THE BAUPOST FUND
SEMI-ANNUAL REPORT
April 28, 2000
(Unaudited)
This report and the financial statements contained herein are submitted for the
general information of the shareholders of The Baupost Fund. The report is not
authorized for distribution to prospective investors in The Baupost Fund unless
preceded or accompanied by the current prospectus.
<PAGE>
THE BAUPOST FUND
ANNUAL REPORT
April 28, 2000
(Unaudited)
Contents:
Management's Discussion of Performance................................. 1
Statement of Assets and Liabilities as of April 28, 2000............... 5
Statement of Operations for the period ended April 28, 2000............ 6
Statement of Changes in Net Assets for the periods ended April
28, 2000 and October 31, 1999...................................... 7
Schedule of Investments as of April 28, 2000........................... 8
Schedule of Forward Foreign Currency Contracts as of April 28, 2000.... 16
Schedule of Securities Sold Short as of April 28, 2000................. 17
Notes to Financial Statements.......................................... 18
Financial Highlights................................................... 24
<PAGE>
The Baupost Fund
44 Brattle Street, 5th Floor
P.O. Box 381288
Cambridge, Massachusetts 02238
Tel. (617) 497-6680
Fax (617) 868-3529
June 13, 2000
Dear Fund Shareholder,
We are pleased to report a healthy gain of 10.28% for the six months ended
April 28, 2000. This result was achieved amidst a volatile equity market
environment where both growth and value managers experienced difficulty. Indeed,
two of the most notable investors of the twentieth century effectively ended
their investment careers this year after incurring substantial losses.
Ironically, Julian Robertson's Tiger Fund closed its doors largely as a result
of missing out on technology stocks in recent years, while Stanley Druckenmiller
of the Soros organization quit as a result of losses experienced from his
technology holdings. This bucking bronco of a market has made it hard for nearly
all investors, regardless of approach, to hang on.
The Baupost Fund, as you know, exists to accommodate the family members and
friends of Baupost clients. It participates ratably in all of the investment
ideas generated at Baupost which are consistent with legal guidelines applicable
to the Fund and with the Fund's investment objective. The investment objective
of the Fund is capital appreciation, with income as a secondary goal. The Fund
seeks to achieve its objective by profiting from market inefficiencies using a
value-oriented and, often, an event driven approach. We are not seeking to keep
up with any particular market index or benchmark. Rather, we are attempting to
achieve good risk-adjusted investment results over time through the successful
implementation of our investment philosophy.
We continue to believe strongly in a value investment approach, attempting
to buy assets or businesses at a considerable discount to underlying value.
Bargains exist because the financial markets are inefficient, yet many investors
lack the requisite patience and discipline to take advantage of them. A value
approach may outperform or underperform the overall market at various times
because of changing investor sentiment, but we believe that a value philosophy
never goes out of style. When sentiment towards undervalued sectors of the
market is at its nadir, it is the best time to be buying value.
As we sift through the market for opportunities, we come across many stocks
that are overvalued and thus of no interest to the Fund. Undervalued stocks are
of interest when several or all of the following criteria are met: if the
undervaluation is substantial; if there is a catalyst to assist in the
realization of that value; if the business value is stable and growing, not
eroding; and if the company's management is able and properly incentivized.
1
<PAGE>
Our search for opportunity is conducted on a bottom-up, not top-down
basis, seeking to reduce risk situation by situation as a result of in-depth
fundamental analysis, a strict assessment of risk versus return, a value
philosophy which attempts to create a margin of safety in each of our holdings,
an event-driven focus, and ongoing monitoring of our positions to enable us to
react to changing market conditions or fundamental developments. We may further
attempt to reduce risk for the portfolio through appropriate diversification by
asset class, geography and security type, through market hedges such as
out-of-the-money put options, and by our willingness to hold cash when we are
unable to identify compelling opportunities.
Because investing is a highly competitive activity, we consider for each of
our investments not only whether a security is undervalued but why it is
undervalued. If the reason is that there are uninformed or emotional sellers, we
become more comfortable. Conversely, we do not want to ever be in the situation
of having less information than the party selling to us. In effect, we seek an
edge in all of our investments, a reason to believe we will have the wind at our
backs, not in our faces, as we seek good investment returns over time with
limited risk. Situations analytically complex, or where there are forced,
mechanical or panicked sellers, nicely fit this criterion.
Since we cannot predict the future level of securities prices, we invest
with the goal of performing well regardless of future market conditions. This
cautious approach does not guarantee good results (witness 1998) and can cause
significant market underperformance for fairly long periods of time. However, we
believe that it will deliver strong results with limited risk over the long-run.
Our recent performance and current portfolio positioning illustrate the
application of our investment principles. The gain for the first six months of
our current fiscal year was achieved throughout the portfolio, net of hedging
costs and management fees. We were profitable in four of those months (and were
only down 23 and 31 basis points in the other two months), and largely avoided
the extreme market volatility experienced by many others over the same period.
Table 1 below provides a breakdown of our holdings by geography and asset class.
Table 1
-------
Portfolio Breakdown by Geography and Asset Class at April 28, 2000
------------------------------------------------------------------
Cash 4.6%
U.S. Public Equities 61.9%
Western Europe Public Equities 9.5%
Arbitrage or Spread Trades 9.3%
Other Public Equities 3.4%
Private Equities and Partnerships 2.0%
Performing and Non-Performing Debt 5.2%
Securities in Liquidation 2.9%
Market Hedges and Other 1.2%
------
Total 100.0%
======
Our current portfolio is broadly diversified with a concentration in
undervalued U.S. equities, many with a partial or full catalyst for value
realization. In the first four months of 2000, cash balances declined as a
result of numerous new commitments. In particular, distressed debt
2
<PAGE>
holdings have increased of late. The discount on our equities from underlying or
private market value frequently exceeds 50%, an indication of the compelling
value opportunities available at this time. A very high percentage of our equity
positions trade at single digit p/e multiples, at a healthy discount to tangible
book value, or both.
A recent Washington Post article recounted the tremendous core of investor
optimism still prevalent in today's financial markets. In an April poll
conducted by PaineWebber and the Gallup Organization, investors expected a 16.6%
annual rate of return from stocks over the next ten years. The least experienced
investors expected 20% returns. By contrast, one prominent investment firm,
Grantham, Mayo, Van Otterloo & Co., uses an assessment of market valuation and
historic returns to forecast a slightly negative real return from U.S. equities
over the next decade. According to Yale economist Robert J. Shiller, today's
high investor confidence is not a natural, steady state. It is a sign that the
market is vulnerable to decline in coming years.
We don't buy "the market". We invest in discrete situations, each
individually compelling. Regardless of what the future brings, we believe we are
well-positioned.
Please let us know if you have any questions, comments or suggestions.
Very truly yours,
/s/ Seth A. Klarman
------------------------
Seth A. Klarman
President
3
<PAGE>
--------------------------------------------------------------------------------
Average Annual Total Returns (1) 1 5 Life of Fund
For Periods Ended 4/28/2000 Year Year (since 12/14/90)
The Baupost Fund 9.94% 10.52% 12.68%
--------------------------------------------------------------------------------
Total return is an historical measure of past performance and is not intended to
indicate future performance. Because investment return and principal value will
fluctuate, the Fund's shares may be worth more or less than their original cost
when redeemed. During some of the periods reported above, an expense cap was in
place which had the effect of lowering the Fund's management fee and therefore
enhanced the total return of the Fund.
--------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $50,000 INVESTMENT(1)
IN THE BAUPOST FUND FROM 12/14/90 THROUGH 4/28/00
--------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
FUND S&P
---- ---
12/14/90 $50,000.00 $50,000.00
04/30/91 $58,158.98 $58,161.73
04/30/92 $63,692.31 $66,325.82
04/30/93 $75,761.04 $72,448.88
04/30/94 $85,933.03 $76,302.11
04/30/95 $92,875.27 $89,627.93
04/30/96 $105,059.48 $116,707.47
04/30/97 $131,063.27 $146,040.47
04/30/98 $170,436.34 $206,014.84
04/30/99 $139,277.38 $250,971.95
04/28/00 $153,115.97 $276,390.70
(1) Assumes reinvestment of all dividends.
4
<PAGE>
THE BAUPOST FUND
STATEMENT OF ASSETS AND LIABILITIES
April 28, 2000
(Unaudited)
<TABLE><CAPTION>
<S> <C>
ASSETS:
Investments in securities - at value $ 100,016,720
(cost $104,261,483)
Cash 9,100,936
Foreign cash (cost $227) 215
Receivable for investments sold 4,952,501
Receivable for investments sold short 9,907,554
Interest and dividends receivable 213,170
Unrealized appreciation on forward foreign currency contracts 335,124
Unrealized appreciation on swaps 1,087,966
Purchased interest 46,230
Other assets 21,170
-------------
Total Assets 125,681,586
LIABILITIES:
Payable for investments purchased 1,307,612
Payable to The Baupost Group, L.L.C 363,063
Other payables and accrued expenses 202,884
Payable for Fund shares redeemed 10,414
Payable for securities sold short
(proceeds $10,006,118) 8,119,460
-------------
Total Liabilities 10,003,433
-------------
NET ASSETS $ 115,678,153
=============
COMPOSITION OF NET ASSETS:
Paid in capital $ 113,614,173
Distributions in excess of net investment income (443,054)
Accumulated net realized gain on investments
and foreign currency transactions 3,370,314
Net unrealized depreciation on investments
and assets and liabilities in foreign currencies (863,280)
-------------
NET ASSETS $ 115,678,153
=============
NET ASSET VALUE:
Offering and redemption price per share
($115,678,153/8,333,896) $ 13.88
=============
</TABLE>
See notes to financial statements.
5
<PAGE>
THE BAUPOST FUND
STATEMENT OF OPERATIONS
Six Months Ended April 28, 2000
(Unaudited)
<TABLE><CAPTION>
<S> <C>
INVESTMENT INCOME:
INCOME:
Interest $ 1,652,671
Dividends (net of foreign withholding taxes of $15,527) 264,943
---------------
Total Income 1,917,614
EXPENSES:
Investment management fee 583,531
Interest expense 398,770
Investment expenses 317,497
Equity swap contract expense 307,299
Administrative fee 145,883
Custodian fees 51,788
Audit fees 19,980
Legal fees 18,727
Directors' fees 17,640
Transfer agent fees 11,947
Registration and filing fees 11,045
Miscellaneous 10,104
---------------
Total Expenses 1,894,211
NET INVESTMENT INCOME 23,403
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) on:
Investments and equity swap contracts 3,774,213
Foreign currency transactions 1,124,680
Short sales (807,756)
---------------
4,091,137
Change in unrealized depreciation on:
Investments and equity swap contracts 4,788,687
Foreign currency transactions 398,323
Short sales 1,884,289
---------------
7,071,299
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS 11,162,436
---------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 11,185,839
===============
</TABLE>
See notes to financial statements.
6
<PAGE>
THE BAUPOST FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 28, 2000 OCTOBER 31, 1999
------------- -------------
(UNAUDITED)
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 23,403 $ 1,423,388
Net realized gain on investments and foreign
currency transactions 4,091,137 5,876,232
Change in unrealized depreciation on
investments and foreign currency transactions 7,071,299 3,607,340
------------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 11,185,839 10,906,960
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (2,952,563) (2,901,043)
From net realized gain on investments -- --
------------- -------------
TOTAL DISTRIBUTIONS (2,952,563) (2,901,043)
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 3,841,751 11,240,554
Reinvestment of dividends 2,769,217 2,801,021
Cost of shares redeemed (23,064,875) (32,151,611)
------------- -------------
NET DECREASE IN NET ASSETS
RESULTING FROM SHARE TRANSACTIONS (16,453,907) (18,110,036)
------------- -------------
TOTAL DECREASE IN NET ASSETS (8,220,631) (10,104,119)
NET ASSETS AT BEGINNING OF PERIOD 123,898,784 134,002,903
------------- -------------
NET ASSETS AT END OF PERIOD
(including distributions in excess of net
investment income of ($443,054) and
undistributed net income of $2,486,106, respectively) $ 115,678,153 $ 123,898,784
============= =============
OTHER INFORMATION:
Shares sold 295,911 880,382
Shares issued in reinvestment of dividends 215,671 224,441
Shares redeemed (1,771,832) (2,516,963)
------------- -------------
Net decrease (1,260,250) (1,412,140)
============= =============
</TABLE>
See notes to financial statements.
7
<PAGE>
THE BAUPOST FUND
SCHEDULE OF INVESTMENTS
April 28, 2000
(Unaudited)
<TABLE><CAPTION>
Number of
shares, units or
face value Market Value
---------- ------------
<S> <C> <C>
COMMON STOCKS - 61.81%
UNITED STATES - 52.91%
SAVINGS INSTITUTIONS - 8.55%
600 ALASKA PACIFIC BANCSHARES INC $ 5,325
111,092 AMERICAN FINANCIAL HOLDINGS 1,402,537
1,700 BAY STATE BANCORP INC 31,875
6,500 EMPIRE FEDERAL BANCORP INC 73,125
110 FIDELITY BANKSHARES INC 1,732
900 FIRST FEDERAL OF OLATHE BANCORP INC 11,250 *
476,400 HUDSON CITY BANCORP INC 7,086,450 ~
20,300 KLAMATH FIRST BANCORP INC 203,000
2,300 LIBERTY BANCORP INC 15,525
1,949 MID-CENTRAL FINANCIAL CORPORATION 44,827
44,000 PORT FINANCIAL CORPORATION 489,500 *
21,700 SOUND FEDERAL BANCORP 185,806
15,900 WEST ESSEX BANCORP INC. 143,100
4,600 WILLOW GROVE BANCORP INC 42,550
15,500 WORONOCO BANCORP INC 156,938
-------------
9,893,540
REAL ESTATE INVESTING - 6.53%
938,000 REGENCY EQUITIES CORPORATION 46,900 *
137,500 SECURITY CAPITAL US REALTY ADR 2,182,813 *
3,784 SECURITY CAPITAL GROUP INC - CLASS A 2,800,160 *
130,050 SECURITY CAPITAL GROUP INC - CLASS B 1,950,750 *
35,800 SECURITY CAPITAL US REALTY 562,060 *
-------------
7,542,683
APARTMENT BUILDING OPERATORS - 5.12%
274,900 LNR PROPERTY CORPORATION 5,927,531
CHEMICALS - 4.83%
47,600 CHEMFIRST INC 922,250
168,100 OCTEL CORPORATION 1,565,431 *
227,200 SOLUTIA INC 3,095,600
-------------
5,583,281
COMPUTER PERIPHERAL EQUIPMENT - 4.61%
105,000 SEAGATE TECHNOLOGY INC 5,335,312 *
PACKAGING - PAPER & LAMINATED - 4.21%
594,500 PACTIV CORPORATION 4,867,469 *~
</TABLE>
8
<PAGE>
THE BAUPOST FUND
SCHEDULE OF INVESTMENTS
April 28, 2000
(Unaudited)
<TABLE><CAPTION>
Number of
shares, units or
face value Market Value
---------- ------------
<S> <C> <C>
BOAT BUILDING & REPAIRING - 2.36%
142,200 BRUNSWICK CORPORATION $ 2,728,463
PASSENGER TRANSPORT - 2.04%
101,900 GALILEO INTERNATIONAL INC 2,356,438
REAL ESTATE INVESTMENT TRUST - 1.90%
3,500 JDN REALTY CORPORATION 33,906
550,450 VENTAS INC 2,167,397 *
-------------
2,201,303
MISCELLANEOUS PUBLISHING - 1.64%
50,900 HARCOURT GENERAL INC 1,902,388
LIFE INSURANCE - 1.52%
56,800 MONY GROUP INC 1,757,250
DIVERSIFIED OPERATIONS/COMMERCIAL SERVICES - 1.40%
165,500 OGDEN CORPORATION 1,623,969
SCHOOLS & EDUCATION SERVICES - 1.23%
94,500 SYLVAN LEARNING SYSTEMS INC 1,423,406 *
MOTOR VEHICLE PARTS & ACCESSORIES - 1.16%
150,600 TENNECO AUTOMOTIVE INC 1,336,575
CONSTRUCTION SERVICES - 1.01%
109,100 WALTER INDUSTRIES INC 1,166,006
COMMUNICATION SERVICES - 0.80%
17,432 UNITEDGLOBALCOM INC 926,075
BIOPHARMACEUTICAL RESEARCH - 0.70%
27,700 NEUROGEN CORPORATION 810,225 *
FOREIGN TRADE & INTERNATIONAL BANKS - 0.55%
82,100 MFC BANCORP 636,275 *
</TABLE>
9
<PAGE>
THE BAUPOST FUND
SCHEDULE OF INVESTMENTS
April 28, 2000
(Unaudited)
<TABLE><CAPTION>
Number of
shares, units or
face value Market Value
---------- ------------
<S> <C> <C>
MISCELLANEOUS - 2.75%
8,666 3COM CORPORATION $ 341,763 *
123,800 CALIFORNIA FEDERAL BANK - CONTINGENT LITIGATION
RECOVERY PARTICIPATION INTERESTS 185,700 *
89,600 CALIFORNIA FEDERAL BANK - SECONDARY CONTINGENT
LITIGATION RECOVERY PARTICIPATION INTERESTS 95,200 *
69,600 COAST FEDERAL LITIGATION CONTINGENT PAYMENT RIGHTS
TRUST 91,350 *
57,198 GENTIVA HEALTH SERVICES 496,908 *
97,400 GLOBAL-TECH APPLIANCES INC 499,175 *
44,300 HOMESTEAD VILLAGE INC 143,975 *
14,600 IHOP CORPORATION 237,250
56,200 IVEX PACKAGING CORPORATION 505,800 *
2,000 LANDMARK LAND COMPANY INC 2,000 *
27,600 OMEGA WORLDWIDE 134,550 *
40,100 THERMEDICS INC 330,825 *
10,600 WABTEC CORPORATION 119,912
100 WYNDHAM INTERNATIONAL INC 206
-------------
3,184,614
TOTAL COMMON STOCKS - UNITED STATES $ 61,202,803
(Total Cost $61,856,414) =============
FRANCE - 3.12%
TEXTILES - 2.86%
61,500 CHARGEURS SA $ 3,308,864
HOLDING COMPANIES - 0.26%
687 SOCIETE EURAFRANCE SA 300,711
-------------
TOTAL COMMON STOCKS - FRANCE $ 3,609,575
(Total Cost $3,186,424) =============
THE NETHERLANDS - 1.28%
TOWING AND TUGBOAT SERVICES - 1.28%
67,841 SMIT INTERNATIONALE NV $ 1,484,756
-------------
TOTAL COMMON STOCKS - THE NETHERLANDS $ 1,484,756
(Total Cost $1,689,858) =============
</TABLE>
10
<PAGE>
THE BAUPOST FUND
SCHEDULE OF INVESTMENTS
April 28, 2000
(Unaudited)
<TABLE><CAPTION>
Number of
shares, units or
face value Market Value
---------- ------------
<S> <C> <C>
SWEDEN - 1.24%
AIRCRAFT & AEROSPACE - 1.24%
175,100 SAAB AB - B $ 1,434,972
-------------
TOTAL COMMON STOCKS - SWEDEN $ 1,434,972
(Total Cost $1,364,871) =============
GERMANY - 0.96%
CHEMICALS - 0.91%
78,800 K+S AG $ 1,049,134
INDUSTRIAL MACHINERY - 0.05%
3,168 AGIV AG 59,223
-------------
TOTAL COMMON STOCKS - GERMANY $ 1,108,357
(Total Cost $1,185,790) =============
RUSSIA - 0.86%
ELECTRIC UTILITIES - 0.56%
1,536,200 KRASNOYARSKENERGO $ 62,984 *
358,110 SAMARAENERGO SPONSORED ADR 589,091
-------------
652,075
OIL & GAS - 0.30%
24,600 SURGUTNEFTEGAZ PREFERRED SPONSORED ADR 347,475
-------------
TOTAL COMMON STOCKS - RUSSIA $ 999,550
(Total Cost $111,783) =============
BRAZIL - 0.65%
TELEPHONE COMMUNICATIONS - 0.65%
1,982,000 TELEMIG CELULAR SA PREFERENCE C $ 50,455 *
6,458,900 TELEPAR CELULAR SA COMMON 564,752
8,468,000 TELERJ CELULAR SA COMMON 132,620
-------------
TOTAL COMMON STOCKS - BRAZIL $ 747,827
(Total Cost $687,396) =============
</TABLE>
11
<PAGE>
THE BAUPOST FUND
SCHEDULE OF INVESTMENTS
April 28, 2000
(Unaudited)
<TABLE><CAPTION>
Number of
shares, units or
face value Market Value
---------- ------------
<S> <C> <C>
NORWAY - 0.45%
HOTELS & MOTELS - 0.45%
207,500 CHOICE HOTELS SCANDINAVIA ASA $ 521,928
-------------
TOTAL COMMON STOCKS - NORWAY $ 521,928
(Total Cost $514,297) =============
UNITED KINGDOM - 0.30%
OIL & GAS - 0.30%
1,146,308 BURREN ENERGY PLC $ 343,892 *+
-------------
TOTAL COMMON STOCKS - UNITED KINGDOM $ 343,892
(Total Cost $905,308) =============
BAHAMAS - 0.04%
CRUDE PETROLEUM - 0.04%
170,430 BASIC PETROLEUM INTERNATIONAL LTD UNIT TRUST $ 42,608
-------------
TOTAL COMMON STOCKS - BAHAMAS $ 42,608
(Total Cost $175,032) =============
TOTAL COMMON STOCKS $ 71,496,268
(Total Cost $71,677,173) =============
Corporate Bonds - 4.37%
55,870 BURREN ENERGY PLC 15.00% CONVERTIBLE LOAN NOTES
7/30/2001 $ 55,870 +
125,000 JDN REALTY CORPORATION 6.80% 8/01/2004 91,250
205,000 JDN REALTY CORPORATION 6.95% 8/01/2007 143,500
65,000 OMEGA HEALTHCARE INVESTORS 6.95% 6/15/2002 42,900
335,000 OMEGA HEALTHCARE INVESTORS 6.95% 8/01/2007 201,000
11,000 PIEDMONT MANAGEMENT CONTINGENT INTEREST NOTES 8.00%
6/30/2006 9,043 +
740,000 SERVICE CORPORATION INTERNATIONAL 7.375% 4/15/2004 451,400
2,000,000 SERVICE CORPORATION INTERNATIONAL 7.20% 6/01/2006 1,170,000
45,000 SERVICE CORPORATION INTERNATIONAL 6.875% 10/01/2007 26,100
1,975,000 SERVICE CORPORATION INTERNATIONAL 6.50% 3/15/2008 1,096,125
2,670,000 SERVICE CORPORATION INTERNATIONAL 7.70% 4/15/2009 1,521,900
12,511,100 STRUCTURED ASSET SECURITIES CORP 1996-CFL CLASS X2 FRN
2/25/2028 246,312
-------------
TOTAL CORPORATE BONDS $ 5,055,400
(Total Cost $4,876,498) =============
</TABLE>
12
<PAGE>
THE BAUPOST FUND
SCHEDULE OF INVESTMENTS
April 28, 2000
(Unaudited)
<TABLE><CAPTION>
Number of
shares, units or
face value Market Value
---------- ------------
<S> <C> <C>
COMPANIES IN LIQUIDATION - 1.64%
3,150 EHLCO LIQUIDATING TRUST $ 315 *+
DEM 15,000,000 MAXWELL COMMUNICATIONS CORPORATION PLC 6.00%
6/15/1993 244,778 *
CHF 5,500,000 MAXWELL COMMUNICATIONS CORPORATION PLC 5.00%
6/16/1995 112,199 *
836,059 MBO PROPERTIES INC 209,015 *^
272,500 TLC-LC INC 803,875 *+
589,981 TRUSTOR AB - B 526,550 *
-------------
TOTAL COMPANIES IN LIQUIDATION $ 1,896,732
(Total Cost $360,248) =============
PARTNERSHIPS - 1.16%
EMERGING EUROPE FUND FOR SUSTAINABLE DEV LP $ 435,806 +
NCH INVESTORS FUND LP 62,475 +
NEW CENTURY CAPITAL PARTNERS II LP 351,233 +
SIGMA/UKRAINE LP 175,946 +
SIGMA/UKRAINE CLASS C LP 101,166 +
THE EMERGING EUROPE FUND II LP 64,421 +
UKRAINIAN GROWTH FUND II LP 153,000 +
-------------
TOTAL PARTNERSHIPS $ 1,344,047
(Total Cost $3,273,054) =============
CLOSED - END INVESTMENT COMPANIES - 1.04%
183,969 JUPITER NARODOWY FUNDUSZ INVESTCYJNY SA $ 228,367 *
282,000 KAZAKHSTAN FUND LIMITED 246,750 *
45,782 NIF II 27,852 *
45,782 NIF VII 24,064 *
237,192 NIF VIII 323,612 *
45,443 NIF X 25,816 *
45,782 NIF XII 22,220 *
296,557 NIF XIII 204,293 *
122,099 NIF XIV 100,498 *
-------------
TOTAL CLOSED - END INVESTMENT COMPANIES $ 1,203,472
(Total Cost $3,558,838) =============
</TABLE>
13
<PAGE>
THE BAUPOST FUND
SCHEDULE OF INVESTMENTS
April 28, 2000
(Unaudited)
<TABLE><CAPTION>
Number of
shares, units or
face value Market Value
---------- ------------
<S> <C> <C>
OPTIONS - 0.96%
127 GENERAL ELECTRIC COMPANY 135.00 PUT 6/17/2000 $ 24,606
569 GOLD 550 CALLS 4/05/2001 13,644
569 GOLD 550 CALLS 4/09/2001 14,213
500 GOLD 450 CALLS 4/19/2001 28,000
563 GOLD 550 CALLS 7/19/2001 28,713
JPY 408,000,000 JAPANESE GOVERNMENT BOND - 210 98.00 PUT 5/08/0000 377
JPY 1,225,500,000 JAPANESE GOVERNMENT BOND - 210 96.00 PUT 5/18/2000 1,133
149 LUCENT TECHNOLOGIES INC 40.00 PUT 7/22/2000 4,656
123 LUCENT TECHNOLOGIES INC 50.00 PUT 7/22/2000 15,375
127 PALM INC 50.00 PUT 11/18/2000 368,300
56,450 RJR STUB CALLS 5.22 5/01/2000 0
113 S&P 500 INDEX 1133.52 PUT 6/16/2000 20,340
110 S&P 500 INDEX 1168.44 PUT 6/27/2000 38,658
30 S&P 500 INDEX 1173.52 PUT 7/14/2000 13,500
30 S&P 500 INDEX 1246.87 PUT 7/14/2000 25,500
26 S&P 500 INDEX 1167.20 PUT 7/19/2000 11,960
26 S&P 500 INDEX 1240.15 PUT 7/19/2000 22,360
53 S&P 500 INDEX 1123.36 PUT 8/01/2000 24,696
79 S&P 500 INDEX 1134.56 PUT 8/02/2000 37,130
26 S&P 500 INDEX 1144.80 PUT 8/04/2000 12,740
26 S&P 500 INDEX 1216.35 PUT 8/04/2000 23,920
115 S&P 500 INDEX 1163.68 PUT 8/28/2000 107,060
53 S&P 500 INDEX 1124.40 PUT 9/06/2000 37,630
73 S&P 500 INDEX 1173.20 PUT 9/21/2000 82,547
86 S&P 500 INDEX 1163.68 PUT 10/30/2000 141,557
21,400 TELEGLOBE INC 30.00 PUT 6/16/2000 4,049
21,400 TELEGLOBE INC 32.00 PUT 6/16/2000 8,821
SEK (5,370,929) TRUSTOR AB REDEMPTION SHARE 6.30 PUT 10/31/2000 0
-------------
TOTAL OPTIONS $ 1,111,485
(Total Cost $2,393,379) =============
WARRANTS - 0.84%
951,000 GOLDEN STATE BANCORP LITIGATION WARRANTS 12.00
1/01/2010 $ 980,719
55,870 BURREN ENERGY PLC WARRANTS 0.30 4/30/2003 0 +
-------------
TOTAL WARRANTS $ 980,719
(Total Cost $1,827,438) =============
PURCHASED BANK DEBT & Trade Claims - 0.97%
2,453,801 MAXWELL BANK DEBT (BAKER NYE) $ 86,245 *+
5,000,000 MAXWELL COMMUNICATIONS BERLITZ OBLIGATIONS 175,000 *+
167,868 MAXWELL REVOLVER BANK DEBT (FIRST CHICAGO) 5,948 *+
396,015 MAXWELL REVOLVER BANK DEBT (HALCYON II) 14,031 *+
943,496 MAXWELL REVOLVER BANK DEBT (HALCYON) 33,539 *+
</TABLE>
14
<PAGE>
THE BAUPOST FUND
SCHEDULE OF INVESTMENTS
April 28, 2000
(Unaudited)
<TABLE><CAPTION>
Number of
shares, units or
face value Market Value
---------- ------------
<S> <C> <C>
875,543 MAXWELL REVOLVER BANK DEBT (LAZARD FRERES/C) $ 30,999 *+
264,059 MAXWELL REVOLVER BANK DEBT (MERRILL LYNCH) 9,355 *+
823,981 MAXWELL REVOLVER BANK DEBT (SAN PAOLO) 29,279 *+
1,015,000 MAXWELL REVOLVER BANK DEBT (TCC) 36,052 *+
579,133 MAXWELL TERM BANK DEBT (FIRST CHICAGO) 20,270 *+
702,221 MAXWELL TERM BANK DEBT (HALCYON II) 24,578 *+
1,678,704 MAXWELL TERM BANK DEBT (HALCYON) 58,755 *+
426,846 MAXWELL TERM BANK DEBT (LAZARD FRERES/C) 14,940 *+
468,269 MAXWELL TERM BANK DEBT (MERRILL LYNCH) 16,389 *+
325,093 MAXWELL TERM BANK DEBT (SAN PAOLO) 11,378 *+
1,806,952 MAXWELL TERM BANK DEBT (TCC) 63,243 *+
170,000 SAFETY-KLEEN REVOLVER 71,400 *+
385,000 SAFETY-KLEEN TERM LOAN A 169,400 *+
296,159 SAFETY-KLEEN TERM LOAN B 130,310 *+
296,159 SAFETY-KLEEN TERM LOAN C $ 130,310 *+
-------------
TOTAL PURCHASED BANK DEBT & Trade Claims $ 1,131,421
(Total Cost $495,133) =============
TREASURY OBLIGATIONS - 13.67%
5,000,000 US TREASURY BILLS 7/13/2000 $ 4,940,466 ~
11,000,000 US TREASURY BILLS 7/20/2000 10,856,710 ~
-------------
TOTAL TREASURY OBLIGATIONS $ 15,797,176
(Total Cost $15,799,722) =============
TOTAL INVESTMENTS - 86.46% $ 100,016,720
(Total Cost $104,261,483) =============
* Non-income producing security.
+ Restricted securities - See note C.
^ Affiliated Company.
~ A portion of the security is serving as collateral or is segregated for securities sold short.
Foreign Currency Abbreviations
------------------------------
CHF Swiss Franc
DEM German Deutschemark
JPY Japanese Yen
The percentage shown for each investment category is the total value of that category expressed
as a percentage of total net assets of the Fund.
</TABLE>
See notes to financial statements.
15
<PAGE>
THE BAUPOST FUND
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
April 28, 2000
(Unaudited)
<TABLE><CAPTION>
MARKET UNREALIZED
CONTRACTS TO SELL VALUE GAIN/(LOSS)
----- -----------
<S> <C> <C> <C>
BPS 1,352,700 BRITISH POUND STERLING DUE 5/10/2000 $ 2,100,134 $ 78,627
(Receivable Amount $2,178,761)
BPS 275,893 BRITISH POUND STERLING DUE 6/16/2000 428,459 14,261
(Receivable Amount $442,720)
CAD 2,764,666 CANADIAN DOLLAR DUE 6/09/2000 1,867,980 36,704
(Receivable Amount $1,904,684)
CSK 3,149,100 CZECH KORUNA DUE 06/01/2000 78,828 9,332
(Receivable Amount $88,160)
CSK 9,747,000 CZECH KORUNA DUE 07/12/2000 244,478 26,197
(Receivable Amount $270,675)
EUR 4,856,295 EUROPEAN CURRENCY UNIT DUE 7/31/2000 4,443,219 71,096
(Receivable Amount $4,514,315)
NOK 3,050,250 NORWEGIAN KRONE DUE 7/25/2000 341,223 11,742
(Receivable Amount $352,965)
PLN 3,590,024 POLISH ZLOTY DUE 7/10/2000 786,651 47,743
(Receivable Amount $834,394)
SEK 54,197,193 SWEDISH KRONA DUE 6/07/2000 6,087,986 166,982
(Receivable Amount $6,254,968) ------------- -------------
TOTAL CONTRACTS TO SELL $ 16,378,958 462,684
(Receivable Amount $16,841,642) ============= -------------
CONTRACTS TO BUY
BPS 1,352,700 BRITISH POUND STERLING DUE 5/10/2000 $ 2,100,134 $ (79,323)
(Payable Amount $2,179,457)
BPS 275,893 BRITISH POUND STERLING DUE 6/16/2000 428,459 (6,593)
(Payable Amount $435,052)
CAD 2,142,666 CANADIAN DOLLAR DUE 6/09/2000 1,447,718 (7,456)
(Payable Amount $1,455,174)
CSK 3,149,100 CZECH KORUNA DUE 06/01/2000 78,829 (9,505)
(Payable Amount $88,334)
CSK 9,747,000 CZECH KORUNA DUE 07/12/2000 244,478 (24,683)
(Payable Amount $269,161) ------------- -------------
TOTAL CONTRACTS TO BUY $ 4,299,618 (127,560)
(Payable Amount $4,427,178) ============= -------------
$ 335,124
=============
</TABLE>
See notes to financial statements.
16
<PAGE>
THE BAUPOST FUND
SCHEDULE OF SECURITIES SOLD SHORT
April 28, 2000
(Unaudited)
<TABLE><CAPTION>
Par Value
or Shares Market Value
--------- ------------
<S> <C> <C>
COMMON STOCK - 6.09%
3,100 ASSICURAZIONI GENERALI $ 88,483
4,700 JDN REALTY CORPORATION 45,531
6,225 NORTEL NETWORKS CORPORATION 704,981
300 PALM INC 8,175
1,200 TELEGLOBE INC 30,004
5,940 THERMO ELECTRON CORPORATION 115,088
47,824 VERITAS SOFTWARE CORPORATION 5,129,871
15,508 UNITED PAN-EUROPE COMMUNICATIONS NV 566,100
9,905 UNITED PAN-EUROPE COMMUNICATIONS NV ADR 362,152
--------------
TOTAL COMMON STOCK SOLD SHORT $ 7,050,385
(Total Proceeds $8,843,109) ==============
CORPORATE BONDS - 0.92%
$1,055,000 TENNECO AUTOMOTIVE INC 11.625% 10/15/2009 $ 1,060,275
--------------
TOTAL CORPORATE BONDS SOLD SHORT $ 1,060,275
(Total Proceeds $1,067,738) ==============
OPTIONS - 0.01%
64 PALM INC 50.00 CALL 11/18/2000 $ 8,800
--------------
TOTAL OPTIONS SOLD SHORT $ 8,800
(Total Proceeds $95,271) ==============
TOTAL SECURITIES SOLD SHORT $ 8,119,460
(Total Proceeds $10,006,118) ==============
The percentage shown for each investment category is the total value of
that category expressed as a percentage of total net assets of the Fund.
</TABLE>
See notes to financial statements.
17
<PAGE>
THE BAUPOST FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 28, 2000
(UNAUDITED)
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Baupost Fund (the "Fund") was established as a Massachusetts business trust
under an Agreement and Declaration of Trust dated June 29, 1990, and is
registered under the Investment Company Act of 1940, as amended, as a no-load,
non-diversified, open-end management investment company.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that may affect the
reported amounts of assets and liabilities. Actual results could differ from
those estimates.
SECURITY VALUATION: Portfolio securities (other than certain foreign
securities), options and futures contracts for which market quotations are
available and which are traded on an exchange or on NASDAQ are valued at the
last quoted sale price or, if there is no such reported sale that day, at the
closing bid price. Securities, options and forward contracts traded in the
over-the-counter market (other than those traded on NASDAQ) and other unlisted
securities are valued at the most recent bid price as obtained from one or more
dealers that make markets in the securities. Portfolio securities which are
traded both in the over-the-counter market and on one or more stock exchanges
are valued according to the broadest and most representative market. To the
extent the Fund engages in "naked" short sales (i.e., it does not own the
underlying security or a security convertible into the underlying security
without the payment of any further consideration), the Fund will value such
short position as described above, except that the valuation, where necessary,
will be based on the ask price instead of the bid price. Securities traded in
foreign markets are valued at their current market value, which, depending on
local custom, may or may not be the last quoted sale price (or the closing bid
price).
Assets for which no quotations are readily available are valued at fair value as
determined in good faith in accordance with procedures adopted by the Trustees
of the Fund. Determination of fair value is based upon such factors as are
deemed relevant under the circumstances, including the financial condition and
operating results of the issuer, recent third-party transactions (actual or
proposed) relating to such securities and, in some cases, the liquidation value
of the issuer.
Certain investments held by the Fund are restricted as to public sale in
accordance with the Securities Act of 1933. Whenever possible, such assets are
valued based on bid prices obtained from reputable brokers or market makers as
of the valuation date. For assets not priced by brokers or market makers, fair
value is determined by The Baupost Group, L.L.C. ("Baupost") in accordance with
procedures adopted by the Trustees of the Fund.
FOREIGN CURRENCY TRANSLATION: The value of foreign securities is translated into
U.S. dollars at the rate of exchange on the valuation date. Purchases and sales
of foreign securities, as well as income and expenses relating to such
securities, are translated into U.S. dollars at the exchange rate on the dates
of the transactions. For financial statement purposes, gains and losses
attributable to foreign currency exchange rates on sales of securities are
recorded as net realized gains and losses, and gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded as foreign
currency transaction
18
<PAGE>
THE BAUPOST FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 28, 2000
(UNAUDITED)
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
gains and losses. The portion of both realized and unrealized gains and losses
on investments that results from fluctuations in foreign exchange rates is not
separately disclosed.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Gains and losses on securities sold are determined
using the specific identification method. Dividend income is recorded on the
ex-dividend date, except income on certain foreign dividends, where the ex-
dividend date may have passed, is recorded as soon as the Fund becomes aware of
the dividends. Interest income, including original issue discount, where
applicable, is recorded on an accrual basis, except for bonds in default for
which there is some concern as to whether interest will be received, in which
case interest is recorded when received.
SECURITIES SOLD SHORT: The Fund engages in short-selling which obligates the
Fund to replace the security borrowed by purchasing the security at the then
current market value. The Fund would incur a loss if the price of the security
increases between the date of the short sale and the date on which the Fund
replaces the borrowed security. The Fund would realize a gain if the price of
the security declines between those dates. Until the Fund replaces the borrowed
security, the Fund maintains daily, in a segregated account with its custodian,
cash or securities sufficient to cover its short exposure.
FORWARD FOREIGN CURRENCY CONTRACTS: The Fund may enter into forward foreign
currency contracts for the purchase or sale of a specific foreign currency at a
fixed price on a future date. Losses may arise from changes in the value of a
foreign currency relative to the U.S. dollar or from the potential inability of
the counterparties to meet the terms of their contracts. The Fund uses forward
foreign currency contracts to hedge the risks associated with holding securities
denominated in foreign currencies. The forward foreign currency exchange
contracts are adjusted by the daily exchange rate of the underlying currency,
and any gains or losses are recorded as unrealized until the contract settlement
date. On contract settlement date, the gains or losses are recorded as realized
gains or losses on foreign currency transactions.
FUTURES CONTRACTS: The Fund may enter into index futures contracts for
non-hedging purposes and in order to hedge against the effects of fluctuations
in market conditions. The potential risk to the Fund is that the change in value
of the futures contracts may not correspond to the change in value of the
securities held by the Fund in those markets. In addition, for non-listed
futures contracts, losses may arise if there is an illiquid secondary market for
the contracts or if the counterparty to the contracts is unable to perform. At
the time the Fund enters into a futures contract, it is required to deposit with
its broker cash or U.S. government securities as collateral, calculated on a per
contract basis. Subsequent payments to and from the broker are made on a daily
basis as the market price of the futures contract fluctuates. Daily adjustments
arising from this "mark to market" are recorded by the Fund as unrealized gains
or losses. When the contracts are closed, the Fund recognizes a gain or loss. At
April 28, 2000, the Fund had no open positions in futures contracts.
EQUITY SWAP CONTRACTS: The Fund has entered into equity swap contracts to gain
exposure to specific foreign equities. A swap is an agreement that obligates two
parties to exchange a series of cash flows at
19
<PAGE>
THE BAUPOST FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 28, 2000
(UNAUDITED)
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
specified intervals based upon or calculated by reference to changes in
specified security prices or interest rates. The payment flows are usually
netted against each other, with the difference being paid by one party to the
other. At the time the Fund enters into an equity swap contract, it may be
required to deposit collateral, cash or Treasury bills with its broker.
Risks may arise as a result of the failure of another party to the swap contract
to comply with the terms of the swap contract. The loss incurred by the failure
of a counterparty is generally limited to the net payment to be received by the
Fund and/or the termination value at the end of the contract. The loss incurred
by the failure of a counterparty could include the collateral, in certain
circumstances, if there is no required segregation of cash collateral from other
assets. Therefore, the Fund considers the creditworthiness of each counterparty
to a swap contract in evaluating potential credit risk. Additionally, risks may
arise from unanticipated movements in interest rates or in the value of the
underlying equities.
The Fund records a net receivable or payable for the amount expected to be
received or paid under the contract. The interest component of the equity swap
contract is recorded as swap interest income or expense. The fluctuation in the
market value of the underlying security is recorded as unrealized appreciation
or depreciation on investments. When the contracts are closed, the Fund
recognizes a gain or loss. Premium payments made to enter into a swap contract,
if any, are capitalized and amortized over the life of the swap contract.
At April 28, 2000, the Fund had outstanding equity swap contracts with the
following terms:
<TABLE><CAPTION>
SWAP NOTIONAL AMT. TERMINATION UNDERLYING PAYMENTS BY/
COUNTERPARTY LONG/(SHORT) DATE SHARES UNDERLYING EQUITY (RECEIPTS TO) THE FUND
------------ ------------ ---- ------ ----------------- ----------------------
<S> <C> <C> <C> <C> <C>
Warburg Dillon Read $ 14,371,655 09/30/2000 121,500 BCE Inc One Week LIBOR
Plus .375% on Notional
Warburg Dillon Read (11,709,805) 09/30/2000 (94,748) Nortel Networks (One Week LIBOR
Corporation Less .375% on Notional)
Warburg Dillon Read (2,567,485) 12/31/2010 (202,588) Telecom Italia Mobile (One Week LIBOR
SpA Less 1.375% on Notional)
Warburg Dillon Read 2,521,546 12/31/2010 496,400 Telecom Italia Mobile One Week LIBOR
SpA Savings Plus .50% on Notional
Warburg Dillon Read (2,538,523) 12/31/2010 (180,408) Telecom Italia SpA (One Week LIBOR
Less 1.375% on Notional)
Warburg Dillon Read 4,369,184 12/31/2010 714,408 Telecom Italia SpA One Week LIBOR
Savings Plus .50% on Notional
</TABLE>
20
<PAGE>
THE BAUPOST FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 28, 2000
(UNAUDITED)
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements with
institutions that Baupost has determined are creditworthy. Each repurchase
agreement is recorded at cost. The Fund requires that the securities purchased
in a repurchase transaction be transferred to the custodian in a manner
sufficient to enable the Fund to obtain those securities in the event of a
default under the repurchase agreement. The Fund monitors, on a daily basis, the
value of the collateral to ensure that its value, including accrued interest, is
greater than the amounts owed to the Fund under each such repurchase agreement.
OPTIONS: The Fund may either write or purchase call and put options for both
hedging and non-hedging activities. The risk associated with purchasing an
option is that the Fund pays a premium whether or not the option is exercised.
Also, for non-listed options, the Fund bears the risk of loss of premium and
market value should the counterparty not perform under the contract. The Fund's
exposure to market risk relating to the securities is affected by a number of
factors including the size and composition of the options held, the time period
during which the options may be exercised, the volatility of the underlying
security or index and the relationship between the current market price of the
underlying security or index and the strike or exercise price of the option.
FEDERAL INCOME TAXES AND DISTRIBUTIONS: The Fund is a regulated investment
company, as defined under Subchapter M of the Internal Revenue Code (the Code).
By complying with Code provisions, the Fund is not subject to federal income tax
provided that substantially all of its taxable income is distributed to
shareholders. Therefore, no provision has been made for federal income taxes.
The Fund's income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to different treatment for
certain of the Fund's foreign securities. Differences in the recognition or
classification of income between the financial statements and tax earnings and
profits, which result in temporary overdistributions for financial statement
purposes, are classified as distributions in excess of net investment income or
accumulated net realized gains. During the six months ended April 28, 2000,
there were reclassifications between undistributed net investment income,
accumulated net realized gain on investments and paid in capital due to
differences between book and tax accounting for passive foreign investment
companies, foreign currency transactions, market discount on bonds and
shareholder distributions. This change had no effect on net assets nor on net
asset value per share. For federal income tax purposes, the Fund had a capital
loss carryforward of $582,500 from tax year 1998. The carryforward may be
applied against any net taxable realized gains of the current year and
succeeding years until the earlier of its utilization or expiration on October
31, 2006. The Fund utilizes earnings and profits distributed to shareholders
upon redemption of shares as a part of the dividends paid deduction for income
tax purposes.
NOTE B - INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the period ended April 28, 2000 aggregated $138,972,000 and $148,663,000,
respectively.
21
<PAGE>
THE BAUPOST FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 28, 2000
(UNAUDITED)
NOTE B - INVESTMENT TRANSACTIONS - CONTINUED
For federal income tax purposes, the identified cost of investments at April 28,
2000 was $104,507,755. Unrealized appreciation/(depreciation), on a federal
income tax basis, for all securities was as follows:
Six Months Ended
April 28, 2000
--------------
Gross unrealized appreciation $ 10,284,193
Gross unrealized depreciation ( 14,775,228)
-------------
Net unrealized depreciation ($ 4,491,035)
=============
NOTE C - RESTRICTED SECURITIES
At April 28, 2000, the Fund held the following securities which are restricted
as to public sale in accordance with the Securities Act of 1933:
<TABLE><CAPTION>
Earliest
Value at Acquisition
Cost April 28, 2000 Date
---- -------------- --------
<S> <C> <C> <C>
Purchased Bank Debt & Trade Claims:
-----------------------------------
Maxwell Bank Debt $ 0 $ 630,001 11/22/1993
Safety-Kleen Bonds 495,133 501,420 04/06/2000
Corporate Bonds:
----------------
Burren Energy PLC 15.00% Convertible Loan Notes due 7/30/2001 55,870 55,870 03/31/2000
Piedmont Management Contingent Interest Notes 8.00% due 6/30/2006 9,043 9,043 12/21/1995
Partnerships:
-------------
Emerging Europe Fund for Sustainable Development, L.P. 284,660 435,806 02/25/1997
NCH Investors Fund, L.P. 585,201 62,475 12/18/1995
New Century Capital Partners II, L.P. 744,400 351,233 11/30/1995
Sigma / Ukraine, L.P. 625,390 175,946 05/14/1996
Sigma / Ukraine Class C, L.P. 404,663 101,166 11/27/1996
The Emerging Europe Fund II, L.P. 68,852 64,421 12/08/1997
Ukrainian Growth Fund II, L.P. 559,888 153,000 03/31/1997
Common Stock:
-------------
Burren Energy PLC 905,308 343,892 04/14/1998
Warrants:
---------
Burren Energy PLC Warrants 0.30 4/30/2003 0 0 03/31/2000
Companies in Liquidation:
-------------------------
Ehlco Liquidating Trust 0 315 01/30/1989
TLC-LC Inc. 0 803,875 07/27/1995
---------- ----------
TOTAL RESTRICTED SECURITIES (3.19% of Net Assets) $4,738,408 $3,688,463
========== ==========
</TABLE>
22
<PAGE>
THE BAUPOST FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 28, 2000
(UNAUDITED)
NOTE C - RESTRICTED SECURITIES - CONTINUED
The Fund does not have the right to demand that such securities be registered.
The Fund does not anticipate any significant costs associated with the
disposition of these securities.
NOTE D - INVESTMENT MANAGEMENT CONTRACT AND OTHER TRANSACTIONS WITH
AFFILIATES
The Fund retains Baupost as its investment adviser and administrator. Certain
individuals who are officers and trustees of the Fund are also officers,
directors and members of Baupost.
The Fund pays Baupost a quarterly management fee at an annual rate of 1.00% of
the Fund's average net assets and an administrative fee at an annual rate of
0.25% of the Fund's average net assets to serve as investment adviser and
administrator. Baupost has agreed with the Fund to reduce its management fee by
up to 0.75% of the Fund's average net assets until further notice to the extent
that the Fund's total annual expenses (including the management fee,
administrative fee and certain other expenses, but excluding brokerage
commissions, transfer taxes, interest and expenses relating to preserving the
value of the Fund's investments) would otherwise exceed 1.50% of the Fund's
average net assets. For the purpose of determining the applicable management and
administrative fees, average net assets is determined by taking an average of
the determination of such net asset values during each quarter at the close of
business on the last business day of each month during such quarter before any
month-end share purchases or redemptions.
23
<PAGE>
THE BAUPOST FUND
FINANCIAL HIGHLIGHTS
<TABLE><CAPTION>
Six Months Ended
April 28, Year Ended October 31
---------------------------------------------------------------
2000 1999 1998 1997 1996 1995
--------- --------- --------- --------- --------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Selected Per Share Data
Net Asset Value, beginning of period $12.91 $12.18 $17.09 $15.38 $13.47 $14.33
--------- --------- --------- --------- --------- ----------
Income/(loss) from investment operations
Net investment income 0.02 0.14 0.55 0.30 0.41 0.25
Net realized and unrealized gain/(loss) 1.28 0.86 (2.83) 3.47 2.43 0.71
--------- --------- --------- --------- --------- ----------
Total from investment operations 1.30 1.00 (2.28) 3.77 2.84 0.96
--------- --------- --------- --------- --------- ----------
Less distributions
From net investment income 0.33 0.27 0.58 0.40 0.28 0.25
In excess of net investment income - - - - - 0.08
From net realized gain - - 2.05 1.66 0.65 1.49
--------- --------- --------- --------- --------- ----------
Total distributions 0.33 0.27 2.63 2.06 0.93 1.82
--------- --------- --------- --------- --------- ----------
Net Asset Value, end of period $13.88 $12.91 $12.18 $17.09 $15.38 $13.47
========= ========= ========= ========= ========= ==========
Total Return 10.28% 8.29% (16.30%) 27.04% 22.51% 7.91%
Ratios and Supplemental Data
Net assets, end of period (in thousands) $115,678 $123,899 $134,003 $152,958 $108,788 $89,439
Ratio of net expenses to average net assets 3.25%(a)(b)(c) 2.00%(b) 2.12%(b) 2.14%(b) 1.50% 1.54%
Ratio of total expenses excluding waiver of
management fee to average net assets 3.25%(a)(b)(c) 2.00%(b) 2.19%(b) 2.14%(b) 1.50% 1.54%
Ratio of net investment income to average
net assets 0.04%(a)(c) 1.08% 2.98% 1.45% 2.27% 1.60%
Ratio of net investment income excluding
waiver of management fee to average net
assets 0.04%(a)(c) 1.08% 2.91% 1.45% 2.27% 1.60%
Portfolio turnover rate 301%(a) 149% 129% 140% 120% 106%
(a) Annualized
(b) The expense ratios include equity swap contract expense.
(c) Excluding pass-through amounts from investment partnerships, the above expense in net investment ratios would have been 2.11%
and 0.55%, respectively.
</TABLE>
24
