<PAGE>
[LOGO]
BARON
CAPITAL
FUNDS
PERFORMANCE.................................................1
INVESTMENT STRATEGY.........................................2
767 Fifth Avenue
NY, NY 10153
212-583-2100
1-800-99-BARON
<PAGE>
--------------------------------------------------------------------------------
BARON CAPITAL ASSET FUND
SEMI-ANNUAL REPORT JUNE 30, 2000
Dear Baron Capital Asset
Fund Shareholder:
--------------------------------------------------------------------------------
PERFORMANCE
Baron Capital Asset Fund's* performance since its inception on October 1, 1998
has been strong both absolutely and relative to the market. The Fund has gained
81.6% (40.6% per year) since the Fund's inception through June 30, 2000. This
compares to a gain of 50.7% (26.5% per year) and 50.9% (26.6% per year) for the
S&P 500 and Russell 2000 respectively. During the first half of 2000, Baron
Capital Asset Fund gained 0.9% and lagged the Russell 2000, +3.0%, while
outperforming the S&P 500, -0.5%. Based on the Fund's strong performance in
July and August-to-date, +4.3%, it is now outperforming both of these indices
year-to-date.
-------
* The inception date for the insurance class was October 1, 1997. Performance
results for the retirement class can be found in the supplemental table to this
report.
These are Bizarre Times!
Small and Medium Sized Companies
Baron Capital Asset Fund invests in small and medium sized companies. The
investment performance of smaller companies in 1999, as measured by the Russell
2000, +21.3%, after under-performing by a record 30 percentage points in 1998
and after years of under-performance, was only slightly better than the
performance of larger companies as measured by the S&P 500, +21.0%. In 2000,
stocks of smaller cap companies are marginally outperforming stocks of larger
companies. Over the last five years the performance of the Russell 2000, +95%,
was cumulatively half the performance of the S&P 500, +191%. This relative
under-performance of smaller companies has resulted in relative valuations of
smaller companies that are compelling. Historically, small company stock prices
have usually been able to sustain periods of strong outperformance relative to
larger companies that last for years at a time from these price levels. More
importantly,
[GRAPH]
====================== ======================== =========================
PERFORMANCE PERFORMANCE PERFORMANCE
SIX MONTHS ENDED SINCE INCEPTION SINCE INCEPTION
JUNE 30, 2000 OCTOBER 1, 1999 THROUGH NOVEMBER 25, 1998 THROUGH
JUNE 30, 2000 JUNE 30, 2000
INSURANCE SHARES 0.9%
RETIREMENT SHARES 1.O% INSURANCE SHARES 81.6% RETIREMENT SHARES 51.1%
RUSSELL 2000* 3.0% RUSSELL 2000* 50.9% RUSSELL 2000* 32.2%
S&P 500* -0.5% S&P 500* 50.7% S&P 500* 24.9%
====================== ======================== =========================
* THE S&P 500 AND RUSSELL 2000 ARE UNMANAGED INDEXES, THE S&P MEASURES THE
PERFORMANCE OF THE STOCK MARKET IN GENERAL; THE RUSSELL 2000 OF SMALL AND
MID-SIZED COMPANIES.
<PAGE>
--------------------------------------------------------------------------------
B A R O N C A P I T A L A S S E T F U N D
--------------------------------------------------------------------------------
bottom up, we are identifying many investment opportunities in what we believe
are great businesses that are selling at very attractive prices on an absolute
basis as well as on a relative basis to larger cap stocks.
Value vs. Growth - The Gap Narrows
The gap between the performance of growth and value stocks in 1999 was record
setting. While the Russell 2000 growth index gained 43.1% for the year, the
Russell 2000 value index lost 1.5%! This gap has now begun to narrow. In 2000,
year-to-date, the Russell 2000 value index is ahead of the growth index by 16
percentage points. Our focus is on buying what we believe are great businesses
with significant growth prospects at reasonable prices. We believe these
companies will double in size within four years. We call our style a value
orientation toward growth. As value returns to favor, we believe we will
benefit.
It's Been a Trading World
Traders have been big winners during the last year, not investors. The
combination of unusual stock price volatility and retail momentum investors in
mostly technology oriented, limited float stocks has been nirvana for day
traders. Even larger, more established, institutional investors or mutual funds
that have a momentum style and high turnover have benefited from this trading
oriented environment. It is our belief that this, too, will end. We believe
that when, not if, normalcy returns to the stock market, investing, investing
for the long-term, which is what we do, will once again generate superior
long-term investment results. Of course we cannot guarantee that will occur.
--------------------------------------------------------------------------------
INVESTMENT STRATEGY
Baron Capital Asset Fund, like Baron Asset Fund and Baron Growth Fund, is a
long-term investor in growth businesses purchased at what we believe are
attractive prices.
The most successful mutual fund manager so far, Fidelity's vice-chairman and
former Magellan portfolio manager Peter Lynch, observed that he usually didn't
make much money until after he had owned shares for two or three years. We
concur. And just why is that? Because the most successful investments are often
those businesses whose prospects are not yet obvious or evident to others. They
are businesses run by entrepreneurs whose dreams are clear to them, but which
dreams have not yet been realized. Invest in a business for what it can become,
not necessarily just what it is today! Senator Robert Kennedy often remarked
that "Some men see things as they are and ask 'why?' I dream things that never
were and ask, 'Why not?' " Invest in dreams that we think can become
realities...before you read about them on the front pages of business magazines
or in Internet chat rooms. That's how we try to invest.
About half of Baron Capital Asset Fund's portfolio is invested in businesses
that were quite small when we first invested. . .but had
<PAGE>
very large opportunities. . .were run by visionary entrepreneurs . . .and have
been extraordinarily successful investments. These businesses have since become
larger. . .in many instances a lot larger and a lot more profitable.
In 1991, although 80% of businesses had employed temporary employees with light
skills, fewer than 20% had used temporary accountants or other highly skilled
and highly paid executives or assistants, employees who are the bread and
butter of Max Messmer's temporary employment agency Robert Half. Probably no
one was then thinking about Internet-sourced job candidates. Based in Silicon
Valley, how could Max have missed it? He didn't. Robert Half's earnings had
grown 30-40% annually for years, and after slowing in the middle of last year
due to candidate shortages, have reaccelerated in recent quarters as Internet
initiatives have impacted results.
Also in 1991, Ron Taylor's and Dennis Keller's DeVry's for-profit, accredited
schools offered students, many of whom were minorities, a technical education,
a college degree for a lot lower cost than private colleges and a virtually
assured job. The Department of Education then forecast that 80% of jobs in ten
years would require post secondary education, but only 25% of our population
were so educated. Ivy educated investors and analysts then looked askance at
DeVry's privately owned for-profit colleges. No longer. I can hardly remember
when DeVry's quarterly earnings did not increase 20-25% from the prior year.
In 1992, few thought Chuck Schwab's and David Pottruck's Charles Schwab's
Mutual Fund Marketplace was about to revolutionize the distribution of mutual
funds. Schwab, the same technology-oriented discount broker that had led the
way on May Day in 1975 when stock brokerage commissions became negotiable. Who
would have thought this Silicon Valley based technology business disguised as a
discount stock broker would be the leader in reinventing full service brokerage
with an Internet backbone in 2000? Chuck and Dave. That's who. Schwab's
customer assets have grown 40% annually since we first invested in 1992,
driving earnings growth at about the same pace.
In 1993, George Blumenthal and Barclay Knapp raised the financing required to
acquire a U.K. cable television franchise that could also offer residential and
business telephony services to compete against the notoriously poor service
provider British Tel. NTL has since acquired a communications tower business,
most of its cable competitors, successfully obtained both telephony and cable
customers, begun to offer Internet access and digital television, raised
billions in capital, most recently from Microsoft and France Telecom, and has
recently begun to expand its services to Continental Europe. Whew!
In 1995, few recognized that hardcharging Michael Mark's Flextronic's would
have the opportunity to outsource the manufacturing for the likes of Motorola,
Ericsson, Microsoft, et. al. by
2
<PAGE>
--------------------------------------------------------------------------------
B A R O N C A P I T A L A S S E T F U N D
--------------------------------------------------------------------------------
manufacturing for them in low cost jurisdictions such as China, Mexico and
Eastern Europe and would grow his business twenty fold in five years with the
potential to quadruple it again in the next five!
In 1996, investors had not yet recognized that Mac Tichenor's Hispanic
Broadcasting would be able to dominate Spanish radio with its carefully
researched programming catering to a rapidly growing Hispanic population
driving ratings while its aggressive sales force would sell its leading market
shares for rapidly increasing "power ratios." Ditto in 1997 for Jerry
Perenchio's even more dominant Spanish television station business, Univision,
with its unique programming almost impossible to copy. Steve Dodge recognized
before others the explosive incipient demand for wireless communications. Steve
raised the capital, and acquired and built American Tower into the largest U.S.
communications tower business that is growing rapidly due to demand for voice
services and could soar with demand for data services, "the Internet everywhere
and anywhere all the time."
The table below lists Baron Asset Fund's small cap investments that have
already been so successful they are no longer small cap investments. Although
these investments were made in another Fund, Baron Capital Asset Fund holds
most of the securities listed and is managed similarly to Baron Asset Fund
using the same philosophy and style. Since the positions were purchased at a
later date, however, the actual appreciation for Baron Capital Asset Fund is
not as great as for Baron Asset Fund. The Table is presented here to show
examples of how we believe our investment philosophy and long-term approach
offers shareholders the opportunity to see small cap investments grow. Of
course we may not achieve our goals, but we believe in the power of growth.
And, the power of the visionary, hardworking, ethical, smart executives who
make it happen. When investors question our admiration and respect for and
relationships with the executives who run the companies in which we invest, we
direct their attention to the table below. It's too bad, of course, that we, on
occasion, misjudge people. But, overall, as you can see, the results of our
program to "invest in people, not just buildings" have been positive.
Table I
Successful small-cap investments.
Baron Asset Fund
Date Initial Purchase Appreciation
Robert Half ............... 1991 75X
DeVry ..................... 1991 19X
Charles Schwab ............ 1992 60X
NTL ....................... 1993 7X
Flextronics ............... 1995 19X
Dollar Tree ............... 1995 8X
Hispanic Bdcstg ........... 1996 8X
Cox Radio ................. 1996 5X
Westwood One .............. 1996 10X
Univision ................. 1997 7X
American Tower ............ 1998 3X
United Globalcom .......... 1998 6X
Four Seasons .............. 1998 3X
--------------------------------------------------------------------------------
<PAGE>
The challenge is to balance our already successful investments, against ones in
which we continue to believe we can double our money within the next four
years, with newer, as of yet unproven investments. Our investment strategy is
to have roughly the remaining half of the portfolio invested in new investment
themes that offer us the opportunity to generate comparable investment results
to those outlined in the table above. We believe that the Fund owns many
investments in companies with great prospects for growth selling at attractive
prices. Our goal is that many of these companies will some day join the above
list of successful investments in which we have made 3X, 5X or even 10X our
original investment. Of course we might not achieve our goals.
Portfolio Structure
Baron Capital Asset Fund invests in a relatively small number of securities. As
of June 30, 2000, the Fund owned 61 companies. We believe that we can gain the
greatest investment advantage by concentrating our investments in the
businesses in which our original, independent research has identified the
greatest opportunities for long term capital appreciation. As of June 30, the
Fund had 35% of its portfolio invested in its ten largest positions.
10 Largest security positions
Charles Schwab ................. 5.5%
ChoicePoint Inc. ............... 4.0%
NTL, Inc. ...................... 3.7%
Apollo Group Inc. .............. 3.5%
Citizen Communications ......... 3.2%
Flextronics Int'l .............. 3.2%
Southern Union ................. 3.1%
Ethan Allen .................... 3.0%
Rural Cellular Corp. ........... 3.0%
DeVry Inc. ..................... 2.9%
-----
Subtotal ....................... 35.1%
51 other positions ............. 59.0%
Cash ........................... 5.9%
Total .......................... 100.0%
Thank you for investing in Baron Capital Asset Fund
We are pleased with the Fund's start but recognize that it is less than two
years old. We will work hard to invest your savings within a philosophy and
approach to investing that has served as well over a long period of time. We
hope to earn over the years the confidence you have placed in us by becoming
shareholders of the Fund.
Sincerely,
/s Ronald Baron
-----------------
Ronald Baron
Chairman & CEO
August 10, 2000
3
<PAGE>
--------------------------------------------------------------------------------
B A R O N C A P I T A L A S S E T F U N D
--------------------------------------------------------------------------------
Table I
--------------------------------------------------------------------------------
Portfolio Market Capitalization (Unaudited)
--------------------------------------------------------------------------------
The Fund invests primarily in small and medium sized companies. Table I ranks
the Fund's investments by market capitalization and displays the percentage of
the Fund's portfolio invested in each market capitalization category. At times
the Fund will invest in companies with market capitalizations greater than $5
billion.
--------------------------------------------------------------------------------
Baron Capital Asset Fund
--------------------------------------------------------------------------------
Equity
Market Cap % of
Company (in millions) Net Assets
--------------------------------------------------------------------------------
Large Capitalization
--------------------------------------------------------------------------------
AT&T Liberty Media Group Cl A ................. $62,621 1.1%
Charles Schwab Corp. .......................... 42,453 5.5
NTL, Inc. ..................................... 8,509 3.7
Flextronics Intl., Ltd. ....................... 7,931 3.2
Nextel Partners, Inc., Cl A ................... 7,822 0.3
American Tower Corp., Cl A .................... 6,599 1.3
Crown Castle Intl. Corp. ...................... 5,836 1.1
Robert Half Intl., Inc. ....................... 5,061 2.3
---
18.5%
Medium Capitalization
--------------------------------------------------------------------------------
Citizens Utilities Co. ........................ $ 4,548 3.2%
UnitedGlobalCom, Inc., Cl A ................... 4,470 0.8
Dollar Tree Stores, Inc. ...................... 4,064 1.5
Lamar Advertising Co., Cl A ................... 3,836 0.9
Westwood One, Inc. ............................ 3,833 1.1
McLeodUSA, Inc., Cl A ......................... 3,321 1.2
Capstone Turbine Corp. ........................ 3,304 0.1
Primedia, Inc. ................................ 3,304 1.1
SFX Entertainment, Inc., Cl A ................. 3,027 2.1
Entercom Comm. Corp. .......................... 2,202 2.3
Apollo Group, Inc., Cl A ...................... 2,123 3.5
RCN Corp. ..................................... 1,982 1.2
ChoicePoint, Inc. ............................. 1,847 4.0
DeVry, Inc. ................................... 1,841 2.9
XM Satellite Radio Hldgs., Inc., Cl A ......... 1,825 0.6
Sirius Satellite Radio, Inc. .................. 1,721 0.7
Getty Images, Inc. ............................ 1,715 2.3
---
29.5%
<PAGE>
Equity
Market Cap % of
Company (in millions) Net Assets
--------------------------------------------------------------------------------
Small Capitalization
--------------------------------------------------------------------------------
Polo Ralph Lauren Corp., Cl A ................. $ 1,406 2.4%
Citadel Comm. Corp. ........................... 1,286 1.4
The Yankee Candle Co., Inc. ................... 1,179 0.4
Commonwealth Telephone Ent., Inc. ............. 1,051 2.2
OM Group, Inc. ................................ 1,051 2.1
Sotheby's Hldgs., Inc., Cl A .................. 1,030 1.6
Ethan Allen Interiors, Inc. ................... 949 3.0
Electric Lightwave, Inc., Cl A ................ 942 1.2
Wink Comm., Inc. .............................. 932 0.5
Rural Cellular Corp., Cl A .................... 901 3.0
Liberty Livewire Corp., Cl A .................. 889 2.6
Radio One, Inc., Cl A ......................... 836 1.1
Azurix Corp. .................................. 821 0.4
CoreComm, Ltd. ................................ 783 1.7
Southern Union Co. ............................ 783 3.1
Motient Corp. (formerly American Mobile
Satellite Corp.) ............................ 777 1.2
Gabelli Asset Mgmt., Inc., Cl A ............... 740 0.5
Manor Care, Inc. .............................. 716 2.0
Industrie Natuzzi SPA ADR ..................... 682 0.5
Expedia, Inc., Cl A ........................... 657 0.7
Seacor Smit, Inc. ............................. 653 0.5
Vail Resorts, Inc. CL A ....................... 581 1.0
Sun Intl. Hotels, Ltd. ........................ 557 1.9
Choice Hotels Intl., Inc. ..................... 530 1.2
Education Mgmt. Corp. ......................... 521 1.1
Libbey, Inc. .................................. 489 1.2
American Classic Voyages Co. .................. 428 1.0
drugstore.com, Inc. ........................... 393 1.2
Alexander's, Inc. ............................. 366 0.1
Saga Comm., Inc., Cl A ........................ 363 2.1
DVI, Inc. ..................................... 228 0.7
Smart and Final, Inc. ......................... 224 0.2
Radio One, Inc., Cl D ......................... 62 1.7
The Sports Club Co., Inc. ..................... 62 0.2
---
45.7%
4
<PAGE>
--------------------------------------------------------------------------------
B A R O N C A P I T A L A S S E T F U N D
--------------------------------------------------------------------------------
Table II
--------------------------------------------------------------------------------
Historical Information (Unaudited)
--------------------------------------------------------------------------------
Table II displays on a quarterly basis each class' closing net assets and net
asset value per share, dividend distributions and the value of $10,000 invested
in a class at the time of its inception.
--------------------------------------------------------------------------------
Insurance Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value of Shares
Value Owned, if Initial
Date Class Net Assets Per Share Dividends Investment was $10,000*
---------- ------------------ ----------- ----------- ------------------------
<S> <C> <C> <C> <C>
10/01/98 $ 100,000 $ 10.00 $10,000
-------- ----------- ------- -------
12/31/98 806,286 13.25 13,250
-------- ----------- ------- -------
03/31/99 2,257,290 14.10 14,100
-------- ----------- ------- -------
06/30/99 9,763,273 15.66 $ 0.196 15,861
-------- ----------- ------- ------- -------
09/30/99 14,113,049 14.67 14,858
-------- ----------- ------- -------
12/31/99 31,238,741 17.77 17,998
-------- ----------- ------- -------
03/31/00 53,190,352 19.70 19,953
-------- ----------- ------- -------
06/30/00 60,504,930 17.89 0.040 18,160
-------- ----------- ------- ------- -------
</TABLE>
* Assumes all dividends were reinvested and no shares were redeemed.
Retirement Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value of Shares
Value Owned, if Initial
Date Class Net Assets Per Share Dividends Investment was $10,000*
---------- ------------------ ----------- ----------- ------------------------
<S> <C> <C> <C> <C>
11/25/98 $2,400,000 $ 12.06 $10,000
-------- ---------- ------- -------
12/31/98 2,638,488 13.26 10,995
-------- ---------- ------- -------
03/31/99 2,809,738 14.11 11,700
-------- ---------- ------- -------
06/30/99 3,158,955 15.67 $ 0.197 13,161
-------- ---------- ------- ------- -------
09/30/99 2,961,439 14.69 12,337
-------- ---------- ------- -------
12/31/99 3,589,954 17.81 14,958
-------- ---------- ------- -------
03/31/00 3,982,115 19.76 16,596
-------- ---------- ------- -------
06/30/00 3,625,539 17.95 0.040 15,109
-------- ---------- ------- ------- -------
</TABLE>
* Assumes all dividends were reinvested and no shares were redeemed.
<PAGE>
AVERAGE ANNUAL RETURN
Period ended June 30, 2000
Insurance Shares
--------------------------------------------------------------------------------
One year 14.5%
--------------------------------------------------------------------------------
Since inception October 1, 1998 40.6%
--------------------------------------------------------------------------------
Retirement Shares
--------------------------------------------------------------------------------
One year 14.8%
--------------------------------------------------------------------------------
Since inception November 25, 1998 29.4%
--------------------------------------------------------------------------------
The performance data represents past performance. Investment returns and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their cost. For more complete information about
Baron Capital Asset Fund including charges and expenses, contact your plan
administrator or participating insurance company for a copy of the Fund's
prospectus. Read it carefully before you invest or send money. This report is
not authorized for use as an offer of sale or a solicitation of an offer to buy
shares of Baron Capital Asset Fund unless accompanied or preceded by the Fund's
current prospectus.
5
<PAGE>
--------------------------------------------------------------------------------
B A R O N C A P I T A L A S S E T F U N D
--------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
June 30, 2000 (Unaudited)
Shares Value
-------------------------------------------------------------------
Common Stocks (93.73%)
-------------------------------------------------------------------
Business Services (7.25%)
57,500 ChoicePoint, Inc.* $ 2,558,750
14,000 Lamar Advertising Co., Cl A* 606,375
52,000 Robert Half Intl., Inc.* 1,482,000
-----------
4,647,125
Chemical (2.06%)
30,000 OM Group, Inc. 1,320,000
Communications (20.65%)
20,000 American Tower Corp., Cl A* 833,750
30,000 Commonwealth Telephone Ent., Inc.* 1,411,875
55,000 CoreComm, Ltd.* 1,072,500
20,000 Crown Castle Intl. Corp.* 730,000
40,000 Electric Lightwave, Inc., Cl A* 747,500
24,000 Liberty Livewire Corp., Cl A* 1,686,000
36,000 McLeodUSA, Inc., Cl A* 744,750
50,000 Motient Corp. (formerly American
Mobile Satellite Corp.)* 784,375
5,000 Nextel Partners, Inc., Cl A* 162,813
40,000 NTL, Inc.* 2,395,000
30,000 RCN Corp.* 761,250
25,000 Rural Cellular Corp., Cl A* 1,914,062
-----------
13,243,875
Consumer Services (0.69%)
30,000 Expedia, Inc., Cl A* 444,375
Education (7.51%)
80,000 Apollo Group, Inc., Cl A* 2,240,000
70,000 DeVry, Inc.* 1,850,625
40,000 Education Mgmt. Corp.* 722,500
-----------
4,813,125
Energy (0.54%)
9,000 Seacor Smit, Inc.* 348,188
Financial (6.80%)
105,000 Charles Schwab Corp. 3,530,625
30,000 DVI, Inc.* 480,000
14,000 Gabelli Asset Mgmt., Inc., Cl A* 350,000
-----------
4,360,625
Health Services (1.96%)
180,000 Manor Care, Inc. * 1,260,000
Hotels and Lodging (1.24%)
80,000 Choice Hotels Intl., Inc.* 795,000
Manufacturing (3.21%)
30,000 Flextronics Intl., Ltd.* 2,060,625
Media and Entertainment (13.29%)
30,000 AT&T Liberty Media Group Cl A* 731,250
25,000 Citadel Comm. Corp.* 873,438
30,000 Entercom Comm. Corp.* 1,462,500
25,000 Radio One, Inc., Cl A* 739,062
50,000 Radio One, Inc., Cl D* 1,103,125
60,000 Saga Comm., Inc., Cl A* 1,320,000
10,000 Sirius Satellite Radio, Inc.* 443,125
10,500 UnitedGlobalCom, Inc., Cl A* 490,875
20,000 Westwood One, Inc.* 682,500
10,000 Wink Comm., Inc.* 305,000
10,000 XM Satellite Radio Hldgs., Inc., Cl A* 374,375
-----------
8,525,250
Printing & Publishing (3.38%)
40,000 Getty Images, Inc.* 1,482,500
30,000 Primedia, Inc.* 682,500
-----------
2,165,000
<PAGE>
Shares Value
--------------------------------------------------------------------
Real Estate and REITs (0.11%)
1,000 Alexander's, Inc.* $ 73,250
Recreation and Resorts (6.17%)
30,000 American Classic Voyages Co.* 618,750
54,300 AMF Bowling, Inc.* 10,181
30,000 SFX Entertainment, Inc., Cl A* 1,359,375
60,000 Sun Intl. Hotels, Ltd.* 1,200,000
32,500 The Sports Club Co., Inc.* 113,750
40,000 Vail Resorts, Inc. CL A* 652,500
-----------
3,954,556
Retail Trade and Restaurants (10.32%)
24,000 Dollar Tree Stores, Inc.* 949,500
100,000 drugstore.com, Inc.* 753,130
80,000 Ethan Allen Interiors, Inc. 1,920,000
110,000 Polo Ralph Lauren Corp., Cl A* 1,567,500
15,439 Smart and Final, Inc.* 118,687
60,000 Sotheby's Hldgs., Inc., Cl A 1,050,000
12,000 The Yankee Candle Co., Inc.* 259,500
-----------
6,618,317
Utility Services (6.83%)
40,000 Azurix Corp.* 280,000
800 Capstone Turbine Corp.* 36,050
120,000 Citizens Utilities Co.* 2,070,000
126,000 Southern Union Co.* 1,992,375
-----------
4,378,425
Wholesale Trade (1.72%)
25,000 Industrie Natuzzi SPA ADR 296,875
25,000 Libbey, Inc. 803,125
-----------
1,100,000
-----------
Total Common Stocks
(Cost $53,461,987) 60,107,736
-----------
--------------------------------------------------------------------
Warrants (0.36%)
--------------------------------------------------------------------
Communications
37,500 CoreComm, Ltd. Exp 05/26/2002*@
(Cost $736,875) 231,250
-----------
Total Investments (94.09%)
(Cost $54,198,862**) 60,338,986
-----------
Cash and Other Assets
Less Liabilities (5.91%) 3,791,483
-----------
Net Assets (100.00%) $64,130,469
===========
Net Asset Value per Share
Insurance Shares:
Net asset value, offering and redemption price
per share (based on net assets of $60,504,93
and 3,382,009 shares of beneficial Interest
outstanding) $ 17.89
===========
----------
% Represents percentage of net assets
* Non-income producing securities
@ Restricted securities
** For Federal income tax purposes the cost basis is $54,207,872.
Aggregate unrealized appreciation and depreciation of invest-
ments are $11,519,999 and $5,388,885, respectively.
See Notes to Financial Statements.
6
<PAGE>
--------------------------------------------------------------------------------
B A R O N C A P I T A L A S S E T F U N D
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
June 30, 2000 (Unaudited)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (Cost $54,198,862) ............................ $60,338,986
Cash .............................................................................. 3,647,620
Dividends and interest receivable ................................................. 50,618
Receivable for securities sold .................................................... 51,112
Receivable for shares sold ........................................................ 193,022
-----------
64,281,358
-----------
Liabilities:
Payable for securities purchased .................................................. 13,175
Payable for shares redeemed ....................................................... 123,893
Accrued expenses and other payables ............................................... 13,821
-----------
150,889
-----------
Net Assets ......................................................................... $64,130,469
===========
Net Assets consist of:
Capital paid-in ................................................................... $58,114,066
Accumulated net investment loss ................................................... (232,068)
Accumulated net realized gain ..................................................... 108,347
Net unrealized appreciation on investments ........................................ 6,140,124
-----------
Net Assets ......................................................................... $64,130,469
===========
Net Asset Value Per Share
Insurance Shares
Net asset value, offering and redemption price per share (based on net assets of
$60,504,930 and 3,382,009 shares outstanding) .................................. $ 17.89
===========
Retirement Shares
Net asset value, offering and redemption price per share (based on net assets of
$3,625,539 and 202,016 shares outstanding) ..................................... $ 17.95
===========
</TABLE>
<PAGE>
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
For the Six Months Ended June 30, 2000 (Unaudited)
<TABLE>
<S> <C>
Investment income:
Income:
Interest ..................................................... $ 108,594
Dividends .................................................... 45,113
----------
Total income ................................................. 153,707
----------
Expenses:
Investment advisory fees ..................................... 260,037
Distribution fees -- Insurance Shares ........................ 60,729
Shareholder servicing agent fees ............................. 17,822
Reports to shareholders ...................................... 27,841
Custodian fees ............................................... 4,392
Registration and filing fees ................................. 18,112
Professional fees ............................................ 12,877
Trustee fees ................................................. 350
Miscellaneous ................................................ 917
----------
Total expenses ............................................... 403,077
Less: Expense reimbursement by investment adviser ............ (17,302)
----------
Net expenses ................................................. 385,775
----------
Net investment loss .......................................... (232,068)
----------
Realized and unrealized gain on investments:
Net realized gain on investments sold .......................... 117,128
Change in net unrealized appreciation of investments ........... 509,782
----------
Net gain on investments ...................................... 626,910
----------
Net increase in net assets resulting from operations ......... $ 394,842
==========
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
--------------------------------------------------------------------------------
B A R O N C A P I T A L A S S E T F U N D
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
For The
Six Months For The Year
Ended Ended
June 30, 2000 December 31, 1999
----------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment loss .................................................. ($ 232,068) ($ 87,138)
Net realized gain on investments sold ................................ 117,128 220,944
Change in net unrealized appreciation on investments ................. 509,782 5,449,881
----------- -----------
Increase in net assets resulting from operations ..................... 394,842 5,583,687
----------- -----------
Distributions to shareholders from:
Net investment income:
Insurance Shares ..................................................... 0 (2,887)
Retirement Shares .................................................... 0 (1,194)
Net realized gain on investments:
Insurance Shares ..................................................... (134,524) (110,285)
Retirement Shares .................................................... (8,063) (38,010)
----------- -----------
(142,587) (152,376)
----------- -----------
Capital share transactions:
Insurance Shares:
Proceeds from the sale of shares ................................... 35,504,588 30,980,161
Net asset value of shares issued in reinvestment of dividends ...... 134,524 113,172
Cost of shares redeemed ............................................ (6,597,656) (5,179,651)
Retirement Shares:
Proceeds from the sale of shares ................................... 0 2,080
Net asset value of shares issued in reinvestment of dividends ...... 8,063 39,204
Cost of shares redeemed ............................................ 0 (2,356)
----------- -----------
Increase in net assets derived from capital share transactions ..... 29,049,519 25,952,610
----------- -----------
Net increase in net assets ......................................... 29,301,774 31,383,921
Net assets:
Beginning of period .................................................. 34,828,695 3,444,774
----------- -----------
End of period ........................................................ $64,130,469 $34,828,695
=========== ===========
Accumulated net investment loss at the end of period .................. ($ 232,068) $ 0
=========== ===========
Shares of Beneficial Interest:
Insurance Shares:
Shares sold ........................................................ 1,986,506 2,033,403
Shares issued in reinvestment dividends ............................ 7,532 7,401
Shares redeemed .................................................... (370,453) (343,220)
----------- -----------
Net increase in Insurance Shares outstanding ....................... 1,623,585 1,697,584
=========== ===========
Retirement Shares:
Shares sold ........................................................ 0 154
Shares issued in reinvestment dividends ............................ 450 2,561
Shares redeemed .................................................... 0 (154)
----------- -----------
Net increase in Retirement Shares outstanding ...................... 450 2,561
=========== ===========
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
--------------------------------------------------------------------------------
B A R O N C A P I T A L A S S E T F U N D
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Baron Capital Funds Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the"1940 Act"), as a diversified, open-end
management investment company. The Trust currently consists of one series,
Baron Capital Asset Fund (the "Fund"). There are currently two classes of
shares: the Insurance Shares and the Retirement Shares. The Insurance Shares
are offered in connection with variable annuity contracts and variable life
insurance contracts offered by life insurance companies. The Retirement Shares
are offered to certain qualified retirement plans. The two classes of shares
differ in their respective shareholder servicing and distribution expenses. The
two classes have identical rights to earnings, assets and voting privileges,
except for class specific-expenses and exclusive voting rights with respect to
matters affecting that individual class. The following is a summary of
significant accounting policies followed by the Fund. The policies are in
conformity with generally accepted accounting principles.
(a) Security Valuation. Portfolio securities traded on any national stock
exchange or quoted on the NASDAQ National Market System are valued based on the
last sale price or where market quotations are not readily available, based on
fair value as determined the Adviser, using procedures established by the Board
of Trustees. Money market instruments held by the Fund with a remaining
maturity of sixty days or less are valued at amortized cost, which approximates
value.
(b) Security Transactions, Investment Income and Expense Allocation. Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on an identified cost basis for financial
reporting and federal income tax purposes. Dividend income is recognized on the
ex-dividend date and interest income is recognized on an accrual basis. Income,
expenses (other than those attributable to a specific class) and gains and
losses are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses directly
attributable to a specific class are charged against the operations of that
class.
(c) Federal Income Taxes. It is the policy of the Fund to continue to qualify
as a regulated investment company under the Internal Revenue Code and to
distribute all of its taxable income, including net realized capital gains, if
any, to its shareholders. No federal income tax provision is therefore
required.
<PAGE>
(d) Distributions. Income distributions and capital gains distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due
to differing treatments for net operating losses and distributions from REIT's.
(e) Use of Estimates. The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of financial statements, and the amounts of income and
expenses during the period. Actual results could differ from those estimates.
(2) Purchases and Sales of Securities. For the six months ended June 30, 2000,
purchases and sales of securities, other than short term securities, aggregated
$33,272,331 and $5,846,750, respectively.
(3) Investment Advisory Fees and Other Transactions with Affiliates
(a) Investment Advisory Fees. BAMCO, Inc., (the "Adviser"), a wholly owned
subsidiary of Baron Capital Group, Inc. ("BCG"), serves as investment adviser
to the Fund. As compensation for services rendered, the Adviser receives a fee
payable monthly from the assets of the Fund equal to 1% per annum of the Fund's
average daily net asset value. The Adviser has contractually agreed to reduce
its fee to the extent required to limit the operating expense to 1.25% for the
Retirement Shares and for the Insurance Shares, 1.5% for the first $250 million
of net assets; 1.35% for the next $250 million of net assets, and 1.25% for net
assets over $500 million.
(b) Distribution Fees. Baron Capital, Inc. ("BCI"), a wholly owned subsidiary
of BCG, is a registered broker dealer and the distributor of the Insurance
Shares pursuant to a distribution plan under Rule 12b-1 of the 1940 Act. The
distribution plan authorizes the Fund to pay BCI a distribution fee equal on an
annual basis to 0.25% of average daily net assets of the Insurance Shares.
Brokerage transactions for the Fund may be effected by or through BCI. During
the six months ended June 30, 2000, BCI earned brokerage commissions of
$46,436.
(c) Organization Costs. Costs incurred in connection with the organization and
initial registration of the Fund have been paid by BAMCO, Inc.
(d) Trustee Fees. Certain Trustees of the Trust may be deemed to be affiliated
with or interested persons (as defined by the 1940 Act) of the Fund's Adviser
or of BCI. None of the Trustees so affiliated received compensation for his/her
services as a Trustee of the Trust. None of the Fund's officers received
compensation from the Fund.
(4) Restricted Securities.
A summary of the restricted securities held at June 30, 2000 follows:
Acquisition
Name of Issuer Date Value
CoreComm, Ltd. Warrants Exp. 05/26/2002 11/17/1999 $231,250
(Cost $736,875) (0.36% of Net Assets)
9
<PAGE>
--------------------------------------------------------------------------------
B A R O N C A P I T A L A S S E T F U N D
--------------------------------------------------------------------------------
(5) FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period:
--------------------------------------------------------------------------------
Insurance Shares:
<TABLE>
<CAPTION>
Six Months Year ended December 31,
ended
June 30, 2000 1999 1998*
----------------------- ---------------- --------------------
<S> <C> <C> <C>
Net asset value, beginning of
period .......................... $ 17.77 $ 13.25 $ 10.00
------------- ----------- ----------
Income from investment
operations
Net investment income (loss) ...... (0.07) (0.06) 0.02
Net realized and unrealized gains
on investments .................. 0.23 4.78 3.23
-------------- ----------- ----------
Total from investment
operations ................... 0.16 4.72 3.25
-------------- ----------- ----------
Less distributions
Dividends from net investment
income .......................... 0.00 (0.01) 0.00
Distributions from net realized
gains ........................... (0.04) (0.19) 0.00
-------------- ----------- ----------
Total distributions ............. (0.04) (0.20) 0.00
-------------- ----------- ----------
Net asset value, end of period .... $ 17.89 $ 17.77 $ 13.25
============== =========== ==========
Total Return .................... 0.9% 35.8% 32.5%
-------------- ----------- ----------
Ratios/Supplemental Data
Net assets (in thousands), end of
period .......................... $ 60,504.9 $ 31,238.7 $ 806.3
Ratio of total expenses to aver-
age net assets .................. 1.53%** 1.88% 7.62%**
Less: Expense reimbursement by
investment adviser .............. (0.03%)** (0.38%) (6.17%)**
-------------- ----------- -----------
Ratio of net expenses to average
net assets ...................... 1.50%** 1.50% 1.45%**
============== =========== ===========
Ratio of net investment income
(loss) to average net assets .... (0.91%)** (0.78%) 0.99%**
Portfolio turnover rate ........... 12.24% 37.18% 37.11%
</TABLE>
--------------------------------------------------------------------------------
* For the period October 1, 1998 (commencement of operations) to December 31,
1998.
** Annualized.
<PAGE>
Retirement Shares:
<TABLE>
<CAPTION>
Six Months Year ended December 31,
ended
June 30, 2000 1999 1998*
---------------------- --------------- ----------------------
<S> <C> <C> <C>
Net asset value, beginning of
period .......................... $ 17.81 $ 13.26 $ 12.06
------------ ---------- ------------
Income from investment
operations
Net investment income (loss) ...... (0.06) (0.04) 0.02
Net realized and unrealized gains
on investments .................. 0.24 4.79 1.18
------------- ---------- ------------
Total from investment
operations ................... 0.18 4.75 1.20
------------- ---------- ------------
Less distributions
Dividends from net investment
income .......................... 0.00 (0.01) 0.00
Distributions from net realized
gains ........................... (0.04) (0.19) 0.00
------------- ---------- ------------
Total distributions ............. (0.04) (0.20) 0.00
------------- ---------- ------------
Net asset value, end of period .... $ 17.95 $ 17.81 $ 13.26
============= ========== ============
Total Return 1.0% 36.0% 10.0%
------------- ---------- ------------
Ratios/Supplemental Data
Net assets (in thousands), end of
period .......................... $ 3,625.5 $ 3,590.0 $ 2,638.5
Ratio of total expenses to aver-
age net assets .................. 1.80%** 1.62% 7.38%**
Less: Expense reimbursement by
investment adviser .............. (0.55%)** (0.38%) (6.17%)**
------------- ---------- -------------
Ratio of net expenses to average
net assets ...................... 1.25%** 1.24% 1.21%**
============= ========== =============
Ratio of net investment income
(loss) to average net assets .... (0.67%)** (0.28%) 1.34%**
Portfolio turnover rate ........... 12.24% 37.18% 37.11%
</TABLE>
--------------------------------------------------------------------------------
* For the period Novermber 25, 1998 (commencement of operations) to December
31, 1998.
** Annualized.
10
<PAGE>
[LOGO]
BARON
CAPITAL
FUNDS
2QR00
