baron international growth fund baron emerging markets ... · billy joel. “allentown.” 1982....

Baron Asset FundBaron Growth FundBaron Small Cap FundBaron Opportunity FundBaron Partners FundBaron Fifth Avenue Growth FundBaron Focused Growth FundBaron International Growth FundBaron Real Estate FundBaron Emerging Markets FundBaron Energy and Resources FundBaron Global Advantage FundBaron Discovery Fund

September 30, 2016

Baron Funds®

Quarterly Report

RONALD BARON

CEO AND CHIEF INVESTMENT OFFICER

“We’re living here in Allentown and they’reclosing all the factories down…and it’sgetting very hard to stay.” Billy Joel.“Allentown.” 1982.

Soon after the 1980-82 recession, Billy Joel andanother legendary, working class hero, BruceSpringsteen, sang about the plight of factoryworkers who were losing their jobs. “They’reclosing down the textile mill across the railroadtracks, foreman says these jobs are going, boys,and they ain’t coming back,” was Bruce’sgravelly voiced refrain in “My Hometown.” Thatwas a decade before third-party Presidentialcandidate Ross Perot predicted a “giant suckingsound” caused by factory jobs lost to Mexicowhen the North American Free Trade Agreementwas implemented in 1994. Perot’s warning wasmore than two decades before Donald Trump’splaint that, “We’re losing jobs to Mexico, Chinaand other places at a higher rate than ever.”

In 1970, at the start of my career, investors wereconcerned that America’s trade deficit wouldcause an imminent decline in factory jobs. Ithought those anxieties were overstated sinceour economy had become less dependent uponmanufacturing, more diversified and services,knowledge and technology oriented. Contrary toexpectations, for the next 30 years, most of thetime, America’s factory jobs remained between17 and 18 million. Further, from 1989-2000,technology and innovation increased workerproductivity 4.1% per year while factory outputgained 3.7% per year; increasing almost 50%during this period. However, in the wake of the2008-09 recession and resultant cyclical declinein output, only 12.3 million American factoryjobs remain. In 1989, factory jobs represented17% of our workers. Those jobs are now just 9%of our workforce. Many attribute lost factoryjobs to uncompetitive wages in America,stringent environmental and worker safetyregulations, currency manipulation by tradingpartners, and higher income taxes thancompetitor nations. However, since Americanfactory workers are competitively disadvantaged

because they earn $79,000 per year includingbenefits, compared to $8,000-$9,000 or less inmany countries, we think the “Boss” had it rightwhen he sang, “those jobs are going, boys, andthey ain’t coming back”…unless, of course, wewant to pay $60,000 for Toyota Corollas and alot more for steel and other manufacturedproducts than we do now!

We believe a Technology Revolution comprisingplant automation, artificial intelligence, androbotics is the most significant reason factoryjobs did not increase from 1970 through 2000while output more than doubled. We also believeadditional plant automation investments coupledwith the 2008-09 recession are principallyresponsible for the recent meaningful decline inAmerican factory jobs, even though factoryoutput is only 4% less than its pre-recession peak.

Were it not for productivity gains and factoryoutput increases since 1970, there would beperhaps three-to-four times as many factory jobsin America as today! However, prices for goodsand services in America would likely be much,much higher than they are today…and ourstandard of living much, much lower.

The Technology Revolution now impacting ourfactories is akin to the Industrial Revolution twohundred years ago. At the dawn of the IndustrialRevolution, Luddite workers in London riotedand destroyed textile machinery they believedthreatened their jobs. Today’s TechnologyRevolution, met with protests and anger inAmerica’s Rust Belt factories, is in its earlyinnings and, we think, is irreversible. When ouranalysts and I travel America visiting companiesand factories as we research businesses, onething is apparent: robots have taken the jobs ofmany workers…and bigger, smarter, faster, morespecialized robots are taking the jobs of generalpurpose robots! The societal benefit is better,

TABLE OF CONTENTSLetter from Ron 1Letter from Linda 7Baron Funds Performance 13Baron Asset Fund 18Baron Growth Fund 22Baron Small Cap Fund 27Baron Opportunity Fund 31Baron Partners Fund 35Baron Fifth Avenue Growth Fund 40Baron Focused Growth Fund 44Baron International Growth Fund 49Baron Real Estate Fund 53Baron Emerging Markets Fund 59Baron Energy and Resources Fund 63Baron Global Advantage Fund 69Baron Discovery Fund 73Portfolio Holdings 77

Letter from Ron

cheaper products and an improved standard ofliving for all of us…including displaced workers.We just need a stronger safety net for thosedisplaced. Blue collar workers also need theability to educate their children with nextgeneration skills without incurringunmanageable debt. This to make certain they,too, can benefit from the growth of oureconomy in the midst of our TechnologyRevolution.

Do not lose hope. Whoever becomes our nextPresident is likely to significantly increaseinfrastructure investments, which will createjobs and strengthen our nation. The vibrancy ofour nation and its economy is becomingincreasingly visible in what we used to callAmerica’s Rust Belt. Our nation’s Midwesterncities may instead already deserve the name,“startup cities.” Millennials, whom we regard asthe 21st century’s “immigrants,” and whom wethink will boost America’s growth, are resettlingin those post-industrial cities. Generousincentives from those cities that are leveragingtheir universities are causing redevelopment oftheir downtown urban centers. Pittsburgh hasattracted Uber in part because its CarnegieMellon Technology Center is undergoingmeaningful expansion. Pittsburgh’s downtownpopulation increased 20% during the past 10years, Cincinnati’s downtown populationdoubled over the same period, St Louis’population also doubled, Kansas City’sdowntown nearly quadrupled, and Cleveland’sincreased 50%. Detroit, alone among the top 10Midwestern cities, has not increased itsdowntown urban population, but things are nowlooking better there too. Just as they are inTribeca, Hudson Yards, Silicon Alley in theFlatiron District in New York City; The BrooklynNavy Yard, New York; South Beach in Miami andtoo many other places to list.

Where are the jobs in those urban centers? Theyare in services and technology. Not so much inblue collar manufacturing. Analytics, coding,software engineering, marketing, alternativeenergy, logistics in the new technology corridors,cyber defense, entertainment, leisure, media,health care and traditional defense. Israel has an“Iron Dome” to protect against missile attacksfrom its enemies. Of course, America will alsosoon develop a shield, whether from space withlasers or terrestrial, to protect our nation thesame way. Some of this work will be done inAmerica’s post-industrial cities. We think thedark cloud of the 2008-09 recession and the lossof blue collar manufacturing jobs is theproximate cause of this development.

Warren Buffett recently remarked that, “Theluckiest person born in history is the baby beingborn in the United States today.” He continuedthat although a compound rate of 2% may notsound like a lot, over his 86 year lifespan, thatmeans real wage growth per capita (inflationadjusted) has increased nearly sixfold since1930. He believes the lifestyle of our citizens willcontinue to improve at least as rapidly as it hasduring his lifetime. For example, life expectancyfor Americans in 1900 was 45 years. It is now 80and increasing by three months every year!

One more thing. According to Richard W. Rahn,a senior fellow at the Cato Institute andChairman of the Institute for Global EconomicGrowth, the average low income Americantoday lives better than the French King LouisXIV, the Sun King, more than 300 years ago.“The average low-income American lives in ahome with air conditioning, a flat screen TV anda dishwasher; and owns an automobile. LouisXIV lived in constant fear of dying from smallpox and many other diseases that are now curedquickly by antibiotics. His palace at Versailleshad 700 rooms but no bathrooms and no centralheating or air conditioning. One hundred yearsago, John D. Rockefeller was the richest man inthe world. He had bathrooms but no airconditioning and was in constant danger ofdying from ailments that are now quicklytreatable.” We are convinced that ourgrandchildren’s grandchildren will think aboutour lives the way we think about the lives ofLouis XIV and John D. Rockefeller.

One of the lessons I learned in law school wasthe phrase, “Res ipsa loquitur.” It means “thething speaks for itself.” That is how I think aboutthe greatness of our country and its economy. Itof course can improve…which I am certain itwill. As an architect might say, the “bones” arethere.

“No matter how great the talent or efforts,some things just take time. You can’t producea baby in one month by getting nine womenpregnant.” Warren Buffett. 2013.

Baron Funds invest in growth businesses forconsiderably longer time periods than mostmutual funds. This is because we attempt tomaterially outperform benchmark indexes overthe long term by investing in companies thatcould grow much faster than passive indexesover the long term. For example, Baron GrowthFund’s holding period for its investments is over12 years! Most actively managed mutual fundsattempt to compete against their benchmarkindexes over the short term and turn over their

entire portfolios every 1.3 years. This meansthey purchase and hold stocks on average for 16months before selling them.

Baron Growth Fund has outperformed itsbenchmark over nearly 22 years by on averagemore than 526 basis points per year. This isdespite several periods when this and theperformance of other Baron Funds has been onlyaverage. A significant portion of Baron Funds’assets under management have investmentholding periods that average in excess of sixyears and have also outperformed their indexesover the long term. See Table 1. We believe fewactive managers employing short-term tradingstrategies have outperformed over the longterm. This is since the research such investorsperform is focused on news not fundamentals.

In order to significantly outperform passiveindexes and other active managers, our Firm’s 36investment professionals research businesseswith compelling growth opportunities that “justtake time” to realize. To provide us withconfidence to hold such investments when thosecompanies’ share prices do not outperform inthe short term, we try to imagine and score thelikelihood of many favorable and unfavorablescenarios. We especially focus on whethercompetitive advantages of businesses in whichwe invest are durable. We also carefully studyevents that can create or forestall businessgrowth. To invest with conviction for years inbusinesses with compelling growthopportunities, we also need to carefully assessmanagement and its vision.

We began to purchase Vail Resorts in 1997. Wemade significant investments in Vail through2006. Our returns on that investment through2006 were modest. However, from 2006through 2016, Vail’s share price increased nearlysixfold. Based on our estimates for cash flowgrowth and a modest increase in multiple, Vailshares could double again in five or six years. Weinvested in Vail since we believed the physicalattributes of its ski mountains, what weconsidered to be Vail’s competitive advantage,were better than any other and its growthopportunity was strong. Vail’s management thenthought the idea of investing mountain cashflow to regentrify Vail Village where there hadbeen virtually no construction since 1970 wasnot a good one. Management also consideredadditional investments in $15 million high speedski lifts, $15 million restaurants, moresnowmaking and more grooming withquestionable returns to be “doubling down” and“too risky.” We thought those ideas offeredpotential to enable Vail to increase daily ski pass

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September 30, 2016 Letter from Ron

prices from $44 to $100 and significantly boostcash flow. Baron became Vail’s largestshareholder in 2006; and, Rob Katz, a Boardmember and we think a spectacular executivethen became its CEO. A building boom in Vailensued; Vail made significant investments in Vailmountain; Vail’s annual season pass salesmushroomed; it received the National ParkService’s approval to add summer mountainrides that we expect to be an appealingattraction; and Vail acquired other skimountains, including Park City/Canyons,Whistler, and Perisher. Vail’s daily ski ticket cost$178 last year! Vail’s share price was $27 in2006. It is now $156. We think Vail’s growthopportunities remain favorable, its competitiveadvantages are stronger than ever, and itsmanagement exceptional.

From 1966 to 1969, I attended GeorgeWashington University Law School in the eveningsand was a Patent Examiner in the United StatesPatent Office by day. In the summer of 1969, Iread that Manor Care, a nursing home business,planned an initial public offering. I was interestedbecause President Lyndon Johnson four yearsbefore persuaded Congress to create Medicare. Ithought Medicare legislation would increasedemand for Manor Care’s services. Medicareprovided health insurance to individuals over 65,half of whom had previously been unable to affordmedical care.

After studying Manor Care’s prospectus, Iborrowed $2,000 from Household Finance,Beneficial Finance, and The United States PatentOffice Credit Union enabling me to invest inManor Care stock. After Manor Care sold360,000 of its 1.4 million outstanding shares at

$12 per share, Manor Care’s book value was just$5 million. In the 1970’s, I became aninstitutional securities analyst and recommendedour clients purchase Manor Care. Thoseinvestments were successful. When we startedBaron Capital in 1982, we invested a significantpercentage of our initially modest assets undermanagement in Manor Care’s stock. By 1998,Baron mutual funds and clients had become oneof Manor Care’s largest shareholders andremained so until its acquisition by The CarlyleGroup in 2007. We invested for all those yearsbecause we believed Manor Care’s growthprospects were bright, we thought the real estateit owned was undervalued, and we believed itsproperties were more attractive than others. Atleast as importantly, we invested because, afterspending a lot of time with Stewart Bainum, thecompany’s CEO whose family was Manor Care’slargest shareholder, we believed he was unusuallytalented and would treat shareholders fairly.When the company merged with HCR,fortunately for us, we found its CEO, PaulOrmond, a terrific executive and wonderfulperson. We were right. HCR ManorCare was soldto Carlyle for $4.9 billion in 2007! That was1,000 times its value in 1969! We also receiveddividends of hotel franchisor Choice Hotels,nursing home pharmacy Vitalink, and hotelowner Sunburst along the way.

Following the 2008-09 worldwide financialpanic, Stewart invested for his family to helprecapitalize 50 of the 16,000 community banksin small town USA that then existed. Only 6,000such banks remain. Stewart, not surprisingly tothose who know him, earned very strong returnson his family’s community bank investmentsover the past 10 years.

Stewart called recently and asked me if I wouldmeet with Joe Squeri and Tim Peterson, whomanaged those investments for the Bainums. Ihave known Joe for a long time. He is the formerCFO of Choice Hotels, which Stewart also controlsand in which Baron has been a shareholderfollowing the Choice spinout from Manor Care in1996. Baron Funds has also earned attractivereturns and received large special dividends fromour Choice Hotels’ investment…with still moreappreciation to come, we think.

At the end of my two hour, incredibly interestingmeeting with Joe and Tim, I asked them whatelse they were doing that might be of interestfor Baron Funds. Joe replied that Stewart hadrecently asked him the same thing and wantedthe two men to find an interesting investmentfor Stewart’s mother. Joe then asked Stewart hismom’s age? When Stewart replied, “96,” Joeasked what time horizon Stewart had in mind?“Fifteen years,” was the reply! I love Stewart.Although my investment horizon is long, I nowthink Stewart’s may be longer.

I could write about Hyatt, Under Armour, Tesla,Arch Capital, Edwards Lifesciences, Schwab,Wynn Resorts and dozens and dozens of ourother, successful long-term investments but Iwon’t. One of my friends, who reviews myconference speeches every year and suggestsedits, a year or two ago argued to eliminateparagraphs that I thought were required to fullyexplain a concept. “Ron,” he told me. “I havenever heard anyone leave a speech regardless ofhow brilliantly delivered and remark, ‘Wow! Thatwas great. I just wish it was five minuteslonger.’”

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Letter from Ron

Table I. Performance of Certain Baron Funds Since Inception (Institutional Shares) Through September 30, 2016. We strive to beat the passive benchmarks.

Fund Morningstar Category Primary BenchmarkSince Inception

Morningstar Ranking

AnnualizedReturn

Since FundInception

AnnualizedBenchmark

ReturnSince FundInception

InceptionDate Net Assets

3-YearAveragePortfolioTurnover

Baron Growth Fund

Baron-AdjustedMorningstar Small Growth

Russell 2000 Growth IndexTop 2%

12.72% 7.46% 12/31/1994 $5.96 billion 8.26%Morningstar US OEMid-Cap Growth Top 5%

Baron Partners FundMorningstar US OEMid-Cap Growth Russell Midcap Growth Index Top 1% (the #1 fund) 12.36% 9.28% 1/31/1992 $1.64 billion 24.24%

Baron Asset FundMorningstar US OEMid-Cap Growth Russell Midcap Growth Index Top 8% 11.15% 9.73% 6/12/1987 $2.53 billion 12.44%

Baron FocusedGrowth Fund

Morningstar US OEMid-Cap Growth Russell 2500 Growth Index Top 10% 10.50% 7.26% 5/31/1996 $177.91 million 22.52%

Baron Small Cap FundMorningstar US OESmall Growth Russell 2000 Growth Index Top 12% 9.39% 5.30% 9/30/1997 $3.51 billion 13.77%

Baron EmergingMarkets Fund

Morningstar US OEDiversified Emerging Mkts MSCI EM IMI Growth Index Top 1% 3.70% -0.25% 12/31/2010 $2.62 billion 25.03%

Baron Real Estate FundMorningstar US OEReal Estate

MSCI USA IMI ExtendedReal Estate Index Top 7% 14.93% 13.64% 12/31/2009 $1.10 billion 39.53%

Baron InternationalGrowth Fund

Morningstar US OEForeign Large Growth

MSCI ACWI ex USAIMI Growth Index Top 5% 11.60% 8.93% 12/31/2008 $86.62 million 40.58%

Source : Morningstar Direct-Performance Reporting, Baron Capital.

Fund 1-year returns 5-years returns 10-years returns Annual expense ratio

Baron Growth Fund 7.88% 14.21% 7.76% 1.04%(1)

Baron Partners Fund 7.23% 17.26% 7.28% 1.26%(2)(3)

Baron Asset Fund 11.44% 15.61% 7.51% 1.04%(1)

Baron Focused Growth Fund 8.02% 11.21% 7.10%(5) 1.09%(2)

Baron Small Cap Fund 13.21% 14.10% 7.63% 1.04%(1)

Baron Emerging Markets Fund 17.28% 8.20% N/A 1.20%(2)

Baron Real Estate Fund 3.39% 18.55% N/A 1.06%(2)

Baron International Growth Fund 13.13% 9.76% N/A 1.31%/1.25%(2)(4)

(1) As of 9/30/2015.(2) As of 12/31/2015.(3) Comprised of operating expenses of 1.06% and interest expenses of 0.20%.(4) Annual expense ratio was 1.31%, but the net annual expense ratio was 1.25% (net of the Adviser's fee waivers which the Adviser has contractually agreed to for so long as it

serves as the Adviser to the Fund).(5) Reflects the actual fees and expenses that were charged when the Fund was a partnership. The predecessor partnership charged a 15% performance fee after reaching a certain

performance benchmark. If the annual returns for the Fund did not reflect the performance fee for the years the predecessor partnership charged a performance fee, returns wouldbe higher. The Fund’s shareholders are not charged a performance fee. The predecessor partnership’s performance is only for periods before the Fund’s registration statement waseffective (6/30/08). During those periods, the predecessor partnership was not registered under the Investment Company Act of 1940 and was not subject to its requirements orthe requirements of the Internal Revenue Code relating to registered investment companies, which, if they were, might have adversely affected its performance.

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 transferagency 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 theperformance data quoted. For performance information current to the most recent month end, visit www.BaronFunds.com or call 1-800-99BARON.

Baron Investment Conference 2016.November 4, 2016. Metropolitan OperaHouse. New York City.

We hope you will be able to attend our 25thannual investment conference on November 4th.For those of you who can’t attend, you will beable to watch the live webcast on the BaronFunds website (except for the entertainment,which we are contractually prevented fromstreaming). You can get a sense of our meetingby watching CNBC’s Squawk Box that morningfrom 6 a.m. to 8:30 a.m. EST. CNBC’s AndrewRoss Sorkin and I will be interviewing severalexecutives with whom Baron Funds has invested

and with whom we expect to make a lot moremoney…although, we obviously can’t promisethat. Andrew will also interview me on SquawkBox live from the conference that morning. Welike to say, “We invest in people.” We hope whenyou attend our annual conferences or watch uson CNBC or visit our website, you will gain abetter understanding of the businesses in whichwe invest, and the character and talent of theexecutives who run them, as well as of thepeople who work at our Firm. Thank you forjoining us as fellow shareholders in Baron Funds.We will continue to work hard to justify yourconfidence in us. See you in November.

Respectfully,

Ronald BaronCEO and Chief Investment OfficerOctober 17, 2016

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September 30, 2016 Letter from Ron

The discussion of market trends and companies are not intended as advice to any person regarding the advisability of investing in any particular security. Some ofour comments are based on current management expectations and are considered “forward-looking statements.” Actual future results, however, may prove to bedifferent from our expectations. Our views are a reflection of our best judgment at the time and are subject to change any time based on market and otherconditions, and we have no obligation to update them.

Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summaryprospectuses contain this and other information about the Funds. You may obtain them from the Funds’ distributor, Baron Capital, Inc., by calling1-800-99BARON or visiting www.BaronFunds.com. Please read them carefully before investing.

If a Fund’s historical performance was impacted by gains from IPOs and/or secondary offerings, there is no guarantee that these results can be repeated or that a Fund’s levelof participation in IPOs and secondary offerings will be the same in the future.

The Morningstar US OE Mid-Cap Growth Average is not weighted and represents the straight average of annualized returns of each of the funds in the Mid-Cap Growthcategory. Morningstar rankings are based on total returns and do not include sales charges. Total returns do account for management, administrative, and 12b-1 fees andother costs automatically deducted from fund assets. As of September 30, 2016, the category consisted of 721, 574 and 425 funds for the 1-, 5-, and 10-year periods.Morningstar ranked Baron Asset Fund Institutional Share Class in the 22nd, 23rd, 49th and 8th percentiles, respectively, in the category for the 1-, 5-, 10-year and sinceinception (6/12/1987) periods (consisted of 29 funds). Morningstar ranked Baron Growth Fund Institutional Share Class in the 57th, 45th, 43rd and 5th percentiles, respectively,in the category for the 1-, 5-, 10-year and since inception (12/31/1994) periods (consisted of 84 funds). Morningstar ranked Baron Partners Fund Institutional Share Class inthe 62nd, 7th, 56th and 1st percentiles, respectively, in the category for the 1-, 5-, 10-year and since inception (1/31/1992) periods (consisted of 38 funds (share classes)).Morningstar ranked Baron Focused Growth Fund Institutional Share Class in the 55th, 89th, 60th and 10th percentiles, respectively, in the category for the 1-, 5-, 10-year andsince inception (5/31/1996) periods (consisted of 110 funds).

The Morningstar US OE Small Growth Category Average is not weighted and represents the straight average of annualized returns of each of the funds in the Small Growthcategory. Morningstar rankings are based on total returns and do not include sales charges. Total returns do account for management, administrative, and 12b-1 fees andother costs automatically deducted from fund assets. As of September 30, 2016, the category consisted of 736, 596 and 433 funds for the 1-, 5- and 10-year time periods.Morningstar ranked Baron Small Cap Fund Institutional Share Class in the 32nd, 57th, 51st and 12th percentiles, respectively, in the category for the 1-, 5-, 10-year and sinceinception (9/30/1997) periods (consisted of 150 funds).

Morningstar moved Baron Growth Fund from the Small Growth Category effective May 31, 2011 to the Mid-Cap Growth Category. The Fund’s investment mandate has been andcontinues to be investing in small cap growth stocks for the long run. While the ranking information contained herein may be based on performance measurements from Morningstar,Baron created a new Baron-Adjusted Morningstar Small Growth Category to include Baron Growth Fund Retail and Institutional shares. We intend to continue to provide comparativeperformance data for the Small Growth Category because we strongly disagree with Morningstar’s reclassification of the Fund. Because of its long-term approach, the Fund could havea significant percentage of its assets invested in securities that have appreciated beyond their market capitalization at the time of the Fund’s initial investment.

As of September 30, 2016, the Baron-Adjusted Morningstar Small Growth Category consisted of 738, 601, 437 and 73 funds for the 1-, 5-, 10-year and Since Inceptionperiods. The number of funds in the Category may vary depending on the date that Baron made the calculation. The Baron-Adjusted Morningstar Small Growth CategoryAverage is not weighted and represents the straight average of annualized returns of each of the funds in the Category. Baron Growth Fund Institutional Share Class rankedin the 68th, 55th, 46th and 2nd percentiles, respectively.

The Morningstar US OE Foreign Large Growth Average is not weighted and represents the straight average of annualized returns of each of the funds in the Foreign LargeGrowth category. Morningstar rankings are based on total returns and do not include sales charges. Total returns do account for management, administrative, and 12b-1 feesand other costs automatically deducted from fund assets. As of September 30, 2016, the category consisted of 355, 275 and 243 funds for the 1- and 5-year periods and sinceinception. Morningstar ranked Baron International Growth Fund Institutional Share Class in the 11th, 19th and 5th percentiles, respectively, in the category.

The Morningstar US OE Real Estate Category Average is not weighted and represents the straight average of annualized returns of each of the funds in the Real Estatecategory. Morningstar rankings are based on total returns and do not include sales charges. Total returns do account for management, administrative, and 12b-1 fees andother costs automatically deducted from fund assets. As of September 30, 2016, the category consisted of 284, 219, and 182 funds for the 1- and 5- year periods and sinceinception. Morningstar ranked Baron Real Estate Fund Institutional Share Class in the 99th, 1st, and 7th percentiles, respectively, in the category.

The Morningstar US OE Diversified Emerging Mkts Average is not weighted and represents the straight average of annualized returns of each of the funds in the DiversifiedEmerging Mkts category. Morningstar rankings are based on total returns and do not include sales charges. Total returns do account for management, administrative, and12b-1 fees and other costs automatically deducted from fund assets. As of September 30, 2016, the category consisted of 867, 435 and 369 funds for the 1- and 5-yearperiods and since inception. Morningstar ranked Baron Emerging Markets Fund Institutional Share Class in the 35th, 2nd and 1st percentiles, respectively, in the category.

© 2016 Morningstar, Inc. All Rights Reserved. The Morningstar information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not becopied 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 lossesarising from any use of this information.

Index performance is not fund performance; one cannot invest directly into an index.

Definitions (provided by BAMCO, Inc.): The Russell 2000® Growth Index is an unmanaged index that measures the performance of small-sized U.S. companies that areclassified as growth. The Russell 2500™ Growth Index measures the performance of small to medium-sized companies that are classified as growth. The Russell Midcap®

Growth Index is an unmanaged index of those Russell Midcap medium-sized companies that are classified as growth companies. The MSCI ACWI ex USA IMI Growth IndexNet USD is an unmanaged, free float-adjusted market capitalization weighted index. It measures the performance of large, mid, and small-cap growth securities acrossdeveloped and developing markets, excluding the U.S. The index returns reflect the reinvestment of dividends, net of foreign withholding taxes, which positively impact theperformance results. The MSCI USA IMI Extended Real Estate Index is a custom index calculated by MSCI for, and as requested by, BAMCO, Inc. The index includes realestate and real estate-related GICS classification securities. The MSCI EM (Emerging Markets) IMI Growth Index Net USD is a free float-adjusted market capitalization indexdesigned to measure equity market performance of large, mid and small-cap securities in the emerging markets. The MSCI EM IMI Growth Index Net screens for growth-stylesecurities. The index returns reflect the reinvestment of dividends and other earnings, which positively impact performance results.

About Risk: The value of investments in equity securities is subject to unpredictable declines in the value of individual securities and periods of below average performance inindividual securities and the equity market as a whole. Growth stocks are generally more sensitive to market movements than other types of stocks primarily because theirstock prices are based heavily on future expectations. If our assessment of the prospects for a company’s growth is wrong, or if our judgment of how other investors will valuethe company’s growth is wrong, then the price of the company’s stock may fall or not appreciate as we expect.

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Letter from Ron

Portfolio HoldingsAs a Percentage of Net Assets

As of September 30, 2016

BaronAssetFund

BaronGrowth

Fund

BaronOpportunity

Fund

BaronPartners

Fund

BaronFifth

AvenueGrowth

Fund

BaronFocusedGrowth

Fund

BaronInternational

GrowthFund

BaronEnergy

andResources

Fund

Arch Capital Group Ltd. 4.0 5.2 8.5* 4.5 2.5

The Carlyle Group 0.4 2.0* 3.8

The Charles Schwab Corp. 3.2 2.0 3.9* 1.7

Choice Hotels International, Inc. 0.9 2.3 3.8

Edwards Lifesciences Corp.

Hyatt Hotels Corp. 1.0 5.7* 9.4

Tesla Motors, Inc. 3.3 10.1* 10.3 2.6

Under Armour, Inc. 4.3 1.0 4.1* 1.3

Vail Resorts, Inc. 4.9 5.4 6.5* 12.0

Wynn Resorts Ltd.

* % of Long Positions.

At September 30, 2016, Baron Small Cap Fund, Baron Real Estate Fund, Baron Emerging Markets Fund, Baron Global Advantage Fund, and Baron Discovery Fund did not own any ofthe securities listed above.

Portfolio holdings are subject to change. Current and future portfolio holdings are subject to risk.

Baron FundsNet Realized and Unrealized Gain ($ in millions)

As of September 30, 2016

BaronAssetFund

BaronGrowth

Fund

BaronPartners

Fund

BaronFocusedGrowth

Fund

The Carlyle Group $ (15.3) $ (39.0) $ (2.7)

Choice Hotels International, Inc. $133.7 $ 85.0 $ 12.3 $ 3.6

Vail Resorts, Inc. $ 84.0 $264.1 $119.4 $12.9

At September 30, 2016, Baron Small Cap Fund, Baron Opportunity Fund, Baron Fifth Avenue Growth Fund, Baron International Growth Fund, Baron Real Estate Fund, BaronEmerging Markets Fund, Baron Energy and Resources Fund, Baron Global Advantage Fund, and Baron Discovery Fund did not own any of the securities listed above.

Portfolio holdings are subject to change. Current and future portfolio holdings are subject to risk.

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September 30, 2016 Letter from Linda

LINDA MARTINSON

CHAIRMAN, PRESIDENT AND COO

Imagine you are an NFL head coach at the end of a season preparing for thedraft. You, your assistant coaches, and your analyst staff watch hundreds ofhours of film of college players, attend college games all over the country,and spend days at the Combine. You might even look at high school players.You analyze numbers, analyze players, and analyze how players would fitwith your team. Your team typically gets seven draft picks, and it’s your jobto pick the best ones from the hundreds of eager candidates.

This daunting challenge is similar to trying to select from among the 6,000publicly traded U.S. small cap companies.

The Small Cap Space is Broader than the Mid and Large Cap SpacesTotal Number of Stocks Across Market Capitalizations in the U.S.

as of 9/30/2016

Small Cap Mid Cap Large Cap

5,822

858206

Source: FactSet.

Some of these small cap companies will grow to become the new leaders intheir industries, earning stellar returns for investors. A good portion will notbe successful and some will just fade away or go bankrupt. So how do wesift through a massive haystack and find the great opportunities? Certainlynot by applying the investing methods used by ETFs or index funds. Suchpassive products use backward-looking criteria that bundle great and poorstocks together. They do not differentiate between high and low qualitycompanies, and cannot evaluate future potential or assess management skill.Yet, it is critically important to have the ability to do all of these, especiallywhen investing in the small cap space. If it were that simple, perhaps NFLcoaches should also use a formula in their search for talent.

Great Small Cap Opportunities Exist but Require Hard Work

In our opinion, small cap is an unusual area for investing, as it requiressignificantly more resources, expertise, and commitment than investing inlarger cap stocks. Due to the sheer number of companies, the analystcoverage is scant and there is not a lot of publicly available information ofhigh quality.

Analyst Coverage Decreases with SizeAnalyst Coverage of Public U.S. Companies

25

16

6

0 1

7

Large Cap Mid Cap Small Cap

Average # of Analysts Covering% of Companies without Analyst Coverage

Source: FactSet Estimates as of 9/30/2016

Since small cap companies don’t offer as much cushion for failure as largecaps, it is essential to factor in as much information as possible beforemaking an investment. To identify the best companies, an investor has tospend thousands of hours with management teams, be able to discernbluster from brilliance, visit plants and facilities, analyze competitors andsuppliers, understand industries exceptionally well, and evaluate reams offinancial statements. We believe that only skilled active managers can dothis successfully and sustainably over time.

The prime goal of active management is to add value by finding marketinefficiencies and capitalizing on them. Active management in the small capspace can be particularly rewarding, as this is the most inefficient equitysegment. When compared to large caps, the stock returns of smaller companiesare much more driven by company-specific events and less so by industry andmarket events. This means that skilled stock pickers, who are able to understandand evaluate the idiosyncrasies of companies, are presented with a betteropportunity in the smaller cap space. The two charts below, from a recentDeutsche Bank Research publication,1 show that currently about 85% of thereturns of small-cap companies are driven by stock-specific events compared toonly about 60% in the large cap space. The charts also show that historicallythe difference has been in favor of smaller cap stocks.

Stock Pickers Have a Bigger Opportunity in the Small Cap SpaceLarge cap opportunity set

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Stock-Specific Style Industry

Feb-0

0

Feb-0

1

Feb-0

2

Feb-0

3

Feb-0

4

Feb-0

5

Feb-0

6

Feb-0

7

Feb-0

8

Feb-0

9

Feb-1

0

Feb-1

1

Feb-1

2

Feb-1

3

Feb-1

4

Feb-1

6

Feb-1

5

Source: Bloomberg Financial LP, Compustat, IBES, MSCI, Russell, S&P, Thomson Reuters,Worldscope, Deutsche Bank

1 “Quantitative Strategy, The Quant View” by Deutsche Bank Markets Research from 9/7/2016.

7

Letter from Linda

Small cap opportunity set

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Stock-Specific Style Industry

Feb-0

0

Feb-0

1

Feb-0

2

Feb-0

3

Feb-0

4

Feb-0

5

Feb-0

6

Feb-0

7

Feb-0

8

Feb-0

9

Feb-1

0

Feb-1

1

Feb-1

2

Feb-1

3

Feb-1

4

Feb-1

6

Feb-1

5

Source: Bloomberg Financial LP, Compustat, IBES, MSCI, Russell, S&P, Thomson Reuters,Worldscope, Deutsche Bank

While the opportunity is greater with small caps, it often takes time forthese businesses to realize their growth potential. Over short periods, stocksmay go up or down by double-digit percentages, making short-termoutcomes particularly unpredictable. However, the payoffs have been muchmore stable over the long term. Using monthly rolling returns since 1978,the Russell 2000 Index has generated positive returns over three-monthperiods less than two-thirds of the time. As the investment horizonincreases, the likelihood of achieving positive returns increases too, asshown in the chart below.

Positive Returns Are More Likely with Long-Term InvestingRussell 2000 Index – % Time With Positive Returns Over Different Holding Horizons

65%

69%

74%

85%89%

95%

100% 100% 100%

3 Mo. 6 Mo. 1 Year 2 Years 3 Years 5 Years 10 Years 15 Years 20 Years

Source: FactSet

Based on monthly rolling returns over the period 12/29/1978 – 9/30/2016.

Baron’s Approach to Small Cap Investing

Baron Capital has been investing in small cap stocks ever since the firm wasestablished in 1982. We have recognized the potential to generate above-average returns in this space, and we have launched three small cap mutualfunds: Baron Growth Fund, managed by Ron Baron since inception in 1994;Baron Small Cap Fund, managed by Cliff Greenberg since inception in 1997;and Baron Discovery Fund, managed by Laird Bieger and Randy Gwirtzmansince inception in 2013. The goal of all three funds is to deliver above-average performance and outperform the Russell 2000 Growth Index overthe long term.

Like all Baron Funds, the three small cap funds are managed with the sameinvestment philosophy and principles. Stocks are added to the portfolios oneat a time, as a result of deep bottom-up fundamental research. The portfoliomanagers look for businesses that we believe have significant growthpotential, strong competitive advantages, and exceptional management. Andthe stocks of these businesses have to be, in our view, attractively priced. Wepurchase stocks with the intention of owning them for an extended period oftime. These four criteria have always been the basis of our investmentphilosophy, and we believe that applying them in a consistent and disciplinedway has played a major part in our long-term success.

Unlike most funds in the growth equity space, our three small cap fundshave had the same portfolio managers since their inception dates. This hasensured continuity, which we believe is key for successful long-terminvesting. As of September 30, 2016, there were only two funds inMorningstar’s small growth category and two funds in the mid-cap growthcategory with a single portfolio manager who has had a longer tenure thanRon’s. There are only 13 small cap growth funds and eight mid cap growthfunds where at least one member of the management team has had alonger tenure than Ron’s.

On average, Ron visits or talks with the managements of 50 current orpotential investments each month. This adds up to over 13,000conversations over the nearly 22 years Ron has been managing BaronGrowth Fund. In addition, he has visited plants, factories, and otherproperties and has read hundreds of thousands of pages of financialstatements. And this accounts for less than half of Ron’s 46-year researchexperience. As a result, there are probably few things that Ron hasn’t seen inthe investment world, and we think this has helped him to hone hisjudgment about what should work (or not) in the small cap space.

Cliff’s story is no less impressive. He has been analyzing small cap businesses forover 32 years, the last 19 at Baron. Currently, there are only three small capgrowth funds with a single manager who has had longer tenure than Cliff’s withBaron Small Cap Fund. While Randy and Laird have not yet accumulated thesame outstanding track record with the three-year old Baron Discovery Fund,they have been under Cliff’s tutelage at Baron for 14 and 16 years, respectively,long enough to build similarly valuable experiences and to understand Baron’sresearch process and portfolio management philosophy.

Through their broad and comprehensive experiences, our portfolio managershave been able to refine the specific qualities and characteristics they lookfor. Equally importantly, they have learned to avoid certain types ofcompanies, although we haven’t always gotten it right. Baron Growth Fundand Baron Small Cap Fund favor more mature, higher quality small capcompanies with well-established management teams, strong marketpositions and competitive advantages, and visible paths to growth and valuecreation. Recurring revenues, high free cash flows, and low volatility aresome of the typical characteristics of such businesses. At the same time,Ron and Cliff generally avoid speculative businesses, single-productcompanies, and companies with high cyclicality and potential rapid productobsolescence, among others. As a result, they have little exposure toindustries such as biotechnology, pharmaceuticals, computer hardware,semiconductors, and heavy electrical equipment. Accordingly, thefundamental characteristics of the Funds’ holdings have, for the most part,been favorable when compared to those of the Russell 2000 Growth Index.

8


Baron Growth Fund and Baron Small Cap Fund Invest in High Quality Businesses

Baron Small Cap Fund

Russell 2000 Growth Index

Baron Growth Fund

2%

4%

6%

8%

10%

12%

Sep-

11

Mar

-12

Sep-

12

Mar

-13

Sep-

13

Mar

-14

Sep-

14

Mar

-15

Sep-

15

Mar

-16

Sep-

16

Net Margin



Baron Growth Fund

0%

2%

4%

6%

8%

10%

12%

14%

16%

Sep-

11

Mar

-12

Sep-

12

Mar

-13

Sep-

13

Mar

-14

Sep-

14

Mar

-15

Sep-

15

Mar

-16

Sep-

16

Return on Invested Capital



Baron Growth Fund

10%

15%

20%

25%

30%

Sep-

11

Mar

-12

Sep-

12

Mar

-13

Sep-

13

Mar

-14

Sep-

14

Mar

-15

Sep-

15

Mar

-16

Sep-

16

EBITDA Margin

BaronSmall

Cap Fund


Baron Growth Fund

0%

2%

4%

6%

8%

10%

12%

14%

Sep-

11

Mar

-12

Sep-

12

Mar

-13

Sep-

13

Mar

-14

Sep-

14

Mar

-15

Sep-

15

Mar

-16

Sep-

16

Free Cash Flow Margin

Gross Margin


Baron Growth Fund


30%

35%

40%

45%

50%

Sep-

11

Mar

-12

Sep-

12

Mar

-13

Sep-

13

Mar

-14

Sep-

14

Mar

-15

Sep-

15

Mar

-16

Sep-

16



Baron Growth Fund

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Sep-

11

Mar

-12

Sep-

12

Mar

-13

Sep-

13

Mar

-14

Sep-

14

Mar

-15

Sep-

15

Mar

-16

Sep-

16

Return on Equity

Source: FactSet PA – Compustat and FactSet as of 9/30/2016

Largely driven by skilled stock picking, Baron Growth Fund and Baron Small Cap Fund have generated strong absolute and relative long-term results. They haveoutperformed their benchmark the vast majority of the time over five and 10-year rolling periods and 100% of the time over any 15-year period.2

Baron Growth Fund and Baron Small Cap Fund Have Strong Long-Term Track Records

Long-Term Performance vs. Primary Benchmark (Russell 2000 Growth Index)

as of 9/30/2016

FundExcess Return

Since Inception(annualized)

AlphaSince Inception

(annualized)

Outperforming Periods

Rolling5 Years

Rolling10 Years

Rolling15 Years

Baron Growth Fund(inception: 12/30/1994)

5.26% 7.11% 144/202 71% 125/142 88% 82/82 100%

Baron Small Cap Fund(inception: 9/30/1997)

4.09% 5.16% 107/169 63% 84/109 77% 49/49 100%

Source: Morningstar Direct, BAMCO

Our success has not been achieved evenly over time. Most NFL teams don’t win all 16 of their regular season games. We don’t outperform all the time either.Our Funds tend to perform better during gradual uptrends and down markets and tend to lag when the market is spiking high. Over the past few years, wehave seen more of the latter. The market has been favoring low-quality, highly speculative businesses, especially in small cap biotechnology andpharmaceutical industries. Between the end of 2012 and the middle of 2015, the stocks of these companies skyrocketed and outperformed the Russell 2000Growth Index by nearly 100%. The combined weight of the two sub-industries increased by 69% to over 16% of the index and the number of stocks increasedfrom 123 to 197 due to the high IPO activity in the sector. At the same time, nearly 90% of these companies had negative earnings, compared to less than30% for the rest of the stocks in the index.

As of 9/30/2016, the annualized performance of Baron Growth Fund’s Institutional Share Class was as follows: one year: 7.88%, five years:14.21%, ten years: 7.76%, since inception: 12.72%. The annualized performance of Baron Small Cap Fund’s Institutional Share Class was asfollows: one year: 13.21%, five years: 14.10%, ten years: 7.63%, since inception: 9.39%. As of 9/30/15, Baron Growth Fund’s and Baron SmallCap Funds’ annual expense ratios for their Institutional Share Classes were 1.04%.

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. Current performance may be lower or higher than the performance data quoted. For performance information current to the most recentmonth end, visit www.BaronFunds.com or call 1-800-99BARON.

9

Letter from Linda

The Number of Biotech and Pharma Companies in the IndexHas Grown Significantly…Number of Biotechnology and Pharmaceuticals Stocks in the Russell 2000 Growth Index

0

25

50

75

100

125

150

175

200

225

Dec

-11

Mar

-12

Jun-

12

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13

Dec

-13

Mar

-14

Jun-

14

Sep-

14

Dec

-14

Mar

-15

Jun-

15

Sep-

15

Dec

-15

Mar

-16

Jun-

16

Pharmaceuticals

Biotechnology

Source: FactSet

… While the Vast Majority of them Have BeenUnprofitable% of Companies in the Russell 2000 Growth Index with Negative LTM Net Income

Biotechnology

Pharmaceuticals

Index ex. Biotech & Pharma

0%10%20%30%40%50%60%70%80%90%

100%

Dec

-11

Mar

-12

Jun-

12

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13

Dec

-13

Mar

-14

Jun-

14

Sep-

14

Dec

-14

Mar

-15

Jun-

15

Sep-

15

Dec

-15

Mar

-16

Jun-

16

Source: FactSet

For an unusually long period of time, the market chose to reward, en masse, non-profitable businesses whose success often depends on binary outcomes.Simultaneously with this, the stocks of the highly cyclical semiconductor companies were also shooting up due to the higher demand for autos and mobile devicesand consolidation in the industry. This contributed additional market momentum, a factor that Baron Growth Fund and Baron Small Cap Fund typically underweight.Despite these temporary headwinds, Ron and Cliff did not deviate from their investment approach which has worked over the long term. They continued tolimit their exposure to unprofitable, highly cyclical, high momentum, and high volatility stocks. They did not chase such stocks during the dot-com bubble,when those stocks were even more popular. This was largely to the benefit of our Funds’ performance when the technology sector subsequently collapsed.While Baron Growth Fund and Baron Small Cap Fund have low exposure to biotechnology, pharmaceuticals, and semiconductors, we believe that there are some goodopportunities in these areas. Baron Discovery Fund, which invests in earlier-stage and smaller-cap companies, has identified several that fit our criteria and, in ouropinion, have great growth potential at reasonable risk. As the Fund just turned three years on September 30, 2016, it is still too early to assess it like our seasonedsmall cap funds. Following the core Baron principles, so far Randy and Laird’s investment approach has been successful, largely driven by their stock picking skills.

Baron Discovery Fund Has Outperformed Since InceptionBaron Discovery Fund Annualized Performanceas of 9/30/2016

PeriodPortfolioReturn

BenchmarkReturn

ExcessReturn

Excess Returnfrom StockSelection

Excess Returnfrom SectorAllocation

One Year 23.58% 12.12% 11.46% 12.63% –1.28%

Three Years 11.38% 6.58% 4.80% 5.57% –0.85%

Source: FactSet PAInception: 9/30/2013. As of 9/30/15, Baron Discovery Fund’s annual expense ratio for the Institutional Shares was 1.25%, and the net annual expense ratio was 1.10% (net of the adviser’s fee waiver whichthe adviser has contractually agreed to for so long as it serves as adviser to the Fund). The Fund’s stock selection and sector allocation were calculated using Brinson performance attribution at the GICSsector level. Excess return calculations from stock selection and sector allocation are transaction-based and are calculated from the underlying security-level data; they may not correspond with publishedperformance information based on NAV per share. Please see last page of this letter for definitions.

Although the three small cap Baron Funds use the same process and philosophy, the portfolios look very different from each other. All are diversified funds, butthe sub-industry and stock exposures in each vary greatly, as shown below.

The Three Small Cap Baron Funds Invest in Different AreasBaron Small Cap Funds – Top Five GICS Sub-Industry Exposuresas of 9/30/2016Baron Growth Fund Baron Small Cap Fund Baron Discovery Fund Russell 2000 Growth Index

Financial Exchanges & Data (8.97%) Application Software (9.18%) Internet Software & Services (11.56%) Biotechnology (9.04%)

Application Software (7.98%) Life Sciences Tools & Services (7.47%) Biotechnology (8.12%) Application Software (5.00%)

Leisure Facilities (6.36%) Health Care Equipment (7.40%) Aerospace & Defense (7.86%) Internet Software & Services (4.65%)

IT Consulting & Other Services (5.21%) Aerospace & Defense (6.52%) Health Care Equipment (7.67%) Semiconductors (4.12%)

Internet Software & Services (5.18%) Education Services (6.08%) Semiconductors (6.58%) Health Care Equipment (3.95%)

Source: FactSet

Baron Small Cap Funds – Top Five Holdingsas of 9/30/2016Baron Growth Fund Baron Small Cap Fund Baron Discovery Fund

Vail Resorts, Inc. (5.43%) TransDigm Group, Inc. (5.53%) Mercury Systems, Inc. (4.25%)

Arch Capital Group Ltd. (5.18%) Gartner, Inc. (4.14%) Qualys, Inc. (4.23%)

FactSet Research Systems, Inc. (4.35%) IDEXX Laboratories, Inc. (4.00%) MACOM Technology Solutions Holdings, Inc. (4.20%)

Under Armour, Inc. (4.27%) Bright Horizons Family Solutions, Inc. (3.98%) Education Realty Trust, Inc. (2.98%)

Gartner, Inc. (4.15%) The Ultimate Software Group, Inc. (3.77%) Amber Road, Inc. (2.80%)

Source: FactSet

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. Current performance may be lower or higher than the performance data quoted. For performance information current to the most recentmonth end, visit www.BaronFunds.com or call 1-800-99BARON.

10


While all our portfolio managers look for the same four fundamentalcharacteristics, they may prioritize them differently. The differences occurbecause our portfolio managers focus on different things. Ron placesparticular emphasis on a company’s competitive advantages, and is willingto pay more for a company he thinks will use those advantages to growsignificantly over time. He is very patient, and will build a position in a stocklong before he thinks it will add real value to the portfolio. Cliff looks forlower multiple stocks, and seeks a catalyst that will move the stock pricesooner. Catalysts might include a new product or expansion into a newmarket. He also likes what he calls fallen angels: stocks that are down buthave, in his view, strong potential growth opportunities. Randy and Lairdinvest in younger businesses in fast-growing areas of the economy, such asmedical devices, cybersecurity, and biotechnology. Their portfolio tends tobe higher growth than the other two Baron small cap funds.

The Three Small Cap Baron Funds Have Different GrowthProfilesHoldings – Based Style Map*

as of 9/30/2016Deep-Value

Mic

roSm

all

Mid

Larg

eG

iant

Core-Value Core Core-Growth High-Growth

Baron Small Cap

Fund

Baron Growth

Fund

Baron Discovery

Fund

Source: Morningstar Direct

* See the last page of this letter for the methodology.

While our small cap funds are different from each other in their holdings andindustry exposures, they are even more different from their benchmark. Thisis evident from their high active share.

The Three Small Cap Baron Funds Have High Active Share*Active Share vs. Russell 2000 Growth Index

as of 9/30/2016

Fund Name Active Share

Baron Growth Fund 96.54%

Baron Small Cap Fund 94.57%

Baron Discovery Fund 95.54%


* See the last page of this letter for the definition of high active share.

We are not governed or constrained by the limitations of the index. Forexample, the Russell 2000 Growth Index has 1,959 stocks, which representsonly one-third of all publicly traded U.S. small cap stocks. As a result, wehave a broader opportunity set. Our small cap funds invest only in small cap

stocks, but we are able to hold on to our winners even when they growbeyond small cap. Selling an investment just because it reaches a largermarket cap does not make sense to us, especially when we are very familiarwith the company and believe there is high growth ahead.

Allowing great opportunities to compound at high rates over extended periodsof time has proven largely beneficial. As of September 30, 2016, 33 stocks inBaron Growth Fund, representing 73% of assets, were held longer than fiveyears. Since first purchase, the average annualized return on these stocks hasbeen 17.1% and 17 of them have more than quadrupled in value. Baron SmallCap Fund has 20 stocks, representing 42% of assets, that have been held longerthan five years. Their average annualized return since first purchase has been19.6% and 10 of them have more than quadrupled in value.

Holding on to successful, larger-cap investments has helped Baron GrowthFund and Baron Small Cap Fund maintain lower risk profiles, reducing theirvolatility and enhancing their downside protection. The two more seasonedFunds have outperformed their benchmark in every bear market since theirinceptions. While Baron Discovery Fund is more volatile, it, too, has so farbeen able to achieve a high upside/downside capture ratio.

The Seasoned Baron Small Cap Funds Have Low Betas…Weighted Average 5-Year Russell 2000 Growth Beta

0.6

0.7

0.8

0.9

1.0

1.1

1.2

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Russell 2000Growth Index

Baron SmallCap Fund

Baron GrowthFund

Baron DiscoveryFund

Sources: FactSet PA – as of 9/30/2016

… And All Baron Small Cap Funds Have Strong Up/DownCapture RatiosUpside and Downside Capture Ratios vs. Russell 2000 Growth Index Since Inception

as of 9/30/2016

Fund NameUpsideCapture

DownsideCapture

Upside/DownsideCapture Ratio

Baron Growth Fund(inception: 12/30/1994)

81% 61% 1.34

Baron Small Cap Fund(inception: 9/30/1997)

84% 69% 1.21

Baron Discovery Fund(inception: 9/30/2013)

113% 95% 1.19


To achieve better returns than the market, we have to invest differentlythan the index. At Baron we have been doing things differently for over30 years. Our time-tested process has achieved strong long-term results.At a time when the market has been trading not on fundamentals but onsentiment, and when many investors are overly focused on the latestdata points and near-term results, we remain steadfast in our approach.We dedicate significant resources to our research efforts. Our researchteam (our scouts) spends endless hours looking for what we think are the

Past performance is no guarantee of future results.11

Letter from Linda

best stock picks we can find. Just like the Steelers when they pickedMaurkice Pouncey in the 2010 NFL draft. As a rookie, Pouncey started all16 games at center, and he was selected for the Pro Bowl that year. Heremains their starting center. We try to see through the flashy Tim

Tebow (now a minor league baseball player) and Johnny Manziel (a rehabregular) types. Through our extensive experience in small cap investing,we have learned to ignore the hype and noise and to focus on whatmatters over the long term.

Sincerely,

Linda S. MartinsonChairman, President, and COOOctober 17, 2016

Past performance is no guarantee of future results.

Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summaryprospectuses contain this and other information about the Funds. You may obtain them from the Funds’ distributor, Baron Capital, Inc., by calling1-800-99BARON or visiting www.BaronFunds.com. Please read them carefully before investing.

If a Fund’s historical performance was impacted by gains from IPOs and/or secondary offerings, there is no guarantee that these results can be repeated or that a Fund’s level of participation in IPOsand secondary offerings will be the same in the future.

The Morningstar holdings-based approach is a purely quantitative approach that analyzes the individual stocks in the Fund’s portfolio in terms of style and size. Morningstar conducts proprietary in-house research on equity securities and plots them in its trademarked Morningstar Style Box. The style attribute of stocks within the Fund are rolled up to determine the Fund’s overall investmentstyle. The stocks are then analyzed by size. The scale for both style and size range from –100 to 400. The Holdings-Based Style Map chart is created at a point in time and is as of 9/30/2016. Itrepresents the Morningstar Ownership ZoneTM. The shaded area represents the center 75% of the Fund’s assets, and it provides an intuitive visual representation of the area of the market in which theFund invests. A “centroid” plot in the middle of the Ownership ZoneTM represents the weighted average of all the Fund’s holdings.

About Risk: The value of investments in equity securities is subject to unpredictable declines in the value of individual securities and periods of below average performance in individual securities andthe equity market as a whole. Growth stocks are generally more sensitive to market movements than other types of stocks primarily because their stock prices are based heavily on future expectations.If our assessment of the prospects for a company’s growth is wrong, or if our judgment of how other investors will value the company’s growth is wrong, then the price of the company’s stock may fallor not appreciate as we expect.

Performance attribution helps analyze the effect of several portfolio management decisions, including allocation, security selection, and interaction. Security selection and interaction are combined.All attribution effects are computed daily and are linked through time. Excess return from allocation measures the investment manager’s ability to effectively allocate the portfolio’s assets to variousGICS sectors. A sector’s allocation effect equals the weight of the portfolio’s sector minus the weight of the benchmark’s sector times the total return of the benchmark sector minus the total return ofthe benchmark in aggregate. Excess return from selection measures the investment manager’s ability to select securities within a given GICS sector relative to the Fund’s benchmark. A sector’sselection effect equals the weight of the benchmark’s sector multiplied by the total return of the portfolio’s sector minus the total return of the benchmark’s sector.

An ETF, or exchange traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock ona stock exchange. ETFs experience price changes throughout the day as they are bought and sold.

Active Share a term used to describe the share of a portfolio’s holdings that differ from that portfolio’s benchmark index. It is calculated by comparing the weight of each holding in the Fund to thatholding’s weight in the benchmark. Positions with either a positive or negative weighting versus the benchmark have Active Share. An Active Share of 100% implies zero overlap with the benchmark.Active Share was introduced in 2006 in a study by Yale academics, M. Cremers and A. Petajisto, as a measure of active portfolio management.

The Cremers/Pareek study explains High Active Share and Low Active Share as follows: “The median active share of mutual funds equals 79% in our sample. Funds in the bottom Active Share quintilegenerally have an Active Share below 60% and can thus be considered ‘closet index funds.’ Funds in the top Active Share quintile portfolio have an Active Share of at least 90%, and are thus quitedistinct from their benchmarks.”

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.

Upside Capture explains how well a fund performs in time periods where the benchmark’s returns are greater than zero.

Downside Capture measures how well a fund performs in time periods where the benchmark’s returns are less than zero.

Index performance is not fund performance; one cannot invest directly into an index.

The Russell 2000® Growth Index is an unmanaged index that measures the performance of small-sized U.S. companies that are classified as growth.

12

Baron Funds Performance

Baron Asset Fund

Comparison of the change in value of $10,000 investment in Baron Asset Fund (Institutional Shares)†

in relation to the Russell Midcap Growth Index and the S&P 500 Index

$0

$60,000

$40,000

$20,000

$80,000

$100,000

$120,000

$180,000

$200,000

$240,000

$220,000

$160,000

$140,000

$221,126

$151,344$138,984

Information Presented by Fiscal Year as of September 30 Baron Asset Fund1,4

S&P 500 Index1

Russell Midcap Growth Index1

6/12/87 9/169/11 9/159/139/939/919/899/87 9/95 9/97 9/99 9/01 9/03 9/05 9/07 9/09

Baron Asset Fund’s annualized returns as of September 30, 2016: 1-year, 11.44%; 3-year, 9.02%; 5-year, 15.61%; 10-year, 7.51%; and Since Inception, 11.15%.

Baron Growth Fund

Comparison of the change in value of $10,000 investment in Baron Growth Fund (Institutional Shares)†

in relation to the Russell 2000 Growth Index and the S&P 500 Index

$0

$60,000

$40,000

$20,000

$140,000

$160,000

$120,000

$100,000

$80,000

$135,116

$71,583

$47,850

Information Presented by Fiscal Year as of September 30 Baron Growth Fund2,4

S&P 500 Index2

Russell 2000 Growth Index2

12/31/94 9/95 9/97 9/99 9/01 9/03 9/05 9/07 9/09 9/11 9/13 9/15 9/16

Baron Growth Fund’s annualized returns as of September 30, 2016: 1-year, 7.88%; 3-year, 4.89%; 5-year, 14.21%; 10-year, 7.76%; and Since Inception, 12.72%.


Comparison of the change in value of $10,000 investment in Baron Small Cap Fund (Institutional Shares)†


$0

$30,000

$20,000

$10,000

$60,000

$50,000

$40,000

$55,052

$32,640

$26,676

Information Presented by Fiscal Year as of September 30 Baron Small Cap Fund3,4

S&P 500 Index3


9/30/97 9/169/019/99 9/03 9/05 9/07 9/09 9/139/11 9/15

Baron Small Cap Fund’s annualized returns as of September 30, 2016: 1-year, 13.21%; 3-year, 5.06%; 5-year, 14.10%; 10-year, 7.63%; and Since Inception, 9.39%.

1 The indexes are unmanaged. The Russell Midcap® Growth Index measures the performance of medium-sized U.S. companies that are classified as growth and the S&P 500 Index of 500 widelyheld large cap U.S. companies. The indexes and Baron Asset Fund are with dividends, which positively impact the performance results.

2 The indexes are unmanaged. The Russell 2000® Growth Index measures the performance of small-sized U.S. companies that are classified as growth and the S&P 500 Index of 500 widely heldlarge cap U.S. companies. The indexes and Baron Growth Fund are with dividends, which positively impact the performance results.

3 The indexes are unmanaged. The Russell 2000® Growth Index measures the performance of small-sized U.S. companies that are classified as growth and the S&P 500 Index of 500 widely heldlarge cap U.S. companies. The indexes and Baron Small Cap Fund are with dividends, which positively impact the performance results.

4 Past performance is not predictive of future performance. The performance data does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemptions of Fund shares.† Performance for the Institutional Shares prior to May 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 May 29, 2009 did not reflect this fee, the returns would be higher.

13


Baron Opportunity FundComparison of the change in value of $10,000 investment in Baron Opportunity Fund (Institutional Shares)†


Baron Opportunity Fund1,4

S&P 500 Index1


$0

$5,000

$10,000

$20,000

$25,000

$15,000

$21,880

$15,602

$21,893

Information Presented by Fiscal Year as of September 30

2/29/00 9/169/13 9/159/01 9/03 9/099/079/05 9/11

Baron Opportunity Fund’s annualized returns as of September 30, 2016: 1-year, 9.44%; 3-year, 3.28%; 5-year, 11.06%; 10-year, 8.06%; and Since Inception, 4.84%.

Baron Partners FundComparison of the change in value of $10,000 investment in Baron Partners Fund (Institutional Shares)†

in relation to the Russell Midcap Growth Index and the S&P 500 Index

$0

$40,000

$20,000

$60,000

$80,000

$100,000

$180,000

$160,000

$200,000

$120,000

$140,000

$177,285

$89,207$87,553

Information Presented by Fiscal Year as of December 31and for the nine months ended September 30, 2016

Baron Partners Fund2,4,5

S&P 500 Index2

Russell Midcap Growth Index2

1/31/92 9/16 12/13 12/1512/93 12/95 12/97 12/99 12/01 12/03 12/05 12/07 12/09 12/11

Baron Partners Fund’s annualized returns as of September 30, 2016: 1-year, 7.23%; 3-year, 7.40%; 5-year, 17.26%; 10-year, 7.28%; and Since Inception, 12.36%.

Baron Fifth Avenue Growth FundComparison of the change in value of $10,000 investment in Baron Fifth Avenue Growth Fund (Institutional Shares)†


Information Presented by Fiscal Year as of September 30 Baron Fifth Avenue Growth Fund3,4

S&P 500 Index3


$0

$5,000

$10,000

$15,000

$20,000

$30,000

$25,000

$27,007$25,368$23,955

4/30/04 9/169/159/06 9/07 9/08 9/09 9/10 9/11 9/12 9/13 9/149/059/04

Baron Fifth Avenue Growth Fund’s annualized returns as of September 30, 2016: 1-year, 14.74%; 3-year, 10.58%; 5-year, 16.90%; 10-year, 6.96% and Since Inception, 7.29%.

1 The indexes are unmanaged. The Russell 3000® Growth Index measures the performance of those companies classified as growth among the largest 3,000 U.S. companies and the S&P 500 Index of 500widely held large cap U.S. companies. The indexes and Baron Opportunity Fund are with dividends, which positively impact the performance results.

2 The indexes are unmanaged. The Russell Midcap® Growth Index measures the performance of medium-sized U.S. companies that are classified as growth and the S&P 500 Index of 500 widelyheld large cap U.S. companies. The indexes and Baron Partners Fund are with dividends, which positively impact the performance results.

3 The indexes are unmanaged. The Russell 1000® Growth Index measures the performance of large-sized U.S. companies that are classified as growth and the S&P 500 Index of 500 widely held largecap U.S. companies. The indexes and Baron Fifth Avenue Growth Fund are with dividends, which positively impact the performance results.

4 Past performance is not predictive of future performance. The performance data does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.5 Reflects the actual fees and expenses that were charged when the Fund was a partnership. The predecessor partnership charged a 20% performance fee after reaching a certain performance

benchmark. If the annual returns for the Fund did not reflect the performance fees for the years the predecessor partnership charged a performance fee, returns would be higher. The Fund’sshareholders will not be charged a performance fee. The predecessor partnership’s performance is only for periods before the Fund’s registration statement was effective, which was April 30, 2003.During those periods, the predecessor partnership was not registered under the Investment Company Act of 1940 and was not subject to its requirements or the requirements of the InternalRevenue Code relating to registered investment companies, which, if it were, might have adversely affected its performance.

† Performance for the Institutional Shares prior to May 29, 2009 is based on the performance of the Retail Shares, which have a distribution fee. The Institutional Shares do not have a distributionfee. If the annual returns for the Institutional Shares prior to May 29, 2009 did not reflect this fee, the returns would be higher.

14


Baron Focused Growth FundComparison of the change in value of $10,000 investment in Baron Focused Growth Fund (Institutional Shares)†


$0

$50,000

$40,000

$30,000

$20,000

$10,000

$90,000

$80,000

$70,000

$60,000

$76,204

$47,440$41,557


Baron Focused Growth Fund1,4,5

S&P 500 Index1


5/31/96 12/99 12/01 12/03 12/05 12/07 12/09 9/1612/13 12/1512/97 12/11

Baron Focused Growth Fund’s annualized returns as of September 30, 2016: 1-year, 8.02%; 3-year, 2.86%; 5-year, 11.21%; 10-year, 7.10%; and Since Inception, 10.50%.

Baron International Growth FundComparison of the change in value of $10,000 investment in Baron International Growth Fund (Institutional Shares)†

in relation to the MSCI ACWI ex USA IMI Growth Index and the MSCI ACWI ex USA Index

$0

$15,000

$20,000

$10,000

$5,000

$25,000$23,416

$17,538$19,400

12/31/08 9/1612/09 12/11 12/12 12/13 12/14 12/1512/10

Baron International Growth Fund2,5

MSCI ACWI ex USA Index2

MSCI ACWI ex USA IMI Growth Index2


Baron International Growth Fund’s annualized returns as of September 30, 2016: 1-year, 13.13%; 3-year, 3.51%; 5-year, 9.76%; and Since Inception, 11.60%.

Baron Real Estate FundComparison of the change in value of $10,000 investment in Baron Real Estate Fund (Institutional Shares)

in relation to the MSCI USA IMI Extended Real Estate Index and the S&P 500 Index

$0

$15,000

$10,000

$5,000

$30,000

$20,000

$25,000 $25,580$23,711$22,428

12/31/09 9/1612/12 12/13 12/14 12/1512/1112/10

Baron Real Estate Fund3,5

S&P 500 Index3

MSCI USA IMI Extended Real Estate Index3


Baron Real Estate Fund’s annualized returns as of September 30, 2016: 1-year, 3.39%; 3-year, 6.34%; 5-year, 18.55%; and Since Inception, 14.93%.

1 The indexes are unmanaged. The Russell 2500™ Growth Index measures the performance of small to medium-sized U.S. companies that are classified as growth and the S&P 500 Index of 500 widely held large cap U.S.companies. The indexes and Baron Focused Growth Fund are with dividends, which positively impact the performance results.

2 The MSCI ACWI ex USA indexes cited are unmanaged, free float-adjusted market capitalization weighted indexes reflected in US dollars. The MSCI ACWI ex USA IMI Growth Index Net USD measures the performance of large, mid andsmall cap growth securities across developed and emerging markets, excluding the United States. The MSCI ACWI ex USA Index Net USD measures the equity market performance of large and mid cap securities across developed andemerging markets, excluding the United States. The indexes and Baron International Growth Fund include reinvestment of dividends, net of foreign withholding taxes, which positively impact the performance results.

3 The MSCI USA IMI Extended Real Estate Index is a custom index calculated by MSCI for, and as requested by, BAMCO, Inc. The index includes real estate and real estate-related GICS classification securities. MSCImakes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis forother indexes or any securities or financial products. This report is not approved, reviewed or produced by MSCI. The S&P 500 Index measures the performance of 500 widely held large cap U.S. companies. The indexesand Baron Real Estate Fund are with dividends, which positively impact performance results.

4 Reflects the actual fees and expenses that were charged when the Fund was a partnership. The predecessor partnership charged a 15% performance fee through 2003 after reaching a certain performance benchmark. If the annual returnsfor the Fund did not reflect the performance fees for the years the predecessor partnership charged a performance fee, the returns would be higher. The Fund’s shareholders will not be charged a performance fee. The predecessorpartnership’s performance is only for the periods before the Fund’s registration statement was effective, which was June 30, 2008. During those periods, the predecessor partnership was not registered under the Investment Company Act of1940 and was not subject to its requirements or the requirements of the Internal Revenue Code relating to registered investment companies, which, if it were, might have adversely affected its performance.

5 Past performance is not predictive of future performance. The performance data does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.† Performance for the Institutional Shares prior to May 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 May 29, 2009 did not reflect this fee, the returns would be higher.

15


Baron Emerging Markets Fund

Comparison of the change in value of $10,000 investment in Baron Emerging Markets Fund (Institutional Shares)in relation to the MSCI EM IMI Growth Index and the MSCI EM IMI Index

$0

$10,000

$5,000

$15,000

$12,323

$9,092$9,859

12/31/10 9/166/1612/146/1412/11 12/12 12/136/13 6/15 12/156/126/11

Baron Emerging Markets Fund1,3

MSCI EM IMI Index1

MSCI EM IMI Growth Index1


Baron Emerging Markets Fund’s annualized returns as of September 30, 2016: 1-year, 17.28%; 3-year, 3.19%; 5-year, 8.20%; and Since Inception, 3.70%.

Baron Energy and Resources Fund

Comparison of the change in value of $10,000 investment in Baron Energy and Resources Fund (Institutional Shares)in relation to the S&P North American Natural Resources Sector Index and the S&P 500 Index

$0

$10,000

$5,000

$20,000

$15,000

$8,788$10,137

$19,088

12/30/11

Baron Energy and Resources Fund2,3

S&P 500 Index2

2S&P North American Natural Resources

Sector Index


9/166/1612/146/1412/12 12/136/13 6/15 12/156/12

Baron Energy and Resources Fund’s annualized returns as of September 30, 2016: 1-year, 19.29%; 3-year, (8.15)%; and Since Inception, (2.68)%.

1 The MSCI EM (Emerging Markets) indexes cited are unmanaged, free float-adjusted market capitalization weighted indexes reflected in US dollars. The MSCI EM(Emerging Markets) IMI Growth Index Net USD and the MSCI EM (Emerging Markets) IMI Index Net USD are designed to measure equity market performance of large,mid and small cap securities in the emerging markets. The MSCI EM (Emerging Markets) IMI Growth Index Net USD screens for growth-style securities. The indexes andBaron Emerging Markets Fund include reinvestment of dividends, net of foreign withholding taxes, which positively impact the performance results.

2 The S&P indexes cited are unmanaged. The S&P 500 North American Natural Resources Sector Index measures the performance of U.S.-traded natural resources-relatedstocks, including mining, energy, paper and forest products, and plantation owning companies. The S&P 500 Index measures the performance of 500 widely held large capU.S. companies. The indexes and Baron Energy and Resources Fund are with dividends, which positively impact the performance results.

3 Past performance is not predictive of future performance. The performance data does not reflect the deduction of taxes that a shareholder would pay on Funddistributions or redemption of Fund shares.

16


Baron Global Advantage Fund

Comparison of the change in value of $10,000 investment in Baron Global Advantage Fund (Institutional Shares)in relation to the MSCI ACWI Growth Index and the MSCI ACWI Index

$0

$10,000

$5,000

$20,000

$15,000

4/30/12 9/1612/156/1412/12 6/13 12/13 12/14 6/15 6/166/12

Baron Global Advantage Fund1,3

MSCI ACWI Index1

MSCI ACWI Growth Index1

$15,010

$13,978$14,436


Baron Global Advantage Fund’s annualized returns as of September 30, 2016: 1-year, 21.46%; 3-year, 7.69%; and Since Inception, 9.63%.

Baron Discovery Fund

Comparison of the change in value of $10,000 investment in Baron Discovery Fund (Institutional Shares)in relation to the Russell 2000 Growth Index and the S&P 500 Index

$0

$10,000

$5,000

$20,000

$15,000$13,736$12,108

$13,816

9/30/13 9/16

Baron Discovery Fund2,3

S&P 500 Index2


Information Presented by Fiscal Year as of September 30

3/14 9/14 3/15 9/15 3/16

Baron Discovery Fund’s annualized returns as of September 30, 2016: 1-year, 23.58%; 3-year and Since Inception, 11.38%.

1 The MSCI ACWI indexes cited are unmanaged, free float-adjusted market capitalization weighted indexes reflected in US dollars. The MSCI ACWI Growth Index Net USDmeasures the equity market performance of large and mid cap growth securities across developed and emerging markets. The MSCI ACWI Index Net USD measures theequity market performance of large and mid cap securities across developed and emerging markets. The indexes and the Baron Global Advantage Fund includereinvestment of dividends, net of foreign withholding taxes, which positively impact the performance results.

2 The indexes are unmanaged. The Russell 2000® Growth Index measures the performance of small-sized U.S. companies that are classified as growth and the S&P 500Index of 500 widely held large cap U.S. companies. The indexes and Baron Discovery Fund are with dividends, which positively impact the performance results.

3 Past performance is not predictive of future performance. The performance data does not reflect the deduction of taxes that a shareholder would pay on Funddistributions or redemption of Fund shares.

17

Baron Asset Fund

ANDREW PECK

PORTFOLIO MANAGER

Retail Shares: BARAXInstitutional Shares: BARIX

R6 Shares: BARUX

Dear Baron Asset Fund Shareholder:

Performance

Equity markets were strong during the quarter ended September 30, 2016.Baron Asset Fund (the “Fund”) Retail Shares gained 5.06% and the InstitutionalShares gained 5.15%; the Russell Midcap Growth Index (the “Index”) gained4.59%, and the S&P 500 Index gained 3.85%.

As discussed below, the investments that had the most significant positiveimpact on performance included businesses in the Consumer Discretionarysector that rose on both encouraging company-specific earnings, as well as themarket’s more optimistic outlook for ongoing strength in consumer spendingpatterns on a global basis. Beneficiaries included ski resort owner Vail Resorts,Inc., online travel agency The Priceline Group, Inc. and jewelry retailerTiffany & Co. Rising equity markets and increased speculation that the FederalReserve would raise interest rates provided a tailwind for most of the Fund’sFinancials sector investments. These included brokerage firm The CharlesSchwab Corp., insurer Arch Capital Group Ltd., and MarketAxess HoldingsInc., an electronic trading platform for fixed-income securities. Several stocksin the Health Care sector gained on good earnings results, including IDEXXLaboratories, Inc., a veterinary diagnostic firm, and Mettler-ToledoInternational, Inc., which manufacturers advanced weighing devices.

The worst performers included stocks in the Information Technology (IT)sector that reported earnings Wall Street perceived to be disappointing.These included IT research firm Gartner, Inc. and Guidewire Software, Inc.,which sells various solutions to the global insurance industry. Retailer TractorSupply Co. also reported weak earnings, and Verisign, Inc., which operatesinternet domain name registries, fell on fears of adverse regulatory changes.

Table I.PerformanceAnnualized for periods ended September 30, 2016

BaronAssetFundRetail

Shares1,2

BaronAssetFund

InstitutionalShares1,2,3

RussellMidcapGrowthIndex1

S&P500

Index1

Three Months5 5.06% 5.15% 4.59% 3.85%Nine Months5 6.22% 6.44% 6.84% 7.84%One Year 11.14% 11.44% 11.24% 15.43%Three Years 8.73% 9.02% 8.90% 11.16%Five Years 15.30% 15.61% 15.85% 16.37%Ten Years 7.30% 7.51% 8.51% 7.24%Since Inception

(June 12, 1987) 11.07% 11.15% 9.73%4 9.40%

Table II.Top contributors to performance for the quarter ended September 30, 2016

YearAcquired

PercentImpact

IDEXX Laboratories, Inc. 2006 1.31%Illumina, Inc. 2012 0.75The Charles Schwab Corp. 1992 0.64FleetCor Technologies, Inc. 2012 0.61Vail Resorts, Inc. 1997 0.58

Shares of veterinary diagnostics leader IDEXX Laboratories, Inc. increasedafter the company reported impressive financial results, which led to ameaningful expansion in its trading multiple. We believe the company’scompetitive position is strong and improving, as evidenced by itsaccelerating organic revenue growth, the robust placements of its diagnosticinstruments into veterinary clinics, and the higher prices it is capturingacross its product portfolio. In addition, IDEXX’s results demonstratedoperating margin expansion, which is finally being recognized after severalyears of intensive investment into its business. Looking forward, we expectto witness sustained double-digit organic revenue growth during the nextseveral years, driven by productivity benefits from its move to a direct sales

Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares and Institutional Shares as ofSeptember 30, 2015 was 1.31% and 1.04%, respectively. The performance data quoted represents past performance. Past performance is no guarantee of futureresults. The investment return and principal value of an investment will fluctuate; an investor’s shares, when redeemed, may be worth more or less than theiroriginal cost. The Fund’s transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, without which performance would havebeen lower. Current performance may be lower or higher than the performance data quoted. For performance information current to the most recent month end,visit www.BaronFunds.com or call 1-800-99BARON.1 The indexes are unmanaged. The Russell Midcap® Growth Index measures the performance of medium-sized U.S. companies that are classified as growth and the S&P 500

Index of 500 widely held large cap U.S. companies. The indexes and the Fund are with dividends, which positively impact the performance results. Russell InvestmentGroup is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell is a trademark of Russell Investment Group.

2 The performance data in the table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.3 Performance for the Institutional Shares prior to May 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 May 29, 2009 did not reflect this fee, the returns would be higher.4 For the period June 30,1987 to September 30, 2016.5 Not annualized.

18

September 30, 2016 Baron Asset Fund

model in the U.S., the company’s persistent innovation pipeline, and returnson its intensive investment into international markets.

Shares of Illumina, Inc., the leading provider of DNA sequencing technologyto academic and commercial laboratories, gained after the companyreported financial results that exceeded Wall Street’s expectations. Theresults confirmed strong demand both for the company’s sequencinginstruments in the Americas and China, as well as for its products in clinicalapplications, such as oncology screening and diagnosis. Management alsodemonstrated its ability to rein in expenses, which helped lead toaccelerating EPS growth. We continue to believe Illumina has a long runwayfor growth, driven by increasing adoption of DNA sequencing technologies,particularly in clinical markets.

Shares of brokerage firm The Charles Schwab Corp. appreciated as risingequity markets led to growth in its client assets and the revenue streamsstemming from those assets. The firm also continued to grow its percentageof assets that charge for fee-based advice, a move that we believe createsgreater revenue visibility and the potential for increased profitability. Inaddition, ongoing speculation of an interest rate hike by the U.S. FederalReserve was a positive for Schwab, which we believe would experiencesignificant, rapid profit growth should interest rates increase to higherhistorical levels.

FleetCor Technologies, Inc. issues commercial charge cards that allow theemployees of primarily small- and mid-sized businesses to buy fuel andmaintenance at participating gasoline retailers. Fleetcor also managescommercial fleet card programs for major oil companies (such as BP, Arco,Chevron, and Citgo), which themselves maintain a great many end-customer relationships. Its shares performed well after the companyreported good quarterly results and raised its full-year earnings guidance.FleetCor also benefited from its recent acquisition of STP, the leadingelectronic toll company in Brazil. We believe that improved results at itsComdata division, the likelihood of further acquisitions, rising fuel prices,and stabilizing foreign exchange rates could lead to an ongoing accelerationin FleetCor’s earnings.

Shares of Vail Resorts, Inc., the largest operator of ski resorts, increasedprincipally on news that Vail had entered into an agreement to acquireWhistler Blackcomb, a major Canadian ski resort operator. After thistransaction closes, Vail will own several of the leading ski resorts in NorthAmerica, including, of course, Vail, Beaver Creek, Park City, and nowWhistler. The acquisition affords Vail not only greater scale to leverage itscorporate infrastructure, but also the chance to expand its successful EpicPass season ticket offering (which allows ticket holders to ski at all of thecompany’s resorts) to a larger group of skiers.

Table III.Top detractors from performance for the quarter ended September 30, 2016

YearAcquired

PercentImpact

Gartner, Inc. 2007 -0.54%Tractor Supply Co. 2011 -0.33Verisign, Inc. 2013 -0.21Henry Schein, Inc. 2003 -0.19Inovalon Holdings, Inc. 2015 -0.16

Shares of Gartner, Inc., a provider of syndicated information technologyresearch, fell after reporting results that were challenged by tougher annualcomparisons and slightly more challenging macroeconomic conditions. Webelieve that Gartner’s key revenue metrics remain solid. The company hassignificant financial flexibility, and we believe it will aggressively deploy capitalfor ongoing share repurchases or accretive acquisitions. We believe that overtime Gartner will demonstrate accelerating revenue growth, faster growth in itsearnings and free cash flow, and persistent returns of capital to shareholders.

Tractor Supply Co. is a chain of more than 1,500 stores that sellequipment, tools, feed, and clothing to a largely rural customer base offarmers and ranchers. The company’s shares declined after it reported weakresults, partly influenced by depressed farm incomes due to unusually lowcrop prices and some stores’ exposure to deflated energy-related markets.Although we reduced our position, we believe these factors will prove largelytransitory. We believe Tractor Supply offers the potential for ongoingearnings growth based on its ability to meaningfully expand its store base,while also growing its assortment of higher-margin private label goods andincreasing its sales mix of consumable goods.

Shares of internet infrastructure services provider Verisign, Inc. fell overconcerns that it might face difficulties extending its contract to administerthe ‘.com’ domain registry with the National Telecommunications andInformation Administration (NTIA) as the result of some U.S. senators’objections. We believe this concern has been overblown and that Verisignwill successfully extend this contract on favorable terms.

Shares of Henry Schein, Inc., a global distributor of dental, medical, andanimal health products, declined after reporting an unexpected slowdown inits North American dental and equipment sales. No specific reasons for theslowdown have emerged, and we believe that it is too early to extrapolate atrend. While performance in other divisions was solid, Schein’s earningsguidance was revised downward for the first time in several years. We aremonitoring events but remain positive given, in our opinion, the company’sstrong management, consistent performance, and large market opportunities.

Shares of health care data and analytics vendor, Inovalon Holdings, Inc.,detracted from performance, as its financial results fell short of investorexpectations and the company reduced its guidance for the remainder of2016. Management attributed the shortfall to two issues: price reductions inits retrospective risk adjustment unit, and a margin shortfall stemming frominvestments designed to drive long-term growth. We are hopeful that thecompany’s latent earnings power will soon become apparent.

Portfolio Structure

At September 30, 2016, Baron Asset Fund held 55 positions. The Fund’s 10largest holdings represented 43.0% of assets, and the 20 largest represented65.9% of assets. The Fund’s largest weighting was the Health Care sector at25.3% of assets. This sector includes life sciences companies, health careequipment and supplies companies, and health care technology companies. TheFund held 22.8% of its assets in the Information Technology sector, whichincludes investments in software companies, IT consulting firms, and dataprocessing firms. The Fund held 16.7% of its assets in the Financials sector,which includes investments in insurance companies, investment brokers andfinancial exchanges. The Fund also had significant weightings in Industrials at14.1% of assets and Consumer Discretionary at 11.7% of assets.

19

Baron Asset Fund

Table IV.Top 10 holdings as of September 30, 2016

YearAcquired

MarketCap

WhenAcquired(billions)

QuarterEnd

MarketCap

(billions)Amount

(millions)

Percentof NetAssets

IDEXX Laboratories, Inc. 2006 $2.5 $10.1 $188.3 7.4%Gartner, Inc. 2007 2.9 7.3 137.1 5.4Vail Resorts, Inc. 1997 0.2 5.7 123.2 4.9Verisk Analytics, Inc. 2009 4.0 13.7 105.7 4.2Mettler-Toledo

International, Inc. 2008 2.4 11.1 105.0 4.1Arch Capital Group Ltd. 2003 0.9 9.7 101.1 4.0FleetCor Technologies, Inc. 2012 2.9 16.1 86.9 3.4Illumina, Inc. 2012 5.3 26.6 83.0 3.3The Charles Schwab Corp. 1992 1.0 41.8 80.5 3.2FactSet Research

Systems, Inc. 2006 2.5 6.6 79.4 3.1

Recent Activity

During the past quarter, the Fund established two new positions and addedto one other. The Fund also sold two positions and reduced its holdings of15 others.

Table V.Top net purchases for the quarter ended September 30, 2016

Quarter EndMarket Cap

(billions)

AmountPurchased(millions)

Expedia, Inc. $17.5 $15.6Rollins, Inc. 6.4 15.5Vantiv, Inc. 10.8 2.1

Rollins, Inc. is a leading provider of pest and termite control services formore than two million residential and commercial customers, primarilylocated in North America. We believe that Rollins operates in an industrywith high barriers to entry and a fragmented competitive landscape, and webelieve Rollins should be able to consistently increase its market share overtime. In North America, Rollins is the number one player in commercial andresidential pest control and wildlife control, and the number two player intermite control. Developing a well-regarded national brand requiresmeaningful investment in sales, marketing, employee training andtechnology, which smaller players simply cannot afford.

Pests are a major headache for residential customers, and they can lead tomeaningful business issues for commercial customers, like restaurants andhotels. Thus, customers are typically willing to pay for these services,regardless of how the economy is performing. As a result, Rollins hasdemonstrated impressive operating performance across all marketconditions, including positive revenue growth during the 2008 and 2009recession. Furthermore, Rollins has focused significant effort to improve itsretention of employees and customers, which has led recurring revenues torepresent approximately 80% of the company’s total.

We estimate that Rollins has just a 20% share of a large and growingaddressable market. We think Rollins has several avenues for generatingmodest single-digit organic revenue growth, and believe it can supplementthat growth with acquisitions. Industry price increases are estimated to be1.5% to 2% per year, largely driven by the price insensitivity of customers.Commercial pest control volumes are likely to benefit from increasingregulation, with the Food Safety Modernization Act providing increasedbusiness opportunities in food and beverage segments. In addition, Rollins’scale and financial resources should enable it to gain share by utilizing itsbrand building initiatives, internet search engine optimization capabilities,and BOSS, the company’s new customer and workforce managementsoftware platform. Furthermore, Rollins has expanded its product offeringsinto the wildlife, bed bug, and mosquito control segments. While smaller thanthe core business, we believe these markets represent high growthopportunities that can drive overall company growth as penetrationincreases. Moreover, Rollins can grow through international expansion, sinceinternational markets represented only 7% of 2015 revenue. Beyond organicgrowth, the company can leverage M&A to drive low-single digit incrementalrevenue growth. Rollins’ adjusted EBITDA margins are currently ~20%, butwe believe that Rollins has the chance to grow EBITDA margins into the mid-20% range, through natural operating leverage, tight sales, general andadministrative expense control, and the positive impact stemming from thenew BOSS workforce management system.

The management team has impressive experience both at the company andin the pest and termite control business more generally. Moreover, theRollins family has run the company for more than 50 years and stillmaintains greater than 50% ownership. We view the Rollins familyownership as an opportunity to invest alongside a controlling shareholderwhose interests are aligned with ours.

Table VI.Top net sales for the quarter ended September 30, 2016

AmountSold

(millions)

Inovalon Holdings, Inc. $20.3Tractor Supply Co. 11.7SS&C Technologies Holdings, Inc. 10.1Norwegian Cruise Line Holdings, Ltd. 9.5Willis Towers Watson Public Limited Company 7.3

We reduced our position in health care data and analytics vendor InovalonHoldings, Inc. after the company reported financial results that fell short ofinvestor expectations and reduced its guidance for the remainder of 2016.We also reduced our position in retailer Tractor Supply Co. and exitedNorwegian Cruise Line Holdings, Ltd. after each reported weakenedbusiness trends. We reduced our holdings of SS&C Technologies Holdings,Inc. on concerns about negative business trends impacting its hedge fundclients. We trimmed our position in Willis Towers Watson Public LimitedCompany on concerns about its meaningful exposure to the British marketin the aftermath of Brexit.

20

September 30, 2016 Baron Asset Fund

Outlook

We continue to believe that high-quality, mid-sized growth stocks representan attractive long-term investment opportunity. During the past 30 years,mid-cap growth stocks, as a category, have outperformed small-cap andlarge-cap growth stocks. We believe that this trend will continue.

The U.S. economy continues to rank among the world’s healthiest, and itsequity market multiples are within the range of their long-term averages.Perhaps the most prevalent concern among equity investors is uncertaintyabout what will happen to stocks when interest rates finally begin toincrease. We believe that equity markets often perform well during a risingrate environment. Separately, employment and housing trends haveimproved throughout 2016, and energy prices remain meaningfully belowrecent levels. We think our portfolio of what we believe are well-managed,competitively advantaged, fast growing companies will continue to performwell in this environment, although we cannot guarantee that they will.

Thank you for investing in Baron Asset Fund.

Our entire Firm and our research department, in particular, are committedto justifying your ongoing confidence and support. I remain a significantinvestor in the Fund alongside you.

Sincerely,

Andrew PeckPortfolio ManagerOctober 17, 2016

Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summaryprospectus contains this and other information about the Funds. You may obtain them from its distributor, Baron Capital, Inc., by calling 1-800-99BARON orvisiting www.BaronFunds.com. Please read them carefully before investing.

The Adviser believes that there is more potential for capital appreciation in mid-sized companies, but there also may be more risk. Specific risks associatedwith investing in mid-sized companies include that the securities may be thinly traded and they may be more difficult to sell during market downturns. Prior toFebruary 15, 2007, the Fund’s strategy was to invest primarily in small and mid-sized growth companies. Since then, the Fund’s investment strategy hasshifted to mid-sized companies. The Fund may not achieve its objectives. Portfolio holdings are subject to change. Current and future portfolio holdings aresubject to risk.

The discussions of the companies herein are not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of therespective portfolio managers only through the end of the period stated in this report. The portfolio manager’s views are not intended as recommendations or investment advice to any person readingthis report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.

This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Asset Fund by anyone in any jurisdiction where it would be unlawful under the laws of thatjurisdiction to make such offer or solicitation.

21

Baron Growth Fund

22

RONALD BARON

CEO AND PORTFOLIO MANAGER

Retail Shares: BGRFXInstitutional Shares: BGRIX

R6 Shares: BGRUX

Dear Baron Growth Fund Shareholder:

Performance

U.S. stock markets digested better domestic economic prospects, causing lowerquality, riskier stocks to outperform the safer investments that had risen earlierthis year. This is best demonstrated by the rally in biotechnology shares, whichrose 23% in the quarter after declining almost 28% in the first half of the year.Against this backdrop, Baron Growth Fund (the “Fund”) increased in value 2.59%(Institutional Shares) during the September quarter, trailing the Russell 2000Growth Index, the small cap benchmark against which we compare the Fund.That index rose by 9.22% during the quarter. For the first three quarters of 2016,the Fund returned 6.39%. The index increased 7.48% during that period.


BaronGrowth

FundRetail

Shares1,2

BaronGrowth

FundInstitutional

Shares1,2,3

Russell2000

GrowthIndex1

S&P500

Index1

Three Months4 2.52% 2.59% 9.22% 3.85%Nine Months4 6.18% 6.39% 7.48% 7.84%One Year 7.60% 7.88% 12.12% 15.43%Three Years 4.63% 4.89% 6.58% 11.16%Five Years 13.92% 14.21% 16.15% 16.37%Ten Years 7.56% 7.76% 8.29% 7.24%Fifteen Years 9.65% 9.79% 8.90% 7.15%Since Inception

(December 31,1994) 12.62% 12.72% 7.46% 9.47%

Over the long term, the Fund has significantly outperformed its benchmarkwhile taking significantly less risk. Baron Growth Fund’s 12.72% annualizedperformance has exceeded that of the Russell 2000 Growth Index by anaverage of 5.26% per year since its inception on December 31, 1994. Please seeTable I. The Fund’s beta, a measure of the Fund’s volatility in comparison to themarket, has averaged 0.68 over the same time period. This means the Fund hasbeen just 68% as volatile as its benchmark. Please see Table III. As a result of itsstrong absolute and relative returns and lower risk, the Fund has achieved7.11% annual “alpha,” a measure of risk-adjusted performance, since inception.

The Fund has also significantly outperformed its peers over the long term.Morningstar reclassified Baron Growth Fund from the Small GrowthCategory to the Mid Growth Category. We strongly disagree withMorningstar’s decision. Because of its long-term approach, the Fund couldhave a significant percentage of its assets invested in securities that haveappreciated beyond their market capitalization at the time of the Fund’sinitial investment. For comparison purposes, we created a Baron-AdjustedMorningstar Small Growth Category that simply includes Baron GrowthFund with the funds in Morningstar’s Small Growth Category. Whencompared to the 49 funds in that Category for the nearly 22 years since theFund’s inception, Baron Growth Fund ranks as the #2 performing Fund inthat Category.* We hope to continue to meet our objective of doubling theper share value of Baron Growth Fund every five or six years. Of course, wecannot assure you that we will achieve this goal.

Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail shares and Institutional shares as ofSeptember 30, 2015 was 1.29% and 1.04%, respectively. The performance data quoted represents past performance. Past performance is no guarantee of futureresults. The investment return and principal value of an investment will fluctuate; an investor’s shares, when redeemed, may be worth more or less than theiroriginal cost. The Fund’s transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, without which performance would havebeen lower. Current performance may be lower or higher than the performance data quoted. For performance information current to the most recent month end,visit www.BaronFunds.com or call 1-800-99BARON.1 The indexes are unmanaged. The Russell 2000® Growth Index measures the performance of small-sized U.S. companies that are classified as growth and the S&P 500 Index of 500 widely held large

cap U.S. companies. The indexes and the Fund are with dividends, which positively impact the performance results. Russell Investment Group is the source and owner of the trademarks, servicemarks and copyrights related to the Russell Indexes. Russell is a trademark of Russell Investment Group.

2 The performance data in the table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.3 Performance for the Institutional Shares prior to May 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 May 29, 2009 did not reflect this fee, the returns would be higher.4 Not annualized.* The Morningstar US OE Small Growth Category Average is not weighted and represents the straight average of annualized returns of each of the funds in the Small Growth Category. Morningstar

rankings are based on total returns and does not include sales charges. Total returns do account for management, administrative, and 12b-1 fees and other costs automatically deducted from fund assets.Morningstar moved Baron Growth Fund from the Small Growth Category effective May 31, 2011 to the Mid-Cap Growth Category. The Fund’s investment mandate has been and continues to beinvesting in small cap growth stocks for the long term. While the ranking information contained herein may be based on performance measurements from Morningstar, Baron created a new Baron-Adjusted Morningstar Small Growth Category to include Baron Growth Fund Retail and Institutional shares. We intend to continue to provide comparative performance data for the Small GrowthCategory because we strongly disagree with Morningstar’s reclassification of the Fund. Because of its long-term approach, the Fund could have a significant percentage of its assets invested in securitiesthat have appreciated beyond their market capitalization at the time of the Fund’s initial investment.As of September 30, 2016, the Baron-Adjusted Morningstar Small Growth Category consisted of 738, 601, 437 and 73 funds (share classes) for the 1-, 5-, 10-year and Since Inception periods. Thenumber of funds in the Category may vary depending on the date that Baron made the calculation. The Baron-Adjusted Morningstar Small Growth Category Average is not weighted and representsthe straight average of annualized returns of each of the funds in the Category. Baron Growth Fund Institutional Share Class ranked in the 68th, 55th, 46th and 2nd percentiles, respectively. TheCategory consisted of 156, 354, 523, 743 and 73 funds (share classes) during the time intervals 12/31/1994 – 12/31/1999, 12/31/1999 – 12/31/2008, 12/31/2008 –12/31/2015, 12/31/2015 – 9/30/2016 and 12/31/1994 – 9/30/2016, respectively. Baron Growth Fund Institutional Share Class ranked in the 21st, 13th, 50th, 63rd and2nd percentiles, for the respective time intervals.

** The Morningstar US OE Mid-Cap Growth Average is not weighted and represents the straight average of annualized returns of each of the funds in the Mid-CapGrowth Category. Morningstar rankings are based on total returns and does not include sales charges. Total returns do account for management, administrative, and 12b-1 fees and other costs automatically deducted from fund assets. The Category consisted of 197, 366, 497, 723 and 84 funds (share classes) during the time intervals12/31/1994 – 12/31/1999, 12/31/1999 –12/31/2008, 12/31/2008 – 12/31/2015, 12/31/2015 – 9/30/2016 and 12/31/1994 – 9/30/2016, respectively. Baron GrowthFund Institutional Share Class ranked in the 25th, 12th, 48th, 32nd and 5th percentiles, for the respective time intervals. As of September 30, 2016, the Category consistedof 721, 574, 425 and 84 funds (share classes) for the 1-, 5-, 10-year and Since Inception periods. Morningstar ranked Baron Growth Fund Institutional Share Class in the57th, 45th, 43rd and 5th percentiles, respectively.

September 30, 2016 Baron Growth Fund

Due to our long-term, low-turnover approach, the Fund often holds asignificant percentage of its assets in securities that have appreciated beyondMorningstar’s definition of small capitalization stocks. We choose not todogmatically sell stocks just because they go up, but prefer to hold them iftheir competitive advantages and growth prospects remain strong. As thesebusinesses mature they frequently offer predictable, but slightly slower,revenue growth while enhancing investor returns with dividends and sharerepurchases. We think our long-term investment strategy is better than apassive strategy that sells the best stocks purely for market cap reasons.Although we only buy small-cap companies, the Fund’s performance comparesalmost as well against mid-cap funds as it does against small-cap funds. Whenmeasured against the 84 funds (share classes) in Morningstar’s Mid-CapGrowth Category over the Fund’s lifetime, Baron Growth Fund ranks in the top5%.

The nine months ended September 30, 2016 included the specter of a Fedtightening cycle, volatile energy prices, and unusually significant swings inforeign exchange rates. It also included Brexit, which markets initiallyconsidered a “Run For Your Life” event. Stocks declined more than 5% in thetwo days following the unexpected British decision to leave the E.U. Investorswere then concerned about the impact to Britain’s economy, collateral damageto global economic growth, and the risk that nationalist political movementscould gather strength on the continent and lead to the breakup of the E.U.

Like most macro events that have occurred during the Fund’s nearly 22 yearhistory, the impact of Brexit was short-lived (Paul and John knew “It Won’t BeLong”), and markets recovered their losses during the final three days of thequarter. Stocks continued to rally during the third quarter, as a better-than-expected jobs report helped to reassure investors of the underlying strength ofthe U.S. economy, and ignited expectations for an interest rate increase later in2016. Investors shifted their focus from perceived safe havens, such as bondsand stocks with high dividend yields, towards riskier investments.

We think the best evidence of this reversal is the rally in biotechnology shares,which jumped approximately 23% in the quarter after falling almost 28% inthe first half of the year. The Fund traditionally has not invested inbiotechnology, as small-cap stocks in this sector tend not to meet our

investment criteria. These small businesses tend to be pre-revenue, have binaryoutcomes where a clinical trial will either fail or succeed, have unpredictablecompetitive environments, and finite-lived barriers to entry. They also facelong-term pricing risks, as they sell to customers such as Centers for Medicareand Medicaid Services with near-unilateral pricing power, and face growingregulatory pressure to reduce the cost of drugs. Instead, the Fund invests insuppliers such as West Pharmaceutical Services, Inc. and Bio-TechneCorporation, which sell mission-critical drug delivery devices, proteins, andantigens to biotechnology companies for use in the research andmanufacturing processes. These businesses benefit from the same positivesecular trends, but also enjoy sustainable competitive advantages, high barriersto entry, predictable revenue growth, and outstanding cash flow generation.These stocks tend to trail the broader index in “risk-on” quarters such as thisone, but we believe will generate superior returns with far less volatility acrosscycles.

We believe that prospects for the U.S. economy are solid. Employment trendsremain strong, housing prices are appreciating, wages are growing at a modestrate, and low fuel prices are still helping consumers. The yield on the 10-yearU.S. Treasury bond is near record low levels, and we believe that the pace ofFed interest rate increases will prove to be gradual. Finally, energy prices havestabilized, evidenced by crude currently trading around $50 per barrel. Lastyear’s precipitous decline in energy prices, and the corresponding impact onmanufacturing and industrial sectors, led to six consecutive quarters ofdomestic earnings declines for S&P 500 companies. We believe theseheadwinds are now abating.

The Fund has invested in a diversified portfolio of businesses with, in our view,high barriers to entry, positive secular trends, and large addressable markets,led by best-in-class management teams. In the current environment, webelieve stock prices are likely to be less correlated than they were in the recentpast, and that investors will be willing to pay premiums for the high qualitygrowth businesses in which we have invested. We think the Fund will continueto achieve strong relative performance over the long term, although there is noguarantee that this will be the case.

Table II.PerformancePeriods of euphoria and stress

“Yesterday”Clinton Years

1992-2000Internet Bubble

12/31/99P/E 33x

“The Long andWinding Road”

Bush Years2000-20089/11; Iraq;

Afghanistan;Housing Bubble;Financial Panic

“Here Comesthe Sun”

Obama Years2008-2016

Recovery andQuantitative

EasingP/E 16.1x

“HelterSkelter” Fed“tightening”

“Any Timeat All”

Annualized ReturnsInception

12/31/94 to12/31/99

12/31/99 to12/31/08

12/31/08 to12/31/15

12/31/15 to9/30/16

Inception12/31/94 to

9/30/16

Baron Growth Fund (Institutional Shares) 29.90% 2.46% 15.60% 6.39% 12.72%Russell 2000 Growth Index 18.99% (4.71)% 16.33% 7.48% 7.46%S&P 500 Index 28.56% (3.60)% 14.81% 7.84% 9.47%

Percentile rank in Baron-Adjusted Morningstar Small Growth Category 21 13 50 63 2# of Share Classes in Baron-Adjusted Morningstar Small Growth Category 156 354 523 743 73Baron-Adjusted Morningstar Small Growth Category Avg* 22.16% (2.69)% 15.51% 7.38% 9.75%

Percentile rank in Morningstar Mid-Cap Growth Category 25 12 48 32 5# of Share Classes in Morningstar Mid-Cap Category 197 366 497 723 84Morningstar Mid-Cap Growth Category Avg** 25.32% (3.33)% 15.45% 4.93% 9.31%

23

Baron Growth Fund

Table III.Performance Based Characteristics as of September 30, 2016

Time Interval

12/31/94to

12/31/99

12/31/99to

12/31/08

12/31/08to

12/31/15

12/31/15to

9/30/16

12/31/94to

9/30/16

Alpha (%) 13.61 5.05 2.66 0.15 7.11Beta 0.77 0.58 0.77 0.65 0.68Upside Capture (%) 99.01 71.91 79.62 61.14 81.35Downside Capture (%) 61.19 57.14 68.99 48.16 60.56# of Monthly

Observations 60 108 84 9 261

Table IV.Top contributors to performance for the quarter ended September 30, 2016

YearAcquired

MarketCap


QuarterEnd

MarketCap

(billions)Total

ReturnPercentImpact

Vail Resorts, Inc. 1997 $0.2 $ 5.7 13.49% 0.62%IDEXX Laboratories, Inc. 2005 1.9 10.1 21.40 0.59Arch Capital Group Ltd. 2002 0.4 9.7 10.08 0.44SS&C Technologies

Holdings, Inc. 2010 1.0 6.5 14.70 0.41Dick’s Sporting Goods, Inc. 2004 1.4 6.4 26.20 0.38

Shares of ski resort company Vail Resorts, Inc. increased in the thirdquarter on news that the company had entered into an agreement toacquire Whistler Blackcomb in Canada. Vail owns among the best ski resortsin North America, including Vail, Beaver Creek, Park City, and now Whistler.The deal gives the company greater scale, which we think it will be able toleverage in its bid to continue to grow its season pass sales. (David Baron)

Shares of veterinary diagnostics leader IDEXX Laboratories, Inc. increasedin the third quarter. The stock continued to rally on strong financial resultsand multiple expansion. Competitive trends are strong and improving,highlighted by instrument revenue growth, domestic lab growth, rising salesproductivity, and stability in rapid assays. We believe that IDEXX’s direct go-to-market model coupled with research and development-driven productenhancements will put steady upward pressure on organic revenue andearnings growth over time. (Neal Rosenberg)

Arch Capital Group Ltd. is a specialty insurance and reinsurance company.The stock performed well during the third quarter on solid quarterly results,with profitable underwriting, modest catastrophe losses, and favorablereserve development. The market also reacted favorably to Arch’sagreement to acquire mortgage insurance company United Guaranty fromAIG. This acquisition will make Arch the largest provider of mortgageinsurance, a market that we believe has attractive profitability and growthcharacteristics. (Josh Saltman)

Table V.Top detractors from performance for the quarter ended September 30, 2016

YearAcquired

MarketCap



(billions)Total

ReturnPercentImpact

Gartner, Inc. 2007 $2.3 $ 7.3 –9.20% –0.40%Inovalon Holdings, Inc. 2015 4.4 2.2 –18.34 –0.29Under Armour, Inc. 2005 1.0 15.8 –5.23 –0.22TreeHouse Foods, Inc. 2009 0.9 4.9 –15.06 –0.18Primerica, Inc. 2010 1.1 2.5 –7.08 –0.18

Shares of Gartner, Inc., a provider of syndicated IT research, relinquishedsome gains due to tougher comparisons and slightly more challengingmacro conditions. We believe Gartner’s key metrics are solid. The companyhas significant financial flexibility, and we think it will aggressively deploycapital for repurchases or mergers and acquisitions. Over time, in our view,Gartner will generate accelerating top line growth, significant growth inearnings and free cash flow, and persistent return of capital.(Neal Rosenberg)

Shares of health care data and analytics vendor Inovalon Holdings, Inc. fellin the third quarter on weak financial results and reduced guidance throughyear end. Management attributed the revenue shortfall to price reductionsin its retrospective risk adjustment business, and the margin shortfall toinvestments aimed at long-term growth. We think the recent poorperformance is temporary. Inovalon has high quality products that generatesolid return on investment for its customers, and we think it is wellpositioned to capitalize on the need for robust data and analytics in healthcare. (Neal Rosenberg)

Shares of Under Armour, Inc., a manufacturer and distributor of athleticapparel and footwear, declined in the third quarter as the bankruptcy andstore closing of a top sporting goods retailer created questions aroundupcoming growth targets. Under Armour is diversifying into mass channelsthat could potentially pressure margins as well. We remain optimistic aboutUnder Armour’s ability to grow its core domestic business, achieveprofitability overseas, and increasingly sell products direct to consumers.(Michael Baron)

Portfolio Structure and Investment Strategy

Due to Baron Growth Fund’s long-term, low turnover approach, the Fundoften holds a significant percentage of its assets in securities that haveappreciated beyond their market capitalizations at the time of the Fund’sinitial investment. The Fund’s three-year average turnover is 8.26%, whichmeans we hold investments on average for over 12 years. This is verydifferent than other funds in our small-growth peer group that turn overportfolios every 16 months, on average.

24

September 30, 2016 Baron Growth Fund

For new investments, we exclusively purchase small capitalization companiesthat we think can double in size in a five-or six-year period. Ideally, these newinvestments generate strong price appreciation during the early phase of ourinvestment, such as the ones highlighted in the table below. However, theperformance of newer investments is more often significantly below ourlong-term expectations. This is generally because these businesses areinvesting in themselves in order to capture significant long-term marketopportunities. Recent portfolio examples include Benefitfocus, Inc., which isinvesting to add new products and expand its ecosystem; AO World plc,which is investing to expand into Europe from its base in the U.K.; NordAnglia Education Inc., which is investing to expand its presence in mainlandChina; and Caesarstone Ltd., which is adding manufacturing lines to increaseits capacity. While all these investments penalize short-term results, andoften negatively impact stocks’ short-term performance, we encourage thisbecause it paves the way for sustained growth and profitability over the longterm. We regard these investments as “seed corn,” because these companieshave the potential to grow significantly. If these investment programs aresuccessful, the results eventually show up in the financial statements asfaster-than-expected revenue growth, greater profitability, and higher cashflow. We find that our investments generate their best returns as thesemetrics become apparent to other investors, so Baron Capital continues tomake significant investments to support and expand our research staff todiscover such opportunities.

Table VI.Top performing stocks owned less than five years

Year ofFirst Purchase

CumulativeTotal Return

Since First Dateof Purchase

Caesarstone Ltd. 2012 246.1%Pinnacle Entertainment, Inc. 2013 188.1Guidewire Software, Inc. 2012 142.9Bright Horizons Family Solutions, Inc. 2013 136.2West Pharmaceutical Services, Inc. 2013 127.7

As these businesses mature they frequently become “all weather”investments, offering predictable growth while enhancing returns throughthe increased dividends and share repurchases.

We believe this is a superior strategy to that of managers or indexes that selltheir best performing stocks purely due to market cap restrictions. Mostinvestments in the Fund that have been held for more than five years haverealized approximately three to five-fold appreciation so far. Six haveachieved returns in excess of seven times since their initial date of purchase.

Table VII.Top performing stocks owned more than five years

Year ofFirst Purchase

CumulativeTotal Return

Since First Dateof Purchase

Choice Hotels International, Inc. 1996 1,144.0%Under Armour, Inc. 2005 1,083.8Alexander’s, Inc. 1999 871.5Arch Capital Group Ltd. 2002 824.1Vail Resorts, Inc. 1997 766.9IDEXX Laboratories, Inc. 2005 683.3

As a result of owning stocks that have generated outsized returns over alonger holding period, the market caps of approximately 62% of the Fundare above Morningstar’s breakpoint classification of small-cap stocks. Overthe last five years, Baron Growth Fund’s weighted average market cap hasmoved in line with the Morningstar Small Cap Breakpoint of $2.0-$4.0billion and remains far below the highest market capitalization limit for mid-cap stocks of $19 billion.

Recent Purchases

Table VIII.Top net purchases for the quarter ended September 30, 2016

YearAcquired

MarketCap


QuarterEnd

MarketCap

(billions)


Juno Therapeutics, Inc. 2016 $3.3 $3.2 $10.8Essent Group Ltd. 2016 2.2 2.5 9.5Penn National Gaming, Inc. 2008 1.1 1.1 2.5Inovalon Holdings, Inc. 2015 4.4 2.2 0.7AO World plc 2016 0.9 0.9 0.5

Juno Therapeutics, Inc. is a biotech company pioneering a novel approach tocancer therapy involving the removal, manipulation and re-introduction ofyour own body’s immune cells to fight tumors. Part of a broaderimmunotherapeutic approach to cancer treatment, this cell-based therapyhas delivered breakthroughs in a subset of fatal blood cancers. Clinical trialresults show potentially curative characteristics for many treated patients;albeit total treated numbers remain small and longer follow up is stillrequired. Regardless, given the high unmet need, the FDA has granted thesetherapies with “breakthrough designation,” and we expect development tocontinue at a breakneck pace. Eventually, this therapy’s utility should expandbeyond blood cancers to solid tumors and help usher in new age of modernmedicine. With regards to Juno, we regard them to be best positioned amongcompetitors given the strength of their scientific pedigree and their extensivecollaboration with partner Celgene. (Josh Riegelhaupt)

During the quarter we initiated a position in Essent Group Ltd., a mortgageinsurance company. Private mortgage insurance plays a critical role in the U.S.housing finance system by facilitating the sale of low down-payment loans intothe secondary market. Essent provides credit protection to lenders andmortgage investors by covering a portion of the unpaid principal balance in theevent of a default. In return, the company collects premiums that are investedin a portfolio of investment-grade securities. Essent was formed in 2008 to takeadvantage of the severe dislocation in the mortgage market, so it isunencumbered by pre-crisis liabilities and has grown premiums much fasterthan peers off a smaller base. Since the financial crisis, mortgage credit qualityhas dramatically improved and the housing market is recovering. Essent isbenefiting from growing demand for mortgage insurance and low losses onunderwritten policies. As of June 30, 2016, the company insured over 328,000mortgages representing over $72 billion of mortgage debt with over 25%growth in earned premiums. Profitability is excellent with a combined ratiobelow 40% and returns on equity in the mid-high teens. We believe thatmanagement exercises good underwriting discipline and has a sound, long-termvision for the company. (Josh Saltman)

25

Baron Growth Fund

In the quarter, we increased our position in Penn National Gaming, Inc. aswe believed the stock was attractively valued. Its shares declined onconcerns about a delay in the opening of the Jamul tribal casino in SanDiego as well as uncertainty regarding the refinancing of the tribe’s loanswhere Penn was the main lender. However, we believed these would beresolved and, with an over 20% free cash flow yield with an improvingbalance sheet, we considered Penn’s stock decline made it an attractivebuying opportunity. (David Baron)

Portfolio Holdings

Baron Growth Fund is different than most small-cap growth funds. TheFund’s objective is to outperform its benchmark index over the long term byinvesting in businesses seeking to grow significantly faster than theeconomy and the market over the long term. To accomplish this, we investin businesses that we believe have significant opportunities for growth,sustainable competitive advantages, exceptional management teams, andan attractive valuation. These growth-oriented companies often accomplishtheir objectives by investing in their businesses and penalizing their profits inthe short term. As they build competitive advantages and address theirgrowth opportunities, the lower-than-normalized profitability of many ofthese companies often depresses their share prices in the short term. It isalso what gives Baron Growth Fund a chance to make investments in thosebusinesses at prices that we believe do not reflect their long-term profitprospects.

As of September 30, 2016, Baron Growth Fund held 61 investments. The top10 holdings comprised 39.9% of the Fund’s net assets. All these top 10investments have been successful and were purchased when they weresmaller businesses. We believe they all offer significant further appreciationpotential although we cannot guarantee that will be the case. The medianmarket capitalization for Baron Growth Fund’s entire portfolio isapproximately $2.7 billion. We believe the Fund’s diversified portfolio offersinvestors potentially better-than-market returns with less risk than themarket.

Table IX.Top 10 holdings as of September 30, 2016

YearAcquired

MarketCap


QuarterEnd

MarketCap

(billions)Amount

(millions)

Percentof NetAssets

Vail Resorts, Inc. 1997 $0.2 $ 5.7 $323.9 5.4%

Arch Capital Group Ltd. 2002 0.4 9.7 309.1 5.2

FactSet Research Systems, Inc. 2006 2.5 6.6 259.4 4.4

Under Armour, Inc. 2005 1.0 15.8 254.6 4.3

Gartner, Inc. 2007 2.3 7.3 247.7 4.2

CoStar Group, Inc. 2004 0.7 7.1 216.5 3.6

IDEXX Laboratories, Inc. 2005 1.9 10.1 202.9 3.4

SS&C TechnologiesHoldings, Inc. 2010 1.0 6.5 192.9 3.2

Gaming and LeisureProperties, Inc. 2013 4.2 6.9 189.0 3.2

MSCI, Inc. 2007 1.8 7.9 180.5 3.0

Thank you for investing in Baron Growth Fund.

Thank you for joining us as fellow shareholders in Baron Growth Fund. Webelieve the growth prospects for the businesses in which Baron Growth Fundhas invested continue to be favorable.

We continue to work hard to justify your confidence and trust in ourstewardship of your family’s hard-earned savings. We will also continue toprovide you with information that I would like to have if our roles werereversed. This is so you will be able to make an informed judgment aboutwhether Baron Growth Fund remains an appropriate and attractiveinvestment for your family.

Respectfully,

Ronald BaronCEO and Portfolio ManagerOctober 17, 2016

26


The Adviser believes that there is more potential for capital appreciation in smaller companies, but there also may be more risk. Specific risks associated withinvesting in smaller companies include that the securities may be thinly traded and they may be more difficult to sell during market downturns. The Fund maynot achieve its objectives. Portfolio holdings are subject to change. Current and future portfolio holdings are subject to risk.The discussions of the companies herein are not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of therespective portfolio managers only through the end of the period stated in this report. The portfolio manager’s views are not intended as recommendations or investment advice to any person readingthis report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.

This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Growth Fund by anyone in any jurisdiction where it would be unlawful under the laws of thatjurisdiction to make such offer or solicitation.

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 (Russell 2000 Growth Index) is 1.00 by definition.

P/E: the price earnings ratio is a valuation ratio of a company’s current stock price to its actual earnings per share.

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.

September 30, 2016 Baron Small Cap Fund

Retail Shares: BSCFX

Institutional Shares: BSFIX

R6 Shares: BSCUX

CLIFF GREENBERG

PORTFOLIO MANAGER

Dear Baron Small Cap Fund Shareholder:

Performance

Baron Small Cap Fund (the “Fund”) gained 6.50% (Institutional Shares) inthe third quarter of 2016. Year-to-date, the Fund is up 8.76%. In the quarter,the Fund trailed the Russell 2000 Growth Index but outpaced the S&P 500Index. Year-to-date, the Fund is ahead of both the Russell 2000 GrowthIndex (+7.48%) and the S&P 500 Index (+7.84%).


BaronSmall Cap

FundRetail

Shares1,2

BaronSmall Cap

FundInstitutional

Shares1,2,3

Russell2000

GrowthIndex1

S&P500

Index1


(September 30, 1997) 9.29% 9.39% 5.30% 6.42%

The market continued its uptrend in the third quarter, recovering from thepost-Brexit dip. Against a backdrop of gloom and doom which marks thepresidential campaign, the economy proved to be quite resilient. Job growthis solid and the unemployment rate has held at 5%. The figures are not toostrong, though, so the Federal Reserve can delay raising interest rates untillate this year. There is little to suggest that significantly higher inflation is inthe offing. This environment of continued growth, even if muted, lowinterest rates, and modest inflation is a good backdrop for stocks.

Scant growth and cheap borrowing costs has led to an increase in mergersand acquisitions which have been positive for the Fund. Year-to-date, six ofour holdings have been acquired (Press Ganey Holdings, Inc., FEICompany, Mattress Firm Holding Corp., ExamWorks Group, Inc., BatsGlobal Markets, Inc. and ITC Holdings Corp.), four by other publiccompanies and two by private equity funds. Another of our holdings, WasteConnections, Inc., was actually purchased in a reverse acquisition, though itis the surviving business. Waste Connections, along with other holdingsTransDigm Group, Inc., Gaming and Leisure Properties, Inc., AcuityBrands, Inc., FleetCor Technologies, Inc., WEX Inc., Electronics for

Imaging, Inc., Liberty Media Group and Berry Plastics Group, Inc., haveannounced meaningful purchases of businesses this year that we believe areall accretive to value creation for these investments.


PercentImpact

Mattress Firm Holding Corp. 0.76%IDEXX Laboratories, Inc. 0.72TransDigm Group, Inc. 0.48FleetCor Technologies, Inc. 0.43PRA Health Sciences, Inc. 0.40

Mattress Firm Holding Corp., the largest mattress retailer in the U.S., wasacquired by the South African firm Steinhoff International, a global mattressstore chain, for $64 per share. This was a 115% premium over the closingprice on the day prior, a good outcome. We were shareholders of MattressFirm since it went public in 2011. We doubled our money, as themanagement grew the business from 640 stores upon IPO to about 3,500stores on sale.

Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares and Institutional Shares as ofSeptember 30, 2015 was 1.30% and 1.04%, respectively. The performance data quoted represents past performance. Past performance is no guarantee of futureresults. The investment return and principal value of an investment will fluctuate; an investor’s shares, when redeemed, may be worth more or less than theiroriginal cost. The Fund’s transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, without which performance would havebeen lower. Current performance may be lower or higher than the performance data quoted. For performance information current to the mostrecent month end, visit www.BaronFunds.com or call 1-800-99BARON.1 The indexes are unmanaged. The Russell 2000® Growth Index measures the performance of small-sized U.S. companies that are classified as growth and the S&P 500

Index of 500 widely held large cap U.S. companies. The indexes and the Fund are with dividends, which positively impact the performance results. Russell InvestmentGroup is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell is a trademark of Russell Investment Group.


not have a distribution fee. If the annual returns for the Institutional Shares prior to May 29, 2009 did not reflect this fee, the returns would be higher.4 Not annualized.

27


IDEXX Laboratories, Inc., the dominant provider of veterinary diagnostics,reported strong financial results – revenues up 12% organically, EPS up23% – and its stock continued its surge. IDEXX is taking market share as itintroduces new products developed by its sustained R&D spending. Its newdiagnostic instruments offer unique attributes and are pulling through highmargin proprietary tests, many of which we believe will have a meaningfulimpact as it is in the early innings of roll out, driving high marginconsumable revenues. The company’s decision to go direct with its salesforce is enhancing its growth rates and profitability and is creating evenstickier customer relationships. The company has over 90% recurringrevenues and over 95% customer retention. We believe the stock multiplehas expanded to reflect the company’s tremendous business characteristicsand growth outlook, and also because animal health stocks are in voguewith concerns over human drug pricing.

TransDigm Group, Inc., the manufacturer of aircraft parts focused on theaftermarket, reported another strong quarter with the key commercialaftermarket sales growing low double-digits organically, continuing therebound from a weak first quarter. EBITDA margins that had expanded 150basis points are now back to almost 50%, after absorbing the dilutive effectsof recent acquisitions. The company closed on its second largest purchaseever, the $1 billion purchase of DDC Corporation, a company withproprietary products and significant aftermarket exposure, so a terrific fit.Recently, the company announced that they will pay a $24/share specialdividend to distribute excess cash and right size the balance sheet. Thecompany will have paid five special dividends since 2009, returning $91.50per share over time. We now have received more than our total investmentback in these dividends and still own $195 million of stock. Totally amazing.

FleetCor Technologies, Inc., which provides payment processing services tovehicle fleets and other businesses worldwide, posted strong results –revenues up 9% and earnings up 15% – causing its stock to rise. FleetCorclosed on the meaty acquisition of STP, an operator of Brazilian toll roadservices, which we believe is strategic and highly accretive. Management hasproven to be skilled buyers and integrators of growing electronic paymentprocessors. We believe the company is well positioned for meaningfulearnings growth over the next several years, driven by double-digit organicgrowth and the benefits of recent, and we suspect, future transactions.These are significant barriers to entry in the fuel card business, in addition tohigh margins and free cash flow generation, which we admire.

Other stocks that rose over 20% this quarter but contributed less to overallreturns include PRA Health Sciences, Inc., Cognex Corp., TheSpectranetics Corporation, WEX, Inc., HealthEquity, Inc., Party CityHoldco, Inc., Liberty Media Corp., and DigitalGlobe, Inc.


PercentImpact

Gartner, Inc. –0.40%The Chefs’ Warehouse, Inc. –0.27BJ’s Restaurants, Inc. –0.24Diplomat Pharmacy, Inc. –0.20Summit Materials, Inc. –0.12

Shares of Gartner, Inc., a provider of syndicated IT research, fell afterreporting that the contract value of their research sales decelerated slightlyin the quarter. Gartner is experiencing some challenges with longer salescycles in some pockets of their business, namely energy and Brazil. We

believe that the slowdown is modest and that the company will continue togrow double-digits organically and increase free cash flow (the appropriatemetric by which to value the stock in our opinion) per share by 20% thisyear and going forward. The company’s balance sheet is presentlyunderutilized, and we suspect the company is considering a sizeableacquisition, or if not, will return to aggressively repurchasing its shares.Either, we believe, will likely add significant value.

Shares of The Chef’s Warehouse, Inc., the leading food service distributorto high end restaurants, fell after reporting disappointing results and cuttingguidance by about 20%. The company had issues with switching over tonew operating systems at its West Coast protein operation. The corespecialty business slowed somewhat as well, yet still grew 6%. Though thestock is in the penalty box, we believe that the issues are self-inflicted andwill be resolved, and the company will continue on its path to growinternally and consolidate its fragmented industry.

BJ’s Restaurants, Inc., the operator of casual restaurants, reported solidearnings but same-store-sales were lower-than-expected caused by weak trafficcounts. BJ’s and other casual diners are suffering from weak consumer spendingand heavy discounting. Over the last few years, we think management hasdone an outstanding job recasting the stores and operations, which has led tooutsize margin expansion. However, negative traffic is weighing on the gains.We believe BJ’s has a differentiated offering, featuring high quality foodofferings at value prices in the attractive contemporary environs, which drivesindustry-leading volumes; has a long runway of unit growth at high returns; andnow trades at a knock-down multiple, which does not reflect the quality of thebusiness and its growth prospects.

Shares of Diplomat Pharmacy, Inc., the largest independent specialtypharmacy in the U.S., fell in the quarter, pressured by concerns about the futureof drug pricing. We believe the effect of this on the company’s fortunes areoverblown. Sales grew 30% in the quarter outside its HepC business, which isabout twice the rate of growth in its sector. The drug development pipeline isskewed towards specialty drugs, and Diplomat is winning more limiteddistribution mandates, which bodes well for continued organic growth.

The other stock that declined 20% in the quarter was Zoe’s Kitchen, Inc.

Portfolio Structure

As of September 30, 2016, the Fund had $3.5 billion under management andwas invested in 74 common stocks. The top 10 positions represented 36.6%of the Fund at the end of the quarter.


YearAcquired

Quarter EndInvestment

Value(millions)

Percentof NetAssets

TransDigm Group, Inc. 2006 $195.2 5.6%Gartner, Inc. 2007 145.9 4.2IDEXX Laboratories, Inc. 2008 140.9 4.0Bright Horizons Family Solutions, Inc. 2013 140.5 4.0The Ultimate Software Group, Inc. 2008 132.9 3.8Waste Connections, Inc. 2016 119.5 3.4Acuity Brands, Inc. 2011 119.1 3.4SBA Communications Corp. 2004 100.9 2.9Guidewire Software, Inc. 2012 96.0 2.7Gaming and Leisure Properties, Inc. 2013 92.0 2.6

28

September 30, 2016 Baron Small Cap Fund

The Fund has been built over the years through one-off stock picks. Ourapproach is to stick with our winners and prosper as these companies growand their stock prices compound. Our turnover is low, 13.8%, whichcompares to average small-cap funds of 77.0%.

We favor business that we believe are established leaders in their niches;have sustainable competitive advantages in our view; are well managed byproven executives; are growing considerably; and, in our view, will continueto do so both organically and through deploying their free cash flow in valueaccretive activities; and are reasonably valued. That’s more than a mouthful,it’s a tough standard to meet. It’s especially hard finding companies that cangrow rapidly in this weak macroeconomic environment and that don’t tradeat nose bleed valuations. But that is precisely what we own.

Here are the current growth and quality characteristics of the Fund (that wehave compiled using reported numbers, our internal estimates for out years,and that are weighted based on position sizes of each stock in the portfolio):

• Year-to-date organic growth (constant currency) of 9.6%• Year-to-date total revenue growth (constant currency) of 17.7%• Year-to-date profit growth (measured by EBITDA) of 20.2%• Year-to-date EBITDA margins of 28.9% and EBIT margins of 21.0%• Price earnings multiple (P/E) for 2016 31.5; P/E for 2017 of 25.0x• Enterprise value/EBITDA for 2016 of 18.6x, EV/EBITDA for 2017 of

15.4x

To simplify, our portfolio of companies’ revenues grow organically at10%and grow twice that rate when one includes acquisitions. Profits grow evenfaster. Cash flow margins are almost 30%, which we consider a hallmark ofhigh quality businesses. They also trade at 15 times projected EBITDA, whichwe believe is reasonable for these growth and quality characteristics.

Recent Activity

During the quarter, we initiated five new positions. One is a special situation(Univar Inc.), one a fallen angel (Zoe’s Kitchen, Inc.), and two were recentIPOs (Medpace Holdings, Inc. and Patheon N.V.).


YearAcquired


(billions)


Univar Inc. 2016 $3.0 $28.7Medpace Holdings, Inc. 2016 1.2 15.5Zoe’s Kitchen, Inc. 2016 0.4 15.0Liberty Media Group 2013 2.4 7.9Red Rock Resorts, Inc. 2016 2.7 5.5

We invested in Univar Inc., a leading global distributor of chemicals andprovider of innovative services, soon after a new CEO, Steve Newlin, wasannounced. We have the utmost respect for Steve and his successful trackrecord, most recently as the leader of PolyOne, a chemical company heturned around and whose stock more than tripled during his tenure. Webelieve he has the skillset and experience to greatly improve growth andprofitability at Univar.

Univar purchases basic and specialty chemicals in bulk quantity and thenprocesses and delivers them to these users. Chemical distributors provide

compelling value to both chemical producers – market access, safety,reduced complexity – and to customers – simplified sourcing, just-in-timeinventory, value added solutions. Univar was founded in 1924, does about$9 billion in sales, and is the largest chemical distributor in the U.S. andsecond biggest worldwide.

We believe that Univar is well positioned for growth. Distribution is now lessthan 10% of the addressable market, and we believe this can double or tripleover time, as has been the case with industrial gas distribution. The industryis highly fragmented, and we believe will greatly consolidate over time asboth suppliers and customers push for fewer distributors. We think thatUnivar will be an acquirer and this will add stockholder value. Univarprovides value added services (on site manufacturing, chemical wastemanagement, and digital sales services), which are higher margin businessesand only 10% of present business, destined for higher mix.

Univar came public mid-2015, and the stock fell over 40%, as their ill-conceived focus on sale of chemicals to the fracking industry collapsed withthe decline in drilling, and foreign exchange headwinds hurt reportedearnings. The business and the stock are depressed, creating a good entrypoint for the Fund. According to the CEO, the biggest target for change willbe sales execution. The company is changing sales compensation with focuson optimizing pricing, selling additional services, and reducing discounting.The company’s EBITDA margins are only 6.6%, well below competitors’margins and what new management believes is attainable as the operationalimprovement plan takes hold. As margins expand, organic growth picks up,debt levels decline, and acquisitions are made with free cash flow, webelieve the trading multiple will expand, leading to strong returns forshareholders.

Zoe’s Kitchen, Inc. owns and operates the Zoe’s Kitchen restaurant chain,which offers healthy, fresh, Mediterranean-style cooking in a contemporary,fast, casual setting. The concept is highly differentiated relative tocompetitors in its markets and offers a unique value proposition for parentslooking for fast, healthy take-out. Zoe’s was founded as a family business inAlabama in 1995. The current CEO, Kevin Miles, took over the business in2009 and has grown the store count from a base of 21 locations in 7 statesto 186 locations across 19 states. Aspirations are to reach 1,600 units intime, 10 times the size of the existing chain. Unit and developmenteconomics are industry-leading – the restaurants generate $1.5 million inrevenue each, with store-level EBITDA margins of 21% and cash-on-cashreturns exceeding 30% – so we expect that growth will be highly returngenerative for investors.

The company came public in early 2014 and the stock spiked and stayedexpensive for the next two years, as investors recognized the concept’sdifferentiation and growth potential. We have been tracking the companysince then, waiting for the right opportunity to invest. As industry-widetraffic has declined in 2016 and Zoe’s indicated that its same-store-salesgrowth had moderated during the summer, the stock’s price was cut nearlyin half. We saw this as an opportunity to initiate and build a position, andhave been doing so during the end of the third quarter. We believe the long-term prospects for Zoe’s, which is on-trend with consumer preferences forfresh, healthy, made-to-order, fast-casual cuisine, will not be derailed bycurrent, transient industry-wide issues like labor inflation and trafficcyclicality. We believe current EBITDA of $50 to 60 million can double overthe next four years and increase 5 times over the next 10 years. We believethat Zoe’s can ultimately be a business worth about $5 billion, versus itspresent enterprise value of $450 million.

29



YearAcquired

MarketCap


Quarter EndMarketCap or

Market CapWhen Sold(billions)

AmountSold

(millions)

Mattress Firm Holding Corp. 2011 $0.6 $ 2.4 $59.4Press Ganey Holdings, Inc. 2015 1.4 2.2 42.4Waste Connections, Inc. 2016 3.5 13.1 41.6FEI Company 2011 1.6 4.4 26.9Chesapeake Lodging Trust 2010 0.3 1.5 25.0

During the quarter, we sold the last of our positions in Mattress FirmHolding Corp., FEI Company, and ExamWorks Group, Inc., as transactionsto acquire each closed in the period. We also sold much of our holdings inPress Ganey Holdings, Inc. on the announcement of the deal for it to goprivate.

We exited our positions in Chesapeake Lodging Trust, as we thought it wasreasonably valued. We moved on from Catalent, Inc., and swapped into acomparable drug manufacturing company which is operating better. Wealso sold out of Artisan Partners Asset Management Inc. because ofindustry headwinds, and we reduced our position significantly in HoughtonMifflin Harcourt Company when they announced the departure of theirCEO, since the company results have been disappointing.

We trimmed our holdings in some larger holdings that have been actingwell, including Waste Connections, Acuity Brands, Berry Plastics Group, andIDEXX Labs. Our approach is to reduce positions into strength, even whenwe like the long-term prospects as we are mindful of the market cap of ourholdings, to remain true to our mandate to manage a small-cap fund.

Outlook

The tone of the election is so negative and depressing it is causing anxietywhich we believe is temporarily weighing on consumer spending. Once it isover (and we can’t wait for it to be over!), we suspect we will revert to samefine environment for stocks, as has been the case year to date. We foreseecontinued moderate growth and do not fear a recession in the near future.We expect bond yields will rise, but moderately, and we believe that isalready built into stock prices. Wages are increasing, which will pressuresome businesses, but we still see margin expansion opportunities forcompanies with above average revenue growth. We are concerned that thedollar is back on the rise, since that would dampen growth somewhat andhurt earnings because of negative translation. We view the market as fairlyvalued, but believe multiples will stay in their present range. We think we

will make our returns based on the growth of our companies’ earnings andtheir additive use of the cash flow their businesses generate.

The Fund comprises high quality, well-managed, established/leadingbusinesses that grow rapidly. As discussed before, we expect our portfolio togrow revenues about 10% organically and 18% overall, to grow earnings(measured by EBITDA) at 20% and earnings per share at a higher rate, andto have EBITDA margins of about 30%. The portfolio trades at 25 times ourestimate of next year’s EPS and 15.4 times 2017 EBITDA.

Over the last several years, we have made our returns as these businesses havegrown their earnings, and benefited from owning them as their multiples haveexpanded. We continue to believe their trading multiples are reasonable andsustainable because of the quality of their businesses and the significant andstable growth they have generated. There is a scarcity value in these highquality, well-growing companies that justifies their present valuations. Owningthese safe and consistent performers enables us to sleep at night. It also resultsin a portfolio that produces enviable returns with less risk and volatility. Wecontinue to favor a portfolio of these types of businesses for good reason.

I am pleased to announce that David Goldsmith has been appointed to theposition of Assistant Portfolio Manager for the Fund. David, a graduate ofDuke University and Wharton Business School, has worked at Baron for 10years, primarily on small caps. His promotion is in recognition of his researchprowess and great contribution to the Fund, and part of our plan at Baron totrain our top analysts to be the next generation of portfolio managers. Awonderful development.

David, as an additional dedicated resource to the Fund, will be able to helpme continue to monitor our portfolio holdings closely and stay in closeworking contact with our deep (35 person) research team. He will alsoinitially focus on new idea generation and processing. Over time, I envisionhim taking on additional responsibilities.

Thanks for investing in the Fund. We are working hard to create a portfolioof special companies whose stocks will perform well as the businessescontinue to grow.

Cliff GreenbergPortfolio ManagerOctober 17, 2016


The Adviser believes that there is more potential for capital appreciation in smaller companies, but there also may be more risk. Specific risks associated withinvesting in smaller companies include that the securities may be thinly traded and they may be more difficult to sell during market downturns. The Fund maynot achieve its objectives. Portfolio holdings are subject to change. Current and future portfolio holdings are subject to risk.

The discussions of the companies herein are not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of therespective portfolio manager only through the end of the period stated in this report. The portfolio manager’s views are not intended as recommendations or investment advice to any person readingthis report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.

This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Small Cap Fund by anyone in any jurisdiction where it would be unlawful under the laws of thatjurisdiction to make such offer or solicitation.

30

September 30, 2016 Baron Opportunity Fund

Retail Shares: BIOPX

Institutional Shares: BIOIX

R6 Shares: BIOUX

MICHAEL A. LIPPERT

PORTFOLIO MANAGER

DEAR BARON OPPORTUNITY FUND SHAREHOLDER:

PERFORMANCE

Baron Opportunity Fund (the “Fund”) had a solid third quarter, advancing6.47% (Institutional Shares). The Fund outperformed both the Russell 3000Growth Index, which rose 4.92%, and the S&P 500 Index, which rose 3.85%.

Table I.Performance†

Annualized for periods ended September 30, 2016

BaronOpportunity

FundRetail

Shares1,2

BaronOpportunity

FundInstitutional

Shares1,2,3

Russell3000

GrowthIndex1

S&P500

Index1


(February 29, 2000) 4.72% 4.84% 2.72% 4.83%

REVIEW & OUTLOOK

As mentioned above, the Fund performed well during the third quarter,continuing a steady improvement from a challenging start to the year. InJanuary and February, investors appeared to put significant weight on macrodownside risks: a sharp economic slowdown in China, the end of the U.S.economic recovery, persistent low and even negative sovereign interestrates, collapsing oil prices, etc… As we have progressed through the year,concerns over those fears have turned more optimistic and the marketenvironment has been more favorable for the Fund. But as I write everyquarter, macro uncertainties always exist. Today they involve such issues aswhether the Federal Reserve will raise interest rates before the end of theyear, the outcome of one of our nation’s most troubling presidentialelections (at least since I have been politically aware), the persistentchallenges in the Middle East (Syria, Iraq, ISIS, etc...) and the seemingly ever-present threats of terrorist attacks, and, of course, what the next move inthe stock market will be. While we try to stay abreast of all these issues, we

really do remain laser focused on what we can control: our industry andcompany research and portfolio construction decisions.

The consistent strategy of the Fund has been to invest in high growth,innovative businesses capitalizing on powerful secular trends. This is how westrive to distinguish ourselves from a passive index or ETF, as well asgeneralized growth funds, and to provide our shareholders with what webelieve is a unique investment vehicle in today’s increasingly passive, index-driven investment mindset. In a world and market concerned about wheregrowth will come from, we aim to differentiate not by trying to figure outthe next bend in the cyclical growth curve, but by identifying powerfulsecular trends–generational, paradigm or tectonic shifts across industriesand society–that will drive robust long-term growth regardless of the short-term fluctuations of the underlying economy. These trends are visible,impactful, and persistent. They are where the world’s going, not where it’sbeen (paraphrasing the great hockey player Wayne Gretzky). We believemany of the businesses that emerge as winners will possess significantgrowth opportunities, considerable moats to sustain their leadership andcapture large profit pools from the legacy way of doing things.

Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares and Institutional Shares as of September 30,2015 was 1.38% and 1.10%, respectively. The performance data quoted represents past performance. Past performance is no guarantee of future results. The investmentreturn 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 hasreimbursed 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 expenseoffsets from an unaffiliated transfer agent, without which performance would have been lower. Current performance may be lower or higher than the performance dataquoted. For performance information current to the most recent month-end, visit www.BaronFunds.com or call 1-800-99BARON.

† The Fund’s historical performance was impacted by gains from IPOs and/or secondary offerings. There is no guarantee that these results can be repeated or that theFund’s level of participation in IPOs and secondary offerings will be the same in the future.

1 The indexes are unmanaged. The Russell 3000® Growth Index measures the performance of those companies classified as growth among the largest 3,000 U.S. companies andthe S&P 500 Index of 500 widely held large cap U.S. companies. The indexes and the Fund are with dividends, which positively impact the performance results. RussellInvestment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell is a trademark of Russell Investment Group.



31

Baron Opportunity Fund

Some of the powerful secular themes in which we invest include:

• Cloud computing and software-as-a-service (SaaS)• Mobile• Big data and analytics• Digital (Internet-delivered) media• E-commerce• Genetics• Electronic medical records• Immuno-oncology• Targeted digital advertising• Cybersecurity• Electric drive vehicles and autonomous driving• Electronic payments

By investing in this way, our portfolio companies have consistently deliveredtop-line growth rates that are orders of magnitude above the general economy,as reflected in broad market indexes. Below we show the revenue growth ratesof the S&P 500 Index, the Russell 3000 Index, and the Russell 3000 GrowthIndex as compared to our portfolio for the first and second quarters of this year:

Comparison of Revenue Growth

ActualQ2 2016

ActualQ1 2016

S&P 500 Index. 1.21% –0.40%Russell 3000 Index 1.46% 0.01%Russell 3000 Growth Index 5.85% 5.38%Baron Opportunity Fund 27.74% 25.25%

Here are some highlights from the recent reports of several of our longer-term holdings:

• CoStar Group, Inc.– Leading provider of commercial real estate information, analytics

and online marketplaces– 15-year investment for the Fund– Total revenue grew 21%– Core Information and Analytics Suite revenue rose 14%, an

acceleration from 12.5% last quarter– Multifamily Online Marketplace segment, a key growth driver,

expanded revenue 54%, or about 24% adjusted for acquisitions

• Guidewire Software, Inc.– Leading provider of software products for property and casualty

insurers– Four-year investment for the Fund– Software license revenue grew 23%– Rolling four-quarter recurring revenue (a key metric for the

company) increased 22%

• Benefitfocus, Inc.– Leading provider of cloud-based benefits management software– A nearly three-year investment for the Fund– Total revenue grew 36%– Employer revenue (direct sales to enterprises), its key growth engine,

rose 75% (roughly 58% adjusted for certain one-time revenue)

• Acxiom Corporation– Marketing data, analytics and software-as-a-service company– Four-year investment for the Fund– Fast-growing and differentiated Connectivity division grew sales

52%

• Tesla, Inc.– World leader in electric drive vehicles– Two-year investment for the Fund– Delivered approximately 24,500 vehicles in the third quarter, up

111% year-over-yearO Model S, now in its fourth year since launch, hit 15,800 units,

up 36% year-over-yearO Model X, in just its fourth full quarter since launch, ramp to

8,700 vehicles, up 70% quarter-on-quarter

• Equinix, Inc– Leading global interconnection and data center business– 13-year investment for the Fund– Total revenue grew 35%, or 15% adjusted for acquisitions and

currency fluctuations.

I believe wholeheartedly in the strategy for the Fund: growth based onpowerful, long-term, innovation-driven secular growth trends. In the highlyuncertain world we live in, we believe non-cyclical, sustainable, and resilientgrowth should be part of investors’ portfolios.


PercentImpact

Amazon.com, Inc. 1.11%Alphabet Inc. 0.79Acxiom Corporation 0.63Illumina, Inc. 0.56Alibaba Group Holding Limited 0.53

Shares of Amazon.com, Inc., the world’s largest online retailer and cloudservices provider, rose in the third quarter after reporting strong revenuegrowth (28% year-over-year) and improving margins in its core e-commercebusiness. Amazon’s other major business segment, Amazon Web Services(AWS), the disruptive cloud computing offering, continues to gain tractionwith enterprise customers, and had another strong quarter of growth (58%year-over-year in currency-neutral dollars). Given our belief that the shift inenterprise IT spending has passed the tipping point towards cloudcomputing, we expect AWS to be an even larger contributor to valuecreation than Amazon’s core e-commerce segment. (Ashim Mehra)

Alphabet Inc. is the world’s largest search and digital advertisingcompany. Shares of Alphabet were up in the third quarter, driven byquarterly results that surpassed Wall Street expectations. We continue tobelieve that even while desktop search is becoming a more mature businessfor the company, Alphabet is well positioned to benefit from substantialgrowth in mobile and online video advertising. (Ashim Mehra)

Acxiom Corporation is a critical player in the data-driven, people-basedadvertising industry, whose technology, data, and connections helpadvertisers significantly improve the targeting and productivity of theirdigital advertising spend. Shares of Acxiom were up in the third quarter,driven by rapid growth in the company’s cloud-based connectivity andidentity business, branded LiveRamp. LiveRamp’s products enable advertisersto resolve the hundreds of different identifiers for consumers used ondevices (smart phone, tablet, computer, TV), marketing platforms (such asFacebook or Instagram) and their own internal systems to a real person in aprivacy-compliant manner. (Ashim Mehra)

32

September 30, 2016 Baron Opportunity Fund

Shares of Illumina, Inc., the leading provider of DNA sequencing technologyto academic and commercial laboratories, contributed to performance inthe third quarter. The company reported financial results that beat WallStreet expectations and reiterated guidance for the year. Unfortunately,after quarter end, Illumina pre-announced weaker-than-expected thirdquarter results and guided down its fourth quarter, and its stock hasretreated. While we acknowledge that Illumina may be in a soft patch untilwe hit an inflection point in the adoption of genetic sequencing for actualpatient care, with oncology being the largest opportunity, we continue tobelieve Illumina has strong moats around its DNA sequencing platform anda long runway for growth. (Neal Kaufman)

Shares of Alibaba Group Holding Limited, the largest e-commerce companyin China, performed well in the third quarter following strong quarterly results.Alibaba’s core China retail commerce business grew revenues 49% – driven bythe continued shift to mobile transactions and improvements in mobilemonetization – and its cloud business (same as AWS) grew sales156%. Enhanced financial disclosure helped investors to understand better theprofitability of the core commerce business – which has over 60% operatingmargins – and thereby attribute a higher value to it. We expect that mobilemonetization will continue to improve through 2016 and beyond, and that thecompany will continue to profit from investments in new areas such as onlinegrocery and cloud computing. (Ashim Mehra)


PercentImpact

Bristol-Myers Squibb Company –0.39%Gartner, Inc. –0.36salesforce.com, inc. –0.21FireEye, Inc. –0.20Equinix, Inc. –0.20

Bristol-Myers Squibb Company is a large diversified pharmaceuticalcompany that is one of the leaders in the development of immune-system-stimulating therapies to fight cancer. These efforts are spearheaded by itsproduct Opdivo, now approved to treat several types of cancer. Afterpositive data was released on a rival drug to treat first-line advanced non-small-cell lung cancer, Bristol-Myers revealed that Opdivo did not meet theprimary endpoint in a Phase III trial in the same indication, and its sharesfell. We have exited our Bristol-Myers position, but are continuing toresearch the budding immuno-oncology space carefully. (Josh Riegelhaupt)

Shares of Gartner, Inc., a provider of syndicated IT research, relinquishedsome gains due to tougher comparisons and slightly more challengingmacro conditions. We believe Gartner’s key metrics are solid. The companyhas significant financial flexibility, and we think it will aggressively deploycapital for repurchases or mergers and acquisitions. Over time, in our view,Gartner will generate accelerating top line growth, significant growth inearnings and free cash flow, and persistent return of capital. We added toour Gartner position during the quarter. (Neal Rosenberg)

Shares of cloud computing pioneer salesforce.com, inc. decreased in thethird quarter. The company reported mixed bookings results due to whatmanagement called transitory execution issues in the domestic market inthe last month of the quarter. We believe that salesforce’s addressablemarket is more than 10-times larger than its current run-rate revenue, givingit ample opportunity to compound revenue in excess of 20% annually. Webelieve the company is highly innovative, and has a strong track record of

disrupting legacy environments with next-generation software. We added toour salesforce position during the quarter. (Neal Rosenberg/Ishay Levin)

Shares of cybersecurity software vendor FireEye, Inc. fell during the thirdquarter on disappointing guidance as new management reset expectationsfor 2016 in an effort to build a solid base for 2017. New management’s planis to right-size the organization, launch new subscription products thatexpand the customer base and respond to customer needs driven by theshift to the cloud and mobile, and to fine tune go-to-market partnerships.We reduced our weighting in FireEye, but retain a smaller investment inlight of the significant long-term opportunity we believe management isattacking with its leading technology. (Gilad Shany)

This quarter saw pressure in the data center segment, and Equinix, Inc. wasno exception. Reports of slowing industry activity and what was interpretedas cautious management commentary spurred some profit taking ahead ofthird quarter earnings. We like the growth prospects for Equinix and thinkmanagement has a clear and sensible plan to keep growing at a solid pacewhile improving efficiencies and demonstrating margin leverage. We view2016 as a digestion year, with two acquisitions and a divestiture, and expect2017 to show significant leverage to shareholder profitability. (Gilad Shany)

Portfolio Structure

The Fund invests in high growth, innovative businesses across all marketcapitalizations. As of the end of the third quarter, the largest market capholding in the Fund was $542.8 billion and the smallest was $731.7 million.

The median market cap of the Fund was $13.0 billion. The Fund had$250.8 million of assets under management. The Fund had investments in45 securities. The Fund’s top 10 positions accounted for 44.4% of theportfolio.



(billions)


Value(millions)

Percentof NetAssets

Amazon.com, Inc. $396.9 $18.8 7.5%Alphabet Inc. 542.8 16.0 6.4CoStar Group, Inc. 7.1 12.4 4.9Guidewire Software, Inc. 4.4 12.2 4.9Benefitfocus, Inc. 1.2 9.9 3.9Gartner, Inc. 7.3 9.2 3.7Acxiom Corporation 2.1 8.9 3.6Facebook, Inc. 368.3 8.6 3.4Tesla Motors, Inc. 30.3 8.2 3.3Equinix, Inc. 25.6 7.0 2.8

Recent Activity



(billions)


Glaukos Corporation $ 1.2 $2.5Expedia, Inc. 17.5 2.3The Trade Desk 1.1 2.0Netflix, Inc. 42.3 1.5Foundation Medicine, Inc. 0.8 1.4

33


Glaukos Corporation is the current market leader in the field of minimally-invasive glaucoma surgery or MIGS. As a pioneer in the field, Glaukos wasthe first to obtain FDA approval and insurance reimbursement for their eyestent, which they cleverly branded the iStent. Given the progressive natureof glaucoma that inevitably leads to blindness unless one’s eye pressure iseffectively controlled, the iStent offers ophthalmologists a paradigm-shiftingtreatment option. Effectively, the iStent is a micro-sized plumbing solutionthat clears a blocked drain enabling a return of proper fluid flow. This allowsfor continuous pressure control and, as an ancillary benefit, a reduction inthe need for concomitant glaucoma eye drops.

We highlighted Expedia, Inc. last quarter as a new purchase. We continuedbuilding our positon during the third quarter.

We purchased shares of The Trade Desk (“TTD”) in the quarter inconnection with its IPO. TTD is the leading Demand Side Platform, whosetargeting technology and connections enable advertising agencies to moreefficiently purchase digital advertising on emerging real-time biddingplatforms for display, mobile, and video ads. The company was founded byJeff Green, the CEO who has built a unique culture of excellence andcustomer focus. As increasing amounts of advertising become more digital,targeted, and automated, we expect TTD to remain a key technologysupplier benefiting from this shift. We estimate that the company has 10%market share in what the advertising industry calls programmaticbuying. Programmatic buying today represents only $10 billion out of $640billion in global advertising, and we believe it will take a far greater share inthe years to come.

We added to our long-term Netflix, Inc. position during the quarter, atwhat we believed was an attractive price, as the stock fell on weaker-than-expected second quarter net subscriber adds. We have followed and/or beenan investor in Netflix since its IPO, and have witnessed that its quarterlysubscriber metrics are very difficult to predict and fluctuate for manyreasons, including things like the Olympics, price increases and the timing ofexciting content going live. We retain high conviction in our thesis that theway people watch TV is undergoing a major disruption from legacy time-based networks to on-demand streaming, and that Netflix will be a winnerin this shift. Here is a quote from the CEO of one of the world’s mostvaluable media companies: “We are seeing change in media, and it’s mostlypowered by technology. It’s powered by the shift that technology hascreated away from the distributor and the producer to the consumer. Theconsumer has much more authority than ever before to decide what theywant to watch, when they want to watch, where they want to watch it;even how much they pay for it. We are already seeing that in so many otherways. Just think about Amazon and … Netflix as another example. It’s just achanging world and … We are not going to be able to stop it.” Guess whosaid it? Bob Iger, Chairman and CEO of Disney, at Fortune’s Brainstorm Techconference earlier this year. We agree with Bob.

Foundation Medicine, Inc. (“FMI”) is a diagnostic lab company thatspecializes in analyzing the DNA sequence of the most complex cancers. Ituses next generation genetic sequencing to find over 300 relevant cancergenes. On top of this, its information technology platform linkspharmaceutical companies with oncologists and scientific research. RocheHoldings announced a broad strategic relationship with FMI in January 2015,buying over 50% of FMI’s shares at $50 per share. Included in the variousagreements with Roche are plans to co-market FMI’s tests overseas, developadditional high value tests, and use Roche’s U.S. sales force to educatemedical professionals about the advantages of FMI’s technology. We believeFMI is well positioned to take share in the emerging multi-billion dollarcomplex cancer diagnostics market.


Quarter EndMarket Cap or


AmountSold

(millions)

The Priceline Group, Inc. $72.7 $3.4FireEye, Inc. 2.5 3.2Bristol-Myers Squibb Company 94.4 3.1Inovalon Holdings, Inc. 2.1 3.0ANSYS, Inc. 8.1 1.9

We trimmed our The Priceline Group, Inc. position, in part, to fund ourpurchases of Expedia. Priceline remains a Top 20 position for the Fund.

We decreased our FireEye, Inc. position, as stated above, due to thefundamental business challenges facing the company and to harvest a taxloss. We retain a small position.

We exited our Bristol-Myers Squibb Company position, as discussedabove.

We decided to exit our Inovalon Holdings, Inc. position based on ourfundamental research into the business.

We trimmed our ANSYS, Inc. positon on strength. ANSYS remains a Top 25position for the Fund.

Thank you for your support and for trusting us with your assets. We lookforward to updating you in future letters.

Sincerely,

Michael A. LippertPortfolio ManagerOctober 17, 2016


The Adviser believes that there is more potential for capital appreciation in securities of high growth businesses benefiting from innovation throughdevelopment of pioneering, transformative or technologically advanced products or services, but there also is more risk. Companies propelled by innovation,including technological advances and new business models, may present the risk of rapid change and product obsolescence and their successes may be difficultto predict for the long term. Securities issued by small and medium sized companies may be thinly traded and may be more difficult to sell during marketdownturns. The Fund may not achieve its objectives. Portfolio holdings are subject to change. Current and future portfolio holdings are subject to risk.The discussions of the companies herein are not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of therespective portfolio managers only through the end of the period stated in this report. The portfolio manager’s views are not intended as recommendations or investment advice to any person readingthis report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.

This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Opportunity Fund by anyone in any jurisdiction where it would be unlawful under the laws of thatjurisdiction to make such offer or solicitation.

34

September 30, 2016 Baron Partners Fund

RONALD BARON


Retail Shares: BPTRXInstitutional Shares: BPTIX

R6 Shares: BPTUX

Dear Baron Partners Fund Shareholder:

Performance

During the three-month period ended September 30, 2016, Baron PartnersFund (the “Fund”) advanced 3.72% (Institutional Shares), trailing slightly theRussell Midcap Growth Index, the benchmark against which we compare theperformance of this Fund, which increased 4.59%. The Fund’s performancewas in line with the S&P 500 Index, which measures the performance oflarge cap companies, which rose 3.85%.


BaronPartners

FundRetail

Shares1,2,3

BaronPartners

FundInstitutionalShares1,2,3,4

RussellMidcapGrowthIndex2

S&P500

Index2

Three Months5 3.66% 3.72% 4.59% 3.85%Nine Months5 4.07% 4.26% 6.84% 7.84%One Year 6.95% 7.23% 11.24% 15.43%Three Years 7.13% 7.40% 8.90% 11.16%Five Years 16.94% 17.26% 15.85% 16.37%Ten Years 7.08% 7.28% 8.51% 7.24%Since Conversion

(April 30, 2003) 12.51% 12.67% 10.99% 8.84%Fifteen Years 11.95% 12.10% 9.66% 7.15%Twenty Years 10.08% 10.19% 8.35% 7.91%Since Inception

(January 31,1992) 12.27% 12.36% 9.28% 9.19%

We provide the information in Table I above to comply with FINRA and SECperformance advertising rules. Regardless, we believe the over 24 years sincethe Fund’s inception divided into the four periods described in Table II beloware more relevant. That table depicts how the Fund performed duringperiods of euphoria and stress. Such periods have generally resulted fromevents that could not be foreseen and that significantly affected economiesand markets.

During the quarter, lower quality stocks led the market higher. Those stockshad performed poorly in the first half of the year due to global growthconcerns, falling oil prices, and uncertainty caused by Brexit. The Fund’slower exposure to Health Care, specifically biotechnology stocks, which thisFund does not own, detracted from performance. As a sub-industry,biotechnology stocks surged 19% during the third quarter. The Fund’s largerexposure to Consumer Discretionary companies and stock selection in theInformation Technology sector hurt performance on a relative basis duringthe quarter. The Fund was penalized in the period by share price declines inseveral long-term holdings about which we remain optimistic in the longterm, including Inovalon Holdings, Inc. and Tesla Motors, Inc.

Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares as of December 31, 2015 was 1.52%(comprised of operating expenses of 1.32% and interest expense of 0.20%) and Institutional Shares was 1.26% (comprised of operating expenses of 1.06% andinterest expense of 0.20%). The performance data quoted represents past performance. Past performance is no guarantee of future results. The investmentreturn 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 Fund’stransfer agency expenses may be reduced by expenses offsets from an unaffiliated transfer agent, without which performance would have been lower. Currentperformance may be lower or higher than the performance data quoted. For performance information current to the most recent month end, visitwww.BaronFunds.com or call 1-800-99BARON.1 Reflects the actual fees and expenses that were charged when the Fund was a partnership. The predecessor partnership charged a 20% performance fee after reaching a certain performance

benchmark. If the annual returns for the Fund did not reflect the performance fees the returns would be higher. The Fund’s shareholders will not be charged a performance fee. The predecessorpartnership’s performance is only for periods before the Fund’s registration statement was effective, which was April 30, 2003. During those periods, the predecessor partnership was not registeredunder the Investment Company Act of 1940 and was not subject to its requirements or the requirements of the Internal Revenue Code relating to registered investment companies, which, if itwere, might have adversely affected its performance.

2 The indexes are unmanaged. The Russell Midcap® Growth Index measures the performance of medium-sized U.S. companies that are classified as growth and the S&P 500 Index of 500 widely heldlarge cap U.S. companies. The Russell Midcap Growth Index, the S&P 500 Index and the Fund are with dividends, which positively impact the performance results. RussellInvestment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell is a trademark of Russell InvestmentGroup.



35

Baron Partners Fund

Although the Fund is underperforming year-to-date, its consistent long-termapproach to investing in what we believe are high quality, competitivelyadvantaged, growth businesses of any market capitalization run byexceptional managers has generated substantial excess returns sinceinception. We think we can continue to achieve substantial excess returnsper year, on average, though there can be no guarantee we can achieve ourgoal.

Over the long term, the Fund has outperformed its benchmark by 1.68% peryear on average since its conversion from a partnership to a mutual fund onApril 30, 2003, and by 3.08% per year annualized since its inception onJanuary 31, 1992. When Baron Partners Fund is compared to the 38 fundscurrently in the Morningstar Mid-Cap Growth Category since the Fund’sinception in 1992, Baron Partners Fund is the #1 performing fund in thatcategory.**

We think two periods since December 31, 1999 are especially interesting.The first is the nine years ended December 2008 when stock marketsperformed poorly. This period, “The Long and Winding Road” included thebursting of the Internet bubble, 9/11, wars in Iraq and Afghanistan, thehousing bubble and a financial panic. During this period, the Fund, unlike themarket, had positive returns and outperformed its benchmark by 6.23% peryear annualized.

The second period is the seven years ended December 2015 when stocksperformed exceptionally well, the “Here Comes the Sun” years. The mostimportant development during this period was an economic recovery drivenby the U.S. Federal Reserve’s quantitative easing. The Fund (InstitutionalShares) trailed its benchmark by 1.15% per year annualized during thisperiod but outperformed the large-cap S&P 500 Index by 2.08% per yearannualized. The Fund earned annualized returns of 16.89% for these sevenyears, about tripling in value, a period marked by highly correlated stockprices regardless of business fundamentals. The absence of biotechnologystocks and “FANG” tech stocks in the portfolio disadvantaged the Fundrelative to our benchmark index during the period. Regardless, the Fundperformed in the top 25th percentile against its peers in the MorningstarMid-Cap Growth Category during the period.

We believe the outlook for stocks and the U.S. economy remains favorable.Jobless claims are in a range consistent with moderate growth andunemployment is holding steady at around 5%, the lowest level since therecession began in late 2007. Housing starts and existing home sales arestrong, while affordability, given the continued low interest rateenvironment, has never been higher. Given this backdrop, stocks remainattractively valued, in our opinion, trading approximately 17 times nextyear’s earnings. Historically, stocks have provided protection againstinflation and better returns than other asset classes. We think that willcontinue to be the case.

Table II.PerformancePeriods of euphoria and stress



12/31/99P/E 33x







EasingP/E 16.1x

“HelterSkelter” Fed“tightening”


Annualized Returns

Inception1/31/92 to12/31/99

12/31/99 to12/31/08

12/31/08 to12/31/15

12/31/15 to9/30/16

Inception1/31/92 to

9/30/16

Baron Partners Fund (Institutional Shares) 22.45% 1.54% 16.89% 4.26% 12.36%Russell Midcap Growth Index 19.26% (4.69)% 18.04% 6.84% 9.28%S&P 500 Index 20.21% (3.60)% 14.81% 7.84% 9.19%

Percentile rank in Morningstar Mid-Cap Growth Category* 15** 16** 25 61 1**# of Share Classes in the Category 83** 366** 497 723 38**Morningstar US OE Mid-Cap Growth Peer Group Avg 18.00% (3.33)% 15.45% 4.93% 8.64%

* The Morningstar US OE Mid-Cap Growth Category Average is not weighted and represents the straight average of annualized returns of each of the funds in the Mid-Cap Growth Category.Morningstar rankings are based on total returns and do not include sales charges. Total returns do account for management, administrative, and 12b-1 fees and other costs automatically deductedfrom fund assets. As of September 30, 2016, the Category consisted of 721, 574 and 425 funds for the 1- and 5-, and 10-year periods. Baron Partners Fund Institutional Share Class ranked in the62nd, 7th and 56th percentiles, respectively, in the Category. The Category consisted of 83, 366, 497, 723 and 38 funds during the time intervals 1/31/1992–12/31/1999, 12/31/1999–12/31/2008,12/31/2008–12/31/2015, 12/31/2015–9/30/2016 and 1/31/1992–9/30/2016, respectively. Baron Partners Fund Institutional Share Class ranked in the 15th, 16th, 25th, 61st and 1st percentiles, forthe respective time intervals.

** Source: Morningstar Direct – Performance Reporting.

36


Table III.Top contributors to performance for the quarter ended September 30, 2016

YearAcquired

MarketCap


QuarterEnd

MarketCap

(billions)Total

ReturnPercentImpact

IDEXX Laboratories, Inc. 2013 $4.7 $10.1 21.40% 1.17%The Charles Schwab Corp. 1992 1.0 41.8 25.02 1.05Vail Resorts, Inc. 2008 1.6 5.7 13.49 1.01Arch Capital Group Ltd. 2002 0.6 9.7 10.08 0.97Illumina, Inc. 2013 6.8 26.6 29.41 0.85

Shares of veterinary diagnostics leader IDEXX Laboratories, Inc. increasedin the third quarter. The stock continued to rally on strong financial resultsand multiple expansion. Competitive trends are strong and improving,highlighted by instrument revenue growth, domestic lab growth, rising salesproductivity, and stability in rapid assays. We believe that IDEXX’s direct go-to-market model coupled with research and development-driven productenhancements will put steady upward pressure on organic revenue andearnings growth over time. (Neal Rosenberg)

Shares of brokerage business The Charles Schwab Corp. appreciated in thethird quarter on continued strong asset growth. The business continued toshift to fee-based advice from trading activity, a move that we believecreates more stability and the potential for increased profitability.Speculation of an interest rate hike by the U.S. Federal Reserve also helpedboost the stock price as a rate increase would likely improve earnings for thecompany. (Michael Baron)


Table IV.Top detractors from performance for the quarter ended September 30, 2016

YearAcquired

MarketCap


QuarterEnd

MarketCap

(billions)Total

ReturnPercentImpact

Inovalon Holdings, Inc. 2015 $ 4.1 $ 2.2 –19.09% –0.67%Tesla Motors, Inc. 2014 21.9 30.3 –3.89 –0.44Zillow Group, Inc. 2014 4.3 6.2 –6.03 –0.40Gartner, Inc. 2013 5.7 7.3 –9.20 –0.34Under Armour, Inc. 2016 16.0 15.8 –3.66 –0.19

Shares of health care data and analytics vendor Inovalon Holdings, Inc. fellin the third quarter on weak financial results and reduced guidance throughyear end. Management attributed the revenue shortfall to price reductionsin its retrospective risk adjustment business, and the margin shortfall toinvestments aimed at long-term growth. We think the recent poorperformance is temporary. Inovalon has high quality products that generatesolid return on investment for its customers, and we think it is wellpositioned to capitalize on the need for robust data and analytics in healthcare. (Neal Rosenberg)

Shares of electric vehicle company Tesla Motors, Inc. fell during the thirdquarter as the market continued to evaluate the potential merger withSolarCity. An investigation into a fatal accident involving Tesla’s autopilotand the possibility of an additional equity round by year end also pressuredthe stock. We feel good about the brand Tesla has built and its ability tobring substantial innovation to its products. Tesla has received over 370,000Model 3 reservations, representing close to $18 billion in backlog and thelargest product launch in history. (Gilad Shany)

Zillow Group, Inc. is the leading online real estate company in the U.S.Shares fell in the third quarter as investors paused prior to a new productroll out. While investors appear cautious about the near-term impact of thisroll out, we expect that after a short transition period, the program will havea positive impact on revenue growth. Zillow continues to invest in its brandas the leader in an $8 billion real estate advertising market. We believe that,as the leader of a highly fragmented market, Zillow remains well positionedto grow its share going forward. (Ashim Mehra)

Recent Portfolio Additions


MarketCap


QuarterEnd

MarketCap

(billions)


Robert Half International, Inc. $ 4.9 $ 4.9 $32.0Inovalon Holdings, Inc. 4.1 2.2 24.8Netflix, Inc. 39.5 42.3 20.9Under Armour, Inc. 16.0 15.8 6.0Norwegian Cruise Line Holdings, Ltd. 6.5 8.6 1.0

An attractive entry point led us to establish a position in Robert HalfInternational, Inc., a company we have admired for many years and ownedin various accounts since 1990. Founded in 1948, Robert Half is the first andlargest provider of specialized staffing services, competing globally in someof the most attractive, highest margin segments of the staffingindustry–finance, accounting, and IT- which are benefiting from strongsecular demand and skilled worker shortages. We believe Robert Half hasunique competitive advantages including its market positioning, strongbrand name, and best-in-class management. Its focus on small- and middle-market clients, rather than large national accounts supports premium pricingleading to higher margins. Robert Half continues to invest in sophisticatedtechnologies to improve its candidate sourcing and management and jobplacement capabilities. In addition to its staffing business, we believe thecompetitive advantages of Robert Half’s Protiviti subsidiary, a leadingindependent internal audit and business and technology risk consulting firm,make for an exciting story. We believe the $750 million in annual revenueProtiviti generated has the potential to be much larger, its growth driven bya stricter regulatory environment, especially since the financial crisis and theever increasing need for enhanced data security and privacy. Theindependence of Protiviti’s internal audit practice is uniquely positioned tobenefit from the heightened scrutiny of businesses’ internal financialcontrols with regulators routinely inspecting the work of larger publicaccounting firms. Robert Half generates a high ROIC, and its strong free cashflow is returned to shareholders through consistent share repurchases anddividends. We believe Robert Half will be able to continue to grow itsrevenue and margins. (Susan Robbins)

37

Baron Partners Fund

The Fund added to its position in Inovalon Holdings, Inc., a health caredata and analytics company. The foundation of the company is a proprietarydata set which contains more than 11.3 billion medical events from132 million unique patients. This data powers Inovalon’s advanced analytics,which help insurers identify gaps in care, quality, data integrity, and financialperformance. Clients leverage Inovalon’s intervention platforms to driveimprovement in clinical and quality outcomes, utilization, and financialperformance across the health care landscape. The company addresses a$14 billion annual opportunity in its core markets, with growth driven by theneed to reduce inexorable health care cost inflation and the shift to value-based health care from consumption-based health care. Inovalon hasrecently announced beachhead relationships with Quest Diagnostics toenter the provider market, with Kindred Healthcare to enter the post-acutecare market, and with Bristol-Myers to enter the pharma market. We believethat addressing these adjacencies can increase Inovalon’s total addressablemarket by three-to-four times. (Neal Rosenberg)

We initiated a position in Netflix, Inc. in the quarter. Netflix is the leadingprovider of on-demand streaming media that is now available in over 100countries worldwide. We view that this form of Internet TV, which is ondemand, personalized, and available anywhere, is replacing the linear TVexperience. Netflix management has targeted 60 to 90 million U.S.subscribers long term and approximately twice that number globally. Weview recent partnerships with multi-channel video programming distributorssuch as Comcast, DISH, and Virgin, who have integrated the Netflix offeringon to their platforms as another positive. As the company scales subscribersas it has in the U.S., we expect margin expansion to follow accordingly.(Ashim Mehra)

Investment Strategy

Baron Partners Fund is a concentrated portfolio that invests for the longterm in what we believe are competitively advantaged, well-managed,growing businesses at what we think are attractive prices. Often, we haveopportunities to purchase stocks of businesses we have researchedextensively, which we believe are mispriced or have fallen in price due towhat we perceive to be temporary issues. This quarter, we continued to addto our stake in sportswear brand Under Armour, Inc., health care analyticscompany Inovalon, and cruise operator Norwegian Cruise Line Holdings,Ltd. for just these reasons. We initiated new positions in staffing firm RobertHalf International, which we have owned previously for many years andstreaming video and content subscription leader Netflix. Our objective is topurchase shares of what we believe are well-established, appropriatelycapitalized, growing companies, with strong positions in markets withgrowing demand for their products and services. The Fund may use leveragewith the goal of enhancing its investment returns. Leverage also increasesrisk, of course.

Another common attribute of Baron Partners Fund is that we invest inbusinesses investing for growth, often at the expense of short-term profits.These businesses are investing in order to become much larger, moreprofitable businesses in the future. Virtually all the businesses in which wehave invested are making such capital commitments. During the thirdquarter, two of our long-time holdings, Vail Resorts and Arch Capital GroupLtd., made significant acquisitions that are worth highlighting. Vail Resortsacquired Whistler Blackcomb, Canada’s premier ski resort. This deal helpsdiversify Vail’s portfolio and expand the base of customers to which it canmarket and sell its successful season pass product. After recently acquiringPark City, Canyons, and Perisher in Australia, Vail has built what we considerto be an unmatched portfolio of the best ski resorts in the world. In August,Arch Capital announced the acquisition of United Guaranty, AIG’s mortgageinsurance subsidiary, which makes Arch the nation’s largest underwriter ofmortgage insurance. Mortgage insurance offers some of the best risk-adjusted returns in the property & casualty insurance market and UnitedGuaranty’s risk-based pricing methodology complements Arch’sunderwriting philosophy. We expect both acquisitions to improve theearnings growth outlooks for both businesses and drive shareholder value.

Verisk Analytics, Inc. continues to make additional investments in its realestate data services, CarMax, Inc. continues to grow its superstores andwholesale auctions at a healthy clip while investing heavily in its digitalstrategy. Hyatt Hotels Corp.’s investment in renovations and improvedguest services, as well as its ongoing expansion in Asia, are also noteworthyin this regard. As long-term investors who hold stocks for an average of overfour years, we expect to benefit from these expenditures. In contrast, mostgrowth-oriented mutual funds are trading oriented, turning over their entireportfolios on average every 17 months. Since these funds, in general, willnot care about or benefit from such long-term, strategic investments bybusinesses, they accord them little or no value. This allows us to invest inthese companies at prices we feel are especially attractive.

Baron Partners Fund also has significant investments in growing “C”corporations like Vail Resorts, Inc., whose shares we believe are undervaluedwhen compared to similar businesses structured as REITs or master limitedpartnerships. We expect alternative money manager The Carlyle Group andfinancial intermediary The Charles Schwab Corp. to benefit as interest ratesincrease.

Managing risk is a key part of our investment process. We help manage riskfrom a company perspective by investing in businesses that we believe areconservatively financed with high barriers to entry. Our proprietary researchregarding business’ long-term growth opportunities, competitiveadvantages, management teams, and risks determines how much weallocate to individual securities. We invest in different industries that areaffected differently in the short term by various events. This is to achieve aportfolio of investments with risks that are not correlated. This is part of oureffort to help reduce the volatility of this non-diversified and leveragedportfolio.

38


Portfolio Structure

The portfolio is currently invested in 30 businesses, principally in mid-capcompanies. As of September 30, 2016, the weighted average marketcapitalization of its portfolio investments was $14.0 billion, compared with$13.2 billion for the Russell Midcap Growth Index. The Fund currently hassignificantly larger investments in the Financials and ConsumerDiscretionary sectors than the benchmark. The Fund’s investments inIndustrials, Health Care and Information Technology are weighted less thanthe index. The Fund does not have investments in Consumer Staples, Energy,Materials, Telecommunication Services or Utilities. We are not attemptingto mirror our benchmark or any other index with the Fund’s portfolio. TheFund’s top 10 holdings represent 64.8% of the Fund’s gross assets.

Table VI.Top 10 holdings as of September 30, 2016

YearAcquired

MarketCap


QuarterEnd

MarketCap

(billions)Amount

(millions)

Percentof Total

Investments

CoStar Group, Inc. 2005 $ 0.7 $ 7.1 $238.2 10.6%Tesla Motors, Inc. 2014 21.9 30.3 226.5 10.1Arch Capital Group Ltd. 2002 0.6 9.7 190.2 8.5Vail Resorts, Inc. 2008 1.6 5.7 145.2 6.5Hyatt Hotels Corp. 2009 4.2 6.5 128.0 5.7FactSet Research

Systems, Inc. 2007 2.5 6.6 125.6 5.6IDEXX Laboratories, Inc. 2013 4.7 10.1 112.7 5.0Zillow Group, Inc. 2014 4.3 6.2 103.4 4.6Under Armour, Inc. 2016 16.0 15.8 92.4 4.1Manchester United plc 2014 2.8 2.8 90.7 4.1

Thank you for investing in Baron Partners Fund.

Thank you for joining us as fellow shareholders in Baron Partners Fund. Webelieve the growth prospects for the businesses in which Baron PartnersFund has invested are favorable and improving. Since, in our opinion, theshare prices of our businesses do not reflect their prospects, we believe theyremain attractive. Of course, there can be no guarantee this will be the case.

We are continuing to work hard to justify your confidence and trust in ourstewardship of your family’s hard-earned savings. We also remain dedicatedto continuing to provide you with the information I would like to have if ourroles were reversed. This is so you will be able to make an informed decisionabout whether this Fund remains an appropriate investment for you andyour family.

Respectfully,



The Adviser believes that there is more potential for capital appreciation using non-diversification and leverage, but there also is more risk. Specific risksassociated with non-diversification and leverage include increased volatility of the Fund’s returns and exposure of the Fund to greater loss in any given period.The Fund invests in companies of all sizes, including small and medium sized companies whose securities may be thinly traded and made difficult to sell duringmarket downturns. Leverage is the degree to which an investor or business is utilizing borrowed money. The Fund may not achieve its objectives. Portfolioholdings are subject to change. Current and future portfolio holdings are subject to risk.

The discussions of the companies herein is not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of therespective portfolio managers only through the end of the period stated in this report. The portfolio manager’s views are not intended as recommendations or investment advice to any person readingthis report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.

This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Partners Fund by anyone in any jurisdiction where it would be unlawful under the laws of thatjurisdiction to make such offer or solicitation.

39

Baron Fifth Avenue Growth Fund

ALEX UMANSKY

PORTFOLIO MANAGER

Retail Shares: BFTHXInstitutional Shares: BFTIX

R6 Shares: BFTUX

Dear Baron Fifth Avenue Growth Fund Shareholder:

PerformanceWe had a nice quarter.

The Baron Fifth Avenue Growth Fund (the “Fund”) returned 10.2%(Institutional Shares) in the third quarter of 2016, which compared favorablyto the 4.6% and 3.9% for the Fund’s benchmarks, the Russell 1000 GrowthIndex and the S&P 500 Index, respectively. In a complete reversal from thefirst half of the year, where we plainly lacked sizable “winners,” we sawbroad-based strength across the entire portfolio, with 21 of our 36investments rising double digits, and 12 of them appreciating over 15%.While some of them, like Alibaba Group (up 33%), Illumina (up 29%),Alphabet (up 13%), and Biogen (up 29%) were playing catchup, many ofour core holdings like Amazon.com (up 17%), Priceline Group (up 18%),Facebook (up 12%), and Mastercard (up 16%) continued a steady climbforward. Even our smaller, lesser known, and seldom discussed in detail,investments in Naspers (up 14%), Yum! Brands (up 10%), ConchoResources (up 15%), and Regeneron (up 15%) all made meaningfulpositive contributions to the Fund’s overall results.

A quarter like this tends to move the dial (both ways) and we saw a niceimprovement in competitive rankings where, according to Morningstar, theBaron Fifth Avenue Growth Fund has outperformed 87% of its peers overthe last 5 years and 92% of its peers over the last 12 months.*


Baron FifthAvenueGrowth

FundRetail

Shares1,2

Baron FifthAvenueGrowth

FundInstitutional

Shares1,2,3

Russell1000

GrowthIndex1

S&P500

Index1


(April 30, 2004) 7.13% 7.29% 8.33% 7.79%

The results would have been even better had we not suffered from two blowups. Bristol-Myers Squibb (“Bristol”) is one of the leading developers ofbiopharmaceutical products in the world. We have written in the past aboutthe progress being made in the field of immune-oncology and highlightedour belief that Bristol was in the lead in articulating our investment thesisearlier this year. Our research suggested that Opdivo, Bristol’s leading drug insecond-line lung cancer treatment, was likely going to succeed in extendingits commercial dominance to front line, which would be a significantly largeropportunity. Unfortunately, Opdivo failed in an important trial and theshares of Bristol declined 27% during the quarter. We have reduced ourexposure as we await future clinical trial updates to help us decipher the bestway to invest in this field where we believe changes and improvements tocancer care are happening at breathtaking speeds.

FireEye, down 11%, was our second double-digit decliner. FireEye is acybersecurity company that sells software and services designed to detect,remediate, and protect against advanced cyber attacks. We have written atlength about our thesis that FireEye has industry-leading technology

Performance listed in the table above is net of annual operating expenses. Annual expense ratio for the Retail Shares as of September 30, 2015 (restated toreflect current fees) was 1.12% but the net annual expense ratio was 1.10% (net of the Adviser’s fee waivers) and Institutional Shares was 0.84%. Theperformance data quoted represents past performance. Past performance is no guarantee of future results. The investment return and principal value of aninvestment will fluctuate; an investor’s, shares, when redeemed, may be worth more or less than their original cost. The Adviser has reimbursed certain Fundexpenses (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 anunaffiliated 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 www.BaronFunds.com or call 1-800-99BARON.1 The indexes are unmanaged. The Russell 1000® Growth Index measures the performance of large-sized U.S. companies that are classified as growth and the S&P 500 Index of 500 widely held large

cap U.S. companies. The indexes and the Fund are with dividends, which positively impact the performance results. Russell Investment Group is the source and owner of the trademarks, servicemarks and copyrights related to the Russell Indexes. Russell is a trademark of Russell Investment Group.


not have a distribution fee. If the annual returns for the Institutional Shares prior to May 29, 2009 did not reflect this fee, the returns would be higher.4 Not annualized.* The Morningstar US OE Large Growth Average is not weighted and represents the straight average of annualized returns of each of the funds in the Large Growth

category. Morningstar rankings are based on total returns and do not include sales charges. Total returns do account for management, administrative, and 12b-1 fees andother costs automatically deducted from fund assets. As of September 30, 2016, the category consisted of 1,629, 1,285 and 924 funds for the 1-, 5- and 10-year periods.Morningstar ranked Baron Fifth Avenue Growth Fund Institutional Share Class in the 8th, 13th and 66th percentiles, respectively, in the category for the 1-, 5- and 10-yearperiods.

40

September 30, 2016 Baron Fifth Avenue Growth Fund

(thousands of large organizations attested to that), and an opportunity tobecome the cybersecurity platform of the future. Unfortunately, businessmodel transition from selling licenses to subscriptions, senior managementturnover, and repeated disappointing short-term results have put that thesisin jeopardy and made this investment the subject of intense internal debate.Some of us believe that FireEye is building a solid foundation for thecompany in order to grow in 2017 and beyond. Others feel that FireEye’sjourney from the high end to mass market has been too slow and allowedcompetition to increase customers’ share of mind. New management resetexpectations for 2016 in an effort to build a solid base for 2017, andimpatient investors sold the stock due to the disappointing guidance. Theorganization has been right-sized; mid-market and new subscriptionproducts are being launched and go-to-market partnerships have been finetuned. With the stock trading at approximately 2x enterprise value to sales,the valuation is undemanding, and with continuous consolidation activity insoftware at-large and cyber in particular, we think a take-out possibilityshould put a floor under the price.

Amazon.com, the Fund’s largest investment, continued to report sparklingresults with revenues, earnings, units sold, Amazon Web Services, and profitmargins, all ahead of heightened expectations, despite making significantnew investments in India and new fulfillment centers.

We believe that U.S. large-cap is among the most efficient asset classes inthe world (although it is not fully efficient or one could never find a companyappreciating 118% in 12 months, as Amazon did for calendar year 2015!).We look to invest in companies that are misunderstood by the market due tostructural biases. Examples would be an over-emphasis on short-term results,or lack of an obvious comparable, or a mischaracterization of the company’sbusiness. We think Amazon suffers (or benefits, depending on the side thatyou’re on) from all three. Investors that see Amazon as nothing more than anonline retailer and compare its business model to that of Walmartfundamentally misunderstand what Amazon is and more importantly, whatAmazon is attempting to become. Taking a step back, in 2015 Amazonbecame the fastest company ever to reach $100 billion in annual sales.Interestingly, Amazon Web Services, the cloud computing business with overa million customers that seemingly has little to do with online retailing hasreached $10 billion in annual sales… doing so at a pace even faster than theoriginal Amazon did. Then, there is Amazon Prime with an estimated 60 to80 million members (growing memberships north of 50% year-over-year)and streaming videos with proprietary original content, and over 70,000third-party sellers, in 189 countries last year alone, each with annual salesover $100,000. Echo speakers and Artificial Intelligence that drives Amazon’sAlexa voice assistant, delivery drones, ocean freight licenses, leasing a fleet ofBoeing 767s – what is all this? Does Walmart do that? Other online retailers?

We do not think of Amazon as an e-commerce company, or a cloudinfrastructure provider, or an online media company. We think Amazon hasbuilt an online/digital service platform enabled by a massively scalable IT andunparalleled logistics infrastructure. Yes, that infrastructure allows Amazonto be the world’s largest online retailer. But it also allows the company to bethe world’s biggest public cloud service provider, a leading online streamingservice provider and digital content seller, and a major provider of fulfillment(and increasingly advertising) services to third-party retailers.

We believe that Amazon.com is most likely going to be the biggest winner ine-commerce and cloud computing, two multi-trillion dollar markets. And so,it remains our highest conviction long-term investment idea.



(billions)PercentImpact

Amazon.com, Inc. $396.9 2.39%Alibaba Group Holding Limited 264.0 1.65Illumina, Inc. 26.6 0.94Alphabet Inc. 542.8 0.84The Priceline Group, Inc. 72.7 0.67

Shares of Amazon.com, Inc., the world’s largest e-commerce and cloudservices provider, rose 17% during the September quarter, after reportingstrong revenue growth and improving margins in its core business. Amazon’sother major business segment, Amazon Web Services (AWS), continues togain traction with enterprise customers, and had another strong quarter ofgrowth. Over time, we expect AWS to be the larger contributor to valuecreation. The company continues to invest in new and potentially largebusiness segments such as e-finance, business supplies, and apparel.

Alibaba Group Holding Limited is the largest e-commerce company inChina. Alibaba owns and operates the two largest online shopping platformsin China, Taobao and Tmall. It also participates in the profits of AntFinancial, which owns Alipay, the largest third-party online paymentprovider in China. Shares of Alibaba increased 33% after reporting strongquarterly results. Improved financial disclosures allowed investors tounderstand better the profitability of the core e-commerce business andthereby attribute a higher value to it.

We expect that mobile monetization should continue to improve through2016 as the company invests in new areas such as grocery and cloudcomputing.

Shares of Illumina, Inc., the leading provider of DNA sequencing technologyto academic and commercial laboratories, rose 29% in the third quarter. Thecompany reported financial results that beat Street expectations andreiterated guidance for the year. We continue to believe Illumina has a longrunway for growth, driven by increasing adoption of DNA sequencing inclinical markets such as cancer screening, diagnosis, and treatment.

Alphabet Inc. is the world’s largest search and online advertising company.Shares of Alphabet appreciated 13% over the last three months, driven byquarterly results that surpassed Wall Street expectations. We continue tobelieve that even while desktop search is becoming a more mature businessfor the company, Alphabet is well positioned to benefit from substantialgrowth in mobile and online video advertising.

Shares of leading online travel agency The Priceline Group, Inc. rose 18%in the third quarter on the strength of strong second quarter results and arobust outlook for the third quarter. Booked hotel room night growth, a keymetric for the company, remained strong, demonstrating continued marketshare gains for the business. Though the cost of consumer marketingcontinued to increase for Priceline and the industry, we believe it is morethan offset by new growth opportunities the company is addressing in theU.S., Asia, and Latin America.

41





Bristol-Myers Squibb Company $90.1 –0.50%Equinix, Inc. 25.6 –0.34FireEye, Inc. 2.5 –0.25Mobileye N.V. 9.3 –0.21Starbucks Corp. 79.4 –0.14

Bristol-Myers Squibb Company is a large diversified pharmaceuticalleading the development of immune stimulating therapies for oncology.These efforts are spearheaded by its product Opdivo, now approved to treatseveral types of cancer. After positive data was released on a rival drug totreat first-line advanced non-small-cell lung cancer, Bristol-Myers revealedthat Opdivo did not meet the primary endpoint in a Phase III trial in thesame indication, and shares fell 27% during the third quarter. We havereduced our position and continue to analyze the competitor’s trial resultsand Bristol-Myers’ data sets.

This quarter saw pressure in the data center segment, and Equinix, Inc. wasno exception. Slowing industry activity and cautious managementcommentary spurred some profit taking ahead of September earnings resultswith the stock declining 7%. We like the growth prospects for Equinix andthink management has a clear and sensible plan to keep growing at arelatively higher pace while improving efficiencies and demonstratingmargin leverage. We view 2016 as a digestion year, with two acquisitionsand a divestiture, and expect 2017 to show significant leverage toshareholder profitability.

Shares of cybersecurity software vendor FireEye, Inc. declined 11% duringthe quarter, due to disappointing guidance as new management resetexpectations for 2016 in an effort to build a solid base for next year. Webelieve management is building a strong foundation for future growth. Theorganization has been right-sized, mid-market and new subscriptionproducts are being launched, and go-to-market partnerships have been finetuned. FireEye has best-in-class technology and is improving its deliverymethodology in products (subscriptions) and go-to-market design.

Shares of Mobileye N.V., maker of vision-based advanced driver assistancesystems (ADAS), fell 8% in the third quarter on news of the “divorce”between Mobileye and Tesla Motors, Inc. While most investors anticipatedthat Tesla will develop its own technology over time, the fact that Teslaalluded to new auto-pilot architecture, centered on radar, took investors bysurprise. Delays in the strategic agreement with Volkswagen and the launchof mapping technology with General Motors also added to these concerns.We believe Mobileye has a superior technology and additional originalequipment manufacturers will choose to work with the company. As ADASfeatures become standard, we anticipate Mobileye’s unit growth will drivesales higher. As the company rolls out additional autonomous capabilities,we believe the increasing content per vehicle will lead to better averagesales prices. We look forward to watching the impact these technologies willhave on the world and on Mobileye’s performance.

Shares of leading global specialty coffee company Starbucks Corp. declined5% in the September quarter, after results fell slightly short of Streetestimates. Starbucks reported a solid 4% same-store-sales growth, but brokeits streak of 25 consecutive quarters of comparable store sales at or above5%, causing some investor concern. Though we have trimmed our position,we retain conviction because, in our view, Starbucks has strong growth

opportunities in food attachment, mobile payment and loyalty programs,Asia-Pacific expansion, and wholesale channel development.

Portfolio StructureThe top 10 positions represented 57.3% of the Fund, the top 20 were79.9%, and we exited the quarter with 35 holdings. At over 70% of theFund, Information Technology and Consumer Discretionary continue to beour two largest sectors. We continue to have no exposure to ConsumerStaples or Telecommunication Services which proved beneficial to relativereturns over the last three months.



(billions)


Value(millions)

Percentof NetAssets

Amazon.com, Inc. $396.9 $24.5 15.6%Alibaba Group Holding Limited 264.0 9.9 6.3Alphabet Inc. 542.8 9.4 6.0Facebook, Inc. 368.3 8.3 5.3Equinix, Inc. 25.6 7.0 4.5Visa, Inc. 195.2 6.9 4.4Mastercard Incorporated 111.7 6.6 4.2The Priceline Group, Inc. 72.7 6.4 4.1Illumina, Inc. 26.6 6.1 3.9Apple, Inc. 609.2 4.7 3.0

Recent ActivityDuring the September quarter, we initiated one new investment, added tothree existing ones, and reduced 12 holdings, mostly on strength, mostnotably slightly reducing exposures to long-time favorites Alphabet, Apple,Starbucks, and Yum! Brands.



(billions)


Expedia, Inc. $17.5 $1.8Under Armour, Inc. 15.8 0.7Allergan plc 91.2 0.7Ctrip.com International, Ltd. 23.2 0.2

Expedia, Inc. is the largest global online travel agency in the U.S., and thesecond largest in the world. The company generates over $60 billion ofglobal bookings and revenues of $6.6 billion. Expedia operates in 75 differentcountries and has over 18,000 employees globally. Expedia operates over 20global brands including Expedia, Trivago, Hotels.com, Travelocity,CheapTickets, Wotif, Hotwire, and Venere. The company also recentlyacquired Orbitz and HomeAway. We believe Expedia is a leading player in alarge and secularly growing online travel market where the penetration rateis still relatively low (Priceline Group and Expedia, the two largest players,account for less than 10% of the $1.4 trillion global travel market). Expediahas grown its supply of properties by 73,000 in the last two years (now has180,000 compared to 800,000 for Priceline) and improved its user interfaceleading to better conversion rates. We further believe that Expedia’s marginsand overall profitability, which have been running at about half those ofPriceline, are poised for significant improvement over the next few years.

42

September 30, 2016 Baron Fifth Avenue Growth Fund

We continued to modestly ramp up our investments in Under Armour, Inc.,Allergan plc, and Ctrip.com International, Ltd. where we added to ourexisting positions on market weakness.



(billions)

AmountSold

(millions)

Alphabet Inc. $542.8 $1.7Biogen, Inc. 68.6 1.6Starbucks Corp. 79.4 0.9Bristol-Myers Squibb Company 90.1 0.5Verisk Analytics, Inc. 13.7 0.5

We reduced the size of our positions in Alphabet Inc., Biogen, Inc.,Starbucks Corp., Bristol-Myers Squibb Company, and Verisk Analytics,Inc., along with seven other holdings, mostly on strength, with the exceptionof Bristol, which was explained in more detail earlier in this letter.

OutlookOur goal is to maximize long-term returns without taking significant risks ofpermanent loss of capital. We continue to focus on identifying and investingin what we believe are unique companies with sustainable competitiveadvantages and the ability to redeploy capital at high rates of return. We areoptimistic about the long-term prospects of the companies in which we areinvested and continue to search for new ideas and investment opportunities.

Thank you for investing in the Baron Fifth Avenue Growth Fund.

Sincerely,

Alex Umansky,Portfolio ManagerOctober 17, 2016


The Fund invests primarily in large cap equity securities which are subject to price fluctuations in the stock market. The Fund may not achieve its objectives.Portfolio holdings are subject to change. Current and future portfolio holdings are subject to risk.


This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Fifth Avenue Growth Fund by anyone in any jurisdiction where it would be unlawful under the lawsof that jurisdiction to make such offer or solicitation.

43

Baron Focused Growth Fund

RONALD BARON


Retail Shares: BFGFXInstitutional Shares: BFGIX

R6 Shares: BFGUX

Dear Baron Focused Growth Fund Shareholder:

Performance

In the third quarter of 2016, Baron Focused Growth Fund (the “Fund”)increased in value by 1.05% (Institutional Shares) while the Russell 2500Growth Index, the benchmark against which we compare the performanceof the Fund, increased by 6.98%. The S&P 500 Index, which measures theperformance of large-cap companies, increased by 3.85%. The MorningstarUS OE Mid-Cap Growth Category Average, in which the Fund is classified,increased by 4.81%.



BaronFocusedGrowth

FundRetail

Shares1,2,3

BaronFocusedGrowth

FundInstitutionalShares1,2,3,4

Russell2500

GrowthIndex2

S&P500

Index2

Three Months5 0.99% 1.05% 6.98% 3.85%Nine Months5 1.38% 1.58% 6.95% 7.84%One Year 7.71% 8.02% 11.02% 15.43%Three Years 2.59% 2.86% 7.43% 11.16%Five Years 10.93% 11.21% 16.20% 16.37%Ten Years 6.91% 7.10% 8.82% 7.24%Fifteen Years 11.47% 11.60% 9.52% 7.15%Since Inception

(May 31,1996) 10.41% 10.50% 7.26% 7.96%

With the Brexit vote in the rearview mirror, markets headed solidly higher inthe third quarter as investors believed they had overreacted. The Energy andHealth Care sectors (particularly the biotechnology sub-industry) led theway for the index this quarter as oil prices stabilized from their Februarylows and acquisition activity increased for drug companies. Large firms tookadvantage of the year’s early sell-off to buy companies with drugs in FDAtrials. The Fund owns no energy or biotechnology investments. We think it is

not possible to predict energy prices in the short term or the timing of FDAdrug approvals with any consistency.

The Fund remains a concentrated portfolio of competitively advantagedsmall- and mid-cap companies where a premium is placed on predictablegrowth over the long term. The top five positions in the portfolio, VailResorts, Inc., Tesla Motors, Inc., Hyatt Hotels Corp., CoStar Group, Inc.and FactSet Research Systems, Inc., all have, in our view, significantcompetitive advantages due to irreplaceable assets, technologically superiorknowhow, or exclusive data that is integral to their operations. We thinkthat these businesses cannot be easily duplicated. Their competitiveadvantages secure their future earnings growth, in our opinion. Other thanVail Resorts, which announced an important acquisition, the other four

Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares as of December 31, 2015 was 1.39%, butthe net annual expense ratio was 1.35% (net of the Adviser’s fee waivers) and Institutional shares was 1.09%. The performance data quoted represents pastperformance. 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. isthe adviser to the Fund) for and the Fund’s transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, without whichperformance would have been lower. Current performance may be lower or higher than the performance data quoted. For performance information current tothe most recent month end, visit www.BaronFunds.com or call 1-800-99BARON.† The Fund’s historical performance was impacted by gains from IPOs and/or secondary offerings. There is no guarantee that these results can be repeated or that the Fund’s level of participation in

IPOs and secondary offerings will be the same in the future.1 Reflects the actual fees and expenses that were charged when the Fund was a partnership. The predecessor partnership charged a 15% performance fee through 2003 after reaching a certain

performance benchmark. If the annual returns for the Fund did not reflect the performance fees for the years the predecessor partnership charged a performance fee, the returns would be higher.The Fund’s shareholders will not be charged a performance fee. The performance is only for the periods before the Fund’s registration statement was effective, which was June 30, 2008. Duringthose periods, the predecessor partnership was not registered under the Investment Company Act of 1940 and was not subject to its requirements or the requirements of the Internal Revenue Coderelating to registered investment companies, which, if it were, might have adversely affected its performance.

2 The indexes are unmanaged. The Russell 2500™ Growth Index measures are classified as growth and the S&P 500 Index of 500 widely the performance of small tomedium-sized U.S. companies that held large cap U.S. companies. The indexes and the Fund are with dividends, which positively impact the performance results. RussellInvestment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell is a trademark of Russell InvestmentGroup.

3 The performance data does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.4 Performance for the Institutional Shares prior to May 29, 2009 is based on the performance of the Retail Shares, which have a distribution fee. The Institutional Shares do


44

September 30, 2016 Baron Focused Growth Fund

positions trailed the Russell 2500 Growth Index. We think that these fourbusinesses should soon again outperform, but we cannot guarantee that willbe the case.

The companies that contributed the most to absolute performance duringthe quarter announced or completed strategic acquisitions that we believewill allow these businesses to expand into new markets or accelerategrowth. Financial Engines, Inc. exhibited the benefits of its recently closedacquisition of The Mutual Fund Store (rebranded as Financial EnginesAdvisors). The combined company now has the ability to provide its servicesto new retirement accounts outside of defined contribution plans, as well asimprove 401(k) plan enrollment rates. Vail Resorts announced theacquisition of Whistler Blackcomb, which should create cross-marketingopportunities and improve sales of its season ticket, Epic Pass. In August,Arch Capital Group Ltd. announced in the acquisition of United Guaranty,

AIG’s mortgage insurance subsidiary, which makes Arch the nation’s largestunderwriter of mortgage insurance. Mortgage insurance offers some of thebest risk-adjusted returns in the property and casualty insurance market andUnited Guaranty’s risk-based pricing methodology complements Arch’sunderwriting philosophy. We expect all of the acquisitions to improve theearnings growth outlooks for the businesses and drive shareholder value.

The two stocks that declined the most were Virtu Financial, Inc. andInovalon Holdings, Inc. Both companies reduced guidance. Virtu faced adifficult environment as lower market volatility resulted in weak tradingvolumes and reduced spreads. Inovalon is facing difficulties with modestlyhigher customer churn and pricing concessions on an estimated 20% of itsbusiness. While Inovalon’s new product pipeline has improved steadily, thecompany has been slow to close these deals. We believe these two stocksare also well positioned to improve results in the future.

Table IIPerformance.Periods of euphoria and stress



12/31/99P/E 33x







EasingP/E 16.1x

“HelterSkelter” Fedtightening”


Annualized Returns

Inception5/31/96 to12/31/99

12/31/99 to12/31/08

12/31/08 to12/31/15

12/31/15 to9/30/16

Inception5/31/96 to

9/30/16

Baron Focused Growth Fund (Institutional Shares) 27.87% 2.72% 13.60% 1.58% 10.50%Russell 2500 Growth Index 17.60% (3.99)% 17.74% 6.95% 7.26%S&P 500 Index 26.58% (3.60)% 14.81% 7.84% 7.96%

Percentile rank in Morningstar Mid-Cap Growth Category* 24** 11** 84 86 10**# of Share Classes in the Category 266** 366** 497 723 110**Morningstar US OE Mid-Cap Growth Peer Group Avg 21.87% (2.85)% 15.45% 4.93% 7.94%

* The Morningstar US OE Mid-Cap Growth Category Average is not weighted and represents the straight average of annualized returns of each of the funds in the Mid-Cap Growth Category.Morningstar rankings are based on total returns and do not include sales charges. Total returns do account for management, administrative, and 12b-1 fees and other costs automatically deductedfrom fund assets. As of September 30, 2016, the Category consisted of 721, 574 and 425 funds for the 1-, 5- and 10-year periods. Baron Focused Growth Fund Institutional Share Class ranked inthe 55th, 89th, 60th and 10th percentiles, respectively, in the Category for the 1-, 5-, 10-year and since inception (5/31/1996) periods (consisted of 110 funds). The Category consisted of 266, 366,497, 723 and 110 funds during the time intervals 5/31/1996–12/31/1999, 12/31/1999–12/31/2008, 12/31/2008–12/31/2015, 12/31/2015–9/30/2016 and 5/31/1996–9/30/2016, respectively.Baron Focused Growth Fund Institutional Share Class ranked in the 24th, 11th, 84th, 86th and 10th percentiles, for the respective time intervals.

** Source: Morningstar Direct-Performance Reporting.

Table III.Performance Based Characteristics as of September 30, 2016

Time Interval

5/31/96 to12/31/99

12/31/99 to12/31/08

12/31/08 to12/31/15

12/31/15 to9/30/16

5/31/96 to9/30/16

Alpha (%) 12.42 5.97 –1.94 –0.46 4.98Beta 0.85 0.69 0.90 0.85 0.78Upside Capture (%) 111.70 84.60 83.77 61.20 89.55Downside Capture (%) 86.45 68.34 89.62 84.82 76.62# of Monthly Observations 43 108 84 9 244

45


Table IV.Top contributors to performance for the quarter ended September 30, 2016

YearAcquired

MarketCap


QuarterEnd

MarketCap

(billions)Total

ReturnPercentImpact

Vail Resorts, Inc. 2013 $2.3 $5.7 13.49% 1.36%Arch Capital Group Ltd. 2003 0.9 9.7 10.08 0.38Financial Engines, Inc. 2014 1.8 1.8 15.11 0.37Manchester United plc 2012 2.3 2.8 5.96 0.26Caesarstone Ltd. 2013 1.5 1.3 8.49 0.26


Arch Capital Group Ltd. is a specialty insurance and reinsurance company.The stock performed well during the third quarter on solid quarterly results,with profitable underwriting, modest catastrophe losses, and favorablereserve development. The market also reacted favorably to Arch’sagreement to acquire mortgage insurance company United Guaranty fromAIG. This acquisition will make Arch the largest provider of mortgageinsurance, a market that we believe has attractive profitability and growthcharacteristics. (Josh Saltman)

Shares of retirement account manager Financial Engines, Inc. increased inthe third quarter. The company reported improving metrics across allcategories. Shares also benefited from investor sentiment that the recentintegration of its Mutual Fund Store acquisition will help improve the legacybusiness while allowing expansion into a new channel. New marketingcampaigns and advisor seminars appear to be having an early impact as thecompany reported a drop in cancellations and a slight increase inenrollments. (Michael Baron)

Table V.Top detractors from performance for the quarter ended September 30, 2016

YearAcquired

MarketCap


QuarterEnd

MarketCap

(billions)Total

ReturnPercentImpact

Inovalon Holdings, Inc. 2015 $ 2.8 $ 2.2 –18.28% –0.52%Tesla Motors, Inc. 2014 31.2 30.3 –3.89 –0.35Iridium Communications

Inc. 2014 0.6 0.8 –6.52 –0.23Choice Hotels

International, Inc. 2010 1.9 2.5 –4.90 –0.19Church & Dwight Co.,

Inc. 2007 3.0 12.3 –6.52 –0.18

Shares of health care data and analytics vendor Inovalon Holdings, Inc. fellin the third quarter on weak financial results and reduced guidance throughyear end. Management attributed the revenue shortfall to price reductionsin its retrospective risk adjustment business, and the margin shortfall toinvestments aimed at long-term growth. We think the recent poorperformance is temporary. Inovalon has high quality products that generatesolid return on investment for its customers, and we think it is well

positioned to capitalize on the need for robust data and analytics in healthcare. (Neal Rosenberg)

Shares of electric vehicle company Tesla Motors, Inc. fell during the thirdquarter as the market continued to evaluate its potential merger withSolarCity. The possibility of an additional equity round by year end alsopressured the stock. We believe Tesla’s brand is strong and has the ability tobring substantial innovation to its products and increase its salesdramatically in many years. Tesla has received over 370,000 Model 3reservations, representing close to $18 billion in backlog and the largestproduct launch in history. (Gilad Shany)

Shares of satellite communications company Iridium Communications Inc.fell in the third quarter. While the company reported a strong secondquarter, delays in payments from a customer/subsidiary, Aireon, ignitedconcerns regarding financing and liquidity. In addition, the SpaceX explosionof a Falcon 9 missile increased the risk of a delayed launch schedule. We seepotentially significant cash flows yield for the NEXT constellation launch in2018 and beyond and look forward to launches later this year. (Gilad Shany)

Recent Purchases

Table VI.Top net purchases for the quarter ended September 30, 2016

YearAcquired

MarketCap


QuarterEnd

MarketCap

(billions)


AO World plc 2016 $0.8 $0.9 $3.9The Carlyle Group 2012 0.9 1.3 3.0

The severe market reaction to the Brexit vote gave the Fund an opportunityto establish a position in AO World plc. AO World is the leading onlineseller of major domestic appliances (MDA) in the U.K. The company isbenefiting from the growth in e-commerce, where they have more than30% market share in the online MDA category. AO World’s competitiveadvantages are a result of best-in-class customer service; differentiatedvideo and editorial content, which make for easier purchase decisions byconsumers; and an efficient supply chain. The company continues to expandrapidly in its core U.K. market, while making further gains in the Germanmarket, which is twice as large as the U.K.’s. The company has plans to enterseveral more countries in Europe over the next several years, with limitedcapital expenditures required to do so. AO World estimates that U.K. MDAmarket is $4.5 billion, and the broader European markets the company planson entering be more than five times larger. With its competitive advantagesand plans for diversification, we do not believe the company will besignificantly impacted by the British vote. (Ashim Mehra)

The Carlyle Group is one of the largest diversified alternative assetmanagers with approximately $175 billion under management. VariousBaron Funds and portfolios have held Carlyle since the company’s initialpublic offering in 2012. The Fund increased its stake in the companybecause we saw the company’s recent stock price weakness as a buyingopportunity. Founded in 1987, Carlyle has a long history of successfulinvestments around the globe and loyal customers who invest acrossproducts. The firm comprises over 100 products with various geographic andindustry mandates. The company’s diverse products should result insmoother capital raising and management fee-related earnings than morespecialized managers. Its performance fee earnings will be lumpy given theuncertainty of realization timings; however, this revenue stream is extremely

46

September 30, 2016 Baron Focused Growth Fund

profitable and the company is committed to paying out a high portion of itsdistributable earnings. While the company has been under pressure due tofears about industry flows, fees, and recent performance in select products,we feel these issues will abate given Carlyle’s sought-after services and itslong-term historic success. (Michael Baron)

These purchases highlight the critical importance of our valuation discipline.

Investment Strategy

The objective of Baron Focused Growth Fund is to double its value per sharewithin five years. Our strategy to accomplish this goal is to invest for thelong term in a focused portfolio of what we believe are appropriatelycapitalized, well-managed, small- and mid-cap businesses at attractiveprices. We attempt to create a portfolio of less than 30 securities diversifiedby GICS sectors that will be approximately 85% as volatile as the market.We identify these businesses through our proprietary research.

We think the businesses in the Fund are well managed, have sustainablecompetitive advantages, and excellent, long-term growth opportunities.Considering current stock price valuations, we believe we have theopportunity to meet our performance goals during the next decade,although there is no guarantee that we will do so.

As of 9/30/2016, the Fund held 20 investments. The weighted average marketcapitalization of those small- and mid-sized growth companies was $8.0 billion.

While concentrated, the Fund has exposure to a diverse mix of industries.The Fund’s sector weightings are significantly different from those of theRussell 2500 Growth Index. Our exposures will likely change over timedepending on where we find the most promising investment opportunitiesthat meet our investment criteria.

The Fund is also diversified across businesses in different stages of theirgrowth trajectories, each of which have different attributes that make themappealing investments. Please see Tables VII, VIII, and IX below.

We own less seasoned companies in their early, rapid growth stage. Thesemore recently purchased businesses currently account for approximately 42%of the Fund’s assets. They are penalizing current earnings through ongoinginvestments in their businesses to meet future demand. On current metrics,these businesses may look expensive; however, we think they will continue togrow and have the potential to generate exceptional returns. For example, AOWorld is providing distribution solutions for hard to deliver home products inEurope and feedback to suppliers to improve future merchandise. It ispenalizing current earnings as it expands its logistical presence.

We also like businesses with irreplaceable assets that, we believe, offer aparticularly useful hedge against inflation pressures. These stocks representapproximately 27% of the assets. Manchester United plc, for example, hasa 130-year history and a dedicated fan base that is deeply committed to theteam. We think Manchester United has the opportunity to monetize variousaspects of the franchise through improved sponsorship deals, mediacontracts, and game day sales.

Longer-term investments that we own have been steadily growing theirearnings while using excess free cash flow to buy back stock and paydividends. We call these foundational investments. These types of stocksrepresent approximately 23% of the portfolio. For example, Choice HotelsInternational, Inc.’s capital light franchise model allows the company toreturn cash to shareholders through buybacks and dividends while stillachieving high single-digit earnings growth and low teens earnings growth.

We believe this mixture of businesses that we have in the portfolio shouldresult in steadier results for the Fund in various business cycles.

Table VII.Investments in Less Seasoned Growth Companies

Percentof NetAssets

YearAcquired

CumulativeReturnSinceInitial

Purchase

Tesla Motors, Inc. 10.3% 2014 –18.5%CoStar Group, Inc. 9.1 2014 1.2Benefitfocus, Inc. 5.1 2014 46.4Iridium Communications Inc. 3.8 2014 19.1Caesarstone Ltd. 3.4 2013 –9.0Guidewire Software, Inc. 3.4 2013 29.8Financial Engines, Inc. 2.9 2014 –11.7AO World plc 2.5 2016 12.5Inovalon Holdings, Inc. 1.3 2015 –21.6

Table VIII.Investments with Irreplaceable Assets

Percentof NetAssets

YearAcquired


Purchase

Vail Resorts, Inc. 12.0% 2013 165.0%Hyatt Hotels Corp. 9.4 2009 75.8Manchester United plc 5.2 2012 24.1

Table IX.Foundational Investments: Growth, Dividends, and Share Repurchases

Percentof NetAssets

YearAcquired


Purchase

FactSet Research Systems, Inc. 6.8% 2008 246.9%Arch Capital Group Ltd. 4.5 2003 625.6Choice Hotels International, Inc. 3.8 2010 110.7Verisk Analytics, Inc. 2.7 2009 193.2Church & Dwight Co., Inc. 2.7 2007 371.6Fastenal Co. 2.4 2007 138.7

47


Table X.Top 10 holdings as of September 30, 2016

YearAcquired

MarketCap


QuarterEnd

MarketCap

(billions)Amount

(millions)

Percentof NetAssets

Vail Resorts, Inc. 2013 $ 2.3 $ 5.7 $21.4 12.0%Tesla Motors, Inc. 2014 31.2 30.3 18.4 10.3Hyatt Hotels Corp. 2009 4.2 6.5 16.7 9.4CoStar Group, Inc. 2014 6.2 7.1 16.2 9.1FactSet Research

Systems, Inc. 2008 2.5 6.6 12.2 6.8Manchester United plc 2012 2.3 2.8 9.3 5.2Benefitfocus, Inc. 2014 0.7 1.2 9.0 5.1Arch Capital Group Ltd. 2003 0.9 9.7 7.9 4.5The Carlyle Group 2012 0.9 1.3 6.8 3.8Choice Hotels

International, Inc. 2010 1.9 2.5 6.8 3.8

Thank you for investing in Baron Focused Growth Fund.

We are continuing to work hard to justify your confidence and trust in ourstewardship of your family’s hard-earned savings. We are also continuing totry to provide you with information I would like to have if our roles werereversed. This is so you can make an informed judgment about whetherBaron Focused Growth Fund remains an appropriate investment for yourfamily.

Respectfully,



The Adviser believes that there is more potential for capital appreciation in small and medium-sized companies and using non-diversification, but there alsomay be more risk. Specific risks associated with non-diversification include increased volatility of the Fund’s returns and exposure of the Fund to greater risk ofloss in any given period. Securities of small and medium-sized companies may be thinly traded and they may be more difficult to sell during marketdownturns. The Fund may not achieve its objectives. Portfolio holdings are subject to change. Current and future holdings are subject to risk.


This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Focused Growth Fund by anyone in any jurisdiction where it would be unlawful under the laws ofthat jurisdiction to make such offer or solicitation.

Beta: measures a fund’s sensitivity to market movements. The beta of the market (Russell 2500 Growth Index) is 1.00 by definition.

P/E: the price earnings ratio is a valuation ratio of a company’s current stock price to its actual earnings per share.

Alpha: measures the difference between a fund’s actual returns and its expected performance, given its level of risk as measured by beta.

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.

48

September 30, 2016 Baron International Growth Fund

MICHAEL KASS

PORTFOLIO MANAGER

Retail Shares: BIGFXInstitutional Shares: BINIX

R6 Shares: BIGUX

Dear Baron International Growth Fund Shareholder:

Performance

Baron International Growth Fund (the “Fund”) gained 7.68% (InstitutionalShares) for the third quarter of 2016, while its principal benchmark index,the MSCI ACWI ex USA IMI Growth Index, rose 6.20% for the quarter.Notably, the broad international indexes outperformed the S&P 500 Index inU.S. dollar terms. Emerging market equities, bonds, and currenciesdemonstrated leadership, logging significant gains in a year-to-date periodmarked by new lows in sovereign bond yields worldwide. We believe thedecline in yields witnessed in the year-to-date period, particularly inreaction to the surprise Brexit outcome in late June, likely presages aneconomic upturn and earnings recovery in the previously stressed emergingmarket economies, and thus could pave the way towards continuedoutperformance for developing world-biased equities.

During the quarter, several positive catalysts stand out in addition to thebroad decline in yields referenced above. First, both the Bank of Japan and theECB communicated a preparedness to up the ante in terms of unconventionalquantitative easing measures. While U.S. Federal Reserve communication wasmore nuanced, they deferred on a potential rate hike in September, sparking arally to fresh year-to-date highs in many equity markets worldwide. Further,key financial and economic conditions in China appeared to stabilize if notimprove; we view such stability in China as a key barometer of the visibility ofglobal and corporate earnings growth. We suggest that policymakers in Chinaseem to be achieving success under challenging conditions. For now, weremain optimistic that a cyclical earnings recovery is coalescing with longer-term structural reforms throughout much of the developing world to form animportant inflection point in emerging market economic and equityperformance. This also implies an improvement in a key source of pressure onglobal corporate earnings in recent years. On the other hand, and morerecently, the U.S. Federal Reserve has joined the Bank of Japan in expressing awillingness to accommodate a rise in forward looking inflation indicators, and,as if on cue, several such indicators have begun to perk up. Given theincreasing influence of global central bank policy in determining the cost ofcapital and asset prices worldwide, we believe that we may be at the precipiceof a significant shift with longer-term implications. Several factors suggest weare nearing the liftoff of fiscal spending in many jurisdictions, as acomplement to quantitative easing, in the quest for economic stimulus andgrowth. While the implication would likely be rising interest rates, if executedcarefully, such a shift could spark an important rotation from bonds into

equities on a global basis, and we look forward to following up on thisphenomenon in our next communication.



BaronInternational

GrowthFund

RetailShares1,2

BaronInternational

GrowthFund

InstitutionalShares1,2,3

MSCIACWI exUSA IMIGrowthIndex1

MSCIACWI ex

USA Index1

Three Months4 7.63% 7.68% 6.20% 6.91%Nine Months4 7.87% 8.09% 6.18% 5.82%One Year 12.82% 13.13% 11.76% 9.26%Three Years 3.24% 3.51% 2.51% 0.18%Five Years 9.47% 9.76% 7.62% 6.04%Since Inception

(December 31, 2008) 11.33% 11.60% 8.93% 7.52%

Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares and Institutional Shares as ofDecember 31, 2015 was 1.59% and 1.31%, but the net annual expense ratio was 1.50% and 1.25% (net of the Adviser’s fee waivers), respectively. Theperformance data quoted represents past performance. Past performance is no guarantee of future results. The investment return and principal value of aninvestment will fluctuate; an investor’s shares, when redeemed, may be worth more or less than their original cost. The Adviser has reimbursed certain Fundexpenses (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 anunaffiliated 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 www.BaronFunds.com or call 1-800-99BARON.† The Fund’s historical performance was impacted by gains from IPOs and/or secondary offerings. There is no guarantee that these results can be repeated or that the

Fund’s level of participation in IPOs and secondary offerings will be the same in the future.1 The MSCI ACWI ex USA indexes cited are unmanaged, free float-adjusted market capitalization weighted indexes. The MSCI ACWI ex USA IMI Growth Index Net USD

measures the equity market performance of large, mid and small cap growth securities across developed and emerging markets, excluding the United States. The MSCI ACWIex USA Index Net USD measures the equity market performance of large and mid cap securities across developed and emerging markets, excluding the United States. Theindexes and Baron International Growth Fund include reinvestment of dividends, net of foreign withholding taxes, which positively impact the performance results.

2 The performance data does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.3 Performance for the Institutional Shares prior to May 29, 2009 is based on the performance of the Retail Shares, which have a distribution fee. The Institutional Shares do


49

Baron International Growth Fund

For the third quarter of 2016, we outperformed our principal internationalbenchmark indexes, while achieving a considerable advance. Whileperformance was broad-based during the quarter, our healthy weighting ofemerging markets exposure made a notable contribution. Here, AlibabaGroup Holding Limited, which operates the leading e-commerce platformin China, and Multi Commodity Exchange of India Ltd. and BharatFinancial Inclusion Limited, both related to our India financial reform andinvestment theme, contributed. From a sector perspective, stock selection inHealth Care was the largest contributor to relative performance, led by ourlongstanding investment in Eurofins Scientific SE, the world’s leading foodtesting and certification provider. Further, strong stock selection, oursignificant underweighting in the Consumer Staples sector, and solid stockselection in the Energy sector helped drive relative gains. Bellamy’sAustralia Limited, an infant formula producer, and Golar LNG Ltd. werestrong relative and absolute performers during the period. During thequarter, the largest driver of adverse relative performance was weak stockselection in the Information Technology sector, where MellanoxTechnologies, Ltd. and Check Point Software Technologies Ltd. detractedthe most, posting absolute declines in a strong market.


PercentImpact

Eurofins Scientific SE 0.76%Alibaba Group Holding Limited 0.71Multi Commodity Exchange of India Ltd. 0.49Golar LNG Ltd. 0.46Bellamy’s Australia Limited 0.43

Shares of Eurofins Scientific SE contributed to performance in the thirdquarter. Eurofins provides analytical testing services to clients in the food,pharmaceutical, and environmental sectors. The company reported strongfinancial results for the first half of 2016, including double-digit organicrevenue growth and cash flow greater than analyst forecasts. We continueto believe Eurofins has a strong long-term growth outlook, driven byincreasing demand for safe, high-quality food; increasing regulation; andmore outsourcing of testing by clients. (Neal Kaufman)

Shares of Alibaba Group Holding Limited, the largest e-commercecompany in China, performed well in the third quarter following strongquarterly results. Enhanced financial disclosure helped investors tounderstand better the profitability of the core commerce business andthereby attribute a higher value to it. We expect that mobile monetizationwill continue to improve through 2016 and beyond as the company investsin new areas such as online grocery and cloud computing. (Ashim Mehra)

Shares of Multi Commodity Exchange of India Ltd. rose in the third quarter.With over 85% share of the commodity exchange market, the companybenefits from growing commodity trading activity in India. The governmentrecently approved options trading on commodity exchanges, which isexpected to significantly expand market participation and traded volumes. Anincrease in trading fees by about 25% was also a key driver of stockperformance. We like the company’s recurring revenue model and ability togenerate high returns on capital given its dominant position. (Anuj Aggarwal)

Shares of liquefied natural gas company Golar LNG Ltd. increased in the thirdquarter. During the second quarter, Golar finalized a joint venture with a strongfinancial partner for downstream activity and made progress on convertingvessels to regasification units. As LNG supply grows worldwide, rates for carriers

have started to rebound. Gas production costs in Cameroon (where Golar isfocused) are low, and the government is incentivized to find an outlet.Stabilizing oil prices also helped boost the stock price. (Gilad Shany)

Shares of Bellamy’s Australia Limited rose in the third quarter. Thecompany is Australia’s leading player in infant nutrition products with afocus on organic baby formula. The stock increased on strong earningsgrowth driven by robust demand in China. Bellamy’s continued to gainmarket share from local Chinese brands as consumers switched to imported,high quality, organic infant formula. We believe Bellamy’s is well positionedto sustain high double-digit earnings growth over the next two-to-threeyears as it expands into China. (Anuj Aggarwal)


PercentImpact

MonotaRO Co., Ltd. –0.27%Mellanox Technologies Ltd. –0.24Reckitt Benckiser Group Plc –0.13BM&FBOVESPA SA –0.12Nets A/S –0.11

Shares of MonotaRO Co., Ltd. declined during the third quarter. MonotaROsells a variety of consumables to business customers in Japan and Korea.While MonotaRO’s business continues to grow in a predictable andprofitable manner, the stock can be highly volatile quarter to quarter due tohigh growth expectations. We believe the company has a substantialopportunity to gain market share in the maintenance, repair, and overhauldistribution business in its core Japanese market, with incrementalopportunities in Korea and Indonesia. (Aaron Wasserman)

Shares of semiconductor company Mellanox Technologies Ltd. fell ondisappointing second quarter results, including a slowdown in the company’sInfiniBand business and heightened competitive concerns around a newproduct from Intel Corp. We expect Mellanox to be a share leader at thehigh end of the InfiniBand business and protect its high margin businessmodel with strong innovation and product leadership. We view Mellanox’sEthernet business as an open-ended opportunity that is potentially muchbigger than its InfiniBand business. (Gilad Shany)

Shares of British consumer products company Reckitt Benckiser Group Plcfell in the third quarter, weighed down by a pending investigation in SouthKorea where several companies, including Reckitt Benckiser, were named inthe sale of harmful humidifier sanitizers. We believe the price correctionmay be overdone. The company has already taken a charge for costsassociated with the sanitizer, and its Korea business is relatively small.Earnings growth has been solid, as it has been growing revenue whileexpanding margins through efficiency programs. (Kyuhey August)

Shares of Brazilian financial exchanges operator BM&FBOVESPA SA fell inthe third quarter as it gave back some gains from the first half of 2016.Mediocre trading volumes and concerns that the company’s pendingacquisition of Cetip could be held up by antitrust issues also pressured thestock. We continue to own the stock because we expect the acquisition ofCetip will close and create significant shareholder value, while longer-termdevelopment of the Brazilian capital markets should lead to higher tradingvolumes. (Josh Saltman)

Nets A/S is the dominant payment services provider in the Nordic region,operating across the entire payments value chain. The stock fell during the

50

September 30, 2016 Baron International Growth Fund

third quarter immediately following the IPO. We believe the shares werepoorly allocated during the offering, and selling pressure from investors“flipping” the IPO damaged investor sentiment. We believe this is atemporary phenomenon and that earnings growth will lead to meaningfulshare price appreciation over time. (Josh Saltman)

Portfolio Structure

Table IV.Top 10 holdings as of September 30, 2016 – Developed Countries

Percent ofNet Assets

Eurofins Scientific SE 3.9%Domino’s Pizza Enterprises Ltd. 3.0Constellation Software, Inc. 2.7Softbank Group Corp. 2.6Aena SA 2.6Abcam plc 2.5Arch Capital Group Ltd. 2.5Fresenius Medical Care AG & Co. KGaA 2.4RIB Software AG 2.2Reckitt Benckiser Group Plc 2.2

Table V.Top five holdings as of September 30, 2016 – Developing Countries


Alibaba Group Holding Limited 2.9%Tencent Holdings, Ltd. 2.4Bharat Financial Inclusion Limited 2.3Multi Commodity Exchange of India Ltd. 1.8BM&FBOVESPA SA 1.6

Exposure by Country: At the end of the third quarter of 2016, the Fund wasinvested 67.8% in developed countries and 29.8% in developing countries,with the remaining 2.4% in cash. The Fund seeks to maintain broaddiversification by country at all times. A detailed review of the Fund’sholdings by country is available at the back of this Baron Funds QuarterlyReport.

Table VI.Percentage of securities in developed markets as of September 30, 2016


United Kingdom 13.5%Japan 9.4Germany 7.1Australia 6.3Canada 6.0Spain 5.3United States 4.8France 3.9Israel 2.7Hong Kong 2.4Ireland 1.8Switzerland 1.7Norway 1.7Denmark 1.2

Table VII.Percentage of securities in developing markets as of September 30, 2016


China 11.6%India 6.1Brazil 3.7Indonesia 2.5Panama 1.2Russia 1.2Mexico 1.2South Africa 1.2Chile 1.1

The Fund may invest in companies of any market capitalization, and westrive to maintain broad diversification by market cap. As of September 30,2016, the Fund’s median market cap was $8.6 billion, and we were investedapproximately 55.4% in large- and giant-cap companies, 35.7% in mid-capcompanies, and 6.5% in small- and micro-cap companies, as defined byMorningstar, with the remainder in cash.

Recent Activity

During the quarter we established several new positions, both in developedmarket companies as well as in the emerging markets given our ongoingview that fundamentals here have reached an important inflection point.We ended the quarter with our largest exposure to emerging markets insome time at nearly 30%. We participated in the initial public offering ofNets A/S, the leading Scandinavian transaction payments company, abusiness we are familiar with through our investment in Worldpay Groupplc. We believe the company has a strategic market position withhigh barriers to entry, can grow earnings at an attractive rate, and willcontinue to exhibit strong free cash flow generation. We also initiatedpositions in MYOB Group Limited, an Australian accounting softwareprovider engaged in a transition to cloud-based offerings that we believe willdrive market share gains and cement long-term customer relationships, andin Encana Corp., a Canada-based oil & gas producer with an attractivereserve base and a strong and capital efficient growth profile. Within theemerging markets, we made initial investments in Copa Holdings, S.A., astrategically positioned and competitively advantaged airline based inPanama, China Distance Education Holdings Limited, an online and testpreparation services provider in mainland China, BYD Company Ltd., aleading automotive manufacturer based in China with a growing emphasison electronic vehicles and power storage solutions, and Maruti Suzuki IndiaLtd., a leading automobile maker in India with a history of innovation andstrong brand equity. We also sold several holdings during the quarter basedon deteriorating fundamentals, most notably our positions in Brenntag AG,a global specialty chemicals distribution company based in Germany, EMISGroup plc, a health care software and systems provider, and IntesaSanpaolo S.p.A., a leading bank in Italy because of concerns over anupcoming referendum and uncertainties regarding a potential role by Intesain the recapitalization of weaker Italian banks.

51


Outlook

The third quarter of 2016 post-Brexit rally suggests that thus far there arefew signs of political change or contagion strong enough to disrupt themarket equilibrium that has remained in place for many years. Indeed,during the quarter, sovereign bond markets initially moved aggressively todiscount likely global policy support, a stimulative catalyst, particularly forthe emerging markets. At one point early in the quarter, experts observedthat roughly one-third of global sovereign (ten year) bonds were tradingwith negative yields on offer, a rare phenomenon which would naturallycoax global savers to pursue higher yields amongst corporate, high-yield oremerging market debt securities. From our vantage point, while we mayquestion the fundamental underpinnings, we must respect that such asignificant decline in cost of capital around the globe is likely to spark anearnings recovery, particularly in the developing world where previouspressures suggest pent-up demand and trough corporate profit margins. Assuch, we remain confident for the time being that developing world-biasedequities can maintain a leadership position, as exhibited in the third quarterand year-to-date periods.

A key question for global investors over the past year has been whetherimbalances and strong credit growth in China will ultimately lead to a creditcontraction and/or a marked RMB devaluation. While we have noted causefor concern in previous writings, during the most recent quarter, we observethat financial and economic conditions appear to be stable and improving,with economic growth, consumption, and commodity prices holding up wellin the face of moderating stimulus measures and increased scrutiny overnon-traditional bank lending. We interpret this as a sign that ongoingstructural reforms, improved policy coordination and communication, andprogress on capital market liberalization, financial reform and bank non-performing loan recognition, seem to be achieving desired objectives. Inother words, while we agree that China faces difficult challenges, authoritiesseem to be effectively managing through active policy initiatives andreforms. As an important contributor to global demand, we believe stabilityin China is a key variable in the outlook for global growth and corporateearnings, and are encouraged by recent progress.

Looking forward, we remain optimistic, though as always, there are severalkey variables that we are monitoring. Japan, while continuing to strugglewith inadequate growth and inflation, seems poised to enter a fiscalexpansion largely financed by money printing, which could likely spark

equity appreciation, even if that were partially offset by currencydepreciation. While Europe remains challenged by political and financialcomplexities, credit and earnings growth appear reasonably healthy. TheU.K. economy has held up well thus far in spite of Brexit uncertainties, whilethe weaker pound has actually improved earnings visibility for export-oriented companies domiciled there. In sum, we see adequate if notincreasing opportunities for bottom up investments in these developedeconomies. Further, we believe that developing world economies,commodities, and related equities have reached a favorable inflectionpoint. In the emerging markets in particular, the cyclical earnings recoveryreferred to above seems to be coalescing with longer-term structuralreforms and favorable political evolution in countries such as Brazil andArgentina, largely in direct response to the deteriorating economic andfinancial conditions suffered over the past several years. More recently, ourenthusiasm is balanced by early signs that we may be passing through animportant secular bottom in sovereign bond yields. Evolving politicalrealities, likely fiscal expansion, signs of rising wage and rent inflation, andcomments by the U.S. Federal Reserve and Bank of Japan suggest thatcentral bankers appear to be encouraging inflation expectations to rise, andperhaps “run hot” for the time being. This important shift is occurringsubsequent to an historic decline in global yields, which leaves investorsentiment and positioning vulnerable to inflation sightings. We suspect bondmarket volatility is likely to rise in the foreseeable future; in our view itremains an open question as to whether this would ultimately be favorableor unfavorable for equities, and we suspect we will have more to report onthis subject at year end. Again, on balance, we remain optimistic.

Thank you for investing in the Baron International Growth Fund.

Sincerely,

Michael KassPortfolio ManagerOctober 17, 2016


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. Specific risksassociated with investing in small and medium-sized companies include that the securities may be thinly traded and they may be more difficult to sell duringmarket downturns. The Fund may not achieve its objectives. Portfolio holdings are subject to change. Current and future portfolio holdings are subject to risk.


This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron International Growth Fund by anyone in any jurisdiction where it would be unlawful under thelaws of that jurisdiction to make such offer or solicitation.

52

September 30, 2016 Baron Real Estate Fund

Retail Shares: BREFXInstitutional Shares: BREIX

JEFFREY KOLITCH

PORTFOLIO MANAGER R6 Shares: BREUX

Dear Baron Real Estate Fund Shareholder:

Performance

The Baron Real Estate Fund (the “Fund”) gained 2.21% (Institutional Shares)in the third quarter of 2016. This compares favorably with its primarybenchmark, the MSCI USA IMI Extended Real Estate Index (the “MSCI RealEstate Index”), which was essentially flat with a 0.10% return. The S&P 500Index gained 3.85% in the third quarter. Year-to-date, the Fund is down1.84%. This compares unfavorably with both the MSCI Real Estate Indexwhich gained 8.03%, and the S&P 500 Index which gained 7.84%. Ourdetailed thoughts with regard to performance are described below.


BaronReal Estate

FundRetail

Shares1,2

BaronReal Estate

FundInstitutional

Shares1,2

MSCIUSA IMI

ExtendedReal Estate

Index1S&P 500Index1

Three Months3 2.15% 2.21% 0.10% 3.85%Nine Months3 (2.02)% (1.84)% 8.03% 7.84%One Year 3.13% 3.39% 14.69% 15.43%Three Years 6.07% 6.34% 11.19% 11.16%Five Years 18.25% 18.55% 17.63% 16.37%Since Inception

(December 31, 2009)(Annualized) 14.65% 14.93% 13.64% 12.71%

Since Inception(December 31, 2009)(Cumulative)3 151.59% 155.80% 137.11% 124.28%

Comprehensive Performance Review: A “Look Back”and A “Look Forward”

The Baron Real Estate Fund has an overall track record of strong performance:

For the five-year period ended September 30, 2016, the Baron Real EstateFund was recognized by both Morningstar and Lipper as the #1 ranked realestate fund for its 5-year performance.* However, despite the Fund’s top

Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares and Institutional Shares as of December 31,2015 was 1.31% and 1.06%, respectively. The performance data quoted represents past performance. Past performance is no guarantee of future results. Theinvestment 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. TheAdviser 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 bereduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower. Current performance may be lower or higherthan the performance data quoted. For performance information current to the most recent month end, visit www.BaronFunds.com or call 1-800-99BARON.1 The indexes are unmanaged. The MSCI USA IMI Extended Real Estate Index is a custom index calculated by MSCI for, and as requested by, BAMCO, Inc. The index includes real estate and real

estate-related GICS classification securities. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein.The MSCI data may not be further redistributed or used as a basis for other indexes or any securities or financial products. This report is not approved, reviewed or produced by MSCI. The S&P 500Index measures the performance of 500 widely held large cap U.S. companies. The FTSE NAREIT Equity REIT Index is a free-float adjusted, market capitalization weighted index of U.S. Equity REITs.The indexes and the Fund include reinvestment of interest, capital gains and dividends, which positively impact the performance results.

2 The performance data in the table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.3 Not annualized.* The Institutional Share Class was ranked #1 by Morningstar (out of 236 funds in the Morningstar US OE Real Estate Category) and Lipper (out of 219 funds in the Lipper Real Estate Fund Category),

for the 3-year period ended December 31, 2014. The Institutional Share Class was ranked #1 by Morningstar (out of 192 funds) and Lipper (out of 172 funds), for the 5-year period endedDecember 31, 2014. Morningstar and Lipper rankings are based on total returns for the 3-year and 5-year periods ended 12/31/2014.For the period ended 12/31/2014, Morningstar 3-year star rating is based on risk adjusted returns with 236 funds in category; and 5-year star rating is based on risk adjusted returns with 192 fundsin category. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating based on a Morningstar Risk-Adjusted Return measure that accounts for variation in afund’s monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class iscounted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.)The Morningstar US OE Real Estate Category Average is not weighted and represents the straight average of annualized returns of each of the funds in the Real Estatecategory. Morningstar rankings are based on total returns and do not include sales charges. Total returns do account for management, administrative, and 12b-1 fees andother costs automatically deducted from fund assets. As of September 30, 2016, the category consisted of 284, 219, and 182 funds for the 1- and 5-year periods andsince inception. Morningstar ranked Baron Real Estate Fund Institutional Share Class in the 99th, 1st, and 7th percentiles, respectively, in the category.The Lipper Real Estate Fund Category Average is not weighted and represents the straight average of annualized returns of each of the funds in the category. As ofSeptember 30, 2016, the Category consisted of 264, 202, and 162 funds for the 1- and 5-year periods and since inception. Lipper ranked Baron Real Estate FundInstitutional Share Class in the 99th, 1st, and 8th percentiles, respectively, in the category.

53

Baron Real Estate Fund

ranking, results have lagged during certain segments of this same period. Wethought it would be instructive to illustrate why the Fund has recentlyunderperformed, how we have addressed it, and why we are confident thatwe will resume our strong performance.

In this letter, we provide both a performance “look back” and “lookforward”, while we also review the merits of the Baron approach toinvesting in real estate.

A Look Back*:

The Baron Real Estate Fund has been in operation for nearly seven years.

The Fund performed extremely well in its first five years ending December 31,2014 as follows:

• The Fund earned recognition from Morningstar and Lipper as the #1ranked real estate fund for both its 5-year and 3-year performances.

• The Fund was also awarded the highest 5-star Morningstar rating forboth its 5-year and 3-year performances.

• The Fund’s average annual return of 22.21% during the 5-year periodabove:

(a) exceeded the annual returns of its primary benchmark, the MSCI USAIMI Extended Real Estate Index (16.50%) by 571 basis points per year;

(b) exceeded the annual returns of the S&P 500 Index (15.45%) by676 basis points per year; and

(c) exceeded the annual returns of the FTSE NAREIT Equity REITIndex (16.88%) by 533 basis points per year.

However, despite the strong results above, and despite maintaining its #1ranking for the cumulative five-year period ended September 30, 2016, theFund’s more recent annual performance has lagged. In our view, certain keyitems have weighed on the Fund’s results.

First, persistently declining interest rates to all-time record low levels hasnegatively impacted the Fund’s relative performance.

The 10-year U.S. treasury yield has declined by approximately 50% from thebeginning of 2014 when it peaked at 3.04% to 1.60% at September 30,2016! In fact, just this past summer 10-year yields actually reached an all-time low of 1.37%. These extreme declines in 10-year treasury yieldsoccurred despite the fact that the U.S. is seven years into its economicrecovery, while experiencing strong job growth!

As interest rates have dropped precipitously, many investors clamored foralternative sources of income. Consequently, dividend-focused mutual funds(such as REIT funds) and certain other dividend-paying securities havebenefited.

It is noteworthy that during this same time period, while the 10-yeartreasury yield declined by approximately 50% (3.04% to 1.60%), the FTSENAREIT Equity REIT Index increased almost in lockstep (correlation of –0.93)by 50.08% – more than double the S&P 500 Index’s total increase of24.29%. Conversely, during times when interest rates increased, REIT shareprices have generally been subject to downward pressure.

During this recent period of persistently declining interest rates, theperformance of the Baron Real Estate Fund has lagged most REIT funds andits primary benchmark, due, in part, to the fact that we are not a REIT fund.Since the inception of the Fund on December 31, 2009, we have stated ourintention to structure a balanced real estate fund, and accordingly, wewould cap the Fund’s REIT exposure at no more than 40% to 50% of netassets.

We have maintained our research discipline, and during this aforementionedtime period of declining rates, we have limited the Fund’s REIT exposure toless than 40% of net assets, primarily because we have generally believedthere had been superior value and growth potential in non-REIT real estatecompanies. This decision, however, coupled with the aforementioned sharpdeclines in interest rates, has impacted the Fund’s recent performance asmany investors have piled into dividend-yield securities such as REITs.

Second, the outsized MSCI Real Estate Index combined weighting of 13% inHome Depot, Inc. and Lowe’s Companies, Inc. has exceeded the Fund’s 5%investment in these two companies.

Since the end of 2013, the Fund’s benchmark, the MSCI Real Estate Index,combined weighting in Home Depot and Lowe’s averaged an outsized 13%.The Fund’s investment percentage in these same two companies has beenapproximately 5% of the Fund’s net assets, which we view as a prudent, yetsignificant allocation. During this time, Home Depot and Lowe’s stocksgained 63% and 50%, respectively, resulting in a gain for both the Fund andthe MSCI Index.

However, because of this larger weighting by the MSCI Index (13%) versusthe Fund’s (5%) investment in Home Depot and Lowe’s, it resulted in a 414basis point greater gain for the MSCI Index from these two stocks. Since wedo not seek to mimic the index, sometimes we are hurt when stocks we areunderweight outperform.

Third, recent underperformance is also due to a few investmentmistakes – some of which can be attributed to ordinary “bad luck.” We havespent considerable time documenting “lessons learned,” and believe we arewell positioned to avoid these missteps in the future.

In 2016, a few surprising “bad luck” developments have negatively impactedFund performance.

First, the shares of cruise line operators, Norwegian Cruise Line Holdings,Ltd. and Royal Caribbean Cruises Ltd., have had a significant negativeimpact on Fund performance – in large part due to a series of unforeseenterrorist events in Europe (Brussels, Paris, Nice, Turkey, Germany, andIstanbul) which negatively impacted European cruise travel.

Further, these share prices were also impacted by the unexpected andsudden onset of the Zika mosquito virus that likely discouraged cruise travel.We also note that concerns about terrorism and Zika have most likelyimpacted the shares of the Fund’s investments in hotel and timesharecompanies during 2016 and to some extent in 2015. At this stage, webelieve these factors are largely priced into the stocks.

Second, the surprising referendum vote in the United Kingdom to withdrawfrom the European Union – “Brexit” – is another surprising event that hasnegatively impacted recent Fund performance. Consequently, the shares ofthe two leading commercial real estate services companies, CBRE Group,Inc. and Jones Lang LaSalle, Inc., have declined significantly in 2016, partlydue, in our opinion, to uncertainty over the outlook for U.K. commercial realestate activity following Brexit. The U.K. represents approximately 12% and10% of 2015 cash flow for Jones Lang LaSalle and CBRE Group, respectively.

Other factors that have weighed on Fund performance include theunexpected resignation by the CEO of building products company,Caesarstone Ltd., and the slower than anticipated merger integration ofEmeritus Corp. by senior housing operator Brookdale Senior Living, Inc.

We are not making excuses. We own our decisions and our results. We justwant you to have a better understanding of what is behind the numbers.

54


A Look Forward:

Looking forward, we remain optimistic that we are “righting the ship,” andwe will improve upon recent performance. We are intently focused onregaining and maintaining the Fund’s top real estate ranking.

Our bullish view is due to the following:

(i) We understand why the Fund has recently trailed. We have thoroughlyanalyzed the Fund’s recent performance. Factors include someallocation disproportions between real estate categories (such asREITs), some stock selecting missteps, and unforeseen “bad luck.”Lessons have been learned and measures have been taken.

(ii) We anticipate that macroeconomic conditions will normalize in theyears ahead. We expect that the highly unusual environment of thelast few years (most notably the collapse in interest rates to all-timelow levels) will slowly begin to “normalize.” An eventual “reversion tothe mean” and return to a somewhat more normal interest rate andeconomic environment should bode well for the Baron Real EstateFund.

(iii) “Trees don’t grow to the sky”. Dividend-yield securities such as REITshave benefited significantly from the unprecedented declines ininterest rates. One case in point – in January 2000, the 10-yeartreasury was at 6.44%, and had subsequently declined to 1.60% as ofSeptember 30, 2016. During this very steep interest rate decline, theFTSE NAREIT Equity REIT Index generated a total return of 591%, farexceeding the S&P 500 Index’s total return of 104%. Given thismassive decline in interest rates, and the related and consequentialincrease in REIT valuation multiples (or compression in capitalizationrates), we believe these outsized gains for REITs are unlikely to berepeated. This should bode well for the Fund, given our broader realestate categories, and more balanced approach to real estate-relatedinvesting.

(iv) The Fund is comprised of “best-in-class” companies. Though we arepleased with the high quality of the companies held in the Fund, wecontinuously strive to improve the Fund’s diversified portfolio of “best-in-class” real estate companies. We believe the businesses that weemphasize are: (a) well-managed; (b) market leaders; (c) generallypossess quality balance sheets; (d) own well-located real estate; and(e) grow cash flow at a faster rate than most peers. Our view is thatthese special “best-in-class” companies should generate superiorreturns over the long term.

(v) The Fund’s holdings are attractively valued. We believe the Fund is chockfull of companies that offer a rare combination of “high quality” that are“on sale.” Examples include Mohawk Industries, Inc., InterXionHolding N.V., Gaming and Leisure Properties, Inc., CBRE Group, Inc.,Brookfield Asset Management, Inc., Hilton Worldwide Holdings, Inc.,Jones Lang LaSalle, Inc., and Toll Brothers, Inc. – all of which arecurrently priced at discounts to our assessment of intrinsic value.

(vi) Interest rates may finally begin to rise. Globally, with interest rates inmany countries close to zero (in fact, there are estimates that globallythere is $15 trillion of negative yielding debt!) and/or near all-timelows, we ask rhetorically, “Do you think interest rates will be higher orlower in the next three to five years?” While we do not forecastinterest rates at Baron, we suspect that going forward, interest rateswill finally begin to move higher. This should have a beneficial effect onour Fund’s more balanced real estate portfolio.

(vii) We have assembled an excellent real estate team. Our real estate team ishighly skilled, motivated, and applies an “all-hands-on-deck” coordinatedapproach to our day-to-day research and Fund management.




MGM Resorts International $14.7 0.82%Macquarie Infrastructure Corporation 6.8 0.56Kennedy-Wilson Holdings, Inc. 2.5 0.47Jones Lang LaSalle, Inc. 5.1 0.41Brookdale Senior Living, Inc. 3.2 0.35

The shares of MGM Resorts International (“MGM”) performed well in thethird quarter of 2016. MGM is a leading global hospitality company thatowns and operates or has joint venture interests in hotel and casinoproperties in Las Vegas and elsewhere in Nevada, Mississippi, Michigan,Illinois, and Macau.

We remain optimistic about the company’s long-term prospects because webelieve MGM offers an attractive combination of the following:

(i) high quality real estate assets (i.e., Bellagio, MGM Grand Las Vegas,Mandalay Bay, The Mirage, Luxor, New York-New York, MGM China,MGM Growth Properties, and others);

(ii) a leading presence in Las Vegas, one of the strongest real estatemarkets in the U.S. (strong visitor trends, an improving local economy,and limited new construction activity; approximately 75% of MGM’scash flow is generated from Las Vegas);

(iii) a strong growth outlook as management believes it can almost doubleits cash flow in the next four years from $2.2 billion in 2015 to $4billion in 2019;

(iv) management’s plan to decrease its net debt dividend by its cash flowfrom its current level of 4.8 times to its desired level of 3.0 times by2018, thus achieving a coveted investment grade rating; and

(v) a cheap stock, in our opinion, because MGM’s owned real estate iscurrently valued at approximately 8 times 2017 estimated cash flow (alevel that we believe is a significant discount to its private marketvalue).

The shares of Macquarie Infrastructure Corporation continued to performwell in the most recent quarter. We maintain our favorable view of thecompany’s long-term prospects because: (i) Macquarie owns and/or operateshigh-quality real estate-like infrastructure assets (most notably along theNew York Harbor and Lower Mississippi River); (ii) the company has a longtrack record of growing free cash flow per share annually by approximately14%. We believe management can continue to generate double-digit annualfree cash flow growth; (iii) we have high regard for CEO James Hooke, andhis management team. We believe management will continue to createvalue in the years ahead by allocating capital to disciplined and prudentgrowth initiatives; and (iv) we anticipate that the company will pay adividend of approximately $5.70 per share in 2017, which at the currentshare price equates to an attractive 7.0% dividend yield.

The shares of Kennedy-Wilson Holdings, Inc., Jones Lang LaSalle, Inc.,and Brookdale Senior Living, Inc. rebounded strongly in the most recentquarter, following disappointing price performance in the first six months of2016. We continue to believe the shares of all three companies remainattractively valued.

55


Kennedy-Wilson Holdings, Inc. is a high quality real estate operatingcompany. Its current share price of only $22.50 compares favorably to ournet asset value estimate of approximately $30 per share.

Jones Lang LaSalle, Inc. is a leading commercial real estate servicecompany currently valued at only 11.0 times 2017 consensus earnings vs. itshistoric multiple of approximately 16 times earnings.

Brookdale Senior Living, Inc. is a senior housing company currentlyvalued at less than 7 times 2017 estimated earnings!




Equinix, Inc. $25.6 –0.24%Digital Realty Trust, Inc. 14.5 –0.24Lowe’s Companies, Inc. 63.2 –0.19Masonite International Corp. 1.9 –0.18Martin Marietta Materials, Inc. 11.4 –0.15

Following strong performance in the first six months of 2016, the shares ofdata center companies, Equinix, Inc. and Digital Realty Trust, Inc., declinedin the most recent quarter. These real estate data center companies arebenefiting from secular demand that is currently outpacing supply growth.These beneficial tailwinds include accelerating internet traffic, growingoutsourcing of corporate data center department functions and needs,greater consumption and utilization of data on mobile devices, and thegrowth and proliferation of digital photos and video.

Data center tenants have become more sophisticated, and consequently agrowing number are requiring data center landlord/operators to have theability to offer a full suite of data center services, and to maintain severallocations, preferably with a global presence. For these reasons, we expect amore rational and contained new construction outlook than in prior cycles.Currently, there are only two data center companies that offer both globaland comprehensive product offerings – Digital Realty Trust and Equinix – bothof which are owned in the Fund. We remain optimistic about the long-termprospects for both companies.

The shares of Lowe’s Companies, Inc., the second largest homeimprovement center in the U.S. with 1,846 stores, declined in the mostrecent quarter following somewhat less than expected quarterly resultsattributed in part to seasonal variations (early spring with bad weather thatpulled sales forward to the first quarter), and Lowe’s integration costs of arecent acquisition. Following the stock’s recent pullback, we believe theshares are attractively valued at approximately 15.5 times forward earningsper share for 17% expected growth.

The shares of Masonite International Corp., the largest manufacturer ofresidential doors in North America, declined in the third quarter largely dueto somewhat disappointing quarterly earnings results. Investments in facilitystart-up costs, higher personnel costs, brand spending initiatives, andsoftware-related costs negatively impacted results. Additionally, a highersales mix of lower-priced interior doors (rather than exterior doors) weighedon results. Our sense is that the earnings disappointment is a short-term“bump in the story”, and we remain optimistic about long-term prospectsfor the company due to its strong competitive position, solid growthprospects, and favorable valuation.

Following strong share price performance in the first six months of 2016, theshares of Martin Marietta Materials, Inc., a leading producer of aggregatesand specialty products, declined in the third quarter in part due to delays inbusiness activity from unfavorable weather and a lull in governmentspending on infrastructure. We maintain our positive long-term view on thecompany given its sustainable competitive advantages (notably a leadingmarket share in most of its real estate markets), its exposure to strongdemand drivers (recoveries in residential and non-residential constructionand increased government infrastructure spending), and its attractivegrowth prospects.

Portfolio Structure

We remain confident about the quality, attractive valuations, and stronglong-term prospects of the Fund’s holdings.

Key observations regarding the Fund’s portfolio structure and strategy are asfollows:

1. Real estate-related categories: The Baron Real Estate Fund currentlyhas investments in 11 real estate-related categories (see “Table IV”below). The Fund’s diversification is in stark contrast to most other realestate funds that limit their investments primarily to one real estatecategory (i.e., REITs). We maintain that the Fund’s broader approachand diversity is a long-term competitive advantage.

2. REITs vs. non-REITs: Currently, the Fund has approximately one-third ofnet assets invested in REITs and two-thirds in other real estate-relatedcategories. In the last few years, this smaller allocation to REITs hasweighed on relative performance as many investors have piled intodividend-yield securities (in some cases, in our opinion, without regardto valuation and growth prospects). We believe our approach ofstructuring a more diversified and balanced real estate fund is asensible strategy that should produce superior results over the longterm.

3. Commercial and residential real estate exposure: The Fund invests inboth commercial and residential real estate-related companies. Duringthe economic downturn of 2008 and 2009, the residential real estatemarket experienced a greater decline than the U.S. commercial realestate market, and has yet to recover to the same degree as thecommercial market. Consequently, the U.S. residential real estatemarket remains more cyclically depressed than the U.S. commercialreal estate market. Therefore, we continue to prioritize our evaluationof opportunities to invest in companies that will benefit from arecovery in the U.S. residential real estate market. Examples includehomebuilders, building product/services companies, single family rentaloperators, infrastructure-related companies, and senior housingcompanies.

4. An emphasis on “tailwinds”: We continue to tilt the structure of theFund towards real estate categories and companies that are expectedto benefit from secular and/or cyclical tailwinds. Examples include:data centers, wireless towers, infrastructure-related companies, studenthousing, and residential-related companies.

5. Number of Fund holdings: At September 30, the Fund was invested in35 companies, which is currently a bit lower than the 41 companiesthat we held at the end of 2015. Our 10 largest holdings comprise46.8% of the Fund.

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6. Market Capitalization and Liquidity: We invest in companies of allmarket capitalizations (small, mid, and large). At September 30, 2016,the median market capitalization of the Fund’s investments was $11.4billion. Companies with a market capitalization of less than $2.5 billioncomprised only 3.8% of the Fund. The liquidity of the Fund is strong. In2016, the average daily trading volume of the Fund’s holdings has been$118.3 million.

7. “Best-in-class” companies that are attractively valued: The Fund ispredominantly structured with “best-in-class” companies that webelieve offer appealing investment opportunities.

Table IV.Fund investments in real estate categories as of September 30, 2016


REITs 34.5%Building Products/Services 18.4Real Estate Operating Companies 6.8Hotel & Leisure 6.2

Cruise Lines 3.3Hotels & Timeshare/Leisure 2.9

Casinos & Gaming Operators 6.0Real Estate Services Companies 5.6Homebuilders & Land Developers 3.0Senior Housing Operators 2.7Tower Operators1 2.5Other2 10.0

Cash and Cash Equivalents 4.3%

100.0%

1 Total would be 7.2% if included tower REIT American Tower Corp.2 Other includes Data Centers and Infrastructure-Related real estate-related

categories.

Recent Activity



(billions)


Vulcan Materials Company $15.1 $27.7Vornado Realty Trust 19.1 12.0Rexford Industrial Realty, Inc. 1.5 5.9

In the most recent quarter, we added three new companies to the portfolio.

Vulcan Materials Company is a real estate-related company that is thelargest aggregates producer in the U.S. with 344 active quarries.Approximately 90% of the gross profit of Vulcan is generated from mining,processing, and transporting crushed stone, sand, and gravel (collectively,“aggregates”) from its quarries. The balance of gross profit is derived fromready-mix concrete and asphalt. The company’s products are sold andutilized for infrastructure projects such as highways, as well as residentialand non-residential construction.

We believe aggregates are an attractive long-term business because:

(i) High barriers to entry: Permits to open new quarries are difficult toobtain, and the approval process typically takes five to ten years;

(ii) Consistent pricing power: Given the difficulty in opening competingnew quarries, and the transportation constraints attributable to thehigh weight of rocks, the producers of aggregates have historicallyenjoyed great pricing power. In the last 30 years, pricing of aggregateshas increased, on average, 4% per year; and

(iii) Preponderance of local monopolies primarily due to the steeptransportation costs of this high-weight cargo: Therefore, the sale ofheavy rock is primarily a local business, and quarry location is a keydeterminant of value. Vulcan is entrenched and very well positioned, asit owns 344 aggregate facilities across the U.S.

In our view, the prospects for Vulcan in the next few years are attractivebecause the three key demand drivers for its business are all moving in theright direction, and there is a path toward growing cash flow from $1 billionto $2 billion. The three key demand factors that should drive growth are:

(i) Government spending on infrastructure projects is expected toaccelerate;

(ii) Residential construction levels though cyclically depressed areimproving; and

(iii) Non-residential construction has been rebounding moderately.

In 2016, Vulcan anticipates that it may generate approximately $1 billion ofcash flow. Management believes that as demand conditions improve, thereis a path toward doubling cash flow to $2 billion in the years ahead. $2billion of cash flow would equate to approximately 255 million tons ofaggregate shipments versus a current trailing 12 month run-rate of185 million tons and a prior peak shipment of 305 million tons.

We recently began acquiring shares in Vornado Realty Trust, a leadingowner, manager, and developer primarily of high quality office and retailassets. Vornado’s portfolio is concentrated in two of the nation’s keymarkets – New York City and Washington, D.C. – along with a premier realestate asset in both Chicago and San Francisco.

We believe Vornado is an attractive long-term investment opportunitybecause the company is:

(i) On a path to becoming almost a “pure-play” New York City real estatecompany: In recent years, the management team has been wiselytightening its business focus by divesting or spinning off certain realestate assets. More recently, its management team has stated that it isexploring separating its Washington D.C. real estate business into astand-alone publicly traded company. This would result in Vornadobecoming an almost “pure-play” New York City office and retailcompany. Long term, we believe New York City will remain the mostattractive real estate market in the world;

(ii) Strong balance sheet: The company is well equipped and positioned tocapitalize on future acquisition and development opportunities givenits strong balance sheet with more than $4 billion of available liquidity;

(iii) Poised to grow: Management has cited its expectations to grow cashflow by an incremental $200 million through 2018 from recentlysigned leases. Further, the company is well positioned with significantfuture development growth opportunities located in close proximity toNew York City’s Penn Station;

(iv) Led by a deep management team: CEO Steve Roth, has assembled adeeply talented management team; and

(v) Attractively valued: We believe Vornado’s shares trade at an attractivediscount to our assessment of its intrinsic value.

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Rexford Industrial Realty, Inc. is a real estate investment trust focusedsolely on owning and operating industrial properties in Southern California.The company currently owns and operates 133 properties comprisingapproximately 15 million square feet. We believe its long-term prospects areattractive primarily due to the following key considerations: First, SouthernCalifornia is the largest U.S. industrial real estate market for consumption,manufacturing, and distribution. Real estate prospects should remain stronggiven growing demand with limited supply. Second, management believes ithas the potential over time to grow its real estate portfolio in SouthernCalifornia from 15 million square feet presently to 75–100 million squarefeet. Third, we believe management may increase its cash flow byapproximately 40% in the next 18 months through its growth in bothoccupancy and rents, the repositioning of its real estate assets, and throughacquisitions.



(billions)

AmountSold

(millions)

CBRE Group, Inc. $ 9.4 $26.7MGM Resorts International 14.7 20.8Jones Lang LaSalle, Inc. 5.1 18.7Digital Realty Trust, Inc. 14.5 17.9Norwegian Cruise Line Holdings, Ltd. 8.6 16.3

Though we remain optimistic about the long-term prospects for thecompanies listed in “Table VI” above and continue to own these companiesin the Fund, we recently reduced our positions in order to reallocate theproceeds to additional investments opportunities.

Outlook

A Few Final Thoughts:

We have great confidence in the merits of our balanced approach toinvesting in real estate.

We continually strive to build a real estate fund comprised of “best-in-class”companies that have the potential to grow at an attractive rate over thelonger term. Our Fund is expansive and more diversified than typical REIT-only funds.

Though we may occasionally underperform in the shorter term, we continueto believe that our more balanced and less-constrained real estate approachis a key distinction that has outperformed over the longer term. We havethe track record that substantiates this belief.

We hope that you have found the “look back” and “look forward” segmentsof this letter to be informative, and that we have provided you with adeeper understanding of the Baron Real Estate Fund’s performance and whywe are optimistic about it in the future.

Table VII.Top 10 holdings as of September 30, 2016


(billions)


Value(millions)


MGM Resorts International $14.7 $65.5 6.0%Mohawk Industries, Inc. 14.9 65.2 5.9InterXion Holding N.V. 2.5 59.9 5.5Gaming and Leisure Properties, Inc. 6.9 59.4 5.4American Tower Corp. 48.2 51.5 4.7Macquarie Infrastructure Corporation 6.8 50.5 4.6Equinix, Inc. 25.6 42.5 3.9CBRE Group, Inc. 9.4 41.4 3.8MGM Growth Properties LLC 5.6 40.5 3.7Brookfield Asset Management, Inc. 34.7 35.9 3.3

Thank you for your continued support. I remain a major shareholder ofthe Baron Real Estate Fund, alongside you.

Sincerely,

Jeffrey KolitchPortfolio ManagerOctober 17, 2016


Baron Real Estate Fund is non-diversified, which means it may invest a greater percentage of its assets in fewer issues, and which increases the volatility of itsreturns and exposes it to potentially greater losses in a given period. In addition to general market conditions, the value of the Fund will be affected by thestrength of the real estate markets. Factors that could affect the value of the Fund’s holdings include the following: overbuilding and increased competition;increases in property taxes and operating expenses; declines in the value of real estate; lack of availability of equity and debt financing to refinance maturingdebt; vacancies due to economic conditions and tenant bankruptcies; losses due to costs resulting from environmental contamination and its related cleanup;changes in interest rates; changes in zoning laws, casualty or condemnation losses; variations in rental income; changes in neighborhood values; and functionalobsolescence and appeal of properties to tenants. The Fund may not achieve its objectives. Portfolio holdings are subject to change. Current and futureportfolio holdings are subject to risk.

Discussions of the companies herein are not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of therespective portfolio managers only through the end of the period stated in this report. The portfolio manager’s views are not intended as recommendations or investment advice to any person readingthis report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.

This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Real Estate Fund by anyone in any jurisdiction where it would be unlawful under the laws of thatjurisdiction to make such an offer or solicitation.

58

September 30, 2016 Baron Emerging Markets Fund

MICHAEL KASS

PORTFOLIO MANAGER

Retail Shares: BEXFXInstitutional Shares: BEXIX

R6 Shares: BEXUX

Dear Baron Emerging Markets Fund Shareholder:

Performance

Baron Emerging Markets Fund (the “Fund”) gained 7.33% (Institutional

Shares) for the third quarter of 2016, while its principal benchmark index,

the MSCI EM IMI Growth Index, rose 9.36% for the quarter. Notably,

emerging market equities, bonds, and currencies demonstrated leadership,

logging significant gains during a quarter marked by new lows in sovereign

bond yields worldwide. We believe the decline in yields witnessed in the

year-to-date period, particularly in reaction to the surprise Brexit outcome

in late June, likely presages an economic upturn and earnings recovery in the

developing world, and thus could pave the way towards continued

outperformance for this asset class.

During the quarter key financial and economic conditions in China appeared

to stabilize if not improve; we view such stability in China as a key

barometer of the visibility of global and corporate earnings growth. We

suggest that policymakers in China seem to be achieving success under

challenging conditions. For now, we remain optimistic that a cyclical

earnings recovery is coalescing with longer-term structural reforms

throughout much of the developing world to form an important inflection

point in emerging market equity performance. On the other hand, more

recently, the U.S. Federal Reserve has joined the Bank of Japan in expressing

a willingness to accommodate a rise in forward looking inflation indicators,

and as if on cue, several such indicators have begun to perk up. Given the

increasing influence of global central bank policy in determining the cost of

capital and asset prices worldwide, we believe that we may be at the

precipice of a significant shift with longer-term implications. Several factors

suggest we are nearing the liftoff of fiscal spending, as a complement to

quantitative easing, in the quest for economic stimulus and growth. While

the implication would likely be rising interest rates, if executed carefully,

such a shift could spark an important rotation from bonds into equities on a

global basis, and we look forward to following up on this phenomenon in our

next communication.



BaronEmergingMarkets

FundRetail

Shares1,2

BaronEmergingMarkets

FundInstitutional

Shares1,2

MSCI EMIMI

GrowthIndex1

MSCI EMIMI

Index1

Three Months3 7.26% 7.33% 9.36% 8.83%Nine Months3 13.15% 13.41% 14.20% 15.02%One Year 16.92% 17.28% 17.39% 16.19%Three Years 2.92% 3.19% 1.63% (0.33)%Five Years 7.94% 8.20% 5.11% 3.24%Since Inception

(December 31, 2010) 3.44% 3.70% (0.25)% (1.64)%

Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares and Institutional Shares as ofDecember 31, 2015 was 1.45% and 1.20%, respectively. The performance data quoted represents past performance. Past performance is no guarantee of futureresults. The investment return and principal value of an investment will fluctuate; an investor’s shares, when redeemed, may be worth more or less than theiroriginal 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 agencyexpenses may be reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower. Current performance maybe lower or higher than the performance data quoted. For performance information current to the most recent month end, visit www.BaronFunds.com or call1-800-99BARON.† The Fund’s historical performance was impacted by gains from IPOs and/or secondary offerings. There is no guarantee that these results can be repeated or that the

Fund’s level of participation in IPOs and secondary offerings will be the same in the future.1 The MSCI EM (Emerging Markets) IMI indexes cited are unmanaged, free float adjusted market capitalization weighted indexes reflected in U.S. dollars. The MSCI EM

(Emerging Markets) IMI Growth Index Net USD and the MSCI EM (Emerging Markets) IMI Index Net USD are designed to measure equity market performance of large,mid and small cap securities in the emerging markets. The MSCI EM (Emerging Markets) IMI Growth Index Net USD screens for growth-style securities. The indexes andBaron Emerging Markets Fund include reinvestment of dividends, net of foreign withholding taxes, which positively impact the performance results.

2 The performance data does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.3 Not annualized.

59


For the third quarter of 2016, we underperformed our key EM benchmarkgrowth index, while still achieving a considerable advance. During thequarter, the largest driver of adverse relative performance was allocationeffect in the Information Technology sector, largely due to our lowerexposure to Tencent Holdings, Ltd., which comprises a roughly 6% weightin the index. Despite reducing our cash position during the quarter based onnew investment opportunities and our view that a positive inflection pointin fundamentals has occurred, our cash position detracted from relativeperformance. The largest contributor to our relative performance for thequarter was stock selection in the Industrials sector, driven by CopaHoldings, S.A., the Panamanian airline which reported a bottoming ofpricing and operating margins, and Bidvest Group Ltd., which appreciatedmarkedly after the successful spin-off of its non-South African foodserviceoperations. From a country perspective, positive stock selection effect inIndia led the way, offset by poor stock selection effect in China and Taiwan.


PercentImpact

Alibaba Group Holding Limited 0.90%Copa Holdings, S.A. 0.65NAVER Corporation 0.46Shenzhou International Group Holdings Ltd. 0.44Sunny Optical Technology Group 0.43

Shares of Alibaba Group Holding Limited, the largest e-commercecompany in China, performed well in the third quarter following strongquarterly results. Enhanced financial disclosure helped investors tounderstand better the profitability of the core commerce business andthereby attribute a higher value to it. We expect that mobile monetizationwill continue to improve through 2016 and beyond as the company investsin new areas such as online grocery and cloud computing. (Ashim Mehra)

Copa Holdings, S.A. is a leading Latin American airline with a hub inPanama City’s Tocumen airport, a strategic location with reach to majordestinations across the Americas and superior infrastructure to neighboringairports. Shares have been under pressure in 2015 due to economic andcurrency weakness in Latin America. With the industry rationalizing capacityand prioritizing yield, we have seen a strong return to profitability for Copa,and the third quarter continued the year-to-date recovery in share price.(Kyuhey August)

NAVER Corporation is the leading search company in Korea. It also ownsLine, the leading messaging application in Japan, Taiwan, and Thailand andthe second largest global messaging application after WhatsApp. Shares ofNAVER were up in the third quarter as investors ascribed greater value to thecompany as a result of Line’s recent initial public offering. (Ashim Mehra)

Shares of China-based textile company Shenzhou International GroupHoldings Ltd. increased in the third quarter. While some textile peers havebeen struggling due to inventory and traffic issues at U.S. customers,Shenzhou sustained good earnings growth driven by favorable currencyexchange rates and automation. Shenzhou has also benefited from the trendtoward athletic apparel and fast fashion because of its expertise in nylonand knit. While the textile industry has recently faced headwinds, we remainfavorably disposed to the industry and the company. (Kyuhey August)

Sunny Optical Technology Group is a leading supplier of opticalcomponents, particularly camera modules and handset lenses for mobilephones as well as vehicle lenses for automated driving solutions forautomobiles. Sunny’s shares were strong during the third quarter,particularly subsequent to the release of the iPhone 7, which confirmedexpectations that the iconic phone would incorporate a dual lens solution.(Anuj Aggarwal)


PercentImpact

Mr Price Group Limited –0.18%LG Household & Health Care Ltd. –0.15Grupo Lala, S.A.B. de C.V. –0.12BM&FBOVESPA SA –0.10GRUMA, S.A.B. de C.V. –0.09

Mr Price Group Limited is a South African fast fashion brand and retailer. Ithas performed remarkably well, growing same store sales at 10% CAGR foryears despite a challenging economy. However, exogenous factors appear tobe finally catching up. Mr Price is experiencing the impact of low spending ina country with 27% unemployment, increasing regulation on credit, andgrowing price competition. While the company itself remains interesting, wehave recently trimmed our position given negative forces that are larger andmore protracted than we expected. (Kyuhey August)

LG Household & Health Care Ltd. is a South Korean company in thecosmetics, home & personal care and beverage categories. In recent years, ithas been riding on the success of its cosmetics division through exports intomainland China and duty free sales to Chinese tourists. Despite the company’sstrong fundamentals year to date, geopolitical worries surrounding NorthKorea and the Thaad missile deployment pressured the share price in the thirdquarter. We believe the correction is a buying opportunity.

Shares of Grupo Lala, S.A.B. de C.V., Mexico’s leading dairy conglomerate,fell in the third quarter. The stock was pressured by a slowdown in consumerspending in Mexico along with currency weakness, which negatively impactsprofitability. The company recently announced a U.S. acquisition from arelated party, which investors viewed unfavorably. We believe Grupo Lala iswell positioned to sustain double-digit earnings growth over the next two-to-three years given strong brand loyalty, nationwide supply and distributionnetwork, and improving operational efficiencies. (Anuj Aggarwal)

Shares of Brazilian financial exchanges operator BM&FBOVESPA SA fell inthe third quarter as it gave back some gains from the first half of 2016.Mediocre trading volumes and concerns that the company’s pendingacquisition of Cetip could be held up by antitrust issues also pressured thestock. We continue to own the stock because we expect the acquisition ofCetip will close and create significant shareholder value, while longer-termdevelopment of the Brazilian capital markets should lead to higher tradingvolumes. (Josh Saltman)

GRUMA, S.A.B. de C.V. is a Mexican food company specializing in tortillaand corn flour products. Concerns surrounding the U.S. presidential electionoutcome pressured Mexican securities in the third quarter, including thoseof GRUMA. We believe it is a mistake to group GRUMA together with theaverage Mexican security, given that its largest and fastest growing businessis its U.S. division. The division manufactures and distributes productslocally, and we believe it will be largely unaffected by the election outcome.(Kyuhey August)

60

September 30, 2016 Baron Emerging Markets Fund

Portfolio Structure



Alibaba Group Holding Limited 3.8%Samsung Electronics Co., Ltd. 2.5Tencent Holdings, Ltd. 2.4Taiwan Semiconductor Manufacturing Company Ltd. 2.1Bharat Financial Inclusion Limited 1.9NAVER Corporation 1.9Copa Holdings, S.A. 1.7Divi’s Laboratories Ltd. 1.7Ctrip.com International, Ltd. 1.6China Mobile Ltd. 1.5

Exposure By Country

Table V.Percentage of securities by country as of September 30, 2016


China 22.0%India 17.4Taiwan 8.9South Africa 7.1Brazil 6.5Korea 6.5Mexico 5.1Indonesia 3.4Russia 3.0Hong Kong 3.0Philippines 2.8Panama 1.7United Kingdom 1.1Chile 1.0Singapore 0.9Argentina 0.9Thailand 0.7Australia 0.7United States 0.5

Exposure by Market Cap: The Fund may invest in companies of any marketcapitalization, and we have generally been broadly diversified across large-,mid- and small-cap companies, as we believe developing world companiesof all sizes often exhibit attractive growth potential. At the end of the thirdquarter of 2016, the Fund’s median market cap was $6.6 billion, and wewere invested approximately 71.5% in large- and giant-cap companies,20.2% in mid-cap companies and 1.5% in small- and micro-cap companiesas defined by Morningstar, with the remainder in cash.

Recent Activity

Given our ongoing view that emerging market fundamentals have reachedan important inflection point, during the recent quarter we were activelyinvesting existing cash as well as new inflows into new and existingpositions. We initiated positions in two automotive manufacturers duringthe quarter, Maruti Suzuki India Ltd., India’s leading domestic automakerwith a history of innovation, and BYD Company Ltd. of China, a leadingdomestic manufacturer of traditional and electronic vehicles as well as aleader in electronic vehicle batteries and power storage solutions. We alsoinitiated a position in Delta Electronics, Inc., a leading and high qualitydiversified supplier of electronics, technology, and telecom components, aswell as industrial automation solutions based in Taiwan. In the Energysector, we have returned to a slight overweight exposure, establishing newinvestments in YPF S.A. of Argentina and Tullow Oil plc, a U.K.-basedupstream oil producer with operations concentrated in West Africa andGhana, as we believe the supply/demand balance and politicalconsiderations have turned favorable. In addition, we initiated positions inPT Bank Mandiri (Persero) Tbk and PT Bank Negara Indonesia (Persero)Tbk, because we believe the recently initiated tax amnesty reform as well asfundamental and macroeconomic improvements in Indonesia will likely leadto a positive turn in credit growth and earnings for select banks amid anupturn in infrastructure spending in the country. We added to severalexisting positions, most notably Alibaba Group Holding Limited of China,as we believe monetization and profitability in the core e-commerce andpayments business is improving, momentum in the cloud business remainsstrong, and rationalization of O2O investments appears to be taking shapeacross several markets in China, all positive signs for future value creation.We also sold several holdings during the quarter, most notably our positionsin Qihoo 360 Technology Co. Ltd., the China-based search engine andmobile game platform, pursuant to completion of a cash tender offer; ChinaTelecom Corp. Ltd., given a lack of transparency of SOE reform initiatives;and our remaining investment in Universal Robina Corp., a Philippines-based food producer, based on concerns over its market share, pricing, andacquisition strategy.

Outlook

The third quarter of 2016’s post-Brexit rally suggests that thus far there arefew signs of political change or contagion strong enough to disrupt themarket equilibrium that has remained in place for many years. During thequarter, sovereign bond markets initially moved aggressively to discountlikely global policy support, a stimulative catalyst, particularly for theemerging markets. At one point early in the quarter, experts observed thatroughly one-third of global sovereign (10 year) bonds were trading withnegative yields on offer, a rare phenomenon which would naturally coaxglobal savers to pursue higher yields amongst corporate, high-yield, oremerging market debt securities. From our vantage point, while we mayquestion the fundamental underpinnings, we must respect that such asignificant decline in the cost of capital around the globe is likely to spark anearnings recovery, particularly in the developing world where previouspressures suggest pent-up demand and a trough in corporate profitmargins. As such, we remain confident for the time being that emergingmarket equities can maintain a leadership position, as exhibited in the thirdquarter and year-to-date periods.

61


A key question for emerging markets and global investors over the past yearhas been whether imbalances and strong credit growth in China willultimately lead to a credit contraction and/or a marked RMB devaluation.While we have noted cause for concern in previous writings, during the mostrecent quarter, we observe that financial and economic conditions appear tobe stable and improving, with economic growth, consumption, andcommodity prices holding up well in the face of moderating stimulusmeasures and increased scrutiny over non-traditional bank lending. Weinterpret this as a sign that ongoing structural reforms, improved policycoordination and communication, and progress on capital marketliberalization, financial reform, and bank non-performing loan recognition,seem to be achieving desired objectives. In other words, while we agree thatChina faces difficult challenges, authorities seem to be effectively managingthrough active policy initiatives and reforms. As an important contributor toglobal demand, we believe stability in China is a key variable in the outlookfor global growth and corporate earnings, and are encouraged by recentprogress.

Looking forward, we remain optimistic, though as always, there are severalkey variables that we are monitoring. We believe that emerging marketeconomies and equities have reached a favorable inflection point, where thecyclical earnings recovery referred to above seems to be coalescing withlonger-term structural reforms across many EM countries, drivingoutperformance and potentially a sustainable bull market. Such reforms arein direct response to the deteriorating economic and financial conditionssuffered over the past several years, and often take time to take effect.China, India, Indonesia, Mexico, Brazil, and Argentina are countries where we

have made investments in companies likely to benefit from specificeconomic, financial or labor reforms, or significant political change. Morerecently, our enthusiasm is balanced by early signs that we may be passingthrough an important secular bottom in sovereign bond yields. Developingpolitical realities, likely fiscal expansion, signs of rising wage and rentinflation, and comments by the U.S. Federal Reserve and Bank of Japansuggest the central bankers appear to be encouraging inflation expectationsto rise, and perhaps “run hot” for the time being. This important shift isoccurring subsequent to an historic decline in global yields, which leavesinvestor sentiment and positioning vulnerable to inflation sightings. Wesuspect bond market volatility is likely to rise; in our view it remains an openquestion as to whether this would ultimately be favorable or unfavorable forequities, and we suspect we will have more to report on this subject at yearend. Again, on balance, we remain optimistic.

Thank you for investing in the Baron Emerging Markets Fund.

Sincerely,

Michael KassPortfolio ManagerOctober 17, 2016


In addition to the general stock market risk that securities may fluctuate in value, investments in developing countries may have increased risks due to agreater possibility of: settlement delays; currency and capital controls; interest rate sensitivity; corruption and crime; exchange rate volatility; and inflation ordeflation. The Fund invests in companies of all sizes, including small and medium sized companies whose securities may be thinly traded and more difficult tosell during market downturns. The Fund may not achieve its objectives. Portfolio holdings are subject to change. Current and future portfolio holdings aresubject to risk.


This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Emerging Markets Fund by anyone in any jurisdiction where it would be unlawful under the laws ofthat jurisdiction to make such offer or solicitation.

62

September 30, 2016 Baron Energy and Resources Fund

JAMES STONE

PORTFOLIO MANAGER

Retail Shares: BENFXInstitutional Shares: BENIX

R6 Shares: BENUX

Dear Baron Energy And Resources Fund Shareholder:

Performance

Baron Energy and Resources Fund (the “Fund”) posted very strongperformance again during the third quarter. Following the greater than 17%gain in the second quarter, the Fund rose by another 9.9% (InstitutionalShares) and outpaced its benchmark – the S&P North American NaturalResources Sector Index – by 566 basis points. Following the Fund’s gains forthe quarter, we are now within less than 100 basis points of our benchmarkon a year-to-date basis, a big change from the Fund’s greater than 1,000basis point relative deficit that we had at the end of the first quarter of thisyear.

Through the second quarter, the recovery in the Fund’s performance hadlargely coincided with the recovery in oil prices. However, in the thirdquarter, oil prices were essentially flat and yet the Fund’s Energy holdingsgenerated a total return of 11.24% and outperformed the Energy holdings inour benchmark by 644 basis points. It is our view that because of our focuson growth oriented small-cap and mid-cap energy and resource companies,our Fund is structured to perform better in flat or rising oil and gas priceenvironments than falling price environments and this has clearly beenborne out over the past several years. This is what we saw in the thirdquarter as it became increasingly clear that Energy’s two-year long recessionhad come to an end. While sharply rising oil prices in the second quarterprovided a tailwind for the Fund, prices were flat in the third quarter and ourEnergy investments still posted solid gains and outperformed the benchmarkas noted above.

Based on a combination of industry indicators such as oil and gasinventories, oil and gas supply and demand trends, commodity prices, anddrilling rig and well completion activity, we believe that the first half of2016 will be seen as the bottom of the recession for this industry, and thatconditions are in place for fundamental longer-term recovery. We believethat such a recovery will result in a return to more normalized oil and gasprices, which we view as the price level necessary for industry participantsto earn returns that are close to the cost of capital and are higher thancurrent futures prices. A return toward normalized price levels should allowmany of the companies in our portfolio to realize both cyclical and seculargrowth in earnings and cash flows over the next several years. As such, wecontinue to be constructive on the outlook for investing in the Energysector, which is the dominant portion of the Fund’s holdings (80.5% atquarter end). See Outlook section for more detail.


BaronEnergy

andResources

FundRetail

Shares1,2

BaronEnergy andResources

FundInstitutional

Shares1,2

S&PNorth

AmericanNatural

ResourcesSectorIndex1

S&P500

Index1

Three Months3 9.87% 9.89% 4.23% 3.85%Nine Months3 23.47% 23.66% 24.62% 7.84%One Year 19.07% 19.29% 22.36% 15.43%Three Years (8.36)% (8.15)% (3.58)% 11.16%Since Inception

(December 30, 2011) (2.89)% (2.68)% 0.29% 14.58%

Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares and Institutional Shares as ofDecember 31, 2015 was 1.58% and 1.29%, respectively, but the net annual expense ratio was 1.35% and 1.10% (net of the Adviser’s fee waivers), respectively.The performance data quoted represents past performance. Past performance is no guarantee of future results. The investment return and principal value of aninvestment will fluctuate; an investor’s shares, when redeemed, may be worth more or less than their original cost. The Adviser has reimbursed certain Fundexpenses (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 anunaffiliated 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 www.BaronFunds.com or call 1-800-99BARON.

1 The indexes are unmanaged. The S&P North American Natural Resources Sector Index measures the performance of U.S.-traded natural resources related stocks and theS&P 500 Index of 500 widely held large cap U.S. companies. The indexes and the Fund are with dividends, which positively impact the performance results.

2 The performance data in the table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemptions of Fund shares.3 Not annualized.

63


As noted, this quarter’s strong performance was largely driven on both anabsolute and relative basis by the gains generated by our investments in theEnergy sector, although we also finally got some help from our investmentsin renewable energy and Materials as well. Our Energy investmentsgenerated a total return of 11.2% and a contribution to return of 8.9% forthe quarter, which was about 91% of the Fund’s total return in the quarter,despite representing an average weight in the Fund of just under 80%. Theexploration & production sub-industry (“E&P”) was the leading contributorto our Energy-related returns, contributing gains of nearly 6.1%, or 62% ofthe total return for the quarter. Within E&P, the Fund benefited the mostfrom maintaining high exposure to U.S.-based E&Ps that are focused ondeveloping unconventional resources like shale oil and tight-oil reservoirs,particularly in the Permian basin in West Texas and New Mexico. Companiessuch as Parsley Energy, Inc., Concho Resources, Inc., RSP Permian, Inc.and Energen Corporation are among our largest positions and are all pure-plays on the Permian, which has emerged as the largest and mosteconomical of the oil shale plays in the world today. As we look out over thenext several years, we believe that the Permian basin will be the key driverfor oil volume growth in the U.S. and will be one of the prime basins forgrowth on a global basis as well. Companies operating in the Permian basinhave just begun to fully understand the size and scope of the opportunityfor this basin and there was significant merger and acquisition activity in thePermian basin during the third quarter that further highlighted the values ofexisting positions for many of the incumbent companies. In our view, energycompanies’ understanding of the true potential for size of the resource,resource recovery, and production growth potential in the Permian basin isstill relatively nascent. Over the next several years we anticipate ongoingimprovements in technology, knowledge, and processes will result in highervaluations for companies that have significant exposure and long-livedresource opportunities in the Permian basin.

In addition to the gains in Energy during the quarter, we also had strongcontributions from Materials and Utilities (renewable energy) sectors. Thesetwo sectors contributed 81 and 44 basis points, respectively, and accountedfor about 12.8% of the total return during the quarter, outpacing the 11.5%average weighting for these industries within the portfolio. Within theMaterials sector, strong gains from Flotek Industries, Inc. and KratonCorporation paced the gains in the quarter while our positions in TerraFormPower, Inc. and TerraForm Global, Inc. also posted strong gains within theUtilities sector as both companies continue to restructure their ownershipand get out from under the weight of the SunEdison, Inc. bankruptcy.


YearAcquired

PercentImpact

Parsley Energy, Inc. 2014 1.61%Encana Corp. 2016 1.42Concho Resources, Inc. 2012 0.90Rice Energy Inc. 2016 0.82U.S. Silica Holdings, Inc. 2016 0.69

Parsley Energy, Inc. is an independent E&P company focused on thePermian basin in West Texas. Shares rose in the third quarter on strongoperational performance, significantly raised production guidance, loweredcash costs, and a three-year growth outlook that exceeded even the mostbullish estimates. Parsley also boosted its drilling inventory through an

acquisition. We expect Parsley will continue to deliver peer-leadingoperational performance, capitalize on its strong balance sheet, and grow itsfootprint through acquisitions.

Encana Corp. is an E&P company with primary operations in WesternCanada and Texas. Shares rose in the third quarter on raised productionguidance, lowered cash costs, and significantly increased drilling activity inits highest return area. Encana has strong positions in two of the moreattractive oil resource plays in the Permian and Eagle Ford basins and two ofthe lowest cost natural gas resource basins in Western Canada. Given itslong-term growth potential, we think Encana is one of the most attractivelyvalued E&Ps in the industry.

Concho Resources, Inc. is an independent oil and gas E&P companyfocused on the Permian basin in West Texas and New Mexico. Shares rose inthe third quarter on increased production guidance, lowered cash costs, anda solid operations update, as well as strong M&A activity in the Delawarebasin, which highlighted the value of its holdings in the basin. As one of thebest run mid-cap E&P companies, in our view, we believe Concho is wellpositioned to exploit the deep economic inventory of drilling locationswhere it operates.


YearAcquired

PercentImpact

SolarEdge Technologies, Inc. 2016 -0.33%Core Laboratories N.V. 2012 -0.24Barrick Gold Corporation 2016 -0.22PBF Logistics LP 2016 -0.19Valero Energy Partners LP 2013 -0.19

Shares of SolarEdge Technologies, Inc., a leading maker of inverters forsolar energy systems, detracted in the third quarter as changes in the U.S.market appeared to dampen growth prospects of large installers. As thebusiness model shifts from lease to own, the U.S. solar market is shiftingfrom large installers to smaller, local vendors. Fears around pricing pressuredue to increased competition also hurt the stock price. Although we believethis is a temporary structural adjustment, we decided to reduce our positionas the market transitions.

Core Laboratories N.V. is a leading provider of core and fluid analysis tothe oil and gas industry. Shares fell on moderated short-term growth andmargin recovery estimates and reduced revenue guidance. Core Labsdominates its niche, has limited competition, provides value added, non-commoditized services, and generates the highest returns on equity andcapital in the industry. We believe strong secular growth drivers in each ofits three businesses will allow it to outgrow other oilfield service companieswhile generating premium returns.

Shares of gold mining company Barrick Gold Corporation fell during thethird quarter in concert with a decline in gold prices. Gold prices surgedfollowing the Brexit vote in late June. As equity markets recovered, concernsover Brexit eased, and concerns regarding less accommodative monetarypolicies rose, gold and gold equities weakened. We believe it is prudent tomaintain a modest exposure to gold at this time. We think the shares areattractively valued based on our outlook for gold pricing, Barrick’s growinggold volumes, and falling cost structure.

64


Portfolio Structure

We ended the quarter with 2.5% cash, which was up modestly from the endof the second quarter, but is at a level that we would still describe as prettyclose to fully invested relative to historical cash levels for the Fund. TheFund remains concentrated with the top 10 holdings representing 48.1% ofthe Fund at quarter end, up slightly from the end of the second quarter andsubstantially higher than year-ago levels (36.1%).

At the end of the quarter, the portfolio breakdown in the key sub-industrieswas as follows:

Oil & Gas Exploration & Production: The E&P sub-industry represented43.1% of the Fund at the end of the quarter, and continued to be focusedon North American-based producers that operate primarily in developingunconventional oil & gas reservoirs. Companies that primarily operate in thePermian basin in Texas and New Mexico are our largest focus for E&Pinvestment, followed by companies that are focused on the Anadarko basinin Oklahoma, the Appalachian basin in Pennsylvania/Ohio, and the WesternCanadian Sedimentary basin. These plays are characterized by multiple pay-zones, industry-leading returns, and expanding resource potential, andstocks such as Parsley Energy, Inc., Concho Resources, Inc., Encana Corp.,and Rice Energy Inc. are key investments in these plays and were keycontributors to our performance this quarter. We continue to be bullish onthe long-term growth potential of these four plays and the companies thatare the leading developers in each area.

Oil & Gas Storage & Transportation: This sub-industry, which is largelycomposed of MLPs and publicly traded general partnerships, is the secondlargest sub-industry for the Fund and it represented 19.2% of the Fund’sassets at the end of the quarter. We continued to see improving conditionsin this sector, particularly for storage and transmission related companies.Many companies in this sub-industry have undergone financial and strategicrestructurings in the last 12 months resulting in stronger balance sheets andstreamlined corporate structures. In addition to these actions, a morepositive outlook for commodity prices has also eased investor concernsabout future dividend/distribution growth, enhancing the relative valuationcomparison for these stocks versus other yield-oriented investments likeUtilities, REITs, and Consumer Staples. As a result, investment flows intodedicated MLP/midstream funds have picked up over the past severalmonths and the increase in investment flows has also coincided withdeclining capital needs as a result of slower organic growth. The reduction incapital needs along with a series of M&A transactions have reduced thesupply of equity, which we view as a positive for our investments in thisarea.

Oil & Gas Equipment, Services & Drilling: At 14.7%, our exposure to thissub-industry was up from last quarter, as we both added and subtractedfrom our holdings in this area. New investments in companies such asForum Energy Technologies, Inc., FMC Technologies, Inc., and NaborsIndustries Ltd. were added during the quarter as our conviction on thetiming and shape of a recovery in oil company capital spending and drilling/completion activity grew. It became clear during the quarter that industryactivity is bottoming in North America and that the prospects for a recoveryin activity and industry pricing were improving. Valuation and normalizedearnings power remain concerns in this sub-industry, but we are gettingmore comfortable that the restructuring of the past two years could resultin a stronger earnings recovery than currently embedded in consensusvaluations.

Renewable Energy: Renewable or alternative energy is not a specific GICSsub-industry, but we think this is really the appropriate classification for ourinvestments in the Utilities and Information Technology sectors, since ourinvestments in these two areas are primarily companies involved in theconstruction and operation of solar and wind electricity generation assetsand battery storage systems. Investments in this area accounted for 5.7% ofthe Fund at the end of the quarter, and performance was mixed. Ourinvestments in TerraForm Power, Inc. and TerraForm Global, Inc.continued to be positive contributors, as parent company SunEdison’sChapter 11 process moved forward during the quarter. However, slowinggrowth in U.S. residential solar installations and fears of pendingcompetition from Chinese manufacturers hurt our position in SolarEdgeTechnologies, Inc. and offset some of our gains. Tesla Motors, Inc.continued to be volatile during the quarter, particularly after management’sdecision to propose a merger with SolarCity, Inc. and become much moreinvolved in renewable energy development.

Materials: 9.1% of the portfolio is invested in this area, and while most ofour investments are in businesses that are closely related to the Energysector, we also maintained a small weighting in two of the leading goldmining companies, Barrick Gold Corporation and Newmont MiningCorporation. Our investments in mining were down during the quarter butgiven the uncertainty around the outlook for global interest rates and theefficacy of monetary policy tools, we are comfortable with our modestlysized investment in the mining category.

Oil & Gas Refining & Marketing: Independent refiners represented 3.5% ofassets at the end of the quarter. Our position is well below the 6.4% averageweight for this sub-industry in our benchmark. We are not too sanguineabout a near-term rebound, but believe that U.S. independent refinersremain competitively advantaged to grow earnings and generate free cashflow over the long term. In addition, we believe that these companies willuse much of that free cash to enhance shareholder returns throughdividends and buybacks.


.Year

Acquired

MarketCap


QuarterEnd

MarketCap

(billions)Amount

(millions)

Percentof NetAssets

Parsley Energy, Inc. 2014 $ 2.5 $ 6.9 $7.6 6.9%Concho Resources, Inc. 2012 10.1 19.3 6.7 6.1RSP Permian, Inc. 2014 1.5 3.9 6.1 5.5Newfield Exploration Co. 2015 3.9 8.6 5.9 5.3Encana Corp. 2016 5.2 10.0 5.9 5.3Rice Energy Inc. 2016 1.2 5.1 5.2 4.8Flotek Industries, Inc. 2013 1.2 0.8 5.2 4.7Halliburton Co. 2012 31.4 38.6 3.7 3.3Schlumberger Limited 2015 102.8 109.4 3.5 3.2Targa Resources Corp. 2016 4.6 8.2 3.3 3.0

65


Recent Activity



(billions)


Anadarko Petroleum Corporation $35.1 $1.6Noble Midstream Partners LP 0.9 1.4Forum Energy Technologies, Inc. 1.8 1.3FMC Technologies, Inc. 6.7 1.1Nabors Industries Ltd. 3.4 0.7

All of our top net purchases for the quarter were new positions for the Fund,and several of our purchases were companies that we have owned in thepast. Our biggest purchases in the quarter were Anadarko PetroleumCorporation, Noble Midstream Partners LP, and Forum EnergyTechnologies, Inc. We owned both Anadarko and Forum in the past anddecided to re-engage on both companies during the quarter as ourconfidence in the outlook for both companies improved.

Anadarko is a U.S.-based independent oil & gas producer that has a morediversified mix of operations than most of its peers. The company has strongonshore positions in some of the most attractive U.S. shale basins, includingthe Delaware sub-basin in the Permian basin. These positions arecomplemented by one of the best offshore, deepwater exploration anddevelopment teams in the industry, which drove Anadarko’s successfulgrowth in deepwater production in both the Gulf of Mexico and offshoreWest Africa. In the third quarter, Anadarko purchased the bulk of FreeportMcMoran’s deepwater Gulf of Mexico assets for an attractive price, and indoing so, it added assets that will generate substantial free cash flow in thenext five years and improved its own liquidity position. This deal removedsome of our biggest concerns around Anadarko’s growth and liquidityprofiles, which combined with an attractive valuation created the catalystfor us to add the stock back into the portfolio. We think that Anadarko nowoffers a great combination of accelerating growth and improving returns ata solid discount to both net asset value and peer cash flow multiples.

Forum Energy Technologies is a U.S.-based oilfield equipmentmanufacturing company that we think will benefit significantly from thepending upturn in drilling and well completion activity in the U.S. andCanada. It is our opinion that the long downturn in drilling and completionactivity came to an end in the second quarter of this year and we expect tosee rising levels of activity into year end and throughout 2017. Many ofForum’s products are critical consumable components that are used duringthe well completion and hydraulic fracturing process, and some of its capitalequipment products are in high demand as customers seek to upgrade andrefurbish equipment that has either been idled or cannibalized for parts. Webelieve that industry inventories of these products have been depleted in thepast two years, which should lead to a quicker turnaround in Forum’sbusiness than in other oilfield equipment and service business, which are stilldealing with capacity and inventory overhangs. Not only are we interestedin Forum because of the likelihood that its business is one of the firstresponders to an upturn in activity, but we have been impressed with thecost cutting and organizational restructuring management completed in thepast two years to strengthen the company and improve its mid-cyclemargins.

Noble Midstream Partners LP was spun out of Noble Energy, Inc. as aninitial public offering during the third quarter. Noble Midstream owns andoperates portions of the oil and gas gathering, transportation and processingassets that are primarily located around Noble Energy’s operations inColorado and Texas. We know the Noble assets extremely well, having beeninvestors in Noble Energy for the past several years and see solid organicand inorganic growth potential at Noble Midstream over the next five years.The primary drivers of distributable cash flow growth at Noble Midstreamwill come from Noble Energy’s ability to grow oil and gas productionvolumes in Colorado and Texas, and Noble Midstream’s dropdownacquisitions over the next several years.


AmountSold

(millions)

Noble Energy, Inc. $1.8Helmerich & Payne, Inc. 1.2Dominion Midstream Partners, L.P. 1.0Western Gas Equity Partners LP 0.8Oil States International, Inc. 0.7

During the quarter all of our top sales were the result of decisions toreallocate capital within the portfolio to what we believe are better risk/reward situations. For example, we reduced our position in Noble Energy,Inc. and exited Western Gas Equity Partners LP to make room for ourpurchase of Anadarko and Noble Midstream Partners, two companies thathave similar operational and risk characteristics to Noble Energy, but wherewe felt there was better reward potential. Another situation in which wemade a similar risk/reward swap was our decision to sell Helmerich &Payne, Inc., which is the leading U.S.-based land drilling contractor, tofacilitate our purchase of its close competitor in the land drilling business –Nabors Industries Ltd.

Outlook

As we head into the fourth quarter and turn our attention to 2017 andbeyond, we continue to be bullish on the outlook for energy and resource-related companies. Since Energy companies represent over 80% of ourportfolio, our outlook remains largely focused on that sector. We think thereare three key messages that investors should think about as it pertains toinvesting in Energy over the next two to three years.

1. The worst Energy recession in a generation is coming to an end.2. The U.S. Energy Renaissance is alive and well.3. Equity investors remain significantly underweight in their

exposures to the Energy sector and, to a lesser extent, resource-related businesses.

The recession is coming to an end: Since late 2014, the energy industryhas been through a sharp and painful recession that at times has felt like adepression. This downturn produced as significant a contraction in industryactivity as anything we had experienced in my 28 years in the business. Itwas clearly driven by the precipitous decline in oil prices that resulted froman excess of oil supply relative to demand, leading to record levels of crudeoil inventory building up on a global basis. While the market was clearlyoversupplied for much of the past two years, the magnitude of the excess

66


capacity was never much more than 1-2 million barrels per day (mmb/d) inthe context of a 95 mmb/d market. However, since oil, like nearly allcommodities, is priced on the basis of marginal supply or marginal demand,collapsing prices led to collapsing cash flows and investments. Industry-widecapital investment in the past two years fell over 50% and in some marketslike the U.S., the decline was even sharper, as evidenced by a nearly 80%decline in the U.S. rig count (measured quarterly peak to trough) and sharpdeclines in pricing for all types of oilfield products and services. Thesedeclines essentially wiped out the profitability for E&P companies and manyoilfield service & equipment companies. Over 100 energy companies in theU.S. filed for bankruptcy during this period and a number of others barelyskirted chapter 11 or were forced to raise expensive capital to stay afloat.While this period has been very painful, it has forced adjustments in oilsupply, stimulated oil demand growth, and created an impetus forsignificant improvements in cost structures and operating efficiencies. As aresult, we believe that a number of companies will emerge from thisrecession/depression stronger than when business turned south two yearsago.

Oil demand growth has strengthened: In November 2014, theInternational Energy Agency (IEA) estimated that 2014 oil demand would be92.4 mmb/d. In its most recent monthly report, the IEA now estimates that2016 demand will be 96.3 mmb/d. This nearly 4 mmb/d increase in globaldemand has significantly exceeded trend line annual growth in oil demand,which has averaged 1.1 mmb/d since 2005. This significant amount ofgrowth occurred within the context of a sluggish global economy, includinga slowdown in Chinese growth, economic crises in Russia and Brazil, and thenegative economic effects on most oil producing countries that had beenfast growing consumers of oil and oil products during the 2010-2014 periodwhen oil prices averaged nearly $100/barrel. As oil prices recover, we expectdemand growth to slow back toward historical trend levels over the nextseveral years. The strong growth in the past two years has helped tosignificantly narrow the gap between supply and demand and has put themarket onto firmer fundamental footing.

Oil supply growth has stagnated: While oil demand growth has surprisedto the upside in the last couple of years, non-OPEC oil supply has changedas expected. It continued to rise through much of 2015 before peaking and,since late 2015, has declined by about 1.5 mmb/d due to a combination ofthe reduction in capital investment in new and existing fields and thenormal underlying decline rate of existing production. Most of this declineresulted from short-cycle projects and the sharp drop in U.S. shale oiloutput, which has already fallen by over 1 mmb/d since peaking in early2015, and should continue to trend lower through the rest of this year. Thesupply side of the oil market is really governed by two factors: 1) underlyingfield declines and 2) capital investment to offset declines and to bring onnew sources of production. In 2015, and even continuing through this yearand next, global oil markets were still seeing strong levels of productionadditions from long-cycle projects that had been sanctioned in the 2010-2014 period when oil prices were much higher. The effects of the decline incapital investment have yet to be felt in production from long-cycle projectsas there have been almost no new large scale oil projects sanctioned forinvestment in the past two years and few that are expected to besanctioned in the next 12 months either. We think much of this impact willshow up as potential supply shortfalls in 2018-2021.

OPEC’s market share is up, but at a great cost: As a result of the strengthin demand and the stagnation of non-OPEC supply, OPEC’s share of themarket has increased by about 200 basis points since November 2014 andin that sense its “market share war” has worked. That being said, we believeOPEC’s victory has been a pyrrhic one as most OPEC countries findthemselves in much worse financial situations than was the case two yearsago. The group’s gains in volumes outside of Iran, which has benefited fromthe cessation of economic sanctions on the oil industry, have notcompensated anyone for the fall in prices. Therefore, budget deficits acrossOPEC have swelled and political unrest is more prevalent among nearly allOPEC producers than was the case two years ago. Countries like Venezuela,Nigeria, and Libya are economic and political messes, and even the mightySaudi Arabia has felt significant pressure. In the past 12 months the Saudigovernment has attempted to begin to restructure its own economy byreducing subsidies for fuel, water, and electricity. It has also sharply cutsalaries for government employees. At the same time, Saudi Arabia facesmilitary challenges on nearly all its borders, necessitating high levels ofdefense spending. Inflation has increased and foreign currency reserves havedwindled. Saudi Arabia has been accessing the sovereign debt market for thefirst time in years to cover its budget shortfalls, and press reports indicategrowing tensions within the country.

Time for another change in OPEC policy: We believe the fact that oilmarkets have become more balanced through stimulated demand growthand curtailed non-OPEC production growth combined with rising tensionswithin many OPEC producers led to the reversal in OPEC (really Saudi)policy that was announced last month at a meeting in Algeria. At thatmeeting, OPEC surprisingly announced plans to cut its output by 0.5-1.0mmb/d, with formal cuts to be announced in November. There is stillconsiderable skepticism in equity and commodity markets as to whetherOPEC will follow through with these cuts, which countries will bear thebrunt, and whether Russia will go along as well. Nevertheless our view isthat: 1) this announcement represents a decided and positive shift in OPECpolicy and 2) even if OPEC only manages to freeze its production, ouranalysis indicates that the oil market has already transitioned fromoversupplied to undersupplied as third quarter inventories fell when thirdquarter inventories typically rise, and they should fall further during thefourth quarter. An OPEC cut would just exacerbate this trend and lead to amore rapid rebalancing of the oil market. We think that the tightening of thesupply/demand balance and the prospects for inventory reduction over thenext 12 to 18 months is supportive of flat to rising oil prices and is animportant feature of a more positive backdrop for investing in energy andenergy-related companies.

A focus on U.S. Energy Renaissance leaders: Our portfolio is heavilyweighted toward U.S.-based energy companies, and particularly companieswith significant investments and exposure to the U.S. Energy Renaissancethat has been ongoing for the past decade. While the energy recession hitthis sub-segment of the industry as hard, or harder, than any other part ofthe industry, there has also been perhaps no other part of the industry thathas done so much to stay competitive. U.S. unconventional oil and gascompanies have been successful in making their businesses much moreefficient by lowering drilling and operating costs, improving resourcerecoveries per well, and making structural rather than cyclical changes totheir businesses. There is no question that some of the cost reductions are

67


cyclical and result from lower service and supply pricing, but many of thechanges are structural and will survive a return to more normal levels ofinvestment and activity. For example, the industry has reduced the numberof days it takes to drill a typical shale oil well in the U.S. by more than 50%and it has reduced the time it takes to hydraulically fracture wells by 25% to30%, even while increasing the complexity and size of these “frac” jobs.Since 2014, U.S. government data indicates that the amount of productionadded per active rig in the key unconventional oil plays in the U.S. hasincreased by over 70% and underlying production declines from existingshale wells has slowed down. New technology, streamlined processes, focuson supply chains, fat trimming, and going up the learning curve in nearly allshale plays has positioned the U.S. industry to be a leader in global oil supplygrowth over the next three-to-five years if not longer and do so at anormalized oil price that is perhaps 20% to 30% lower than what we wouldhave thought possible two years ago. As a result of the gains in efficiencyand the reductions in cost, we think that the U.S. Energy Renaissance is aliveand well and will continue to be a focus of our Fund.

Investor sentiment improves but still underweight: Investor surveyscontinue to show that while institutional investors are less skeptical aboutthe outlook for energy and resource-related stocks, and are less underweightthan earlier this year, they are still cautiously positioned toward these areasand remain underweight relative to historical norms. We think this meansthat there is still a significant amount of capital remaining on the sidelinesthat could be put to work in the areas in which the Fund invests.

Furthermore, it is possible that index weightings will get revised upward overtime, adding more pressure for both active and passive investors to getinvolved. The Energy sector has been the least correlated of the major sub-sectors of the S&P 500 Index to the overall performance of the S&P 500Index over the past five years, so an allocation to a dedicated energy &resource fund may provide a differentiated return and diversification forinvestors.

I am pleased to have had the opportunity to share my thoughts withyou in this letter. Thank you for having the confidence to join me ininvesting in Baron Energy and Resources Fund.

Sincerely,

James StonePortfolio ManagerOctober 17, 2016


The Fund is non-diversified, which means the volatility of the Fund’s returns may increase and expose the Fund to greater risk of loss in any given period.Energy companies can be affected by fluctuations in energy prices and supply and demand of energy fuels. Resources industries can be affected byinternational political and economic developments, the success of exploration projects, and meteorological events.

S&P 500 Index measures the performance of 500 widely held large-cap U.S. companies.


This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Energy and Resources Fund by anyone in any jurisdiction where it would be unlawful under thelaws of that jurisdiction to make such offer or solicitation.

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September 30, 2016 Baron Global Advantage Fund

ALEX UMANSKY

PORTFOLIO MANAGER

Retail Shares: BGAFXInstitutional Shares: BGAIX

R6 Shares: BGLUX

Dear Baron Global Advantage Fund Shareholder:

Performance

We had an excellent quarter.

The Baron Global Advantage Fund (the “Fund”) was up 11.1% (InstitutionalShares) in the third quarter of 2016, which compared favorably to a returnof 5.3% for both the MSCI ACWI Growth and MSCI ACWI Indexes, theFund’s benchmarks. We saw broad-based strength across the portfolio with22 of our 39 investments rising over 10% and one (Aerie Pharmaceuticals)more than doubling in price during the quarter.

Our core holdings performed very well with Amazon (up 17%), AlibabaGroup (up 33%), Illumina (up 29%), JUST EAT (up 22%), andConstellation Software (up 17%) leading the charge. This time we alsoreceived significant contributions from the smaller investments with ARMHoldings rising 45% after being acquired by Softbank, and our two lesserknown health care investments in Glaukos (up 29%) and AeriePharmaceuticals (up 115%) working out nicely as well. The third quarterwas a favorable investment environment, as we undoubtedly benefited fromrising tides lifting all boats, and from playing a bit of catchup after fallingbehind earlier in the year.

Since its inception on April 30, 2012, the Baron Global Advantage Fund hasoutperformed 82% of its Morningstar peers. We have performed better than90% of our peers over the last 3 years, and better than 97% over the last 12months.*



BaronGlobal

AdvantageFundRetail

Shares1,2

BaronGlobal

AdvantageFund

InstitutionalShares1,2

MSCIACWI

GrowthIndex1

MSCIACWIIndex1

Three Months3 11.01% 11.08% 5.28% 5.30%Nine Months3 6.54% 6.71% 5.75% 6.60%One Year 21.18% 21.46% 12.06% 11.96%Three Years 7.47% 7.69% 6.75% 5.17%Since Inception

(April 30, 2012) 9.40% 9.63% 8.67% 7.88%

Our investments in China have continued to make significant positivecontributions to absolute and relative returns. At over 16% of the Fundcompared to less than 3% in the benchmarks, China is by far our largestgeographic overweight. Naturally, we believe that the four Chinese stocksthat we own, each merit investment based on their bottom-upfundamentals. But moreover, we think the benchmarks have it wrong.

China is the second largest economy in the world. With GDP of $11.4 trillionin 2015, the Chinese economy is almost three times larger than the thirdlargest economy, Japan. After decades of torrid growth and years of beingone of the main contributors to global GDP growth, China now represents15.5% of total global GDP. Until a few years ago, the Chinese economy wasdominated by manufacturing, mining, and construction businesses but that’snot the case anymore. The Chinese services industries are now over 50% ofChina’s GDP and rising, accounting for 87% of total GDP growth in 2015.The Chinese middle class is continuing to emerge with urban disposableincome per capita rising to 23% of total income. While shortcomings intransparency and corporate governance need to continue to improve, we

Performance listed in the table above is net of annual operating expenses. Annual expense ratio for the Retail Shares and Institutional Shares as ofDecember 31, 2015 was 3.19% and 2.89%, but the net annual expense ratio is 1.50% and 1.25% (net of the Adviser’s fee waivers), respectively. Theperformance data quoted represents past performance. Past performance is no guarantee of future results. The investment return and principal value of aninvestment will fluctuate; an investor’s shares, when redeemed, may be worth more or less than their original cost. The Adviser has reimbursed certain Fundexpenses (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 anunaffiliated 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 www.BaronFunds.com or call 1-800-99BARON.† The Fund’s historical performance was impacted by gains from IPOs and/or secondary offerings. There is no guarantee that these results can be repeated or that the Fund’s level of participation in

IPOs and secondary offerings will be the same in the future.1 The indexes are unmanaged. The MSCI ACWI indexes cited are unmanaged, free float-adjusted market capitalization weighted indexes reflected in US dollars. The MSCI ACWI Growth Index Net

USD measures the equity market performance of large and mid cap growth securities across developed and emerging markets. The MSCI ACWI Index Net USD measures the equity marketperformance of large and mid cap securities across developed and emerging markets. The indexes and the Baron Global Advantage Fund include reinvestment ofdividends, net of foreign withholding taxes, which positively impact the performance results.

2 The performance data in the table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.3 Not annualized.* The Morningstar US OE World Stock Average is not weighted and represents the straight average of annualized returns of each of the funds in the World Stock

category. Morningstar rankings are based on total returns and do not include sales charges. Total returns do account for management, administrative, and 12b-1 fees andother costs automatically deducted from fund assets. As of September 30, 2016, the category consisted of 1,141, 953 and 793 funds for the 1-year, 3-year, and SinceInception (4/30/2012) periods. Morningstar ranked Baron Global Advantage Fund Institutional Share Class in the 3rd, 10th, and 18th percentiles, respectively, in thecategory for the 1-year, 3-year, and Since Inception periods.

69


believe China offers an unusually fertile ground for long-term investmentopportunities. Until MSCI re-evaluates their benchmark weightings, we arelikely to remain significantly overweight in our exposure to China.

Relevant specifically to our investment in Ctrip.com, China’s outboundtravel penetration appears to have recently hit an inflection point, rising to8%. To compare, it is 13% in Japan and 33% in South Korea. However, atjust 8% penetration, China is already the world’s biggest outbound tourismspender at $165 billion/year. The United States is #2, at $146 billion.

However, it is important to understand that detailed, bottom-up,fundamental analysis, including our estimation of the companies’ intrinsicvalue and the presence of the margin of safety, underpin every investmentdecision that we undertake on behalf of our shareholders.




Amazon.com, Inc. $396.9 1.84%Alibaba Group Holding Limited 264.0 1.65Illumina, Inc. 26.6 0.78JUST EAT plc 4.7 0.75Aerie Pharmaceuticals, Inc. 1.1 0.74

Shares of Amazon.com, Inc., the world’s largest e-commerce and cloudservices provider, rose 17% during the September quarter, after reportingstrong revenue growth and improving margins in its core business. Amazon’sother major business segment, Amazon Web Services (AWS), continues togain traction with enterprise customers, and had another strong quarter ofgrowth. Over time, we expect AWS to be the larger contributor to valuecreation. The company continues to invest in new and potentially largebusiness segments such as e-finance, business supplies, and apparel.

Alibaba Group Holding Limited is the largest e-commerce company inChina. Alibaba owns and operates the two largest online shopping platformsin China, Taobao and Tmall. It also participates in the profits of AntFinancial, which owns Alipay, the largest third-party online paymentprovider in China. Shares of Alibaba increased 33% after reporting strongquarterly results. Improved financial disclosures allowed investors tounderstand better the profitability of the core e-commerce business andthereby attribute a higher value to it. We expect that mobile monetizationshould continue to improve through 2016 as the company invests in newareas such as grocery and cloud computing.

Shares of Illumina, Inc., the leading provider of DNA sequencing technologyto academic and commercial laboratories, rose 29% in the third quarter. Thecompany reported financial results that beat Street expectations andreiterated guidance for the year. We continue to believe Illumina has a longrunway for growth, driven by increasing adoption of DNA sequencing inclinical markets such as cancer screening, diagnosis, and treatment.

JUST EAT plc is an online marketplace for restaurant delivery in Europe,Latin America, and Canada. Shares were up 22% in the third quarter. Muchof that performance can be attributed to the company’s very strongearnings report for the six months ended June 30, 2016, with sales, EBITDAand EPS coming in 4%, 16% and 24% above street consensus,respectively. The company reported an impressive 40% increase in like-for-like orders relative to the same period last year and, simultaneously, better-

than-expected margin expansion in its largest market, the U.K. Revenue andEBITDA guidance for the full year were raised by 3% and 4%, respectively,with further upside to these estimates likely. We have been investors inJUST EAT since the company’s IPO in early 2014 and remain invested. JUSTEAT operates in a winner-take-most/all industry currently experiencing rapidsecular growth, so the company’s current #1 position across its marketsshould be self-reinforcing and translate into meaningful earnings growth inthe intermediate term with limited incremental capital investmentrequired. By the end of this year, EBITDA will have tripled over the last twoyears and we believe it can triple again over the next three-to-four years.

Aerie Pharmaceuticals, Inc. is developing eye drops for the treatment ofglaucoma. Shares rose 115% in the quarter after the company reportedsuccessful outcomes of a Phase 3 clinical trial of its lead, front-linemonotherapy glaucoma agent called Roclatan. Combined with their alreadyclinically de-risked second line agent, Rhopressa, Aerie is making thetransition from a drug developer to a commercial stage biotechnologycompany. Given a 20-30 year void in the development of new drugs to treatglaucoma, a disease of aging that inevitably leads to blindness, we expectstrong physician interest in novel mechanisms to address diseaseburden. For this reason, we also assume Aerie remains a logical acquisitiontarget for large pharmaceutical companies with an establishedophthalmology business.




PercentImpact

Mellanox Technologies Ltd. $2.1 –0.38%FireEye, Inc. 2.5 –0.32PT Sarana Menara Nusantara Tbk. 3.0 –0.26Mobileye N.V. 9.3 –0.20athenahealth, Inc. 4.8 –0.13

Shares of semiconductor company Mellanox Technologies Ltd. fell 10% ondisappointing second quarter earnings results, including a slowdown in thecompany’s InfiniBand business and heightened competitive concerns arounda new product from Intel Corp. Our research continues to suggest thatMellanox will likely maintain its leadership position at the high end of theInfiniBand market and protect its high margin business model with stronginnovation and product leadership. We view Mellanox’s Ethernet business asan open-ended opportunity that is potentially much larger than its currentcore InfiniBand business.

Shares of FireEye, Inc. declined 11% during the quarter. FireEye is acybersecurity company that sells software and services designed to detect,remediate and to protect from advanced cyber attacks. We have written atlength about our thesis that FireEye has industry-leading technology(thousands of large organizations attested to that), and an opportunity tobecome the cybersecurity platform of the future. Unfortunately, businessmodel transition from selling licenses to subscriptions, senior managementturnover, and repeated disappointing short-term results have put that thesisin jeopardy and made this investment the subject of intense internal debate.Some of us believe that FireEye is building a solid foundation for thecompany in order to grow in 2017 and beyond. Others feel that FireEye’sjourney from the high end to mass market has been too slow and allowedcompetition to increase customers’ share of mind. New management

70

September 30, 2016 Baron Global Advantage Fund

reset expectations for 2016 in an effort to build a solid base for 2017, andimpatient investors sold the stock due to the disappointing guidance. Webelieve the sales organization has been right-sized; mid-market and newsubscription products are being launched and go-to-market partnershipshave been fine-tuned. With the stock trading at approximately 2x enterprisevalue to sales, the valuation is undemanding, and with continuousconsolidation activity in software at-large and cyber in particular, we think atake-out possibility should put a floor under the price.

Shares of PT Sarana Menara Nusantara Tbk., the largest independentowner of wireless telecommunication towers in Indonesia, declined 7%during the quarter as telecommunication service providers continued todefer network equipment upgrades. We believe that wireless networkspending in Indonesia will eventually climb as operators contend withsignificant growth in wireless data consumption. Over time, we believeSarana Menara will build a significant number of new towers for these telcotenants and have the opportunity to acquire peer tower companies as well.

Shares of Mobileye N.V., maker of vision-based advanced driver assistancesystems (ADAS), fell 8% in the third quarter on news of the “divorce”between Mobileye and Tesla Motors, Inc. While most investors anticipatedthat Tesla will develop its own technology over time, the fact that Teslaalluded to new auto-pilot architecture, centered on radar, took investors bysurprise. Delays in the strategic agreement with Volkswagen and the launchof mapping technology with General Motors also added to these concerns.We believe Mobileye has a superior technology and additional originalequipment manufacturers will chose to work with the company. Weanticipate, as ADAS features become standard, Mobileye’s unit growth willdrive sales higher and as the company rolls out additional autonomouscapabilities, the increasing content per vehicle will lead to better averagesales prices. We look forward to watching the impact these technologies willhave on the world and on Mobileye’s performance.

Shares of athenahealth, Inc. declined 12% in the third quarter.Athenahealth offers software-enabled services for health care providers. Thecompany’s financial results missed quarterly street expectations, thoughmanagement did not change its annual guidance. We exited our position inthe stock.

Portfolio Structure

The portfolio is constructed on a bottom-up basis with the quality of ideasand conviction level having the highest roles in determining the size of eachindividual investment. Sector or country weights tend to be an outcome ofthe portfolio construction process and are not meant to indicate a positiveor a negative “view.”

The top 10 positions represented 55.1% of the Fund, the top 20 were82.1%, and we exited the quarter with 34 holdings. Almost 90% of the Fundcontinues to be invested in stocks in the Information Technology, ConsumerDiscretionary, and Health Care sectors with about half the assets invested incompanies that are domiciled outside of the United States.



(billions)


Value(thousands)

Percentof NetAssets

Amazon.com, Inc. $396.9 $1,300.3 12.1%Alibaba Group Holding Limited 264.0 685.7 6.4Facebook, Inc. 368.3 589.0 5.5Naspers Limited 76.0 552.7 5.1Alphabet Inc. 542.8 541.0 5.0Constellation Software, Inc. 9.6 499.0 4.6TAL Education Group 5.7 490.4 4.6Ctrip.com International, Ltd. 23.2 442.8 4.1JUST EAT plc 4.7 416.6 3.9Mellanox Technologies Ltd. 2.1 410.5 3.8

Exposure By Country

Table V.Percentage of securities by country as of September 30, 2016

Percentof NetAssets

United States 49.9%China 16.2Israel 7.5United Kingdom 6.8South Africa 5.1Canada 4.6Indonesia 3.1Brazil 2.9Netherlands 1.6Argentina 1.5

Recent Activity

During the September quarter, we initiated one new investment, added tofive existing ones, eliminated four and reduced 10 holdings, mostly onstrength, most notably slightly reducing exposures to long-time favoritesIllumina, Alphabet, TAL Education Group, ASML Holding, and Priceline Group.

Table VI.Top net purchases for the quarter ended September 30, 2016


(billions)

AmountPurchased

(thousands)

Noble Midstream Partners LP $ 0.9 $92.9Mellanox Technologies Ltd. 2.1 91.3Globant, S.A. 1.4 77.2Ctrip.com International, Ltd. 23.2 57.5Allergan plc 91.2 44.1

Noble Midstream Partners LP is an MLP that was recently IPO’d by NobleCorp. The MLP will own, operate, and develop midstream assets to supportNoble’s upstream activity in the U.S., outside of the Marcellus basin. In addition,Noble Midstream will develop midstream assets to support third parties. Webelieve this investment has a great combination of strong organic growth,potential for acquisitions, and a high yield. The parent entity, Noble Corp.,maintains a significant stake in the MLP and is aligned with its growth plans.

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Mellanox Technologies Ltd. supplies semiconductor-based systems forcomputing, storage and communications applications connecting servers toservers and servers to storage, providing high bandwidth and low latencyand selling mainly to servers/storage OEMs. Second quarter results includedsome slowdown in InfiniBand business for Mellanox and inducedcompetitive concerns around Intel’s new product (OPA).

We continue to view Mellanox’s Ethernet opportunity as an open-ended oneand much bigger than its InfiniBand business. We expect Mellanox to be ashare leader at the high end of the market (IB) and protect its high marginbusiness model relative to competition with strong innovation and productleadership. As a result, we added to our positions in a company that isgrowing significantly faster than the market and is valued at half of itsmultiple.

We added to our position in Globant, S.A. when market confusion aroundquarterly earnings created an attractive entry point. Globant is adifferentiated IT services provider that combines software engineeringexpertise with creative design capabilities to deliver digital solutions forbusiness customers. Second quarter revenue growth of 32% exceededexpectations, and full-year guidance was raised. However, the sharestemporarily fell as news of a dual listing in Europe created the mistakenimpression that the company was raising equity capital. We believe thatGlobant has a long runway for growth in a very large market for next-generation IT services.

Table VII.Top net sales for the quarter ended September 30, 2016



AmountSold

(thousands)

ARM Holdings plc $24.0 $221.7Check Point Software Technologies Ltd. 13.6 199.8TAL Education Group 5.7 164.8PT Tower Bersama Infrastructure, Tbk. 2.3 159.1Baidu, Inc. 63.0 133.9

We sold ARM Holdings plc after it was acquired by Softbank; eliminated ourinvestment in PT Tower Bersama Infrastructure, Tbk.; and reduced positionsin Check Point Software Technologies Ltd., TAL Education Group, andBaidu, Inc. to re-allocate capital and fund purchases of other investments.

Outlook

While we expect the markets to remain volatile, we remain constructive onthe overall environment. Over the last 50 years, despite the doubling of thepopulation, average global income per capita has tripled, life expectancy hasrisen by a third, and child mortality is down 70%. Literacy rates are upmeaningfully, and average IQs are considerably higher even after adjustingfor inflation and better nutrition. People are healthier, smarter, and moreprosperous than they have ever been. All predictions of doom haverepeatedly proved wrong. Despite disasters and reverses, quality of life,material wealth, and prosperity have continued to increase everywhere inthe world, and we think that’s unlikely to change.

Our goal remains to maximize long-term returns without taking significantrisks of permanent loss of capital. We believe the best strategy for long-termcapital appreciation is to collect a mix of unique companies that sell intodifferent end markets and different geographies. We will continue to focuson identifying and investing in companies that we believe have sustainablecompetitive advantages and the ability to reinvest excess capital at highrates of return.

Thank you for investing in the Baron Global Advantage Fund.

Sincerely,

Alex Umansky,Portfolio ManagerOctober 17, 2016


Growth stocks can react differently to issuer, political, market and economic developments than the market as a whole. Non-U.S. investments may involveadditional risks to those inherent in U.S. investments, including exchange-rate fluctuations, political or economic instability, the imposition of exchangecontrols, expropriation, limited disclosure and illiquid markets, resulting in greater share price volatility. Securities of small and medium-sized companies maybe thinly traded and more difficult to sell.


This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Global Advantage Fund by anyone in any jurisdiction where it would be unlawful under the laws ofthat jurisdiction to make such offer or solicitation.

72

September 30, 2016 Baron Discovery Fund

Retail Shares: BDFFX

R6 Shares: BDFUXInstitutional Shares: BDFIX

RANDY GWIRTZMAN AND LAIRD BIEGER

PORTFOLIO MANAGERS

Dear Baron Discovery Fund Shareholder:

Performance

We were pleased with the Fund’s performance in the quarter with theInstitutional Shares outperforming the Russell 2000 Growth Index by 6.16%.This third quarter outperformance brings our year-to-date performance to21.73% which is 14.25% better than our benchmark. As we have talkedabout in prior letters, we achieved this outperformance despite therepositioning of the portfolio in the second half of 2015 to have a heavierweighting in more established and higher cash flowing businesses. We havebeen pleased with our performance during both up and down markets,though we still believe our smaller capitalization bias will tend to performrelatively better in up markets over severe down markets.

September 30th marked our three-year anniversary. Since it has beenalmost three years we wanted to reiterate our core principles by quotingwhat we wrote in our first letter:

We will continue to use the same Baron investment process that is used in allBaron Funds – we will seek high growth companies with terrific managers andlong-term competitive advantages. We will also seek to purchase thosecompanies at what we believe are reasonable stock prices. We will also take alonger-term view than most other investment managers. We believe that byanalyzing the investment over a longer-term horizon, we can gain anadvantage over most market participants who are only focused on theshort term.

This long-term focus doesn’t necessarily work every quarter or even everyyear, but we believe that our strategy is the only way we can outperformthe market over the long term.

We have seen some consistent trends that have carried over from lastquarter. First, the merger and acquisition environment has picked up. In fact,three of our companies agreed to be acquired in the quarter: Press Ganey,Cepheid, and Isle of Capri Casinos. We continue to believe that many of ourcompanies make ideal acquisition targets for the same reasons we investedin them in the first place (i.e., they are fast growing companies with long-term competitive advantages). Second, multiples for our faster growingcompanies have remained at the upper end of historical norms due to thescarcity of growth in a stagnant U.S. economy. Finally, we are still benefitingfrom the salutary effects of balancing the portfolio with a combination ofestablished but still growing businesses with cash flow and exciting, earlierstage, high growth companies that have very large opportunities.



BaronDiscovery

FundRetail

Shares1,2

BaronDiscovery

FundInstitutional

Shares1,2

Russell2000

GrowthIndex1

S&P500

Index1

Three Months3 15.22% 15.38% 9.22% 3.85%Nine Months3 21.49% 21.73% 7.48% 7.84%One Year 23.24% 23.58% 12.12% 15.43%Three Years and

Since Inception(September 30, 2013)(Annualized) 11.11% 11.38% 6.58% 11.16%

Three Years andSince Inception(September 30, 2013)(Cumulative)3 37.16% 38.16% 21.08% 37.36%

Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares and Institutional Shares as of September 30,2015 was 1.57% and 1.25%, but the net annual expense ratio was 1.35% and 1.10% (net of the Adviser’s fee waivers which the Adviser has contractually agreedto for so long as it serves as the adviser to the fund), respectively. The performance data quoted represents past performance. Past performance is no guarantee offuture 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 theiroriginal 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 expensesmay be reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower. Current performance may be lower orhigher than the performance data quoted. For performance information current to the most recent month end, visit www.BaronFunds.com or call 1-800-99BARON.

† The Fund’s historical performance was impacted by gains from IPOs and/or secondary offerings. There is no guarantee that these results can be repeated or that theFund’s level of participation in IPOs and secondary offerings will be the same in the future.

1 The indexes are unmanaged. The Russell 2000® Growth Index measures the performance of small-sized U.S. companies that are classified as growth and the S&P 500Index of 500 widely held large cap U.S. companies. The indexes and the Fund are with dividends, which positively impact the performance results. Russell InvestmentGroup is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell is a trademark of Russell Investment Group.

2 The performance data in the table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.3 Not annualized.

73



PercentImpact

Impinj, Inc. 1.65%MACOM Technology Solutions Holdings, Inc. 1.20Qualys, Inc. 1.03Amber Road, Inc. 0.81Wingstop Inc. 0.81

Impinj, Inc., a leader in providing radio-frequency identity solutions, was acontributor in the quarter. The company, which somewhat flew under theradar when it came public this year, reported strong second quarter revenuegrowth and continues to gain new retailer customers for its retailerinventory control management solutions. In simple terms, the company sellsradio-frequency identification (RFID) “tags” which are put on every item inthe store. Each store then has “readers” which read the tags and allow for95% real-time inventory visibility. Impinj’s solution is a vast improvementover the laborious manual inventory process it replaces. Impinj has 70%market share in this small, but fast growing, market and we believe it willincreasingly participate as passive UHF RFID solutions become moreubiquitous.

MACOM Technology Solutions Holdings, Inc. designs and manufactureshigh-end analog semiconductors used for industrial, military, andcommunications end markets. Shares were up in the quarter as thecompany continued to execute on its strategy to grow in a number of largetarget markets including optical networking, which is starting to accelerateas the technology penetrates metro and data center markets; radartechnology, including upgrades to F-16 fighter jets and civilian weather andair traffic control systems; and cellular base station power amplifiers. Wecontinue to believe that MACOM’s large potential for growth is still notadequately valued in the market.

Qualys, Inc., is a cloud-based cybersecurity services provider that specializesin assessing software vulnerabilities of hardware attached to internetnetworks. Shares were up in the quarter as the company showed success insome of its new product offerings, particularly its “cloud agent” technology,which allows customers to see changes to hardware configurations in arapid and dynamic manner. This allows for quicker responses to potentialcyber-intrusions. Qualys is accelerating its growth and continues to trade ata reasonable multiple of real free cash flow, whereas many of its peers arestill losing money.

Amber Road, Inc. provides subscription software services (SaaS) deliveredthrough the cloud that enables some of the largest companies in the worldto navigate difficult trade regulation environments. Shares increased in thequarter as management continued to build orders in excess of expectations.Given a trade environment that we think will continue to increase incomplexity, we believe that Amber Road is uniquely well positioned to helpits customers.

Wingstop Inc., a franchisor of chicken wing-focused restaurants, was acontributor in the quarter. The company reported strong sales and franchiseunit development that allowed it to raise its full year 2016 earningsguidance. The company ended the quarter with about 900 stores, and webelieve there is room for 2,500 stores domestically and another 3,000 in

international markets. The company also paid a special dividend of $2.90 inthe quarter. This represented about an 11% return of capital and reflects thestrong cash flow characteristics of this franchise business.


PercentImpact

TherapeuticsMD, Inc. –0.34%Neos Therapeutics, Inc. –0.29American Renal Associates Holdings, Inc. –0.20Education Realty Trust, Inc. –0.16The Habit Restaurants, Inc. –0.12

TherapeuticsMD, Inc. is a specialty pharmaceutical company that isdeveloping drugs that address the multi-billion dollar hormone replacementtherapy (HRT) market. Shares dropped in the quarter although our belief isthat this is entirely trading related, as its fundamentals remain strong.During the quarter the company made substantial progress on thecommercialization of its first drug, Yuvexxy, which is slated for potentialapproval in May 2017. We continue to believe that its menopause drug willbe approved in 2018. These drugs are unique and target multi-billion dollarmarkets.

Neos Therapeutics, Inc., is a specialty pharmaceutical company. Neos justlaunched its first drug called Adzenys (a unique, extended release, orallydissolving tablet for ADHD indications). While volumes are as strong as anydrug launch in the category, the market has so far been disappointed in netrevenues per prescription due to initial discounting activity. We are notoverly concerned, and believe that Neos can build a durable franchise in thespace.

American Renal Associates Holdings, Inc. is a health care servicescompany that runs about 200 dialysis centers in the U.S. We sold ourposition after we grew concerned about a customer lawsuit relating to thecompany’s reimbursement practices. While the stock was down a little inthe quarter as a result of the news, it had a positive cumulative return forthe period we held it.

Education Realty Trust, Inc., an owner and operator of collegiate housingcommunities, was a detractor in the quarter. The company reported leasingstatistics for the 2016-2017 academic year that were slightly belowexpectations due to two of their 80 communities having occupancy come inlower than expected. We believe that one of these two communities hasmade the changes necessary to get occupancy back to historical levels nextyear. The other community will take longer to recover as it is at a universitythat is facing its own enrollment challenges. Longer term, we are bigbelievers in Education Realty Trust’s growth opportunity, as we believe theirvirtual duopoly with American Campus Communities creates challenges fornew entrants.

The Habit Restaurants, Inc., an operator of fast casual hamburgerrestaurants, was a detractor in the quarter. The company lowered its salesand earnings guidance for the second half of 2016. We believe this shortfallwas not self-inflicted by the company. Rather, it illustrates the difficultpromotional environment in the restaurant industry today.

74

September 30, 2016 Baron Discovery Fund

Portfolio Structure

As of September 30, 2016, the Fund had $43.4 million under managementand was invested in 62 publicly traded stocks. At the end of the quarter, thetop 10 positions represented 30.4% of the Fund’s assets.

Our key sector weightings at the end of September 2016 were 28.9%Information Technology (3.4% above the Russell 2000 Growth Index),27.3% Health Care (3.9% above than the index), 13.5% ConsumerDiscretionary (1.2% below than the index), and 12.7% Industrials (2.8%below than the index).

We have been overweight Health Care and underweight ConsumerDiscretionary and Industrials pretty consistently over the last few quarters.However, Information Technology, which was in line with the index lastquarter, is now an above index weighting. This is a result of our InformationTechnology holdings performing better than the overall portfolio in thequarter and new ideas being added to the sector. As we start the fourthquarter, we continue to find new and exciting investing ideas withinInformation Technology.


YearAcquired


Value(millions)

Percentof NetAssets

Mercury Systems, Inc. 2015 $1.8 4.2%Qualys, Inc. 2013 1.8 4.2MACOM Technology Solutions

Holdings, Inc. 2015 1.8 4.2Education Realty Trust, Inc. 2015 1.3 3.0Amber Road, Inc. 2014 1.2 2.8JUST EAT plc 2014 1.2 2.7Wingstop Inc. 2015 1.1 2.4Gaming and Leisure Properties, Inc. 2014 1.0 2.4Kinsale Capital Group, Inc. 2016 1.0 2.3Sientra, Inc. 2016 1.0 2.2

Recent Activity


YearAcquired


(billions)


Myriad Genetics, Inc. 2016 $1.4 $0.8Kinsale Capital Group, Inc. 2016 0.5 0.8Medpace Holdings, Inc. 2016 1.2 0.7Liberty Media Group 2016 2.4 0.7SiteOne Landscape Supply, Inc. 2016 1.4 0.7

Our newest “fallen angel” investment is Myriad Genetics, Inc. Myriad is alab company that has a stable of best-in-class proprietary health carediagnostic panels. Its Hereditary Cancer Testing (HCT) is the currentbackbone of the business, and accounted for most of its fiscal 2016revenues (ended June 30, 2016). We invested after shares fell 30% on softerthan expected HCT revenues in the second quarter. Other Myriad tests onthe market include its prostate cancer risk classification test and a

rheumatoid arthritis predictive test. In 2017, the company will have newtests for melanoma and breast cancer tumor aggressiveness. And thefollowing year we believe that Myriad will have a novel companiondiagnostic test for a promising new cancer drug from TESARO (initially forovarian cancer but with applications in breast and other cancers). These areall best-in-class tests based on numerous clinical studies. In addition, Myriadrecently agreed to buy a company called Assurex that has a test calledGeneSight, which tests genetic compatibility to anti-depressant drugs. Whilethere are risks to the base HCT business, we believe that the market hasoverly discounted these risks, while not giving enough credit tomanagement for being able to grow its franchise away from HCT in someother attractive markets. We believe that Myriad can still grow its cash flowat a significant clip after what should be a trough year in fiscal 2017. Givenits low current trading multiple, we feel that we can earn a meaningfulreturn for the Fund if only a couple of growth opportunities work out for thecompany.

We initiated a position in Kinsale Capital Group, Inc., a specialty insurancecompany. Kinsale focuses exclusively on excess & surplus (E&S) lines, a less-commoditized market segment for risks that are unique or hard to place inthe standard market. We believe that Kinsale is a well-run insurer thatshould grow book value per share much faster than the rest of the industry.Because of its small size and low-cost technology platform, Kinsale has therare potential to achieve double-digit premium growth while delivering best-in-class underwriting margins. Management has decades of experience inthe E&S market, is highly regarded in the industry, and previously ran asuccessful insurer that was sold to private equity at a premium valuation.We believe that Kinsale has a long runway for profitable growth in the largeinsurance market.

We established a position in Medpace Holdings, Inc., a top 10 globalContract Research Organization (CRO) by revenue. Medpace offers a uniquefull service outsourcing model which is particularly attractive to small-, andmid-sized biotech and specialty pharma companies which often lack theinfrastructure and expertise to manage their drug development internally.Importantly, this is the market segment that is currently experiencing thefastest growing R & D spend in the biopharmaceutical space. Over the lastthree years, Medpace achieved annualized revenue growth of 22%, while theefficiencies driven by its full service model have generated the industry’shighest margins. We believe that given its market positioning and relativelysmall revenue base Medpace should continue to see faster top-line growththan its peers with sustainable margins for the next several years.

We initiated a position in Liberty Media Group which has agreed toacquire Formula 1, the owner and operator of the auto racing series. Similarto our investment in Manchester United, we have a strong belief that thevalue of sports rights will continue to climb as consumers tend to watchsports live, as opposed to recording them on a DVR, which creates a highervalue to advertisers because viewers do not skip their ads. We also believethe asset has been undermanaged and that cash flow can be increased asadditional commercial partners are added, the online strategy is expanded,and additional races are added to the schedule. Lastly, we are big fans ofChase Carey, who will be overseeing Formula 1 for Liberty, and JohnMalone, Chairman of Liberty Media, who have proven to be money makersin the past.

We initiated a position in SiteOne Landscape Supply, Inc., the largestwholesale distributor of landscape supplies in the U.S. The company supplies

75


irrigation supplies; fertilizer; herbicides; landscape accessories; nursery goodsand hardscapes, such as pavers, natural stones, and blocks to landscapeprofessionals and contractors. We believe the company has a largeconsolidation opportunity ahead as the market is fragmented and SiteOne isthe only large consolidator. The company is also benefiting fromhomeowners spending more than ever improving their outdoor spaces.


YearAcquired

Market CapWhen

Acquired(billions)

Quarter End MarketCap or Market Cap

When Sold(billions)

AmountSold

(millions)

Press GaneyHoldings, Inc. 2015 $1.4 $2.1 $1.6

Isle of CapriCasinos, Inc. 2016 0.6 0.9 0.6

American RenalAssociatesHoldings, Inc. 2016 0.8 0.8 0.5

Gaming and LeisureProperties, Inc. 2014 6.5 6.9 0.4

The HabitRestaurants, Inc. 2015 0.6 0.4 0.3

We sold our investment in Press Ganey Holdings, Inc. after it announcedits intent to sell to a private equity firm in August. As is the case with manyof our acquired investments, the sale is bittersweet, as we really like themanagement team and believe that the company has some great growthahead of it.

We sold our position in Isle of Capri Casinos, Inc. as the company agreedto be acquired by El Dorado Resorts.

We continue to like the long-term prospects of Gaming and LeisureProperties, Inc. but we expect to continue to trim the position over time(as we did in the third quarter) given its large market capitalization.

Outlook

Overall, we are extremely pleased with our results since inception but werealize this is a team effort. What shareholders do not see is all the hardwork our analyst team, salespeople, analytics team, and support staff (thankyou Kate!) give us day in and day out. We especially want to thank LindaMartinson, our President, who was the driving force behind launching BaronDiscovery Fund, Cliff Greenberg, our Portfolio Manager Advisor, who hasmentored us and pushed us to become the best investors we can be and RonBaron, our Chief Investment Officer, who instilled in us what it means toinvest in people for the long term.

Thank you for investing in the Fund.

Randy Gwirtzman & Laird BiegerPortfolio ManagersOctober 17, 2016


The Adviser believes that there is more potential for capital appreciation in smaller companies, but there also may be more risk. Specific risks associated withinvesting in smaller companies include that the securities may be thinly traded and they may be more difficult to sell during market downturns. The Fund maynot achieve its objectives. Portfolio holdings are subject to change. Current and future portfolio holdings are subject to risk.

The discussions of the companies herein are not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of therespective portfolio manager only through the end of the period stated in this report. The portfolio managers’ views are not intended as recommendations or investment advice to any person readingthis report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.

This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Discovery Fund by anyone in any jurisdiction where it would be unlawful under the laws of thatjurisdiction to make such offer or solicitation.

76

Baron Funds

Portfolio Market Capitalization (Unaudited)

Baron Asset Fund

Baron Asset Fund invests in mid-sized growth companies with market capitalizations above $2.5 billion or the smallest market cap stock in the Russell MidcapGrowth Index at reconstitution, whichever is larger, and below the largest market cap stock in the Russell Midcap Growth Index at reconstitution.

Company

EquityMarket Cap(in millions)

% ofNet

Assets

The Priceline Group, Inc. . . . . . . . . . . . . . . . . . . . . . $72,731 1.9%The Charles Schwab Corp. . . . . . . . . . . . . . . . . . . . 41,767 3.2Illumina, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,631 3.3Equinix, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,605 2.1Concho Resources, Inc. . . . . . . . . . . . . . . . . . . . . . . 19,337 0.6Nielsen Holdings plc . . . . . . . . . . . . . . . . . . . . . . . . 19,143 1.6Roper Technologies Inc. . . . . . . . . . . . . . . . . . . . . . 18,492 1.7Willis Towers Watson Public Limited Company . . 18,329 2.6Expedia, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,495 0.6T. Rowe Price Group, Inc. . . . . . . . . . . . . . . . . . . . . 16,529 0.7FleetCor Technologies, Inc. . . . . . . . . . . . . . . . . . . . 16,080 3.4SBA Communications Corp. . . . . . . . . . . . . . . . . . . 13,977 2.9Verisk Analytics, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 13,734 4.2Henry Schein, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 13,331 2.3Fastenal Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,073 1.1Universal Health Services, Inc. . . . . . . . . . . . . . . . . 11,999 0.9First Republic Bank . . . . . . . . . . . . . . . . . . . . . . . . . 11,491 1.4Mettler-Toledo International, Inc. . . . . . . . . . . . . . 11,121 4.1Vantiv, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,777 1.4CarMax, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,215 0.8IDEXX Laboratories, Inc. . . . . . . . . . . . . . . . . . . . . . 10,094 7.4Arch Capital Group Ltd. . . . . . . . . . . . . . . . . . . . . . 9,715 4.0Quintiles Transnational Holdings, Inc. . . . . . . . . . . 9,650 0.9CBRE Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,391 2.1Mobileye N.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,333 0.6Tiffany & Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,071 0.7Tractor Supply Co. . . . . . . . . . . . . . . . . . . . . . . . . . 9,002 0.8The Cooper Companies, Inc. . . . . . . . . . . . . . . . . . . 8,738 1.8

Company


% ofNet

Assets

CDK Global, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,612 0.5%Verisign, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,353 2.0Ralph Lauren Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 8,320 0.1ANSYS, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,077 2.0Teleflex Incorporated . . . . . . . . . . . . . . . . . . . . . . . 7,400 0.7Westinghouse Air Brake Technologies

Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,358 1.6Gartner, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,308 5.4IDEX Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . 7,124 1.6The Middleby Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 7,113 1.2CoStar Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 7,060 1.2FactSet Research Systems, Inc. . . . . . . . . . . . . . . . . 6,590 3.1Hyatt Hotels Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 6,548 1.0SS&C Technologies Holdings, Inc. . . . . . . . . . . . . . 6,467 1.4Rollins, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,392 0.6WABCO Holdings Inc. . . . . . . . . . . . . . . . . . . . . . . . 6,334 0.4MarketAxess Holdings Inc. . . . . . . . . . . . . . . . . . . . 6,231 1.5Zillow Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 6,231 1.2Vail Resorts, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,676 4.9West Pharmaceutical Services, Inc. . . . . . . . . . . . . 5,455 2.2Guidewire Software, Inc. . . . . . . . . . . . . . . . . . . . . . 4,383 2.8Bio-Techne Corporation . . . . . . . . . . . . . . . . . . . . . 4,085 1.6Tallgrass Energy GP, LP . . . . . . . . . . . . . . . . . . . . . . 3,781 0.1MAXIMUS, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,670 0.9Choice Hotels International, Inc. . . . . . . . . . . . . . . 2,529 0.9Inovalon Holdings, Inc. . . . . . . . . . . . . . . . . . . . . . . 2,242 0.2Alexander’s, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,143 1.0

99.2%

77

Baron Funds

Baron Growth Fund

Baron Growth Fund invests in small-sized growth companies with market capitalizations up to the largest market cap stock in the Russell 2000 Growth Indexat reconstitution, or companies with market capitalizations up to $2.5 billion, whichever is larger.

Company


% ofNet

Assets

Under Armour, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . $15,774 4.3%Church & Dwight Co., Inc. . . . . . . . . . . . . . . . . . . . 12,344 2.0Mettler-Toledo International, Inc. . . . . . . . . . . . . . 11,121 1.7IDEXX Laboratories, Inc. . . . . . . . . . . . . . . . . . . . . . 10,094 3.4Arch Capital Group Ltd. . . . . . . . . . . . . . . . . . . . . . 9,715 5.2Alexandria Real Estate Equities, Inc. . . . . . . . . . . . . 8,481 1.4ANSYS, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,077 2.9MSCI, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,943 3.0Gartner, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,308 4.2The Middleby Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 7,113 2.6CoStar Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 7,060 3.6Gaming and Leisure Properties, Inc. . . . . . . . . . . . . 6,861 3.2FactSet Research Systems, Inc. . . . . . . . . . . . . . . . . 6,590 4.4SS&C Technologies Holdings, Inc. . . . . . . . . . . . . . 6,467 3.2Dick’s Sporting Goods, Inc. . . . . . . . . . . . . . . . . . . . 6,404 1.9Vail Resorts, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,676 5.4Douglas Emmett, Inc. . . . . . . . . . . . . . . . . . . . . . . . 5,532 2.3West Pharmaceutical Services, Inc. . . . . . . . . . . . . 5,455 1.2TreeHouse Foods, Inc. . . . . . . . . . . . . . . . . . . . . . . . 4,945 1.1Booz Allen Hamilton Holding Corp. . . . . . . . . . . . . 4,696 1.1Panera Bread Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,604 1.5Guidewire Software, Inc. . . . . . . . . . . . . . . . . . . . . . 4,383 1.2Bio-Techne Corporation . . . . . . . . . . . . . . . . . . . . . 4,085 1.8Bright Horizons Family Solutions, Inc. . . . . . . . . . . 3,938 2.5MAXIMUS, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,670 2.8Morningstar, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,413 1.6Juno Therapeutics, Inc. . . . . . . . . . . . . . . . . . . . . . . 3,174 0.2Air Lease Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,939 0.5Littelfuse, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,892 0.6Manchester United plc . . . . . . . . . . . . . . . . . . . . . . 2,769 1.5Red Rock Resorts, Inc. . . . . . . . . . . . . . . . . . . . . . . . 2,734 0.6

Company


% ofNet

Assets

Oaktree Capital Group, LLC . . . . . . . . . . . . . . . . . . $2,653 1.0%Performance Food Group Company . . . . . . . . . . . . 2,562 0.5Choice Hotels International, Inc. . . . . . . . . . . . . . . 2,529 2.3Essent Group Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,478 0.2Primerica, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,464 2.2Hudson’s Bay Co. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,342 0.2Nord Anglia Education Inc. . . . . . . . . . . . . . . . . . . . 2,267 0.9Pegasystems, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,250 0.7Inovalon Holdings, Inc. . . . . . . . . . . . . . . . . . . . . . . 2,242 1.3Alexander’s, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,143 0.9Neogen Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,110 0.3Virtu Financial, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 2,094 0.2Marriott Vacations Worldwide Corp. . . . . . . . . . . . 1,979 2.0American Assets Trust, Inc. . . . . . . . . . . . . . . . . . . . 1,970 0.5Cohen & Steers, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 1,961 1.6Masonite International Corp. . . . . . . . . . . . . . . . . . 1,901 1.6Financial Engines, Inc. . . . . . . . . . . . . . . . . . . . . . . . 1,836 1.1Trex Company, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 1,723 1.1Moelis & Company . . . . . . . . . . . . . . . . . . . . . . . . . 1,463 0.4Caesarstone Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,327 1.3The Carlyle Group . . . . . . . . . . . . . . . . . . . . . . . . . . 1,267 0.4Benefitfocus, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,184 1.6Penn National Gaming, Inc. . . . . . . . . . . . . . . . . . . 1,132 0.9Whistler Blackcomb Holdings, Inc. . . . . . . . . . . . . . 1,088 0.6ClubCorp Holdings, Inc. . . . . . . . . . . . . . . . . . . . . . 949 0.3Smart & Final Stores, Inc. . . . . . . . . . . . . . . . . . . . . 944 0.7AO World plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 922 0.4Iridium Communications Inc. . . . . . . . . . . . . . . . . . 776 1.2Pinnacle Entertainment, Inc. . . . . . . . . . . . . . . . . . . 705 0.5

99.8%

78

Baron Funds


Baron Small Cap Fund invests 80% of its net assets in small-sized growth companies with market capitalizations up to the largest market cap stock in theRussell 2000 Growth Index at reconstitution, or companies with market capitalizations up to $2.5 billion, whichever is larger.

Company


% ofNet

Assets

FleetCor Technologies, Inc. . . . . . . . . . . . . . . . . . . . $16,080 2.5%TransDigm Group, Inc. . . . . . . . . . . . . . . . . . . . . . . 15,400 5.6SBA Communications Corp. . . . . . . . . . . . . . . . . . . 13,977 2.9Waste Connections, Inc. . . . . . . . . . . . . . . . . . . . . . 13,103 3.4Liberty Broadband Corporation . . . . . . . . . . . . . . . 12,948 0.9Acuity Brands, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 11,613 3.4SL Green Realty Corp. . . . . . . . . . . . . . . . . . . . . . . . 11,277 0.5Liberty SiriusXM Group . . . . . . . . . . . . . . . . . . . . . . 11,258 1.4Mettler-Toledo International, Inc. . . . . . . . . . . . . . 11,121 1.8IDEXX Laboratories, Inc. . . . . . . . . . . . . . . . . . . . . . 10,094 4.0CBRE Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,391 0.8DexCom, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,353 2.0Gartner, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,308 4.2Gaming and Leisure Properties, Inc. . . . . . . . . . . . . 6,861 2.6The Ultimate Software Group, Inc. . . . . . . . . . . . . 5,915 3.8Nordson Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,698 1.3Berry Plastics Group, Inc. . . . . . . . . . . . . . . . . . . . . 5,332 1.2WEX Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,618 1.4Cognex Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,499 2.0Guidewire Software, Inc. . . . . . . . . . . . . . . . . . . . . . 4,383 2.7Patheon N.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,299 0.1ICON plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,252 1.9The Madison Square Garden Company . . . . . . . . . 4,078 1.2Bright Horizons Family Solutions, Inc. . . . . . . . . . . 3,938 4.0Aspen Technology, Inc. . . . . . . . . . . . . . . . . . . . . . . 3,731 1.6PRA Health Sciences, Inc. . . . . . . . . . . . . . . . . . . . . 3,443 1.6Cantel Medical Corp. . . . . . . . . . . . . . . . . . . . . . . . 3,253 1.4Brookdale Senior Living, Inc. . . . . . . . . . . . . . . . . . . 3,244 0.5PT Sarana Menara Nusantara Tbk. . . . . . . . . . . . . . 3,049 1.1Univar Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,015 0.9Bats Global Markets, Inc. . . . . . . . . . . . . . . . . . . . . 2,904 0.7Valero Energy Partners LP . . . . . . . . . . . . . . . . . . . 2,886 1.0Healthcare Services Group, Inc. . . . . . . . . . . . . . . . 2,868 0.7Red Rock Resorts, Inc. . . . . . . . . . . . . . . . . . . . . . . . 2,734 1.0The Cheesecake Factory, Inc. . . . . . . . . . . . . . . . . . 2,407 1.4INC Research Holdings, Inc. . . . . . . . . . . . . . . . . . . 2,380 1.7Liberty Media Group . . . . . . . . . . . . . . . . . . . . . . . . 2,371 0.6Electronics For Imaging, Inc. . . . . . . . . . . . . . . . . . . 2,286 1.7

Company


% ofNet

Assets

ACI Worldwide, Inc. . . . . . . . . . . . . . . . . . . . . . . . . $2,271 1.1%Nord Anglia Education Inc. . . . . . . . . . . . . . . . . . . . 2,267 1.9Press Ganey Holdings, Inc. . . . . . . . . . . . . . . . . . . . 2,242 1.4Manitowoc Foodservice, Inc. . . . . . . . . . . . . . . . . . 2,225 0.6HealthEquity, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,220 1.3Abcam plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,208 0.5Acxiom Corporation . . . . . . . . . . . . . . . . . . . . . . . . 2,063 1.1Party City Holdco Inc. . . . . . . . . . . . . . . . . . . . . . . . 2,045 1.1Monro Muffler Brake, Inc. . . . . . . . . . . . . . . . . . . . . 1,975 0.6On Assignment, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 1,936 2.3Diplomat Pharmacy, Inc. . . . . . . . . . . . . . . . . . . . . 1,859 0.8Dominion Midstream Partners, L.P. . . . . . . . . . . . . 1,858 0.3Summit Materials, Inc. . . . . . . . . . . . . . . . . . . . . . . 1,856 1.2Financial Engines, Inc. . . . . . . . . . . . . . . . . . . . . . . . 1,836 0.8RBC Bearings Incorporated . . . . . . . . . . . . . . . . . . . 1,817 1.2comScore, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,738 0.4DigitalGlobe, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,723 0.6Houghton Mifflin Harcourt Company . . . . . . . . . . 1,640 0.2Ferroglobe PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,552 0.4Moelis & Company . . . . . . . . . . . . . . . . . . . . . . . . . 1,463 1.0SiteOne Landscape Supply, Inc. . . . . . . . . . . . . . . . 1,421 0.8MSG Networks Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 1,395 0.5Medpace Holdings, Inc. . . . . . . . . . . . . . . . . . . . . . . 1,184 0.5Penn National Gaming, Inc. . . . . . . . . . . . . . . . . . . 1,132 0.7The Spectranetics Corporation . . . . . . . . . . . . . . . . 1,078 1.1Mercury Systems, Inc. . . . . . . . . . . . . . . . . . . . . . . . 992 0.4HealthStream, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 876 0.2BJ’s Restaurants, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 859 1.1Wingstop Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 842 0.6PBF Logistics LP . . . . . . . . . . . . . . . . . . . . . . . . . . . . 827 0.5Flotek Industries, Inc. . . . . . . . . . . . . . . . . . . . . . . . 823 0.8Scorpio Tankers Inc. . . . . . . . . . . . . . . . . . . . . . . . . 812 0.4Westlake Chemical Partners LP . . . . . . . . . . . . . . . 618 0.2Zoe’s Kitchen, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 432 0.3The Habit Restaurants, Inc. . . . . . . . . . . . . . . . . . . 364 0.2The Chefs’ Warehouse, Inc. . . . . . . . . . . . . . . . . . . 292 0.5

99.1%

79

Baron Funds


Baron Opportunity Fund invests in high growth businesses of any market capitalization selected for their capital appreciation potential.

Company


% ofNet

Assets

Alphabet Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $542,758 6.4%Amazon.com, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 396,947 7.5Facebook, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368,305 3.4Alibaba Group Holding Limited . . . . . . . . . . . . . . . 263,975 2.1Visa, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195,239 2.2Mastercard Incorporated . . . . . . . . . . . . . . . . . . . . 111,717 2.0The Priceline Group, Inc. . . . . . . . . . . . . . . . . . . . . . 72,731 2.0salesforce.com, inc. . . . . . . . . . . . . . . . . . . . . . . . . . 48,861 2.0Netflix, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,251 2.7The Charles Schwab Corp. . . . . . . . . . . . . . . . . . . . 41,767 2.0Tesla Motors, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 30,338 3.3Alexion Pharmaceuticals, Inc. . . . . . . . . . . . . . . . . . 27,479 0.7Illumina, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,631 2.2Equinix, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,605 2.8Ctrip.com International, Ltd. . . . . . . . . . . . . . . . . . 23,175 1.7Concho Resources, Inc. . . . . . . . . . . . . . . . . . . . . . . 19,337 1.3Willis Towers Watson Public Limited Company . . 18,329 1.6Expedia, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,495 2.0Under Armour, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 15,774 1.0Red Hat, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,638 2.0SBA Communications Corp. . . . . . . . . . . . . . . . . . . 13,977 1.7Verisk Analytics, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 13,734 1.5ServiceNow, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,020 2.8

Company


% ofNet

Assets

Mobileye N.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,333 1.5%

ANSYS, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,077 1.9Gartner, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,308 3.7CoStar Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 7,060 4.9MarketAxess Holdings Inc. . . . . . . . . . . . . . . . . . . . 6,231 1.9Zillow Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 6,231 2.0athenahealth, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 4,962 1.0Guidewire Software, Inc. . . . . . . . . . . . . . . . . . . . . 4,383 4.9Juno Therapeutics, Inc. . . . . . . . . . . . . . . . . . . . . . . 3,174 0.5Manchester United plc . . . . . . . . . . . . . . . . . . . . . 2,769 2.7FireEye, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,499 0.5Press Ganey Holdings, Inc. . . . . . . . . . . . . . . . . . . . 2,242 2.0Mellanox Technologies Ltd. . . . . . . . . . . . . . . . . . . 2,081 1.9Acxiom Corporation . . . . . . . . . . . . . . . . . . . . . . . 2,063 3.6Sage Therapeutics, Inc. . . . . . . . . . . . . . . . . . . . . . 1,680 1.0Qualys, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,351 0.5TherapeuticsMD, Inc. . . . . . . . . . . . . . . . . . . . . . . . 1,338 0.9Glaukos Corporation . . . . . . . . . . . . . . . . . . . . . . . 1,246 1.2Benefitfocus, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,184 3.9The Trade Desk . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,117 1.3Foundation Medicine, Inc. . . . . . . . . . . . . . . . . . . . 816 0.6Talend S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 732 0.7

100.0%

Baron Partners Fund

Baron Partners Fund is a non-diversified fund that invests primarily in U.S. companies of any size with significant growth potential.

Company


% ofTotal

Investments

Amazon.com, Inc. . . . . . . . . . . . . . . . . . . . . . $396,947 0.6%Netflix, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 42,251 1.0The Charles Schwab Corp. . . . . . . . . . . . . . . 41,767 3.9Tesla Motors, Inc. . . . . . . . . . . . . . . . . . . . . . 30,338 10.1Illumina, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 26,631 2.8Under Armour, Inc. . . . . . . . . . . . . . . . . . . . . 15,774 4.1Verisk Analytics, Inc. . . . . . . . . . . . . . . . . . . 13,734 3.1Fastenal Co. . . . . . . . . . . . . . . . . . . . . . . . . . 12,073 2.0CarMax, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 10,215 1.6IDEXX Laboratories, Inc. . . . . . . . . . . . . . . . . 10,094 5.0Arch Capital Group Ltd. . . . . . . . . . . . . . . . . 9,715 8.5Norwegian Cruise Line Holdings, Ltd. . . . . . 8,562 0.7Gartner, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 7,308 2.6CoStar Group, Inc. . . . . . . . . . . . . . . . . . . . . 7,060 10.6Gaming and Leisure Properties, Inc. . . . . . . 6,861 3.3

Company


% ofTotal

Investments

FactSet Research Systems, Inc. . . . . . . . . . . $6,590 5.6%Hyatt Hotels Corp. . . . . . . . . . . . . . . . . . . . . 6,548 5.7Zillow Group, Inc. . . . . . . . . . . . . . . . . . . . . . 6,231 4.6Vail Resorts, Inc. . . . . . . . . . . . . . . . . . . . . . . 5,676 6.5MGM Growth Properties LLC . . . . . . . . . . . . 5,620 0.4Douglas Emmett, Inc. . . . . . . . . . . . . . . . . . . 5,532 1.6Robert Half International, Inc. . . . . . . . . . . . 4,927 1.4Panera Bread Co. . . . . . . . . . . . . . . . . . . . . . 4,604 0.4Air Lease Corp. . . . . . . . . . . . . . . . . . . . . . . . 2,939 1.7Manchester United plc . . . . . . . . . . . . . . . . . 2,769 4.1Inovalon Holdings, Inc. . . . . . . . . . . . . . . . . . 2,242 3.3The Carlyle Group . . . . . . . . . . . . . . . . . . . . 1,267 2.0Benefitfocus, Inc. . . . . . . . . . . . . . . . . . . . . . 1,184 0.7AO World plc . . . . . . . . . . . . . . . . . . . . . . . . 922 2.0

99.9%

80

Baron Funds


Baron Fifth Avenue Growth Fund invests in large-sized growth companies with market capitalizations above the smallest market cap stock in the top 85% ofthe Russell 1000 Growth Index at reconstitution, or companies with market capitalizations above $10 billion, whichever is smaller.

Company


% ofNet

Assets

Apple, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $609,164 3.0%Alphabet Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 542,758 6.0Amazon.com, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 396,947 15.6Facebook, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368,305 5.3Alibaba Group Holding Limited . . . . . . . . . . . . . . . 263,975 6.3Visa, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195,239 4.4Mastercard Incorporated . . . . . . . . . . . . . . . . . . . . 111,717 4.2Allergan plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,192 2.0Bristol-Myers Squibb Company . . . . . . . . . . . . . . . 90,093 1.2Starbucks Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,402 2.4Naspers Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,977 2.7The Priceline Group, Inc. . . . . . . . . . . . . . . . . . . . . . 72,731 4.1Biogen, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,591 1.1ASML Holding N.V. . . . . . . . . . . . . . . . . . . . . . . . . . 47,485 2.0Monsanto Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,744 2.0Regeneron Pharmaceuticals, Inc. . . . . . . . . . . . . . . 42,331 1.1The Charles Schwab Corp. . . . . . . . . . . . . . . . . . . . 41,767 1.7CME Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,417 2.4

Company


% ofNet

Assets

YUM! Brands, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . $35,406 2.3%Brookfield Asset Management, Inc. . . . . . . . . . . . . 34,696 2.2Alexion Pharmaceuticals, Inc. . . . . . . . . . . . . . . . . 27,479 1.6Illumina, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,631 3.9Equinix, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,605 4.5Ctrip.com International, Ltd. . . . . . . . . . . . . . . . . . 23,175 2.1Concho Resources, Inc. . . . . . . . . . . . . . . . . . . . . . 19,337 1.6Expedia, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,495 1.2Under Armour, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 15,774 1.3Red Hat, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,638 2.1Verisk Analytics, Inc. . . . . . . . . . . . . . . . . . . . . . . . 13,734 1.4First Republic Bank . . . . . . . . . . . . . . . . . . . . . . . . . 11,491 1.6Mobileye N.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,333 2.4athenahealth, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 4,962 0.9EPAM Systems, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 3,527 1.0FireEye, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,499 2.0TerraForm Global, Inc. . . . . . . . . . . . . . . . . . . . . . . 732 0.4

100.0%


Baron Focused Growth Fund is a non-diversified fund that invests in small and mid-sized growth companies with market capitalizations up to the largestmarket cap stock in the Russell Midcap Growth Index at reconstitution.

Company


% ofNet

Assets

Tesla Motors, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . $30,338 10.3%Verisk Analytics, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 13,734 2.7Church & Dwight Co., Inc. . . . . . . . . . . . . . . . . . . . 12,344 2.7Fastenal Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,073 2.4Arch Capital Group Ltd. . . . . . . . . . . . . . . . . . . . . . 9,715 4.5CoStar Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 7,060 9.1FactSet Research Systems, Inc. . . . . . . . . . . . . . . . . 6,590 6.8Hyatt Hotels Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 6,548 9.4Vail Resorts, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,676 12.0Guidewire Software, Inc. . . . . . . . . . . . . . . . . . . . . . 4,383 3.4Manchester United plc . . . . . . . . . . . . . . . . . . . . . . 2,769 5.2

Company


% ofNet

Assets

Choice Hotels International, Inc. . . . . . . . . . . . . . . $2,529 3.8%Inovalon Holdings, Inc. . . . . . . . . . . . . . . . . . . . . . . 2,242 1.3Virtu Financial, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 2,094 0.8Financial Engines, Inc. . . . . . . . . . . . . . . . . . . . . . . . 1,836 2.9Caesarstone Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,327 3.4The Carlyle Group . . . . . . . . . . . . . . . . . . . . . . . . . . 1,267 3.8Benefitfocus, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,184 5.1AO World plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 922 2.5Iridium Communications Inc. . . . . . . . . . . . . . . . . . 776 3.8

95.9%

81

Baron Funds


Baron International Growth Fund is a diversified fund that invests in non-U.S companies with significant growth potential. Investments may be made across allmarket capitalizations. The Fund invests principally in companies of developed countries and may invest up to 30% in companies of developing countries.

Company


% ofNet

Assets

Alibaba Group Holding Limited . . . . . . . . . . . . . . . $263,975 2.9%Tencent Holdings, Ltd. . . . . . . . . . . . . . . . . . . . . . . 259,960 2.4Industria de Diseño Textil, S.A. . . . . . . . . . . . . . . . . 115,536 1.4Softbank Group Corp. . . . . . . . . . . . . . . . . . . . . . . . 77,222 2.6Reckitt Benckiser Group Plc . . . . . . . . . . . . . . . . . . 66,161 2.2Baidu, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,042 0.5Suncor Energy Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 46,239 1.1Sony Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . 41,939 0.7FANUC Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,232 1.0Bridgestone Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 29,716 1.1Fresenius Medical Care AG & Co. KGaA . . . . . . . . . 26,865 2.4Haitong Securities Co., Ltd. . . . . . . . . . . . . . . . . . . 25,088 0.5Maruti Suzuki India Ltd. . . . . . . . . . . . . . . . . . . . . . 24,851 0.8Steinhoff International Holdings N.V. . . . . . . . . . . 24,579 1.2Ctrip.com International, Ltd. . . . . . . . . . . . . . . . . . 23,175 1.1Aena SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,124 2.6BYD Company Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . 21,130 0.7Mitsui Fudosan Co. Ltd. . . . . . . . . . . . . . . . . . . . . . 20,879 0.8Experian plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,170 1.7Ryanair Holdings plc . . . . . . . . . . . . . . . . . . . . . . . . 18,821 1.8Rakuten, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,514 1.9Agilent Technologies, Inc. . . . . . . . . . . . . . . . . . . . . 15,275 1.5Grupo Financiero Banorte, S.A.B. de C.V. . . . . . . . . 14,546 1.2Grifols SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,953 1.4Check Point Software Technologies Ltd. . . . . . . . . 13,574 1.4Newcrest Mining Ltd. . . . . . . . . . . . . . . . . . . . . . . . 13,018 1.4Agnico Eagle Mines Limited . . . . . . . . . . . . . . . . . . 12,166 0.9Encana Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 1.2Daiwa Securities Group, Inc. . . . . . . . . . . . . . . . . . . 9,737 0.5Arch Capital Group Ltd. . . . . . . . . . . . . . . . . . . . . . 9,715 2.5Constellation Software, Inc. . . . . . . . . . . . . . . . . . . 9,553 2.7Symrise AG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,512 1.3BM&FBOVESPA SA . . . . . . . . . . . . . . . . . . . . . . . . . 9,382 1.6ProSiebenSat.1 Media AG . . . . . . . . . . . . . . . . . . . . 9,364 1.2Julius Baer Group Ltd. . . . . . . . . . . . . . . . . . . . . . . . 9,107 1.7Wynn Macau Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . 8,601 0.9Zee Entertainment Enterprises Ltd. . . . . . . . . . . . . 7,887 1.3

Company


% ofNet

Assets

Worldpay Group plc . . . . . . . . . . . . . . . . . . . . . . . . $7,678 1.3%Eurofins Scientific SE . . . . . . . . . . . . . . . . . . . . . . . 7,659 3.9Intertek Group plc . . . . . . . . . . . . . . . . . . . . . . . . . . 7,298 1.6Sociedad Química y Minera de Chile SA . . . . . . . . 7,234 1.1Yandex N.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,756 1.2TAL Education Group . . . . . . . . . . . . . . . . . . . . . . . 5,730 1.1easyJet plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,185 0.2Domino’s Pizza Enterprises Ltd. . . . . . . . . . . . . . . . 4,781 3.0JUST EAT plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,704 0.6Nets A/S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,146 1.2PT Matahari Department Store Tbk . . . . . . . . . . . . 4,131 1.4Copa Holdings, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . 3,689 1.2MonotaRO Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . 3,326 1.0PT Sarana Menara Nusantara Tbk. . . . . . . . . . . . . . 3,049 0.4L’Occitane International S.A. . . . . . . . . . . . . . . . . . 2,944 0.6Man Wah Holdings Ltd. . . . . . . . . . . . . . . . . . . . . . 2,469 0.9Domino’s Pizza Group plc . . . . . . . . . . . . . . . . . . . . 2,391 1.3PT Tower Bersama Infrastructure, Tbk. . . . . . . . . . 2,242 0.7Abcam plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,208 2.5Mellanox Technologies Ltd. . . . . . . . . . . . . . . . . . . 2,081 1.3Smiles SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,051 1.1Golar LNG Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,973 1.7MYOB Group Limited . . . . . . . . . . . . . . . . . . . . . . . 1,711 0.8Bharat Financial Inclusion Limited . . . . . . . . . . . . . 1,685 2.3TOTVS SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,527 0.9Kingdee International Software Group Co. Ltd. . . . 1,160 0.9Multi Commodity Exchange of India Ltd. . . . . . . . 1,035 1.8Bellamy’s Australia Limited . . . . . . . . . . . . . . . . . . 963 1.1AO World plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 922 1.0TerraForm Global, Inc. . . . . . . . . . . . . . . . . . . . . . . 732 0.8RIB Software AG . . . . . . . . . . . . . . . . . . . . . . . . . . . 575 2.2China Distance Education Holdings Limited . . . . . 445 1.3Horizon Discovery Group plc . . . . . . . . . . . . . . . . . 182 0.6Lekoil, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 0.5

97.6%

82

Baron Funds


Baron Real Estate Fund is a non-diversified fund that invests 80% of its net assets in equity securities of U.S. and non-U.S. real estate and real estate-relatedcompanies of any size. The Fund’s investment in non-U.S. companies will not exceed 25%.

Company


% ofNet

Assets

Home Depot, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . $158,994 2.5%Simon Property Group, Inc. . . . . . . . . . . . . . . . . . . 65,049 2.8Lowe’s Companies, Inc. . . . . . . . . . . . . . . . . . . . . . . 63,159 2.1American Tower Corp. . . . . . . . . . . . . . . . . . . . . . . 48,221 4.7Brookfield Asset Management, Inc. . . . . . . . . . . . . 34,696 3.3Equinix, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,605 3.9General Growth Properties, Inc. . . . . . . . . . . . . . . . 24,419 1.6Hilton Worldwide Holdings, Inc. . . . . . . . . . . . . . . 22,696 2.9Aena SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,124 1.0Boston Properties, Inc. . . . . . . . . . . . . . . . . . . . . . . 20,947 1.2Vornado Realty Trust . . . . . . . . . . . . . . . . . . . . . . . 19,111 1.1Royal Caribbean Cruises Ltd. . . . . . . . . . . . . . . . . . 16,134 1.2Vulcan Materials Company . . . . . . . . . . . . . . . . . . 15,134 2.4Mohawk Industries, Inc. . . . . . . . . . . . . . . . . . . . . . 14,856 5.9MGM Resorts International . . . . . . . . . . . . . . . . . . 14,723 6.0Digital Realty Trust, Inc. . . . . . . . . . . . . . . . . . . . . . 14,510 1.7SBA Communications Corp. . . . . . . . . . . . . . . . . . . 13,977 1.4Martin Marietta Materials, Inc. . . . . . . . . . . . . . . . . 11,362 2.1

Company


% ofNet

Assets

CBRE Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,391 3.8%Norwegian Cruise Line Holdings, Ltd. . . . . . . . . . . 8,562 2.1Alexandria Real Estate Equities, Inc. . . . . . . . . . . . . 8,481 2.4Gaming and Leisure Properties, Inc. . . . . . . . . . . . . 6,861 5.4Macquarie Infrastructure Corporation . . . . . . . . . . 6,786 4.6American Campus Communities, Inc. . . . . . . . . . . 6,637 2.7MGM Growth Properties LLC . . . . . . . . . . . . . . . . . 5,620 3.7Douglas Emmett, Inc. . . . . . . . . . . . . . . . . . . . . . . . 5,532 2.8Jones Lang LaSalle, Inc. . . . . . . . . . . . . . . . . . . . . . . 5,141 1.8Toll Brothers, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,897 3.0Brookdale Senior Living, Inc. . . . . . . . . . . . . . . . . . . 3,244 2.7PT Sarana Menara Nusantara Tbk. . . . . . . . . . . . . . 3,049 1.1InterXion Holding N.V. . . . . . . . . . . . . . . . . . . . . . . 2,541 5.5Kennedy-Wilson Holdings, Inc. . . . . . . . . . . . . . . . . 2,537 2.5Armstrong World Industries, Inc. . . . . . . . . . . . . . . 2,293 0.6Masonite International Corp. . . . . . . . . . . . . . . . . . 1,901 2.7Rexford Industrial Realty, Inc. . . . . . . . . . . . . . . . . . 1,511 0.5

95.7%

83

Baron Funds


Baron Emerging Markets Fund is a diversified fund that invests 80% of its net assets in non-U.S. companies of all sizes domiciled, headquartered or whoseprimary business activities or principal trading markets are in developing countries. The Fund may invest up to 20% in companies in developed marketcountries and in Frontier Countries.

Company


% ofNet

Assets

Alibaba Group Holding Limited . . . . . . . . . . . . . . . $263,975 3.8%Tencent Holdings, Ltd. . . . . . . . . . . . . . . . . . . . . . . 259,960 2.4China Mobile Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . 247,747 1.5Samsung Electronics Co., Ltd. . . . . . . . . . . . . . . . . . 205,555 2.5PetroChina Co. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . 189,285 0.6Taiwan Semiconductor Manufacturing Company

Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158,642 2.1Baidu, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,042 0.8Sberbank of Russia PJSC . . . . . . . . . . . . . . . . . . . . . 50,611 1.0Wal-Mart de México, S.A.B. de C.V. . . . . . . . . . . . . 38,345 0.6Coal India Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,576 1.3NAVER Corporation . . . . . . . . . . . . . . . . . . . . . . . . 26,428 1.9Fomento Económico Mexicano, S.A.B. de C.V. . . . . 26,329 1.2Haitong Securities Co., Ltd. . . . . . . . . . . . . . . . . . . 25,088 1.2Maruti Suzuki India Ltd. . . . . . . . . . . . . . . . . . . . . . 24,851 1.2Steinhoff International Holdings N.V. . . . . . . . . . . 24,579 1.4Ctrip.com International, Ltd. . . . . . . . . . . . . . . . . . 23,175 1.6Kotak Mahindra Bank Ltd. . . . . . . . . . . . . . . . . . . . 21,416 1.2BYD Company Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . 21,130 1.1PT Bank Mandiri (Persero) Tbk . . . . . . . . . . . . . . . . 20,024 0.7Magnit PJSC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,711 0.8Samsung Life Insurance Co. Ltd. . . . . . . . . . . . . . . . 19,158 0.5Sasol Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,848 0.8Grupo Financiero Banorte, S.A.B. de C.V. . . . . . . . . 14,546 1.2LG Chem Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,532 0.5Delta Electronics, Inc. . . . . . . . . . . . . . . . . . . . . . . . 13,839 1.0LG Household & Health Care Ltd. . . . . . . . . . . . . . 13,543 1.1Sinopharm Group Co. Ltd. . . . . . . . . . . . . . . . . . . . 13,289 1.5Taiwan Mobile Co., Ltd. . . . . . . . . . . . . . . . . . . . . . 12,278 1.2MediaTek Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,088 0.4Ayala Land, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,908 1.0Weibo Corporation . . . . . . . . . . . . . . . . . . . . . . . . . 10,666 0.0Aspen Pharmacare Holdings Ltd. . . . . . . . . . . . . . . 10,311 0.7Shenzhou International Group Holdings Ltd. . . . . . 9,740 1.3BM&FBOVESPA SA . . . . . . . . . . . . . . . . . . . . . . . . . 9,382 1.5Bangkok Bank Public Co. Ltd. . . . . . . . . . . . . . . . . . 8,952 0.7Wynn Macau Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . 8,601 0.9BDO Unibank, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 8,261 1.0PT Bank Negara Indonesia (Persero) Tbk . . . . . . . . 7,930 0.6Zee Entertainment Enterprises Ltd. . . . . . . . . . . . . 7,887 1.5Far EasTone Telecommunications Co., Ltd. . . . . . . 7,693 1.4Kroton Educacional SA . . . . . . . . . . . . . . . . . . . . . . 7,395 1.2China Mengniu Dairy Co. Ltd. . . . . . . . . . . . . . . . . . 7,282 1.1Sociedad Química y Minera de Chile SA . . . . . . . . 7,234 1.0Techtronic Industries Co. Ltd. . . . . . . . . . . . . . . . . . 7,169 1.0YPF S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,166 0.9Yandex N.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,756 1.2Motherson Sumi Systems Ltd . . . . . . . . . . . . . . . . . 6,703 0.8AngloGold Ashanti Limited . . . . . . . . . . . . . . . . . . 6,524 0.7

Company


% ofNet

Assets

Global Logistic Properties Ltd. . . . . . . . . . . . . . . . . $6,427 0.9%Bid Corporation Ltd. . . . . . . . . . . . . . . . . . . . . . . . . 6,334 0.9Bank of Baroda . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,793 1.3TAL Education Group . . . . . . . . . . . . . . . . . . . . . . . 5,730 1.5GRUMA, S.A.B. de C.V. . . . . . . . . . . . . . . . . . . . . . . 5,690 0.9Sunny Optical Technology Group . . . . . . . . . . . . . 5,417 1.1SINA Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . 5,158 0.2Divi’s Laboratories Ltd. . . . . . . . . . . . . . . . . . . . . . . 5,147 1.7Grupo Lala, S.A.B. de C.V. . . . . . . . . . . . . . . . . . . . . 4,716 0.7Metro Pacific Investments Corp. . . . . . . . . . . . . . . 4,612 0.8Infraestructura Energetica Nova S.A.B. de C.V. . . . 4,511 0.4PT Matahari Department Store Tbk . . . . . . . . . . . . 4,131 1.0Torrent Pharmaceuticals Ltd. . . . . . . . . . . . . . . . . . 4,126 0.8Bidvest Group Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . 3,949 1.0Copa Holdings, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . 3,689 1.7Cetip S.A. – Mercados Organizados . . . . . . . . . . . . 3,467 1.0China Everbright Ltd. . . . . . . . . . . . . . . . . . . . . . . . 3,446 0.6Eclat Textile Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . 3,209 0.8PT Sarana Menara Nusantara Tbk. . . . . . . . . . . . . . 3,049 0.3Tullow Oil plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,993 0.8Sun TV Network Ltd. . . . . . . . . . . . . . . . . . . . . . . . 2,990 0.9Mr Price Group Limited . . . . . . . . . . . . . . . . . . . . . 2,971 0.5Zhaojin Mining Industry Company Limited . . . . . . 2,943 0.8Life Healthcare Group Holdings Limited . . . . . . . . 2,919 0.9Amara Raja Batteries Limited . . . . . . . . . . . . . . . . . 2,593 1.1Man Wah Holdings Ltd. . . . . . . . . . . . . . . . . . . . . . 2,469 1.0Exide Industries Ltd. . . . . . . . . . . . . . . . . . . . . . . . . 2,336 1.0PT Tower Bersama Infrastructure, Tbk. . . . . . . . . . 2,242 0.8Multiplus SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,195 0.7Novatek Microelectronics Corp. . . . . . . . . . . . . . . . 2,145 0.6Smiles SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,051 1.4Bharat Financial Inclusion Limited . . . . . . . . . . . . . 1,685 1.9Biostime International Holdings Ltd. . . . . . . . . . . . 1,638 0.3TOTVS SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,527 0.8Dish TV India Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,490 0.4Kingdee International Software Group Co. Ltd. . . . 1,160 0.7Multi Commodity Exchange of India Ltd. . . . . . . . 1,035 0.7Makalot Industrial Co., Ltd. . . . . . . . . . . . . . . . . . . . 986 0.5Bellamy’s Australia Limited . . . . . . . . . . . . . . . . . . 963 0.7Ginko International Co., Ltd. . . . . . . . . . . . . . . . . . . 920 0.9PVR Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 832 1.0TerraForm Global, Inc. . . . . . . . . . . . . . . . . . . . . . . 732 0.5Manpasand Beverages Ltd. . . . . . . . . . . . . . . . . . . . 565 0.5Hathway Cable & Datacom Limited . . . . . . . . . . . 326 0.1DEN Networks Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . 192 0.2Lekoil, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 0.3

93.2%

84

Baron Funds

Baron Energy And Resources Fund

Baron Energy and Resources Fund is a non-diversified fund that invests 80% of its net assets in equity securities of U.S. and non-U.S. energy and resourcescompanies and related companies of any size.

Company


% ofNet

Assets

Schlumberger Limited . . . . . . . . . . . . . . . . . . . . . . . $109,364 3.2%EOG Resources, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 53,253 2.2Halliburton Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,646 3.3Anadarko Petroleum Corporation . . . . . . . . . . . . . 35,077 1.5Tesla Motors, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 30,338 2.6Valero Energy Corporation . . . . . . . . . . . . . . . . . . . 24,451 1.7Marathon Petroleum Corp. . . . . . . . . . . . . . . . . . . . 21,462 1.8Newmont Mining Corporation . . . . . . . . . . . . . . . . 20,847 0.9Barrick Gold Corporation . . . . . . . . . . . . . . . . . . . . 20,650 1.0Concho Resources, Inc. . . . . . . . . . . . . . . . . . . . . . . 19,337 6.1Energy Transfer Equity, L.P. . . . . . . . . . . . . . . . . . . 17,542 2.4Noble Energy, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 15,357 1.0MPLX LP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,500 1.4Encana Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 5.3Newfield Exploration Co. . . . . . . . . . . . . . . . . . . . . 8,631 5.3Antero Resources Corporation . . . . . . . . . . . . . . . . 8,279 2.2Targa Resources Corp. . . . . . . . . . . . . . . . . . . . . . . 8,183 3.0Parsley Energy, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 6,921 6.9FMC Technologies, Inc. . . . . . . . . . . . . . . . . . . . . . . 6,694 1.0Energen Corporation . . . . . . . . . . . . . . . . . . . . . . . . 5,603 1.6Rice Energy Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,132 4.8Core Laboratories N.V. . . . . . . . . . . . . . . . . . . . . . . 4,955 1.9

Company


% ofNet

Assets

RSP Permian, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . $3,942 5.5%Aspen Technology, Inc. . . . . . . . . . . . . . . . . . . . . . . 3,731 2.2Tallgrass Energy Partners, LP . . . . . . . . . . . . . . . . . 3,476 2.4Nabors Industries Ltd. . . . . . . . . . . . . . . . . . . . . . . . 3,446 0.7U.S. Silica Holdings, Inc. . . . . . . . . . . . . . . . . . . . . . 2,960 2.4Valero Energy Partners LP . . . . . . . . . . . . . . . . . . . 2,886 2.2Golar LNG Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,973 2.3TerraForm Power, Inc. . . . . . . . . . . . . . . . . . . . . . . . 1,940 1.0SemGroup Corporation . . . . . . . . . . . . . . . . . . . . . 1,868 1.8Forum Energy Technologies, Inc. . . . . . . . . . . . . . . 1,814 1.4Oil States International, Inc. . . . . . . . . . . . . . . . . . . 1,621 0.7Kraton Corporation . . . . . . . . . . . . . . . . . . . . . . . . . 1,081 1.6Noble Midstream Partners LP . . . . . . . . . . . . . . . . . 887 1.6PBF Logistics LP . . . . . . . . . . . . . . . . . . . . . . . . . . . . 827 1.3Flotek Industries, Inc. . . . . . . . . . . . . . . . . . . . . . . . 823 4.7Scorpio Tankers Inc. . . . . . . . . . . . . . . . . . . . . . . . . 812 0.9TerraForm Global, Inc. . . . . . . . . . . . . . . . . . . . . . . 732 0.9SolarEdge Technologies, Inc. . . . . . . . . . . . . . . . . . . 705 1.2Westlake Chemical Partners LP . . . . . . . . . . . . . . . 618 1.0Lekoil, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 0.6

97.5%


Baron Global Advantage Fund is a diversified fund that invests primarily in established and emerging markets companies located throughout the world withcapitalization within the range of companies included in the MSCI ACWI Growth Index Net.

Company


% ofNet

Assets

Alphabet Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $542,758 5.0%Amazon.com, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 396,947 12.1Facebook, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368,305 5.5Alibaba Group Holding Limited . . . . . . . . . . . . . . . 263,975 6.4Allergan plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,192 2.0Naspers Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,977 5.1The Priceline Group, Inc. . . . . . . . . . . . . . . . . . . . . . 72,731 2.0Baidu, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,042 1.1ASML Holding N.V. . . . . . . . . . . . . . . . . . . . . . . . . . 47,485 1.6Illumina, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,631 3.2Ctrip.com International, Ltd. . . . . . . . . . . . . . . . . . 23,175 4.1Check Point Software Technologies Ltd. . . . . . . . . 13,574 1.0First Republic Bank . . . . . . . . . . . . . . . . . . . . . . . . . 11,491 1.6Constellation Software, Inc. . . . . . . . . . . . . . . . . . . 9,553 4.6Mobileye N.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,333 2.6Worldpay Group plc . . . . . . . . . . . . . . . . . . . . . . . . 7,678 2.9TAL Education Group . . . . . . . . . . . . . . . . . . . . . . . 5,730 4.6JUST EAT plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,704 3.9

Company


% ofNet

Assets

EPAM Systems, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . $3,527 3.1%Cetip S.A. – Mercados Organizados . . . . . . . . . . . . 3,467 2.9PT Sarana Menara Nusantara Tbk. . . . . . . . . . . . . . 3,049 3.1Bats Global Markets, Inc. . . . . . . . . . . . . . . . . . . . . 2,904 0.1FireEye, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,499 2.5Mellanox Technologies Ltd. . . . . . . . . . . . . . . . . . . 2,081 3.8Acxiom Corporation . . . . . . . . . . . . . . . . . . . . . . . . 2,063 2.3Luxoft Holding, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 1,755 0.7Globant, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,449 1.5Pacira Pharmaceuticals, Inc. . . . . . . . . . . . . . . . . . . 1,276 1.7Glaukos Corporation . . . . . . . . . . . . . . . . . . . . . . . . 1,246 2.4Benefitfocus, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,184 1.6Aerie Pharmaceuticals, Inc. . . . . . . . . . . . . . . . . . . . 1,102 1.3Noble Midstream Partners LP . . . . . . . . . . . . . . . . . 887 1.1TerraForm Global, Inc. . . . . . . . . . . . . . . . . . . . . . . 732 0.8Westlake Chemical Partners LP . . . . . . . . . . . . . . . 618 1.0

99.2%

85

Baron Funds


Baron Discovery Fund invests in small sized growth companies with market capitalizations up to the weighted median market capitalization of the Russell2000 Growth Index at reconstitution, or companies with market capitalizations up to $1.5 billion, whichever is larger.

Company


% ofNet

Assets

Gaming and Leisure Properties, Inc. . . . . . . . . . . . . $6,861 2.4%TESARO, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,149 0.6JUST EAT plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,704 2.7Cepheid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,858 0.4Education Realty Trust, Inc. . . . . . . . . . . . . . . . . . . 3,151 3.0Nevro Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,975 1.6Manchester United plc . . . . . . . . . . . . . . . . . . . . . . 2,769 1.0Red Rock Resorts, Inc. . . . . . . . . . . . . . . . . . . . . . . . 2,734 1.2Coherent, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,689 2.0Kennedy-Wilson Holdings, Inc. . . . . . . . . . . . . . . . . 2,537 1.2Domino’s Pizza Group plc . . . . . . . . . . . . . . . . . . . . 2,391 1.4Liberty Media Group . . . . . . . . . . . . . . . . . . . . . . . . 2,371 2.0MACOM Technology Solutions Holdings, Inc. . . . . 2,272 4.2Nord Anglia Education Inc. . . . . . . . . . . . . . . . . . . . 2,267 1.7HealthEquity, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,220 0.8Mellanox Technologies Ltd. . . . . . . . . . . . . . . . . . . 2,081 1.0Acxiom Corporation . . . . . . . . . . . . . . . . . . . . . . . . 2,063 1.7Party City Holdco Inc. . . . . . . . . . . . . . . . . . . . . . . . 2,045 0.6American Assets Trust, Inc. . . . . . . . . . . . . . . . . . . . 1,970 1.0RBC Bearings Incorporated . . . . . . . . . . . . . . . . . . . 1,817 0.4comScore, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,738 0.3DigitalGlobe, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,723 1.4Sage Therapeutics, Inc. . . . . . . . . . . . . . . . . . . . . . . 1,680 1.1Envestnet, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,561 1.8Rexford Industrial Realty, Inc. . . . . . . . . . . . . . . . . . 1,511 0.7Myriad Genetics, Inc. . . . . . . . . . . . . . . . . . . . . . . . 1,423 1.9SiteOne Landscape Supply, Inc. . . . . . . . . . . . . . . . 1,421 1.5Qualys, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,351 4.2TherapeuticsMD, Inc. . . . . . . . . . . . . . . . . . . . . . . . 1,338 1.7Pacira Pharmaceuticals, Inc. . . . . . . . . . . . . . . . . . . 1,276 0.9Glaukos Corporation . . . . . . . . . . . . . . . . . . . . . . . . 1,246 1.9Sonic Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,245 1.3

Company


% ofNet

Assets

Inogen, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,204 2.2%ESCO Technologies, Inc. . . . . . . . . . . . . . . . . . . . . . 1,194 2.2Benefitfocus, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,184 1.2Medpace Holdings, Inc. . . . . . . . . . . . . . . . . . . . . . . 1,184 1.9Quotient Technology Inc. . . . . . . . . . . . . . . . . . . . . 1,117 1.2The Trade Desk . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,117 1.5The Spectranetics Corporation . . . . . . . . . . . . . . . . 1,078 1.6Mercury Systems, Inc. . . . . . . . . . . . . . . . . . . . . . . . 992 4.2Noble Midstream Partners LP . . . . . . . . . . . . . . . . . 887 0.5Wingstop Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 842 2.4Flotek Industries, Inc. . . . . . . . . . . . . . . . . . . . . . . . 823 2.2Foundation Medicine, Inc. . . . . . . . . . . . . . . . . . . . 816 1.9Varonis Systems, Inc. . . . . . . . . . . . . . . . . . . . . . . . 794 2.2Pinnacle Entertainment, Inc. . . . . . . . . . . . . . . . . . . 705 1.6Impinj, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703 1.4Easterly Government Properties, Inc. . . . . . . . . . . . 671 1.4Novadaq Technologies Inc. . . . . . . . . . . . . . . . . . . 665 1.9Cerus Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . 638 1.5Westlake Chemical Partners LP . . . . . . . . . . . . . . . 618 0.5Flexion Therapeutics Inc. . . . . . . . . . . . . . . . . . . . . 538 1.7Kinsale Capital Group, Inc. . . . . . . . . . . . . . . . . . . . 461 2.3The KEYW Holding Corporation . . . . . . . . . . . . . . . 452 2.2Zoe’s Kitchen, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 432 0.4QAD Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 415 0.7Adamas Pharmaceuticals, Inc. . . . . . . . . . . . . . . . . 360 0.5Kornit Digital Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . 285 0.8Amber Road, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 255 2.8Sientra, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 2.2Neos Therapeutics, Inc. . . . . . . . . . . . . . . . . . . . . . 106 0.9Barfresh Food Group, Inc. . . . . . . . . . . . . . . . . . . . . 60 0.9

98.5%

86

Baron Funds

Baron Asset Fund — PORTFOLIO HOLDINGS

September 30, 2016

Shares Cost Value

Common Stocks (99.20%)

Consumer Discretionary (11.69%)

Apparel, Accessories & LuxuryGoods (0.12%)

30,000 Ralph Lauren Corp. $ 517,383 $ 3,034,200

Automotive Retail (0.82%)388,000 CarMax, Inc.1 4,415,017 20,699,800

Hotels, Resorts & CruiseLines (1.91%)

525,400 Choice Hotels International, Inc. 2,254,244 23,685,032500,000 Hyatt Hotels Corp., Cl A1 13,523,436 24,610,000

15,777,680 48,295,032

Internet & Direct MarketingRetail (2.48%)

135,000 Expedia, Inc. 15,620,574 15,757,20032,000 The Priceline Group, Inc.1 5,125,131 47,087,680

20,745,705 62,844,880

Leisure Facilities (4.86%)785,000 Vail Resorts, Inc. 15,238,959 123,150,800

Specialty Stores (1.50%)260,000 Tiffany & Co. 8,018,828 18,883,800285,000 Tractor Supply Co. 8,929,604 19,194,750

16,948,432 38,078,550

Total Consumer Discretionary 73,643,176 296,103,262

Energy (0.64%)

Oil & Gas Exploration &Production (0.58%)

107,500 Concho Resources, Inc.1 4,595,625 14,765,125

Oil & Gas Storage &Transportation (0.06%)

60,366 Tallgrass Energy GP LP 1,737,515 1,451,802

Total Energy 6,333,140 16,216,927

Financials (16.52%)

Asset Management & CustodyBanks (0.65%)

250,000 T. Rowe Price Group, Inc. 6,031,232 16,625,000

Financial Exchanges &Data (4.64%)

490,000 FactSet Research Systems, Inc. 26,769,373 79,429,000230,000 MarketAxess Holdings, Inc. 25,489,330 38,085,700

52,258,703 117,514,700

Insurance Brokers (2.62%)500,000 Willis Towers Watson plc2 61,600,526 66,385,000

Investment Banking &Brokerage (3.18%)

2,550,000 The Charles Schwab Corp. 2,490,233 80,503,500

Property & CasualtyInsurance (3.99%)

1,275,000 Arch Capital Group Ltd.1,2 13,874,064 101,056,500

Regional Banks (1.44%)475,000 First Republic Bank 15,197,602 36,627,250

Total Financials 151,452,360 418,711,950

Shares Cost Value

Common Stocks (continued)

Health Care (25.34%)

Health CareDistributors (2.25%)

350,000 Henry Schein, Inc.1 $ 9,382,832 $ 57,043,000

Health Care Equipment (8.11%)1,670,000 IDEXX Laboratories, Inc.1 34,794,636 188,259,100

102,000 Teleflex, Inc. 17,644,261 17,141,100

52,438,897 205,400,200

Health Care Facilities (0.87%)180,000 Universal Health

Services, Inc., Cl B 10,213,393 22,179,600

Health Care Supplies (3.96%)250,000 The Cooper Companies, Inc. 31,903,956 44,815,000745,000 West Pharmaceutical Services, Inc. 33,865,763 55,502,500

65,769,719 100,317,500

Health CareTechnology (0.17%)

296,906 Inovalon Holdings, Inc., CI A1 7,684,677 4,367,487

Life Sciences Tools &Services (9.98%)

380,000 Bio-Techne Corporation 36,982,042 41,610,000457,000 Illumina, Inc.1 19,855,497 83,018,620250,000 Mettler-Toledo International, Inc.1 15,496,167 104,957,500286,000 Quintiles Transnational

Holdings, Inc.1 12,449,145 23,183,160

84,782,851 252,769,280

Total Health Care 230,272,369 642,077,067

Industrials (14.06%)

Construction Machinery &Heavy Trucks (2.03%)

90,000 WABCO Holdings, Inc.1 10,455,704 10,217,700505,000 Westinghouse Air Brake

Technologies Corporation 33,676,456 41,233,250

44,132,160 51,450,950

Environmental & FacilitiesServices (0.62%)

541,087 Rollins, Inc. 15,457,519 15,843,027

IndustrialConglomerates (1.73%)

240,000 Roper Technologies, Inc. 20,050,484 43,792,800

Industrial Machinery (2.81%)430,000 IDEX Corporation 31,397,849 40,235,100250,000 The Middleby Corp.1 12,230,843 30,905,000

43,628,692 71,140,100

Research & ConsultingServices (5.76%)

750,000 Nielsen Holdings PLC2 17,797,011 40,177,5001,300,000 Verisk Analytics, Inc.1 33,418,943 105,664,000

51,215,954 145,841,500

Trading Companies &Distributors (1.11%)

675,000 Fastenal Co. 11,933,597 28,201,500

Total Industrials 186,418,406 356,269,877

87

Baron Funds

Baron Asset Fund — PORTFOLIO HOLDINGS (Continued)

September 30, 2016

Shares Cost Value


Information Technology (22.83%)

Application Software (7.33%)550,000 ANSYS, Inc.1 $ 14,771,000 $ 50,935,500220,000 CDK Global, Inc. 10,973,416 12,619,200

1,200,000 Guidewire Software, Inc.1 57,781,316 71,976,000331,000 Mobileye N.V.1,2 9,103,032 14,090,670

1,124,000 SS&C Technologies Holdings, Inc. 31,041,234 36,136,600

123,669,998 185,757,970Data Processing & Outsourced

Services (5.68%)500,000 FleetCor Technologies, Inc.1 18,222,612 86,865,000400,000 MAXIMUS, Inc. 20,233,990 22,624,000610,000 Vantiv, Inc., Cl A1 32,167,828 34,324,700

70,624,430 143,813,700

Internet Software &Services (4.41%)

140,000 CoStar Group, Inc.1 22,994,156 30,314,200650,000 Verisign, Inc.1 31,889,165 50,856,000270,872 Zillow Group, Inc., Cl A1 7,666,898 9,331,541614,000 Zillow Group, Inc., CI C1 15,676,412 21,275,100

78,226,631 111,776,841

IT Consulting & OtherServices (5.41%)

1,550,000 Gartner, Inc.1 33,739,350 137,097,500

Total Information Technology 306,260,409 578,446,011

Real Estate (5.24%)

Office REITs (1.04%)63,000 Alexander’s, Inc.4 2,831,362 26,434,800

Real Estate Services (2.07%)1,875,000 CBRE Group, Inc., Cl A1 24,329,071 52,462,500

Specialized REITs (2.13%)149,505 Equinix, Inc. 10,178,728 53,859,176

Total Real Estate 37,339,161 132,756,476

Telecommunication Services (2.88%)

Integrated TelecommunicationServices (2.88%)

650,000 SBA Communications Corp., Cl A1 18,558,057 72,904,000

TOTAL COMMON STOCKS 1,010,277,078 2,513,485,570

Private Equity Investments (0.13%)

Financials (0.13%)


7,056,223 Windy City InvestmentsHoldings, L.L.C.1,3,4 0 3,175,300

Principal Amount Cost Value

Short Term Investments (0.48%)

$12,172,988 Repurchase Agreement withFixed Income Clearing Corp.,dated 9/30/2016, 0.03% due10/3/2016; Proceeds atmaturity - $12,173,018;(Fully collateralized by$11,470,000 U.S. TreasuryNote, 0.125% due 4/15/2017;Market value - $12,186,875and $225,000 U.S. TreasuryNote, 1.50% due 5/31/2020;Market value - $230,344 ) $ 12,172,988 $ 12,172,988

TOTAL INVESTMENTS (99.81%) $1,022,450,066 2,528,833,858

CASH AND OTHER ASSETSLESS LIABILITIES (0.19%) 4,872,483

NET ASSETS $2,533,706,341

RETAIL SHARES (Equivalent to $60.67 per share based on29,709,807 shares outstanding) $1,802,593,889

INSTITUTIONAL SHARES (Equivalent to $62.30 per sharebased on 11,610,463 shares outstanding) $ 723,308,839

R6 SHARES (Equivalent to $62.30 per share based on125,261 shares outstanding) $ 7,803,613

% Represents percentage of net assets.1 Non-income producing securities.2 Foreign corporation.3 The Adviser has reclassified/classified certain securities in or out of this sub-

industry. Such reclassifications/classifications are not supported by S&P orMSCI.

4 At September 30, 2016, the market value of restricted and fair valued securitiesamounted to $3,175,300 or 0.13 % of net assets. This security is not deemedliquid.

88

Baron Funds

Baron Growth Fund — PORTFOLIO HOLDINGS

September 30, 2016

Shares Cost Value




3,475,000 Under Armour, Inc., Cl A1 $ 13,912,447 $ 134,413,0003,550,020 Under Armour, Inc., Cl C1 13,508,309 120,203,677

27,420,756 254,616,677

Casinos & Gaming (2.09%)4,049,207 Penn National Gaming, Inc.1 35,499,262 54,947,7392,600,000 Pinnacle Entertainment, Inc.1 29,087,224 32,084,0001,600,000 Red Rock Resorts, Inc., Cl A 30,988,925 37,744,000

95,575,411 124,775,739

Department Stores (0.16%)750,000 Hudson’s Bay Co. (Canada)2 12,791,580 9,638,325

Education Services (3.38%)2,200,000 Bright Horizons Family

Solutions, Inc.1 72,617,520 147,158,0002,491,880 Nord Anglia Education, Inc.1,2 47,367,959 54,273,146

119,985,479 201,431,146


3,007,500 Choice Hotels International, Inc.4 73,061,456 135,578,1001,600,000 Marriott Vacations

Worldwide Corp.4 87,504,361 117,312,000

160,565,817 252,890,100


11,704,702 AO World plc (United Kingdom)1,2 26,353,820 25,639,062

Leisure Facilities (6.36%)1,150,000 ClubCorp Holdings, Inc. 19,929,639 16,640,5002,064,800 Vail Resorts, Inc.4 59,870,980 323,925,8241,358,700 Whistler Blackcomb Holdings,

Inc. (Canada)2 15,542,103 38,732,711

95,342,722 379,299,035

Movies &Entertainment (1.55%)

5,465,000 Manchester United plc, Cl A2 77,397,834 92,249,200

Restaurants (1.47%)450,000 Panera Bread Co., Cl A1 15,602,751 87,624,000

Specialty Stores (1.90%)2,000,000 Dick’s Sporting Goods, Inc. 32,175,162 113,440,000

Total Consumer Discretionary 663,211,332 1,541,603,284

Consumer Staples (4.26%)

Food Distributors (0.49%)1,181,677 Performance Food Group Co.1 22,572,665 29,305,590

Food Retail (0.68%)3,200,000 Smart & Final Stores, Inc.1 55,879,772 40,864,000

Household Products (1.99%)2,475,000 Church & Dwight Co., Inc. 22,528,953 118,602,000

Packaged Foods &Meats (1.10%)

750,000 TreeHouse Foods, Inc.1 26,305,223 65,392,500

Total Consumer Staples 127,286,613 254,164,090

Shares Cost Value


Financials (21.29%)


1,500,000 The Carlyle Group $ 32,844,320 $ 23,355,0002,175,000 Cohen & Steers, Inc. 55,319,497 92,981,2502,250,000 Financial Engines, Inc. 63,928,705 66,847,5001,455,195 Oaktree Capital Group, LLC 65,648,565 61,700,268

217,741,087 244,884,018Financial Exchanges &

Data (8.97%)1,600,000 FactSet Research Systems, Inc. 80,624,740 259,360,0001,200,000 Morningstar, Inc. 31,380,846 95,124,0002,150,000 MSCI, Inc. 42,521,078 180,471,000

154,526,664 534,955,000


850,000 Moelis & Co., Cl A 24,886,289 22,856,500975,000 Virtu Financial, Inc., Cl A 19,512,074 14,595,750

44,398,363 37,452,250

Life & Health Insurance (2.22%)2,500,000 Primerica, Inc.4 57,555,497 132,575,000



Thrifts & MortgageFinance (0.18%)

400,000 Essent Group, Ltd.1,2 9,483,065 10,644,000

Total Financials 521,707,428 1,269,624,268

Health Care (9.97%)

Biotechnology (0.18%)350,000 Juno Therapeutics, Inc.1 10,846,807 10,503,500

Health Care Equipment (3.40%)1,800,000 IDEXX Laboratories, Inc.1 28,558,026 202,914,000

Health Care Supplies (1.59%)365,038 Neogen Corp.1 8,075,677 20,420,226

1,000,000 West Pharmaceutical Services, Inc. 34,882,531 74,500,000

42,958,208 94,920,226


5,426,517 Inovalon Holdings, Inc., CI A1 113,703,130 79,824,065


960,943 Bio-Techne Corporation 54,172,122 105,223,258240,000 Mettler-Toledo International, Inc.1 11,081,574 100,759,200

65,253,696 205,982,458


Industrials (7.08%)

Building Products (4.02%)2,090,000 Caesarstone Ltd.1,2,4 43,041,952 78,813,9001,498,500 Masonite International Corp.1,2 84,509,237 93,161,7451,150,000 Trex Company, Inc.1 42,309,066 67,528,000

169,860,255 239,503,645

Industrial Machinery (2.58%)1,245,000 The Middleby Corp.1 35,550,035 153,906,900

89

Baron Funds

Baron Growth Fund — PORTFOLIO HOLDINGS (Continued)

September 30, 2016

Shares Cost Value


Industrials (continued)


1,000,000 Air Lease Corp. $ 23,203,508 $ 28,580,000



Application Software (7.99%)1,850,000 ANSYS, Inc.1 44,326,673 171,328,5001,198,796 Guidewire Software, Inc.1 39,188,028 71,903,7841,360,000 Pegasystems, Inc. 19,649,439 40,106,4006,000,000 SS&C Technologies Holdings, Inc. 50,581,459 192,900,000

153,745,599 476,238,684

Data Processing & OutsourcedServices (2.84%)

3,000,000 MAXIMUS, Inc. 57,528,621 169,680,000

Electronic Components (0.61%)282,658 Littelfuse, Inc. 31,793,095 36,409,177


2,324,374 Benefitfocus, Inc.1,4 86,529,482 92,789,010999,653 CoStar Group, Inc.1 44,116,616 216,454,864

130,646,098 309,243,874


2,000,000 Booz Allen HamiltonHolding Corp. 22,614,948 63,220,000

2,800,000 Gartner, Inc.1 44,694,145 247,660,000

67,309,093 310,880,000

Total Information Technology 441,022,506 1,302,451,735

Real Estate (8.24%)

Diversified REITs (0.52%)712,000 American Assets Trust, Inc. 13,451,727 30,886,560

Office REITs (3.18%)125,000 Alexander’s, Inc.5 24,384,557 52,450,000

3,750,000 Douglas Emmett, Inc. 50,560,518 137,362,500

74,945,075 189,812,500

Specialized REITs (4.54%)750,000 Alexandria Real Estate

Equities, Inc.5 27,827,790 81,577,5005,650,000 Gaming and Leisure

Properties, Inc. 128,845,460 188,992,500

156,673,250 270,570,000



Alternative Carriers (1.02%)7,493,437 Iridium Communications, Inc.1,4 45,709,971 60,771,774


Shares Cost Value

Preferred Stocks (0.21%)


Alternative Carriers (0.21%)41,074 Iridium Communications, Inc.,

Series B, 6.75%4 $ 10,268,500 $ 12,353,827


Financials (0.02%)


2,375,173 Windy City InvestmentsHoldings, L.L.C.1,3,5 0 1,068,828

Principal Amount


$4,927,324 Repurchase Agreement withFixed Income Clearing Corp.,dated 9/30/2016, 0.03% due10/3/2016; Proceeds atmaturity - $4,927,337;(Fully collateralized by$45,000 U.S. TreasuryNote, 0.125% due 7/15/2026;Market value - $45,788 and$4,865,000 U.S. TreasuryNote, 1.50% due 5/31/2020;Market value - $4,980,544) 4,927,324 4,927,324



NET ASSETS $5,962,784,675


INSTITUTIONAL SHARES (Equivalent to $68.42 per sharebased on 44,481,079 shares outstanding) $3,043,257,679

R6 SHARES (Equivalent to $68.42 per share based on 34,091shares outstanding) $ 2,332,538

% Represents percentage of net assets.1 Non-income producing securities.2 Foreign corporation.3 At September 30, 2016, the market value of restricted and fair valued securities

amounted to $1,068,828 or 0.02% of net assets. This security is not deemedliquid.

4 An “Affiliated” investment may include any company in which the Fund owns5% or more of its outstanding shares.

5 The Adviser has reclassified/classified certain securities in or out of this sub-industry. Such reclassifications/classifications are not supported by S&P orMSCI.

90

Baron Funds

Baron Small Cap Fund — PORTFOLIO HOLDINGS

September 30, 2016

Shares Cost Value



Automotive Retail (0.61%)350,000 Monro Muffler Brake, Inc. $ 18,224,623 $ 21,409,500

Cable & Satellite (2.87%)150,000 Liberty Broadband

Corporation, Cl A1 621,053 10,524,000300,000 Liberty Broadband

Corporation, Cl C1 1,184,602 21,444,000300,000 Liberty SiriusXM Group, Cl A1 626,689 10,194,000

1,200,000 Liberty SiriusXM Group, Cl C1 2,632,540 40,092,0001,000,000 MSG Networks Inc., Cl A1 7,003,117 18,610,000

12,068,001 100,864,000

Casinos & Gaming (1.66%)1,700,000 Penn National Gaming, Inc.1 9,389,959 23,069,0001,500,000 Red Rock Resorts, Inc., Cl A 29,954,187 35,385,000

39,344,146 58,454,000

Education Services (6.10%)2,100,000 Bright Horizons Family

Solutions, Inc.1 70,667,886 140,469,000500,000 Houghton Mifflin

Harcourt Company1 11,462,500 6,705,0003,082,500 Nord Anglia Education, Inc.1,2 56,533,962 67,136,850

138,664,348 214,310,850


750,000 Liberty Media Group, Cl C1 10,168,679 21,105,000250,000 The Madison Square Garden

Company, Cl A1 13,336,231 42,352,500

23,504,910 63,457,500

Restaurants (3.51%)1,050,000 BJ’s Restaurants, Inc.1 38,592,640 37,327,500

950,000 The Cheesecake Factory, Inc. 18,719,871 47,557,000416,639 The Habit Restaurants, Inc., Cl A1 7,211,445 5,832,946725,000 Wingstop Inc.1 17,308,455 21,242,500500,000 Zoe’s Kitchen, Inc.1 14,991,333 11,095,000

96,823,744 123,054,946

Specialty Stores (1.10%)2,250,000 Party City Holdco, Inc.1 32,984,775 38,520,000



Food Distributors (0.53%)1,680,563 The Chefs’ Warehouse, Inc.1,3 25,544,604 18,721,472

Energy (2.15%)


400,000 Dominion MidstreamPartners, L.P. 8,400,000 9,564,000

800,000 PBF Logistics LP 20,465,744 15,856,0003,250,000 Scorpio Tankers Inc.2 26,975,000 15,047,500

800,000 Valero Energy Partners LP 23,241,891 34,952,000

Total Energy 79,082,635 75,419,500

Financials (2.49%)


1,000,000 Financial Engines, Inc. 14,907,587 29,710,000


800,000 Bats Global Markets, Inc. 19,189,803 24,104,000

Shares Cost Value


Financials (continued)


1,250,000 Moelis & Co., Cl A $ 34,517,401 $ 33,612,500



Biotechnology (0.47%)1,500,000 Abcam plc (United Kingdom)2 14,075,553 16,331,482

Health CareEquipment (7.43%)

638,900 Cantel Medical Corp. 26,883,023 49,821,422800,000 DexCom, Inc.1 10,765,337 70,128,000

1,250,000 IDEXX Laboratories, Inc.1 20,109,293 140,912,500

57,757,653 260,861,922

Health Care Facilities (0.50%)1,000,000 Brookdale Senior Living, Inc.1 14,153,304 17,450,000

Health Care Services (0.84%)1,050,000 Diplomat Pharmacy, Inc.1 30,411,577 29,410,500

Health Care Supplies (1.07%)1,500,000 The Spectranetics Corporation1 41,833,030 37,635,000


205,246 HealthStream, Inc.1 5,373,042 5,664,7901,250,000 Press Ganey Holdings, Inc.1 32,680,408 50,500,000

38,053,450 56,164,790


850,000 ICON plc1,2 24,477,343 65,764,5001,300,000 INC Research Holdings, Inc., Cl A1 32,616,022 57,954,000

600,000 Medpace Holdings, Inc.1 15,481,352 17,916,000150,000 Mettler-Toledo

International, Inc.1 7,800,479 62,974,500125,000 Patheon N.V.1,2 2,625,000 3,703,750975,000 PRA Health Sciences, Inc.1 18,227,335 55,097,250

101,227,531 263,410,000

Managed Health Care (1.35%)1,250,000 HealthEquity, Inc.1 21,851,092 47,312,500



Aerospace & Defense (6.55%)750,000 DigitalGlobe, Inc.1 21,329,051 20,625,000571,100 Mercury Systems, Inc.1 11,768,971 14,031,927675,000 TransDigm Group, Inc.1 161,351 195,156,000

33,259,373 229,812,927

Diversified SupportServices (0.68%)

600,000 Healthcare Services Group, Inc. 18,079,930 23,748,000

Electrical Components &Equipment (3.39%)

450,000 Acuity Brands, Inc. 22,758,773 119,070,000

Environmental & FacilitiesServices (3.40%)

1,600,000 Waste Connections, Inc.2 104,800,000 119,520,000

Human Resource &Employment Services (2.33%)

2,250,000 On Assignment, Inc.1 59,412,815 81,652,500

91

Baron Funds

Baron Small Cap Fund — PORTFOLIO HOLDINGS (Continued)

September 30, 2016

Shares Cost Value


Industrials (continued)

Industrial Machinery (3.05%)1,250,000 Manitowoc Foodservice, Inc.1 $ 20,508,081 $ 20,275,000

450,000 Nordson Corp. 12,849,083 44,833,500550,000 RBC Bearings, Incorporated1 36,858,765 42,064,000

70,215,929 107,172,500Trading Companies &

Distributors (1.75%)800,000 SiteOne Landscape Supply, Inc.1 20,294,503 28,744,000

1,500,000 Univar, Inc.1 28,724,692 32,775,000

49,019,195 61,519,000



Application Software (9.22%)2,000,000 ACI Worldwide, Inc.1 23,764,901 38,760,0001,200,000 Aspen Technology, Inc.1 46,594,815 56,148,0001,600,000 Guidewire Software, Inc.1 45,300,514 95,968,000

650,000 The Ultimate SoftwareGroup, Inc.1 15,149,427 132,853,500

130,809,657 323,729,500


500,000 FleetCor Technologies, Inc.1 11,958,330 86,865,000450,000 WEX, Inc.1 18,982,530 48,640,500

30,940,860 135,505,500

Electronic Equipment &Instruments (1.96%)

1,300,000 Cognex Corp. 24,881,749 68,718,000


500,000 comScore, Inc.1 16,608,298 15,330,000


1,500,000 Acxiom Corp.1 33,527,700 39,975,0001,650,000 Gartner, Inc.1 28,699,533 145,942,500

62,227,233 185,917,500

Technology Hardware, Storage& Peripherals (1.74%)

1,250,000 Electronics For Imaging, Inc.1 53,031,020 61,150,000


Materials (4.00%)

Commodity Chemicals (0.23%)358,200 Westlake Chemical Partners LP 8,720,187 8,181,288

Construction Materials (1.24%)2,350,000 Summit Materials, Inc., Cl A1 48,792,071 43,592,500

Diversified Metals &Mining (0.45%)

1,750,000 Ferroglobe plc2 17,363,844 15,802,500

Metal & Glass Containers (1.25%)1,000,000 Berry Plastics Group, Inc.1 15,852,147 43,850,000

Specialty Chemicals (0.83%)2,000,000 Flotek Industries, Inc.1 37,558,366 29,080,000

Total Materials 128,286,615 140,506,288

Shares Cost Value


Real Estate (3.88%)

Office REITs (0.46%)150,000 SL Green Realty Corp. $ 3,195,723 $ 16,215,000


Specialized REITs (2.62%)2,750,000 Gaming and Leisure

Properties, Inc. 53,980,248 91,987,500





Wireless TelecommunicationServices (1.09%)

128,175,543 PT Sarana Menara NusantaraTbk. (Indonesia)1,2 26,734,407 38,302,400

Total Telecommunication Services 30,365,790 139,246,400


Principal Amount


$17,649,821 Repurchase Agreement withFixed Income Clearing Corp.,dated 9/30/2016, 0.03% due10/3/2016; Proceeds atmaturity - $17,649,865;(Fully collateralized by$16,945,000 U.S. TreasuryNote, 0.125% due 4/15/2017;Market value - $18,004,063) 17,649,821 17,649,821



NET ASSETS $3,510,653,047




% Represents percentage of net assets.1 Non-income producing securities.2 Foreign corporation.3 An “Affiliated” investment may include any company in which the Fund owns

5% or more of its outstanding shares.

92

Baron Funds

Baron Opportunity Fund — PORTFOLIO HOLDINGS

September 30, 2016

Shares Cost Value




31,860 Under Armour, Inc., Cl A1 $ 405,396 $ 1,232,34536,079 Under Armour, Inc., Cl C1 550,411 1,221,635

955,807 2,453,980

Automobile Manufacturers (3.25%)40,000 Tesla Motors, Inc.1,3 8,209,677 8,161,200


22,400 Amazon.com, Inc.1 8,139,143 18,755,74489,500 Ctrip.com International Ltd., ADR1,2 4,100,311 4,168,01543,500 Expedia, Inc. 4,751,407 5,077,32069,500 Netflix, Inc.1 3,579,910 6,849,225

3,450 The Priceline Group, Inc.1 549,720 5,076,640

21,120,491 39,926,944

Movies & Entertainment (2.68%)397,815 Manchester United plc, Cl A2 6,557,977 6,715,117


Energy (1.33%)



Financials (5.50%)

Financial Exchanges & Data (1.88%)28,500 MarketAxess Holdings, Inc. 2,863,177 4,719,315

Insurance Brokers (1.64%)31,000 Willis Towers Watson plc2 3,826,330 4,115,870


157,000 The Charles Schwab Corp. 4,626,841 4,956,490



Biotechnology (2.83%)15,200 Alexion Pharmaceuticals, Inc.1 2,237,903 1,862,60859,500 Foundation Medicine, Inc.1 1,426,387 1,389,32541,500 Juno Therapeutics, Inc.1 1,260,571 1,245,41556,500 Sage Therapeutics, Inc.1 1,834,056 2,601,825

6,758,917 7,099,173

Health Care Equipment (1.17%)77,500 Glaukos Corporation1 2,497,350 2,924,850

Health Care Technology (3.02%)20,500 athenahealth, Inc.1 2,715,115 2,585,460

123,500 Press Ganey Holdings, Inc.1 3,837,054 4,989,400

6,552,169 7,574,860


29,915 Illumina, Inc.1 1,246,320 5,434,359

Pharmaceuticals (0.86%)319,000 TherapeuticsMD, Inc.1 2,464,471 2,172,390


Shares Cost Value


Industrials (1.47%)


45,290 Verisk Analytics, Inc.1 $ 2,112,281 $ 3,681,171


Application Software (10.33%)52,250 ANSYS, Inc.1 1,177,759 4,838,873

204,000 Guidewire Software, Inc.1 5,169,138 12,235,92089,000 Mobileye N.V.1,2 3,787,282 3,788,73070,780 salesforce.com, Inc.1 4,298,376 5,048,737

14,432,555 25,912,260


50,000 Mastercard Incorporated, Cl A(formerly, MasterCard, Inc., Cl A) 4,137,488 5,088,500

66,000 Visa, Inc., Cl A 4,793,693 5,458,200

8,931,181 10,546,700


50,200 Alibaba Group Holding Ltd., ADR1,2 3,555,108 5,310,6588,975 Alphabet, Inc., Cl A1 5,199,071 7,216,439

11,350 Alphabet, Inc., Cl C1 7,058,159 8,822,241248,214 Benefitfocus, Inc.1 8,941,294 9,908,703

57,233 CoStar Group, Inc.1 2,507,281 12,392,66167,000 Facebook, Inc., Cl A1 4,492,756 8,594,090

108,410 The Trade Desk, Inc., Cl A1 1,951,380 3,166,656146,500 Zillow Group, Inc., Cl C1 3,518,359 5,076,225

37,223,408 60,487,673


334,500 Acxiom Corp.1 5,214,843 8,914,425103,644 Gartner, Inc.1 1,647,037 9,167,312

6,861,880 18,081,737

Semiconductors (1.93%)111,700 Mellanox Technologies Ltd.1,2 4,560,121 4,831,025

Systems Software (6.54%)87,000 FireEye, Inc.1 1,316,358 1,281,51033,500 Qualys, Inc.1 1,174,583 1,279,36563,000 Red Hat, Inc.1 2,833,222 5,092,29087,400 ServiceNow, Inc.1 5,648,909 6,917,71070,000 Talend SA, ADR1,2 1,260,000 1,831,200

12,233,072 16,402,075


Real Estate (2.77%)

Specialized REITs (2.77%)19,310 Equinix, Inc. 369,721 6,956,428



38,000 SBA Communications Corp., Cl A1 127,095 4,262,080

TOTAL COMMON STOCKS 156,716,494 250,741,627

93

Baron Funds

Baron Opportunity Fund — PORTFOLIO HOLDINGS (Continued)

September 30, 2016

Shares Cost Value


Securities Lending Collateral (1.04%)2,612,201 State Street Navigator Securities

Lending Prime Portfolio4 $ 2,612,201 $ 2,612,201

TOTAL INVESTMENTS (101.03%) $159,328,695 253,353,828

LIABILITIES LESS CASH ANDOTHER ASSETS (-1.03%) (2,584,526)

NET ASSETS $250,769,302

RETAIL SHARES (Equivalent to $16.87 per share based on12,274,550 shares outstanding) $207,026,016

INSTITUTIONAL SHARES (Equivalent to $17.27 per share basedon 2,507,760 shares outstanding) $ 43,307,491

R6 SHARES (Equivalent to $17.28 per share basedon 25,224 shares outstanding) $ 435,795

% Represents percentage of net assets.1 Non-income producing securities.2 Foreign corporation.3 The value of all securities loaned at September 30, 2016 amounted to

$2,603,015 or 1.04% of net assets.4 Represents investment of cash collateral received from securities lending

transactions.ADR American Depositary Receipt.

94

Baron Funds

Baron Partners Fund — PORTFOLIO HOLDINGS

September 30, 2016 (Unaudited)

Shares Cost Value




2,316,200 Under Armour, Inc., Cl A1 $ 86,219,842 $ 89,590,61682,920 Under Armour, Inc., Cl C1 2,904,386 2,807,671

89,124,228 92,398,287

AutomobileManufacturers (13.77%)

1,110,000 Tesla Motors, Inc.1,5 236,819,491 226,473,300

Automotive Retail (2.19%)675,000 CarMax, Inc.1 18,482,687 36,011,250


2,600,000 Hyatt Hotels Corp., Cl A1 72,054,423 127,972,000425,000 Norwegian Cruise Line

Holdings Ltd.1,2 18,986,457 16,022,500

91,040,880 143,994,500


15,000 Amazon.com, Inc.1 10,743,712 12,559,65020,357,182 AO World plc (United Kingdom)1,2 43,575,320 44,592,254

225,000 Netflix, Inc.1 20,870,342 22,173,750

75,189,374 79,325,654



5,374,321 Manchester United plc, Cl A2 91,547,645 90,718,539

Restaurants (0.47%)40,000 Panera Bread Co., Cl A1 6,855,645 7,788,800


Financials (27.32%)


2,900,723 The Carlyle Group 73,162,711 45,164,257


775,000 FactSet Research Systems, Inc. 50,806,618 125,627,500


2,800,000 The Charles Schwab Corp. 24,289,154 88,396,000




Shares Cost Value


Health Care (15.26%)Health Care Equipment (6.85%)

1,000,000 IDEXX Laboratories, Inc.1 $ 43,593,539 $ 112,730,000


5,078,857 Inovalon Holdings, Inc., CI A1 108,313,780 74,709,986


350,000 Illumina, Inc.1 35,950,431 63,581,000


Industrials (11.08%)Human Resource &

Employment Services (1.96%)850,000 Robert Half International, Inc. 31,991,894 32,181,000


850,000 Verisk Analytics, Inc.1 22,184,264 69,088,000


1,300,000 Air Lease Corp. 41,206,217 37,154,0001,050,000 Fastenal Co. 18,140,729 43,869,000

59,346,946 81,023,000


Information Technology (25.23%)Internet Software &

Services (21.74%)400,000 Benefitfocus, Inc.1 14,575,230 15,968,000

1,100,000 CoStar Group, Inc.1 112,737,432 238,183,0003,000,000 Zillow Group, Inc., Cl A1 74,189,682 103,350,000

201,502,344 357,501,000


649,000 Gartner, Inc.1 41,264,138 57,404,050


Real Estate (7.28%)Hotel & Resort REITs (0.61%)

382,727 MGM Growth Properties LLC, Cl A 8,037,267 9,977,693

Office REITs (2.19%)985,000 Douglas Emmett, Inc. 29,254,614 36,080,550

Specialized REITs (4.48%)2,200,000 Gaming and Leisure

Properties, Inc. 71,552,343 73,590,000



95

Baron Funds

Baron Partners Fund — PORTFOLIO HOLDINGS (Continued)


Shares Cost Value


Financials (0.21%)


7,579,130 Windy City InvestmentsHoldings, L.L.C.1,3,4 $ 0 $ 3,410,609



Lending Prime Portfolio6 72,489,485 72,489,485



NET ASSETS $1,644,776,437

RETAIL SHARES (Equivalent to $37.07 per share based on26,266,851 shares outstanding) $ 973,582,968




amounted to $3,410,609 or 0.21% of net assets. This security is not deemedliquid.

4 The Adviser has reclassified/classified certain securities in or out of this sub-industry. Such reclassifications/classifications are not supported by S&P orMSCI.

5 The value of all securities loaned at September 30, 2016 amounted to$72,234,577 or 4.39% of net assets.

6 Represents investment of cash collateral received from securities lendingtransactions.

96

Baron Funds

Baron Fifth Avenue Growth Fund — PORTFOLIO HOLDINGS

September 30, 2016

Shares Cost Value




62,036 Under Armour, Inc., Cl C1 $ 2,367,366 $ 2,100,539

Cable & Satellite (2.70%)24,450 Naspers Limited, Cl N (South Africa)2 3,602,327 4,232,037


29,201 Amazon.com, Inc.1 7,658,239 24,450,28969,762 Ctrip.com International Ltd., ADR1,2 2,008,826 3,248,81715,593 Expedia, Inc. 1,823,327 1,820,015

4,337 The Priceline Group, Inc.1 2,941,040 6,381,852

14,431,432 35,900,973

Restaurants (4.68%)69,960 Starbucks Corp. 1,929,195 3,787,63439,182 YUM! Brands, Inc. 2,401,067 3,558,118

4,330,262 7,345,752


Energy (1.62%)



Financials (7.95%)


100,307 Brookfield Asset Management, Inc., Cl A2 2,126,719 3,528,800

Financial Exchanges & Data (2.37%)35,570 CME Group, Inc. 2,088,336 3,717,777


86,153 The Charles Schwab Corp. 2,446,873 2,719,850

Regional Banks (1.60%)32,429 First Republic Bank 2,292,567 2,500,600



Biotechnology (3.75%)20,563 Alexion Pharmaceuticals, Inc.1 3,354,213 2,519,790

5,423 Biogen, Inc.1 1,581,967 1,697,5624,113 Regeneron Pharmaceuticals, Inc.1 1,197,729 1,653,508

6,133,909 5,870,860

Health Care Technology (0.92%)11,456 athenahealth, Inc.1 1,553,929 1,444,830

Life Sciences Tools & Services (3.91%)33,727 Illumina, Inc.1 1,236,258 6,126,847

Pharmaceuticals (3.13%)13,470 Allergan plc1,2 3,705,893 3,102,27633,560 Bristol-Myers Squibb Co. 2,161,739 1,809,555

5,867,632 4,911,831


Industrials (1.45%)

Research & Consulting Services (1.45%)27,873 Verisk Analytics, Inc.1 1,078,509 2,265,517

Shares Cost Value



Application Software (2.37%)87,412 Mobileye N.V.1,2 $ 3,903,285 $ 3,721,129


65,205 Mastercard Incorporated Cl A (formerly,MasterCard, Inc., Cl A) 3,418,561 6,635,913

83,299 Visa, Inc., Cl A 2,537,808 6,888,827

5,956,369 13,524,740

Internet Software & Services (17.63%)93,957 Alibaba Group Holding Ltd., ADR1,2 8,068,411 9,939,711

1,948 Alphabet, Inc., Cl A1 280,365 1,566,30910,046 Alphabet, Inc., Cl C1 4,142,964 7,808,65565,002 Facebook, Inc., Cl A1 1,611,512 8,337,807

14,103,252 27,652,482

IT Consulting & Other Services (1.03%)23,271 EPAM Systems, Inc.1 1,572,685 1,612,913

Semiconductor Equipment (2.04%)29,187 ASML Holding N.V.2 1,960,743 3,198,311

Systems Software (4.12%)209,953 FireEye, Inc.1 6,104,501 3,092,608

41,711 Red Hat, Inc.1 2,111,294 3,371,500

8,215,795 6,464,108

Technology Hardware, Storage &Peripherals (2.98%)

41,344 Apple, Inc. 1,169,694 4,673,939


Materials (2.03%)

Fertilizers & AgriculturalChemicals (2.03%)

31,146 Monsanto Co. 2,616,700 3,183,121

Real Estate (4.49%)

Specialized REITs (4.49%)19,555 Equinix, Inc. 3,178,515 7,044,689

Utilities (0.39%)

Renewable Electricity (0.39%)148,160 TerraForm Global, Inc., Cl A 2,111,288 608,938


LIABILITIES LESS CASH ANDOTHER ASSETS (-0.06%) (90,775)

NET ASSETS $156,807,376



R6 SHARES (Equivalent to $19.63 per share basedon 70,371 shares outstanding) $ 1,381,039

% Represents percentage of net assets.1 Non-income producing securities.2 Foreign corporation.ADR American Depositary Receipt.

97

Baron Funds

Baron Focused Growth Fund — PORTFOLIO HOLDINGS


Shares Cost Value



Automobile Manufacturers (10.32%)90,000 Tesla Motors, Inc.1,3 $ 20,342,221 $ 18,362,700


150,000 Choice Hotels International, Inc. 5,080,139 6,762,000340,000 Hyatt Hotels Corp., Cl A1 12,201,302 16,734,800

17,281,441 23,496,800


2,000,000 AO World plc (United Kingom)1,2 3,931,658 4,380,985


Movies & Entertainment (5.22%)550,000 Manchester United plc, Cl A2 8,719,506 9,284,000



Household Products (2.69%)100,000 Church & Dwight Co., Inc. 1,274,171 4,792,000

Financials (18.86%)


435,000 The Carlyle Group 9,519,389 6,772,950175,000 Financial Engines, Inc. 5,948,430 5,199,250

15,467,819 11,972,200

Financial Exchanges & Data (6.83%)75,000 FactSet Research Systems, Inc. 5,828,282 12,157,500


100,000 Virtu Financial, Inc., Cl A 2,035,675 1,497,000


100,000 Arch Capital Group Ltd.1,2 1,800,056 7,926,000


Health Care (1.27%)

Health Care Technology (1.27%)152,973 Inovalon Holdings, Inc., CI A1 2,405,760 2,250,233

Industrials (8.48%)

Building Products (3.39%)160,000 Caesarstone Ltd1,2 6,770,357 6,033,600


60,000 Verisk Analytics, Inc.1 1,688,861 4,876,800


100,000 Fastenal Co. 2,169,716 4,178,000


Shares Cost Value



Application Software (3.43%)101,870 Guidewire Software, Inc.1 $ 4,816,692 $ 6,110,163


225,000 Benefitfocus, Inc.1 5,980,202 8,982,00075,000 CoStar Group, Inc.1 13,824,622 16,239,750

19,804,824 25,221,750





Alternative Carriers (3.77%)22,300 Iridium Communications, Inc.,

Series B, 6.75% 5,814,082 6,707,171

Principal Amount


Repurchase Agreement (4.10%)$7,297,073 Repurchase Agreement with

Fixed Income Clearing Corp., dated9/30/2016, 0.03% due 10/3/2016;Proceeds at maturity - $7,297,091;(Fully collateralized by $7,010,000U.S. Treasury Note, 0.125% due4/15/2017; Marketvalue - $7,448,125) 7,297,073 7,297,073

Shares


Lending Prime Portfolio4 5,877,553 5,877,553

TOTAL SHORT TERM INVESTMENTS 13,174,626 13,174,626



NET ASSETS $177,912,211


INSTITUTIONAL SHARES (Equivalent to $13.46 per share basedon 9,670,062 shares outstanding) $130,121,439


% Represents percentage of net assets.1 Non-income producing securities.2 Foreign corporation.3 The value of all securities loaned at September 30, 2016 amounted to

$5,856,885 or 3.29% of net assets.4 Represents investment of cash collateral received from securities lending

transactions.

98

Baron Funds

Baron International Growth Fund — PORTFOLIO HOLDINGS


Shares Cost Value


Australia (6.34%)100,000 Bellamy’s Australia Ltd. $ 804,054 $ 995,720

48,169 Domino’s Pizza Enterprises Ltd. 388,096 2,592,427250,000 MYOB Group Ltd. 692,543 713,689

70,000 Newcrest Mining Ltd. 676,334 1,188,818

Total Australia 2,561,027 5,490,654

Brazil (3.65%)265,000 BM&FBOVESPA SA 877,435 1,369,755

60,000 Smiles SA 702,409 995,71085,000 TOTVS SA 703,494 794,029

Total Brazil 2,283,338 3,159,494

Canada (5.98%)15,000 Agnico Eagle Mines Ltd. 512,576 812,700

5,200 Constellation Software, Inc. 662,016 2,344,132100,000 Encana Corp. 844,418 1,047,000

35,000 Suncor Energy, Inc. 1,225,000 972,300

Total Canada 3,244,010 5,176,132

Chile (1.09%)35,000 Sociedad Química y Minera de

Chile SA, ADR 725,484 941,500

China (11.57%)24,000 Alibaba Group Holding Ltd., ADR1 1,952,687 2,538,960

2,500 Baidu, Inc., ADR1 483,633 455,17598,000 BYD Co., Ltd., Cl H1 618,952 643,10890,000 China Distance Education Holdings

Ltd., ADR1 996,683 1,162,80021,000 Ctrip.com International Ltd., ADR1 756,010 977,970

275,771 Haitong Securities Co., Ltd., Cl H 411,311 466,4682,001,700 Kingdee International

Software Group Co. Ltd.1 234,264 792,27713,000 TAL Education Group, ADR1 407,782 920,92075,000 Tencent Holdings Ltd. 393,663 2,059,590

Total China 6,254,985 10,017,268

Denmark (1.19%)50,000 Nets A/S, 144A1 1,129,085 1,034,264

France (3.93%)7,500 Eurofins Scientific SE 803,359 3,406,697

Germany (7.04%)23,425 Fresenius Medical Care Ag & Co. 1,947,276 2,046,21323,566 ProSiebenSat.1 Media SE 953,083 1,009,145

158,100 RIB Software AG 1,303,308 1,946,51315,000 Symrise AG 171,805 1,099,141

Total Germany 4,375,472 6,101,012

Hong Kong (2.44%)275,000 L’Occitane International SA 580,547 547,419

1,216,911 Man Wah Holdings Ltd. 718,033 779,749475,000 Wynn Macau Ltd.1 644,146 786,319

Total Hong Kong 1,942,726 2,113,487

India (6.14%)150,000 Bharat Financial Inclusion Limited

(formerly, SKS Microfinance Limited)1 1,138,824 1,984,0428,000 Maruti Suzuki India Ltd. 609,012 658,132

75,000 Multi Commodity Exchange of India Ltd. 1,078,433 1,522,135140,000 Zee Entertainment Enterprises Ltd. 719,129 1,149,669

Total India 3,545,398 5,313,978

Shares Cost Value


Indonesia (2.52%)849,373 PT Matahari Department Store Tbk $ 1,064,961 $ 1,202,373

1,250,000 PT Sarana Menara Nusantara Tbk. 1 260,297 373,5341,301,400 PT Tower Bersama Infrastructure Tbk 534,199 608,271

Total Indonesia 1,859,457 2,184,178

Ireland (1.78%)20,575 Ryanair Holdings plc, ADR1 633,509 1,543,742

Israel (2.73%)16,000 Check Point Software Technologies Ltd.1 758,408 1,241,76026,000 Mellanox Technologies Ltd.1 999,489 1,124,500

Total Israel 1,757,897 2,366,260

Japan (9.43%)25,000 Bridgestone Corp. 480,797 913,66375,000 Daiwa Securities Group, Inc. 624,195 417,435

5,000 FANUC Corp. 338,413 838,71631,000 Mitsui Fudosan Co. Ltd. 594,924 652,83333,000 MonotaRO Co. Ltd. 362,044 878,655

125,000 Rakuten, Inc. 1,588,161 1,616,04535,000 SoftBank Group Corp. 1,489,661 2,251,07218,000 Sony Corp., ADR 587,356 597,780

Total Japan 6,065,551 8,166,199

Mexico (1.21%)200,000 Grupo Financiero Banorte

S.A.B. de C.V., Cl O 1,111,475 1,049,936

Norway (1.71%)70,000 Golar LNG Ltd. 1,397,747 1,484,000

Panama (1.22%)12,000 Copa Holdings SA, Cl A 973,816 1,055,160

Russia (1.22%)50,000 Yandex N.V., Cl A1 714,945 1,052,500

South Africa (1.16%)175,622 Steinhoff International Holdings N.V. 816,104 1,007,928

Spain (5.31%)15,000 Aena SA, 144A 1,384,515 2,212,43775,000 Grifols SA, ADR 629,871 1,197,75032,105 Industria de Diseño Textil SA 919,024 1,190,149

Total Spain 2,933,410 4,600,336

Switzerland (1.74%)37,067 Julius Baer Group Ltd. 1,261,880 1,508,243

United Kingdom (13.45%)200,000 Abcam plc 1,362,532 2,177,531395,214 AO World plc1 1,297,019 865,713225,000 Domino’s Pizza Group plc 675,667 1,089,252

16,200 easyJet plc 353,908 211,44673,000 Experian plc 770,060 1,460,916

275,000 Horizon Discovery Group plc1 567,859 527,53330,000 Intertek Group plc 816,271 1,356,68070,159 JUST EAT plc1 290,233 487,420

1,501,886 Lekoil Ltd.1 530,554 423,40020,125 Reckitt Benckiser Group PLC 1,962,557 1,895,076

300,000 Worldpay Group plc, 144A 1,097,280 1,151,758

Total United Kingdom 9,723,940 11,646,725

99

Baron Funds

Baron International Growth Fund — PORTFOLIO HOLDINGS (Continued)


Shares Cost Value


United States (4.80%)28,000 Agilent Technologies, Inc. $ 639,432 $ 1,318,52027,000 Arch Capital Group Ltd.1 983,682 2,140,020

170,155 TerraForm Global, Inc., Cl A 1,560,949 699,337

Total United States 3,184,063 4,157,877


Principal Amount


$2,160,245 Repurchase Agreement with FixedIncome Clearing Corp., dated9/30/2016, 0.03% due 10/3/2016;Proceeds at maturity - $2,160,250;(Fully collateralized by $2,075,000U.S. Treasury Note, 0.125% due4/15/2017 Market value - $2,204,688) 2,160,245 2,160,245



NET ASSETS $86,617,313



R6 SHARES (Equivalent to $19.64 per share based on 20,279shares outstanding) $ 398,198

% Represents percentage of net assets.1 Non-income producing securities.ADR American Depositary Receipt.144A Security is exempt from registration under Rule 144A of the Securities Act of

1933. This security may be resold in transactions that are exempt fromregistration, normally to qualified institutional buyers. This security has beendeemed liquid pursuant to policies and procedures approved by the Board ofTrustees, unless otherwise noted. At September 30, 2016, the market value ofRule 144A securities amounted to $4,398,459 or 5.08% of net assets.

Summary of Investments bySector as of September 30, 2016

Percentage ofNet Assets

Consumer Discretionary 23.9%Information Technology 20.5%Health Care 12.3%Financials 12.1%Industrials 11.0%Materials 4.7%Energy 4.5%Telecommunication Services 3.7%Consumer Staples 3.3%Real Estate 0.8%Utilities 0.8%Cash and Cash Equivalents* 2.4%

100.0%

* Includes short term investments.

100

Baron Funds

Baron Real Estate Fund — PORTFOLIO HOLDINGS


Shares Cost Value



Casinos & Gaming (5.97%)2,517,000 MGM Resorts International1 $ 50,635,552 $ 65,517,510

Home Furnishings (5.93%)325,307 Mohawk Industries, Inc.1 46,064,799 65,172,004

Home ImprovementRetail (4.66%)

214,650 Home Depot, Inc. 16,864,817 27,621,162326,350 Lowe’s Companies, Inc. 13,005,904 23,565,734

29,870,721 51,186,896

Homebuilding (3.04%)1,116,700 Toll Brothers, Inc.1 36,900,271 33,344,662


1,386,050 Hilton Worldwide Holdings, Inc. 34,060,388 31,782,126614,550 Norwegian Cruise Line

Holdings Ltd.1,2 17,338,168 23,168,535172,400 Royal Caribbean Cruises Ltd.2 13,627,646 12,921,380

65,026,202 67,872,041


Financials (3.27%)


1,019,800 Brookfield AssetManagement, Inc., Cl A2 29,357,487 35,876,564

Health Care (2.72%)

Health Care Facilities (2.72%)1,709,550 Brookdale Senior Living, Inc.1 22,843,696 29,831,648

Industrials (8.97%)

Airport Services (1.02%)76,000 Aena SA, 144A (Spain)2 8,140,035 11,209,679

Building Products (3.35%)163,600 Armstrong World Industries, Inc.1 6,774,332 6,759,952483,700 Masonite International Corp.1,2 28,371,609 30,071,629

35,145,941 36,831,581

Industrial Conglomerates (4.60%)606,750 Macquarie Infrastructure Corp.3 37,297,045 50,505,870




1,653,850 InterXion Holding N.V.1,2 49,917,131 59,902,447

Materials (4.41%)

Construction Materials (4.41%)126,100 Martin Marietta Materials, Inc. 16,615,430 22,585,771227,100 Vulcan Materials Co. 27,708,159 25,828,083

Total Materials 44,323,589 48,413,854

Shares Cost Value


Real Estate (42.56%)

Hotel & Resort REITs (3.69%)1,552,731 MGM Growth Properties LLC, Cl A $ 33,485,265 $ 40,479,697

Industrial REITs (0.54%)260,000 Rexford Industrial Realty, Inc. 5,894,920 5,951,400

Office REITs (5.09%)92,700 Boston Properties, Inc. 11,701,908 12,634,083

852,110 Douglas Emmett, Inc. 20,570,951 31,212,789119,300 Vornado Realty Trust 12,004,218 12,074,353

44,277,077 55,921,225

Real Estate OperatingCompanies (2.53%)

1,230,600 Kennedy-Wilson Holdings, Inc. 18,841,989 27,750,030


173,730 Jones Lang LaSalle, Inc. 15,347,464 19,768,737

48,655,435 61,200,122

Residential REITs (2.74%)591,539 American Campus

Communities, Inc. 24,456,326 30,091,589

Retail REITs (4.36%)615,250 General Growth Properties, Inc. 16,535,036 16,980,900149,100 Simon Property Group, Inc. 23,357,860 30,865,191

39,892,896 47,846,091

Specialized REITs (18.04%)238,600 Alexandria Real Estate Equities, Inc.3 16,839,312 25,952,522454,085 American Tower Corp. 40,972,469 51,461,453193,000 Digital Realty Trust, Inc. 14,511,782 18,744,160117,850 Equinix, Inc. 24,731,433 42,455,463

1,776,750 Gaming and Leisure Properties, Inc. 51,998,939 59,432,287

149,053,935 198,045,885





Wireless TelecommunicationServices (1.14%)

41,978,997 PT Sarana Menara NusantaraTbk. (Indonesia)1,2 10,462,083 12,544,486

Total Telecommunication Services 19,579,542 27,887,974

TOTAL COMMON STOCKS 839,659,854 1,050,838,769

101

Baron Funds

Baron Real Estate Fund — PORTFOLIO HOLDINGS (Continued)




$48,910,535 Repurchase Agreement withFixed Income Clearing Corp.,dated 9/30/2016, 0.03% due10/3/2016; Proceeds atmaturity - $48,910,657;(Fully collateralized by$46,955,000 U.S. TreasuryNote, 0.125% due 4/15/2017;Market value - $49,889,688) $ 48,910,535 $ 48,910,535

TOTAL INVESTMENTS (100.16%) $888,570,389 1,099,749,304


NET ASSETS $1,097,998,695




% Represents percentage of net assets.1 Non-income producing securities.2 Foreign corporation.3 The Adviser has reclassified/classified certain securities in or out of this sub-

industry. Such reclassifications/classifications are not supported by S&Por MSCI.

144A Security is exempt from registration under Rule 144A of the Securities Act of1933. This security may be resold in transactions that are exempt fromregistration, normally to qualified institutional buyers. This security has beendeemed liquid pursuant to policies and procedures approved by the Board ofTrustees, unless otherwise noted. At September 30, 2016, the market value ofRule 144A securities amounted to $11,209,679 or 1.02% of net assets.

102

Baron Funds

Baron Emerging Markets Fund — PORTFOLIO HOLDINGS


Shares Cost Value


Argentina (0.87%)1,250,000 YPF SA, ADR $ 23,057,146 $ 22,775,000

Australia (0.72%)1,900,000 Bellamy’s Australia Ltd. 14,817,134 18,918,683

Brazil (6.54%)7,500,000 BM&FBOVESPA SA 27,831,433 38,766,6622,000,312 Cetip SA - Mercados Organizados 22,581,357 26,374,3616,900,000 Kroton Educacional SA 28,707,484 31,379,5491,300,000 Multiplus SA 14,723,212 17,584,3672,140,000 Smiles SA 28,201,691 35,513,6762,350,818 TOTVS SA 31,170,070 21,960,196

Total Brazil 153,215,247 171,578,811

Chile (1.02%)1,000,000 Sociedad Química y Minera de

Chile SA, ADR 21,616,349 26,900,000

China (21.74%)950,000 Alibaba Group Holding Ltd., ADR1 78,104,735 100,500,500120,000 Baidu, Inc., ADR1 23,219,259 21,848,400

4,250,000 BYD Co., Ltd., Cl H1 27,175,563 27,889,8727,500,000 China Everbright Ltd. 21,530,125 15,335,723

16,000,000 China Mengniu Dairy Co. Ltd. 32,236,188 29,704,5023,350,000 China Mobile Ltd. 42,210,482 40,533,946

875,850 Ctrip.com International Ltd., ADR1 29,735,667 40,788,33518,000,400 Haitong Securities Co., Ltd., Cl H 28,661,386 30,447,79145,000,000 Kingdee International Software

Group Co. Ltd.1 14,212,410 17,811,09822,000,000 PetroChina Co. Ltd. 23,396,708 14,437,110

4,900,000 Shenzhou International GroupHoldings Ltd. 21,892,672 34,113,764

85,033 Sina Corp.1 5,816,194 6,277,9868,400,000 Sinopharm Group Co. Ltd., Cl H 32,203,926 40,340,8805,750,000 Sunny Optical Technology

Group Co., Ltd. 13,256,843 28,392,682550,515 TAL Education Group, ADR1 15,407,360 38,998,483

2,250,000 Tencent Holdings Ltd. 38,989,052 61,787,6858,503 Weibo Corp., ADR1 413,428 426,340

20,509,500 Zhaojin Mining Industry Co. Ltd. 12,103,124 20,704,113

Total China 460,565,122 570,339,210

Hong Kong (2.96%)40,784,289 Man Wah Holdings Ltd. 18,227,964 26,132,989

6,802,100 Techtronic Industries Co. Ltd. 27,266,472 26,572,07315,000,805 Wynn Macau Ltd.1 29,382,650 24,832,440

Total Hong Kong 74,877,086 77,537,502

India (17.39%)1,900,000 Amara Raja Batteries Ltd. 15,419,857 28,845,299

13,250,000 Bank of Baroda 29,610,240 33,314,0583,772,097 Bharat Financial Inclusion

Limited (formerly, SKSMicrofinance Limited)1 30,836,451 49,893,320

7,000,000 Coal India Ltd. 39,415,869 33,885,5513,752,679 DEN Networks Ltd.1 10,244,650 4,044,0787,034,985 Dish TV India Ltd.1 6,090,908 9,837,1452,250,000 Divi’s Laboratories Ltd. 28,780,132 43,621,2079,650,000 Exide Industries Ltd. 25,734,074 26,523,7315,770,000 Hathway Cable and

Datacom Ltd.1 5,093,897 2,266,2292,750,000 Kotak Mahindra Bank Ltd. 31,386,788 32,092,9711,063,750 Manpasand Beverages Ltd. 11,212,855 12,000,340

Shares Cost Value


India (continued)375,000 Maruti Suzuki India Ltd. $ 28,390,538 $ 30,849,917

4,650,000 Motherson Sumi Systems Ltd. 23,017,965 22,209,372925,000 Multi Commodity Exchange of

India Ltd. 13,738,605 18,772,9991,500,000 PVR Ltd. 14,319,858 26,701,7122,950,000 Sun TV Network Ltd. 18,206,788 22,381,984

825,000 Torrent Pharmaceuticals Ltd. 7,646,065 20,117,5844,750,000 Zee Entertainment

Enterprises Ltd. 24,846,379 39,006,646

Total India 363,991,919 456,364,143

Indonesia (3.37%)20,000,000 PT Bank Mandiri (Persero) Tbk 16,960,776 17,163,43635,000,000 PT Bank Negara Indonesia

(Persero) Tbk 15,018,840 14,883,91719,000,327 PT Matahari Department Store Tbk 24,928,798 26,896,86927,631,350 PT Sarana Menara Nusantara Tbk.1 8,841,958 8,257,01245,343,836 PT Tower Bersama

Infrastructure Tbk1 23,345,968 21,193,579

Total Indonesia 89,096,340 88,394,813

Korea, Republic of (6.51%)55,000 LG Chem Ltd. 13,355,611 12,060,19934,000 LG Household & Health Care Ltd. 21,675,204 29,481,99962,000 NAVER Corp. 36,794,436 49,708,08645,000 Samsung Electronics Co., Ltd. 55,924,744 65,292,595

150,000 Samsung Life Insurance Co. Ltd. 14,958,116 14,368,729

Total Korea, Republic of 142,708,111 170,911,608

Mexico (5.06%)335,000 Fomento Económico Mexicano,

S.A.B. de C.V., ADR 30,747,061 30,833,4001,825,300 GRUMA S.A.B. de C.V., Cl B 26,080,621 23,946,6635,950,000 Grupo Financiero Banorte S.A.B.

de C.V., Cl O 32,604,712 31,235,60210,000,513 Grupo Lala S.A.B. de C.V. 20,626,796 19,083,226

2,750,000 Infraestructura Energetica NovaS.A.B. de C.V. 14,909,536 10,712,232

7,750,000 Wal-Mart de MexicoS.A.B de C.V. 17,525,741 16,967,083

Total Mexico 142,494,467 132,778,206

Panama (1.68%)500,000 Copa Holdings SA, Cl A 31,251,656 43,965,000

Philippines (2.75%)33,005,000 Ayala Land, Inc. 24,400,878 26,712,98611,000,000 BDO Unibank, Inc. 24,398,176 24,905,660

140,000,000 Metro Pacific Investments Corp. 15,473,801 20,496,959

Total Philippines 64,272,855 72,115,605

Russia (3.05%)525,000 Magnit PJSC, GDR 21,310,077 21,887,250

2,700,000 Sberbank of Russia, ADR 20,789,427 25,434,0001,550,000 Yandex N.V., Cl A1 25,126,949 32,627,500

Total Russia 67,226,453 79,948,750

Singapore (0.90%)17,250,918 Global Logistic Properties Ltd. 31,817,045 23,655,655

103

Baron Funds

Baron Emerging Markets Fund — PORTFOLIO HOLDINGS (Continued)


Shares Cost Value


South Africa (7.13%)1,200,100 AngloGold Ashanti Ltd., ADR1 $ 13,987,383 $ 19,105,592

825,700 Aspen Pharmacare Holdings Ltd. 22,175,753 18,653,0881,275,138 Bid Corp. Ltd. 22,788,442 24,081,0362,300,138 Bidvest Group Ltd. 19,760,176 27,083,7168,600,613 Life Healthcare Group

Holdings Ltd. 21,883,553 23,735,1221,300,000 Mr Price Group Ltd. 22,333,977 14,376,025

525,000 Sasol Limited 17,420,320 14,385,134300,500 Sasol Limited, ADR 9,976,038 8,209,660

6,500,764 Steinhoff InternationalHoldings N.V. 31,999,155 37,309,133

Total South Africa 182,324,797 186,938,506

Taiwan, Province of China (8.89%)5,000,000 Delta Electronics, Inc. 26,568,699 26,638,5921,675,231 Eclat Textile Co., Ltd. 20,002,643 19,988,081

15,001,000 Far EasToneTelecommunications Co., Ltd. 33,277,526 35,414,142

2,300,000 Ginko International Co., Ltd. 32,058,415 22,819,8633,000,616 Makalot Industrial Co. Ltd. 16,579,409 14,359,0761,500,000 MediaTek, Inc. 19,379,407 11,460,9754,500,000 Novatek Microelectronics Corp. 18,669,328 15,863,5218,800,000 Taiwan Mobile Co., Ltd. 30,026,544 31,583,4811,800,900 Taiwan Semiconductor

Manufacturing Company Ltd., ADR 38,286,376 55,089,531

Total Taiwan, Province of China 234,848,347 233,217,262

Thailand (0.74%)100,000 Bangkok Bank PCL, Cl F 629,574 468,976

4,026,000 Bangkok BankPublic Co., Ltd., NVDR 21,278,175 18,880,952

Total Thailand 21,907,749 19,349,928

United Kingdom (1.07%)25,996,223 Lekoil Ltd.1,2 13,129,931 7,328,660

6,350,000 Tullow Oil plc1 19,298,807 20,831,519

Total United Kingdom 32,428,738 28,160,179

United States (0.55%)3,500,219 TerraForm Global, Inc., Cl A 33,265,281 14,385,900



India (0.02%)3,098,340 Zee Entertainment Enterprises

Ltd., 6.00% due 3/5/2022 367,971 440,226

Principal Amount

Convertible Bonds (0.26%)

China (0.26%)$50,000,000 Biostime International Holdings

Ltd., 0.00% due 02/20/20191 6,590,207 6,953,935



$195,152,821 Repurchase Agreement withFixed Income Clearing Corp.,dated 9/30/2016, 0.03% due10/3/2016; Proceeds atmaturity - $195,153,309;(Fully collateralized by$187,350,000 U.S. TreasuryNote, 0.125% due4/15/2017; Marketvalue - $199,059,375) $ 195,152,821 $ 195,152,821



NET ASSETS $2,623,480,078




% Represents percentage of net assets.1 Non-income producing securities.2 An “Affiliated” investment may include any company in which the Fund owns

5% or more of its outstanding shares.ADR American Depositary Receipt.GDR Global Depositary Receipt.NVDR Non-Voting Depositary Receipt.



Consumer Discretionary 22.9%Information Technology 19.7%Financials 15.7%Consumer Staples 8.9%Health Care 6.5%Telecommunication Services 5.2%Energy 4.6%Industrials 3.8%Materials 3.0%Real Estate 1.9%Utilities 1.0%Cash and Cash Equivalents* 6.8%

100.0%

* Includes short term investments.

104

Baron Funds

Baron Energy and Resources Fund — PORTFOLIO HOLDINGS


Shares Cost Value



Automobile Manufacturers (2.61%)14,100 Tesla Motors, Inc.1,3 $ 3,242,965 $ 2,876,823

Energy (80.45%)

Oil & Gas Drilling (0.75%)67,600 Nabors Industries Ltd.2 705,345 822,016

Oil & Gas Equipment &Services (13.88%)

18,450 Core Laboratories N.V.2 2,224,353 2,072,48938,400 FMC Technologies, Inc.1 1,099,421 1,139,32874,900 Forum Energy Technologies, Inc.1 1,349,703 1,487,51481,396 Halliburton Co. 3,809,495 3,653,05224,531 Oil States International, Inc.1 884,996 774,44444,700 Schlumberger Limited2 3,336,460 3,515,20856,600 US Silica Holdings, Inc. 1,465,530 2,635,296

14,169,958 15,277,331


26,800 Anadarko Petroleum Corporation 1,578,453 1,698,04890,800 Antero Resources Corp.1 2,597,802 2,447,06048,699 Concho Resources, Inc.1 4,914,844 6,688,808

558,900 Encana Corp.2 3,677,024 5,851,68329,766 Energen Corp. 1,343,132 1,718,09424,568 EOG Resources, Inc. 2,047,483 2,375,971

2,496,354 Lekoil Ltd. (United Kingdom)1,2 1,228,382 703,753135,500 Newfield Exploration Co.1 4,025,771 5,888,830

31,449 Noble Energy, Inc. 983,504 1,123,987227,900 Parsley Energy, Inc., Cl A1 3,876,434 7,636,929200,500 Rice Energy, Inc.1 1,894,615 5,235,055157,400 RSP Permian, Inc.1 3,729,271 6,103,972

31,896,715 47,472,190

Oil & Gas Refining &Marketing (3.48%)

49,556 Marathon Petroleum Corp. 1,926,810 2,011,47834,400 Valero Energy Corporation 2,252,935 1,823,200

4,179,745 3,834,678


155,000 Energy Transfer Equity L.P. 1,141,749 2,602,450119,035 Golar LNG Ltd.2 2,602,729 2,523,542

46,500 MPLX LP 1,479,063 1,574,49063,988 Noble Midstream Partners LP1 1,439,730 1,785,26570,000 PBF Logistics LP 1,295,000 1,387,400

214,904 Scorpio Tankers Inc.2 1,943,453 995,00655,400 SemGroup Corp., Cl A 1,718,765 1,958,94455,140 Tallgrass Energy Partners, LP 1,493,563 2,657,74867,400 Targa Resources Corp. 1,939,730 3,310,01454,500 Valero Energy Partners LP 2,307,500 2,381,105

17,361,282 21,175,964

Total Energy 68,313,045 88,582,179


Application Software (2.20%)51,600 Aspen Technology, Inc.1 2,021,534 2,414,364

Semiconductor Equipment (1.19%)76,200 SolarEdge Technologies, Inc.1 1,687,789 1,312,926


Shares Cost Value


Materials (9.15%)

Commodity Chemicals (1.00%)48,032 Westlake Chemical Partners LP $ 1,168,810 $ 1,097,051

Gold (1.91%)60,400 Barrick Gold Corporation2 1,264,650 1,070,28826,400 Newmont Mining Corp. 994,744 1,037,256

2,259,394 2,107,544

Specialty Chemicals (6.24%)354,252 Flotek Industries, Inc.1 4,152,735 5,150,824

49,000 Kraton Corporation, (formerly, KratonPerformance Polymers, Inc.)1 1,282,378 1,716,960

5,435,113 6,867,784

Total Materials 8,863,317 10,072,379

Utilities (1.91%)

Renewable Electricity (1.91%)231,926 TerraForm Global, Inc., Cl A 3,085,182 953,216

82,910 TerraForm Power, Inc., Cl A 1,952,438 1,153,278

Total Utilities 5,037,620 2,106,494


Principal Amount


Repurchase Agreement (1.89%)$2,075,581 Repurchase Agreement with Fixed

Income Clearing Corp., dated9/30/2016, 0.03% due 10/3/2016;Proceeds at maturity - $2,075,587;(Fully collateralized by $1,995,000U.S. Treasury Note, 0.125% due4/15/2017; Marketvalue - $2,119,688) 2,075,581 2,075,581

Shares

Securities Lending Collateral (0.83%)

920,761 State Street Navigator SecuritiesLending Prime Portfolio4 920,761 920,761

TOTAL SHORT TERM INVESTMENTS 2,996,342 2,996,342



NET ASSETS $110,109,266




% Represents percentage of net assets.1 Non-income producing securities.2 Foreign corporation.3 The value of all securities loaned at September 30, 2016 amounted to $917,523

or 0.83% of net assets.4 Represents investment of cash collateral received from securities lending

transactions.

105

Baron Funds

Baron Global Advantage Fund — PORTFOLIO HOLDINGS


Shares Cost Value


Argentina (1.48%)3,786 Globant SA1 $ 150,993 $ 159,466

Brazil (2.88%)23,517 Cetip SA – Mercados Organizados 244,353 310,075

Canada (4.64%)1,107 Constellation Software, Inc. 338,745 499,030

China (16.19%)6,482 Alibaba Group Holding Ltd., ADR1 541,292 685,731

679 Baidu, Inc., ADR1 88,840 123,6259,508 Ctrip.com International Ltd., ADR1 319,515 442,7886,923 TAL Education Group, ADR1 198,990 490,425

Total China 1,148,637 1,742,569

Indonesia (3.10%)1,116,770 PT Sarana Menara Nusantara Tbk.1 321,392 333,722

Israel (7.46%)1,416 Check Point Software Technologies Ltd.1 96,857 109,8969,491 Mellanox Technologies Ltd.1 386,503 410,4856,640 Mobileye N.V.1 323,741 282,665

Total Israel 807,101 803,046

Netherlands (1.57%)1,544 ASML Holding N.V. 111,558 169,439

South Africa (5.13%)3,193 Naspers Limited, Cl N 445,555 552,675

United Kingdom (6.83%)59,967 JUST EAT plc1 258,537 416,61282,876 Worldpay Group plc, 144A 303,127 318,177

Total United Kingdom 561,664 734,789

United States (49.88%)9,405 Acxiom Corp.1 185,152 250,6433,726 Aerie Pharmaceuticals, Inc.1 61,817 140,619

933 Allergan plc1 256,633 214,879696 Alphabet, Inc., Cl C1 358,241 540,994

1,553 Amazon.com, Inc.1 475,611 1,300,342291 Bats Global Markets, Inc. 5,529 8,768

4,399 Benefitfocus, Inc.1 117,819 175,6084,888 EPAM Systems, Inc.1 352,033 338,7874,592 Facebook, Inc., Cl A1 123,378 589,016

18,036 FireEye, Inc.1 556,784 265,6702,231 First Republic Bank 158,847 172,032

Shares Cost Value


United States (continued)6,725 Glaukos Corporation1 $ 150,392 $ 253,8021,889 Illumina, Inc.1 109,775 343,1561,361 Luxoft Holding, Inc.1 81,588 71,9294,129 Noble Midstream Partners LP1 92,903 115,1995,255 Pacira Pharmaceuticals, Inc.1 336,531 179,826

149 The Priceline Group, Inc.1 109,221 219,25220,259 TerraForm Global, Inc., Cl A 288,693 83,265

4,590 Westlake Chemical Partners LP 118,581 104,836

Total United States 3,939,528 5,368,623


CASH AND OTHER ASSETSLESS LIABILITIES (0.84%) 90,347


RETAIL SHARES (Equivalent to $14.82 per share based on372,252 shares outstanding) $ 5,517,999

INSTITUTIONAL SHARES (Equivalent to $14.94 per share basedon 338,846 shares outstanding) $ 5,063,671


% Represents percentage of net assets.1 Non-income producing securities.ADR American Depositary Receipt.144A Security is exempt from registration under Rule 144A of the Securities Act of

1933. This security may be resold in transactions that are exempt fromregistration, normally to qualified institutional buyers. This security has beendeemed liquid pursuant to policies and procedures approved by the Board ofTrustees, unless otherwise noted. At September 30, 2016, the market value ofRule 144A securities amounted to $318,177 or 2.96% of net assets.



Information Technology 50.2%Consumer Discretionary 27.9%Health Care 10.5%Financials 4.6%Telecommunication Services 3.1%Energy 1.1%Materials 1.0%Utilities 0.8%Cash and Cash Equivalents 0.8%

100.0%

106

Baron Funds

Baron Discovery Fund — PORTFOLIO HOLDINGS

September 30, 2016

Shares Cost Value



Casinos & Gaming (2.76%)55,000 Pinnacle Entertainment, Inc.1 $ 619,567 $ 678,70022,000 Red Rock Resorts, Inc., Cl A 488,669 518,980

1,108,236 1,197,680

Education Services (1.71%)34,000 Nord Anglia Education, Inc.1,2 726,402 740,520

Movies & Entertainment (2.95%)30,000 Liberty Media Group, Cl A1 691,840 859,50025,000 Manchester United plc, Cl A2 462,000 422,000

1,153,840 1,281,500

Restaurants (5.53%)130,000 Domino’s Pizza Group plc

(United Kingdom)2 596,434 629,34621,500 Sonic Corp. 577,908 562,87036,000 Wingstop Inc.1 725,394 1,054,800

7,000 Zoe’s Kitchen, Inc.1 157,313 155,330

2,057,049 2,402,346

Specialty Stores (0.59%)15,000 Party City Holdco, Inc.1 163,412 256,800



Packaged Foods & Meats (0.83%)575,000 Barfresh Food Group, Inc.1 287,500 359,375

Energy (0.51%)


8,000 Noble Midstream Partners LP1 184,281 223,200

Financials (2.28%)

Property & Casualty Insurance (2.28%)45,000 Kinsale Capital Group, Inc. 763,140 990,000


Biotechnology (8.11%)14,500 Adamas Pharmaceuticals, Inc.1 255,562 237,945

3,400 Cepheid1 116,108 179,14638,000 Flexion Therapeutics, Inc.1 579,408 742,52035,000 Foundation Medicine, Inc.1 762,652 817,25040,000 Myriad Genetics, Inc.1 845,125 823,20010,200 Sage Therapeutics, Inc.1 505,891 469,710

2,500 TESARO, Inc.1 111,975 250,600

3,176,721 3,520,371

Health Care Equipment (7.66%)22,200 Glaukos Corporation1 531,097 837,82816,000 Inogen, Inc.1 642,030 958,400

6,800 Nevro Corp.1 466,654 709,85271,000 Novadaq Technologies, Inc.1,2 770,247 821,470

2,410,028 3,327,550

Health Care Supplies (5.33%)103,500 Cerus Corp.1 574,480 642,735106,700 Sientra, Inc.1 851,539 959,233

28,500 The Spectranetics Corporation1 599,333 715,065

2,025,352 2,317,033

Life Sciences Tools & Services (1.86%)27,000 Medpace Holdings, Inc.1 706,642 806,220

Shares Cost Value


Health Care (continued)

Managed Health Care (0.78%)9,000 HealthEquity, Inc.1 $ 186,306 $ 340,650

Pharmaceuticals (3.53%)61,500 Neos Therapeutics, Inc.1 542,219 404,67012,000 Pacira Pharmaceuticals, Inc.1 592,786 410,640

105,500 TherapeuticsMD, Inc.1 673,220 718,455

1,808,225 1,533,765



Aerospace & Defense (7.85%)22,200 DigitalGlobe, Inc.1 609,015 610,50086,500 The KEYW Holding Corporation1 765,813 954,96075,000 Mercury Systems, Inc.1 1,169,061 1,842,750

2,543,889 3,408,210

Industrial Machinery (3.34%)20,500 ESCO Technologies, Inc. 737,871 951,61037,000 Kornit Digital Ltd.1,2 358,369 347,060

2,000 RBC Bearings Incorporated1 135,042 152,960

1,231,282 1,451,630


18,000 SiteOne Landscape Supply, Inc.1 672,831 646,740



Application Software (0.67%)15,000 QAD, Inc., Cl B 264,427 292,500

Electronic Equipment &Instruments (1.96%)

7,700 Coherent, Inc.1 609,723 851,158

Internet Software & Services (11.55%)126,000 Amber Road, Inc.1 1,076,329 1,215,900

13,000 Benefitfocus, Inc.1 345,148 518,9604,000 comScore, Inc.1 150,803 122,640

22,000 Envestnet, Inc.1 817,234 801,900170,000 JUST EAT plc (United Kingdom)1,2 880,530 1,181,051

40,000 Quotient Technology, Inc.1 428,360 532,40022,000 The Trade Desk, Inc., Cl A1 453,608 642,620

4,152,012 5,015,471

IT Consulting & Other Services (1.72%)28,000 Acxiom Corp.1 611,849 746,200

Semiconductors (6.57%)16,000 Impinj, Inc.1 243,887 598,72043,000 MACOM Technology Solutions

Holdings, Inc.1 1,426,821 1,820,62010,000 Mellanox Technologies Ltd.1,2 404,130 432,500

2,074,838 2,851,840

Systems Software (6.40%)48,000 Qualys, Inc.1 1,113,745 1,833,12031,500 Varonis Systems, Inc.1 769,348 948,150

1,883,093 2,781,270


107

Baron Funds

Baron Discovery Fund — PORTFOLIO HOLDINGS (Continued)

September 30, 2016

Shares Cost Value


Materials (2.70%)

Commodity Chemicals (0.52%)10,000 Westlake Chemical Partners LP $ 220,309 $ 228,400

Specialty Chemicals (2.18%)65,000 Flotek Industries, Inc.1 752,442 945,100

Total Materials 972,751 1,173,500

Real Estate (9.72%)

Diversified REITs (1.00%)10,000 American Assets Trust, Inc. 343,960 433,800

Industrial REITs (0.74%)14,000 Rexford Industrial Realty, Inc. 273,244 320,460

Office REITs (1.45%)33,000 Easterly Government Properties, Inc. 587,950 629,640

Real Estate OperatingCompanies (1.17%)

22,500 Kennedy-Wilson Holdings, Inc. 465,250 507,375

Residential REITs (2.98%)30,000 Education Realty Trust, Inc. 1,091,942 1,294,200

Specialized REITs (2.38%)31,000 Gaming and Leisure Properties, Inc. 795,601 1,036,950



Warrants (0.14%)


Packaged Foods & Meats (0.14%)300,000 Barfresh Food Group, Inc. Warrants

Exp 3/13/20201,3 0 60,000

Principal Amount


$1,043,014 Repurchase Agreement with FixedIncome Clearing Corp., dated9/30/2016, Proceeds at maturity -$1,043,017; (Fully collateralized by$1,005,000 U.S. Treasury Note,0.125% due 4/15/2017; Marketvalue - $1,067,813) 1,043,014 1,043,014








amounted to $60,000 or 0.14 % of net assets. This security is not deemedliquid.

108

Notes

109

Notes

110

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