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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-5032
767 Fifth Avenue, 49th Floor
New York, NY 10153
(Address of Principal Executive Offices) (Zip Code)
Date of fiscal year end: September 30
Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (Sections 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507.
PERSONS WHO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY VALID OMB CONTROL NUMBER.
SEC 2455 (8-05)
Item 1. Schedule of Investments
| Baron Asset Fund |
| SCHEDULE OF INVESTMENTS |
DECEMBER 31, 2012 (UNAUDITED) |
|||||||||||
| See Notes to Schedules of Investments. |
| Baron Asset Fund |
| SCHEDULE OF INVESTMENTS (CONTINUED) |
DECEMBER 31, 2012 (UNAUDITED) |
|||||||||||
| See Notes to Schedules of Investments. |
| Baron Asset Fund |
| SCHEDULE OF INVESTMENTS (CONTINUED) |
DECEMBER 31, 2012 (UNAUDITED) |
|||||||||||
| Shares | Cost | Value | |||||||||
| Private Equity Investments (1.37%) | |||||||||||
| Consumer Discretionary (0.33%) | |||||||||||
Hotels, Resorts & |
|||||||||||
| 5,200,000 | Kerzner International |
$ | 52,000,000 | $ | 7,020,000 | ||||||
| Financials (1.04%) | |||||||||||
Asset Management & |
|||||||||||
| 7,056,223 | Windy
City Investments |
34,581,904 | 22,015,415 | ||||||||
| TOTAL PRIVATE EQUITY INVESTMENTS | 86,581,904 | 29,035,415 | |||||||||
|
Principal Amount |
|||||||||||
| Short Term Investments (1.84%) | |||||||||||
| $ | 38,914,661 | Repurchase Agreement with Fixed Income Clearing Corp., dated 12/31/2012, 0.01% due 1/2/2013; Proceeds at maturity - $38,914,683; (Fully collateralized by $4,105,000 U.S. Treasury Note, 3.125% due 1/31/2017; Market value - $4,584,230, $30,760,000 U.S. Treasury Note, 1.00% due 9/30/2016; Market value - $31,413,650 and $3,645,000 U.S. Treasury Note, 0.875% due 4/30/2017; Market value - $3,695,119) 5 |
38,914,661 | 38,914,661 | |||||||
| TOTAL INVESTMENTS (100.68%) | $ | 1,150,075,135 | 2,128,650,403 | ||||||||
LIABILITIES LESS CASH AND OTHER |
(14,409,718 | ) | |||||||||
| NET ASSETS | $ | 2,114,240,685 | |||||||||
RETAIL SHARES (Equivalent to $48.88 per share based on 35,856,212 shares outstanding) |
$ | 1,752,781,367 | |||||||||
INSTITUTIONAL SHARES (Equivalent to $49.44 per share based on 7,310,512 shares outstanding) |
$ | 361,459,318 | |||||||||
| % | Represents percentage of net assets. | |
| 1 | Non-income producing securities. | |
| 2 | Foreign corporation. | |
| 3 | At December 31, 2012, the market value of restricted and fair valued securities amounted to $29,035,415 or 1.37% of net assets. None of these securities are deemed liquid. See Note 3 regarding Restricted Securities. | |
| 4 | The Adviser has reclassified/classified certain securities in or out of this sub-industry. Such reclassifications/classifications are not supported by S&P or MSCI. | |
| 5 | Level 2 security. See Note 4 regarding Fair Value Measurements. | |
| 6 | Level 3 security. See Note 4 regarding Fair Value Measurements. | |
| All securities are Level 1, unless otherwise noted. | ||
| See Notes to Schedules of Investments. |
| Baron Growth Fund |
| SCHEDULE OF INVESTMENTS |
DECEMBER 31, 2012 (UNAUDITED) |
|||||||||||
| See Notes to Schedules of Investments. |
| Baron Growth Fund |
| SCHEDULE OF INVESTMENTS (CONTINUED) |
DECEMBER 31, 2012 (UNAUDITED) |
|||||||||||
| See Notes to Schedules of Investments. |
| Baron Growth Fund |
| SCHEDULE OF INVESTMENTS (CONTINUED) |
DECEMBER 31, 2012 (UNAUDITED) |
|||||||||||
| See Notes to Schedules of Investments. |
| Baron Growth Fund |
| SCHEDULE OF INVESTMENTS (CONTINUED) |
DECEMBER 31, 2012 (UNAUDITED) |
|||||||||||
| See Notes to Schedules of Investments. |
| Baron Small Cap Fund |
| SCHEDULE OF INVESTMENTS |
DECEMBER 31, 2012 (UNAUDITED) |
| See Notes to Schedules of Investments. |
| Baron Small Cap Fund |
| SCHEDULE OF INVESTMENTS (CONTINUED) |
DECEMBER 31, 2012 (UNAUDITED) |
| See Notes to Schedules of Investments. |
| Baron Small Cap Fund |
| SCHEDULE OF INVESTMENTS (CONTINUED) |
DECEMBER 31, 2012 (UNAUDITED) |
| See Notes to Schedules of Investments. |
| Baron Small Cap Fund |
| SCHEDULE OF INVESTMENTS (CONTINUED) |
DECEMBER 31, 2012 (UNAUDITED) |
| See Notes to Schedules of Investments. |
| Baron Opportunity Fund |
| SCHEDULE OF INVESTMENTS |
DECEMBER 31, 2012 (UNAUDITED) |
| See Notes to Schedules of Investments. |
| Baron Opportunity Fund |
| SCHEDULE OF INVESTMENTS (CONTINUED) |
DECEMBER 31, 2012 (UNAUDITED) |
| See Notes to Schedules of Investments. |
| Baron Fifth Avenue Growth Fund |
| SCHEDULE OF INVESTMENTS |
DECEMBER 31, 2012 (UNAUDITED) |
| See Notes to Schedules of Investments. |
| Baron Fifth Avenue Growth Fund |
| SCHEDULE OF INVESTMENTS (CONTINUED) |
DECEMBER 31, 2012 (UNAUDITED) |
| See Notes to Schedules of Investments. |
| Baron Investment Funds Trust | December 31, 2012 |
NOTES TO SCHEDULES OF INVESTMENTS (UNAUDITED)
1. ORGANIZATION
Baron Investment Funds Trust (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company established as a Massachusetts business trust on February 19, 1987. The Trust currently offers five series (individually, a “Fund” and collectively, the “Funds”): Baron Asset Fund, Baron Growth Fund, Baron Small Cap Fund, Baron Opportunity Fund and Baron Fifth Avenue Growth Fund.
Each Fund offers two classes of shares, Retail Shares and Institutional Shares, which differ only in their ongoing fees, expenses and eligibility requirements. Retail Shares are offered to all investors. Institutional Shares are for investments in the amount of $1 million or more per Fund. Institutional Shares are intended for certain financial intermediaries that offer shares of Baron Funds through fee based platforms, retirement platforms or other platforms. Each class of shares has equal rights to earnings and assets except that each class bears different expenses for distribution and shareholder servicing. Each Fund’s investment income, realized and unrealized gains or losses on investments and foreign currency, and expenses other than those attributable to a specific class are allocated to each class based on its relative net assets. Each class of shares has exclusive voting rights with respect to matters that affect just that class.
The investment objectives of the Funds are as follows:
Baron Asset Fund seeks capital appreciation through long-term investments primarily in securities of medium-sized companies with undervalued assets or favorable growth prospects.
Baron Growth Fund seeks capital appreciation through long-term investments primarily in securities of small-sized growth companies.
Baron Small Cap Fund seeks capital appreciation through investments primarily in securities of small-sized growth companies.
Baron Opportunity Fund seeks capital appreciation through investments primarily in growth companies with market capitalization between $1 billion and $15 billion that benefit from technology advances.
Baron Fifth Avenue Growth Fund seeks capital appreciation through investments primarily in securities of large-sized growth companies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the Funds. The policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
a) Security Valuation. The Funds’ share prices or net asset values are calculated as of the close of the regular trading session (usually 4 p.m. E.T.) on the New York Stock Exchange (“NYSE”) on any day on which the NYSE is open. Portfolio securities traded on any national stock exchange are valued based on the last sale price. For securities traded on NASDAQ, the Funds use the NASDAQ Official Closing Price. Where market quotations are not readily available, or, if in BAMCO, Inc.’s (the “Adviser”) judgment, they do not accurately reflect the fair value of a security, or an event occurs after the market close but before the Funds are priced that materially affects the value of a security, the securities will be valued by the Adviser using policies and procedures approved by the Board of Trustees (the “Board”).The Adviser has a Fair Valuation Committee (the “Committee”) comprised of senior executives and the Committee reports to the Board every quarter. Factors the Committee considers when valuing a security include whether a current price is stale, there is recent news, the security is thinly traded, transactions are infrequent or quotations are genuine. There can be no guarantee, however, that a fair valuation used by the Funds on any given day will more accurately reflect the market value of an investment than the closing price of such investment in its market. Debt instruments having a remaining maturity greater than 60 days will be valued on the basis of prices obtained from a pricing service approved by the Board or at the mean of the bid and ask prices from the dealer maintaining an active market in that security. Money market instruments held by the Funds with a remaining maturity of 60 days or less are valued at amortized cost, which approximates fair value.
Non-U.S. equity securities are valued on the basis of their most recent closing market prices and translated into U.S. dollars at 4 p.m. E.T., except under the circumstances described below. Most foreign markets close before 4 p.m. E.T. For securities primarily traded in the Far East, for example, the most recent closing prices may be as much as fifteen hours old at 4 p.m. E.T. If the Adviser determines that developments between the close of the foreign markets and 4 p.m. E.T. will, in its judgment, materially affect the value of some or all of the Funds’ non-U.S. securities, the Adviser will adjust the previous closing prices to reflect what it believes to be the fair value of the securities as of 4 p.m. E.T. In deciding whether to make these adjustments, the Adviser reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent non-U.S. securities and baskets of non-U.S. securities. The Adviser may also fair value securities in other situations, for example, when a particular foreign market is closed but the Funds are open. The Adviser uses a threshold of a 1% change in the S&P 500 Index when deciding whether to “fair value” its foreign securities. The Adviser uses an outside pricing service which utilizes a systematic methodology to provide it with closing market prices and information used for adjusting those prices. The Adviser cannot predict how often it will use closing prices or how often it will adjust those prices. As a means of evaluating its fair value process, the Adviser routinely compares closing market prices, the next day’s opening prices in the same markets, and adjusted prices. Other mutual funds may adjust the prices of their securities by different amounts.
b) Foreign Currency Translations. Values of assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the price of such currencies at the time the net asset value is determined. Purchases and sales of investments and dividend income are converted at the prevailing rate of exchange on the respective dates of such transactions. Net realized gain (loss) on foreign currency transactions include gain (loss) arising from the fluctuation in the exchange rates between trade and settlement dates on security transactions and currency gain (loss) between the accrual and payment dates on dividends and foreign withholding taxes. The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments and foreign currency transactions. The Funds may invest in foreign securities and foreign currency transactions that may involve risks not associated with domestic investments as a result of the level of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability, among others.
c) Securities Lending. The Funds may lend securities to certain brokers. Upon such loans, the Funds receive collateral which is maintained by the custodian. The Funds earn interest on such collateral and earn income in the form of negotiated lenders’ fees. Securities loaned are required to be secured at all times by collateral equal to at least 102% of the market value of the securities loaned. Risks may arise upon entering into securities lending to the extent that the value of the collateral is less than the value of the securities loaned due to the changes in the value of collateral or the loaned securities. The Funds may receive collateral in the form of cash or other eligible securities, such as a letter of credit issued by a U.S. bank or securities issued or guaranteed by the U.S. government. Securities purchased with cash collateral are subject to the risks inherent in investing in these securities.
At December 31, 2012, the Funds did not have any securities on loan.
| Baron Investment Funds Trust | December 31, 2012 |
NOTES TO SCHEDULES OF INVESTMENTS (UNAUDITED) (Continued)
d) Repurchase Agreements. The Funds may invest in repurchase agreements, which are short-term investments whereby the Funds acquire ownership of a debt security and the seller agrees to repurchase the security at a future date at a specified price. When entering into repurchase agreements, it is the Funds’ policy that their custodian or a third party custodian take possession of the underlying collateral securities, the market value of which, at all times, equals at least 102% of the principal amount of the repurchase transaction. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market to ensure the adequacy of the collateral. If the seller defaults and the market value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Funds may be delayed or limited.
3. RESTRICTED SECURITIES
At December 31, 2012, investments in securities included securities that are restricted and/or illiquid. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale and are valued pursuant to the policies and procedures for fair value pricing approved by the Board. A security may be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. The Funds may receive more or less than this valuation in an actual sale and that difference could be material. At December 31, 2012, the Funds held investments in restricted and/or illiquid securities that were valued pursuant to policies and procedures for fair value pricing as follows:
Baron Asset Fund |
|||||||
| Name of Issuer | Acquisition Date(s) | Value | |||||
| Private Equity Investments | |||||||
Kerzner International Holdings Ltd., Cl A |
9/27/2006 | $ | 7,020,000 | ||||
Windy City Investments Holdings, L.L.C. |
11/13/2007-1/27/2011 | 22,015,415 | |||||
| Total Restricted Securities: | $ | 29,035,415 | |||||
(Cost $86,581,904) † (1.37% of Net Assets) |
|||||||
Baron Growth Fund |
|||||||
| Name of Issuer | Acquisition Date(s) | Value | |||||
| Private Equity Investments | |||||||
Better Place, Inc., Series C Preferred |
12/1/2011 | $ | 192,467 | ||||
Castlight Health, Inc. |
4/26/2012 | 4,999,998 | |||||
Kerzner International Holdings Ltd., Cl A |
9/27/2006 | 9,990,000 | |||||
Windy City Investments Holdings, L.L.C. |
11/13/2007-1/27/2011 | 7,410,541 | |||||
| Total Restricted Securities: | $ | 22,593,006 | |||||
(Cost $109,475,996) †(0.39% of Net Assets) |
|||||||
Baron Small Cap Fund |
|||||||
| Name of Issuer | Acquisition Date(s) | Value | |||||
| Common Stocks | |||||||
Viggle, Inc. |
8/25/2011, 4/27/2012 | $ | 3,130,910 | ||||
| Private Equity Investments | |||||||
Kerzner International Holdings Ltd., Cl A |
9/27/2006 | 4,725,000 | |||||
SFX Holding Corporation |
6/6/2012 | 10,000,000 | |||||
| Warrants | |||||||
Viggle, Inc. Warrants, Callable, Exp 4/27/2015 |
4/27/2012 | 0 | |||||
Viggle, Inc. Warrants, Non-callable, Exp 8/22/2014 |
8/25/2011 | 40,000 | |||||
Vitacost.com, Inc. Warrants, Exp 2/16/2015 |
2/17/2012 | 293,533 | |||||
| Total Restricted Securities: | $ | 18,189,443 | |||||
(Cost $58,030,234) †(0.43% of Net Assets) |
|||||||
Baron Opportunity Fund |
|||||||
| Name of Issuer | Acquisition Date | Value | |||||
| Private Equity Investments | |||||||
Better Place, Inc., Series C Preferred |
12/1/2011 | $ | 22,026 | ||||
Castlight Health, Inc. |
4/26/2012 | 1,500,001 | |||||
| Total Restricted Securities: | $ | 1,522,027 | |||||
(Cost $4,000,002) †(0.40% of Net Assets) |
|||||||
Baron Fifth Avenue Growth Fund |
|||||||
| Name of Issuer | Acquisition Date | Value | |||||
| Private Equity Investments | |||||||
Better Place, Inc., Series C Preferred |
12/1/2011 | $ | 3,348 | ||||
(Cost $379,998) (0.01% of Net Assets) |
|||||||
| † | See Schedules of Investments for cost of individual securities. |
| Baron Investment Funds Trust | December 31, 2012 |
NOTES TO SCHEDULES OF INVESTMENTS (UNAUDITED) (Continued)
4. FAIR VALUE MEASUREMENTS
Fair value is defined by GAAP as the price that the Funds would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market for the investment. GAAP provides a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable or unobservable. Observable inputs are based on market data obtained from sources independent of the Funds. Unobservable inputs are inputs that reflect the Funds’ own assumptions based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
| • | Level 1 – quoted prices in active markets for identical assets or liabilities; | |
| • | Level 2 –
prices determined using other significant inputs that are observable either directly,
or indirectly through corroboration with observable market data (which could include
quoted prices for similar assets or liabilities, interest rates, credit risk, etc.); |
|
| • | Level 3 –
prices determined using significant unobservable inputs when quoted prices or observable
inputs are unavailable such as when there is little or no market activity for an
asset or liability (unobservable inputs reflect each Fund’s own assumptions
in determining the fair value of assets or liabilities and would be based on the
best information available). |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, non-U.S. securities, whose markets close hours before the Funds value their holdings, may require revised valuations due to significant movement in the U.S. markets. Since these values are not obtained from quoted prices in an active market such securities are reflected as Level 2.
The Funds have procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Funds primarily employ a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. The Funds may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
The following is a summary of the inputs used as of December 31, 2012 in valuing the Funds’ investments carried at fair value:
Baron Asset Fund |
||||||||||||||||
| Other | ||||||||||||||||
| Quoted Prices in | Significant | Significant | ||||||||||||||
| Active Markets for | Observable | Unobservable | ||||||||||||||
| Identical Assets | Inputs | Inputs | ||||||||||||||
| Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
| Common Stocks † | $ | 2,060,700,327 | $ | – | $ | – | $ | 2,060,700,327 | ||||||||
| Private Equity Investments † | – | – | 29,035,415 | 29,035,415 | ||||||||||||
| Short Term Investments | – | 38,914,661 | – | 38,914,661 | ||||||||||||
| Total Investments | $ | 2,060,700,327 | $ | 38,914,661 | $ | 29,035,415 | $ | 2,128,650,403 | ||||||||
Transfers between Levels 1, 2 or 3, if any, are recognized at ending value on December 31, 2012. There have been no transfers in and out of Level 1, 2 or 3 fair value measurements for the Fund for the three months ended December 31, 2012.
Baron Growth Fund |
||||||||||||||||
| Other | ||||||||||||||||
| Quoted Prices in | Significant | Significant | ||||||||||||||
| Active Markets for | Observable | Unobservable | ||||||||||||||
| Identical Assets | Inputs | Inputs | ||||||||||||||
| Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
| Common Stocks † | $ | 5,496,649,050 | $ | 76,755,098 | $ | – | $ | 5,573,404,148 | ||||||||
| Private Equity Investments † | – | – | 22,593,006 | 22,593,006 | ||||||||||||
| Short Term Investments | – | 125,816,917 | – | 125,816,917 | ||||||||||||
| Total Investments | $ | 5,496,649,050 | $ | 202,572,015 | $ | 22,593,006 | $ | 5,721,814,071 | ||||||||
Transfers between Levels 1, 2 or 3, if any, are recognized at ending value on December 31, 2012. There have been no transfers in and out of Level 1, 2 or 3 fair value measurements for the Fund for the three months ended December 31, 2012.
| † See Schedules of Investments for additional detailed categorizations. |
| Baron Investment Funds Trust | December 31, 2012 |
NOTES TO SCHEDULES OF INVESTMENTS (UNAUDITED) (Continued)
Baron Small Cap Fund |
||||||||||||||||
| Other | ||||||||||||||||
| Quoted Prices in | Significant | Significant | ||||||||||||||
| Active Markets for | Observable | Unobservable | ||||||||||||||
| Identical Assets | Inputs | Inputs | ||||||||||||||
| Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
| Common Stocks † | $ | 4,122,341,266 | $ | 3,130,910 | $ | – | $ | 4,125,472,176 | ||||||||
| Private Equity Investments † | – | – | 14,725,000 | 14,725,000 | ||||||||||||
| Warrants † | – | 333,533 | – | 333,533 | ||||||||||||
| Short Term Investments | – | 58,449,600 | – | 58,449,600 | ||||||||||||
| Total Investments | $ | 4,122,341,266 | $ | 61,914,043 | $ | 14,725,000 | $ | 4,198,980,309 | ||||||||
Transfers between Levels 1, 2 or 3, if any, are recognized at ending value on December 31, 2012. There have been no transfers in and out of Level 1, 2 or 3 fair value measurements for the Fund for the three months ended December 31, 2012.
Baron Opportunity Fund |
||||||||||||||||
| Other | ||||||||||||||||
| Quoted Prices in | Significant | Significant | ||||||||||||||
| Active Markets for | Observable | Unobservable | ||||||||||||||
| Identical Assets | Inputs | Inputs | ||||||||||||||
| Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
| Common Stocks † | $ | 371,146,730 | $ | – | $ | – | $ | 371,146,730 | ||||||||
| Private Equity Investments † | – | – | 1,522,027 | 1,522,027 | ||||||||||||
| Short Term Investments | – | 6,245,361 | – | 6,245,361 | ||||||||||||
| Total Investments | $ | 371,146,730 | $ | 6,245,361 | $ | 1,522,027 | $ | 378,914,118 | ||||||||
Transfers between Levels 1, 2 or 3, if any, are recognized at ending value on December 31, 2012. There have been no transfers in and out of Level 1, 2 or 3 fair value measurements for the Fund for the three months ended December 31, 2012.
Baron Fifth Avenue Growth Fund |
||||||||||||||||
| Other | ||||||||||||||||
| Quoted Prices in | Significant | Significant | ||||||||||||||
| Active Markets for | Observable | Unobservable | ||||||||||||||
| Identical Assets | Inputs | Inputs | ||||||||||||||
| Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
| Common Stocks † | $ | 60,053,526 | $ | 1,375,468 | $ | – | $ | 61,428,994 | ||||||||
| Private Equity Investments | – | – | 3,348 | 3,348 | ||||||||||||
| Short Term Investments | – | 3,261,165 | – | 3,261,165 | ||||||||||||
| Total Investments | $ | 60,053,526 | $ | 4,636,633 | $ | 3.348 | $ | 64,693,507 | ||||||||
The fair value of Level 2 investments at September 30, 2012 was $1,961,394. $1,375,468 was transferred out of Level 1 into Level 2 at December 31, 2012 as a result of adjusting closing prices for certain securities (as described in Note 2a), due to significant market movements between the time at which the Fund valued its securities and the earlier closing of foreign markets. It is the Fund’s policy to recognize transfers in and transfers out at the fair value as of the end of the period.
| † See Schedules of Investments for additional detailed categorizations. |
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
Baron Asset Fund |
||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments in Securities | Balance as of September 30, 2012 |
Accrued Premiums/ Discounts |
Net Realized Gain (Loss) |
Net Change in Unrealized Appreciation (Depreciation) |
Purchases | Sales | Transfers Into Level 3 |
Transfers Out of Level 3 |
Balance as of December 31, 2012 |
Change in Net Unrealized Appreciation (Depreciation) from Investments still held at December 31, 2012 |
||||||||||||||||||||||||||||||||||||||||
| Private Equity Investments | ||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer Discretionary |
$ | 8,944,000 | $ | – | $ | – | $ | (1,924,000 | ) | $ | – | $ | – | $ | – | $ | – | $ | 7,020,000 | $ | (1,924,000 | ) | ||||||||||||||||||||||||||||
Financials |
23,708,908 | – | – | (1,693,493 | ) | – | – | – | – | 22,015,415 | (1,693,493 | ) | ||||||||||||||||||||||||||||||||||||||
| Total | $ | 32,652,908 | $ | – | $ | – | $ | (3,617,493 | ) | $ | – | $ | – | $ | – | $ | – | $ | 29,035,415 | $ | (3,617,493 | ) | ||||||||||||||||||||||||||||
| Baron Investment Funds Trust | December 31, 2012 |
NOTES TO SCHEDULES OF INVESTMENTS (UNAUDITED) (Continued)
Baron Growth Fund |
||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments in Securities | Balance as of September 30, 2012 |
Accrued Premiums/ Discounts |
Net Realized Gain (Loss) |
Net Change in Unrealized Appreciation (Depreciation) |
Purchases | Sales | Transfers Into Level 3 |
Transfers Out of Level 3 |
Balance as of December 31, 2012 |
Change in Net Unrealized Appreciation (Depreciation) from Investments still held at December 31, 2012 |
||||||||||||||||||||||||||||||||||||||||
| Private Equity Investments | ||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer Discretionary |
$ | 12,728,000 | $ | – | $ | – | $ | (2,738,000 | ) | $ | – | $ | – | $ | – | $ | – | $ | 9,990,000 | $ | (2,738,000 | ) | ||||||||||||||||||||||||||||
Financials |
7,980,583 | – | – | (570,042 | ) | – | – | – | – | 7,410,541 | (570,042 | ) | ||||||||||||||||||||||||||||||||||||||
Health Care |
4,999,998 | – | – | – | – | – | – | – | 4,999.998 | – | ||||||||||||||||||||||||||||||||||||||||
Utilities |
21,845,000 | – | – | (21,652,533 | ) | – | – | – | – | 192,467 | (21,652,533 | ) | ||||||||||||||||||||||||||||||||||||||
| Total | $ | 47,553,581 | $ | – | $ | – | $ | (24,960,575 | ) | $ | – | $ | – | $ | – | $ | – | $ | 22,593,006 | $ | (24,960,575 | ) | ||||||||||||||||||||||||||||
Baron Small Cap Fund |
||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments in Securities | Balance as of September 30, 2012 |
Accrued Premiums/ Discounts |
Net Realized Gain (Loss) |
Net Change in Unrealized Appreciation (Depreciation) |
Purchases | Sales | Transfers Into Level 3 |
Transfers Out of Level 3 |
Balance as of December 31, 2012 |
Change in Net Unrealized Appreciation (Depreciation) from Investments still held at December 31, 2012 |
||||||||||||||||||||||||||||||||||||||||
| Private Equity Investments | ||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer Discretionary |
$ | 11,020,000 | $ | – | $ | – | $ | (1,295,000 | ) | $ | 5,000,000 | $ | – | $ | – | $ | – | $ | 14,725,000 | $ | (1,295,000 | ) | ||||||||||||||||||||||||||||
| Total | $ | 11,020,000 | $ | – | $ | – | $ | (1,295,000 | ) | $ | 5,000,000 | $ | – | $ | – | $ | – | $ | 14,725,000 | $ | (1,295,000 | ) | ||||||||||||||||||||||||||||
Baron Opportunity Fund |
||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments in Securities | Balance as of September 30, 2012 |
Accrued Premiums/ Discounts |
Net Realized Gain (Loss) |
Net Change in Unrealized Appreciation (Depreciation) |
Purchases | Sales | Transfers Into Level 3 |
Transfers Out of Level 3 |
Balance as of December 31, 2012 |
Change in Net Unrealized Appreciation (Depreciation) from Investments still held at December 31, 2012 |
||||||||||||||||||||||||||||||||||||||||
| Private Equity Investments | ||||||||||||||||||||||||||||||||||||||||||||||||||
Health Care |
$ | 1,500,001 | $ | – | $ | – | $ | – | $ | – | $ | – | $ | – | $ | – | $ | 1,500,001 | $ | – | ||||||||||||||||||||||||||||||
Utilities |
2,500,001 | – | – | (2,477,975 | ) | – | – | – | – | 22,026 | (2,477,975 | ) | ||||||||||||||||||||||||||||||||||||||
| Total | $ | 4,000,002 | $ | – | $ | – | $ | (2,477,975 | ) | $ | – | $ | – | $ | – | $ | – | $ | 1,522,027 | $ | (2,477,975 | ) | ||||||||||||||||||||||||||||
Baron Fifth Avenue Growth Fund |
||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments in Securities | Balance as of September 30, 2012 |
Accrued Premiums/ Discounts |
Net Realized Gain (Loss) |
Net Change in Unrealized Appreciation (Depreciation) |
Purchases | Sales | Transfers Into Level 3 |
Transfers Out of Level 3 |
Balance as of December 31, 2012 |
Change in Net Unrealized Appreciation (Depreciation) from Investments still held at December 31, 2012 |
||||||||||||||||||||||||||||||||||||||||
| Private Equity Investments | ||||||||||||||||||||||||||||||||||||||||||||||||||
Utilities |
$ | 379,998 | $ | – | $ | – | $ | (376,650 | ) | $ | – | $ | – | $ | – | $ | – | $ | 3,348 | $ | (376,650 | ) | ||||||||||||||||||||||||||||
| Total | $ | 379,998 | $ | – | $ | – | $ | (376,650 | ) | $ | – | $ | – | $ | – | $ | – | $ | 3,348 | $ | (376,650 | ) | ||||||||||||||||||||||||||||
| Baron Investment Funds Trust | December 31, 2012 |
NOTES TO SCHEDULES OF INVESTMENTS (UNAUDITED) (Continued)
Significant unobservable valuation inputs developed by the Adviser for significant (greater than 1% of net assets) Level 3 investments as of December 31, 2012, were as follows:
Baron Asset Fund
| Sector | Company | Fair Value as of December 31, 2012 |
Valuation Technique |
Unobservable Input | Weighted Average used on December 31, 2012 |
Range used on December 31, 2012 |
| Private Equity Investments: Financials |
Windy City Investments Holdings, L.L.C. |
$22,015,415 | Combination of Market Comparables and Option Pricing methods |
Estimated volatility of the returns of the enterprise value (1) |
6.16% | 6.16% |
| Discount
for lack of marketability |
5.37% | 5.37% | ||||
| EV/Run Rate
EBITDA Multiple (2) |
9.67x | 7.2x to 11.0x | ||||
| Adjustment
to the EBITDA Multiple due to leverage (2) |
10.6% | 10.6% | ||||
| Change in
the composite equity index of comparable companies |
1.18% | 0.73% to 1.97% |
(1) The volatility was derived using the historical returns of the publicly traded debt of Nuveen Investments, Inc. and the historical returns of the equity of comparable public companies. Nuveen Investments, Inc. is the sole asset of Windy City Investments Holdings, L.L.C.
(2)The multiple was derived as a simple average of the multiples of comparable companies. The derived EBITDA multiple was increased by 10.6% to 9.67x. This increase adjusts for leverage, as Nuveen Investments, Inc. is more levered than its comparable companies.
A significant change in the EV/Run Rate EBITDA Multiple ratio may result in a directionally similar significant change in the fair value measurement, while a significant change in the discount for lack of marketability and equity index of comparable companies may not result in a materially higher or lower fair value measurement.
5. COST OF INVESTMENTS FOR INCOME TAX
PURPOSES
As of December 31, 2012, the components of net assets on a tax basis
were substantially as follows:
| Baron Fifth | |||||||||||||||||||||||||
| Baron | Baron | Avenue | |||||||||||||||||||||||
| Baron Asset | Baron Growth | Small Cap | Opportunity | Growth | |||||||||||||||||||||
| Fund | Fund | Fund | Fund | Fund | |||||||||||||||||||||
| Cost of investments | $ | 1,150,075,135 | $ | 3,296,072,885 | $ | 2,742,048,284 | $ | 304,129,114 | $ | 51,369,431 | |||||||||||||||
| Unrealized appreciation | $ | 1,045,379,268 | $ | 2,550,531,289 | $ | 1,613,423,959 | $ | 83,787,438 | $ | 14,247,938 | |||||||||||||||
| Unrealized depreciation | (66,804,000 | ) | (124,790,103 | ) | (156,491,934 | ) | (9,002,434 | ) | (923,862 | ) | |||||||||||||||
| Net unrealized appreciation | $ | 978,575,268 | $ | 2,425,741,186 | $ | 1,456,932,025 | $ | 74,785,004 | $ | 13,324,076 | |||||||||||||||
| Baron Investment Funds Trust | December 31, 2012 |
NOTES TO SCHEDULES OF INVESTMENTS (UNAUDITED) (Continued)
6. TRANSACTIONS IN “AFFILIATED” COMPANIES 1
| Baron Growth Fund | |||||||||||||||||||||||||||||||||||
| Name of Issuer | Value at September 30, 2012 |
Purchase Cost |
Sales Proceeds | Net Change in Unrealized Appreciation (Depreciation) |
Realized Gains/(Losses) |
Shares Held at December 31, 2012 |
Value at December 31, 2012 |
||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||
| “Affiliated” Company as of December 31, 2012: | |||||||||||||||||||||||||||||||||||
| Ameristar Casinos, Inc. | $ | 35,600,000 | $ | – | $ | – | $ | 16,880,000 | $ | – | 2,000,000 | $ | 52,480,000 | ||||||||||||||||||||||
| Choice Hotels International, Inc. | 96,209,925 | – | – | 4,902,225 | – | 3,007,500 | 101,112,150 | ||||||||||||||||||||||||||||
| DeVry, Inc. | 74,539,000 | – | 544,590 | 3,069,783 | 58,307 | 3,250,000 | 77,122,500 | ||||||||||||||||||||||||||||
| Manchester United plc | – | 36,731,899 | – | 1,540,132 | – | 2,723,988 | 38,272,031 | ||||||||||||||||||||||||||||
| Vail Resorts, Inc. | 115,631,487 | – | – | (7,140,470 | ) | – | 2,005,750 | 108,491,017 | |||||||||||||||||||||||||||
| $ | 321,980,412 | $ | 36,731,899 | $ | 544,590 | $ | 19,251,670 | $ | 58,307 | $ | 377,477,698 | ||||||||||||||||||||||||
| No Longer an “Affiliated” Company as of December 31, 2012: | |||||||||||||||||||||||||||||||||||
| Cymer, Inc. | $ | 82,501,165 | $ | – | $ | 36,865,824 | $ | 44,183,107 | $ | 18,697,552 | 1,200,000 | $ | 108,516,000 | ||||||||||||||||||||||
| $ | 82,501,165 | $ | – | $ | 36,865,824 | $ | 44,183,107 | $ | 18,697,552 | $ | 108,516,000 | ||||||||||||||||||||||||
Baron Small Cap Fund
| Name of Issuer | Value at September 30, 2012 |
Purchase Cost |
Sales Proceeds | Net Change in Unrealized Appreciation (Depreciation) |
Realized Gains/(Losses) |
Shares Held at December 31, 2012 |
Value at December 31, 2012 |
||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||
| “Affiliated” Company as of December 31, 2012: | |||||||||||||||||||||||||||||||||||
| BJ’s Restaurants, Inc. | $ | 36,280,000 | $ | 32,265,623 | $ | – | $ | (10,970,623 | ) | $ | – | 1,750,000 | $ | 57,575,000 | |||||||||||||||||||||
| Bravo Brio Restaurant Group, Inc. | 23,280,000 | – | – | (1,792,000 | ) | – | 1,600,000 | 21,488,000 | |||||||||||||||||||||||||||
| The Chefs’ Warehouse, Inc. | 28,665,000 | – | – | (997,500 | ) | – | 1,750,000 | 27,667,500 | |||||||||||||||||||||||||||
| Chesapeake Lodging Trust | 39,740,000 | – | – | 2,020,000 | – | 2,000,000 | 41,760,000 | ||||||||||||||||||||||||||||
| Globe Specialty Metals, Inc. | 60,880,000 | – | – | (5,880,000 | ) | – | 4,000,000 | 55,000,000 | |||||||||||||||||||||||||||
| The KEYW Holding Corp. | 37,500,000 | – | – | 570,000 | – | 3,000,000 | 38,070,000 | ||||||||||||||||||||||||||||
| Mercury Systems, Inc. | 18,585,000 | – | – | (2,485,000 | ) | – | 1,750,000 | 16,100,000 | |||||||||||||||||||||||||||
| Susser Petroleum Partners LP | 21,622,907 | 6,108,193 | – | 1,202,900 | – | 1,150,000 | 28,934,000 | ||||||||||||||||||||||||||||
| Viggle, Inc. | 4,734,546 | – | – | (1,603,636 | ) | 2,545,455 | 3,130,910 | ||||||||||||||||||||||||||||
Viggle, Inc.,
Warrants, Callable, |
– | – | – | – | – | 545,455 | – | ||||||||||||||||||||||||||||
Viggle, Inc.,
Warrants, Non- callable, |
180,000 | – | – | (140,000 | ) | – | 2,000,000 | 40,000 | |||||||||||||||||||||||||||
| Vitacost.com, Inc. | 20,578,839 | – | – | – | – | 3,035,227 | 20,578,839 | ||||||||||||||||||||||||||||
Vitacost.com,
Inc. Warrants, |
363,884 | – | – | (70,351 | ) | – | 242,589 | 293,533 | |||||||||||||||||||||||||||
| XPO Logistics, Inc. | 14,688,000 | – | – | 6,168,000 | – | 1,200,000 | 20,856,000 | ||||||||||||||||||||||||||||
| $ | 307,098,176 | $ | 38,373,816 | $ | – | $ | (13,978,210 | ) | $ | – | $ | 331,493,782 | |||||||||||||||||||||||
| No Longer an “Affiliated” Company as of December 31, 2012: | |||||||||||||||||||||||||||||||||||
| Rogers Corp. | |||||||||||||||||||||||||||||||||||
| $ | 42,360,000 | $ | – | $ | 10,684,124 | $ | 6,589,755 | $ | (1,020,631 | ) | 750,000 | $ | 37,245,000 | ||||||||||||||||||||||
| $ | 42,360,000 | $ | – | $ | 10,684,124 | $ | 6,589,755 | $ | (1,020,631 | ) | $ | 37,245,000 | |||||||||||||||||||||||
| 1 | An “Affiliated” Company, as defined in the 1940 Act, is a company in which a Fund held 5% or more of the company’s outstanding voting securities at any time during the three month period ended December 31, 2012. |
For additional information regarding the Funds’ other significant accounting policies, please refer to the Funds’ most recent Annual or Semi-Annual shareholder report filed on the U.S. Securities and Exchange Commission’s website, www.sec.gov.
| Item 2. | Controls and Procedures. |
| (a) | The Registrant’s principal executive officer and principal financial officer have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “1940 Act”)) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report. |
| (b) | There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the Registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
| Item 3. | Exhibits |
| 1. | The certifications of the Registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)), are exhibits to this report. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Baron Investment Funds Trust | |||
| By: | /s/ RONALD BARON |
||
| Ronald Baron | |||
| Chief Executive Officer | |||
| Date: February 19, 2013 | |||
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| By: | /s/ RONALD BARON |
||
| Ronald Baron | |||
| Chief Executive Officer |
| By: | /s/ PEGGY WONG |
||
| Peggy Wong | |||
| Treasurer and Chief Financial Officer | |||
| Date: February 19, 2013 | |||
CERTIFICATIONS
I, Ronald Baron, certify that:
| 1. | I have reviewed this report on Form N-Q of Baron Investment Funds Trust; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within in those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: February 19, 2013 |
| /s/ Ronald Baron |
| Ronald Baron |
| Chief Executive Officer |
I, Peggy Wong, certify that:
| 1. | I have reviewed this report on Form N-Q of Baron Investment Funds Trust; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within in those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: February 19, 2013 |
| /s/ Peggy Wong |
| Peggy Wong |
| Treasurer and Chief Financial Officer |