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Baron Focused Growth Fund Table VI. Investments in Less Seasoned Growth Companies Percent of Net Assets Year Acquired Cumulative Return Since Initial Purchase Tesla Motors, Inc. 11.0 2014 –14.7% CoStar Group, Inc. 8.1 2014 –11.9 Iridium Communications Inc. 4.4 2014 41.0 Benefitfocus, Inc. 3.8 2014 8.9 Financial Engines, Inc. 3.7 2014 9.4 Guidewire Software, Inc. 2.9 2013 6.7 Caesarstone Ltd. 2.6 2013 –30.9 AO World plc 2.5 2016 14.9 Table VII. Investments with Irreplaceable Assets Percent of Net Assets Year Acquired Cumulative Return Since Initial Purchase Vail Resorts, Inc. 12.5 2013 175.2% Hyatt Hotels Corp. 10.7 2009 97.4 Manchester United plc 4.5 2012 5.4 Table VIII. Foundational Investments: Growth, Dividends, and Share Repurchases Percent of Net Assets Year Acquired Cumulative Return Since Initial Purchase FactSet Research Systems Inc. 7.0 2008 250.9% Arch Capital Group Ltd. 4.9 2003 690.0 Choice Hotels International, Inc. 4.8 2010 163.0 Verisk Analytics, Inc. 2.8 2009 192.8 Fastenal Co. 2.7 2007 170.6 Church & Dwight Co., Inc. 2.5 2007 336.6 As of December 31, 2016, Baron Focused Growth Fund held 18 investments. The top 10 holdings comprised 71.7% of the Fund’s net assets. Virtually all of these have been successful investments and were purchased when they were smaller businesses. We believe they continue to offer significant further appreciation potential although we cannot guarantee that will be the case. Table IX. Top 10 holdings as of December 31, 2016 Year Acquired Market Cap When Acquired (billions) Quarter End Market Cap (billions) Amount (millions) Percent of Net Assets Vail Resorts, Inc. 2013 $ 2.3 $ 6.4 $22.0 12.5% Tesla Motors, Inc. 2014 31.2 34.4 19.2 11.0 Hyatt Hotels Corp. 2009 4.2 7.2 18.8 10.7 CoStar Group, Inc. 2014 6.2 6.1 14.1 8.1 FactSet Research Systems, Inc. 2008 2.5 6.5 12.3 7.0 Arch Capital Group Ltd. 2003 0.9 10.6 8.6 4.9 Choice Hotels International, Inc. 2010 1.9 3.1 8.4 4.8 Manchester United plc 2012 2.3 2.3 7.8 4.5 Iridium Communications Inc. 2014 0.6 0.9 7.7 4.4 Benefitfocus, Inc. 2014 0.7 0.9 6.7 3.8 The top five positions in the portfolio, Vail Resorts, Tesla Motors, Hyatt Hotels, CoStar Group and FactSet Research Systems, Inc., all have, in our view, significant competitive advantages due to irreplaceable assets, technologically superior knowhow or exclusive data that is integral to their operations. We think these businesses cannot be easily duplicated, which enhances their potential for superior earnings growth. However, these business models were not necessarily rewarded in the current period despite their continued operational success. The same is true of many businesses in which Baron Focused Growth Fund has invested. Their stocks have changed little during the past three years despite substantial growth of their businesses. Brief sketches of several businesses that are investing and penalizing their current income to become much larger businesses follow: CoStar Group, Inc., the leading provider of commercial real estate information and multifamily marketing solutions, is generating robust lowteens revenue growth and margin expansion while significantly investing in its business. The company is preparing to migrate users of its low-end LoopNet Premium Searcher product in 2017. It is expanding its sales, research, and product development capabilities ahead of this transition. We believe that the returns have the potential to be dramatic, as CoStar will be able to migrate LoopNet customers to the superior CoStar product, creating an incremental $200 million in annual recurring revenue while also improving customer efficiencies. We believe that CoStar has the potential to exceed $1 billion of annual revenue and 40% EBITDA margins within the next two years, and can double its revenue and enhance its margins by 5% to 10% over the subsequent 5 years. 52

December 31, 2016 Baron Focused Growth Fund Guidewire Software, Inc., the leading provider of technology solutions to the P&C insurance industry, is benefiting from a replacement cycle of 30- year-old technology. Guidewire has emerged as the gold standard in the industry, with dominant win rates, near perfect retention results, and accelerating demand. Through innovation and targeted acquisitions, Guidewire has more than tripled its addressable market since coming public just five years ago. We believe the company is on a path to increase its EBITDA by 10-fold over our investment horizon. Despite this progress and opportunity, the market punished Guidewire shares this year for signing several new large contracts where it will incur certain costs up front but can’t recognize the corresponding revenue under GAAP accounting conventions for 8 to 12 months. This is despite collecting cash up front for services to be provided later! The market was also disappointed in an acquisition that we believe will enable the company to grow faster and serve its clients better because of a year one accounting decision that penalized current results. Manchester United plc penalized its earnings by investing heavily in a new manager and players in the summer transfer window. Manchester United has a globally recognized brand and vast worldwide following, with almost 660 million fans. The franchise is benefiting from the growing global importance of live sports and secular growth in U.S. soccer. We think the company has significant brand monetization opportunities, including global and regional sponsorships and merchandizing contracts. Its opportunities to increase TV broadcasting revenue and benefit from mobile digital media are also significant. We expect Manchester United’s investments to boost its revenues more than 50%, approaching $1 billion, and to double its EBITDA during the next five or six years. Thank you for investing in Baron Focused Growth Fund. We are continuing to work hard to justify your confidence and trust in our stewardship of your family’s hard-earned savings. We are also continuing to try to provide you with information I would like to have if our roles were reversed. This is so you can make an informed judgment about whether Baron Focused Growth Fund remains an appropriate investment for your family. Respectfully, Ronald Baron CEO and Portfolio Manager 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 Fund’s 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 manager’s 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 fund’s 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 company’s current stock price to its actual earnings per share. Alpha: measures the difference between a fund’s actual returns and its expected performance, given its level of risk as measured by beta. 53

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