Baron International Growth Fund Fact Sheet

Transcription

1 Institutional Shares (BINIX) Baron International Growth Fund Fact Sheet BAMCO, Inc., Registered Investment Adviser

2 The Fund may not achieve its objectives. Portfolio holdings may change over time. Definitions (provided by BAMCO, Inc.): The MSCI AC World ex USA indexes cited are unmanaged, free floatadjusted market capitalization weighted indexes. The MSCI ACWI ex USA Index Net USD measures the equity market performance of large and mid cap securities across developed and emerging markets, excluding the United States. The MSCI ACWI ex USA IMI Growth Index Net USD measures the performance of large, mid and small cap growth securities across developed and emerging markets, excluding the United States. The indexes and the Fund include reinvestment of dividends, net of foreign withholding taxes, which positively impact the performance results. Morningstar moved the Fund from the Foreign Small/Mid Growth Category effective May 31, 2016 to the Foreign Large Growth Category. As of 8/31/2017, Morningstar calculates the Morningstar US Fund Foreign Large Growth Average using its Fractional Weighting methodology Morningstar, Inc. All Rights Reserved. The Morningstar information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Standard Deviation (Std. Dev.): measures the degree to which a fund s performance has varied from its average performance over a particular time period. The greater the standard deviation, the greater a fund s volatility (risk). Sharpe Ratio: is a risk-adjusted performance statistic that measures reward per unit of risk. The higher the Sharpe ratio, the better a fund s risk adjusted performance. Alpha: measures the difference between a fund s actual returns and its expected performance, given its level of risk as measured by beta. Beta: measures a fund s sensitivity to market movements. The beta of the market is 1.00 by definition. R-Squared: measures how closely a fund s performance correlates to the performance of the benchmark index, and thus is a measurement of what portion of its performance can be explained by the performance of the index. Values for R-Squared range from 0 to 100, where 0 indicates no correlation and 100 indicates perfect correlation. Tracking Error: measures how closely a fund s return follows the benchmark index returns. It is calculated as the annualized standard deviation of the difference between the fund and the index returns. Information Ratio: measures the excess return of a fund divided by the amount of risk the fund takes relative to the benchmark index. The higher the information ratio, the higher the excess return expected of the fund, given the amount of risk involved. Upside Capture: explains how well a fund performs in time periods where the benchmark s returns are greater than zero. Downside Capture: explains how well a fund performs in time periods where the benchmark s returns are less than zero. EPS Growth Rate (3-5 year forecast): indicates the long-term forecasted EPS growth of the companies in the portfolio, calculated using the weighted average of the available 3-to-5 year forecasted growth rates for each of the stocks in the portfolio provided by FactSet Estimates. The EPS Growth rate does not forecast the Fund s performance. Price/ Earnings Ratio (trailing 12-months): is a valuation ratio of a company s current share price compared to its actual earnings per share over the last twelve months. Price/Book Ratio: is a ratio used to compare a company s stock price to its tangible assets, and it is calculated by dividing the current closing price of the stock by the latest quarter s book value per share. Price/Sales Ratio: is a valuation ratio of a stock s price relative to its past performance. It represents the amount an investor is willing to pay for a dollar generated from a particular company s operations. Price/Sales is calculated by dividing a stock s current price by its revenue per share for the last 12 months. Historical portfolio characteristics are provided by Compustat and FactSet Fundamentals. Weighted Harmonic Average: is a calculation that reduces the impact of extreme observations on the aggregate calculation by weighting them based on their size in the fund. If in any jurisdiction where it would be unlawful under the laws of that jurisdiction to make such offer or solicitation. This information is only for the intended recipient and may not be distributed to any third party. Not bank guaranteed, may lose value, not FDIC insured.

3 Portfolio Facts and Characteristics MSCI ACWI ex Fund USA Index # of Equity Securities / % of Net Assets 76 / 96.4% - Turnover (3 Year Average) 37.73% - Median Market Cap $11.23 billion $8.50 billion Weighted Average Market Cap $44.70 billion $65.49 billion EPS Growth (3-5 year forecast) 15.9% 14.9% Price/Earnings Ratio (trailing 12-month)* Price/Book Ratio* Price/Sales Ratio* * Weighted Harmonic Average Source: FactSet PA Compustat, FactSet and BAMCO. Internal valuations metrics may differ. R6 Shares are also available for this Fund. Performance Based Characteristics² 3 Years 5 Years Since Inception Std. Dev. (%) - Annualized Sharpe Ratio Alpha (%) - Annualized Beta R-Squared (%) Tracking Error (%) Information Ratio Upside Capture (%) Downside Capture (%) Top 10 Holdings % of Net Assets RIB Software SE 3.3 Square Enix Holdings Co., Ltd. 2.5 Eurofins Scientific SE 2.5 Tencent Holdings, Ltd. 2.2 Mitsubishi UFJ Financial Group, Inc. 2.1 Constellation Software, Inc. 2.1 Vivendi SA 2.1 BNP Paribas S.A. 2.0 JM Financial Limited 2.0 Alibaba Group Holding Limited 1.9 Total 22.7 GICS Sector Breakdown¹ Top 15 GICS Sub-Industry Breakdown¹ Colors of Sub-Industry bars correspond to sector chart above. Investment Strategy The Fund invests mainly in non-u.s. companies of any size with significant growth potential. The Fund invests principally in companies in developed countries. Diversified. Portfolio Manager Michael Kass joined Baron in 2007 and has 31 years of research experience. From 2003 to 2007, he was a managing principal of Artemis Advisors, which acquired the Artemis Funds, a long-short equity strategy he co-founded in From 1993 to 2003, he worked at ING as a director of proprietary trading and was named senior managing director and portfolio manager in From 1989 to 1993, he worked at Lazard Frères in investment banking. From 1987 to 1989, Michael was an analyst at Bear Stearns. Michael graduated summa cum laude from Tulane University with a B.A. in Economics in Investment Principles Long-term perspective allows us to think like an owner of a business Independent and exhaustive research is essential to understanding the long-term fundamental growth prospects of a business We seek appropriately capitalized open-ended growth opportunities, exceptional leadership, and sustainable competitive advantages Purchase price and risk management are integral to our investment process Fund Facts Inception Date December 31, 2008 Net Assets $ million Institutional Shares CUSIP 06828M603 Gross Expense Ratio³ 1.24% Less: Reimbursement of Expenses by Adviser³ (0.29)% Net Expense Ratio³ 0.95% Risk/Return Comparison¹ Non-U.S. investments may involve additional risks to those inherent in U.S. investments, including exchange-rate fluctuations, political or economic instability, the imposition of exchange controls, expropriation, limited disclosure and illiquid markets. This may result in greater share price volatility. Securities of small and medium-sized companies may be thinly traded and more difficult to sell. Even though the Fund is diversified, it may establish significant positions where the Adviser has the greatest conviction. This could increase volatility of the Fund's returns. 1 - Industry sector or sub-industry group levels are provided from the Global Industry Classification Standard ( GICS ), developed and exclusively owned by MSCI, Inc. ( MSCI ) and Standard & Poor s Financial Services LLC ( S&P ). All GICS data is provided as is with no warranties. The Adviser may have reclassified/classified certain securities in or out of a sub-industry. Such reclassifications are not supported by S&P or MSCI. 2 - Source: FactSet SPAR. Except for Standard Deviation and Sharpe Ratio, the performance based characteristics above were calculated relative to the Fund's benchmark. 3 - As of FYE 12/16, restated to reflect current management fee and expense waiver.

4 Performance as of Total Returns(%) Annualized Returns(%) 4th Q 2017 Year to Date 1 Year 3 Years 5 Years 10 Years Since Inception 12/31/2008 Return + Return + Return + Return + Return + Return + Return + BINIX - Institutional Shares N/A MSCI ACWI ex USA Index N/A MSCI ACWI ex USA IMI Growth Index N/A Morningstar Foreign Large Growth Category Average N/A N/A The blue shading represents Fund outperformance vs. the corresponding benchmark. The yellow shading represents underperformance. Historical Performance(Calendar Year %) BINIX - Institutional Shares MSCI ACWI ex USA Index MSCI ACWI ex USA IMI Growth Index Review and Outlook Baron International Growth Fund advanced 7.33% for the fourth quarter of 2017 and 37.33% for the full year. International equities delivered strong annual returns powered by healthy economic growth, strong earnings, and favorable policy support. In addition, elections and political risks were resolved favorably during the latter months of the year in countries such as Japan, France, the Netherlands, India, Brazil, Chile, Argentina, and South Africa, helping fuel confidence and valuation support. We continue to believe that the current phase of outperformance of international equities may still be in the early innings. Several key international economies appear earlier in their economic and monetary cycles and thus would be reasonably well positioned to absorb the impact of a U.S.-led liquidity tightening in our view. We also reiterate that large pockets of the international markets, notably Japan, certain European countries, and much of the developing world, are not only early in introducing market-friendly reforms, but also appear considerably less vulnerable to a wave of populism that, in our view, threatens to compromise future corporate profit margins and returns to capital owners. Most international markets trade at notable discounts to the U.S. In the near term, the balance of a strong economic and earnings environment alongside the rising risk of incremental liquidity tightening suggests higher volatility is coming. In addition, just days after the conclusion of a successful Party Congress where leadership and policy priorities were solidified, China unleashed a series of official tightening measures. In our view, the key implication of these tightening measures is that while China represented an upside surprise to equity performance in 2017, it may represent a modest drag on growth and earnings expectations for international equities, which have greater sensitivity to China than U.S. equities, in the year ahead. Importantly, we feel that if a consolidation or correction occurs in the near term, it would be a healthy development, curing excess optimism rather than foreshadowing a more concerning decline. We are pleased with our quarterly and 2017 performance, particularly considering our below market beta. We remain optimistic that our differentiated discipline and process position us well over the long term to take advantage of substantial investment opportunities across our broad universe. The performance data quoted represents past performance. Past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate; an investor s shares, when redeemed, may be worth more or less than their original cost. The Adviser has reimbursed certain Fund expenses (by contract as long as BAMCO, Inc. is the adviser to the Fund) and the Fund s transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower. Current performance may be lower or higher than the performance data quoted. For performance information current to the most recent month end, visit or call BARON. You should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund and can be obtained from the Fund's distributor, Baron Capital, Inc., by calling BARON or visiting Please read them carefully before investing. Performance for the Institutional Shares prior to 5/29/2009 is based on the performance of the Retail Shares, which have a distribution fee. The Institutional Shares do not have a distribution fee. If the annual returns for the Institutional Shares prior to 5/29/2009 did not reflect this fee, the returns would be higher. 1 - Source: FactSet SPAR.

5 Top Contributors/Detractors to Performance for the Quarter Ended Contributors RIB Software SE is a German company servicing the global construction industry with a productivity-enhancing software solution. Shares appreciated during the fourth quarter thanks to RIB s rapidly growing software licenses business, which also carries an above-average margin. Historically a German company, RIB is now reaching clients globally, and we believe its recent joint venture with a contract manufacturer allows RIB to win new clientele. argenx SE is a Netherlands-based biotech company focused on cancer and autoimmune disorder treatments. Shares rose sharply in Q4 after the Phase 2 clinical trial of the company s ARGX-113 showed effective results for treating myasthenia gravis, a rare autoimmune disorder that causes muscle weakness. We expect the stock to continue rallying as results from trials of argenx s products for treating immune thrombocytopenia purpura, a blood disorder, and pemphigus vulgaris, a skin and mucus membrane disease, become available in Bolsas y Mercados Argentinos S.A. owns the only vertically integrated exchange and is the sole custodian for securities in Argentina. The stock rose sharply in the quarter following Argentina s October primary election results, which support the government s ambitious plans to enact market-friendly reforms. In addition to this positive development, we think the planned capital market and tax reforms will allow faster development of the equity market and increased bond market access for local issuers, which could in turn drive higher trading and custody activities at Bolsas y Mercados. Top Contributors/Detractors to Performance for the Year Ended Contributors RIB Software SE is a German company servicing the global construction industry with a software solution for productivity enhancement. Shares appreciated in During the year, the company continued to post strong growth in software licenses, an area that also carries an above-average margin. As a result, management upgraded the company s earnings guidance. RIB s joint venture with Flextronics announced in late 2016 to collaborate on a cloud-based platform more than doubled RIB s total available market, further boosting shares. Tencent Holdings, Ltd. is one of the two largest internet-related companies in China. The company operates China s leading social network and messaging platform as well as the country s largest online entertainment and media and online pc and mobile gaming businesses. Shares rose in 2017 on the back of strong fundamentals in its gaming and advertising businesses. We predict Tencent will grow each of its large business segments for years to come given its scale, history of execution, and unique online intellectual property. Alibaba Group Holding Ltd., the largest e-commerce company in China, owns and operates the country s two largest online shopping platforms and participates in the profits of Ant Financial, the owner of China s largest third party online payment provider. Shares were up in 2017, as both top and bottom line results exceeded Street expectations. Alibaba benefited from strong mobile and advertising growth, which drove upside beyond core e-commerce growth. We expect mobile monetization to continue while Alibaba invests in new growth areas such as groceries and cloud computing. Detractors Wix.com Ltd. is an Israeli internet company providing an operating system to help micro businesses build and maintain a website and operate their businesses more efficiently. With over 110 million registered users and 3 million premium users, Wix is the industry leader. Shares of Wix declined in Q4 after the company guided at the end of Q3 for increased R&D spend (leading to lower nearterm margins). We retain conviction in Wix due to the large market opportunity, strong cohort economics, its brand name, and its innovative culture. UniCredit S.P.A. is an Italian bank with operations throughout Europe. The stock declined after the company s investor day, as management gave conservative guidance for capital distribution targets. We believe this disappointment acted as a trigger for investors to take profits following previous strong performance and ahead of Italy s general election in March 2018, which could potentially add volatility to local equities. We have conviction in UniCredit given a strong balance sheet, a credible path to restoring profitability, and discounted valuation. Bitauto Holdings Limited is one of two dedicated online auto financing platforms in China. Shares declined in the quarter following significant gains earlier in 2017 due to profit-taking. We retain conviction in Bitauto because the company s core fundamentals remain intact. Online auto advertising and financing sectors remain poised for multiyear growth in China, and Bitauto remains a top player to benefit from that trend. Detractors Domino s Pizza Enterprises Ltd. is a master franchiser of the Domino s Pizza Brand in Australia and New Zealand, certain European countries, and Japan. Shares declined in 2017 as the stock was pressured by an increased market focus on wage inflation in Australia. Reports of abusive labor practices at franchises of other brands in the country also negatively impacted the company s shares. We retain conviction. With extraordinary innovation, a sophisticated CEO, and exceptional execution, we think Domino s Pizza Enterprises is poised for long-term growth. AO World Plc is the U.K. s leading online seller of major domestic appliances, with over 15% market share. AO sets itself apart from competition through the optimization of proprietary software and logistics and a focus on customer service. Shares were down in 2017 as the company continued to be impacted by the Pound s devaluation relative to the Euro. Current trends in the U.K. point to a continuation of weaker demand for longer than we had anticipated. However, we expect the German business to expand more rapidly, providing a broader avenue for growth. Haitong Securities Co., Ltd. is a leading securities firm in China that provides brokerage, investment banking, and asset management services. The stock fell during 2017 on declines in its A-share stock turnover and equity financing activity and a stricter regulatory environment that negatively impacted revenues across the industry. Lower commission rates and losses in the company s overseas banking unit also pressured earnings. We maintain conviction in Haitong. It is a high quality, well-diversified player and key beneficiary of China s shift to a more market-driven economy. Contribution to Return¹ By Holdings - Quarter End Top Contributors Average Weight(%) Contribution(%) RIB Software SE argenx SE Bolsas y Mercados Argentinos S.A Square Enix Holdings Co., Ltd KOSÉ Corporation Top Detractors Average Weight(%) Contribution(%) Wix.com Ltd UniCredit S.p.A Bitauto Holdings Limited BNP Paribas S.A Ctrip.com International, Ltd By Holdings - 12 Month Top Contributors Average Weight(%) Contribution(%) RIB Software SE Tencent Holdings, Ltd Alibaba Group Holding Limited JM Financial Limited TAL Education Group Top Detractors Average Weight(%) Contribution(%) Domino's Pizza Enterprises Ltd AO World plc Haitong Securities Co., Ltd PT Matahari Department Store Tbk Lekoil, Ltd Top 25 Countries 1 - Source: FactSet PA. % of Net Assets 70.6 Developed (Cont'd) % of Net Assets Developed Japan 19.7 Belgium 0.9 United Kingdom 8.5 Hong Kong 0.8 France 7.6 Developing 22.4 Germany 7.2 China 9.8 Netherlands 4.4 India 5.8 Canada 4.0 Russia 1.9 Israel 3.3 Brazil 1.7 Switzerland 2.9 Mexico 1.3 United States 2.6 Korea 1.2 Spain 2.4 Indonesia 0.7 Norway 2.2 Frontier 3.2 Italy 1.5 Argentina 2.5 Ireland 1.4 Panama 0.7 Australia 1.2 Total 96.2

6 Quarterly Performance Attribution¹ Sector Average Weights(%) Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Real Estate Telecom Services Utilities Total² Baron International Growth Fund MSCI All Country World Ex-United States Index Over/Underweight Total Return(%) Baron International Growth Fund MSCI All Country World Ex-United States Index Relative Return Quarterly Analysis Baron International Growth Fund rose 7.33% in the fourth quarter and outperformed the MSCI ACWI ex USA Index by 233 basis points, mainly due to stock selection. Stock selection in developed markets added the most value, driven by outperformance of investments in the Netherlands, Germany, Japan, Norway, and Canada, which was somewhat offset by negative stock selection in emerging markets, mainly in China. On a sector basis, stock selection in Information Technology (IT), Health Care, Industrials, Consumer Staples, and Energy contributed the most to relative results. Within IT, outperformance of application software holdings added the most value after they increased 27.3%, led by RIB Software SE of Germany and Kingdee International Software Group Co. Ltd. of China. RIB was the largest contributor on an absolute basis, while shares of IT solutions provider Kingdee rose on increased investor confidence in the company s ability to capture China s robust demand for cloud-computing services. Outperformance of Japanese video game content producer Square Enix Holdings Co., Ltd. and Israeli big-data connectivity company Mellanox Technologies Ltd. also lifted relative performance. Shares of Square Enix rose on strong Q3 earnings. Mellanox s stock price increased after activist investor Starboard Value LP announced it had acquired a ~10% stake in the company. Strength in Health Care came mainly from Argenx SE of the Netherlands and Divi s Laboratories Ltd. of India. Argenx, which was added in late November, was the second largest contributor to absolute results after shares more than doubled for the period held. Divi s share price was up following the successful resolution of an import alert. Lower exposure to lagging pharmaceutical stocks contributed an additional 20 basis points to relative performance. Within Industrials, several Japanese holdings performed well, led by FANUC Corp., TechnoPro Holdings, Inc., and Recruit Holdings Co., Ltd., which were each up double-digits in the quarter. FANUC, a manufacturer of factory automation equipment, was bolstered by a favorable outlook from management given solid robotics demand. TechnoPro and Recruit Holdings benefited from upward revisions to wage growth. Positive stock selection in Consumer Staples and Energy was attributable to the outperformance of KOSÉ Corporation of Japan and Golar LNG Ltd. of Norway, respectively. Stock selection in Consumer Discretionary detracted the most from relative performance, led by investments in Brazilian loyalty program operator Smiles Fidelidade S.A., Japanese e-commerce company Rakuten, Inc., and Chinese K-12 tutoring company TAL Education Group. Shares of Smiles fell after a weak earnings announcement, and Rakuten s stock price declined after negative investor reaction to the company s decision to invest in its own wireless network. Following outperformance in the first nine months of the year, TAL s share price fell due to slowing network expansion and lower margins. When reviewing performance attribution on our portfolio, please be aware that we construct the portfolio from the bottom up, one stock at a time. Each stock is included in the portfolio if it meets our rigorous investment criteria. To help manage risk, we are aware of our sector and security weights, but we do not include a holding to achieve a target sector allocation or to approximate an index. Our exposure to any given sector is purely a result of our stock selection process. Return calculations for the Portfolio are transaction based and are calculated from the underlying security-level data; they may not correspond with published performance information based on NAV per share. 1 - Attribution analysis for other periods or versus another index will be provided upon request. Source: FactSet PA. 2 - Fund total returns include cash, fees and unassigned securities.

7 One-Year Performance Attribution¹ Sector Average Weights(%) Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Real Estate Telecom Services Utilities Total² Baron International Growth Fund MSCI All Country World Ex-United States Index Over/Underweight Total Return(%) Baron International Growth Fund MSCI All Country World Ex-United States Index Relative Return Annual Analysis Baron International Growth Fund gained 37.33% for the year, significantly outperforming MSCI ACWI ex USA Index by more than 10%. Stock selection was the main driver of outperformance during the year, overshadowing the negative effect of cash exposure in a sharp up-market for equities globally. Stock selection in developed markets contributed the most to relative results, led by outperformance of investments in Japan, Israel, Germany, the Netherlands, and the U.K. Lower exposure to developed market equities also aided relative performance as these stocks trailed their counterparts in emerging markets by more than 13% in the index during the year. Investments in emerging and frontier markets also added value, driven by outperformance of those in China, Brazil, India, Russia, Argentina, and Chile. Additionally, higher exposure to China added value as equities in the country rose more than 54% on investor enthusiasm surrounding the ongoing shift from a state-sponsored to a consumer-driven market-based economy. On a sector basis, meaningfully greater exposure to the top-performing Information Technology (IT) sector, which was up more than 51% in the index, and positive stock selection in Health Care, IT, Industrials, and Financials lifted relative performance. Within IT, higher exposure to two of the best performing stocks in the index, Alibaba Group Holding Limited and Tencent Holdings, Ltd., added value. These stocks were up 96.4% and 112.9%, respectively, during the year. Stock selection was also positive in IT, largely from the outperformance of RIB Software SE of Germany, Momo Inc. of China, Square Enix Holdings Co., Ltd. of Japan, and Mobileye N.V. of Israel. We exited our positions in Momo and Mobileye during the year. Momo s shares nearly doubled before we sold our shares in early September based on the company s apparent inability to convert a steep ramp in marketing expense into new users. Mobileye s stock price rose sharply in early March following Intel s offer to buy the company, and we subsequently exited our position. Health Care investments outperformed after increasing 58.4% as a group, led by Argenx SE of the Netherlands, Abcam plc and Horizon Discovery Group plc of the U.K., and Eurofins Scientific of France. Strength in Industrials came mainly from the outperformance of Intertek Group plc of the U.K., Aena SME, S.A. of Spain, and TechnoPro Holdings, Inc., MonotaRO Co., Ltd., and Recruit Holdings Co., Ltd. of Japan, whose respective shares were all up significantly for the year. Within Financials, two new additions to the portfolio, JM Financial Limited of India and Bolsas y Mercados Argentinos S.A. of Argentina, added the most value after their respective stock prices rose more than 90% each. Apart from cash, no sectors materially detracted from relative performance during the year. When reviewing performance attribution on our portfolio, please be aware that we construct the portfolio from the bottom up, one stock at a time. Each stock is included in the portfolio if it meets our rigorous investment criteria. To help manage risk, we are aware of our sector and security weights, but we do not include a holding to achieve a target sector allocation or to approximate an index. Our exposure to any given sector is purely a result of our stock selection process. Return calculations for the Portfolio are transaction based and are calculated from the underlying security-level data; they may not correspond with published performance information based on NAV per share. 1 - Attribution analysis for other periods or versus another index will be provided upon request. Source: FactSet PA. 2 - Fund total returns include cash, fees and unassigned securities.

8 Top 10 Holdings as of Company Investment Premise Company Investment Premise RIB Software SE (RIB.GR) is a software company with a flagship application called itwo. The application has 5D modeling capability (3D modeling with cost and time management), which allows construction clients to manage a project from start to finish using one software platform. RIB s itwo brings technology to the construction industry, which has underutilized technology to date. Whereas 13.4% of GDP is in global software, only 1% of construction spending is in software. itwo uniquely combines 3D modeling with time and cost management, something that competitors do not provide end-to-end. Historically a German company, RIB now is reaching clients globally. Likewise, its recent joint venture with a contract manufacturer allows RIB to bring in new clientele. Constellation Software, Inc. (CSU. CN) is a holding company that owns and operates approximately 200 small- and medium-sized software businesses. These businesses allow customers across a wide range of verticals to automate key activities, with the goal of saving on labor costs. Constellation has valuable experience to offer its acquisition targets, largely around building high-touch, low-cost modules and contract pricing. We see this experience as a competitive advantage, and we think it remains sustainable as long as the company continues to acquire targets. Since we believe there are over 20,000 small owner-operated vertical market software businesses in the U.S. and Europe, we think Constellation s successful acquisition program will continue, and its moat will remain intact for years to come. Square Enix Holdings Co., Ltd. (9684.JP) is a leading video game content producer based in Japan. Its core IP portfolio consists of well known titles such as Final Fantasy Dragon Quest. We think Square Enix will continue to benefit from strong monetization potentials in its core IP portfolios, increasing digital penetration, and rising mobile adoption in the overseas market. Its Final Fantasy franchise continues to have a strong fan base, and there are a number of highly anticipated titles such as the FFVII remake that have the potential to meaningfully boost earnings, in our view. Vivendi SA (VIV.FP) is a holding company whose major holdings include Canal+ Group, Universal Music Group, and Havas. Our investment in Vivendi is premised on our outlook for Universal Music Group (UMG), the largest music label in the world. We estimate that streaming is growing at a 40% CAGR globally and that UMG is well positioned to benefit from this growth as the largest licensor of global music. We believe that UMG is undervalued inside of Vivendi, and that UMG alone is worth more than the entire market cap of the company. Eurofins Scientific SE (erf. fp) provides analytical testing services to clients in the food, pharmaceutical, and environmental sectors. Luxembourg-based Eurofins benefits from favorable secular trends, including strong demand for safe, high-quality food, increasing regulation, outsourcing of testing by pharmaceutical companies, and heightened environmental concerns. We think the company is well-positioned to grow its revenue while improving its profitability. Management aspires to double the size of the business from 2015 to 2020 through organic growth and acquisitions. BNP Paribas S.A. (BNP.FP) is a French bank with leading positions in France, Belgium, and Italy. It offers retail banking, corporate investment banking, and asset management, among other financial services. BNP has smaller operations throughout Europe, as well as in the U.S., through its subsidiary Bancwest. BNP offers a diversified earning mix, above average execution track record, and high quality management, in our view. The company holds strong franchises in its three main activities: retail banking, corporate and institutional banking, and investment solutions, positioning it to benefit from an expected recovery in the Eurozone. We think BNP will experience ROE improvement through increasing efficiencies. We also think there is upside to management s strategic plan for achieving 10% ROE by 2020, as it is based on conservative assumptions on growth and interest rates. Tencent Holdings Ltd. (700.HK) is a leading internet service company and the top game developer in China. Its primary platforms include QQ for instant messaging (815 million media access units (MAUs)), WeChat for mobile messaging (500 million MAUs), and Qzone for social networking (654 million MAUs). We are bullish on Tencent s ability to grow EPS at over 25%+ in the long term. Tencent benefits from virtuous network effects, and we think it has a long runway to monetize its large user base by pushing valueadded services and advertising through its platforms. Gaming comprises over 50% of Tencent s revenue, but we think advertising is its next major growth driver, through in-feed ads on WeChat. Tencent also invests in online-to-offline services by leveraging its payment solutions across a number of industries including restaurants, ticketing, and travel. JM Financial Ltd. (JM.IN) is a diversified non-banking financial company in India. The company offers trading/brokerage services, real estate financing, corporate lending, asset reconstruction, and wealth management products. The company is headquartered in Mumbai, India. We think JM is well positioned to benefit from growing corporate/retail credit demand in India, especially as large public sector banks, struggling with bad loans, are unable to service their customer base. As India s second largest asset reconstruction company, JM will also benefit from accelerated resolution of non-performing loans in the banking industry, in our view. We remain confident that book value can grow 18-20% for the next three to five years. Mitsubishi UFJ Financial Group, Inc. (MTU) is Japan s largest private financial group, providing commercial banking and asset management services, credit cards, and consumer finance solutions. The company has U.S. exposure through a 23.5% stake in Morgan Stanley and operations in Union Bank of California. We view the company as an undervalued player in Japan with depressed earnings due to the Bank of Japan s current monetary policy. The company stands out from other Japanese megabanks due to high shareholder returns, stable foreign currency procurement structure, and high unrealized securities gains. It also has significant exposure to the U.S. banking industry due to ownership stakes in Morgan Stanley and Union Bank, which allow it to benefit from the positive tailwind drivers (interest rates, regulation) impacting U.S. banks. Alibaba Group Holding Limited (BABA) is the largest e-commerce company in the world. Alibaba owns and operates the two largest online shopping platforms in China, Taobao and Tmall. It also participates in the profits of Ant Financial, which owns China s largest thirdparty online payment vendor Alipay. With over 500 million active buyers and over 10 million merchants, we believe Alibaba is poised to benefit disproportionately from the increased penetration of internet, mobile, and e- commerce in China. It enjoys more than 50% market share of all e-commerce transactions in China, and we expect it to continue growing at a rate of more than 20% for years to come. We also see significant positive optionality in Alibaba s cloud computing, data management, and electronic payments platforms.