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 disadvantagedbecause they earn $79,000 per year including

benefits, 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 be

perhaps 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,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 as

Letter from Ron

the 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 a

home 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 theirentire 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

36 investment 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 in theshort 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 growth opportunities,we also need to carefully assess managementand 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 passprices 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

September 30, 2016 Letter from Ron

evenings and was a Patent Examiner in the UnitedStates Patent Office by day. In the summer of1969, I read that Manor Care, a nursing homebusiness, planned an initial public offering. I wasinterested because President Lyndon Johnson fouryears before persuaded Congress to createMedicare. I thought Medicare legislation wouldincrease demand for Manor Care’s services.Medicare provided health insurance to individualsover 65, half of whom had previously been unableto afford medical 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 estate

it 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 shareholder

following 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.’”

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

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.

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.