period in the Top Contributors and Top
Detractors sections. In many instances, we regard gains and losses in the
short term as random. We continue to believe all the businesses in which
we have invested have the potential to double in size in four to five years.
As a result, we believe stocks that have recently underperformed will
achieve above average returns and contribute positively to the Funds
performance in coming quarters, although we cannot guarantee this.
Biotech stocks have performed strongly over the past few years, and this
strong performance continued in the quarter. The biotech rally has been
driven in part by an increase in the number of novel new drugs approved by
the FDA relative to prior years, some potentially exciting breakthroughs in
cancer therapies, M&A activity, and the fact that biotech companies are
relatively insulated from global macro issues. Another factor that may be
fueling biotech stock outperformance is the industrys increased
representation in the indices, which has driven increased purchases of the
stocks by ETFs, which has driven even higher representation in the indices.
To date, the Fund has avoided biotech stocks because of the difficulty of
predicting whether or not these businesses will be successful. Many of these
businesses have no revenue or earnings and their future prospects are
highly dependent upon the outcomes of clinical trials, which are difficult to
predict and fraught with risk. The Funds preferred way of participating in
the growth of the biotech industry to date has been through its investment
in Illumina, Inc., a company which supplies DNA sequencing instruments
and consumables to biotech and other life sciences customers. Illumina
benefits from many of the same trends as biotech companies but with less
risk. In contrast to many biotech companies, Illumina has a highly profitable,
razor/razor-blade business model with recurring revenues and cash flow.
Managing risk is a key part of our investment process. We manage risk from
a company perspective by investing in businesses that are conservatively
financed with high barriers to entry. Our proprietary research regarding
business long-term growth opportunities, competitive advantages,
management teams and risks determines how much we allocate to
individual securities. We invest in different industries that are affected
differently in the short term by unpredictable events. This is to achieve a
portfolio of investments with risks that are not correlated. This is part of our
effort to reduce the volatility of a non-diversified portfolio. Further, the
underlying businesses in which the Fund has invested historically have less
volatile earnings than the Funds benchmark index.
Our approach is to invest for the long term. We do not try to predict shortterm macro developments or shift our investment approach because
certain types of stocks are in or out of favor.
Although economic data from other regions around the world (Europe, China)
has not been robust, U.S. economic data continues to show broad signs of
strength, including gains in housing prices, starts and existing sales; increased
industrial production; strong auto sales; rising consumer confidence; and
lower unemployment claims. Interest rates remain at historically low levels.
Our outlook for stocks remains favorable. In our opinion, stocks remain
attractively valued, trading at 16.9 times earnings, approximating the
32
Year
Acquired
Market
Cap
Quarter
When End Market
Acquired
Cap
Total
(billions) (billions) Return
2013
$4.2
$4.2
2005
2005
1.6
0.7
2007
2014
2.5
3.3
Percent
Impact
27.78%
0.94%
6.8
6.4
15.06
7.73
0.83
0.81
6.6
3.9
13.39
10.02
0.76
0.66
2014
2006
2005
2015
2009
$21.9
6.8
0.8
15.7
4.2
$23.7
12.2
5.8
14.1
8.8
Total
Return
Percent
Impact
15.13%
12.34
7.04
11.43
1.64
1.44%
0.55
0.54
0.34
0.16
Shares of electric vehicle (EV) company Tesla Motors Inc. fell during the
quarter as lower gas prices raised concerns that EV demand would drop. In
addition, the launch of the companys Model X SUV was delayed until late in
2015. We believe that, Teslas talent pool, first mover advantage, scale and
brand, will result in market share gains for Tesla in years to come. (Gilad Shany)
Shares of industrial supplies distributor Fastenal Co. fell in the first quarter.
Sales growth moderated due to slowing demand in oil and gas regions and
the impact of a stronger U.S. dollar on customers with large export
divisions. Current growth rates of about 10%, while industry-leading,
represent a deceleration from last years 15-20% runrate and are impacting
Fastenals ability to leverage earnings faster than sales growth. We still see
a path to double digit growth over the next several years, as well as an
attractive valuation and debt-free balance sheet. (Matt Weiss)
The stock of ITC Holdings Corp., the nations largest independent transmission
company, fell in the first quarter. An expected increase in interest rates
contributed to overall sector weakness as investors exited utilities and other
yield-oriented investments. The primary drivers for transmission investment
reliability and connection of new generation (including renewables) remain
intact, and we believe ITC has robust prospects for growth and will execute on
its growth strategy and concurrent five-year capital plan. (Rebecca Ellin)
Year
Acquired
Market
Cap
When
Acquired
(billions)
2015
2014
2014
2015
$4.1
4.3
7.9
16.2
Quarter
End
Market Amount
Cap
Purchased
(billions) (millions)
$4.5
5.8
9.1
17.4
$71.4
29.9
11.7
1.9
The Fund initiated a position in Inovalon Holdings, Inc., a health care data and
analytics company that came public during the quarter. The foundation of the
company is a proprietary data set which contains more than 9.2 billion
medical events from 120 million unique patients. This data is used to power
Inovalons advanced analytics, which help insurers identify gaps in care, quality,
data integrity and financial performance. Clients then leverage Inovalons
intervention platforms to drive improvement in clinical and quality outcomes,
utilization, and financial performance across the health care landscape.
Inovalon serves a vast addressable market. The company addresses a $14
billion annual opportunity, and we believe that logical adjacencies can
increase its addressable market opportunity by three-to-four times. Secular
drivers, particularly the need to reduce health care cost inflation and a shift
to value based from consumption based health care, are helping to accelerate
Inovalons growth. Finally, the company has an enviable financial model, with
98% retention rates, high levels of recurring revenue, EBITDA margins that are
approaching 40%, and strong free cash flow. (Neal Rosenberg)
We added to our position in Zillow Group, Inc. in the quarter. Zillow is the
leading online real estate site in the U.S. The company offers information on
homes for sale and rent, in addition to offering a mortgage marketplace. The
company also owns and operates Street Easy, the leading real estate site for
New York City. The company recently closed on its acquisition of Trulia, the
number two online real estate site after Zillow. With the continued consumer
transition to online and mobile, we believe that Zillow is well positioned to
grow its 4% share of the $12 billion dollar real estate advertising market. As
Zillow grows its share of the real estate advertising market in the next several
years, the company should generate meaningfully more revenue and cash
flow, with value accruing to shareholders. (Ashim Mehra)
Mobileye N.V. is a leader in the Advanced Driver Assistance Systems or ADAS
category. We believe people will be less likely to be injured from car accidents
with ADAS, and that computers will be safer and better at driving cars than
humans. Mobileye developed advanced image sensing and processing
technology for the automotive industry. The companys technology interprets
and integrates the imaging data into the driver assistance systems, from
collision prevention to eventually, full autonomous driving. We believe
Mobileyes technology and products are unique, developed by many hundreds
of software and hardware engineers, the products are based on the most
advanced artificial intelligence and machine learning technologies. We think
autonomous driving is a question of when rather than if. (Gilad Shany)
Investment Strategy
We invest for the long term in a non-diversified portfolio of competitively
advantaged, well-managed, growing businesses at what we think are
attractive prices. Often, we have opportunities to purchase stocks of
businesses we have researched extensively and that we believe are mispriced
or have fallen in price due to what we perceive to be temporary issues. This
quarter, we added to current holdings Zillow Group, Inc. and Mobileye N.V.,
and initiated a position in Under Armour, Inc. Our objective is to purchase
shares of well-established, appropriately capitalized, growing companies, with
strong positions in markets with stable demand for their products and
services. The Fund may use leverage to invest in stable and well-capitalized
growth companies, with the goal of enhancing its investment returns.
Another common theme for Baron Partners Funds investments is one of
businesses investing for growth, often at the expense of short-term profits.
These businesses are investing in order to become much larger, more
profitable businesses in the future. Virtually all the businesses in which we
have invested are making such capital commitments: Verisk Analytics, Inc.s
startup investments in health care and real estate data services; CarMax,
Inc.s line of new stores coupled with efforts to grow sales in existing stores;
and Hyatt Hotels Corp.s investment in hotel renovations and improved
guest services, as well as its ongoing expansion in Asia; are noteworthy in this
regard. As long-term investors who hold stocks for an average of about four
years, we expect to benefit from these expenditures. In contrast, most other
mid-cap mutual funds are more trading oriented, turning over their entire
portfolios on average every nine months. Since these funds, in general, will not
care about or benefit from such long-term, strategic investments by
businesses, they accord them little or no value. This allows us to invest in
these companies at prices we feel are especially attractive.
Baron Partners Fund also has significant investments in growing C
corporations like Vail Resorts, Inc. and ITC Holdings Corp., whose shares
we believe are especially undervalued when compared to similar businesses
structured as REITs or master limited partnerships. The Funds investments
in alternative investment money manager The Carlyle Group and financial
intermediary The Charles Schwab Corp., are benefiting from strong
performance of equities since the Financial Panic of 2008-09.
33
Portfolio Structure
We think the businesses in which the Fund has invested have the potential
to double in size within four to five years. We think because of the
competitive advantages of those businesses, it would take many years or
cost a lot of money, and, therefore, not be economically feasible, for new
entrants to compete against them. We think these barriers enable our
companies to generate strong returns on capital and provide them with the
ability to grow consistently over the long term.
We are continuing to work hard to justify your confidence and trust in our
stewardship of your familys hard-earned savings. We also remain dedicated
to continuing to provide you with the information I would like to have
about your investments in Baron Partners Fund if our roles were reversed.
This is so you will be able to make an informed decision about whether this
Fund remains an appropriate investment for you and your family.
Respectfully,
Ronald Baron
CEO and Portfolio Manager
April 30, 2015
Table V.
Top 10 holdings as of March 31, 2015
Market Quarter
Cap
End
When
Market
Percent
Year
Acquired
Cap
Amount
of Total
Acquired (billions) (billions) (millions) Investments
2005
2014
$0.7
21.9
$6.4
23.7
$217.6
155.7
9.4%
6.7
2002
2005
2009
2011
0.6
0.8
4.2
6.1
7.7
5.8
8.8
14.5
150.9
149.7
148.1
138.0
6.5
6.4
6.4
5.9
2007
2.5
6.6
123.4
5.3
2005
1.6
6.8
119.7
5.2
1992
2009
1.0
4.0
40.0
11.3
115.7
107.1
5.0
4.6
Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary
prospectus contains this and other information about the Funds. You may obtain them from its distributor, Baron Capital, Inc., by calling 1-800-99BARON or
visiting www.BaronFunds.com. Please read them carefully before investing.
The Adviser believes that there is more potential for capital appreciation using non-diversification and leverage, but there also is more risk. Specific risks
associated with non-diversification and leverage include increased volatility of the Funds returns and exposure of the Fund to greater loss in any given period.
The Fund invests in companies of all sizes, including small and medium sized companies whose securities may be thinly traded and made difficult to sell
during market downturns. Leverage is the degree to which an investor or business is utilizing borrowed money. The Fund may not achieve its objectives.
Portfolio holdings are subject to change. Current and future portfolio holdings are subject to risk.
The discussions of the companies herein is not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of the
respective portfolio managers only through the end of the period stated in this report. The portfolio managers views are not intended as recommendations or investment advice to any person reading
this report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.
This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Partners Fund by anyone in any jurisdiction where it would be unlawful under the laws of that
jurisdiction to make such offer or solicitation.
P/E: the price earnings ratio is a valuation ratio of a companys current stock price to its actual earnings per share.
34
Three Months3
One Year
Three Years
Five Years
Ten Years
Since Inception (April 30, 2004)
4.95%
13.14%
14.81%
13.89%
7.82%
7.57%
Russell
1000
Growth
Index1
3.84%
16.09%
16.34%
15.63%
9.36%
8.77%
S&P 500
Index1
0.95%
12.73%
16.11%
14.47%
8.01%
8.11%
ALEX UMANSKY
PORTFOLIO MANAGER
Table II.
Top contributors to performance for the quarter ended March 31, 2015
Amazon.com, Inc.
Twitter, Inc.
Apple Inc.
Starbucks Corp.
FireEye, Inc.
Quarter End
Market Cap
(billions)
Percent
Impact
$172.8
32.4
724.8
71.0
6.1
1.51%
1.19
0.67
0.54
0.52
Performance listed in the table above is net of annual operating expenses. Annual expense ratio for the Retail Shares as of September 30, 2014 was 1.37%,
but the net annual expense ratio is 1.30% (net of the Advisers free waivers). The performance data quoted represents past performance. Past performance is
no guarantee of future results. The investment return and principal value of an investment will fluctuate; an investors, shares, when redeemed, may be worth
more or less than their original cost. The Adviser has reimbursed certain Fund expenses (by contract as long as BAMCO, Inc. is the adviser to the Fund) and the
funds transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower.
Current performance may be lower or higher than the performance data quoted. For performance information current to the most recent
month-end, visit www.BaronFunds.com or call 1-800-99BARON
1
2
3
The indexes are unmanaged. The Russell 1000 Growth Index measures the performance of large-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 the Fund are with dividends, which positively impact the performance results. Russell Investment Group is the
source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell is a trademark of Russell Investment Group. On January 1, 2015 the
Fund changed its primary benchmark from the S&P 500 Index to the Russell 1000 Growth Index.
The performance data in the table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
Not annualized.
35
After a 30% decline last quarter, shares of Twitter increased 40% recovering
most, but not all of the loss (trust us, the math is right on this). Similarly to
Amazon, the quarterly results were better than expected as several freshly
launched initiatives led to slightly better user growth, engagement, and
monetization. Naturally, with improved traction, the immediate outlook
looks better. Twitter was our second largest add in the fourth quarter of
2014 (behind Amazon) and, with this move, it has made an appearance in
our top ten holdings for the first time. We dont think the likelihood of
Twitters eventual success is either higher or lower today than it was three
or six months ago. However, a meaningful decline in the price of the stock
due to short-term loss of investor confidence allowed us to build a full
position. This is similar to our experience with Facebook two years ago, and
Illumina, a year before that. We can only hope that our investment thesis
on Twitter plays out in a similar way.
I am not sure what more we can say about Apple after the company sold
and delivered a stunning 74.5 million iPhone units in the fourth quarter of
2014. On March 9th, Apple launched the iWatch, its first new product
category since the passing of Steve Jobs. The strength of the iPhones
product cycle combined with excitement around Apples rediscovered
ability to innovate again, contributed to a 13% rise in the stock in Q1. We
own Apple because how can we not? We may have an answer to this
question at some point, but until we do, you should expect us to continue
to write about it.
Shares of Starbucks, the leading global specialty coffee platform (thats
right!) rose 16% after reporting strong sales and earnings growth that were
better than expectations. While the core in-store beverage business remains
solid, we believe Starbucks is just scratching the surface of opportunities in
food, mobile payment and loyalty programs, emerging market expansion
and wholesale channel development in single serve. Starbucks continues to
be one of our core holdings.
Shares of FireEye were the largest purchase for the Fund in the first quarter.
They were purchased before the stock made most of its 26% move up
(hence instant gratification reference in the section above). FireEye is the
leader in the cybersecurity space with a new generation of software tools
and services designed to help companies deal with the most sophisticated
cyber-attacks. We believe that the well-publicized assaults on Sony and
JPMorgan Chase, as well as security breaches at Home Depot and Target are
the tip of the iceberg rather than isolated incidents. We believe that
FireEye has the best post-breach incident response service that minimizes
remediation time and damage and is the reason it is frequently the first call
for companies that have been victimized. This service consistently gets
FireEye into the door and gives them an opportunity to introduce and sell
their other security products potentially allowing them to build a real
cybersecurity platform of the future.
36
Table III.
Top detractors from performance for the quarter ended March 31, 2015
Quarter End
Market Cap
(billions)
Percent
Impact
$205.2
12.8
12.2
44.3
54.4
0.86%
0.35
0.23
0.16
0.15
Portfolio Structure
The top 10 positions represented 48.0% of the Fund, the top 20 were
72.9%, and we exited the quarter with 36 holdings.
Table IV.
Top 10 holdings as of March 31, 2015
Quarter End Quarter End
Market
Investment
Cap
Value
Percent of
(billions)
(millions) Net Assets
Amazon.com, Inc.
Illumina, Inc.
Facebook Inc.
Apple, Inc.
Google, Inc.
MasterCard, Inc.
Twitter, Inc.
The Priceline Group, Inc.
Starbucks Corp.
Alibaba Group Holding Ltd.
$172.8
26.7
230.9
724.8
375.1
99.8
32.4
60.5
71.0
205.2
$10.9
7.9
7.5
6.9
6.8
5.6
5.4
5.0
4.9
4.9
7.9%
5.8
5.5
5.0
4.9
4.1
4.0
3.7
3.6
3.5
Recent Activity
Monsanto Co.
Ralph Lauren Corp.
Las Vegas Sands Corp.
Liberty Media Corp.
$54.4
12.2
44.0
13.1
$1.8
1.1
0.7
0.6
Outlook
With continuing increase in the costs of postage and our renewed
commitment to keeping this shareholder letter concise, we will no longer
be offering an investment outlook!
Table V.
Top net purchases for the quarter ended March 31, 2015
Quarter End Amount
Market Cap Purchased
(billions)
(millions)
FireEye, Inc.
Ctrip.com International Ltd.
Alibaba Group Holding Ltd.
Mobileye N.V.
Alexion Pharmaceuticals, Inc.
6.1
7.9
205.2
9.1
35.0
$3.1
1.2
0.9
0.7
0.5
FireEyes relatively small size ($6.1 billion market cap) makes it somewhat
unusual for us to have a significant investment in the company this early
in its life cycle, so perhaps a bit more explaining is warranted here. We
believe there is a potentially a massive shift underway in the cybersecurity
Those of you who regularly manage to get this far know that we never
really offered much of an outlook anyway. Not for this Fund and certainly
not for the market.
Some six months ago we were approached by Wally Forbes, who is the
President of the Forbes Investors Advisory Institute. Mr. Forbes asked to
describe our philosophy and process for his readers, as well as, our highest
conviction ideas ostensibly, our largest holdings. While we explicitly do
NOT endorse the title of the article, we think the substance is a worthwhile
read for the shareholders of this Fund. The article can be accessed at the
following link:
http://www.forbes.com/sites/wallaceforbes/2014/09/03/the-only-3stocks-you-need-to-own/
37
Alex Umansky,
Portfolio Manager
April 30, 2015
Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary
prospectus contains this and other information about the Funds. You may obtain them from its distributor, Baron Capital, Inc., by calling 1-800-99BARON or
visiting www.BaronFunds.com. Please read them carefully before investing.
The Fund invests primarily in large cap equity securities which are subject to price fluctuations in the stock market. The Fund may not achieve its objectives.
Portfolio holdings are subject to change. Current and future portfolio holdings are subject to risk.
The discussions of the companies herein are not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of the
respective portfolio managers only through the end of the period stated in this report. The portfolio managers views are not intended as recommendations or investment advice to any person reading
this report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.
This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Fifth Avenue Growth Fund by anyone in any jurisdiction where it would be unlawful under the laws
of that jurisdiction to make such offer or solicitation.
38
Three Months4
One Year
Three Years
Five Years
Ten Years
Fifteen Years
Since Inception (May 31,1996)
Baron
Focused
Growth
Fund1,2,3
Russell
2500
Growth
Index2
S&P 500
Index2
3.38%
6.27%
12.17%
12.52%
9.30%
7.10%
11.54%
7.44%
13.83%
17.91%
16.97%
10.64%
4.84%
7.89%
0.95%
12.73%
16.11%
14.47%
8.01%
4.15%
8.16%
RONALD BARON
Retail shares: BFGFX
CEO
CHIEFAND
INVESTMENT
PORTFOLIO
OFFICER
MANAGER
AND PORTFOLIO MANAGER
Institutional Shares: BFGIX
electric vehicles, saw its shares fall as investors believed the value proposition
for its product became less appealing with lower energy prices.
Table II.
Any Time at All.
The Long and
Winding Road
Bush Years
Here Comes
Yesterday
2000-2008
the Sun
Clinton Years
9/11; Iraq;
Obama Years
1992-2000
Afghanistan;
2008-2015
Internet Bubble Housing Bubble; Recovery Any Time
12/31/99 P/E 33x Financial Panic
P/E 16.8x
at All
Annualized Returns
Inception
Inception
5/31/96 to
12/31/99 to 12/31/08 to 5/31/96 to
12/31/99
12/31/08
3/31/15
3/31/15
Baron Focused
Growth Fund
Russell 2500
Growth Index
S&P 500 Index
27.87%
2.72%
16.13%
11.54%
17.60%
26.58%
3.99%
3.60%
21.49%
16.65%
7.89%
8.16%
Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares as of December 31, 2014 was 1.39%,
but the net annual expense ratio was 1.35% (net of the Advisers fee waivers). The performance data quoted represents past performance. Past performance
is no guarantee of future results. The investment return and principal value of an investment will fluctuate; an investors shares, when redeemed, may be worth
more or less than their original cost. The Adviser has reimbursed certain Fund expenses (by contract as long as BAMCO, Inc. is the adviser to the Fund) for and the
Funds transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower.
Current performance may be lower or higher than the performance data quoted. For performance information current to the most recent month end, visit
www.BaronFunds.com or call 1-800-99BARON.
1
3
4
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 Funds shareholders will not be charged a performance fee. The performance is only for the periods before the Funds 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 registered investment companies, which, if it were, might have adversely affected its performance.
The indexes are unmanaged. The Russell 2500 Growth Index measures the performance of small to 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 the Fund are with dividends, which positively impact the performance results. Russell Investment
Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell is a trademark of Russell Investment Group.
The performance data does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
Not annualized.
39
Table III.
Top contributors to performance for the quarter ended March 31, 2015
Quarter
Market Cap
End
When
Market
Year
Acquired
Cap
Total
Acquired (billions) (billions) Return
Percent
Impact
2013
$2.3
$3.8
14.20% 0.85%
2008
2.5
6.6
13.39
0.76
2010
2014
1.9
1.8
3.7
2.2
14.72
14.63
0.67
0.59
2005
1.6
6.8
15.06
0.58
Shares of Vail Resorts, Inc., the largest U.S. ski resort operator, rose in Q1 on
strong earnings during the 2014-15 ski season despite poor snow at its
Tahoe properties. Vails recent acquisition of Park City has improved the
diversification of its resorts. Vail has also been able to operate Park City
without a significant increase in selling, general and administrative expenses
due to improved scale, which in turn, helped margins. Vail generated strong
cash flow in Q1 and increased its dividend 50%. (David Baron)
Shares of market data vendor FactSet Research Systems, Inc. rose in
response to accelerated organic revenue growth, enhanced seat count
additions, and meaningful earnings growth. We believe FactSet is continuing
to take share across all markets, generate strong cash flow, and return it
aggressively to shareholders. We see continued strength in the companys
buy side customer base and improving conditions on the sell side, which we
believe will be an added tailwind to growth. (Neal Rosenberg)
Shares of Choice Hotels International, Inc., the largest U.S. hotel franchisor,
increased in Q1 on reports of robust revenue per available room across its
portfolio. Choice used the revenue to boost unit growth and deals in its
pipeline of new hotel franchises. The uptick in revenue produced free cash flow
that the company used to buy back shares and increase its dividend. Choice
continues to develop its central reservations system business, which remains
on track with sales and could potentially be spun off or sold. (David Baron)
Table IV.
Top detractors from performance for the quarter ended March 31, 2015
Year
Acquired
2014
2012
2007
2008
2011
Market
Cap
Quarter
When End Market
Acquired
Cap
Total
(billions) (billions) Return
Percent
Impact
$31.2
2.4
6.4
2.2
5.3
1.21%
0.39
0.38
0.28
0.15
$23.7
5.9
12.2
5.8
8.0
15.05%
8.74
12.34
7.04
7.43
Shares of electric vehicle (EV) company Tesla Motors Inc. fell during the
quarter as lower gas prices raised concerns that EV demand would drop. In
addition, the launch of the companys Model X SUV was delayed until late in
2015. We believe that, Teslas talent pool, first mover advantage, scale and
brand, will result in market share gains for Tesla in years to come. (Gilad Shany)
40
Recent Purchases
Table V.
Top net purchases for the quarter ended March 31, 2015
Year
Acquired
2014
2014
Market
Cap
When
Acquired
(billions)
$31.2
0.7
Quarter
End
Market
Cap
(billions)
Amount
Purchased
(millions)
$23.7
1.0
$3.3
1.5
We added to our Tesla Motors Inc. investment during the quarter. During
2015, Tesla expects to increase its automobile production more than 70%
to 55,000 cars from 33,000 in 2014 and 22,000 during 2013. This translates
to non GAAP revenue of more than $5.5 billion in 2015 vs $3.3 billion last
year and $2.6 billion in 2011. Model S has been one of the most successful
luxury sedan launches in the recent history of cars, and Tesla had been
working on this model when it had limited production capacity. We expect
a highly publicized and successful Model X SUV launch later this year.
Finally, we expect the company to launch a $35 40,000 mass market car
in 2017. With supply constraints, we dont think Tesla will be able to meet
demand for Gen 3 cars for years. (Gilad Shany)
The Fund opportunistically added to its position in Benefitfocus, Inc., a
leading provider of cloud-based benefits software. The company offers an
integrated suite of solutions to help customers shop, enroll, manage, and
exchange benefits information. Benefits are presented in a user-friendly
manner that allows insured individuals and their dependents to access all
their benefits in one place. Benefitfocus is experiencing accelerating
demand due to the ACA and a shift towards defined contribution benefit
programs, which requires the enhanced insight and consumer experience
only offered by modern software applications. We believe that Benefitfocus
serves an addressable market that is more than 100 times larger than its
current business, which should allow the company to compound revenue at
more than 30% annually. We see significant margin expansion over time, as
the company leverages its recent investments, hands off lower margin
consulting work to partners, and begins to compete for high margin
brokerage commissions. (Neal Rosenberg)
Portfolio Structure
The objective of Baron Focused Growth Fund is to double its value per share
within five years. Our strategy to accomplish this goal is to invest for the
long term in a focused portfolio of appropriately capitalized, well-managed,
small and mid-cap businesses at attractive prices. We attempt to create a
portfolio of less than thirty securities diversified by GICS sectors that will
be approximately 90% as volatile as the market. These businesses are
identified by our firms proprietary research.
We think the businesses in which Baron Focused Growth Fund has invested
have the potential to double in size within approximately five years and
double again over the subsequent five years. We think these well-managed
businesses have sustainable competitive advantages and strong, long-term
growth opportunities. Considering current stock price valuations, we believe
we have the opportunity to meet our performance goals during the next
decade, although there is no guarantee that we will do so.
As of March 31, 2015, Baron Focused Growth Fund held 24 investments. The
median market capitalization of those small and mid-sized growth
companies was $5.86 billion. Compared to its benchmark, the Funds
investments have higher profitability (as exhibited through greater
operating margin, EBITDA margin and net margin). They also exhibit better
internal returns (higher return on invested capital and return on equity).
And they are more conservatively financed (lower debt to market
capitalization ratio) and, as important as any other metrics, they have
actions more consistent with growth earnings (significantly lower standard
deviation of earnings and lower beta). We find these important metrics
important in limiting risk for a concentrated portfolio.
The Fund has had less exposure to the Health Care sector than its index.
Currently, the Fund does not hold any health care investments, while the
average weighting in the index approached 20%. The Health Care sector, and
particularly the biotech category, has been an extremely strong performer
the past few years as investors expect increased drug approvals and greater
profits. However, we believed that the industry did not offer sufficiently
attractive risk/reward characteristics for a concentrated portfolio. Instead,
the Fund invested in service providers to the health care space such as
Benefitfocus, which assist company employees select appropriate benefit
plans (including health care coverage). While not directly tied to the health
care industry, this company should benefit from an aging employee base
that is often confused by increasingly complex health coverage options. The
Funds lack of exposure to the strong returns in the biotech health care space
posed a significant relative disadvantage in the period.
Table VI.
Top 10 holdings as of March 31, 2015
Market Quarter
Cap
End
When
Market
Percent
Year
Acquired
Cap
Amount of Net
Acquired (billions) (billions) (millions) Assets
2014
2009
2013
2014
$31.2
4.2
2.3
6.2
$23.7
8.8
3.8
6.4
$15.5
14.2
14.1
13.8
7.7%
7.1
7.0
6.9
2008
2011
2.5
5.7
6.6
14.5
11.9
10.4
5.9
5.1
2010
2012
2014
2014
1.9
2.3
1.8
0.7
3.7
2.6
2.2
1.0
9.6
8.8
8.4
8.3
4.8
4.4
4.2
4.1
Ronald Baron
CEO and Portfolio Manager
April 30, 2015
Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary
prospectus contains this and other information about the Funds. You may obtain them from its distributor, Baron Capital, Inc., by calling 1-800-99BARON or
visiting www.BaronFunds.com. Please read them carefully before investing.
The Adviser believes that there is more potential for capital appreciation in small and medium-sized companies and using non-diversification, but there also
may be more risk. Specific risks associated with non-diversification include increased volatility of the Funds returns and exposure of the Fund to greater risk
of loss in any given period. Securities of small and medium-sized companies may be thinly traded and they may be more difficult to sell during market
downturns. The Fund may not achieve its objectives. Portfolio holdings are subject to change. Current and future holdings are subject to risk.
The discussions of the companies herein are not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of the
respective portfolio managers only through the end of the period stated in this report. The portfolio managers views are not intended as recommendations or investment advice to any person reading
this report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.
This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Focused Growth Fund by anyone in any jurisdiction where it would be unlawful under the laws of
that jurisdiction to make such offer or solicitation.
Beta: measures a funds sensitivity to market movements. The beta of the market (Russell 2500 Growth Index) is 1.00 by definition.
P/E: the price earnings ratio is a valuation ratio of a companys current stock price to its actual earnings per share.
41
Three Months3
One Year
Three Years
Five Years
Since Inception (December 31, 2008)
Baron
International
Growth
Fund1,2
MSCI
ACWI ex
USA IMI
Growth
Index1
MSCI
ACWI ex
USA Index1
2.84%
(1.07)%
7.48%
7.41%
13.14%
4.75%
1.18%
7.16%
5.87%
10.99%
3.49%
(1.01)%
6.40%
4.82%
10.04%
MICHAEL KASS
PORTFOLIO MANAGER
Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares as of December 31, 2014 was 1.63%,
but the net annual expense ratio was 1.50% (net of the Advisers fee waivers). The performance data quoted represents past performance. Past performance
is no guarantee of future results. The investment return and principal value of an investment will fluctuate; an investors shares, when redeemed, may be worth
more or less than their original cost. The Adviser has reimbursed certain Fund expenses (by contract as long as BAMCO, Inc. is the adviser to the Fund) and the
Funds transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower.
Current performance may be lower or higher than the performance data quoted. For performance information current to the most recent month-end, visit
www.BaronFunds.com or call 1-800-99BARON.
2
3
The Funds 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 Funds
level of participation in IPOs and secondary offerings will be the same in the future.
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 equity market performance of large, mid and small cap growth securities across developed and emerging markets, excluding the United States. The MSCI ACWI
ex USA Index Net USD measures the equity market performance of large and mid cap securities across developed and emerging markets, excluding the United States. The
indexes and Baron International Growth Fund include reinvestment of dividends, net of foreign withholding taxes, which positively impact the performance results.
The performance data does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
Not annualized.
42
it will seek to improve returns via enhanced dividend payout and/or share
repurchase. We retain conviction due to the companys dominant market
position and ability to generate high returns on capital. (Anuj Aggarwal)
Shares of JUST EAT plc, an online restaurant delivery marketplace in Europe,
Latin America, and Canada, rose in Q1. JUST EAT reported solid results for
the back half of 2014, guided toward sales slightly above Street estimates
for 2015, and demonstrated execution across its European footprint and
evidence that its #1 position across most of its markets is defensible and
sustainable. We believe JUST EAT will benefit from the trend toward online
delivery ordering and its large lead in a winner-take-all industry.
(Eric Guzman)
Rakuten, Inc. is a Japanese online shopping mall and financial services
company. Shares increased due to a solid Q4 earnings report, where
improvements in loss-making businesses have renewed investor optimism.
On the M&A front, the market has taken a less critical stance on its
acquisition of Viber, a loss-making mobile messaging app with 236 million
monthly active users, and a positive view of its recent acquisition of Ebates,
an online coupon supplier that strengthens Rakutens overseas presence.
(Catherine Chen)
Table III.
Top detractors from performance for the quarter ended March 31, 2015
Table II.
Percent
Impact
Top contributors to performance for the quarter ended March 31, 2015
Percent
Impact
0.77%
0.59
0.56
0.52
0.46
0.90%
0.72
0.68
0.54
0.49
43
impact of the slowdown in Brazil and the adverse impact on the company
of the decline in the Brazilian Real. We reduced our position during the
quarter. (Kyuhey August)
Table VI.
Japan
United Kingdom
Germany
Israel
Canada
France
United States
Spain
Switzerland
Australia
Ireland
Italy
Hong Kong
Norway
Portfolio Structure
Table VII.
Percentage of securities in developing markets as of March 31, 2015
Percent of
Net Assets
Table IV.
Top 10 holdings as of March 31, 2015 - Developed Countries
Percent of
Net Assets
3.1%
2.8
2.7
2.3
2.3
2.2
2.0
2.0
2.0
2.0
1.6%
1.4
1.3
1.3
1.2
Exposure by Country: At the end of the first quarter of 2015, the Fund was
invested 75.7% in developed countries and 18.9% in developing
countries, with the remaining 5.4% in cash. The Fund seeks to maintain
broad diversification by country at all times. A detailed review of the
Funds holdings by country is available at the back of this Baron Funds
Quarterly Report.
44
China
India
Indonesia
Brazil
South Africa
7.6%
4.2
2.8
2.6
1.7
Recent Activity
Table V.
15.6%
14.3
11.7
5.5
5.2
4.2
3.9
3.8
3.0
2.6
1.7
1.5
1.4
1.3
During the quarter, we increased our holdings in Japan, Europe and the UK,
where we see country and company specific fundamentals improving, while
we decreased our exposure in the developing world, particularly in Brazil.
Notable new positions include Aena SA, the principal operator of airport
terminals in Spain that was recently privatized by the Spanish government,
and which we believe is very well positioned to benefit from improving
travel volumes as a result of stronger economic activity and the weaker
Euro. The company has strong cash generation potential and significant
operating leverage, which we believe will drive attractive dividend increases
in coming years. We also established new positions in Azimut Holding
S.p.A., a leading wealth management and asset management firm in Italy
positioned to benefit from the decline in deposit rates and yields on
European fixed income assets, and Abcam plc, which we have been
following for several years, a leading U.K. based provider of research-grade
antibodies for the biotech and research industries with a unique and
Outlook
The first quarter of 2015 appeared to confirm the prior quarters passage
into a new, more volatile environment for the global capital markets. Oil
prices, currencies, bond yields and equities continued to exhibit gyrations, as
key macro variables remained uncertain, monetary policy expectations
further diverged, and, as a result, deviation among asset classes, countries
and sectors remained wide and volatile. Further, we observe that the recent
quarter reflected a mean-reverting rotation in performance away from highquality growth stocks and towards the lower quality, more capital intensive
and cyclical elements of the market. In our view, this was driven by the
aggressive stance of the ECB, which provided a jolt of liquidity to offset
previous concerns over anticipated Fed hikes, allowing those stocks most
sensitive to the cost of and access to capital to recover some lost ground.
To us, the key event of the first quarter was the detail of the ECBs easing
campaign, which clearly beat market expectations. The relentless
suffocation of interest rates by developed world central bankers turned a
new chapter, with ten-year sovereign yields plunging to well below 50 basis
points across much of Europe and bank deposit rates going negative in
Switzerland and Scandinavia. In our complex and intertwined financial
world, such policy moves certainly create ripple effects, both intended and
unintended; the Euro has fallen to levels not seen in over a decade, and
yield-driven investors are forced further out on the risk spectrum. We
consider policies of financial repression self-reinforcing, as they encourage
sovereigns and corporates worldwide to add to already healthy levels of
leverage. As such, we suspect interest rates are likely to remain remarkably
low for a sustained period as any material increase is likely to stress the
system and thereby derail economic momentum. We view the current
financial and investment environment as a conundrum that we might
describe as the Truman Show market. Here, global monetary authorities
present a constructed reality, where developed world interest rates, the key
Michael Kass
Portfolio Manager
April 30, 2015
Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary
prospectus contains this and other information about the Funds. You may obtain them from its distributor, Baron Capital, Inc., by calling 1-800-99BARON or
visiting www.BaronFunds.com. Please read them carefully before investing.
Non-U.S. investments may involve additional risks to those inherent in U.S. investments, including exchange-rate fluctuations, political or economic instability,
the imposition of exchange controls, expropriation, limited disclosure and illiquid markets. This may result in greater share price volatility. Specific risks
associated with investing in small and medium-sized companies include that the securities may be thinly traded and they may be more difficult to sell during
market downturns. The Fund may not achieve its objectives. Portfolio holdings are subject to change. Current and future portfolio holdings are subject to risk.
The discussions of the companies herein are not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of the
respective portfolio manager only through the end of the period stated in this report. The portfolio managers views are not intended as recommendations or investment advice to any person reading
this report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.
This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron International Growth Fund by anyone in any jurisdiction where it would be unlawful under the
laws of that jurisdiction to make such offer or solicitation.
45
JEFFREY KOLITCH
PORTFOLIO MANAGER
Performance
Table II.
Table I.
Performance (Retail Shares)
Top contributors to performance for the quarter ended March 31, 2015
Three Months3
4.51%
One Year
16.19%
Three Years
24.10%
Five Years
21.34%
Since Inception
(December 31, 2009) (Annualized) 21.79%
Since Inception
(December 31, 2009) (Cumulative)3 181.47%
Quarter End
Market Cap
(billions)
MSCI
USA IMI
Extended
Real Estate
Index1
S&P 500
Index1
5.12%
19.12%
17.56%
15.65%
0.95%
12.73%
16.11%
14.47%
16.76%
14.87%
125.61%
107.09%
$13.6
2.5
12.3
29.2
7.6
Percent
Impact
0.54%
0.50
0.41
0.40
0.37
Many of our largest investments performed well in the first few months of
2015.
Mohawk Industries, Inc., the worlds largest flooring manufacturer,
announced the $1.2 billion acquisition of IVC Group, a leading producer of
Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares as of December 31, 2014 was 1.32%.
The performance data quoted represents past performance. Past performance is no guarantee of future results. The investment return and principal value of
an investment will fluctuate; an investors shares, when redeemed, may be worth more or less than their original cost. The Adviser has reimbursed certain Fund
expenses (by contract as long as BAMCO, Inc. is the adviser to the Fund) and the Funds transfer agency expenses may be reduced by expense offsets from an
unaffiliated transfer agent, without which performance would have been lower. Current performance may be lower or higher than the performance data quoted.
For performance information current to the most recent month end, visit www.BaronFunds.com or call 1-800-99BARON.
1
2
3
The indexes are unmanaged. 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 representations 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 the Fund
include reinvestment of interest, capital gains and dividends, which positively impact the performance results.
The performance data in the table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
Not annualized.
46
sheet vinyl, luxury vinyl tile (LVT), and laminate. This acquisition should
generate a number of benefits and is expected to be highly accretive. Most
notably, the acquisition will increase the companys exposure to the fast
growing LVT market, which currently accounts for 5% of total flooring sales
in the U.S. and is expected to grow at a mid-teens rate annually for the next
several years. Under the leadership of CEO Jeff Lorberbaum, the company
has a long-standing history of successful acquisitions, and we believe the
IVC acquisition will deliver similar results. We remain optimistic about the
longer-term prospects for Mohawk, and believe the company will continue
to grow through acquisitions, product innovations, international expansion,
and a cyclical recovery in the U.S. housing and commercial real estate
market.
In January, Diamond Resorts International, Inc., a leading timeshare
operator, announced that it will eliminate its external management
structure, whereby certain officers and employees were not employed or
directly compensated by the company, but rather by an external company.
We view this improvement in corporate governance favorably and believe it
will help to narrow Diamond Resorts significant valuation gap between
itself and its peers. Despite industry leading growth, Diamond Resorts
trades at only 8.7 times cash flow, while its peers trade at 12-13 times cash
flow. Earlier this year, the company also reported very strong business
results. Cash flow increased 43% in 2014, and the company is guiding to
continued strong growth in 2015. We first began acquiring shares in
Diamond less than two years ago at $14 per share. Since then, the shares
have more than doubled to $33. We believe the shares can continue to
achieve mid-teen returns in the years ahead.
Early in 2015, Norwegian Cruise Line Holdings Ltd. appointed Frank Del
Rio as President and CEO. Frank had been the CEO of Prestige Cruises,
which Norwegian acquired in 2014. We had the opportunity to meet with
him at the companys first-ever investor day a few months ago and were
impressed. He detailed his long-term strategic vision to drive revenue
growth and lower costs. Management believes it can grow earnings in the
next three years from $2.32 per share in 2014 to $5 per share in 2017,
representing approximately 30% annual growth. If management is
successful in generating $5 per share, we believe the shares would be valued
at 16 to 18 times earnings and appreciate to $80-$90 or approximately
50-70% higher from current levels.
In February, Hilton Worldwide Holdings, Inc. sold its Waldorf Astoria hotel
in New York City for an incredible $1.95 billion or 32 times cash flow! Hilton
will continue to operate the property under a 100-year management
agreement. It utilized the proceeds from this sale to acquire five other U.S.
hotel properties at approximately 13 times cash flow. Hilton also reported
strong business results, and management continues to believe that its
prospects for growth and share price appreciation are strong. For more on
the company, please see the Recent Activity section later in this letter.
Following strong earnings results, the shares of Jones Lang LaSalle, Inc.
continued to perform well. The company is the worlds second largest
commercial real estate services firm after CBRE Group, Inc., which is also a
top holding in the Fund. Jones Lang LaSalles business lines include leasing,
sales, property and facility management, and investment management. In
our opinion, all of its business categories remain well-positioned for the real
estate market recovery and growth during the next few years. We anticipate
that the shares can continue to appreciate 15% per year over the next few
years, in line with anticipated earnings growth.
Table III.
Top detractors from performance for the quarter ended March 31, 2015
Quarter End
Market Cap or
Market Cap
When Sold
Percent
(billions)
Impact
$12.8
44.0
2.2
3.5
39.6
0.35%
0.15
0.14
0.13
0.10
The shares of Wynn Resorts Ltd. and Las Vegas Sands Corp. continued to
underperform in the first few months of 2015. Business conditions in
Macau have remained weak due to Chinas anti-corruption campaign,
tightened visa restrictions, and the softer economic environment in Asia.
Though the near-term outlook may remain disappointing, several factors
bode well for both companies over the longer term. These include an
eventual rebound in gambling growth, improvements in travel
infrastructure (a new bridge, additional ferry and airport capacity, and rail
line upgrades) that should enhance visits to Macau, and the possible
issuance of new gaming licenses.
Essent Group Ltd. is a well-run mortgage insurance company that, in our
view, is well positioned to benefit from the emerging cyclical recovery in
housing and from the secular shift from public mortgage insurance to
private mortgage insurance. The shares, however, lagged in 2014, perhaps
due to the lackluster environment in the homebuilding market. More
recently, in response to the Federal Housing Administration (FHA)
announcement that it would cut its premium rates, the shares of the
company declined. This change could reduce the cost advantage of private
mortgage insurers and consequently reduce Essents addressable market.
We have chosen to exit our investment and reallocate the capital to our
higher conviction ideas.
Following a more than 65% return in 2014, the shares of Tower Bersama
Infrastructure Tbk PT, the second largest independent wireless tower
owner and operator in Indonesia, declined modestly in the first few months
of 2015. We remain optimistic about the prospects for the company.
Bersamas core business is leasing space for antennas and other equipment
for wireless signal transmission under long-term lease agreements with
Indonesian telecommunication operators. The long-term nature of these
lease agreements (contracts are typically 10 years) provides high
predictability of future revenues. We believe that Indonesia, with the fourth
largest population in the world, approximately 250 million people, presents
an attractive wireless market opportunity because the country is
underpenetrated from a wireless infrastructure perspective. Management
believes it may double its tower count in the next 5 years.
47
Portfolio Structure
The Fund differentiates itself as a balanced and more diversified real
estate-related fund than a typical REIT-dominated fund. We also
concentrate on performance through real estate cycles spanning more than
just a single year. We believe that our philosophy of investing in broader real
estate-related categories is a more sensible strategy that should produce
superior results over the long term.
REITs represented 21.9% of the Funds net assets. Business conditions are
generally strong for our REIT companies, and they may continue to benefit
from the possibility that interest rates remain low, limited new construction
activity, and accretive investment opportunities. We are mindful, however,
that the valuations of many REITs have become pricey (with compressed
dividend yields), and REITs may be more vulnerable to an eventual rise in
interest rates. We will continue to closely monitor our REIT investments.
Hotel & Leisure companies comprise 18.0% of the Fund. We maintain that
the prospects for our investments in this category are attractive amid
expectations of solid demand and low supply forecasts and
company-specific initiatives, some of which were detailed earlier in this letter.
Building Products/Services companies represent 12.0% of the Fund. We
believe the Funds investments in these companies should continue to
benefit from a multi-year recovery in housing.
The Fund has invested 10.9% in Senior Housing Operators that are well
positioned, in our opinion, to benefit from favorable demographic trends,
industry consolidation, a cyclical recovery in their businesses, and, perhaps,
initiatives that can unlock real estate value.
The complete list of the Funds real estate-related categories as of
March 31, 2015 is as follows:
Table IV.
Fund investments in real estate categories as of March 31, 2015
Percent of
Net Assets
3
4
21.9%
18.0
12.0
10.9
8.2
7.6
5.7
5.3
3.9
3.6
97.1
2.9
100.0%
Total includes 2.9% from Equinix, Inc., which has been operation as a REIT since
January 1, 2015.
Total would be 21.3% if included hotel REIT LaSalle Hotel Properties, Strategic
Hotels & Resorts, Inc. and Sunstone Hotel Investors, Inc.
Total would be 6.0% if included tower REIT American Tower Corp.
This category includes non-REIT Data Centers and Infrastructure-Related.
48
Recent Activity
Table V.
Top net purchases for the quarter ended March 31, 2015
REITs1
Hotel & Leisure2
Building Products/Services
Senior Housing Operators
Real Estate Service Companies
Real Estate Operating Companies
Casinos & Gaming Operators
Homebuilders & Land Developers
Tower Operators3
Other4
Quarter End
Market Cap
(billions)
Purchased
Amount
(millions)
$10.3
9.3
6.8
29.2
12.8
$56.7
32.9
23.0
20.2
18.1
49
Quarter End
Market Cap or
Market Cap
When Sold
(billions)
Amount Sold
(millions)
$14.3
3.6
10.4
1.8
2.2
$25.8
24.8
22.5
20.1
19.8
Outlook
We are mindful that some of the contributors to positive equity market
performance in the last few years such as favorable valuations, an
accommodating Federal Reserve, and the undervalued U.S. dollar, are now
somewhat less compelling. Consequently, the outsized equity returns of the
last five years are unlikely to be repeated. Nevertheless, we continue to
believe that the prospects for real estate and the Fund are attractive.
In our opinion, economic conditions are generally solid, and currently offer
a rare and welcome combination of low interest rates, low inflation, cheap
oil prices, solid job growth, and increased household formation.
We believe stocks remain attractive versus bonds. Longer duration bonds
are so expensive now that they carry a negative yield when adjusted for the
normalized inflation that consumers may experience in future years. For
example, the 10-year treasury yield has declined from 6.58% in
January 2000 to 1.90% today, despite a longer-term inflation expectation
of at least 2.0%.
The backdrop for commercial real estate remains strong while demand, in
most cases, is outstripping new construction activity. Strong balance sheets,
low interest rates, and wide access to cheap capital afford many companies
the opportunity to develop and acquire real estate, and to propel growth.
In the housing market, it appears that, at long last, the pieces are falling in
place for a normalized and growing residential market. Employment and
household formation have improved. Credit conditions are easing and
mortgage rates are near historical lows. In numerous markets, renting is
more expensive than owning a home. There are signs that the millennial
generation (approximately 75 million ages 18-34) is beginning to move out
of mom and dads home. New home sales are up 25% year-to-date.
50
Table VII.
Top 10 holdings as of March 31, 2015
Quarter End Quarter End
Market
Investment
Cap
Value
Percent of
(billions)
(millions) Net Assets
$ 6.9
29.2
12.9
8.8
0.8
12.3
13.6
10.3
10.9
2.5
$146.3
71.0
68.5
62.1
60.2
59.4
57.1
56.9
56.9
56.3
7.7%
3.7
3.6
3.3
3.2
3.1
3.0
3.0
3.0
3.0
Jeffrey Kolitch
Portfolio Manager
April 30, 2015
Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary
prospectus contains this and other information about the Funds. You may obtain them from its distributor, Baron Capital, Inc., by calling 1-800-99BARON or
visiting www.BaronFunds.com. Please read them carefully before investing.
Baron Real Estate Fund is non-diversified, which means it may invest a greater percentage of its assets in fewer issues, and which increases the volatility of
its returns and exposes it to potentially greater losses in a given period. In addition to general market conditions, the value of the Fund will be affected by
the strength of the real estate markets. Factors that could affect the value of the Funds holdings include the following: overbuilding and increased
competition; increases in property taxes and operating expenses; declines in the value of real estate; lack of availability of equity and debt financing to
refinance maturing debt; vacancies due to economic conditions and tenant bankruptcies; losses due to costs resulting from environmental contamination
and its related cleanup; changes in interest rates; changes in zoning laws, casualty or condemnation losses; variations in rental income; changes in
neighborhood values; and functional obsolescence and appeal of properties to tenants. The Fund may not achieve its objectives. Portfolio holdings are subject
to change. Current and future portfolio holdings are subject to risk.
Discussions of the companies herein are not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of the
respective portfolio managers only through the end of the period stated in this report. The portfolio managers views are not intended as recommendations or investment advice to any person reading
this report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.
This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Real Estate Fund by anyone in any jurisdiction where it would be unlawful under the laws of that
jurisdiction to make such offer or solicitation.
51
Table I.
Performance (Retail Shares)
Annualized for periods ended March 31, 2015
Baron
Emerging
Markets
Fund1,2
MSCI
EM IMI
Growth
Index1
MSCI
EM IMI
Index1
Three Months3
(0.42)%
One Year
1.28%
Three Years
8.02%
Since Inception (December 31, 2010) 4.46%
4.10%
3.42%
3.29%
0.10%
2.42%
0.53%
0.69%
(1.45)%
MICHAEL KASS
PORTFOLIO MANAGER
Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares as of December 31, 2014 was 1.52%,
but the net annual expense ratio was 1.50% (net of the Advisers fee waivers). The performance data quoted represents past performance. Past performance
is no guarantee of future results. The investment return and principal value of an investment will fluctuate; an investors shares, when redeemed, may be worth
more or less than their original cost. The Adviser has reimbursed certain Fund expenses (by contract as long as BAMCO, Inc. is the adviser to the Fund) and the
Funds transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower.
Current performance may be lower or higher than the performance data quoted. For performance information current to the most recent month end, visit
www.BaronFunds.com or call 1-800-99BARON.
The Funds 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 Funds level of participation in
IPOs and secondary offerings will be the same in the future.
The MSCI EM (Emerging Markets) IMI indexes cited are unmanaged, free float adjusted market capitalization weighted indexes reflected in U.S. dollars. The MSCI EM (Emerging
Markets) IMI Growth Index Net USD and the MSCI EM (Emerging Markets) IMI Index Net USD are designed to measure equity market performance of large-, mid- and smallcap 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.
The performance data does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
Not annualized.
52
Lupin Ltd.
Kingdee International Software Group Co. Ltd.
Tencent Holdings, Ltd.
Steinhoff International Holdings Ltd.
China Mengniu Dairy Co. Ltd.
0.53%
0.37
0.36
0.35
0.32
0.80%
0.74
0.66
0.47
0.34
53
Portfolio Structure
Table IV.
Top 10 holdings as of March 31, 2015
Percent of
Net Assets
2.5%
2.5
2.1
1.9
1.8
1.8
1.7
1.7
1.7
1.6
Exposure By Country
Table V.
Percentage of securities by country as of March 31, 2015
Percent of
Net Assets
China
India
Taiwan
Korea
South Africa
Brazil
Philippines
Indonesia
Mexico
Hong Kong
Thailand
Singapore
Chile
United Arab Emirates
United Kingdom
21.4%
18.1
10.2
8.4
7.1
5.7
4.7
4.7
4.5
2.8
1.5
1.3
0.3
0.2
0.2
Exposure by Market Cap: The Fund may invest in companies of any market
capitalization, and we have generally been broadly diversified across large-,
mid- and small-cap companies, as we believe developing world companies
of all sizes often exhibit attractive growth potential. At the end of the first
quarter of 2015, the Funds median market cap was $5.02 billion, and we
were invested approximately 52.9% in large/giant cap companies, 30.0% in
mid-cap companies and 8.2% in small/micro-cap companies, as defined by
Morningstar, with the remainder in cash.
Recent Activity
During the quarter, the most notable area of investment was a new theme
based on the emergence of a group of competitively advantaged Asian
54
Outlook
The first quarter of 2015 appeared to confirm the prior quarters passage
into a new, more volatile environment for the global capital markets. Oil
prices, currencies, bond yields and equities continued to exhibit gyrations,
as key macro variables remained uncertain, monetary policy expectations
further diverged, and, as a result, deviation among asset classes, countries
and sectors remained wide and volatile. Further, we observe that the recent
quarter reflected a mean-reverting rotation in performance away from
high-quality growth stocks and towards the lower quality, more capital
intensive and cyclical elements of the market. In our view, this was driven
by the aggressive stance of the ECB, which provided a jolt of liquidity to
offset previous concerns over anticipated Fed hikes, allowing those stocks
most sensitive to the cost of and access to capital to recover some lost
ground.
To us, the key event of the first quarter was the detail of the ECBs easing
campaign, which clearly beat market expectations. The relentless
suffocation of interest rates by developed world central bankers turned a
new chapter, with ten-year sovereign yields plunging to well below 50 basis
points across much of Europe and bank deposit rates going negative in
Switzerland and Scandinavia. In our complex and intertwined financial
world, such policy moves certainly create ripple effects, both intended and
unintended; the Euro has fallen to levels not seen in over a decade, and
yield-driven investors are forced further out on the risk spectrum. We
consider policies of financial repression self-reinforcing, as they encourage
sovereigns and corporates worldwide to add to already healthy levels of
leverage. As such, we suspect interest rates are likely to remain quite low for
a sustained period as any material increase is likely to stress the system and
thereby derail economic momentum. We view the current financial and
investment environment as a conundrum that we might describe as the
Truman Show market. Here, global monetary authorities present a
constructed reality, where developed world interest rates, the key variable
upon which all other market instruments must be evaluated on a relative
basis, are manipulated rather than set by market forces. Likewise, we must
consider whether the attendant pressure on rates has resulted in capital
misallocation and the mispricing of risk on fixed income instruments. We
note that as risk free rates drift closer to zero, asset prices rise, and all-else
equal, forward-looking returns on equity securities thereby likely fall. While
represent over 50% of our invested capital, and which we believe will serve
as a catalyst for more countries to follow suit in coming years. After a
sustained period of relative underperformance for emerging market equities
in general, we suspect we may soon see increasing opportunities, and we
remain focused on the future value creation latent in our markets and
inherent in our discipline.
Thank you for investing in the Baron Emerging Markets Fund.
Sincerely,
Michael Kass
Portfolio Manager
April 30, 2015
Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary
prospectus contains this and other information about the Funds. You may obtain them from its distributor, Baron Capital, Inc., by calling 1-800-99BARON or
visiting www.BaronFunds.com. Please read them carefully before investing.
In addition to the general stock market risk that securities may fluctuate in value, investments in developing countries may have increased risks due to a
greater possibility of: settlement delays; currency and capital controls; interest rate sensitivity; corruption and crime; exchange rate volatility; and inflation
or deflation. The Fund invests in companies of all sizes, including small and medium sized companies whose securities may be thinly traded and more difficult
to sell during market downturns. The Fund may not achieve its objectives. Portfolio holdings are subject to change. Current and future portfolio holdings are
subject to risk.
The discussions of the companies herein are not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of the
respective portfolio manager only through the end of the period stated in this report. The portfolio managers views are not intended as recommendations or investment advice to any person reading
this report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.
This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Emerging Markets Fund by anyone in any jurisdiction where it would be unlawful under the laws
of that jurisdiction to make such offer or solicitation.
55
Three Months3
1.65%
One Year
(16.67)%
Three Years
1.55%
Since Inception (December 30, 2011) 1.55%
(1.51)%
(13.47)%
0.50%
1.75%
0.95%
12.73%
16.11%
19.05%
JAMES STONE
PORTFOLIO MANAGER
Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares as of December 31, 2014 was 1.79%, but
the net annual expense ratio was 1.35% (net of the Advisers fee waivers). The performance data quoted represents past performance. Past performance is no
guarantee of future results. The investment return and principal value of an investment will fluctuate; an investors shares, when redeemed, may be worth more
or less than their original cost. The Adviser has reimbursed certain Fund expenses (by contract as long as BAMCO, Inc. is the adviser to the Fund) and the Funds
transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower. Current
performance may be lower or higher than the performance data quoted. For performance information current to the most recent month end, visit
www.BaronFunds.com or call 1-800-99BARON.
The Funds 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 Funds
level of participation in IPOs and secondary offerings will be the same in the future.
The indexes are unmanaged. The S&P North American Natural Resources Sector Index measures the performance of U.S.-traded natural resources related stocks and the S&P
500 Index of 500 widely held large cap U.S. companies. The indexes and the Fund are with dividends, which positively impact the performance results.
The performance data in the table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemptions of Fund shares.
Not annualized.
56
SM Energy Co.
Concho Resources, Inc.
SunEdison, Inc.
Newfield Exploration Co.
Tallgrass Energy Partners, LP
2012
2012
2014
2015
2013
Percent
Impact
0.92%
0.75
0.62
0.62
0.46
Table III.
Top detractors from performance for the quarter ended March 31, 2015
Year
Acquired
Percent
Impact
2013
2013
2014
2012
2014
0.66%
0.41
0.34
0.33
0.28
Portfolio Structure
As we discussed in the review of our performance earlier in this letter, we
believe that we have a process and a strategy that differentiates our Fund
from our peers and that this has been one of the factors that has contributed
to our strong performance over the past several years. The results of this
process and strategy are reflected in the structure of our portfolio as well as
in our individual stock selection. Our focus on growth over the long term
often leads us to invest in more mid-cap companies than large-cap, and we
have chosen to eschew investing in the mega-cap oil companies that we
believe are long-term growth challenged. In addition, we choose to allocate
more capital to the midstream and energy infrastructure segments of the
industry and towards renewable or alternative energy companies than many
of our peer funds. At the end of the quarter, our portfolio could be broken
down into the following sub-industries or categories:
Oil & Gas Exploration & Production The E&P sub-industry represented
36.4% of the Fund at the end of the quarter and is largely focused on U.S.
based producers that operate in a number of different unconventional
resource plays in the U.S. Even though these companies are suffering under
the current weight of low oil prices, we believe these companies are
capable of generating strong long-term growth in a more normalized price
environment and represent good value at current levels. Our top positions
in the E&P sector represent six of the top ten positions in the Fund.
Oil & Gas Storage and Transportation This sub-industry, which is
largely composed of master limited partnerships and publicly traded
* As of March 31, 2015, for the one-year (102 funds in the Morningstar US OE Equity Energy Category), three-year (81 funds in the category) and Since Inception (December 30, 2011) (81 funds in
the category) periods, Morningstar ranked Baron Energy and Resources Fund Retail Share Class in the 41st, 34th and 40th percentiles, respectively, and ranked Baron Energy and Resources Fund
Institutional Share Class in the 40th, 31st and 38th percentiles, respectively, in the category. These rankings are based on total returns.
For the period ended 3/31/2015, Morningstar 1-year star rating is based on risk adjusted returns with 102 funds in the category; and 3-year star rating is based on risk adjusted returns with 81 funds
in category. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a funds
monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of
funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted
as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.)
As of March 31, 2015, for the one-year (150 funds in the Lipper Global Natural Resources Funds Category), three-year (138 funds in the category) and Since Inception (December 30, 2011) (136
funds in the category) periods, Lipper ranked Baron Energy and Resources Fund Retail Share Class in the 48th, 22nd and 24th percentiles, respectively, and ranked Baron Energy and Resources Fund
Institutional Share Class in the 47th, 21st and 23rd percentiles, respectively, in the category. These rankings are based on total returns.
Lipper Leader ratings for Total Return reflect funds historical total return performance relative to peers. Ratings for Total Return are computed for all Lipper classifications with five or more distinct
portfolios and span both equity and fixed-income funds (e.g., large-cap core, general U.S. Treasury, etc.).
Lipper Leader ratings for Consistent Return reflect funds historic returns, adjusted for volatility, relative to peers. Ratings for Consistent Return are computed for all Lipper classifications with five or
more distinct portfolios and span both equity and fixed-income funds (e.g., large-cap core, general U.S. Treasury, etc.).
Lipper Leader ratings for Tax Efficiency reflect funds historical success in postponing taxable distributions relative to peers. Scores for Tax Efficiency are computed for all Lipper classifications with
five or more distinct portfolios and span both equity and fixed-income funds (e.g., large-cap core, general U.S. Treasury, etc.).
The ratings are subject to change every month and are calculated for the following time periods: 3-year, 5-year, 10-year, and overall. The overall calculation is based on an equal-weighted average
of percentile ranks for the Total Return metrics, Consistent Return metrics or Tax Efficiency metrics, respectively, over three-, five-, and ten-year periods (if applicable). The highest 20% of funds in
each classification are named Lipper Leaders for Total Return, Consistent Return and Tax Efficiency, respectively, the next 20% receive a rating of 4, the middle 20% are rated 3, the next 20% are
rated 2, and the lowest 20% are rated 1.
57
general partnerships, is the second largest sub-industry for the Fund and
represented 25.7% of our assets at the end of the quarter, a strong
overweight compared to our benchmark. We continue to see strong
opportunities for distributable cash flow growth from our holdings in this
sub-industry and expect our investments in this area to deliver excellent
risk-adjusted returns. We tend to focus on companies with a high
proportion of cash flows related to fixed fee businesses and growth that is
driven either by highly visible organic investments or sizeable inventories
of qualifying assets that can be dropped down to an MLP over time.
Oil & Gas Equipment, Services & Drilling We are relatively
underweight this sub-industry at 13.7% of assets, as we believe that in the
current environment, E&P companies are in a better position to create
value and gain an advantage over service and equipment providers.
However, we did moderately increase our exposure to the sub-industry
during the quarter as valuations became more attractive, and we began to
anticipate that industry conditions would likely bottom in the first half of
this year.
Renewable Energy Renewable or Alternative Energy is not a specific
sub-industry, but this is really the appropriate classification for our
investments in the Utilities and Information Technology sectors, since our
investments in these two areas are companies involved in the construction
and operation of solar and wind electricity generation assets. We believe
that investment in renewable energy assets and businesses will be perhaps
the fastest growing segment of the energy industry for the next decade and
beyond, and we have actively ramped up our exposure to this segment over
the past 12 months. Our holdings in renewable energy related companies
rose to 7.0% at the end of the quarter, and we see room for additional
growth.
Industrials and Materials About 9.6% of our portfolio is allocated to
these sectors, but most of our investments in these sectors are businesses
that are closely related to the energy industry and will benefit from our
long-term view on key growth trends affecting various parts of the energy
industry. For example, Flotek Industries is classified as a Materials company,
but it essentially sells chemicals to the oil industry that are used in the
drilling and completion of shale oil & gas wells.
Table IV.
Top 10 holdings as of March 31, 2015
Market Quarter
Cap
End
When
Market
Percent
Year
Acquired
Cap
Amount of Net
Acquired (billions) (billions) (millions) Assets
58
2012
2015
2014
2012
2014
2012
2012
2013
2013
2014
$10.1
3.9
2.5
4.9
5.6
31.4
1.7
4.1
1.2
3.3
$13.9
5.7
2.3
3.5
6.5
37.3
5.4
3.9
1.2
3.6
$3.4
3.0
2.9
2.7
2.6
2.6
2.5
2.4
2.4
2.1
4.2%
3.6
3.5
3.4
3.2
3.1
3.0
2.9
2.9
2.5
Recent Activity
Table V.
Top net purchases for the quarter ended March 31, 2015
Quarter End Amount
Market Cap Purchased
(billions)
(millions)
$5.7
2.8
2.8
1.3
1.4
$2.5
1.7
1.3
1.3
1.2
$0.7
0.6
0.5
0.5
0.5
Outlook
During the quarter, oil markets faced continued headwinds as the
oversupply situation that was anticipated by markets after OPEC decided
not to rein in production last November materialized. As a consequence,
U.S. oil prices fell by another 10.7% during the quarter. However, at points
in mid-January and early-March, prices were down at least 20% from the
end of the year before rallying back. We think that the behavior of oil prices
during the quarter reflected the push and pull of bearish and bullish forces
as industry fundamentals gave conflicting signals during the quarter. U.S.
inventories built relentlessly to record levels, prompting fears among some
investors that the U.S. could actually run out of room to store all the oil that
was building up in inventory. However, while U.S. inventories were rising to
record levels, oil and product inventories in Europe and Asia were not
building as expected and suggested that: 1) the oversupply problem was
really constrained to the U.S. market, which is distorted by U.S. oil export
policies; and 2) that the oversupply was not as bad as initially feared would
be the case due to stronger than expected demand in the first quarter.
Recent data from the International Energy Agency indicates that global
demand has been stronger than expected, particularly driven by higher
demand in the U.S., India and more recently in China. U.S. petroleum
product demand appears to have risen by over 4% year-over-year in the
quarter, and Chinas demand last month appears to have grown by 7%, its
fastest growth rate in many months. In addition, the lack of inventory
accumulation in Europe or Asia indicates that demand in these markets has
also been stronger than expected. We have seen this in the strength of
refining margins in both regions, which are often a good proxy for demand.
We believe that demand is responding to a combination of lower prices and
stronger economic growth and could continue to benefit as the effects of
quantitative easing improve the economic outlook in a number of key
developed economies.
In addition to seeing green shoots for a recovery in the demand data from
the worlds two largest consumers of oil, we also are seeing indications of what
will likely happen to future oil supply as a consequence of the fall in prices and
consequently cash flows for oil companies. During the quarter, oil companies
around the world announced capital spending budgets for 2015 that indicated
not only a very steep decline in spending, but that companies would be getting
to lower levels of drilling and completion activity much quicker than expected.
As a result, production guidance and growth rates were slashed throughout the
industry, leading us to believe that while U.S. oil production may grow this year
as a consequence of last years drilling strength, production growth would
likely fall to zero by the end of the year and be on a downward trajectory
heading into 2016. We expect a similar pattern to emerge for non-U.S. and
non-OPEC production, which had not grown in the past five years despite oil
prices averaging over $100 per barrel and record levels of investment. If nonU.S. and non-OPEC producers were not growing in a $100 oil price
environment, it is unlikely that growth can be achieved with 40-50% less cash
flow as is implied by the current oil price level.
We believe that the combination of stronger than expected demand and
slowing supply growth (if not outright declines) will lead to a more
balanced oil market in the quarters ahead and a recovery toward
normalized prices that, in our view, should range between $70-90 over
time. We define a normalized oil price as the price level that allows
the industry to generate sufficient cash flow to support the level of
reinvestment and the returns on investment that are needed to offset
reservoir depletion, grow production and meet rising demand. Based
on our analysis of industry economics over the past 25 years, we do not see
the current oil price as sustainable and the market reaction that we are
seeing of stimulating demand and curtailing investment is a perfect
example of why current prices are not sustainable. We dont know when
prices will return to normalized levels (we suspect sooner rather than
59
James Stone
Portfolio Manager
April 30, 2015
Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary
prospectus contains this and other information about the Funds. You may obtain them from its distributor, Baron Capital, Inc., by calling 1-800-99BARON or
visiting www.BaronFunds.com. Please read them carefully before investing.
The Fund is non-diversified, which means the volatility of the Funds returns may increase and expose the Fund to greater risk of loss in any given period.
Energy companies can be affected by fluctuations in energy prices and supply and demand of energy fuels. Resources industries can be affected by
international political and economic developments, the success of exploration projects, and meteorological events.
The discussions of the companies herein are not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of the
respective portfolio manager only through the end of the period stated in this report. The portfolio managers views are not intended as recommendations or investment advice to any person reading
this report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.
This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Energy and Resources Fund by anyone in any jurisdiction where it would be unlawful under the
laws of that jurisdiction to make such offer or solicitation.
60
MSCI
ACWI
Growth
Index1
MSCI
ACWI
Index1
2.54%
6.67%
13.75%
4.36%
9.55%
12.31%
2.31%
5.42%
11.51%
April 30, 2015 will mark the three year anniversary of this Fund. In the next
quarterly letter, we plan to provide a more detailed performance analysis
and discuss whats worked, what has not, and what lessons were learned in
the process of managing this Fund over the last three years.
Table II.
Top contributors to performance for the quarter ended March 31, 2015
Quarter End
Market Cap
(billions)
Table I.
Performance (Retail Shares)
Three Months3
One Year
Since Inception (April 30, 2012)
ALEX UMANSKY
PORTFOLIO MANAGER
$ 3.7
172.8
6.5
4.9
4.5
Percent
Impact
1.24%
1.04
0.94
0.76
0.47
Performance listed in the table above is net of annual operating expenses. Annual expense ratio for the Retail Shares as of December 31, 2014 was 3.61%, but the
net annual expense ratio is 1.50% (net of the Advisers fee waivers). The performance data quoted represents past performance. Past performance is no guarantee
of future results. The investment return and principal value of an investment will fluctuate; an investors shares, when redeemed, may be worth more or less than their
original cost. The Adviser has reimbursed certain Fund expenses (by contract as long as BAMCO, Inc. is the adviser to the Fund) and the Funds transfer agency expenses
may be reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower. Current performance may be lower or
higher than the performance data quoted. For performance information current to the most recent month-end, visit www.BaronFunds.com or call 1-800-99BARON
2
3
The Funds 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 Funds level of participation in
IPOs and secondary offerings will be the same in the future.
The indexes are unmanaged. 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.
The performance data in the table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
Not annualized.
61
evidence that its #1 position across most of its markets is defensible and
sustainable. We believe that penetration rates for online restaurant delivery
services are still low, especially in Latin America, and that JUST EAT has a lot
of room for return-generative growth across its markets. We also think that
the companys large lead over competitors in a winner-take-all industry is a
meaningful and sustainable competitive advantage.
Shares of Amazon.com rose 20% as the company finally reported quarterly
results that gave investors something to cheer about. While we dont get hung
up too much on quarterly performance, we, too, were pleased with continuing
improvements in the gross margins and better-than-expected profitability
outlook for 2015. We also believe that moves to provide greater disclosure,
including breaking out Amazon Web Services, will prove to be beneficial in
improving investor understanding and appreciation for the strength and
robustness of the companys core business. As the largest investment in the
Fund, Amazon continues to be our highest conviction long-term idea.
SunEdison is one of the largest developers of solar projects in the world.
TerraForm Power is a YieldCo created and majority owned by SunEdison
(70%) for the purpose of owning the operating assets and producing and
distributing cash flows to shareholders. The YieldCo serves to lower the cost
of capital, which, in turn, increases the value of the solar assets. Late last
year, the two companies announced a joint acquisition of First Wind for
$2.4 billion, making the combined company one of the largest producers
and operators of wind projects as well. SunEdison, the second largest
position in the Fund at the end of this quarter, appreciated 23%, while
TerraForm, our 11th largest investment, was up 19%. We believe the shares
of both companies did well due to increased investor confidence in the
companies strategies and execution. We continue to be optimistic about
their long-term growth and value creation prospects and our conviction, as
well as the size of our positions, remains unchanged.
With the shares rising over 45%, Qunar was our best absolute performer.
Based in Beijing, China, Qunar is one of the leading online travel providers
in what is a very rapidly growing market. With a rising standard of living
and the emerging middle class, we believe that demand for travel services
in China will continue to expand at a fast pace, and we think Qunar is
likely to be one of the main beneficiaries of this multi-year growth
opportunity.
Table III.
Top detractors from performance for the quarter ended March 31, 2015
62
Quarter End
Market Cap or
Market Cap
When Sold
(billions)
Percent
Impact
$205.2
0.8
2.6
3.1
3.5
0.89%
0.55
0.46
0.41
0.26
Portfolio Structure
Recent Activity
Table VI.
While there was little change at the top of the portfolio, we continue search
for new ideas and attempt to upgrade our lower conviction investments.
During the quarter, we added seven new investments and sold out of six
others. Portfolio turnover during the quarter was just above 6%.
The top 10 positions represented 42.6% of the Fund, the top 20 were 67.0%
and we exited the quarter with 45 holdings.
Table IV.
Top 10 holdings as of March 31, 2015
Quarter End Quarter End
Market
Investment
Cap
Value
Percent of
(billions) (thousands) Net Assets
Amazon.com, Inc.
SunEdison, Inc.
JUST EAT plc
Facebook Inc.
Google, Inc.
Sarana Menara Nusantara Tbk PT
Illumina, Inc.
Mellanox Technologies, Ltd.
Alibaba Group Holding Ltd.
Tower Bersama Infrastructure Tbk PT
$172.8
6.5
3.7
230.9
375.1
3.1
26.7
2.1
205.2
3.5
$529.9
402.9
394.8
386.6
348.5
343.4
317.4
310.3
282.4
249.2
6.3%
4.8
4.7
4.6
4.2
4.1
3.8
3.7
3.4
3.0
Exposure by Country
Table V.
Percentage of securities by country as of March 31, 2015
Percent of
Net Assets
United States
China
Indonesia
United Kingdom
Israel
Brazil
India
Canada
South Africa
Spain
Japan
Netherlands
Norway
48.1%
11.5
7.1
6.1
6.0
4.6
4.3
3.8
2.2
1.9
1.8
1.6
0.7
Top net purchases for the quarter ended March 31, 2015
Quarter End
Amount
Market Cap Purchased
(billions)
(thousands)
Naspers Ltd.
Brookfield Infrastructure Partners L.P.
Westlake Chemical Partners LP
Axis Bank Ltd.
Columbia Pipeline Partners LP
$64.7
6.8
0.7
21.2
2.8
$167.5
151.1
88.8
85.3
74.6
Market Cap
When Sold
(billions)
Amount
Sold
(thousands)
$ 2.4
0.7
56.9
3.4
0.8
$115.2
113.5
80.4
53.6
47.1
63
in which we are invested and continue to search for new ideas and
investment opportunities.
Thank you for investing in the Baron Global Advantage Fund.
Sincerely,
Outlook
Our goal remains to maximize long-term returns without taking significant
risks of permanent loss of capital. Our focus continues to be on identifying
and investing in unique companies with sustainable competitive
advantages that we believe have the ability to reinvest capital at high rates
of return. We are excited about the long-term prospects of the companies
Alex Umansky,
Portfolio Manager
April 30, 2015
Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary
prospectus contains this and other information about the Funds. You may obtain them from its distributor, Baron Capital, Inc., by calling 1-800-99BARON or
visiting www.BaronFunds.com. Please read them carefully before investing.
Growth stocks can react differently to issuer, political, market and economic developments than the market as a whole. Non-U.S. investments may involve
additional risks to those inherent in U.S. investments, including exchange-rate fluctuations, political or economic instability, the imposition of exchange
controls, expropriation, limited disclosure and illiquid markets, resulting in greater share price volatility. Securities of small and medium-sized companies may
be thinly traded and more difficult to sell.
The discussions of the companies herein are not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of the
respective portfolio managers only through the end of the period stated in this report. The portfolio managers views are not intended as recommendations or investment advice to any person reading
this report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.
This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Global Advantage Fund by anyone in any jurisdiction where it would be unlawful under the laws
of that jurisdiction to make such offer or solicitation.
64
Table II.
Top contributors to performance for the quarter ended March 31, 2015
Three Months3
6.72%
One Year
11.17%
Since Inception (September 30, 2013) 25.92%
6.63%
12.06%
14.06%
0.95%
12.73%
17.17%
Percent
Impact
3.19%
2.01
1.36
0.85
0.72
Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares as of September 30, 2014 was 2.16%,
but the net annual expense ratio was 1.35% (net of the Advisers fee waivers). The performance data quoted represents past performance. Past performance
is no guarantee of future results. The investment return and principal value of an investment will fluctuate; an investors shares, when redeemed, may be worth
more or less than their original cost. The Adviser has reimbursed certain Fund expenses (by contract as long as BAMCO, Inc. is the adviser to the Fund) and the
Funds transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower.
Current performance may be lower or higher than the performance data quoted. For performance information current to the most recent month end, visit
www.BaronFunds.com or call 1-800-99BARON.
2
3
The Funds 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 Funds
level of participation in IPOs and secondary offerings will be the same in the future.
The indexes are unmanaged. The Russell 2000 Growth Index measures the performance of small-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 the Fund are with dividends, which positively impact the performance results. Russell Investment Group is the
source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell is a trademark of Russell Investment Group.
The performance data in the table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
Not annualized.
65
While the investment has been volatile, we were finally rewarded in the first
quarter with a major validation of the companys technology and business
strategy. Shares doubled in January when Roche Holdings announced a broad
strategic relationship with FMI and initiated a tender for over 50% of FMIs
shares at $50 per share. Included in the various agreements with Roche are
plans to co-market FMIs tests overseas, development of additional high value
tests, and use of Roches US sales force to educate medical professionals
about the advantages of FMIs technology. And Roche left the existing
management team intact, which we view to be a highly favorable outcome.
We continue to believe FMI is the company best positioned to take share in
the emerging multi-billion dollar complex cancer diagnostics market.
least an additional billion dollars if new Intersect devices are approved for
non-surgical, in-office treatment of sinusitis. This could happen in late 2017
or early 2018. Shares rose in the quarter after XENT beat earnings
expectations and noted that it is advancing its product development on
schedule. We have been shareholders of the company since its IPO last July,
and we have been big fans of management and its growth strategy.
In the Fall of 2014, Esperion showed positive data from a phase 2b clinical
trial (called 008) in statin intolerant patients (showing great LDL lowering
effects without the side effects of statins). Additionally, the market saw the
unexpected successful completion of Mercks IMPROVE-IT trial (which helped
to establish a firmer link between lowering LDL cholesterol and lowering the
risk of heart disease). Esperion has had significant events in 2015 as well. First,
Esperion was notified by the FDA that it could engage in long-term studies of
the drug (as a clinical hold related to safety concerns was lifted). Second,
ESPR released complete data from the 008 trial that incrementally bolstered
investor confidence. Finally, the company released positive initial results from
the ETC-1002-009 trial (showing significant additional LDL lowering effects
when ESPRs drug was used in combination with a statin).
In March, Esperion raised about $190 million in an equity offering to fund
future trial development and position the drug for the market. Given the
size of the cholesterol market (20-27 million patients in U.S. and EU, which
equates to tens of billions of dollars in value) and the scarcity value of a late
stage cardiovascular disease asset, we believe Esperion is a top choice asset
for any large pharmaceutical company seeking pipeline and see Esperion as
a natural take-out candidate.
Pinnacle Entertainment, Inc., an operator of regional casinos, benefitted
from two unrelated factors. First, the company saw strong regional gaming
fundamentals with improved spend at its properties leading to higher
revenue and margins across its portfolio. Second, the company received an
unsolicited offer for its real estate holdings from Gaming and Leisure
Properties, Inc. We believe an acquisition of Pinnacles real estate by
Gaming and Leisure Properties, if it were to take place at the right price,
would be beneficial to shareholders of both companies.
Intersect ENT, Inc. sells a novel drug coated device (called Propel) that is
implanted in patients that have had surgery for chronic sinusitis. Its very
much like a stent for your sinuses. The market for Propel is now worth
potentially $750 million. We believe this market could be extended by at
66
JUST EAT plc provides online takeaway ordering services that allow
consumers to search for and order in real-time from their local takeaway
restaurants. The stock performed well in the first quarter because the
company provided strong 2014 results and issued a strong 2015 outlook.
Table III.
Top detractors from performance for the quarter ended March 31, 2015
Percent
Impact
BioScrip, Inc.
Coupons.com, Incorporated
Varonis Systems, Inc.
Flotek Industries, Inc.
E2open, Inc.
1.13%
0.60
0.55
0.46
0.31
BioScrip, Inc., a provider of specialty drug infusion services, was down in the
first quarter. We believe that BIOS is on the cusp of breaking out of some
operating difficulties caused by its (in retrospect) overly aggressive
acquisition strategy. We saw some early signs of this in last quarters
earnings report. However, shares sold off after the company took a big
charge this quarter for bad debt and raised capital to shore up its balance
sheet. We still believe in management and that the valuation is reasonable,
with the potential for large upside if the company is acquired. There has been
a significant amount of M&A activity in this area, and there is a good activist
presence in the investor base as well. We have maintained our investment.
Coupons.com, Incorporated offers a promotion platform that allows
consumer packaged goods companies to offer coupons to consumers. The
company is attempting to offer a digital replacement for the paper coupons
that exist in newspapers today. During the first quarter, the company issued
guidance that was below Street expectations. As a result, the stock declined
in the first quarter. While we realize there will be some volatility in
Coupons.coms earnings, we are very excited by its Retail IQ digital coupon
platform. The company continues to roll out the platform to additional
retailers and early results are promising.
Varonis Systems, Inc. is a provider of software that that allows enterprises
to map, analyze, manage and migrate their unstructured data. This data
includes spreadsheets, documents, presentations, emails, and other
employee generated data. During the quarter, the stock underperformed its
peers as investors expectations for a fourth quarter beat versus prior
management guidance were not met. We take a longer-term view and see
a very large market opportunity that VRNS can capture. We have high
conviction in managements ability to execute its growth plan.
Portfolio Structure
As of March 31, 2015, the Fund had $94.1 million under management and
was invested in 56 publicly traded stocks. At the end of the quarter, the top
10 positions represented 30.0% of the Funds assets.
Our key sector weightings at the end of March 2015 were 34.2% Health
Care (9.5% greater than the Russell 2000 Growth Index), 20.5%
Information Technology (5.3% below the Index), 14.4% Consumer
Discretionary (1.3% lower than the Index), 8.9% Industrials (5.4% below
the Index), and 8.5% Financials (1.0% greater than the Index).
Table IV.
Top 10 holdings as of March 31, 2015
Quarter End
Investment Percent
Year
Value
of Net
Acquired (millions)
Assets
2013
2013
2014
2014
2014
2014
2014
2013
2014
2014
$3.9
3.4
2.9
2.8
2.7
2.7
2.7
2.4
2.4
2.3
4.1%
3.6
3.1
3.0
2.9
2.9
2.9
2.6
2.5
2.4
Recent Activity
Table V.
Top net purchases for the quarter ended March 31, 2015
Quarter End Amount
Year
Market Cap Purchased
Acquired (billions)
(millions)
2015
2015
2015
2015
2014
$1.3
0.4
0.5
0.5
0.9
$2.2
1.8
1.5
1.3
1.2
67
E2open, Inc.
Polypore International, Inc.
Tallgrass Energy Partners LP
Chesapeake Lodging Trust
Capital Senior Living Corp.
2013
2014
2013
2013
2014
$0.6
1.5
1.0
1.2
0.7
$0.3
2.7
2.3
1.8
0.7
Net
Amount
Sold
(millions)
$1.7
1.6
1.6
1.4
0.9
Outlook
One of the things we have spoken about over the last 18 months was that
we expected to see a handful of our companies acquired each year. We felt
that way because we typically are buying businesses with high barriers to
entry, and in cases where another company wants to get into the same
business, it is generally faster and significantly cheaper to buy our
companies than it would be to try and develop the same business from the
ground up. Last year was a little bit of an anomaly as only one of our
companies was acquired during the year (Open Table). However, in the first
quarter of this year, we had two companies accept takeover offers
(Polypore International and E2Open), one company receive a large
investment at a stock price that was up almost 100% from where it had
been trading prior to the announcement (Foundation Medicine) and one
company receive an offer for its real estate holdings that valued the whole
company at a 50% premium to where it had been trading (Pinnacle
Entertainment). We really believe these offers validate our thesis and, while
we do not expect to see this level of activity every quarter, we do believe
that we will continue to see more takeover offers go forward.
Thank you for investing in the Fund.
Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary
prospectus contains this and other information about the Funds. You may obtain them from its distributor, Baron Capital, Inc., by calling 1-800-99BARON or
visiting www.BaronFunds.com. Please read them carefully before investing.
The Adviser believes that there is more potential for capital appreciation in smaller companies, but there also may be more risk. Specific risks associated with
investing in smaller companies include that the securities may be thinly traded and they may be more difficult to sell during market downturns. The Fund
may not achieve its objectives. Portfolio holdings are subject to change. Current and future portfolio holdings are subject to risk.
The discussions of the companies herein are not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of the
respective portfolio manager only through the end of the period stated in this report. The portfolio managers views are not intended as recommendations or investment advice to any person reading
this report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.
This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Discovery Fund by anyone in any jurisdiction where it would be unlawful under the laws of that
jurisdiction to make such offer or solicitation.
68
Baron Funds
Portfolio Market Capitalization (Unaudited)
Baron Asset Fund
Baron Asset Fund invests in mid-sized growth companies with market capitalizations above $2.5 billion or the smallest market cap stock in the Russell Midcap
Growth Index at reconstitution, whichever is larger, and below the largest market cap stock in the Russell Midcap Growth Index at reconstitution.
Company
Equity
Market Cap
(in millions)
$60,465
39,968
31,262
26,695
25,098
21,101
17,261
16,522
15,151
14,493
13,911
13,836
13,150
13,135
12,891
12,780
12,244
11,928
11,700
11,645
11,609
11,482
11,367
11,289
10,706
9,228
9,196
9,154
9,108
9,050
8,782
8,358
% of
Net
Assets
1.4%
2.8
1.4
3.5
0.7
0.9
1.6
2.0
3.0
1.8
1.0
3.2
1.3
0.4
2.7
0.9
1.7
1.2
1.7
1.5
1.4
0.9
1.1
3.4
1.4
3.2
1.9
1.5
0.6
1.7
2.1
1.0
Company
Equity
Market Cap
(in millions)
$8,094
7,971
7,939
7,828
7,710
7,339
7,327
7,236
7,184
6,770
6,640
5,932
5,908
5,879
5,674
5,262
5,255
5,202
4,549
4,506
4,460
4,332
3,858
3,759
3,691
3,677
3,596
2,852
2,449
2,331
1,213
% of
Net
Assets
0.8%
0.6
1.7
1.4
2.8
4.7
0.2
4.4
0.5
1.1
2.8
1.2
1.1
1.6
1.0
0.9
1.4
0.5
1.2
0.4
1.2
1.5
0.7
3.6
1.7
1.8
0.2
0.8
0.5
1.3
0.2
98.7%
69
Baron Funds
Baron Growth Fund
Baron Growth Fund invests in small-sized growth companies with market capitalizations up to the largest market cap stock in the Russell 2000 Growth Index
at reconstitution, or companies with market capitalizations up to $2.5 billion, whichever is larger.
Company
70
Equity
Market Cap
(in millions)
$17,399
15,318
11,166
9,228
7,939
7,826
7,773
7,710
7,339
7,327
7,236
7,062
6,929
6,891
6,770
6,640
6,392
6,104
5,908
5,879
5,809
5,365
5,255
5,210
4,814
4,750
4,651
4,506
4,467
4,460
4,397
4,387
4,332
4,331
4,297
4,290
4,191
3,871
3,858
3,759
3,724
3,691
3,677
3,638
% of
Net
Assets
3.8%
0.5
1.5
2.2
2.0
0.3
0.6
2.9
2.9
0.3
1.7
0.9
0.1
1.6
2.8
3.1
2.4
2.1
1.3
3.2
3.0
1.0
2.3
2.3
0.3
1.2
0.5
0.4
0.4
0.1
2.4
0.8
0.8
1.2
1.3
0.9
1.6
0.9
2.1
2.6
1.1
0.7
2.3
1.8
Company
Equity
Market Cap
(in millions)
$3,596
3,364
3,323
3,265
3,194
3,161
2,970
2,930
2,659
2,606
2,605
2,468
2,454
2,449
2,331
2,320
2,267
2,221
2,174
2,174
2,131
2,025
1,971
1,886
1,867
1,859
1,749
1,727
1,660
1,497
1,402
1,298
1,251
1,248
1,144
1,091
1,047
918
914
806
791
543
19
% of
Net
Assets
0.7%
1.6
1.1
0.2
0.6
1.4
0.4
0.6
1.7
1.0
1.4
0.9
0.1
0.3
0.7
1.1
0.2
0.6
1.1
1.2
1.3
1.2
0.4
0.4
0.7
1.1
1.1
0.2
0.6
0.8
0.3
0.1
0.2
0.7
1.1
0.3
1.0
1.1
0.1
0.1
0.5
0.2
0.0
98.6%
Baron Funds
Baron Small Cap Fund
Baron Small Cap Fund invests 80% of its net assets in small-sized growth companies with market capitalizations up to the largest market cap stock in the
Russell 2000 Growth Index at reconstitution, or companies with market capitalizations up to $2.5 billion, whichever is larger.
Company
Equity
Market Cap
(in millions)
$15,151
13,836
13,150
13,137
12,891
12,822
11,529
9,228
7,339
7,293
7,236
6,929
6,503
5,969
5,839
5,809
5,674
5,365
5,210
4,932
4,862
4,832
4,825
4,506
4,387
4,344
4,303
4,300
4,249
4,191
4,165
4,154
4,067
3,861
3,858
3,797
3,691
3,345
3,194
3,190
3,161
3,137
2,852
2,787
2,787
2,715
2,702
2,655
2,510
2,472
2,464
% of
Net
Assets
3.5%
2.1
1.5
1.1
0.8
0.6
3.5
1.5
3.0
2.5
1.9
2.4
1.5
2.2
0.5
0.5
0.9
1.3
1.4
0.9
2.2
1.4
1.0
0.5
0.9
1.7
3.0
1.3
0.5
1.8
1.4
0.6
0.8
1.0
2.0
0.2
1.4
1.1
1.2
0.5
2.2
0.8
1.0
0.8
0.3
0.7
0.2
0.4
1.4
1.5
1.0
Company
Equity
Market Cap
(in millions)
$2,439
2,320
2,290
2,221
2,216
2,174
2,060
2,044
2,020
1,998
1,977
1,973
1,971
1,958
1,815
1,789
1,779
1,762
1,747
1,725
1,713
1,660
1,639
1,633
1,622
1,612
1,466
1,429
1,395
1,383
1,376
1,358
1,325
1,248
1,217
928
914
845
833
805
746
726
561
472
396
382
309
295
24
% of
Net
Assets
1.8%
1.6
0.4
1.1
0.6
1.6
0.5
0.5
0.4
0.8
1.4
0.6
0.5
0.4
0.2
0.5
0.6
0.3
0.5
0.5
0.5
0.8
0.4
0.7
0.9
1.2
0.4
0.4
1.5
0.4
0.6
0.4
0.9
0.9
0.2
0.1
0.6
0.1
0.2
0.6
0.3
0.4
0.9
0.8
0.7
0.3
0.3
0.1
0.0
98.8%
71
Baron Funds
Baron Opportunity Fund
Baron Opportunity Fund invests in high growth businesses of any market capitalization selected for their capital appreciation potential.
Company
Equity
Market Cap
(in millions)
Facebook Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alibaba Group Holding Ltd. . . . . . . . . . . . . . . . . . . .
Amazon.com, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MasterCard, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Priceline Group, Inc. . . . . . . . . . . . . . . . . . . . . . .
salesforce.com, inc. . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Charles Schwab Corp. . . . . . . . . . . . . . . . . . . . . .
Alexion Pharmaceuticals, Inc. . . . . . . . . . . . . . . . . . .
Twitter, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LinkedIn Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Illumina, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Netflix, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tesla Motors Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Under Armour, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Workday, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SBA Communications Corp. . . . . . . . . . . . . . . . . . . .
CarMax, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Concho Resources, Inc. . . . . . . . . . . . . . . . . . . . . . . . .
Red Hat, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equinix, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Verisk Analytics, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . .
Mobileye N.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ANSYS, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gartner, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SunEdison, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CoStar Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FireEye, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Middleby Corp. . . . . . . . . . . . . . . . . . . . . . . . . . .
Zillow Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$230,938
205,187
172,797
99,770
60,465
43,467
39,968
35,032
32,444
31,262
26,695
25,209
23,740
17,399
15,869
15,151
14,493
13,911
13,894
13,150
11,289
9,108
7,939
7,339
6,537
6,392
6,110
5,879
5,779
72
% of
Net
Assets
2.5%
1.8
1.7
1.1
1.7
1.7
0.9
0.7
1.5
1.4
3.0
2.2
2.3
1.0
1.4
2.5
2.8
2.7
2.9
2.9
3.0
0.9
2.8
4.0
2.0
3.5
1.3
1.3
1.5
Company
athenahealth, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TerraForm Power, Inc. . . . . . . . . . . . . . . . . . . . . . . . . .
Inovalon Holdings, Inc. . . . . . . . . . . . . . . . . . . . . . . . .
WEX Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cepheid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restoration Hardware Holdings, Inc. . . . . . . . . . . . .
Guidewire Software, Inc. . . . . . . . . . . . . . . . . . . . . . .
JUST EAT plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pacira Pharmaceuticals, Inc. . . . . . . . . . . . . . . . . . . .
Golar LNG Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
HomeAway, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medidata Solutions, Inc. . . . . . . . . . . . . . . . . . . . . . .
Manchester United plc . . . . . . . . . . . . . . . . . . . . . . .
DigitalGlobe, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shutterstock, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liberty Tripadvisor Holdings Inc. . . . . . . . . . . . . . . .
CaesarStone Sdot-Yam Ltd. . . . . . . . . . . . . . . . . . . .
Mellanox Technologies Ltd. . . . . . . . . . . . . . . . . . . . .
The Spectranetics Corporation . . . . . . . . . . . . . . . . .
Acxiom Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foundation Medicine, Inc. . . . . . . . . . . . . . . . . . . . . .
HealthEquity, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AO World plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefitfocus, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Flotek Industries, Inc. . . . . . . . . . . . . . . . . . . . . . . . . .
Aerie Pharmaceuticals, Inc. . . . . . . . . . . . . . . . . . . . .
Unilife Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity
Market Cap
(in millions)
$4,560
4,549
4,460
4,165
4,067
3,957
3,691
3,677
3,220
3,104
2,852
2,707
2,606
2,472
2,449
2,388
2,131
2,072
1,466
1,429
1,402
1,376
1,144
1,047
805
754
517
% of
Net
Assets
1.4%
1.2
0.5
1.1
1.4
1.4
5.0
1.5
1.3
1.0
1.5
1.5
2.1
1.9
2.9
1.5
1.4
1.4
1.2
1.7
0.5
1.0
1.0
2.9
1.0
0.9
0.5
99.7%
Baron Funds
Baron Partners Fund
Baron Partners Fund is a non-diversified fund that invests primarily in U.S. companies of any size with significant growth potential.
Company
Equity
% of
Market Cap
Total
(in millions) Investments
$39,968
26,695
23,740
17,399
14,493
12,343
12,244
11,289
9,108
8,782
7,710
7,339
7,236
5.0%
1.8
6.7
0.1
5.9
0.3
3.2
4.6
1.3
6.4
6.5
2.3
3.5
Company
Equity
% of
Market Cap
Total
(in millions) Investments
$6,770
6,640
6,392
5,879
5,809
5,779
4,460
4,191
3,871
3,759
2,606
1,867
5.2%
5.3
9.4
1.2
6.4
1.7
3.2
3.5
4.5
4.1
3.7
3.9
99.7%
Company
Equity
Market Cap
(in millions)
Apple, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Google, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facebook Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alibaba Group Holding Ltd. . . . . . . . . . . . . . . . . . . .
Amazon.com, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Visa, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MasterCard, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Biogen, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Starbucks Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SoftBank Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costco Wholesale Corp. . . . . . . . . . . . . . . . . . . . . . . .
The Priceline Group, Inc. . . . . . . . . . . . . . . . . . . . . . .
Monsanto Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Regeneron Pharmaceuticals, Inc. . . . . . . . . . . . . . . .
ASML Holding N.V. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Las Vegas Sands Corp. . . . . . . . . . . . . . . . . . . . . . . . .
VMware, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alexion Pharmaceuticals, Inc. . . . . . . . . . . . . . . . . . .
YUM! Brands, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$724,773
375,081
230,938
205,187
172,797
160,621
99,770
99,064
71,006
69,356
66,654
60,465
54,389
46,330
44,274
43,950
35,069
35,032
34,117
% of
Net
Assets
5.0%
4.9
5.5
3.5
7.9
3.5
4.1
2.1
3.6
1.6
1.3
3.7
2.0
1.8
2.1
1.2
1.6
2.1
1.7
Company
Equity
Market Cap
(in millions)
$33,811
32,444
31,970
31,262
26,695
13,911
13,894
13,150
13,137
12,780
12,244
11,289
9,108
7,932
6,110
5,839
5,262
% of
Net
Assets
3.0%
4.0
2.0
1.2
5.8
1.8
2.4
2.4
0.9
2.1
1.5
1.7
1.0
1.1
3.2
0.5
1.2
95.0%
73
Baron Funds
Baron Focused Growth Fund
Baron Focused Growth Fund is a non-diversified fund that invests in small and mid-sized growth companies with market capitalizations up to the largest
market cap stock in the Russell Midcap Growth Index at reconstitution.
Company
74
Equity
Market Cap
(in millions)
$23,740
14,493
12,244
11,289
11,166
8,782
7,971
7,710
6,770
6,640
6,392
5,908
5,809
% of
Net
Assets
7.7%
5.1
2.5
3.0
2.1
7.1
1.8
3.1
4.1
5.9
6.9
2.4
3.7
Company
Equity
Market Cap
(in millions)
$5,210
4,549
3,759
3,691
3,677
2,606
2,174
2,131
1,867
1,047
918
% of
Net
Assets
3.8%
2.0
7.0
2.7
4.8
4.4
4.2
3.6
3.5
4.1
3.9
99.4%
Baron Funds
Baron International Growth Fund
Baron International Growth Fund is a diversified fund that invests in non-U.S. companies with significant growth potential. Investments may be made across
all market capitalizations. The Fund invests principally in companies of developed countries and may invest up to 30% in companies of developing countries.
Company
Equity
Market Cap
(in millions)
$205,187
177,970
100,133
69,356
52,171
51,883
46,265
42,273
37,778
34,206
32,369
32,112
31,513
29,437
25,906
25,543
22,866
21,625
21,213
18,374
17,114
16,159
15,082
15,066
13,953
13,754
13,669
13,540
11,433
11,245
11,230
11,089
10,692
10,037
9,291
8,194
7,710
7,325
% of
Net
Assets
1.0%
1.3
1.1
1.4
1.6
1.1
0.4
1.3
1.8
1.1
1.5
1.6
0.7
1.4
1.1
1.1
2.3
1.6
1.3
1.7
1.0
1.7
1.6
2.8
1.3
0.6
1.3
1.0
1.0
0.5
1.9
1.9
2.0
0.7
1.8
2.2
1.7
3.1
Company
Ingenico SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intertek Group plc . . . . . . . . . . . . . . . . . . . . . . . . . . .
Zee Entertainment Enterprises Ltd. . . . . . . . . . . . . .
Inchcape plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kroton Educacional SA . . . . . . . . . . . . . . . . . . . . . . . .
William Hill PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PT Matahari Department Store Tbk . . . . . . . . . . . . .
Eurofins Scientific SE . . . . . . . . . . . . . . . . . . . . . . . . .
Azimut Holding S.p.A. . . . . . . . . . . . . . . . . . . . . . . . .
JUST EAT plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tower Bersama Infrastructure Tbk PT . . . . . . . . . . .
Sarana Menara Nusantara Tbk PT . . . . . . . . . . . . . .
Golar LNG Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cetip SA - Mercados Organizados . . . . . . . . . . . . . .
TAL Education Group . . . . . . . . . . . . . . . . . . . . . . . . .
Dominos Pizza Enterprises Ltd. . . . . . . . . . . . . . . . .
Sanrio Co. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MonotaRO Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . .
Mellanox Technologies Ltd. . . . . . . . . . . . . . . . . . . . .
Smiles SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dominos Pizza Group plc . . . . . . . . . . . . . . . . . . . . .
TOTVS SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lancashire Holdings Limited . . . . . . . . . . . . . . . . . . .
Luk Fook Holdings (International) Ltd. . . . . . . . . . .
Abcam Plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dish TV India Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PATRIZIA Immobilien AG . . . . . . . . . . . . . . . . . . . . . .
AO World plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kingdee International Software Group Co. Ltd. . . .
Premier Oil plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Perfect World Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . .
GOL Linhas Areas Inteligentes SA . . . . . . . . . . . . .
Hathway Cable & Datacom Ltd . . . . . . . . . . . . . . . .
RIB Software AG . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nomad Holdings Ltd. . . . . . . . . . . . . . . . . . . . . . . . . .
GAEC Educao S.A. . . . . . . . . . . . . . . . . . . . . . . . . . .
DEN Networks Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity
Market Cap
(in millions)
$6,630
5,979
5,245
5,242
5,238
4,825
4,396
4,107
4,093
3,677
3,476
3,137
3,104
2,623
2,620
2,443
2,384
2,182
2,072
1,942
1,904
1,870
1,857
1,641
1,447
1,395
1,237
1,144
1,080
997
920
688
650
610
546
395
343
% of
Net
Assets
2.3%
0.7
0.4
1.3
0.2
1.4
1.2
1.9
1.5
2.0
1.2
0.4
1.3
0.3
1.1
2.0
1.4
1.5
2.7
0.6
2.0
1.0
0.7
0.9
1.4
1.0
0.9
0.7
1.4
0.4
0.5
0.2
0.3
2.0
0.8
0.3
0.2
94.6%
75
Baron Funds
Baron Real Estate Fund
Baron Real Estate Fund is a non-diversified fund that invests 80% of its net assets in equity securities of U.S. and non-U.S. real estate and real estate-related
companies of any size. The Funds investment in non-U.S. companies will not exceed 25%.
Company
Equity
Market Cap
(in millions)
$148,533
70,797
61,507
43,950
39,563
33,811
29,248
26,165
23,010
22,702
21,520
21,043
15,151
14,336
13,562
13,150
12,891
12,822
12,780
12,343
10,907
10,407
10,332
9,346
8,782
76
% of
Net
Assets
2.8%
1.7
1.8
1.2
2.1
1.9
3.7
1.4
1.1
1.1
1.2
1.2
1.7
1.7
3.0
2.9
3.6
1.3
1.5
3.1
3.0
0.3
3.0
1.8
3.3
Company
Equity
Market Cap
(in millions)
$7,640
7,062
6,929
6,909
6,845
6,156
5,809
5,469
4,814
4,387
4,331
3,479
3,476
3,422
3,137
2,706
2,605
2,454
2,208
2,131
2,025
1,700
755
655
% of
Net
Assets
2.9%
1.3
7.7
2.7
2.8
2.3
0.8
2.1
1.2
0.4
1.5
1.5
1.3
1.4
0.9
1.7
0.2
3.0
1.8
1.7
1.8
0.5
3.2
1.0
97.1%
Baron Funds
Baron Emerging Markets Fund
Baron Emerging Markets Fund is a diversified fund that invests 80% of its net assets in non-U.S. companies of all sizes domiciled, headquartered or whose
primary business activities or principal trading markets are in developing countries. The Fund may invest up to 20% in companies in developed market
countries and in Frontier Countries.
Company
Equity
Market Cap
(in millions)
$329,860
267,266
205,187
189,194
177,970
% of
Net
Assets
1.4%
1.5
1.4
2.5
1.6
121,766
1.7
119,152
51,883
43,621
36,628
36,449
34,206
33,449
25,543
25,047
22,119
21,625
21,269
21,213
17,432
14,448
14,425
12,640
12,177
11,297
11,245
11,030
10,823
10,414
9,910
9,346
9,083
7,932
7,863
7,256
6,316
6,298
5,922
5,922
5,716
5,245
5,238
0.3
1.5
0.8
1.2
0.9
2.5
1.7
1.4
1.2
1.3
1.9
1.0
1.7
1.4
1.6
1.8
1.4
1.1
2.1
0.6
1.4
1.0
1.4
1.1
1.3
1.3
0.7
1.5
0.2
0.9
1.1
0.6
0.3
1.0
0.8
0.2
Company
Grupo Lala . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PT Matahari Department Store Tbk . . . . . . . . . . . . .
Divis Laboratories Ltd. . . . . . . . . . . . . . . . . . . . . . . . .
Tower Bersama Infrastructure Tbk PT . . . . . . . . . . .
Eclat Textile Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . .
Glenmark Pharmaceuticals Ltd. . . . . . . . . . . . . . . . .
Novatek Microelectronics Corp. . . . . . . . . . . . . . . . .
Sarana Menara Nusantara Tbk PT . . . . . . . . . . . . . .
Torrent Pharmaceuticals Ltd. . . . . . . . . . . . . . . . . . .
M. Dias Branco SA . . . . . . . . . . . . . . . . . . . . . . . . . . .
Metro Pacific Investments Corp. . . . . . . . . . . . . . . .
Sun TV Network Ltd. . . . . . . . . . . . . . . . . . . . . . . . . .
WuXi PharmaTech (Cayman) Inc. . . . . . . . . . . . . . .
Cetip SA - Mercados Organizados . . . . . . . . . . . . . .
TAL Education Group . . . . . . . . . . . . . . . . . . . . . . . . .
Melco International Development Ltd. . . . . . . . . . .
Biostime International Holdings Ltd. . . . . . . . . . . . .
Exide Industries Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . .
Amara Raja Batteries Ltd. . . . . . . . . . . . . . . . . . . . . .
Grand Korea Leisure Co., Ltd. . . . . . . . . . . . . . . . . . .
Smiles SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
HIWIN Technologies Corp. . . . . . . . . . . . . . . . . . . . .
Man Wah Holdings Ltd. . . . . . . . . . . . . . . . . . . . . . . .
TOTVS SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multiplus SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Luk Fook Holdings (International) Ltd. . . . . . . . . . .
Dish TV India Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Makalot Industrial Co., Ltd. . . . . . . . . . . . . . . . . . . . .
CJ O Shopping Co. Ltd. . . . . . . . . . . . . . . . . . . . . . . .
Kingdee International Software Group Co. Ltd. . . .
Ginko International Co., Ltd. . . . . . . . . . . . . . . . . . . .
Perfect World Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . .
L.P.N. Development PCL . . . . . . . . . . . . . . . . . . . . . .
GOL Linhas Areas Inteligentes SA . . . . . . . . . . . . .
Linx SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hathway Cable & Datacom Ltd . . . . . . . . . . . . . . . .
WeMade Entertainment Co., Ltd. . . . . . . . . . . . . . . .
PVR Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I-Sens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GAEC Educao S.A. . . . . . . . . . . . . . . . . . . . . . . . . . .
DEN Networks Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . .
SHUAA Capital psc . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lekoil, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity
Market Cap
(in millions)
$5,021
4,396
3,787
3,476
3,432
3,408
3,151
3,137
3,133
3,061
3,011
2,782
2,774
2,623
2,620
2,605
2,544
2,414
2,274
2,116
1,942
1,934
1,870
1,870
1,663
1,641
1,395
1,373
1,294
1,080
1,067
920
762
688
684
650
597
440
404
395
343
176
127
% of
Net
Assets
0.9%
1.4
1.4
1.5
1.1
0.8
1.3
0.6
1.8
0.5
0.9
1.0
0.9
1.0
1.5
0.3
0.4
1.2
1.3
0.9
1.2
1.0
1.0
0.9
0.5
0.8
1.6
1.5
1.1
1.2
1.2
0.8
0.5
0.4
0.4
0.3
0.6
1.0
0.8
0.4
0.5
0.2
0.2
91.1%
77
Baron Funds
Baron Energy and Resources Fund
Baron Energy and Resources Fund is a non-diversified fund that invests 80% of its net assets in equity securities of U.S. and non-U.S. energy and resources
companies and related companies of any size.
Company
78
Equity
Market Cap
(in millions)
$50,289
42,687
37,284
34,137
27,951
18,966
13,911
13,135
12,214
9,719
8,569
7,610
7,327
6,537
6,319
5,709
5,674
5,365
5,262
4,918
4,549
4,506
4,312
3,934
3,565
3,487
3,346
3,104
% of
Net
Assets
1.7%
1.9
3.1
2.0
1.7
1.8
4.2
0.9
2.4
0.7
0.8
0.8
1.5
3.2
0.5
3.6
1.3
3.0
1.7
1.2
2.1
1.2
0.8
2.9
2.5
3.4
2.5
1.3
Company
Equity
Market Cap
(in millions)
$3,046
2,789
2,787
2,787
2,702
2,655
2,252
2,098
2,043
1,980
1,762
1,748
1,622
1,395
1,358
1,310
1,217
1,213
887
805
746
726
505
443
156
127
% of
Net
Assets
2.5%
2.5
1.0
1.8
1.8
1.5
3.5
2.2
0.8
1.3
1.8
1.0
1.5
1.7
1.9
1.4
2.9
0.7
0.7
2.5
0.1
1.9
0.7
0.8
0.4
0.5
94.1%
Baron Funds
Baron Global Advantage Fund
Baron Global Advantage Fund is a diversified fund that invests primarily in established and emerging markets companies located throughout the world, with
capitalizations within the range of companies included in the MSCI ACWI Growth Index Net.
Company
Equity
Market Cap
(in millions)
Google, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facebook Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alibaba Group Holding Ltd. . . . . . . . . . . . . . . . . . . .
Amazon.com, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Baidu, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SoftBank Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Naspers Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Priceline Group, Inc. . . . . . . . . . . . . . . . . . . . . . .
ASML Holding N.V. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brookfield Asset Management, Inc. . . . . . . . . . . . . .
ICICI Bank Limited . . . . . . . . . . . . . . . . . . . . . . . . . . .
Illumina, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARM Holdings plc . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Axis Bank Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Check Point Software Technologies Ltd. . . . . . . . . .
Grifols SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mobileye N.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ctrip.com International, Ltd. . . . . . . . . . . . . . . . . . . .
Constellation Software, Inc. . . . . . . . . . . . . . . . . . . .
Brookfield Infrastructure Partners L.P. . . . . . . . . . . .
SunEdison, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Targa Resources Corp. . . . . . . . . . . . . . . . . . . . . . . . . .
Shell Midstream Partners, L.P. . . . . . . . . . . . . . . . . . .
$375,081
230,938
205,187
172,797
73,093
69,356
64,740
60,465
44,274
33,811
30,029
26,695
23,136
21,213
15,066
13,540
9,108
7,932
7,325
6,845
6,537
5,365
5,262
% of
Net
Assets
4.2%
4.6
3.4
6.3
2.6
1.9
2.2
2.7
1.6
1.3
1.7
3.8
1.4
1.0
1.4
1.9
0.9
1.1
2.5
1.8
4.8
1.7
1.3
Company
Equity
Market Cap
(in millions)
$4,905
4,549
3,677
3,476
3,220
3,137
3,046
2,787
2,707
2,623
2,620
2,072
1,942
1,491
1,429
1,079
1,047
915
754
726
517
156
% of
Net
Assets
2.4%
2.8
4.7
3.0
1.7
4.1
2.3
1.0
2.3
2.2
2.1
3.7
2.4
0.8
1.5
0.7
1.9
0.8
0.5
2.0
0.4
0.3
99.7%
79
Baron Funds
Baron Discovery Fund
Baron Discovery Fund invests in small sized growth companies with market capitalizations up to the weighted median market capitalization of the Russell
2000 Growth Index at reconstitution, or companies with market capitalizations up to $1.5 billion, whichever is larger.
Company
80
Equity
Market Cap
(in millions)
$3,677
3,422
3,220
2,787
2,472
2,439
2,174
2,131
2,054
2,020
2,020
1,948
1,937
1,886
1,749
1,713
1,660
1,636
1,607
1,576
1,466
1,402
1,376
1,311
1,251
1,047
1,039
971
914
% of
Net
Assets
2.9%
2.9
1.4
1.2
3.1
1.7
2.0
2.6
2.4
1.9
2.1
1.3
2.0
0.8
0.5
2.9
0.5
2.3
1.6
2.0
3.6
4.1
1.8
2.2
1.2
1.4
1.5
0.9
0.5
Company
Equity
Market Cap
(in millions)
$907
886
875
805
754
726
666
656
642
635
615
607
596
531
517
496
476
472
397
370
309
304
286
241
219
156
47
% of
Net
Assets
1.0%
0.5
2.5
1.6
1.5
2.4
1.1
1.3
0.8
2.0
1.5
2.4
2.2
1.5
1.0
0.7
1.4
0.5
0.6
2.0
1.4
1.7
1.6
3.0
1.0
0.5
0.5
93.5%
Baron Funds
Baron Asset Fund PORTFOLIO HOLDINGS
March 31, 2015 (Unaudited)
Shares
Cost
Value
Shares
Financials (continued)
3,279,792 $
14,772,082
3,577,372
30,808,659
34,386,031
5,449,298
24,327,500
80,080,000
25,176,000
26,527,399
77,420,000
10,477,932
65,554,751
22,836,000
324,242,536
10,408,132
13,850,760
9,382,832
48,867,000
32,146,764
125,901,200
23,304,910
44,141,250
34,262,522
32,733,319
66,995,841
49,666,300
43,652,250
93,318,550
5,777,893
33,609,506
39,387,399
19,413,900
34,741,500
54,155,400
23,556,410
17,214,469
100,245,600
90,378,750
20,659,909
61,430,788
243,056,666
29,466,800
220,091,150
600,325,310
13,390,421
14,131,200
30,445,772
43,836,193
42,754,500
56,885,700
7,016,768
35,107,500
46,333,570
54,856,775
22,869,631
46,440,000
51,256,000
60,700,500
111,956,500
39,581,100
103,420,000
14,773,685
10,826,180
15,846,066
41,445,931
118,824,559
31,344,500
30,803,500
41,254,100
103,402,100
459,620,700
6,508,072
6,685,000
2,494,869
7,365,191
21,186,000
27,871,000
6,807,000
11,284,920
Total Health Care
Industrials (19.22%)
10,983,600
10,966,273
14,950,000
3,848,548
29,764,821
50,608,481
28,922,040
27,561,300
25,350,000
10,496,040
63,407,340
110,421,300
Financials (11.30%)
Asset Management &
Custody Banks (0.92%)
325,000 T. Rowe Price Group, Inc.
38,444,036
14,150,604
Energy (3.85%)
Oil & Gas Drilling (0.24%)
100,000 Helmerich & Payne, Inc.
3,957,397 $
51,757,500
19,491,425
14,611,786
21,119,858
Value
Cost
7,848,785
2,592,634
26,318,500
79,144,000
81
Baron Funds
Baron Asset Fund PORTFOLIO HOLDINGS (Continued)
March 31, 2015 (Unaudited)
Shares
Cost
Value
Shares
Industrials (continued)
635,000
450,000
450,000
390,000
19,376,285 $
32,880,129
23,539,575
25,331,030
101,127,019
31,314,364
34,838,770
66,153,134
30,308,550
34,123,500
46,192,500
39,152,100
149,776,650
56,826,750
96,390,000
153,216,750
Cost
Wireless Telecommunication
Services (3.00%)
735,000 SBA Communications Corp., Cl A1 $
Value
21,480,602 $
86,068,500
Utilities (1.21%)
Renewable Electricity (1.21%)
333,334 TerraForm Power, Inc., Cl A3
616,980 TerraForm Power, Inc., Cl A
Total Utilities
TOTAL COMMON STOCKS
10,000,020
17,861,480
27,861,500
1,152,630,525
12,120,024
22,525,940
34,645,964
2,829,239,006
6,209,476
22,984,895
$1,175,615,420
22,984,895
2,858,433,377
48,686,125
6,458,250
55,144,375
551,427,750
Financials (0.22%)
14,771,000
27,948,821
43,250,976
12,486,735
35,161,545
133,619,077
48,504,500
81,192,000
49,190,350
17,862,750
39,062,100
235,811,700
Principal Amount
21,892,482
90,552,000
800,000
155,000
226,197
600,000
19,792,142
8,240,401
14,348,414
27,498,020
69,878,977
24,136,000
38,728,300
15,532,948
40,182,000
118,579,248
11,589,780
34,958,418
46,548,198
271,938,734
36,943,748
134,160,000
171,103,748
616,046,696
9,936,696
$2,868,370,073
$2,094,000,274
$ 774,369,799
%
1
Materials (0.65%)
Industrial Gases (0.65%)
175,000 Airgas, Inc.
2
3
11,449,835
18,569,250
4
82
Baron Funds
Baron Growth Fund PORTFOLIO HOLDINGS
March 31, 2015 (Unaudited)
Shares
Cost
Value
Shares
Distributors (0.62%)
2,000,000 LKQ Corp.1
Education Services (2.04%)
2,257,170 Bright Horizons Family
Solutions, Inc.1
2,350,000 Nord Anglia Education, Inc.1,2
3,007,500
271,739
30,351,345 $
310,887,500
13,032,059
38,617,500
33,038,240
39,163,343
60,613,909
90,306,816
72,201,583
150,920,725
11,441,173
51,120,000
135,535,661
93,213,297
16,618,824
59,870,980
17,908,000
213,541,616
15,542,103
19,384,713
92,031,907
250,834,329
16,294,480
15,317,200
76,721,822
86,268,777
Publishing (1.06%)
1,175,000 Morningstar, Inc.
25,213,450
88,019,250
15,602,751
71,997,750
9,427,096
67,565,602
9,118,454
227,960,000
76,992,698
237,078,454
889,508,894
1,951,848,217
Restaurants (0.87%)
450,000 Panera Bread Co., Cl A1
Specialty Stores (2.86%)
478,659 The Container Store Group, Inc.1
4,000,000 Dicks Sporting Goods, Inc.
Total Consumer Discretionary
29,104,380
53,854,360
27,474,161
31,978,305
8,771,720
9,849,594
27,340,827
128,130,000
153,036,000
9,112,260
28,589,400
6,459,994
29,779,650
Energy (1.75%)
192,690,525
388,456,329
176,439,858
553,288,117
204,937,314
98,857,949 $
85,049,691
169,117,106
117,522,500
Value
276,598,728
119,152,651
78,402,845
9,084,235
69,159,069
115,725,106
53,392,000
3,804,346
49,668,667
2,638,652
1,450,000
74,787,601
44,365,050
73,061,456
Cost
24,720,322
86,211,000
40,292,576
144,580,050
46,651,360
57,433,262
66,477,436
64,458,848
56,910,000
89,066,250
96,326,877
73,883,874
235,020,906
316,187,001
13,782,555
30,815,360
38,657,293
64,119,000
65,591,464
137,430,000
28,435,048
42,596,064
61,638,300
101,354,000
71,031,112
162,992,300
38,581,866
243,320,000
15,009,212
25,722,000
42,521,078
131,816,500
29,095,131
75,981,000
89,454,329
128,900,248
Total Energy
Financials (15.91%)
2,100,000
2,175,000
2,302,818
1,430,195
118,549,460
204,881,248
638,744,946
1,317,283,409
83
Baron Funds
Baron Growth Fund PORTFOLIO HOLDINGS (Continued)
March 31, 2015 (Unaudited)
Shares
Cost
Value
Shares
Cost
Industrials (continued)
Biotechnology (0.53%)
575,000 Acadia Pharmaceuticals, Inc.1
525,000 Foundation Medicine, Inc.1
18,739,250
25,257,750
40,074,902
43,997,000
4,002,410
28,558,026
42,738,000
139,032,000
32,560,436
181,770,000
5,469,421
10,384,000
59,187,483
169,910,000
Total Industrials
64,656,904
180,294,000
3,899,438
7,928,800
8,075,677
17,058,226
37,684,652
64,887,474
45,760,329
81,945,700
6,102,922
6,042,000
46,631,249
27,486,940
88,349,773
180,757,500
74,118,189
269,107,273
267,173,120
771,084,773
Industrials (16.35%)
Building Products (3.54%)
1,725,000 CaesarStone Sdot Yam Ltd.1,2
1,448,500 Masonite International Corp.1,2
1,670,000 Trex Company, Inc.1,4
Construction &
Engineering (0.48%)
1,850,000 Badger Daylighting Ltd. (Canada)2
Diversified Support
Services (1.23%)
2,700,000 Copart, Inc.1
84
31,551,799
80,959,738
62,696,594
104,724,750
97,426,110
91,065,100
175,208,131
293,215,960
58,732,816
39,496,269
32,090,834
Trucking (0.38%)
475,000 Landstar System, Inc.
2,000,000
1,850,000
800,000
1,600,000
1,173,796
2,309,838
3,087,713
10,136,469 $
28,440,000
47,523,423
75,480,000
17,282,737
35,017,000
64,806,160
110,497,000
11,073,375
31,492,500
557,574,518
1,353,287,979
27,793,289
44,326,673
21,533,616
80,624,740
37,834,851
34,773,982
88,220,000
163,151,500
21,896,000
254,720,000
61,753,408
50,238,976
52,369,848
192,364,520
299,256,999
832,344,404
57,528,621
200,280,000
24,367,636
49,621,000
86,028,591
44,116,616
22,641,080
84,956,314
197,761,353
23,423,063
152,786,287
306,140,730
48,057,122
45,240,023
109,972,000
236,876,250
93,297,145
346,848,250
627,236,688
1,735,234,384
45,709,971
72,761,273
101,439,000
13,836,546
136,332,000
52,423,266
74,456,718
32,589,034
108,585,750
261,757,500
49,152,000
159,469,018
419,495,250
32,221,169
192,880,000
Railroads (2.33%)
2,000,000 Genesee & Wyoming, Inc., Cl A1
14,591,763 $
25,483,139
Value
Utilities (2.97%)
Electric Utilities (2.97%)
6,575,000 ITC Holdings Corp.
TOTAL COMMON STOCKS
67,008,983
246,102,250
3,409,848,424
8,145,470,452
Baron Funds
Baron Growth Fund PORTFOLIO HOLDINGS (Continued)
March 31, 2015 (Unaudited)
Shares
Cost
Value
Principal Amount
Cost
Value
10,268,500 $
14,603,861
2,090,153
Rights (0.00%)
Materials (0.00%)
Fertilizers & Agricultural
Chemicals (0.00%)
393,349 Agrinos AS (Mexico)
Exp 7/15/20151,2,3
41,504
$3,531,125,967
8,273,215,013
5,215,649
NET ASSETS
$8,278,430,662
$4,219,164,112
$4,059,266,550
%
1
2
3
4
5
85
Baron Funds
Baron Small Cap Fund PORTFOLIO HOLDINGS
March 31, 2015 (Unaudited)
Shares
Cost
Value
Shares
Energy (6.27%)
Advertising (0.14%)
500,000 National CineMedia, Inc.
Home Improvement
Retail (0.22%)
400,000 Lumber Liquidators
Holdings, Inc.1
Homefurnishing Retail (1.77%)
1,400,000 Mattress Firm Holding Corp.1
Movies & Entertainment (1.82%)
1,000,000 The Madison Square
Garden Co., Cl A1
3,750,000 SFX Entertainment, Inc.1
Restaurants (2.69%)
950,000 BJs Restaurants, Inc.1
1,100,000 The Cheesecake Factory, Inc.
2,250,000 Del Friscos Restaurant
Group, Inc.1,4
4,676,259 $
7,550,000
8,545,247
29,279,689
35,164,871
35,041,250
67,340,000
44,028,000
72,989,807
146,409,250
23,776,386
29,272,500
1,166,055
3,543,461
15,420,000
45,840,000
4,709,516
61,260,000
621,054
1,184,602
8,472,000
16,980,000
1,805,656
25,452,000
17,926,778
46,980,000
80,059,684
45,918,256
120,374,116
59,646,816
125,977,940
180,020,932
7,633,393
35,360,733
12,312,000
97,496,000
25,000,417
26,066,093
84,650,000
15,337,500
51,066,510
99,987,500
34,185,457
22,660,571
47,927,500
54,263,000
46,652,836
45,337,500
103,498,864
147,528,000
56,982,232
34,803,931
506,404,074
889,072,113
86
Value
9,239,508 $
26,122,500
15,934,618
15,680,000
25,174,126
41,802,500
17,592,985
13,563,000
14,299,024
10,628,771
20,465,744
19,469,513
42,287,906
17,965,719
28,748,548
17,041,593
16,614,000
20,755,000
18,208,000
49,469,000
47,100,000
71,842,500
43,560,000
21,772,500
170,906,818
289,321,000
213,673,929
344,686,500
28,955,338
48,440,910
34,095,000
89,934,500
77,396,248
124,029,500
21,068,223
28,316,573
42,287,500
48,575,000
49,384,796
90,862,500
35,022,101
37,650,000
5,347,806
32,095,000
5,154,322
42,581,000
54,474,530
101,392,500
600,000
500,000
800,000
700,000
5,000,000
750,000
900,000
750,000
Total Energy
Financials (8.44%)
Asset Management &
Custody Banks (2.26%)
750,000 Artisan Partners Asset
Management, Inc., Cl A
2,150,000 Financial Engines, Inc.
30,375,123
35,409,514
257,154,926
464,020,014
16,694,355
24,504,440
25,067,500
42,675,000
41,198,795
67,742,500
29,626,774
17,100,776
21,699,129
33,250,000
77,925,000
103,644,031
68,426,679
214,819,031
Cost
25,099,444
29,393,000
33,488,530
62,683,145
46,967,523
111,708,000
96,171,675
158,675,523
16,404,046
8,462,500
137,675,165
196,531,023
Biotechnology (1.23%)
250,000 Auspex Pharmaceuticals, Inc.1
750,000 Cepheid1
Baron Funds
Baron Small Cap Fund PORTFOLIO HOLDINGS (Continued)
March 31, 2015 (Unaudited)
Shares
Cost
Value
Shares
1,350,000
675,372
250,000
965,200
65,756,572 $
22,136,386
20,955,560
132,065,600
24,972,000
95,215,500
22,104,925
82,162,500
27,836,368
88,171,838
227,319,293
22,938,140
32,593,732
Pharmaceuticals (1.05%)
1,850,000 Catalent, Inc.1
45,616,818
57,627,500
375,200,788
777,995,656
Industrials (17.54%)
Aerospace & Defense (5.25%)
2,400,000 DigitalGlobe, Inc.1
1,881,863 The KEYW Holding Corp.1,4
875,000 TransDigm Group, Inc.1
70,905,306
19,864,378
0
81,768,000
15,487,732
191,380,000
90,769,684
288,635,732
Diversified Support
Services (0.41%)
700,000 Healthcare Services Group, Inc.
21,356,511
22,491,000
44,094,137
13,080,427
138,732,000
13,349,000
57,174,564
152,081,000
26,906,827
44,418,371
59,619,000
120,350,000
71,325,198
179,969,000
Value
42,795,006 $
28,707,573
40,880,643
75,810,000
88,220,000
78,915,000
17,611,027
118,968,500
129,994,249
361,913,500
18,319,250
35,700,494
113,190,000
75,152,000
54,019,744
188,342,000
34,587,744
24,087,500
22,631,628
33,259,652
69,426,000
64,889,000
55,891,280
134,315,000
16,111,094
7,800,000
41,500,997
25,600,000
13,617,000
52,797,500
65,412,091
92,014,500
28,143,704
20,292,435
36,351,618
23,112,500
81,497,500
167,700,000
84,787,757
272,310,000
51,687,216
36,087,000
20,075,413
20,875,000
496,455,494
1,129,944,500
20,498,030
20,115,000
23,129,740
27,687,500
54,964,615
85,140,000
75,853,854
162,855,000
20,856,000
43,388,030
12,681,467
14,245,818
17,856,523
3,500,000
2,000,000
1,500,000
700,000
Cost
Materials (7.04%)
50,117,846
76,740,000
7,828,497
20,666,134
22,431,698
26,737,428
25,256,000
53,590,984
26,789,000
40,035,000
77,663,757
145,670,984
13,433,618
20,780,000
21,723,581
77,152,000
403,564,759
963,519,716
87
Baron Funds
Baron Small Cap Fund PORTFOLIO HOLDINGS (Continued)
March 31, 2015 (Unaudited)
Shares
Cost
Value
Principal Amount
Steel (0.12%)
300,000 SunCoke Energy Partners LP
Total Materials
43,328,996 $
33,165,000
32,710,834
51,320,000
76,039,830
84,485,000
6,563,612
6,387,000
257,049,681
386,669,500
30,976,387
7,557,006
38,533,393
45,603,031
193,215,000
238,818,031
Utilities (0.67%)
Electric Utilities (0.46%)
675,000 ITC Holdings Corp.
Renewable Electricity (0.21%)
350,000 Abengoa Yield plc 2
Total Utilities
TOTAL COMMON STOCKS
9,427,959
25,265,250
10,150,000
11,823,000
19,577,959
37,088,250
2,705,290,168
5,428,345,303
88
75,316,477
5,503,661,780
(9,571,677)
$5,494,090,103
$3,252,356,054
$2,241,734,049
%
1
2
Warrants (0.00%)
75,316,477 $
$2,780,606,645
NET ASSETS
3
4
5
Value
Materials (continued)
Specialty Chemicals (1.54%)
2,250,000 Flotek Industries, Inc.1
$
2,000,000 Platform Specialty
Products Corp.1
Cost
Baron Funds
Baron Opportunity Fund PORTFOLIO HOLDINGS
March 31, 2015 (Unaudited)
Shares
Cost
Value
Shares
Cost
1,253,818
9,832,821
8,777,805
4,128,942
10,894,609
4,037,500
3,345,648
5,604,235
5,744,617
6,653,971
6,660,590
3,895,827
5,635,805
5,810,107
908,996
5,849,360
8,542,145
6,607,715
24,753,496
31,555,637
8,574,757
8,173,603
51,889,482
69,043,389
8,869,279
10,345,860
3,885,338
3,950,336
12,754,617
14,296,196
Financials (0.89%)
Investment Banking &
Brokerage (0.89%)
112,500 The Charles Schwab Corp.
3,373,445
3,396,401
3,795,220
3,934,775
3,478,740
4,900,078
7,191,621
8,378,818
39,907,003
53,375,149
6,254,678
7,496,967
2,013,981
5,285,959
2,386,656
5,050,380
2,994,372
3,053,257
1,941,132
2,772,800
5,229,110
1,972,510
7,988,761
9,974,420
3,957,532
1,715,674
4,796,880
1,804,500
5,673,206
6,601,380
6,074,243
1,716,596
5,750,177
5,312,855
1,873,020
5,713,160
13,541,016
12,899,035
2,610,825
11,586,721
7,642,449
11,552,520
18,297,764
29,385,826
3,705,083
11,033,689
3,593,317
5,921,361
5,080,472
10,648,943
19,255,260
3,530,520
6,480,570
5,317,830
29,333,922
45,233,123
3,954,156
3,830,681
4,146,720
4,079,680
7,784,837
8,226,400
7,034,916
13,755,816
4,087,879
8,126,822
4,819,149
3,888,165
3,957,496
7,315,368
4,448,809
6,988,497
11,118,453
13,452,440
9,824,692
5,633,403
5,872,603
5,546,892
11,295,666
5,704,112
3,424,500
2,901,574
Industrials (7.60%)
Energy (3.70%)
Total Energy
Pharmaceuticals (2.17%)
111,000 Aerie Pharmaceuticals, Inc.1
55,150 Pacira Pharmaceuticals, Inc.1
Value
83,956
302,214
68,000
119,500
186,722
908,000
22,200
164,492
113,900
56,000
Semiconductor Equipment
(1.99%)
321,000 SunEdison, Inc.1
4,642,221
5,616,800
62,076,641
81,053,558
5,576,885
1,337,269
2,841,915
6,489,990
11,068,292
15,524,324
9,756,069
33,082,606
6,243,317
7,704,000
89
Baron Funds
Baron Opportunity Fund PORTFOLIO HOLDINGS (Continued)
March 31, 2015 (Unaudited)
Shares
Cost
Value
Principal Amount
5,010,112
4,688,963
7,366,587
5,540,548
5,043,625
11,392,800
12,055,550
16,436,425
132,260,448
197,276,660
6,917,811
3,825,030
555,914
9,754,430
Utilities (1.29%)
Renewable Electricity (1.29%)
37,000 TerraForm Power, Inc., Cl A
99,833 TerraForm Power, Inc., Cl A3
Total Utilities
TOTAL COMMON STOCKS
Materials (0.99%)
Specialty Chemicals (0.99%)
259,500 Flotek Industries, Inc.1
1,160,706
2,994,990
1,350,870
3,629,928
4,155,696
4,980,798
270,112,180
385,361,978
981,506
$271,093,686
981,506
386,343,484
198,438
NET ASSETS
$386,541,922
$280,701,726
$105,840,196
%
1
2
3
4
ADR
90
Value
Cost
Baron Funds
Baron Partners Fund PORTFOLIO HOLDINGS
March 31, 2015 (Unaudited)
Shares
Cost
Value
Shares
1,909,317 $
2,018,750
Automobile Manufacturers
(7.70%)
825,000 Tesla Motors Inc.1
177,823,619
155,735,250
69,489,756
138,020,000
67,148,542
148,050,000
4,338,221
6,978,524
71,486,763
155,028,524
27,801,851
95,746,236
91,547,645
85,505,447
58,896,964
119,679,000
498,955,915
751,733,207
89,375,354
90,663,050
49,157,674
115,672,000
33,071,317
150,920,000
71,909,656
81,114,000
243,514,001
438,369,050
45,812,786
71,448,142
81,102,000
74,769,750
11,979,764
40,840,800
129,240,692
196,712,550
21,507,177
28,401,921
Industrials (15.51%)
Industrial Machinery (1.40%)
276,687 The Middleby Corp.1
Research & Consulting
Services (5.29%)
1,500,000 Verisk Analytics, Inc., Cl A1
Trading Companies &
Distributors (8.82%)
2,750,000 Air Lease Corp.
1,800,000 Fastenal Co.
Total Industrials
50,806,618 $
24,708,483
123,380,000
30,366,255
75,515,101
153,746,255
112,737,432
217,613,000
42,142,149
40,120,000
154,879,581
257,733,000
41,264,138
54,418,650
271,658,820
465,897,905
40,461,269
149,720,000
1,365,915,857
2,316,302,633
1,832,926
6,669,634
196,659
$1,367,945,442
196,659
2,323,168,926
Total Financials
Value
Utilities (7.40%)
Financials (21.66%)
Asset Management &
Custody Banks (4.48%)
3,345,500 The Carlyle Group
Cost
(299,629,613)
$2,023,539,313
$1,274,482,774
$ 749,056,539
%
1
2
40,826,578
107,100,000
88,234,844
31,516,561
103,785,000
74,583,000
119,751,405
178,368,000
182,085,160
313,869,921
91
Baron Funds
Baron Fifth Avenue Growth Fund PORTFOLIO HOLDINGS
March 31, 2015 (Unaudited)
Shares
Cost
Value
Shares
Cost
Industrials (3.24%)
Broadcasting (0.86%)
30,882 Liberty Media Corp., Cl C1
Cable & Satellite (0.48%)
3,860 Liberty Broadband Corp., Cl A1
7,720 Liberty Broadband Corp., Cl C1
Restaurants (5.30%)
51,782 Starbucks Corp.
30,502 YUM! Brands, Inc.
Total Consumer Discretionary
418,090 $
1,179,692
73,264
139,744
218,013
436,952
213,008
654,965
92
1,630,676
2,074,568
3,023,517
4,468,324
4,318,726
4,605,731
1,088,173
1,368,875
7,658,239
1,230,150
2,941,040
10,865,692
1,501,727
5,048,919
3,418,562
1,816,915
5,633,060
4,769,697
11,829,429
17,416,338
5,235,477
10,402,757
3,152,385
1,761,594
4,903,755
2,401,118
4,913,979
7,304,873
21,693,232
31,161,599
5,117,019
2,333,912
1,256,798
2,508,471
693,965
3,872,406
4,879,945
7,511,409
2,784,039
4,017,388
1,715,539
5,447,853
15,782,571
26,356,173
835,362
1,764,614
1,696,794
3,341,630
1,960,743
2,948,763
3,733,353
2,166,568
2,459,713
4,400,318
3,233,919
2,151,040
8,359,634
9,785,277
2,328,143
2,411,020
960,848
1,629,264
3,288,991
4,040,284
2,641,495
4,107,866
58,625
91,363
5,019
7,331
6,866
108,783
1,498,740
2,769,321
4,140,235
6,877,187
Materials (2.01%)
2,393,756
1,688,462
2,917,269
Financials (4.99%)
Diversified Real Estate Activities (2.98%)
76,625 Brookfield Asset Management, Inc., Cl A2
$ 1,392,841 $
1,573,315
2,745,411
Energy (2.93%)
Oil & Gas Exploration &
Production (1.75%)
20,799 Concho Resources, Inc.1
Value
2,740,373
2,103,571
1,686,704
2,949,566
2,949,346
2,535,512
6,530,648
8,434,424
1,663,348
7,925,343
8,193,996
16,359,767
2,186,665
6,914,948
36,310,057
61,118,423
1,879,080
2,763,082
2,955,677
2,211,531
82,320,147 130,764,811
Baron Funds
Baron Fifth Avenue Growth Fund PORTFOLIO HOLDINGS (Continued)
March 31, 2015 (Unaudited)
Principal Amount
Cost
Value
$ 7,454,601 $
$89,774,748 138,219,412
7,454,601
(500,023)
NET ASSETS
$137,719,389
$ 70,370,178
$ 67,349,211
%
1
2
3
ADR
93
Baron Funds
Baron Focused Growth Fund PORTFOLIO HOLDINGS
March 31, 2015 (Unaudited)
Shares
Cost
Value
Shares
4,242,382
10,351,500
9,610,500
14,212,800
12,887,146
23,823,300
8,272,836
14,088,906
8,719,506
3,839,505
8,263,550
57,107,348
80,756,896
1,274,171
1,800,056
6,160,000
15,160,573
21,572,000
5,406,710
7,285,200
2,610,782
4,773,000
Total Industrials
2,481,307
7,715,200
4,273,076
7,486,000
766,334
2,499,990
912,750
3,029,988
3,266,324
3,942,738
7,539,400
11,428,738
128,695,749
191,982,315
5,814,082
7,928,765
788,918
788,918
$135,298,749
200,699,998
376,118
$201,076,116
6,069,000
$ 46,639,226
3,138,161
4,972,200
$154,436,890
16,042,687
30,814,600
2,405,727
94
3,713,850
NET ASSETS
2,176,188
Principal Amount
Industrials (15.33%)
39,425,231
15,412,000
22,125,850
29,395,382
13,360,517
Railroads (3.84%)
80,000 Genesee & Wyoming, Inc., Cl A1
18,750,409
4,271,000
7,046,000
8,366,000
Total Financials
6,556,081
6,804,436
5,980,202 $ 8,277,750
12,770,207
13,848,100
Materials (1.85%)
8,750,500
Financials (10.73%)
Asset Management &
Custody Banks (7.67%)
260,000 The Carlyle Group
200,000 Financial Engines, Inc.
Value
Utilities (5.68%)
Cost
5,828,282
4,816,691
11,940,000
5,359,381
10,644,973
17,299,381
Baron Funds
Baron International Growth Fund PORTFOLIO HOLDINGS
March 31, 2015 (Unaudited)
Shares
Cost
Value
Total Australia
Cetip SA - Mercados Organizados
GAEC Educao SA
GOL Linhas Areas Inteligentes SA, ADR1
Kroton Educacional SA
Smiles SA
TOTVS SA
Total Brazil
647,331 $
1,019,935
655,434
2,128,074
1,667,266
2,783,508
390,623
784,373
343,263
127,530
486,258
974,040
350,789
327,724
171,629
209,569
632,921
1,063,590
Total Canada
3,106,087
2,756,222
1,744,606
1,246,942
1,633,185
3,318,065
780,388
1,345,500
40,000
180,000
7,700
50,000
43,000
125,000
135,000
55,800
25,000
430,400
4,624,733
5,443,953
Total Japan
1,082,325
1,178,909
742,452
1,082,120
1,218,035
1,158,643
621,454
627,457
1,101,101
368,377
1,430,420
557,400
1,162,700
1,424,997
5,722,075
8,034,315
803,359
1,061,193
2,022,143
2,463,957
1,864,552
4,486,100
1,627,034
1,457,555
1,169,002
259,399
1,870,958
1,182,652
958,117
1,918,591
1,877,064
1,166,044
902,806
2,111,535
2,111,048
2,340,906
8,524,717
12,427,994
1,079,640
374,656
949,239
541,961
1,454,296
1,491,200
802,945
261,197
793,336
238,716
872,063
380,330
1,368,694
222,687
1,019,572
304,451
1,115,634
409,568
3,348,587
4,440,606
1,064,961
260,297
899,297
1,279,744
384,321
1,305,412
Warrants (0.03%)
2,224,555
2,969,477
China (7.59%)
13,000
1,900,000
475,771
3,401,700
Total China
Total France
Germany (11.74%)
32,000
60,000
14,000
50,307
42,966
150,100
37,000
Brenntag AG
Deutsche Post AG
Fresenius Medical Care AG & Co.
PATRIZIA Immobilien AG1
ProSiebenSat.1 Media AG
RIB Software AG
Symrise AG
Total Germany
Total India
2,950,920
2,901,760
4,716,787
5,852,680
1,277,478
1,542,748
984,974
1,498,068
715,566
1,142,215
1,001,454
1,532,855
1,807,893
1,664,590
894,735
1,840,637
1,606,203
1,419,769
1,685,288
1,471,422
1,563,180
1,643,599
2,384,604
1,495,785
1,454,955
1,778,157
13,082,987
16,502,962
1,761,204
1,397,760
1,288,445
1,740,259
1,573,524
488,751
1,067,201
1,709,293
1,082,730
1,192,127
3,129,476
3,984,150
91,755
1,399,262
567,792
418,975
2,010,359
786,596
2,058,809
3,215,930
1,384,254
1,062,838
1,094,425
1,688,526
1,633,319
623,019
1,062,155
463,691
1,403,535
733,732
913,132
1,591,434
1,461,987
722,166
1,028,293
2,128,197
1,959,815
1,073,709
1,359,736
763,340
2,074,348
695,344
371,300
1,516,332
13,654,060
15,154,567
833,457
1,149,524
749,250
1,408,545
1,848,000
843,750
2,732,231
4,100,295
Japan (15.58%)
Bridgestone Corp.
Daiwa Securities Group, Inc.
FANUC Corp.
Mitsui Fudosan Co. Ltd.
MonotaRO Co. Ltd.
Panasonic Corp.
Rakuten, Inc.
Sanrio Co. Ltd.
SoftBank Corp.
Sumitomo Mitsui Trust Holdings, Inc.
Norway (1.32%)
42,000 Golar LNG Ltd.
Spain (3.76%)
17,000 Aena SA, 144A1
33,000 Grifols SA, ADR
37,105 Inditex SA
Switzerland (3.04%)
5,200 Compagnie Financire Richemont SA
40,067 Julius Baer Group Ltd.
11,600 Syngenta AG, ADR
Total Switzerland
Abcam plc
AO World plc1
Burberry Group plc
Dominos Pizza Group plc
easyJet plc
Experian plc
Inchcape plc
Intertek Group plc
JUST EAT plc1
Lancashire Holdings Ltd.
Premier Oil plc
William Hill plc
India (4.19%)
152,900
115,700
778,598
388,835
40,600
75,000
Total Israel
Total Spain
France (4.24%)
7,500 Eurofins Scientific SE
22,400 Ingenico SA
Italy (1.46%)
Canada (5.14%)
9,600 Constellation Software, Inc.
35,000 Crescent Point Energy Corp.
46,000 Suncor Energy, Inc.
Value
Israel (5.53%)
$
Brazil (2.60%)
35,151
68,722
70,629
65,000
40,000
93,000
Cost
Australia (2.63%)
74,700 Brambles Ltd.
75,169 Dominos Pizza Enterprises Ltd.
Shares
77,224,451 100,127,516
Indonesia (2.80%)
849,373 Matahari Department Store Tbk PT
1,250,000 Sarana Menara Nusantara Tbk PT1
1,801,400 Tower Bersama Infrastructure Tbk PT
Total Indonesia
Ireland (1.70%)
27,000 Ryanair Holdings plc, ADR
986,106
750
30,750
1,802,790
95
Baron Funds
Baron International Growth Fund PORTFOLIO HOLDINGS (Continued)
March 31, 2015 (Unaudited)
Principal Amount
Cost
Value
$83,513,037
106,446,102
(553,389)
NET ASSETS
$105,892,713
$ 51,693,794
$ 54,198,919
%
1
ADR
144A
96
Summary of Investments by
Sector as of March 31, 2015
Consumer Discretionary
Information Technology
Industrials
Financials
Health Care
Telecommunication Services
Energy
Materials
Unclassified
Cash and Cash Equivalents*
27.0%
20.2
15.4
13.7
6.7
4.1
3.7
3.0
0.8
5.4
100.0%
Percentage of
Net Assets
Baron Funds
Baron Real Estate Fund PORTFOLIO HOLDINGS
March 31, 2015 (Unaudited)
Shares
Cost
Value
Shares
Financials (continued)
25,185,331 $
56,682,241
34,434,745
23,447,040
56,918,747
28,801,344
116,302,317
109,167,131
40,464,123
57,082,275
Home Improvement
Retail (4.54%)
471,007 Home Depot, Inc.
442,700 Lowes Companies, Inc.
38,028,564
18,595,706
53,511,105
32,932,453
56,624,270
86,443,558
3,773,387
44,499,463
5,291,584
50,563,702
48,272,850
55,855,286
30,130,661
62,190,299
47,904,434
2,598,112
56,250,989
70,990,432
62,139,901
4,404,176
37,846,448
59,354,560
23,357,109
38,868,395
32,239,350
56,860,395
242,895,458
342,239,803
504,559,018
650,788,053
Homebuilding (2.94%)
185,800 D.R. Horton, Inc.
1,285,300 Toll Brothers, Inc.1
1,682,650
2,396,706
1,049,306
54,339
1,098,955
386,100
628,500
Financials (37.14%)
Diversified Real Estate
Activities (1.95%)
693,900 Brookfield Asset
Management, Inc., Cl A2
Hotel & Resort REITs (3.31%)
213,150 LaSalle Hotel Properties
2,165,850 Strategic Hotels & Resorts, Inc.1
1,661,407 Sunstone Hotel Investors, Inc.
5,761,709
19,009,527
20,483,391
8,283,009
26,921,515
27,695,655
45,254,627
62,900,179
20,291,690
21,032,946
21,661,133
23,582,211
19,212,569
16,739,442
23,354,800
28,367,494
24,469,228
22,321,600
81,195,355
98,513,122
38,503,260
44,769,776
36,608,515
35,042,594
101,725,937
108,998,707
68,507,023
55,742,952
33,294,962
95,983,847
157,544,937
18,819,707
19,892,550
6,891,636
22,002,342
20,683,475
8,723,894
45,603,893
51,409,711
24,601,460
27,227,683
26,252,220
33,689,208
51,829,143
59,941,428
18,623,442
37,082,222
24,867,846
39,518,050
55,705,664
64,385,896
566,623,306
706,696,681
104,024,285
50,866,135
146,252,032
60,229,126
154,890,420
206,481,158
18,787,408
16,302,007
31,039,673
18,743,474
32,546,631
35,282,511
66,129,088
86,572,616
47,357,121
56,121,274
15,144,114
21,583,639
17,590,121
31,593,580
17,742,224
24,673,341
54,469,977
73,857,042
47,725,789
11,965,190
52,729,491
14,646,359
59,690,979
67,375,850
1,453,719,909
1,847,892,674
Utilities (3.54%)
Total Utilities
33,580,155
44,090,289 $
30,634,723
21,258,835
Industrials (4.55%)
37,199,979
32,887,006
Value
30,529,890
40,375,958
Total Industrials
32,230,416
Cost
97
Baron Funds
Baron Real Estate Fund PORTFOLIO HOLDINGS (Continued)
March 31, 2015 (Unaudited)
Principal Amount
Cost
Value
63,446,195 $
$1,517,166,104
63,446,195
1,911,338,869
(8,428,672)
NET ASSETS
$1,902,910,197
$ 897,814,764
$1,005,095,433
98
Baron Funds
Baron Emerging Markets Fund PORTFOLIO HOLDINGS
March 31, 2015 (Unaudited)
Shares
Cost
Value
Total Brazil
15,979,887
5,487,402
14,320,468
4,668,972
8,591,358
12,152,922
8,919,765
18,172,971
18,732,036
6,487,969
3,868,967
6,438,251
8,094,186
7,734,163
19,009,792
13,733,094
116,984,417
86,833,711
6,427,045
4,562,500
22,119,322
18,068,979
22,467,822
20,810,000
21,154,057
22,798,656
37,000,000
8,750,000
175,300
16,001,000
45,000,000
700,000
19,000,000
3,000,000
15,000,600
7,750,000
675,515
1,300,000
341,500
5,066,425
22,992,830
13,832,432
9,918,517
26,345,205
3,979,285
23,719,631
13,318,027
10,276,086
38,967,176
14,212,410
14,372,043
22,864,375
18,922,562
13,006,000
21,003,141
12,464,836
13,582,452
7,125,260
28,153,792
19,128,643
18,822,063
8,571,606
31,589,199
22,440,608
24,699,941
11,966,087
13,243,370
Total China
289,921,041
322,081,797
14,890,081
14,110,195
12,537,648
15,855,869
10,131,318
16,410,408
5,217,161
9,220,718
55,542,002
42,831,396
9,036,921
16,612,631
19,363,119
10,244,650
17,612,734
15,589,921
17,849,884
12,790,694
5,093,897
18,023,628
15,219,579
2,451,645
14,319,858
13,865,745
13,606,246
10,202,626
19,328,291
26,836,786
19,136,243
7,222,773
24,075,095
21,397,583
18,461,999
12,876,121
4,517,807
21,083,015
27,620,661
2,468,551
15,888,944
15,532,927
26,863,136
12,854,961
211,883,778
276,164,893
India (18.04%)
1,452,000
2,998,000
3,300,000
3,752,679
18,384,985
750,000
6,500,000
1,025,000
5,770,000
767,250
860,653
300,000
1,500,000
2,200,000
1,451,000
2,354,000
Total India
13,773,011 $
18,369,371
8,841,958
17,821,369
18,368,742
21,852,350
8,495,451
23,189,293
58,805,709
71,905,836
24,627,879
15,615,931
15,399,690
13,158,587
38,932,247
24,484,201
9,002,101
17,552,391
13,646,401
12,145,658
16,676,732
38,965,253
20,918,473
9,069,809
141,220,636
128,974,717
26,190,109
12,772,477
26,647,500
13,150,424
16,848,388
10,868,952
16,385,092
12,459,436
66,679,926
68,642,452
16,956,415
12,940,581
13,459,244
12,228,100
21,106,096
16,604,027
13,506,712
21,093,333
55,584,340
72,310,168
22,006,341
20,275,282
20,394,931
20,078,756
14,734,233
15,215,019
4,232,961
20,090,511
23,830,225
20,192,263
16,077,789
15,291,986
4,084,800
28,521,436
94,746,411
107,998,499
15,166,373
16,438,958
20,457,136
23,631,753
19,497,473
19,628,303
16,588,329
17,708,322
22,925,072
17,833,174
15,915,569
23,370,086
14,888,143
19,415,149
China (21.04%)
250,000
4,000,000
1,750,000
5,000,000
Value
Indonesia (4.70%)
18,775,021 $
12,650,904
Chile (0.30%)
250,000 Sociedad Qumica y
Minera de Chile SA, ADR
Cost
Brazil (5.67%)
1,601,275 Cetip SA - Mercados Organizados $
1,150,678 GAEC Educao SA
2,669,946 GOL Linhas Areas
Inteligentes SA, ADR1
1,200,000 Kroton Educacional SA
440,000 Linx SA
300,000 M. Dias Branco SA
754,400 Multiplus SA
1,201,400 Smiles SA
1,200,818 TOTVS SA
Shares
Mexico (4.48%)
285,000 Fomento Econmico
Mexicano, S.A.B. de C.V., ADR1
6,500,000 Grupo Lala S.A.B. de C.V.
3,000,000 Infraestructura Energetica
Nova S.A.B. de C.V.
5,000,000 Wal-Mart de Mexico S.A.B. de C.V.
Total Mexico
Philippines (4.72%)
24,505,000
6,000,000
125,000,000
4,172,000
Total Philippines
Singapore (1.32%)
10,499,918 Global Logistic Properties Ltd.
21,971,996
25,828,000
154,649,685
156,614,151
629,574
15,031,542
8,506,867
570,067
14,747,526
7,744,315
24,167,983
23,061,908
6,684,893
3,315,537
Thailand (1.51%)
100,000 Bangkok Bank PCL, Cl F
2,601,000 Bangkok Bank Public Co., Ltd., NVDR
15,000,000 L.P.N. Development PCL, Cl F
Total Thailand
7,340,352
3,010,976
1,312,644,559
1,388,583,823
99
Baron Funds
Baron Emerging Markets Fund PORTFOLIO HOLDINGS (Continued)
March 31, 2015 (Unaudited)
Shares
Cost
Value
367,971 $
405,974
Principal Amount
6,590,207
6,070,505
205,541,394
205,541,394
$1,525,144,131
1,600,601,696
(70,042,283)
NET ASSETS
$1,530,559,413
$ 757,469,115
$ 773,090,298
ADR
100
Percentage of
Net Assets
23.8%
14.3
13.4
12.8
8.2
7.5
5.4
4.3
1.1
0.3
8.9
100.0%
Baron Funds
Baron Energy and Resources Fund PORTFOLIO HOLDINGS
March 31, 2015 (Unaudited)
Shares
Cost
Value
Shares
Energy (77.44%)
Industrials (2.21%)
100,200
9,150
73,142
58,296
16,931
20,490
90,457
55,400
18,839
17,100
57,925
95,348
66,200
29,299
14,968
51,736
157,200
1,095,600
84,100
30,749
72,438
179,200
72,900
53,048
12,958
52,875
29,311
26,300
30,735
3,800
15,240
17,142
127,004
25,600
34,961
40,540
25,763
11,728
17,500
12,376
9,537
54,839
Total Energy
$ 1,381,757 $ 1,214,777
1,316,650
1,369,946
2,020,408
3,041,850
910,773
777,504
2,352,962
968,310
1,115,226
956,084
1,433,583
2,558,029
673,346
585,809
2,020,809
629,898
12,758,403
9,972,784
Cost
Value
767,414 $
613,717
809,342
649,635
1,120,221
537,990
2,696,977
1,801,342
2,190,895
2,601,600
1,018,269
1,630,290
1,007,116
1,588,602
2,648,559
2,595,718
1,180,213
1,392,512
2,976,834
2,064,367
6,805,606
6,052,597
1,303,724
1,306,458
1,440,650
1,679,825
Materials (7.41%)
1,698,643
803,246
688,547
3,534,997
2,158,528
3,100,774
1,331,462
2,832,442
1,746,912
829,128
2,490,309
1,706,406
2,456,516
3,241,121
1,666,802
3,086,160
685,862
1,560,058
603,972
348,129
2,351,282
1,954,886
3,396,340
1,372,416
2,375,200
2,049,888
381,925
2,951,069
1,503,626
1,030,068
2,863,616
1,836,351
2,741,521
400,402
34,057,855
29,720,749
1,136,125
1,380,012
Utilities (3.82%)
Renewable Electricity (3.82%)
42,648 Abengoa Yield plc2
46,010 TerraForm Power, Inc., Cl A
Total Utilities
TOTAL COMMON STOCKS
2,610,182
3,120,475
80,575,586
76,812,737
Principal Amount
1,464,109
1,216,699
1,666,368
1,022,861
86,488
1,077,011
814,245
1,196,378
2,082,304
1,363,479
2,050,108
2,467,838
630,966
847,000
742,560
628,011
1,591,976
16,937,786
20,948,401
66,271,926
63,236,723
5,094,440
5,094,440
$85,670,026
81,907,177
(250,121)
NET ASSETS
$81,657,056
$44,599,025
$37,058,031
%
1
2
101
Baron Funds
Baron Global Advantage Fund PORTFOLIO HOLDINGS
March 31, 2015 (Unaudited)
Shares
Cost
Value
Shares
196,454
202,747
183,293
200,367
6,784
1,327
1,424
4,151
4,399
3,379
2,886
4,702
636
1,710
3,830
1,596
197
2,867
16,788
3,735
1,501
6,507
8,477
6,143
Total China
207,391
318,984
292,688
143,994
73,573
79,379
119,563
282,433
216,111
89,689
196,762
174,372
709,197
959,367
85,163
95,316
49,160
62,630
84,144
139,808
69,613
66,012
359,577
NET ASSETS
$ 8,343,888
$ 4,000,827
$ 4,343,061
292,269
Indonesia (7.10%)
PT1
321,392
157,981
343,359
249,166
479,373
592,525
Israel (6.04%)
1,424 Check Point Software
Technologies Ltd.1
6,843 Mellanox Technologies Ltd.1
1,825 Mobileye N.V.1
Total Israel
116,725
310,262
76,705
426,742
503,692
203,364
154,574
91,106
134,131
113,321
57,023
167,226
180,386
192,456
157,488
113,571
263,150
113,659
394,764
376,721
508,423
Netherlands (1.61%)
1,316 ASML Holding N.V.
Norway (0.68%)
4,853 Seadrill Partners, LLC
Spain (1.89%)
4,800 Grifols SA, ADR
102
%
97,496
271,326
57,920
Japan (1.85%)
2,656 SoftBank Corp.
125,436
41,588
529,870
24,948
161,839
153,880
79,913
386,575
348,528
317,444
187,823
141,805
229,338
111,813
402,912
188,879
143,781
237,571
33,993
164,755
110,222
208,762
Total India
67,930
139,461
India (4.31%)
Axis Bank Ltd.
ICICI Bank Limited, ADR
Just Dial Ltd.
MakeMyTrip, Limited1
139,334
41,382
420,699
50,949
117,819
151,109
74,568
126,568
322,674
74,766
172,852
124,433
167,416
65,941
292,762
84,294
147,954
178,527
37,136
164,852
383,660
China (11.50%)
Alibaba Group Holding Ltd., ADR1
Baidu, Inc., ADR1
Ctrip.com International Ltd., ADR1
Qunar Cayman Islands Ltd., ADR1
TAL Education Group, ADR1
Acxiom Corp.1
$
Aerie Pharmaceuticals, Inc.1
1
Amazon.com, Inc.
Atlas Energy Group LLC1
Benefitfocus, Inc.1
Brookfield Infrastructure Partners L.P.
Columbia Pipeline Partners LP1
Facebook Inc., Cl A1
Google, Inc., Cl C1
Illumina, Inc.1
Medidata Solutions, Inc.1
Pacira Pharmaceuticals, Inc.1
The Priceline Group, Inc.1
Shell Midstream Partners, L.P.
SunEdison, Inc.1
Tallgrass Energy Partners, LP
Targa Resources Corp.
TerraForm Power, Inc., Cl A
Unilife Corp.1
Westlake Chemical Partners LP
399,201
Canada (3.82%)
9,400
13,495
3,291
3,006
Value
Brazil (4.60%)
3,393
1,037
1,530
4,770
5,249
Cost
1
ADR
2,956,035
4,012,691
$6,614,402
8,322,521
21,367
Percentage of
Net Assets
40.1%
20.0
10.5
8.9
7.3
6.2
4.7
2.0
0.3
100.0%
Baron Funds
Baron Discovery Fund PORTFOLIO HOLDINGS
March 31, 2015 (Unaudited)
Shares
Cost
Value
Shares
Cost
$ 1,083,124
1,435,200
413,266
489,200
1,164,999
1,912,770
1,401,053
1,601,720
1,054,741
1,122,880
1,821,452
455,699
1,574,514
552,003
1,915,050
463,450
2,135,000
765,670
4,403,668
5,279,170
544,153
476,250
1,113,020
1,190,970
11,178,024
13,508,160
85,000
23,000
35,000
23,000
Restaurants (5.61%)
Chuys Holdings, Inc.1
Del Friscos Restaurant Group, Inc.1
Fiesta Restaurant Group, Inc.1
Zoes Kitchen, Inc.1
Biotechnology (6.56%)
24,500 Esperion Therapeutics, Inc.1
81,100 Foundation Medicine, Inc.1
300,000
1,071,158
336,000
951,150
1,371,158
1,287,150
Energy (1.66%)
Oil & Gas Exploration &
Production (0.48%)
75,000 Atlas Energy Group LLC1
Oil & Gas Storage &
Transportation (1.18%)
23,000 Valero Energy Partners LP
Total Energy
682,756
450,750
1,171,705
1,113,200
1,854,461
1,563,950
Financials (8.50%)
Diversified REITs (0.83%)
18,000 American Assets Trust, Inc.
609,617
2,539,008
2,734,600
2,376,373
2,371,500
2,115,000
7,753,348
8,000,140
2,268,700
3,901,721
1,246,158
751,430
2,098,544
935,424
1,997,588
3,033,968
525,000
1,070,300
2,694,676
2,285,792
1,650,175
2,746,920
4,980,468
4,397,095
746,330
1,243,823
2,507,708
844,698
556,278
1,544,795
3,389,100
976,090
5,342,559
6,466,263
594,847
1,067,259
462,022
1,801,066
1,662,106
2,263,088
1,270,234
1,686,825
1,009,757
1,219,390
1,144,701
650,509
1,222,414
1,404,032
2,286,885
1,338,081
621,900
1,418,725
133,400
80,500
97,500
243,414
Pharmaceuticals (7.51%)
Aerie Pharmaceuticals, Inc.1
Intersect ENT, Inc.1
Pacira Pharmaceuticals, Inc.1
Revance Therapeutics, Inc.1
TherapeuticsMD, Inc.1
5,246,771
7,069,623
23,330,150
32,157,583
2,399,264
1,688,348
2,930,020
1,278,275
4,087,612
4,208,295
2,204,573
452,773
2,428,400
463,505
2,657,346
2,891,905
1,279,981
1,291,620
8,024,939
8,391,820
Industrials (8.92%)
Aerospace & Defense (4.47%)
86,000 DigitalGlobe, Inc.1
155,319 The KEYW Holding Corp.1
6,170,421
779,040
464,977
1,840,447
2,305,424
Value
Total Industrials
103
Baron Funds
Baron Discovery Fund PORTFOLIO HOLDINGS (Continued)
March 31, 2015 (Unaudited)
Shares
Cost
Value
Shares
Warrants (0.07%)
304,300
35,500
70,000
33,000
425,000
$ 1,400,255
1,486,080
Value
66,000
Principal Amount
2,814,775
1,306,045
821,800
1,850,640
2,748,740
8,741,771
9,542,000
6,742,659
6,742,659
$81,163,940
94,758,427
Semiconductors (1.29%)
32,500 MA-COM Technology Solutions
Holdings, Inc.1
1,106,051
1,210,950
1,372,006
953,913
1,643,264
2,004,287
1,877,792
1,865,482
NET ASSETS
$94,103,348
3,969,183
5,747,561
$23,630,837
16,703,340
19,340,905
$70,472,511
Materials (3.93%)
Commodity Chemicals (2.36%)
83,000 Westlake Chemical Partners LP
Specialty Chemicals (1.57%)
100,000 Flotek Industries, Inc.1
Total Materials
TOTAL COMMON STOCKS
104
1,471,994
1,368,400
Cost
2,313,255
2,226,060
%
1
1,892,606
1,474,000
4,205,861
3,700,060
74,421,281
87,949,768
2
3
(655,079)
Notes
105
Notes
106
Notes
107
Notes
108
Notes
109
Notes
110
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March 31