Baron Focused Growth Fund Baron International Growth Fund … · 2020. 7. 31. · management talent and personalities. That ... June 30, 2014 Baron Funds ® ... plateau.” Many institutional

“This company could survive for a long

time without its CEO. It couldn’t last

through lunchtime without its welders.”

Mogens Bay. Chairman and CEO.

Valmont. May 2014.

On average, three to four corporatemanagement teams visit us every day.Management meetings provide us withcontext about businesses that we researchand in which we invest. These meetings alsoenable us to ask questions about long-termstrategies, growth opportunities, challengesand competitive advantages.As importantly,they give us a chance to qualitatively assessmanagement talent and personalities. Thatmay be what is most important of all and inkeeping with our mission statement, “weinvest in people.”

A large part of stock market volume iscomprised of short-term traders who ownstocks for a few months, weeks, days,seconds, milli-seconds or nano-seconds.Accordingly, we get managements’ raptattention when we tell them we manage$26.8 billion; our firm has an averageinvestment holding period of six to sevenyears; and, our largest fund, $8.3 billion BaronGrowth Fund, invests in businesses for onaverage nine years! What we think deservesthe attention of Baron Funds’ shareholders isnot only that we invest for the long term, butthat over the long term, Baron Funds haveperformed better than the benchmarkindexes against which we are compared. Youcan see this from the performance charts onpages 10-14 immediately following the“Letter from Linda.”

I nearly always find something relevantand memorable in management meetingsI attend, whether in our office or theirs. Arecent visit by Mogens Bay, Chairman andCEO of Valmont, a diversified industrialcompany, is a case in point. We have hada modest sized investment in Valmont

since 2009. We have since about doubledour money.

We think Valmont’s towers business willbenefit from increased spending by utilitieson more efficient electricity transmission andis well-positioned to grow.This is because theFederal Energy Regulatory Commission, inorder to reduce our country’s energyconsumption, has granted utilities significantincentives to invest in transmission.

We believe Valmont’s world leadingirrigation business is also exceptionallyattractive and poised for growth. With theworld’s population expected to increase30% by 2050, there will be increaseddemand for food. The world cannot meet

TABLE OF CONTENTSLetter from Ron 1Letter from Linda 6Baron Funds 10Review and Outlook 15Baron Asset Fund 17Baron Growth Fund 21Baron Small Cap Fund 25Baron Opportunity Fund 29Baron Partners Fund 33Baron Fifth Avenue Growth Fund 38Baron Focused Growth Fund 41Baron International Growth Fund 45Baron Real Estate Fund 49Baron Emerging Markets Fund 54Baron Energy and Resources Fund 58Baron Global Advantage Fund 64Baron Discovery Fund 68Portfolio Holdings 72

December 31, 2010 Letter from RonBaron 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

June 30, 2014

Baron Funds®

Quarterly Report

RONALD BARON

CEO AND CHIEF INVESTMENT OFFICER

its crop requirements without irrigation.This is because irrigated farmland providesbetter yields. Only 20% of cultivatedagriculture worldwide is irrigated. Centerpivot irrigation uses the least water, ascarce resource, and produces the bestyields. Valmont has a 45% share of centerpivot irrigation systems in North Americaand is increasing its share in the rest of theworld. Center pivot irrigation has also beensteadily increasing its current 56% share ofirrigation.

When Mogens visited us recently toprovide an update, he mentioned that hetries to visit all of his firm’s more than 100worldwide plants regularly. When he does,he always talks to his factory workers.When I asked whether he has preparedremarks or speaks from the heart, he toldus it was the latter. He explained that “theculture of a business is what’s important.”He said that he wants his generalmanagers to be entrepreneurs “who arepassionate about what we do…makehighways safer, protect the environment,don’t cut corners and commit tocontinuous improvement.” Mogens wenton to say “with plants around the world,somewhere someone is doing somethingwrong.” He finds ‘Can I show you what Ido?’ an effective way to communicate andtrain. “You need to look yourself in themirror every day and make sure you don’tneed to look down. It’s all about how youtreat your employees and customers. Howyou expect people to behave.” Mogensthen remarked that “you need to showpeople that you respect them and careabout them.” To make that point, hefrequently tells his fellow employees thatValmont “could survive for a long timewithout its CEO. It couldn’t last throughlunchtime without its welders.”

Valmont’s home office is in Omaha,Nebraska. Omaha also happens to be thehome of the world’s most prominentinvestor. When Mogens finished updatingus, I remarked that “there must besomething in the water” in Omaha. Mogensis an individual I think about when I tell ourinvestors that “we invest in people.” It’s too

bad we don’t have a larger investment inhis business, I thought. It’s also too bad wedidn’t invest earlier. If we had invested in1993, we would have earned 16.6%compounded annual growth for the past 21years. The S&P 500 Index earned acompounded annual return over the sameperiod of 9.4% per year.

“I am very uncomfortable with current

valuations of stocks.” Joseph Stiglitz.

Economics professor. Columbia University.

2001 Nobel Memorial Prize in Economic

Sciences. July 7, 2014. Dow Jones 17,000.

During my 44 year investment career, Ihave known many brilliant investors,analysts and regulators. I have not met any,however, able to consistently predict howstock markets will perform. For example, in1996, then Fed Chairman Alan Greenspanthought stock prices were “irrationallyexuberant.” The Dow Jones IndustrialAverage was then 6,000. Highly regardedYale economics Professor Irving Fisher inthe autumn of 1929, shortly before themarket crashed, thought “stock prices havereached what looks like a permanently highplateau.” Many institutional and individualinvestors today agree with ProfessorStiglitz’ view that stocks are expensive.Perhaps influencing their judgment is thatthey may not have owned stocks as theyrebounded from their low point during theFinancial Panic that ended in March 2009.They, as a result, continue to hope for adecline to give them another chance.

To provide you with historic perspective onstock valuations, U.S. stock prices haveincreased less than 26% from their peaklevels nearly seven years ago in 2007 andless than 30% from their peak levels inMarch 2000, over 14 years ago.* In contrast,U.S. stock prices over the past century havedoubled about every 10 years. Stockvaluations at present approximate 16 timesearnings. That is the median level for thepast hundred years. Stock prices are basedon many factors. Among them are interestrates and our economy’s growth prospects.Interest rates have never been lower in thehistory of our nation. Low interest rates

make stocks more valuable. If investorsexpected rates to remain at present levels,stock multiples would now be much higher.Further, our economy is steadily growing;unemployment is steadily falling; and ournation is fast becoming energyindependent. These are all good things. Youcan google other stock market predictionsby well known investors over the years tosee for yourself how accurate they havebeen.

By contrast, Warren Buffett, the mostsuccessful investor of our time, says that “Ihave no idea what the stock market isgoing to do. Not the faintest idea. We arenot in that business.” He then remarkedthat, “If I had known in 1973 what wouldhappen in 1974, I never would have boughtstocks in 1973.” Buffett did invest in 1973.The Dow Jones Industrial Average was thenunder 1000.

The story of my wife’s Aunt Ruth is one, likeBuffett’s, that I think also supports anoptimistic outlook about long-terminvestments in publicly-owned businesses.

Ruth Bregman. 1912-1996.

Ruth Bregman was my wife Judy’s aunt.Soon after Judy’s mom Sylvia died in 1982at age 72, Aunt Ruth, Sylvia’s youngersister by two years, became Judy’ssurrogate mom. This spring, Judy’s cousinsent us a 1990 video of Aunt Ruth beinginterviewed by her two daughters. AuntRuth’s dad, Morris Krumholz, emigratedfrom Austria to America in 1897. He wasthen 15. He came to America to escapereligious persecution. When Morriscouldn’t find a job, he lied about his ageand in 1898, enlisted in the U.S. Army tofight in the Spanish-American war. Hisfuture wife, Ray, came to America fromMorris’ home town in Austria in 1898.Soon after the Spanish-American warended in 1901, the young couple married.

Their first apartment was in a tenement onNew York City’s Lower East Side, acommunity of immigrants. Morris’ first jobwas as a peddler selling thread to garment

2

Letter from Ron

factories. When Morris didn’t earn enoughas a peddler, he moved Ray and their fourdaughters to New Jersey where theybecame chicken farmers. When that didn’twork out either, Morris became a landspeculator in Illinois. Finally, in 1923, Morrisand his young family returned to New Yorkwhere he became a builder/owner of sixapartment buildings in the Bronx! Thefamily prospered in the 1920s. They did notfare as well in the 1930s. When Morris’tenants couldn’t afford their $44 permonth apartment rents because they hadlost their jobs, Morris told them to “pay mewhen you can.” Further, when his tenantshad difficulty buying food for their families,Morris lent them money! When Morris diedin 1937 at age 55, four of his six buildingshad been mortgaged during the ‘30s andwere lost. The rents from the two buildingshe owned free and clear were enough tosupport his family for quite a while.

In 1935, Aunt Ruth married Nat Heyman.Nat’s business sold the U.S. Army buttonsfor soldiers’ uniforms. His business thrivedduring World War II, but Nat, just like AuntRuth’s dad, died at a young age. In 1951,when Nat, too, passed away, he was only48. But, by that time, Aunt Ruth had saved$150,000, which she thought would last forthe rest of her life. The purchasing power ofour currency was a lot more then than now.For example, my parents bought our firstsingle family home in 1948 for $5,000! Mydad was an engineer for the Army at Ft.Monmouth, New Jersey, and, in 1956, whenwe celebrated my bar mitzvah, we alsocelebrated the first year my dad would earn$10,000!

So…in 1951….$5,000 homes…$10,000engineer salaries….$44 per monthapartment rents…a Dow Jones IndustrialAverage of 239…and $150,000 cash withmore than $1.5 million purchasing powerin 2014 dollars!

Sound as a dollar?

Is it any wonder that we take FederalReserve Chairman Janet Yellen at her wordthat the Fed will create inflation and won’t

raise interest rates abruptly. To fostereconomic growth, she thinks thebenchmark short-term rate is unlikely torise as high as it has in previous, morerobust recoveries. We think ChairmanYellen will continue this policy because oureconomy remains highly leveraged.Government, corporate and private debt, inthe aggregate, represent more than 300%of GDP. If interest costs rise, borrowers willfind it difficult to pay interest on their debtwhile maintaining spending. That couldhave a substantial negative impact on oureconomy’s growth rate and ability tocreate jobs. If interest costs remain lessthan inflation, our indebtedness will declineas a percentage of our nation’s GDP. Stocksare a hedge against declining currencyvalues and increasing inflation. Investmentsin growing businesses, we think, are thebest hedge.

Baron Funds invests for the long term incompetitively advantaged, entrepreneuriallymanaged, growing businesses. Although webelieve it is not possible to predict marketsin the short term, we think long-termprospects for publicly owned businesses arequite favorable. This is since we think theywill continue to double their earnings andtheir value from present levels about everyten years. That represents a 7%compounded annual growth rate. This iswhile the purchasing power of our moneywill continue to fall by half every twentyyears. That represents, as has been the casefor the past hundred years, about a 3.5%annual decline in the dollar’s purchasingpower. As a result, I guess it should not havebeen surprising that after I watched “TheAunt Ruth Video,” I was so optimistic that Icouldn’t sleep…

Increasing life expectancies…another

reason to be optimistic…

One more thing. In 1900, as you can seefrom The Aunt Ruth story, the average lifeexpectancy for United States’ citizens was48 years. In 2014, it is 80 years! Further, ifyou are lucky enough to make it to 70 andhave a healthy lifestyle, you are likely tolive well into your 90s! Science promises us

that affordable genome sequencing willsoon enable us to determine the causes formore diseases. Also, biotech therapies inthe coming age of “personalized medicine”will allow us to prevent and cure presentlyincurable diseases. Many believe theaverage person in America can expect tolive to 125 before the end of the presentcentury. As one small step, during the 12years of Michael Bloomberg’s term as NewYork’s mayor, the average life expectancyfor New Yorkers increased three years!According to Julian Robertson, Founder ofTiger Management Corp., this was theresult of our former Mayor’s efforts toimprove our city’s environment andeducate our city’s residents about healthylifestyles.

My mom passed away after a brief illnesstwo years ago at age 92. Reaching thatage would have been improbable at thebeginning of the twentieth century. Whenmy mom died, she had been married tomy dad for nearly 70 years! My dad will be94 in December. Jerry Seinfeld’s mom,Betty, was a good friend of my mom’s, andhas an apartment in Florida on the samefloor as my parents’. Betty is now 97 andstill few can keep up with her vigorousexercise program…regardless of how oldthey are! Finally, my Uncle Sam pilotedairplanes well into his 80s. He too gotaround pretty well… until he crashed hismotorcycle into a truck when he was 85!With exponential advances in technologyand health care, we are pretty sure ourchildren and grandchildren will leadhappier, healthier and longer lives than wewill. Which is another reason for us all tobe optimistic.

Baron Investment Conference 2014.

November 7, 2014. Metropolitan Opera

House. New York City.

We hope you will be able to attend our 23rdannual investment conference onNovember 7. These annual meetings aredesigned to allow you to meet and questionexecutives of businesses in which yourhard-earned savings have been invested.They also give you an opportunity to meet

3

June 30, 2014 Letter from Ron

and question our portfolio managers andanalysts, Linda and me and our salesrepresentatives about our investmentprocess, our portfolio investments, and anyother topics that are on your mind….noquestions are off limits. We hope you willregard this day as one to “kick the tires” ofyour investments in Baron Funds. Duringdinners on Thursday evening before ourconference and the early part of thatFriday morning, there are special programsfor institutional investors, registeredinvestment advisers, independent financialadvisers and consultants. At these dinnersand programs, attendees will have a chanceto meet and speak one-on-one with ouranalysts and portfolio managers. Again, notopics are off limits. Our analysts andmanagers will be available throughout therest of Friday to answer any questions anyof you may have.

Finally, the entertainment. At lunch. At theend of the day. As usual, we think it will bevery cool…outstanding, as a matter of fact.

Also, as usual, it will be at our expense, notyours. And as usual, it will be a surprise. No,we can’t tell you who it is. Only Linda andI know for sure. Linda because she signsboth the contracts and the checks. Mebecause I choose the entertainers.

We hope we’ll see you November 7. Forthose of you who can’t attend, though,you will be able to watch by live webcastfrom the Baron Funds websiteeverything but the entertainment. (weare contractually prevented fromstreaming entertainment). You can get asense of our meeting by watchingCNBC’s Squawk Box that morning from6 AM to 8:30 AM (Eastern StandardTime). Becky Quick and I will beinterviewing several executives withwhom we have invested and with whomwe expect Baron Funds to make a lotmore money…although we obviouslycan’t promise that. I will also beinterviewed on Squawk Box by Becky livefrom the conference that morning.

We like to say that “we invest in people.”We hope when you attend our annualconferences or watch us on CNBC or visitour website, you will gain a betterunderstanding of the businesses in whichwe invest; and the character and talent ofthe executives who run them; and thecharacteristics of the people who work atour Firm. See you in November.

Thank you for joining us as fellowshareholders in Baron Funds. We willcontinue to work hard to justify yourconfidence in us. See you this fall.

Respectfully,

Ronald BaronCEO and Chief Investment OfficerBaron FundsJuly 23, 2014

4

Letter from Ron

*Including the effect of reinvested dividends, U.S. stock prices have increased 45% and 69%, respectively.

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 for Baron Opportunity, Fifth Avenue Growth, Focused Growth, International Growth, Real Estate, Emerging Markets, Energy and Resources, Global

Advantage, and Discovery Funds (by contract as long as BAMCO, Inc. is the adviser to the Fund) and all the Funds’ transfer agency expenses may be reduced by

expense offsets from an unaffiliated transfer agent, without which performance would have been lower. Current performance may be lower or higher than the

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

should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary

prospectuses contain this and other information about the Funds. You may obtain them from the Funds’ distributor, Baron Capital, Inc., by calling 1-800-

99BARON or visiting www.BaronFunds.com. Please read them carefully before investing.

Baron Asset Fund’s annualized returns as of June 30, 2014: 1-year, 25.87%; 5-years, 19.09%; 10-years, 9.62%. Annual expense ratio for the Retail Sharesas of September 30, 2013 was 1.32%. Baron Growth Fund’s annualized returns as of June 30, 2014: 1-year, 20.73%; 5-years, 19.58%; 10-years, 9.65%.Annual expense ratio for the Retail Shares as of September 30, 2013 was 1.30%. Baron Small Cap Fund’s annualized returns as of June 30, 2014: 1-year,22.55%; 5- years, 19.61%; 10-years, 9.45%. Annual expense ratio for the Retail Shares as of September 30, 2013 was 1.31%. Baron Opportunity Fund’s

annualized returns as of June 30, 2014: 1-year, 20.31%; 5-years, 18.53%; 10-years, 10.12%. Annual expense ratio for the Retail Shares as of September 30,2013 was 1.37%. Baron Partners Fund’s annualized returns as of June 30, 2014: 1-year, 34.48%; 5-years, 23.62%; 10-years, 11.65%. Annual expense ratiofor the Retail Shares as of December 31, 2013 was 1.67% (comprised of operating expenses of 1.38% and interest expense of 0.29%). Baron Fifth Avenue

Growth Fund’s annualized returns as of June 30, 2014: 1-year, 31.71%; 5-years, 17.83%; 10-years, 7.35%. As of September 30, 2013, annual operatingexpense ratio for the Retail Shares was 1.47%, but the net annual expense ratio was 1.30% (net of the Adviser’s fee waivers). Baron Focused Growth

Fund’s annualized returns as of June 30, 2014: 1-year, 18.29%; 5-years, 17.14%; 10-years, 11.12%. As of December 31, 2013, annual operating expenseratio for the Retail Shares was 1.42%, but the net annual expense ratio was 1.35% (net of the Adviser’s fee waivers). Baron International Growth Fund’s

annualized returns as of June 30, 2014: 1-year, 24.64%; 5-years, 15.44%; Since Inception (12/31/08), 16.07%. As of December 31, 2013, annual operatingexpense ratio for the Retail Shares was 1.74%, but the net annual expense ratio was 1.50% (net of the Adviser’s fee waivers). Baron Real Estate Fund’s

annualized returns as of June 30, 2014: 1-year, 27.11%; Since Inception (12/31/09), 22.86%. Annual expense ratio for the Retail Shares as of December31, 2013 was 1.35%. Baron Emerging Markets Fund’s annualized returns as of June 30, 2014: 1-year, 23.62%; Since Inception (12/31/10), 6.98%. As ofDecember 31, 2013, annual operating expense ratio for the Retail Shares was 1.90%, but the net annual expense ratio was 1.50% (net of the Adviser’s fee

5

June 30, 2014 Letter from Ron

waivers). Baron Energy and Resources Fund’s annualized returns as of June 30, 2014: 1-year, 43.24%; Since Inception (12/30/11), 15.50%.As of December31, 2013, annual operating expense ratio for the Retail Shares was 2.25%, but the net annual expense ratio was 1.35% (net of the Adviser’s fee waivers).Baron Global Advantage Fund’s annualized returns as of June 30, 2014: 1-year, 34.65%; Since Inception (4/30/12), 18.10%. As of December 31, 2013,annual operating expense ratio for the Retail Shares was 5.51%, but the net annual expense ratio was 1.50% (net of the Adviser’s fee waivers). Baron

Discovery Fund’s total return as of June 30, 2014: Since Inception (9/30/13), 29.20% (not annualized). Estimated annual operating expense ratio for theRetail Shares is 3.25%, but the net annual expense ratio is 1.35% (net of the Adviser’s fee waivers).

For Baron Partners Fund (BPF) and Baron Focused Growth Fund (BFGF) the performance reflects the actual fees and expenses that were charged whenthe Funds were partnerships. The predecessor partnerships charged a 20% performance fee (BPF) or a 15% performance fee (BFGF) after reaching a certainperformance benchmark. If the annual returns for the Funds did not reflect the performance fee for the years the predecessor partnerships charged aperformance fee, returns would be higher. The Funds’ shareholders are not charged a performance fee. The predecessor partnerships’ performance is only forperiods before the Funds’ registration statements were effective (4/30/03 for BPF and 6/30/08 for BFGF). During those periods, the predecessor partnershipswas not registered under the Investment Company Act of 1940 and were not subject to its requirements or the requirements of the Internal Revenue Coderelating to registered investment companies, which, if they were, might have adversely affected their performance.

Portfolio holdings as a percentage of net assets as of June 30, 2014 for Valmont Industries, Inc. are as follows: Baron Growth Fund (0.7%). Portfolio holdings

may change over time.

Net realized and unrealized gains for Funds that held Valmont Industries, Inc. are as follows ($ in millions): Baron Growth Fund + $27.2; Baron Small Cap

Fund + $3.1.

The discussion of market trends and companies throughout this report are not intended as advice to any person regarding the advisability of investing in any

particular security. Some of our comments are based on current management expectations and are considered “forward-looking statements.” Actual future

results, however, may prove to be different from our expectations. Our views are a reflection of our best judgment at the time of the publication of this report

and are subject to change any time based on market and other conditions, and we have no obligation to update them.

66

LeBron James is heading back to Cleveland, Germany won the World Cup(again), and Derek Jeter is making his farewell tour in stadiums across thecountry. (I had to get sports in.) In other news, the stock markets have hitnew highs, driven by better-than-expected corporate earnings, continuedlow interest rates, and lower unemployment rates. Featured prominently inthe news have been articles about market structure and dark pools, which,to our knowledge, are not frequented by Michael Phelps. Equity marketstrading has been a frequent topic of discussion this year and is also thetopic of this letter.

Over the past several quarters, my letters have described our investmentprocess: finding investment ideas, researching companies, managingportfolios, and thinking about risk. This quarter’s letter discusses the art ofbuying and selling stocks. At Baron, trade execution is a critical part of ourinvestment process.

The objective of trading has not changed much over the years. For everytrade there is a buyer, who theoretically believes he is buying the stock atless than what he thinks he can subsequently sell it for, and a seller, whotheoretically thinks his stock is fully valued. So buyers and sellers haveintrinsically opposing points of view. Similarly, long investors wish fordifferent results than do short sellers, and long-term investors havedifferent interests than to short-term traders. This creates bothopportunities and inefficiencies. What has changed, and changeddramatically, is the structure and complexity of the trading markets.

Trading in the Constantly Changing Stock Markets

A hundred years ago, the market was much simpler than we know it today.There weren’t thousands of stocks or mutual funds to pick from, and amicrosecond wasn’t an applicable unit of measure for transaction speed.

Letter from Linda

The creation of centralized exchanges made it easier for buyers and sellersto meet and information to be more readily exchanged. Fifty years ago,there were only two stock exchanges in the U.S., the NYSE (1903) andAMEX (1953). By 1971 the number of exchanges had increased to three,but the past 15 years have seen a real proliferation of trading venues.

LINDA MARTINSON

CHAIRMAN, PRESIDENT AND COO

1900 1930 1950 1970 1990 2000 2010 2013

1903

NYSE1953

AMEX

1971

NASDAQExchange

2004

Dual ListingNYSE

2008

BATSExchange

2010

DirectEdge

Exchange

1933

Security Act;Banking Act

1934

SecuritiesExchange

Act

1940

InvestmentCompany Act

1975

Elimination ofStated

Commissions1999

Reg ATS

2005

RegulationNMS

2010

DoddFrank;Circuit

Breakers

2008

CreditCrisis

1980

ProgramTrading

1988

SOES:Nasdaq Auto

Execution

1999

FirstHFT

Firms

2010

FlashCrash

2012

KnightCapital

Implosion

2013

London Whale;Nasdaq Down

for 3 hours

2007

QuantCrash

2001

Tech Crash1987

BlackMonday

2011

S&PDowngraded

U.S. Debt

2011

UptickRule

1997

OrderHandling

1969

Instinet1918

PneumaticTube System

1930

“Black Box”Ticker

1964

The 900Ticker

1976

FullConsolidated

Tape

2002

NasdaqDealers Adopt

Algorithms

1976

NYSE DOT

2012

LimitUp/Down

1993

First EMSPlatform

1929

GreatDepression

2001

Decimalization

Equity Trading Venues

Regulation

Technology/Innovation

Historical Market Events

2005

GS, UBS,Knight

Dark Pools

1996

BloombergTradebook

ECN

1997

ARCA &Redibook

ECNs

2006

CS, Fidelity,Lehman, MLDark Pools

2007

BIDSDark Pool

2001

Liquidnet

2009

GETCO,Citi

Dark Pools

Source: Credit Suisse Trading Strategy; Rosenblatt Securities, Inc.

June 30, 2014 Letter from Linda

More Participants = More Venues to Trade In

Source: Credit Suisse Trading Strategy

The varying degrees of transparency and customer incentives of the differentvenues have also added complexity. They have created more opportunities fortraders and market makers to take advantage of any discrepancies that existbetween the many trading venues and trading vehicles (e.g., derivatives). High-frequency traders, in particular, have been most blamed for unfairly exploitingthese discrepancies and at the expense of other investors. Michael Lewis’s mostrecent book, Flash Boys, which is about HFT, has focused a lot of mediaattention about high-frequency traders. It has also turned the regulators’spotlight on HFT and called for more scrutiny and debate on the subject. It isnot our place to opine on the legitimacy of this business. However, the uproarfrom the book and the incendiary comments made by the main protagonists,the founders of the IEX exchange, have stirred a healthy debate about currentmarket structure. It is clear to us, and has been for a number of years, that HFThas grown much faster than the capacity of regulators to understand andregulate this new marketplace. Today, HFT represents almost 50% of theaggregate trading volume in the U.S., as measured by TABB Group; we think thisis reason enough to reevaluate its behavior and position in the financial system.

HFT Plays a Meaningful Role in Today’s Marketplace

HFT Trade Volume as % of Average Daily Volume

Source: TABB Group

While high-speed computerized trading was responsible for Knight Capital’s$440 million one-day loss (and subsequent failure), several flash-crashes,and alleged front-running, among others, not all HFT is the same and notall HFTs are predatory.

70%

21%26%

35%

52%

61%56% 55%

51% 49% 49%

0%2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

10%

20%

30%

40%

50%

60%

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

FINRA TRF

Other Exchanges

NasdaqBX

DirectEdge

BATS BYX

BATS

NYSE ARCA

NYSE

Nasdaq

Exchange Market Share Over Time

Today, there are at least 13 traditional electronic markets, like the NYSEand NASDAQ, and about 45 alternative trading systems, most of which arecharacterized as dark pools and which account for more than a third oftrading volume.

The Great Depression of 1929 and the accompanying crash in the marketwere the catalysts for the creation of a regulatory system to bettermanage the markets. The backbones of that regulatory system are shownin the box below, and they remain the primary regulatory foundationtoday.

Technology has also had a significant impact on the evolution of themarkets. The first computerized trading network was Instinet, created in1969. Instinet allowed large institutional firms to buy and sell largerquantities of securities automatically and anonymously, without havingto go to a specialist. This solved the problem of unintended informationflow to selective persons (e.g., floor traders and specialists, who hadenjoyed an information advantage). Instinet was essentially an early formof what later became known as “dark pools.” In 1976, the DOT systemallowed orders to be transmitted electronically, and in 1988 Nasdaqcreated SOES, which automatically executed small orders. This thenspawned an early form of high-frequency trading (“HFT”),“SOES Bandits,”who were traders who took advantage of the disconnect betweenelectronic orders and market makers.

Other developments also had impacted on the evolution of the markets,including the May 1975 deregulation of commissions; the Nasdaqantitrust litigation in 1996, alleging that market makers maintainedspreads that were too wide; Reg ATS (1999), which created rules for theproliferating non-exchange venues; and decimalization (2001). Bid/askspreads used to be quoted in eighths, then in sixteenths, butdecimalization enabled trades to be executed at virtually any priceincrement.

After the financial crisis, in 2010, Congress enacted Dodd Frank which,among other things, introduced the “Volker Rule,” effective April 1, 2014,which prohibits banks from engaging in proprietary trading; subjectedhedge funds to the Investment Advisers Act; and created systemic riskoversight of banks that were “too big to fail.”

Over time, the regulatory environment (or its short-comings), as well asfinancial and technological innovations have attracted more marketparticipants and have brought about new ways of trading. Computer powerand enhanced connectivity, the proliferation of 401(k)plans and ETFs, andthe increased popularity of short-selling and financial derivatives have allattracted more types of market participants.

To facilitate the growing variety and needs of investors, more tradingvenues, brokers and market makers emerged. The higher fragmentation hasmade trading more dispersed and intermediation more complicated.

Securities Act of 1933: addresses the capital markets (IPOs andsecondaries), including detailed financial disclosure requirementsfor issuers and selling insiders.

Securities Exchange Act of 1934: regulated secondary trading andexchanges, instituted anti-fraud provisions, and created the SEC.

Investment Company Act of 1940 and Investment AdvisersAct of 1940: regulated mutual funds, UITs, and other publicfunds and investment advisers.

7

Without getting too technical, HFT strategies can be divided into two broadcategories: (i) strategies that profit by reacting to and correcting naturallyoccurring short-term mispricing and (ii) strategies that profit by creatingand subsequently taking advantage of short-term mispricing. The first kindgenerally improves market quality, liquidity and price efficiency. These arethe “good” HFTs. It is the second, “predatory” kind that hurts investors anddeteriorates market quality through sheer market manipulation.

As disturbing as it is, this isn’t something new. Over the long history ofmarket evolution, there has always been someone who manipulates andunfairly exploits the system. Some have successfully avoided detection, butfor many others the outcome was not as good. We think that thecompetitiveness inherent in our dynamic markets has always found a wayto attenuate transgressions in the markets. Because of this, we believe themarkets will, more or less, self-correct, with help from regulatoryenhancements. Unfortunately, technology moves at a faster pace than doCongress and the SEC. We think that HFT is here to stay and it is up to themarket participants to use it effectively.

Have Investors Benefitted from the More Complex Market

Structure?

Over time, the market has attracted a higher number of investors who trademore frequently and manage a greater variety of portfolios and strategies.While high complexity implies higher risk of technological mishaps andmakes fraud and manipulation less detectable, we believe that its benefitsfor investors outweigh its downsides.

In our opinion, the market today operates more efficiently as a result ofimproved regulation and faster technology. These changes have fosteredtransparency and enhanced competition, largely improving the marketenvironment. Compressed bid-ask spreads and more robust compliancepolicies are only a few of the positive effects that have contributed to acheaper and smoother trading process today. As shown in the chart below,median spreads are more than 30 times lower than they were 20 years ago.

Technology + Regulatory Developments = Lower Spreads

Source: Credit Suisse Trading Strategy

Increased market fragmentation has produced substantial positive effects forinvestors. Intense competition among brokers and among venues has forcedthem to reduce their fees and improve service quality.Today, U.S. trading costsare among the lowest in the world, and U.S. investors enjoy the fastestexecution speed. From 1980-2005, commission costs have fallen dramatically,

Decimalization16ths RegNMS

1

2

4

8

16

32

64

128

Jan-

94

Jan-

95

Jan-

96

Jan-

97

Jan-

98

Jan-

99

Jan-

00

Jan-

01

Jan-

02

Jan-

03

Jan-

04

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

11

Jan-

12

Jan-

13

Jan-

14

Median Spread (S&P 500, bps)

as shown in the chart below. In addition, Credit Suisse has estimated that from2006 through January 2014, costs have declined by an additional 37%.

Market Fragmentation + Competition = Lower Commissions

Commissions have fallen dramatically

Source: French, Kenneth R., The Cost of Active Investing (April 9, 2008).

While investors have benefited from change, the markets’ complexity andsophistication require knowledge and experience to navigate successfully.

Trading at Baron

In 1982, when Baron was founded, we traded principally by telephone andhand wrote orders and fills on buy/sell slips, which we time stamped in alittle time stamp machine that sat on the trader’s desk. Today, our ordersare placed through a sophisticated order management system (“OMS”),and we have many direct computer connections with brokers. Orders areautomatically checked against pre-programmed investment guidelinesand restrictions in our OMS’s compliance module. If the portfoliomanager wanted to buy a large cap stock in a small cap portfolio, thesystem would signal an alert, and the trade could not be executed.

Once a valid order clears the compliance system, the traders decide howbest to execute the order. All traders have an affirmative obligation toseek the best execution for clients, which means they seek to execute thetrade at the best volume and price possible. For a small order where, inour traders’ judgment, there will be little market impact, we typically sendit directly to the marketplace for execution. Larger orders are worked bythe traders.

Our traders do not trade as a broker/dealer. Rather, our traders work forour investment advisers, and their sole objective is to get excellentexecutions on behalf of our mutual funds and other clients. We tradeglobally across all market caps. We have three experienced traders. DavidSchneider, our head trader, has 27 years of experience. Jodi Montgomeryhas 18 years of experience, 14 at Baron; and recent hire Michael DiChiaro,who focuses on international markets, has five years of trading experience.They couldn’t do what they do without the experienced assistance of 11-year Baron veteran Kristen Hepp, and Michael DelPrete, in our accountinggroup for 10 years and then on the trading desk for five years.

Like our analysts, our traders do their research. They often use charts andtechnical analysis to help them find the best price range for the volumesought. If a stock has been overbought and is near resistance, we know wecan be less aggressive. Conversely, if we are selling into strength and thestock is near resistance, we will typically be more aggressive. We usetechnicals for price threshold discovery, not for timing the markets.

1.50%

0%

1980 1985 1990 1995 2000 2005 2010

0.50%

1.00%

Letter from Linda

8

9

June 30, 2014 Letter from Linda

We Also Use Multiple Sophisticated Trading Systems…

Source: Mark O’Collin

We do not strive to achieve average executions, so we avoid algorithmsthat are based on volume weighted average prices (“VWAP”), a widelyused execution benchmark. We generally buy more aggressively onweakness and less aggressively on strength, and vice-versa for sales. Ourresults, as measured by Bloomberg Finance, L.P., using Bloomberg’s LimitAdjusted Internal VWAP,* show that our executions are consistently betterthan the VWAP. For the 12 months ended June 2014, those results put usin the top decile as measured against our Bloomberg peer group.

We believe that staying abreast of developments in market structure andtechnology, in addition to being knowledgeable about how individual stockstrade, is critical to effective trade executions. Although we can’t hide ourtrading from the market, we do try to minimize our footprint by beingsmart, paying attention, and applying experience. We strive for moreefficiencies and cost optimization in our trading processes. When doneeffectively, trading can contribute to a portfolio’s performance to thebenefit of our shareholders and investors.

Sincerely,

Linda S. Martinson.Chairman, President and COOJuly 23, 2014

Our traders consult frequently with our portfolio managers to plan a courseof action. Sometimes a portfolio manager just wants the order filledpromptly; sometimes he is willing to be more patient. Conversations withanalysts and portfolio managers about the reason for the investmentdecision help give traders context, which helps guide them as to howaggressive or patient they should be on a stock. Portfolio managersregularly consult with the traders, and vice versa, to discuss orders beingworked and strategies for completing a trade.

Trading for some of our larger funds, especially our small cap funds, canhave an impact on the market, so we try to trade without signaling ourintentions or creating a pattern that computers might recognize. We lookfor natural liquidity whenever possible. Sometimes the liquidity comes tous directly when brokers show us orders, and sometimes we go in searchof it through our trusted network of institutional cash trading desks andinstitutional dark pools such as liquidnet, Bids, or Posit. Often our traders’skills and experience prove critical in finding the other side of a trade.

Over the years we have built strong relationships and an excellentreputation as a long-term investor, which we believe makes us anattractive counterparty for brokers to show their order flow and fordealers to place their IPOs and secondaries. We try to match the rightbroker to the right set of circumstances and use limit orders where wethink they are needed.

We also use multiple electronic trading systems, which in large part rely onalgorithms to execute trades. We meet regularly with our providers todiscuss the markets and their anti-gaming technology. Long before FlashBoys, our traders met with Brad Katsuyama and Ronan Ryan, the heroes ofthe book, before they left Royal Bank of Canada to form their ownexchange, IEX. Katsuyama and Ryan were on a mission to providetransparency to large institutional investors about how HFT impacted theirtrades. They explained their theory that orders in the front of the queuewere more exposed to predatory traders than orders further down and howthey figured out that slowing down their router resulted in better liquidityand better executions. IEX has become one of our regular trading venues.

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 Limit Adjusted Internal VWAP measure the difference between our average execution price and the VWAP from the time the order is received on the blotter until thetime it is filled, excluding orders outside our limit.

Baron Small Cap Fund

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

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

Baron Asset Fund

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

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

Baron Growth Fund

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


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 of500 widely held 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 of500 widely held large-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 500widely held large-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 orredemptions of Fund shares.

$0

$20,000$10,000

$30,000

$50,000$60,000$70,000$80,000$90,000

$40,000

$100,000

$200,000$190,000

$140,000$150,000$160,000$170,000$180,000

$130,000$120,000$110,000

$194,456

$135,092$119,799

Information Presented by Fiscal Year as of September 30 and for the nine months ended June 30, 2014

Baron Asset Fund1,4

S&P 500 Index1

Russell Midcap Growth Index1

6/87 9/89 9/91 9/93 9/97 9/99 9/03 9/05 9/07 9/09 9/13 6/149/87 9/019/95 9/11

$0

$30,000

$20,000

$10,000

$60,000

$50,000

$40,000

$52,611

$28,135

$24,360

Information Presented by Fiscal Year as of September 30and for the nine months ended June 30, 2014

Baron Small Cap Fund3,4

S&P 500 Index3

Russell 2000 Growth Index3

9/97 9/99 9/01 9/03 9/05 6/149/07 9/09 9/11 9/13

$0

$50,000$40,000$30,000$20,000$10,000

$130,000$120,000

$100,000$110,000

$90,000

$60,000$70,000$80,000

$125,884

$61,701

$43,696


Baron Growth Fund2,4

S&P 500 Index2


12/94 9/95 9/97 9/99 9/01 9/03 9/05 9/07 9/09 6/149/139/11

Baron Asset Fund’s annualized returns as of June 30, 2014: 1-year, 25.87%; 3-year, 14.50%; 5-year, 19.09%; 10-year, 9.62%; and Since Inception, 11.60%.

Baron Growth Fund’s annualized returns as of June 30, 2014: 1-year, 20.73%; 3-year, 14.31%; 5-year, 19.58%; 10-year, 9.65%; and Since Inception, 13.87%.

Baron Small Cap Fund’s annualized returns as of June 30, 2014: 1-year, 22.55%; 3-year, 13.38%; 5-year, 19.61%; 10-year, 9.45%; and Since Inception, 10.42%.

Baron Funds

10

Baron Opportunity Fund

Comparison of the change in value of $10,000 investment in Baron Opportunity Fund (Retail Shares)


$0

$14,000

$12,000

$10,000

$2,000

$4,000

$6,000

$8,000

$22,000

$20,000

$16,000

$18,000

$21,130

$16,323

$18,859


Baron Opportunity Fund1,4

S&P 500 Index1


2/00 9/00 9/01 9/02 9/03 9/04 9/05 9/06 9/07 9/12 6/149/08 9/09 9/10 9/11 9/13

Baron Partners Fund

Comparison of the change in value of $10,000 investment in Baron Partners Fund (Retail Shares)


$0

$50,000$40,000$30,000$20,000$10,000

$60,000$70,000$80,000$90,000

$100,000$110,000

$180,000$170,000

$150,000$160,000

$130,000$120,000

$140,000

$171,376

$79,627$75,467

Information Presented by Fiscal Year as of December 31and for the six months ended June 30, 2014

Baron Partners Fund2,4,5

S&P 500 Index2


1/92 12/95 12/97 12/99 12/01 12/03 12/05 12/07 12/09 6/1412/1312/93 12/11

Baron Fifth Avenue Growth Fund

Comparison of the change in value of $10,000 investment in Baron Fifth Avenue Growth Fund (Retail Shares)

in relation to the S&P 500 Index and the Russell 1000 Growth Index

$0

$15,000

$10,000

$5,000

$25,000

$20,000 $20,349$21,866$22,673


Baron Fifth Avenue Growth Fund3,4


S&P 500 Index3

4/04 9/04 9/05 9/06 9/07 6/149/08 9/09 9/10 9/11 9/12 9/13

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 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 S&P 500 Index measures the performance of 500 widely held large-cap U.S. companies and the Russell 1000® Growth Index of large-sized U.S. companies thatare classified as growth. 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.

Baron Opportunity Fund’s annualized returns as of June 30, 2014: 1-year, 20.31%; 3-year, 10.42%; 5-year, 18.53%; 10-year, 10.12%; and Since Inception, 5.36%.

Baron Partners Fund’s annualized returns as of June 30, 2014: 1-year, 34.48%; 3-year, 19.04%; 5-year, 23.62%; 10-year, 11.65%; and Since Inception, 13.51%.

Baron Fifth Avenue Growth Fund’s annualized returns as of June 30, 2014: 1-year, 31.71%; 3-year, 15.91%; 5-year, 17.83%; 10-year, 7.35% and Since Inception, 7.24%.

Baron Funds

11

Baron International Growth Fund

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

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

$0

$50,000

$40,000

$30,000

$20,000

$10,000

$80,000

$70,000

$60,000

$75,557

$40,891$37,807


Baron Focused Growth Fund1,4,5

S&P 500 Index1


5/96 12/97 12/99 12/01 12/03 12/05 12/07 12/09 6/1412/1312/11

$0

$15,000

$20,000

$10,000

$5,000

$25,000

$22,700

$19,290$19,786

12/08 6/09 12/09 6/1412/126/1212/116/10 6/11 6/13 12/1312/10

Baron International Growth Fund2,5

MSCI ACWI ex USA Index2

MSCI ACWI ex USA IMI Growth Index2


1 The indexes are unmanaged.The Russell 2500™ Growth Index measures the performance of small to medium-sized 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- and small-cap growth securities across developed and emerging markets, excluding the United States. The MSCI ACWI ex USA Index Net USD measuresthe equity market performance of large and mid-cap securities across developed and emerging markets, excluding the United States. The indexes and Baron International Growth Fund includereinvestment 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 classificationsecurities. 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 furtherredistributed 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 500 Index measures the performanceof 500 widely held large-cap U.S. companies. The indexes and 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 certainperformance 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 predecessor partnership’s performance is only for the periods before the Fund’s registration statement was effective, which wasJune 30, 2008. 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 ofthe 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.

Baron Focused Growth Fund

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


Baron Real Estate Fund

Comparison of the change in value of $10,000 investment in Baron Real Estate Fund (Retail 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 $25,253

$19,332$19,703

12/09 6/1412/11 12/12 6/13 12/136/126/10 6/1112/10

Baron Real Estate Fund3,5

S&P 500 Index3

MSCI USA IMI Extended Real Estate Index3


Baron Focused Growth Fund’s annualized returns as of June 30, 2014: 1-year, 18.29%; 3-year, 11.56%; 5-year, 17.14%; 10-year, 11.12%; and Since Inception, 11.83%.

Baron International Growth Fund’s annualized returns as of June 30, 2014: 1-year, 24.64%; 3-year, 7.58%; 5-year, 15.44%; and Since Inception, 16.07%.

Baron Real Estate Fund’s annualized returns as of June 30, 2014: 1-year, 27.11%; 3-year, 22.91%; and Since Inception, 22.86%.

Baron Funds

12

Baron Emerging Markets Fund

Comparison of the change in value of $10,000 investment in Baron Emerging Markets Fund (Retail Shares)

in relation to the MSCI EM IMI Growth Index and the MSCI EM IMI Index

$0

$10,000

$5,000

$15,000

$12,663

$9,951$10,293

12/10 6/1412/11 12/12 12/136/136/126/11

Baron Emerging Markets Fund1,3

MSCI EM IMI Index1

MSCI EM IMI Growth Index1


Baron Emerging Markets Fund’s annualized returns as of June 30, 2014: 1-year, 23.62%; 3-year, 8.48%; and Since Inception, 6.98%.

Baron Funds

13

Baron Energy and Resources Fund

Comparison of the change in value of $10,000 investment in Baron Energy and Resources Fund (Retail 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 $14,338$13,861

$16,453

12/11 6/143/139/12 12/12 3/146/13 9/13 12/136/123/12

Baron Energy and Resources Fund2,3

S&P 500 Index2

S&P North American Natural Resources Sector Index2


Baron Energy and Resources Fund’s annualized returns as of June 30, 2014: 1-year, 43.24%; and Since Inception, 15.50%.

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 GrowthIndex 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 and Baron Emerging Markets Fund include reinvestment of dividends, net of foreignwithholding 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-related stocks, including mining,energy, paper and forest products, and plantation owning companies. The S&P 500 Index measures the performance of 500 widely held large-cap U.S. companies. The indexes and Baron Energyand 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 Fund distributions or redemption of Fund shares.

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 USD measures the equitymarket performance of large- and mid-cap growth securities across developed and emerging markets. The MSCI ACWI Index Net USD measures the equity market performance of large- and mid-cap securities across developed and emerging markets. The indexes and the Baron Global Advantage Fund include reinvestment of dividends, net of foreign withholding taxes, which positivelyimpact 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 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 Fund distributions or redemption of Fund shares.4 Not annualized.

Baron Discovery Fund

Comparison of the change in value of $10,000 investment in Baron Discovery Fund (Retail Shares)


$0

$10,000

$5,000

$20,000

$15,000

$12,920

$11,057$11,840

9/13 6/143/1412/13

Baron Discovery Fund2,3

S&P 500 Index2


Information Presented for the nine months ended June 30, 2014

Baron Discovery Fund’s returns as of June 30, 2014: Since Inception, 29.20%.4

Baron Global Advantage Fund

Comparison of the change in value of $10,000 investment in Baron Global Advantage Fund (Retail Shares)

in relation to the MSCI ACWI Growth Index and the MSCI ACWI Index

$0

$10,000

$5,000

$20,000

$15,000 $14,340

$13,440$13,691

4/12 6/143/139/12 12/12 3/146/13 9/13 12/136/12

Baron Global Advantage Fund1,3

MSCI ACWI Index1

MSCI ACWI Growth Index1


Baron Global Advantage Fund’s annualized returns as of June 30, 2014: 1-year, 34.65%; and Since Inception, 18.10%.

14

Baron Funds

15

June 30, 2014 Review and Outlook

Review.

“And the first one now will later be last…for the times they are

a-changin…” Bob Dylan. 1963.

From March 4, 2014 through May 15, 2014, many investors who ownedsmall and mid cap companies and Internet, technology and biotech healthcare stocks that performed exceptionally well in 2013, tried to “take profits.”They seem to have done so to purchase stocks that had not performed aswell last year. Included in that second category were REITs, energy stocks andemerging markets stocks. In the midst of investor “rotation” from the bestperforming stocks in 2013 to the worst performing stocks in 2013, small capgrowth companies, as measured by the Russell 2000 benchmark Index, fell12.28% during those ten weeks peak to trough. Following a strong growthstock rally in June, those stocks finished the six months ended June 30, 2014up 2.22%. The Russell 2000 Growth Index increased 43.30% in 2013.

REITs changed little in 2013. They have achieved strong gains this year.Emerging markets stocks, virtually unchanged last year, also achieved goodgains this year. Energy stocks, which increased in price much less thanmarkets last year, have experienced strong gains this year.

Baron Real Estate Fund, launched in December 2009, has $1.4 billion ofassets; Baron Emerging Markets Fund, launched in December 2010, has $1billion of assets; and, Baron Energy and Resources Fund, launched inDecember 2011 has $70 million of assets.All significantly outperformed theirbenchmark indexes since their inceptions…and last year…and this year, too.

We regard this rotation from one group of stocks to another as a normaloccurrence. We are continuing to invest as we always have…for the longterm in fast growing, competitively advantaged, well managed businessesthat are attractively priced. We continue to expect our investments tooutperform benchmarks over the long term with less volatility, i.e. less risk.Although we cannot assure you that we will be able to duplicate the resultswe have achieved over past 27 years. Further, we believe that theunderperformance in 2013 of stocks in emerging markets, real estate andenergy provides an object lesson when considering the underperformancein 2014 year-to-date of small and mid-sized growth stocks.

Last year proved to be a good time to make investments in 2013’sunderperforming stocks. We think 2014 could prove an equally attractivetime to invest in small cap growth stocks that are presentlyunderperforming. I am always skeptical of managers’ explanations whenthey underperform and tell me it is a temporary phenomenon. On the otherhand, I clearly must believe my explanation since my family and I, who arethe largest individual investors in Baron Funds, continue to make substantialadditional investments in the Funds every month.

Performance.

Year Ended Six Months EndedDecember 31, 2013 June 30, 2014

Russell 2000 Growth Index 43.30% 2.22%

MSCI US REIT Index 1.26% 17.00%

MSCI EM IMI Growth Index 0.10% 6.52%

S&P North American Natural Resources Sector Index 16.49% 16.43%

During the six months ended June 30, the Dow Jones Industrial Average,which measures the performance of 30 large cap businesses, reached a newhigh above 17,000. The broader S&P 500 Index also reached a new high!

In 2013, the Russell 2000 Growth Index increased 43.30%.The Index was aidedby the performance of small cap biotech stocks, which generally rose 50-100%in price last year. To date, we have avoided significant investments in biotechstocks because their prospects seemed to us unpredictable. We have recentlyexpanded our health care research to see if we can take advantage of advancesin biotechnology.We will see. But, we have hired our first biotech and specialtypharma research analyst, Josh Riegelhaupt, a PhD in Genetics and MolecularBiology from Rockefeller University, who had earned an undergraduate degreein Biology from MIT. Although Josh has only three years experience as a WallStreet analyst, we are certain he will help our portfolio managers and threeother health care analysts learn more about this industry.

Businesses with fragile balance sheets, which we also intentionally do notown, achieved strong performances in 2013. Those gains celebrated thesurvival of those businesses during the financial panic of 2008-09. We donot intend to invest in fragile businesses, even though we expect suchstocks to sometimes outperform.

“Software as a service” stocks with substantial recurring revenue, strongcompetitive advantages and significant growth opportunities, of whichwe owned less than benchmark allocations in most Baron Funds, alsoperformed well in 2013, but not as well this year. We are making agreater effort in this growth area.

Outlook.

Investors remain cautious about stock investments.

We think this is because memories of the 2008-09 Financial Panic, marketcrash and narrowly avoided Great Depression II are still fresh. We suppose itis likely that many who lived through that period will never again invest instocks. Just like many who lived through the Crash of 1987, the devastatingdeclines in 1973-74 and the Crash of ‘29 chose not to invest again in stocks.

It is not only individual investors who are cautious about investing in stocks.Institutions are managed by individuals just like you and me.The only differenceis that institutions have more money and their portfolio managers risk being

RONALD BARON

CEO AND CHIEF INVESTMENT OFFICER

fired if they lose money for their employers.An article in The Wall Street Journal

on June 24, “Pension Funds Missed Stock Rally,” outlines that the strategy ofmany institutions since 2009 to own fewer stocks and diversify with alternativeinvestments hasn’t paid off. “The average college endowment had 16% of itsinvestment portfolio in U.S. stocks as of the end of June 2013.... That is downfrom 23% in 2008 and 32% a decade ago,” according to the Journal. “53% oftheir funds were in alternative strategies, up from 33% in 2003.”

According to an article in Barron’s on February 8, 2014, Jane Mendillo, untilshe recently retired from her position, had “one of the most prominent jobsin the investment world. She oversaw the $32.7 billion Harvardendowment, the largest university endowment in the country.” Thatendowment had only 11% of its assets invested in domestic equities in2013! This compared to 12% in 2008 and 38% in 1995. Hedge fundsrepresented 15% of Harvard’s assets in 2013; they represented zero in1995. According to the Journal, Harvard earned 10.5% per year for the pastthree years ended June 30, 2013. This compares to the 18.45% annualizedreturns for the S&P 500 over the same period. Harvard’s endowment hasperformed well over the years and it likely will again. We are just trying tomake the point that individuals who manage money for institutions havethe same biases as individuals who manage money for their families.

When I was young and founded Baron Capital in 1982, my wife, who wasbrought up in a not wealthy neighborhood in the Bronx, cautioned me that“you can’t spend it twice.” This was when I wanted to purchase somethingwe obviously couldn’t afford. The same could be said now of so many whosold their stocks six years ago. “They can’t sell their stocks twice”…unlessthey are shortsellers of course. At some point, institutions and some ofthose who own very little stock will likely buy stock again. We are notexactly sure when. But someday.

Our guys…and our women have skin in the game…

Unlike “over half the 7,700 funds tracked by Morningstar where the fundsare run by managers who don’t have a single penny in their own funds,” allBaron mutual fund managers have significant investments in the Baronmutual funds they manage. Baron employees also have significantinvestments in these funds. According to Morningstar, “just 910 funds havea manager with a seven figure stake.” Most Baron mutual fund managershave greater than a seven figure stake in their funds.

Economists vs. Fortune Cookies

About a year ago, I was interviewed on CNBC’s Squawk Box. An economiston that program asked for my thoughts on “what the market was going todo over the next year.”Although I was quite optimistic about the long term,I tried several times to say that I did not believe it possible to predict howthe stock market would perform in the near term. The prior evening, mywife and I had a take out Chinese food dinner. My fortune cookie was evenbetter than the food. I finally responded to the economist’s questions byremarking, “I don’t believe in economists. I believe in fortune cookies.” Ithen read my fortune from my dinner the prior night. “All the effort you aremaking will ultimately pay off.” It made my point about relying on researchto choose stock investments and not betting on what “the market” will do.It also got some laughs. One of those not laughing, however, was ClaudiaPagazani. Claudia is the individual at our firm in charge of our Portfolio Riskand Analytics Group and who provides Linda, me and our portfoliomanagers with analytics that enable us to monitor portfolio risk. “Ron, howcould you say what you did on television? Does this mean you don’t respectwhat I do? I am an economist with an MBA from MIT and people in myteam have advanced degrees in applied mathematics.” I think she knew Iwas teasing. But, with Claudia you never know…

Review and Outlook

16

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 for Baron Real Estate, Emerging Markets and Energy and Resources Funds (by contract as long as BAMCO, Inc. is the adviser to the Fund) and all theFunds’ transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower.Current performance may be lower or higher than the performance data quoted. For performance information current to the most recent month end, visitwww.BaronFunds.com or call 1-800-99BARON. Investors should consider the investment objectives, risks, and charges and expenses of the investment carefullybefore investing. The prospectus and summary prospectus contain this and other information about the Funds. You may obtain them from the Funds’ distributor,Baron Capital, Inc., by calling 1-800-99BARON or visiting www.BaronFunds.com. Please read them carefully before investing.

Baron Real Estate Fund’s annualized returns as of June 30, 2014: 1-year, 27.11%; Since Inception (12/31/09), 22.86%. Annual expense ratio for the Retail Sharesas of December 31, 2013 was 1.35%. Baron Emerging Markets Fund’s annualized returns as of June 30, 2014: 1-year, 23.62%; Since Inception (12/31/10), 6.98%.As of December 31, 2013, annual operating expense ratio for the Retail Shares was 1.90%, but the net annual expense ratio was 1.50% (net of the Adviser’s feewaivers). Baron Energy and Resources Fund’s annualized returns as of June 30, 2014: 1-year, 43.24%; Since Inception (12/30/11), 15.50%. As of December 31,2013, annual operating expense ratio for the Retail Shares was 2.25%, but the net annual expense ratio was 1.35% (net of the Adviser’s fee waivers).

The discussion of market trends and companies throughout this report are not intended as advice to any person regarding the advisability of investing in anyparticular security. Some of our comments are based on current management expectations and are considered “forward-looking statements.” Actual futureresults, however, may prove to be different from our expectations. Our views are a reflection of our best judgment at the time of the publication of this reportand are subject to change any time based on market and other conditions, and we have no obligation to update them.

The Russell 2000® Growth Index is an unmanaged index that measures the performance of small-sized U.S. companies that are classified as growth. TheRussell 2000 Growth Index returns reflect the reinvestment of dividends and other earnings. The MSCI US REIT Index is an unmanaged free float-adjustedmarket capitalization index that measures the performance of all equity REITs in the US equity market, except for specialty equity REITs that do not generatea majority of their revenue and income from real estate rental and leasing operations. The MSCI EM (Emerging Markets) IMI Growth Index Net USD is afree float-adjusted market capitalization index designed to measure equity market performance of large, mid and small-cap securities in the emergingmarkets. The MSCI EM IMI Growth Index Net screens for growth-style securities. The Index includes reinvestment of dividends, net of withholding taxes. TheStandard & Poor’s (S&P) North American Natural Resources Sector Index is a modified capitalization-weighted equity index of U.S.- traded naturalresources-related stocks, including mining, energy, paper and forest products, and plantation owning companies. The Index returns reflect the reinvestmentof dividends and other earnings. The S&P 500 Index measures the performance of 500 widely held large-cap U.S. companies.

© 2014 Morningstar, Inc. All Rights Reserved. The Morningstar information contained herein: (1) is proprietary to Morningstar and/or its content providers;(2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers areresponsible for any damages or losses arising from any use of this information.

June 30, 2014 Baron Asset Fund

17

Dear Baron Asset Fund Shareholder:

Performance

After a challenging start to the quarter, most market indexes reached newhighs during the rally that took hold in late-May. In contrast with last year’smarket activity, throughout 2014 larger-capitalization indexes havegenerally performed better than mid-capitalization indexes, which, in turn,have surpassed smaller-capitalization indexes. “Value stocks” also continuedto surpass “growth stocks,” with the greatest outperformance of valueversus growth equities occurring among mid cap stocks. We believe thismarket activity is somewhat typical of ongoing bull markets, as investorstake profits in sectors that “have worked” and redeploy those proceeds intoareas that have underperformed.

After first quarter economic metrics contracted, partly as a result ofextremely poor weather, the U.S. economy expanded nicely during thesecond quarter. Employment figures were particularly encouraging, as theU.S. has experienced four continuous months of new job growth exceeding200,000, and the unemployment rate has fallen to its lowest level in sixyears. The market’s rise was bolstered by this positive economic data,coupled with an emerging consensus that interest rates won’t be increasingas quickly as some investors had feared.

Consistent with the fact that “growthier” stocks fell out of relative favorduring the quarter, the Consumer Discretionary and InformationTechnology sectors were two of the three worst performing sectors in theRussell Midcap Growth Index (the “Index”) during the quarter. These twosectors represent approximately 40% of the Fund’s investments, and thispresented a modest headwind to overall performance. During the three-month period ended June 30, 2014, Baron Asset Fund gained 3.59%, theIndex gained 4.37%, and the S&P 500 Index gained 5.23%.

Increasing commodity prices and various positive corporate developmentsresulted in ongoing strength across the Fund’s Energy sector holdings, ledby Phillips 66 Partners LP, a master limited partnership (MLP) focused onenergy infrastructure. Following through on last quarter’s strength,standouts in the Health Care sector again included Illumina, Inc., theleading company providing scientific instruments to the DNA sequencingmarket, and IDEXX Laboratories, Inc., the dominant manufacturer ofveterinary diagnostics. As real estate continued its broad recovery, theFund’s diverse real estate-related holdings also generally did well. Theseincluded CBRE Group, Inc., the largest commercial real estate services firm,Vail Resorts, Inc., the owner and operator of well-known skiing propertiesand lodging assets, and Hyatt Hotels Corp. As discussed below, we werealso pleased that the Fund’s sole remaining private investment, Windy City

Investments Holdings, L.L.C., announced plans during the quarter to sellitself to another financial institution.

ANDREW PECK Retail Shares: BARAX

PORTFOLIO MANAGER Institutional Shares: BARIX

Performance listed in the above table is net of annual operating expenses.Annual expense ratio for the Retail Shares as of September 30, 2013 was1.32%. The performance data quoted represents past performance. Pastperformance is no guarantee of future results. The investment return andprincipal value of an investment will fluctuate; an investor’s shares, whenredeemed, may be worth more or less than their original cost. The Fund’stransfer agency expenses may be reduced by expense offsets from anunaffiliated transfer agent, without which performance would have beenlower. Current performance may be lower or higher than the performancedata quoted. For performance information current to the most recent monthend, visit www.BaronFunds.com or call 1-800-99BARON.

1 The indexes are unmanaged. The Russell Midcap™ Growth Index measures the performanceof medium-sized U.S. companies that are classified as growth and the S&P 500 Index of 500widely held large-cap U.S. companies. The indexes and the Fund are with dividends, whichpositively impact the performance results. Russell Investment Group is the source and ownerof the trademarks, service marks and copyrights related to the Russell Indexes. Russell is atrademark of Russell Investment Group.

2 The performance data in the table does not reflect the deduction of taxes that a shareholderwould pay on Fund distributions or redemption of Fund shares.

3 For the period June 30, 1987 to June 30, 2014.4 Not annualized.

Table I.

Performance (Retail Shares)

Annualized for periods ended June 30, 2014

RussellBaron MidcapAsset Growth S&P 500

Fund1,2 Index1 Index1

Three Months4 3.59% 4.37% 5.23%Six Months4 4.20% 6.51% 7.14%One Year 25.87% 26.04% 24.61%Three Years 14.50% 14.54% 16.58%Five Years 19.09% 21.16% 18.83%Ten Years 9.62% 9.83% 7.78%Since Inception (June 12, 1987) 11.60% 10.12%3 9.61%

Baron Asset Fund

18

Table II.

Top contributors to performance for the quarter ended June 30, 2014

Year PercentAcquired Impact

Windy City Investments Holdings, L.L.C. 2007 0.66%Illumina, Inc. 2012 0.63Phillips 66 Partners LP 2013 0.47FleetCor Technologies, Inc. 2012 0.39IDEXX Laboratories, Inc. 2006 0.39

Seven years after its ill-fated leveraged buyout, asset manager Windy City

Investments Holdings, L.L.C., formerly known as Nuveen Investments,agreed to sell itself to TIAA-CREF, a financial services firm. The transactionis expected to close toward the end of 2014, with additional contingentpayments due to the sellers during the next few years.We are pleased to beexiting this private investment, albeit with a significant loss.We believe thatNuveen remains a fine business that had been burdened by aninappropriately leveraged capital structure during a period of marketturmoil. The pending sale to TIAA-CREF is driven by the synergies thatshould result when Nuveen’s investment teams are able to manage aportion of its new parent’s assets. We believe this transaction has createdan attractive opportunity for us to exit this investment. After last quarter’ssale of Kerzner International Holdings Ltd., the Fund is on the verge ofexiting all of its remaining private investments. As discussed in previousletters, we have learned a painful lesson from the significant losses incurredon the Fund’s private investments, and we have no intention of makingprivate investments in the future.

Shares of Illumina, Inc., the leading provider of next generation DNAsequencing instruments and consumables, retraced significant losses incurredduring early April’s sell-off in growth stocks, and approached all-time highs bylate-June. The shares’ performance was driven by better-than-expected firstquarter financial results coupled with strong 2014 earnings guidance.Illumina’s impressive results have accompanied the announcements ofmultiple new products. These include an ultra-high throughput DNAsequencing platform, the HiSeq X Ten, which is the first platform capable ofsequencing a complete human genome for less than $1,000.

Phillips 66 Partners LP is a master limited partnership (MLP) focused onmidstream energy assets, including oil and natural gas pipelines, terminals,and storage systems. Phillips continued to grow significantly faster than itspeers during the quarter. Its parent company, downstream energy producerPhillips 66, has a $15 billion asset backlog that we believe it will be able tosell to this subsidiary over time. We believe this should allow the MLP togrow at attractive rates for an extended period.

FleetCor Technologies, Inc. provides payment processing services tocorporate vehicle fleets and gas station owners worldwide. Shares rose afterthe company reported good first quarter results and raised its full-yearearnings guidance. The company also signed a large outsourcing agreementwith Royal Dutch Shell PLC that gives FleetCor the opportunity to operateShell’s continental European fuel card business, an attractive deal that maylead to similar arrangements with other large providers in that market.

IDEXX Laboratories, Inc., a leader in veterinary diagnostics, continued itsrecent strong performance during the quarter. Its results continue to bedriven by improving organic revenue growth and excitement around the

launch of its new diagnostic platform, CatalystOne. Revenue growth in itscore companion animal business accelerated to 8% in the recent quarter,helped by strong instrument placements and accelerating consumablevolumes. We believe that recent innovations in its diagnostic and datamanagement products, and the company’s improved go-to-market strategyhave positioned IDEXX to increase market share gains and significantlyaccelerate its revenue growth.

Table III.

Top detractors from performance for the quarter ended June 30, 2014


Core Laboratories N.V. 2008 –0.30%

Dick’s Sporting Goods, Inc. 2007 –0.27

Guidewire Software, Inc. 2013 –0.23

Discovery Communications, Inc. 2009 –0.22Tractor Supply Co. 2011 –0.22

Core Laboratories N.V. is the global leader in reservoir rock and fluidanalysis and specialized well completion tools. The company suffered asetback early in the quarter when it reduced its forward earnings guidancebecause of an unexpected near-term slowdown in its onshore U.S. businessand ongoing delays to new projects in the U.S. Gulf of Mexico.The companycontinues to generate exceptional returns on equity and capital along withsubstantial free cash flow. Core has continued to aggressively raise itsdividend and buy back shares, both of which have enhanced shareholdervalue over time.

Shares of retailer Dick’s Sporting Goods, Inc. declined. The companyreported quarterly earnings that were modestly below expectations andreduced its guidance for the rest of the year. The sales shortfall wasconcentrated in its hunting and golf categories, while other higher marginproduct segments had sales growth exceeding industry averages. We arehopeful that the hunting and golf issues are temporary, and we do notbelieve their slowdown will alter the company’s long-term investmentthesis.

Guidewire Software, Inc. is a SaaS (software as a service) company thatwe believe offers the leading “core system” to property and casualtyinsurance companies. Guidewire’s software has gained rapid adoptionwithin the insurance industry and its products have achieved near-perfectretention rates among its customer base. Despite continuing to reportstrong results, the company’s shares declined as investors rotated awayfrom fast-growing stocks into value stocks. The impact was particularlyacute in stocks that had been good recent performers, such as Guidewire,as investors abandoned winners in search of recent underperformers.

Discovery Communications, Inc. produces programming for cabletelevision systems around the world. Its shares fell after the companycompleted its purchase of a 51% stake in Eurosport, a European televisionsports network. We believe the market is concerned that Discovery’scontent costs may rise as it spends to collect additional sportsprogramming.We believe the company will take a measured approach to itsincremental spending on sports, and we continue to believe that Discoveryis well positioned to benefit from continued growth in internationalmarkets for the next several years.

June 30, 2014 Baron Asset Fund

19

With more than 1,200 stores and $5 billion in sales, Tractor Supply Co. isthe leading farm and feed retail chain in the U.S. Its shares fell on concernsof slowing sales and a late start to its key spring and summer sellingseasons. With steady growth in square footage, a growing private labelassortment, and increasing mix of consumable goods driving strong samestore sales, we believe Tractor Supply offers attractive double digit earningsgrowth for the next several years.

Portfolio Structure

At June 30, 2014, Baron Asset Fund held 62 positions. The Fund’s 10 largestholdings represented 32.1% of assets, and the 20 largest represented 54.8%of assets. The Fund’s largest weighting was the Consumer Discretionarysector at 24.6% of assets. This sector includes the Fund’s investments inretailers, hotels and resorts, gaming and leisure companies andbroadcasters. The Fund held 19.0% of its assets in the Industrials sector,which includes investments in manufacturers, distributors and informationservices firms. The Fund also had significant weightings in InformationTechnology at 16.6% of assets and Health Care at 15.5% of assets.

Table IV.

Top 10 holdings as of June 30, 2014

Market QuarterCap End

When Market PercentYear Acquired Cap Amount of Net

Acquired (billions) (billions) (millions) Assets

Gartner, Inc. 2007 $2.9 $6.4 $116.4 4.2%

IDEXX Laboratories, Inc. 2006 2.5 6.9 110.2 4.0

Illumina, Inc. 2012 5.3 22.9 100.0 3.6

SBA Communications Corp. 2007 3.8 13.2 83.4 3.0

Arch Capital Group Ltd. 2003 0.9 7.7 83.3 3.0

FleetCor Technologies, Inc. 2012 2.9 10.9 82.4 3.0Verisk Analytics, Inc. 2009 4.0 10.0 81.6 2.9Priceline Group, Inc. 2009 6.8 63.1 78.2 2.8Wynn Resorts Ltd. 2001 1.0 21.0 77.8 2.8Vail Resorts, Inc. 1997 0.2 2.8 77.2 2.8

Recent Activity

During the past quarter, the Fund established one new position and addedto seven others. The Fund also sold three positions and reduced its holdingsof 13 others.

Table V.

Top net purchases for the quarter ended June 30, 2014

Quarter EndMarket Cap Amount

(billions) (millions)

Towers Watson & Co. $7.4 $27.6

Shutterstock, Inc. 2.9 7.9

Guidewire Software, Inc. 2.8 6.9

MRC Global, Inc. 2.9 5.7Cooper Companies, Inc. 6.5 5.3

The Fund initiated a position in Towers Watson & Co., a leading globalprofessional services firm. The company offers corporate clients solutions inseveral areas, including benefits, talent management, rewards, and risk

management. The Fund’s investment in Towers Watson provides exposureto the company’s core businesses, which we believe are quite defensibleand cash generative. In addition, we believe the investment providessignificant optionality surrounding the company’s emerging opportunity asa leading provider of private health care exchanges.

Towers Watson operates in three core segments. Benefits consulting, thecompany’s largest segment, helps clients create and manage cost-effectivebenefits programs to attract, retain, and motivate their workforces. In thisarea, we believe that Towers has relationships with over 80% of the Fortune500, and benefits from significant regulatory and accounting requirementsimposed on its clients that drive long-term relationships and greater than98% retention rates. The company’s Risk and Financial Services practiceoffers insurance and investment consulting and software, while its Talent &Rewards segment offers executive compensation consulting, talent andcommunication surveys, and various employment related data sets. Theseservices are primarily delivered annually and afford Towers modest pricingpower.

We are most excited by the transformational opportunity presented byprivate health care exchanges. In the U.S., employers are aggressivelyseeking ways to reduce health care expenses and limit health care costinflation, which is currently running at 6-8% annually. We believe thatprivate exchanges are emerging as the cost control mechanism of choice.Early studies find that moving to an exchange can reduce an employer’saggregate health care costs by 5-15%, yield cost inflation below that of thebroader market, all while offering employees more choice and enhancedcontrol over their coverage. We believe that the potential for exchanges isvast. According to studies by Accenture and McKinsey & Co., approximately40 million employees will be moved to private exchanges by 2018, whichwe estimate represents a $12 billion annual, recurring revenue opportunity.Over a longer time period, we believe that the majority of the 120 millionemployees receiving insurance from their workplace could be moved to anexchange, in addition to emerging exchange opportunities for retirees, earlyretirees, and public sector employees.

We believe that Towers Watson will be able to leverage the breadth of itsexisting relationships in benefits consulting and health care consulting tobecome a leading exchange operator. We believe that success in this areacould result in a doubling of Towers Watson’s existing business, with anoutsized increase in its overall margins and cash flow.

Table VI.

Top net sales for the quarter ended June 30, 2014

Amount(millions)

Clean Harbors, Inc. $–13.4

Medidata Solutions, Inc. –11.5

Ralph Lauren Corp. –9.1

Helmerich & Payne, Inc. –8.5Core Laboratories N.V. –7.8

We exited our position in Clean Harbors, Inc., a provider of hazardouswaste management services that had increased its exposure to the Energysector through a series of acquisitions. We used the proceeds to increaseour stake in MRC Global, Inc., a distributor of pipes, valves and fittings tothe energy market, which we believe will benefit from increased spendingon infrastructure to support oil and gas exploration. We exited our position

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. Priorto February 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 thisreport reflect those of the respective portfolio managers only through the end of the period stated in this report. The portfolio manager’s views are not intended asrecommendations or investment advice to any person reading this report and are subject to change at any time based on market and other conditions and Baron has noobligation 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 underthe laws of that jurisdiction to make such offer or solicitation.

in Medidata Solutions, Inc., a SaaS provider to the pharmaceuticalindustry, and used the proceeds to increase our stake in Guidewire

Software, Inc., a SaaS provider to the insurance industry, whose stockdeclined as investors rotated away from fast-growing stocks into valuestocks. We also modestly reduced our stake in two energy servicescompanies, Helmerich & Payne, Inc. and Core Laboratories N.V., afterrealizing strong long-term gains in both companies.

Outlook

As was the case last quarter, we continue to believe that many of thefactors that contributed to last year’s market rally remain in place. Theseinclude an improving economy and labor market, equity market multiplesthat remain in-line with their long-term historic averages, interest ratesthat we believe will continue to remain low by historic standards, and theneeds of many investors to purchase assets that offer the prospect of betterreturns than the modest yields available on fixed-income products. Inaddition, corporate cash balances remain at record levels, and this cash isincreasingly being used for aggressive share repurchases and stepped-up

For more information about this Fundplease scan this QR code with any barcode reader on your mobile device.

20

Baron Asset Fund

merger and acquisition activity. We believe that our portfolio of well-managed, competitively advantaged, fast growing companies will performwell in this environment.

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 ManagerJuly 23, 2014

June 30, 2014 Baron Growth Fund

21

twenty years, Baron Growth Fund has earned an average compound annualreturn of 13.87%. This compares to 7.86% for the Russell 2000 GrowthIndex and 9.78% for the S&P 500 Index.

In the first half, continuing a trend that began in March, investors sold highquality growth businesses in which the Fund seeks to invest.They purchasedinstead slower growing, but “less expensive” “value-oriented” companiesand large cap stocks. From March 4 to May 15, the Russell 2000 GrowthIndex declined 12.3%, with Internet and biotechnology stocks particularlyhard hit. Baron Growth Fund declined 8% over the same period. The Fund’sallocation to investments in Internet businesses are less than thebenchmark. It owns a de minimis amount of biotech stocks which until veryrecently we had avoided entirely.

Small and mid cap growth companies that had been among the bestperforming stocks of 2013 were among the worst performers during thisperiod. Defensive and yield-oriented businesses in the Energy, Utilities andReal Estate sectors (REITs) outperformed during the quarter.

By mid-quarter, the rotation subsided and growth stocks rallied stronglythrough the end of June. From May 15 to June 30, the benchmarkRussell 2000 Growth Index jumped more than 10%. The Index ended Juneahead 1.72% for the quarter, 2.22% year-to-date.

Baron Growth Fund does not change its investment approach becausecertain types of stocks are in or out of favor in the short-term. We investfor the long term in businesses with large growth opportunities, sustainablecompetitive advantages and talented, visionary management.

Through the first half of the year, we added opportunistically to several newand existing growth investments that had fallen sharplyin price. Since the beginning of the year, Baron GrowthFund made $557 million of new purchases in 12companies having average market caps of $1.7 billion.During the quarter these included two residentialhousing and remodeling companies, Masonite


1 The indexes are unmanaged. The Russell 2000® Growth Index measures the performance ofsmall-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 the Fund are with dividends, which positivelyimpact the performance results. Russell Investment Group is the source and owner of thetrademarks, service marks and copyrights related to the Russell Indexes. Russell is a trademarkof Russell Investment Group.


3 Not annualized.

Dear Baron Growth Fund Shareholder:

Performance

During the second quarter of 2014, Baron Growth Fund increased 0.52%.The small cap growth benchmark Russell 2000 Growth Index rose 1.72%.The S&P 500 Index which measures the performance of large cap stocks,increased 5.23% in the period. This clearly illustrates the significantoutperformance by large cap stocks versus smaller companies in thequarter. Large cap stocks also outperformed small cap stocks during thepast six months.

In 2013, small cap stocks outperformed large cap businesses by more than1,000 basis points. In most instances, we regard gains and losses in the shortterm as random. However, we think the results of the past six months of2014 should be considered together with the 2013 results. You would thenlikely regard the “rotation” of interest by investors into businesses whosestocks lagged in 2013 and were demonstrably less expensive than fastergrowing, smaller businesses as “normal.”

Following the underperformance for the past six months of stocks of manysmall cap growth businesses, we believe Baron Growth Fund’s portfolio isunusually attractive. Over the long term, Baron Growth Fund hasoutperformed its benchmark by 601 basis points per year on average sinceits inception on December 31, 1994. It has also outperformed the large capS&P 500 Index by a little more than 400 basis points per year. Over nearly

Table I.



RussellBaron 2000

Growth Growth S&P 500Fund1,2 Index1 Index1

Three Months3 0.52% 1.72% 5.23%Six Months3 0.72% 2.22% 7.14%One Year 20.73% 24.73% 24.61%Three Years 14.31% 14.49% 16.58%Five Years 19.58% 20.50% 18.83%Ten Years 9.65% 9.04% 7.78%Fifteen Years 9.49% 5.78% 4.35%Since Inception (December 31,1994) 13.87% 7.86% 9.78%

RONALD BARON Retail Shares: BGRFX

CEO AND PORTFOLIO MANAGER Institutional Shares: BGRIX

Baron Growth Fund

22

International Corp., a low-cost manufacturer of premium doors andentryways and Trex Company, Inc., a dominant brand of compositedecking that is taking share from wood. We also purchased two energyservices companies, Badger Daylighting Ltd. and Atlas Energy, L.P.

Badger is a specialized provider of excavation services to the oil and gasindustry. This company is benefiting from significant shale explorationthroughout North America. Atlas is a leading natural gas pipeline operatorin the Midwest. Year-to-date, the Fund also added approximately $212million to existing holdings, having average market capitalizations of $2.3billion, and reduced positions totaling $528 million with average marketcap of approximately $5.9 billion. Those larger businesses had been verysuccessful investments and had been owned for several years by the Fund.

These transactions are illustrative of our strategy. Baron Growth Fundinvests in small cap businesses under $2.5 billion in size with significantcompetitive advantages that possess large addressable marketopportunities. We then monitor their progress closely as they become midcap stocks. We sell them after they’ve become larger, successful companiesand reinvest the proceeds in small cap growth businesses.

While we do not try to predict short-term “macro” developments, webelieve conditions remain favorable for the economy and stocks. Recentdata show gains in housing from depressed levels (although there is still along way to go); momentum in auto sales; and significant gains in new jobswith unemployment falling to 6%, its lowest level in six years. In addition,interest rates remain historically low, which allows businesses to financegrowth more attractively. Energy prices are stable partly as a result ofmassive new domestic shale discoveries. Finally, we believe stocks remainattractively valued, trading around 16x earnings, roughly in-line with themarket’s 100 year average P/E multiple.

We continue to believe all the growth businesses in which we have investedcould double in size within five years. Importantly, we believe theseinvestments possess stronger fundamental and quality characteristics thanthe companies that comprise the benchmark. Baron Growth Fund’sinvestments consist primarily of companies with higher operating profitmargins, more favorable returns on capital, and much lower earningsvolatility than the securities in the benchmark against which we compete.We believe these characteristics should offer investors significant excessreturns over time, although we obviously cannot guarantee that.

“The Long andWinding Road”

Bush Years “Here Comes“Yesterday” 2000-2008 the Sun”

Clinton Years 9/11; Iraq; Obama Years 1992-2000 Afghanistan; 2008-2014

Internet Bubble Housing Bubble; Recovery “Any Time12/31/99 P/E 33x Financial Panic P/E 15.6x at All”

Annualized ReturnsInception

Inception 12/31/94 12/31/99 to 12/31/08 to 12/31/94to 12/31/99 12/31/08 6/30/14 to 6/30/14

Baron GrowthFund 29.90% 2.46% 20.06% 13.87%

Russell 2000Growth Index 18.99% –4.71% 20.81% 7.86%

S&P 500 Index 28.56% –3.60% 17.65% 9.78%

Table II.


MarketCap Quarter

When End MarketYear Acquired Cap Total Percent

Acquired (billions) (billions) Return Impact

CFR Pharmaceuticals SA 2011 $1.8 $2.8 62.79% 0.69%Targa Resources Corp. 2010 0.9 5.9 41.45 0.61Community Health

Systems, Inc. 2004 2.4 5.2 15.78 0.29Iridium Communications

Inc. 2014 0.6 0.8 39.84 0.27FactSet Research

Systems, Inc. 2006 2.5 5.1 11.97 0.26

“When I met you three years ago and you invested in my business, you

told me that you expected to double your money in five years.

Congratulations. You doubled your money in three.” Alejandro Weinstein

Manieu. Chairman and CEO. CFR Pharmaceuticals SA. May 2014.

That was how Alejandro greeted me when he came to visit in May soon afterit was announced that Abbott Labs would acquire CFR Pharmaceuticals. CFRPharmaceuticals was founded in 1922 as a drug store in Santiago, Chile byAlejandro’s grandfather. (Although Alejandro overstated our 80% three yearreturn ability, he was pretty close.) Alejandro’s grandfather had emigrated tothat country from Galicia, Poland in 1905. That was the same place mygrandfather lived before coming to America about the same time! CFR hassince become a leading distributor of branded generic drugs throughout LatinAmerica. Since incomes in Latin America are less than in the United States,these drugs, in general, would not be affordable if they were sold at pricespatented drugs command in our country. The distribution and brandedgeneric manufacturing capability of CFR was obviously appealing to AbbottLabs and others.

In 2014, there were two other takeovers of businesses in which we have beenlong-term investors. Dubai, the majority shareholder of Kerzner International,acquired minority interests in Kerzner from Baron Funds, as well as fromothers, including Sol Kerzner, the founder of that business. KerznerInternational developed The Atlantis resort hotels in the Bahamas and Dubai.It also plans to develop an Atlantis in China. Kerzner is also the franchisor ofOne and Only luxury resort hotels and holds equity interests in certain ofthose properties.

Windy City, the owner of Nuveen Investments, a diversified and wellrespected investment manager of both equity and fixed income securities,agreed to be acquired by TIAA-CREF. TIAA-CREF manages money forteachers’ retirement funds. Nuveen Investments will enable TIAA-CREF tooffer its pension beneficiaries investment products when they reachretirement.

Finally, it was announced that Energy Transfer Partners L.P. has expressed aninterest in acquiring Targa Resources Corp., an energy midstream MLPbusiness that owns storage, pipelines, gathering and processing facilities in theBalkans, Gulf Coast and Permian Basin. Energy Transfer has interests in thoseareas that would be complemented by Targa’s properties. Energy Transfer acquired Baron Growth Fund’s investment in Southern Union (also held in

June 30, 2014 Baron Growth Fund

23

several other Baron funds) in 2011. We had been an investor in SouthernUnion since 1995 and made about eight times our money from that initialinvestment, and about three times our money overall, when that business wasacquired. We have owned Targa since its IPO in December 2010 and have sofar made more than six times our money from that initial investment. Onemore thing. Energy Transfer has been an even better investment than thecompanies they acquired! Unfortunately, for us, we so far missed that one.

Shares of CFR Pharmaceuticals SA increased significantly in the secondquarter. CFR Pharmaceuticals is a leading Latin American generic drugmanufacturer and distribution company. On May16, Abbott Labs announced anagreement to acquire CFR Pharmaceuticals for a purchase price of $2.9 billion,plus the assumption of net debt of approximately $430 million. The purchaseprice represented over a 50% premium to CFR’s closing price on the prior day.We view the acquisition as validation of our investment thesis. (Neal Kaufman)

Targa Resources Corp. is the general partner of Targa Resources Partners, agrowth oriented MLP with a premier natural gas liquids midstream presenceon the Gulf Coast and crude and gas midstream presence at several majorshale energy regions. Shares of Targa increased significantly as Targa continuedto execute on its growth projects and provided upside to its quarterly andannual guidance. Rumors of a possible acquisition of the company also sentthe stock higher.We believe Targa has unique assets that will allow the generalpartner to show a strong dividend growth profile. (Gilad Shany)

Shares of hospital company Community Health Systems, Inc. rose in thesecond quarter. The Affordable Care Act is already resulting in a reduction inuninsured hospital admissions, and the governors of several key states arepursuing Medicaid expansion. Over time, we think Community shouldbenefit from synergies from its acquisition of Health ManagementAssociates, health care reform-driven changes, aging demographics, and ashift in reimbursement to favor those that can deliver high quality patientoutcomes at lower cost. (Susan Robbins)

Table III.



When MarketYear Acquired Cap Total Percent


Dick’s Sporting Goods, Inc. 2004 $1.4 $5.9 –14.50% –0.43%

Generac Holdings, Inc. 2010 0.9 3.4 –17.38 –0.39CoStar Group, Inc. 2004 0.7 5.1 –15.30 –0.35Core Laboratories N.V. 2006 1.2 7.5 –15.91 –0.29Lumber Liquidators

Holdings, Inc. 2010 0.6 2.1 –19.03 –0.26

Shares of Dick’s Sporting Goods, Inc., a sporting goods retailer, declined inthe second quarter. The company reported quarterly earnings that weremodestly below Street expectations and reduced guidance for the rest of theyear. The sales shortfall was concentrated in the hunting and golf categories,while other higher margin product segments had sales growth exceedingindustry averages. We believe the hunting and golf issues are temporary anddo not alter our long-term investment thesis. (Michael Baron)

Shares of Generac Holdings, Inc., a manufacturer of stand-by generators,fell in the second quarter after the company reported first quarter earningsbelow Street expectations. The company cited difficult winter weather as areason sales missed expectations and reiterated full year guidance, despite

the quarterly miss. Weather created strong demand for Generac generators,but delayed timely installations. We continue to like Generac, based on itsdominant market share in an underpenetrated market. In addition, webelieve management will be successful in growing the company into adiversified, global back-up power generation business. (Rebecca Ellin)

After doubling in 2013, real estate information and marketing servicesprovider CoStar Group, Inc. gave back gains in the second quarter. CoStarshares were negatively impacted by sudden and significant multiplecompression in high growth, highly valued stocks, which sold off acutely earlyin the quarter. CoStar also completed an equity offering in the quarter, whichwe expect will be used to finance accretive M&A over the next six months.We continue to maintain our conviction in CoStar. (Neal Rosenberg)

Recent Purchases

Table IV.



When MarketYear Acquired Cap Amount

Acquired (billions) (billions) (millions)

Masonite International Corp. 2014 $1.7 $1.7 $69.9Badger Daylighting Ltd. 2014 1.3 1.2 57.6Trex Company, Inc. 2014 1.2 1.0 56.8Iridium Communications Inc. 2014 0.6 0.8 56.0Atlas Energy, L.P. 2014 2.2 2.3 41.0

We initiated a new position during the second quarter in Masonite

International Corp. Masonite is a leading, vertically-integratedmanufacturer of interior and exterior doors. In 2013, Masonite sold 32million doors to over 7,000 customers in 80 countries. Sales are split 58%U.S., 16% Canada, and 26% rest of world. Masonite has dominant marketpositions in its product categories, particularly in North America, and ispoised to benefit from an improvement in residential and non-residentialconstruction activity off of depressed levels. Additionally, the doors industryhas consolidated recently for certain product categories, improvingMasonite’s ability to raise prices, even though capacity is underutilized. Themanagement team is impressive and has inculcated a culture of operationaldiscipline and innovation.We believe that EBITDA can triple as constructionlevels normalize and pricing firms. Accretive automation investments andacquisitions should be additive to growth. (David Kirshenbaum)

We increased our position in Badger Daylighting Ltd., a provider of custom-made trucks that use pressurized water and powerful vacuums to excavate inareas with buried pipes and cables. These “hydrovac” trucks are much saferthan mechanical equipment and more efficient than manual digging.Hydrovac truck demand is growing rapidly, as oil and gas companies use themto build new wells and pipelines, and as utility companies increasingly usethem to maintain underground infrastructure. Badger is meeting this demandby building more trucks and adding more service locations in the U.S. andCanada. With over 800 trucks and 110 locations, Badger is by far the largestprovider of hydrovacs in North America, competing mostly against local momand pops. This size advantage and the company’s manufacturing capabilitiesallow Badger to enjoy economies of scale and lower operating costs. Given thestrong tailwinds of capital investment by the energy and utility industries,along with increasing safety pressures around accessing and maintainingexisting infrastructure, we believe demand for Badger’s services shouldcontinue growing nicely. (Josh Saltman)


Net realized gains (losses) for funds that held Southern Union Co. are as follows ($in millions): Baron Asset Fund – $51.0; Baron Growth Fund – $101.0; BaronPartners Fund – $(0.7).

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 Fundmay 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 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.

Trex Company, Inc. is the largest and lowest cost manufacturer ofcomposite decking and railing in the U.S. – a category Trex pioneered in the1990s – with 40% market share. 90% of sales stem from repair andreplacement and 10% from new construction. Management, whom werespect, estimates that there are 40 million wood decks in the U.S. that willeventually rot, a significant portion of which will be replaced withcomposite decks. Composite represents approximately 11% of the totalindustry, up from 1% in 1999, with the remainder mostly wood. Consumershave opted to convert from wood to composite because composite lookssimilar, but performs better (doesn’t stain, rot or splinter). Trex is wellpositioned to benefit from this replacement demand. In addition, Trex hasbeen growing its market share through new products and distribution winsand by expanding internationally. Trex also has recycling expertise, which itmay apply to new industries in the future. (David Kirshenbaum)

Portfolio Structure And Strategy

Baron Growth Fund owns 104 stocks. Its top ten holdings compriseapproximately 24.8% of the Fund. We believe this diversified Fund offersinvestors potentially better than market returns with less volatility than themarket. The Fund’s “beta” over the past five years is 0.74. Its “alpha”, i.e.annual excess return, over the same period is 3.86% per year. Our strategyto accomplish this is to invest for the long term in a diversified portfolio ofappropriately capitalized, well-managed, growing, small cap businesses atattractive prices.

The Fund’s average portfolio turnover for the past three years is 11%. This means theFund has an average holding period for its investments of more than nine years.Thiscontrasts sharply with the average small cap mutual fund which typically “turns over”its portfolio every 9 months.We invest in companies with market capitalizations of$2.5 billion or less that we believe have the potential to double in size within four tofive years. We believe that a portfolio of investments diversified among severalindustries all of which are dependent upon different, non-correlated fundamentalswill likely reduce portfolio volatility. In addition, many of the companies in which theFund invests have significant recurring revenue, which makes earnings for companiesin which we have invested less volatile than the Russell 2000 Growth Index.

We find all these businesses through our dedicated research effort. Ourholdings are well-managed businesses with significant barriers to competitivethreats. These barriers provide our companies with pricing power. Most of ourcompanies produce significant cash flows, which are often reinvested in theirbusinesses to increase their revenues and margins over the long term butoften penalize short-term earnings. We believe the Fund has an opportunityto meet its objectives, although there is no guarantee that it will do so.

Table V.





Under Armour, Inc. 2005 $1.0 $12.7 $246.9 3.0%ITC Holdings Corp. 2005 0.8 5.8 245.1 2.9Arch Capital Group Ltd. 2002 0.4 7.7 231.2 2.8The Middleby Corp. 2011 1.6 4.7 210.9 2.5Genesee & Wyoming, Inc. 2004 0.5 5.6 210.0 2.5Gartner, Inc. 2007 2.3 6.4 199.2 2.4FactSet Research

Systems, Inc. 2006 2.5 5.1 192.4 2.3Dick’s Sporting

Goods, Inc. 2004 1.4 5.9 190.9 2.3Colfax Corp. 2011 1.0 9.2 172.6 2.1Targa Resources Corp. 2010 0.9 5.9 167.5 2.0

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 GrowthFund has 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 were reversed.This is so you will be able to make an informed judgment about whether BaronGrowth Fund remains an appropriate and attractive investment for your family.

Respectfully,

Ronald BaronCEO and Portfolio ManagerJuly 23, 2014

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Baron Growth Fund

For more information about this Fundplease scan this QR code with any bar code reader on your mobile device.

June 30, 2014 Baron Small Cap Fund

25

Table I.



RussellBaron 2000

Small Cap Growth S&P 500 Fund1,2 Index1 Index1

Three Months3 2.82% 1.72% 5.23%Six Months3 1.81% 2.22% 7.14%One Year 22.55% 24.73% 24.61%Three Years 13.38% 14.49% 16.58%Five Years 19.61% 20.50% 18.83%Ten Years 9.45% 9.04% 7.78%Since Inception (September 30, 1997) 10.42% 5.46% 6.37%




3 Not annualized.

Dear Baron Small Cap Fund Shareholder:

Performance

Baron Small Cap Fund gained 2.82% in the quarter ended June 30, 2014and was up 1.81% year-to-date. The Fund outperformed the Russell 2000Growth Index in the second quarter (up 1.72%) and slightly trailed year-to-date. The S&P 500 Index was up 5.23% in the quarter and 7.14% year-to-date. Small stocks continue to trail the broader indexes this year, after aperiod of significant outperformance.

Fast growing, high multiple stocks sold off at the end of the first quarter andthat trend continued until late May. We attribute the declines primarily totwo factors – a healthy debate about the valuation of these high flyingsectors (and we did see some froth, as we have pointed out in previousletters) and concern that the economy was not re-accelerating as hoped. Bythe end of the quarter, small stocks charged back toward the highs for theyear, as the broad economic statistics strengthened, and small companiesaffirmed that their profits were growing nicely.

It’s pretty remarkable that the market held in during the second quarter. Itwas reported that GDP fell 2.9% in the first quarter, much worse thananticipated. Interest rates declined significantly, the yield on the 10 yeartreasury fell to 2.5%, another indication of a super soft economy. And thegeopolitical environment was downright scary, with a series of conflictsbetween Russia and Ukraine, Iraq under siege by a terrorist organization,Iran and the West continuing to bicker over a nuclear deal and increasingtension in the Middle East between Israel and its Arab neighbors.

We think stocks disregarded all this, and the broader markets hit all-timehighs, because the economy gained momentum as the quarter progressed,making the weak first quarter seem like an anomaly; that interest ratesseem like they will stay very low for an extended period of time; inflation isnon-existent; and government deficits shrunk to manageable levels. A goodbackdrop for stocks.

Our portfolio benefitted by our overweight position in Energy. Both ourE&P/Services companies and our MLPs performed well. The former becauseoil prices rose with all the geopolitical tensions and operating results werestrong. The latter group benefitted from declining interest rates, and alsodividend increases. Our Materials and Telecommunication Services holdingsdid well too, both absolutely and relatively. Our Consumer Discretionaryholdings continued to be a drag on performance.

Table II.


PercentImpact

Targa Resources Corp. 0.57%Platform Specialty Products Corp. 0.50SBA Communications Corp. 0.46Phillips 66 Partners LP 0.39Susser Holdings Corp. 0.36

TTaarrggaa RReessoouurrcceess CCoorrpp.. is the Fund’s longest held MLP and continues to bea terrific performer.We have made six times our money since purchase, andthe stock rose 41% in the second quarter alone. Targa grew its dividend by7% in the first quarter, as the company continues to invest enormousamounts of growth capital (we expect $650 million in 2014) on high returnprojects. Near the end of the quarter, there were rumors of a possibleacquisition of the company by another well respectedMLP, which gave the stock an additional goose.

PPllaattffoorrmm SSppeecciiaallttyy PPrroodduuccttss CCoorrpp.., a specialty chemicalacquisition vehicle, rose 47% in the second quarter, ontop of strong performance earlier in the year. The

CLIFF GREENBERG Retail Shares: BSCFX

PORTFOLIO MANAGER Institutional Shares: BSFIX


26

company announced the acquisition of its second business, ChemturaAgroSolutions, which provides agro chemicals and seed treatment products.We like the deal, in that the business fits well in the business model and willbe highly accretive to earnings. The company completed a successfulfollow-on equity raise and is poised to pursue additional targets.We remainvery enthused about the company’s execution and opportunity to continueto build a substantial business, but we did trim our position because thestock has almost tripled from our purchase price.

SSBBAA CCoommmmuunniiccaattiioonnss CCoorrpp.., the wireless tower company, and the Fund’slargest position, rose 12.5% in the quarter. SBA reported strong results forthe first quarter, handily beating expectations. Same tower revenue growthaccelerated as the environment for 4G network build-out strengthened.SBA announced their fourth acquisition of towers in Brazil, which nowaccounts for 15% of revenues. We favor SBA’s entrance into foreignmarkets, and believe this will continue to add value.

PPhhiilllliippss 6666 PPaarrttnneerrss LLPP is one of our newer MLP investments, and it too hada very strong quarter, rising 56%. We expect Phillips to be our fastestgrowing MLP and has a very deep pipeline of assets to drop down to sustaingrowth for a long time.We believe cash flow can grow from $800 million in2013 to $1.5 billion in 2017. In the second quarter, Phillips increased itsdividend by 22% and the stock traded to a higher multiple (lower yield),which we believe it deserves because of its superior growth profile.

It was announced during the quarter that SSuusssseerr HHoollddiinnggss CCoorrpp.. (and itssister company SSuusssseerr PPeettrroolleeuumm LLPP) is being acquired by Energy TransferPartners for $80.25 per share, a 41% premium. Both were high convictioninvestments of ours and big winners for the portfolio (average cost ofSusser was $44), so we are sad to see them go. However, we think the pricebeing paid is fair, so we are pleased with the deal and thank themanagement team for creating such value for their fellow shareholders.

Other stocks that appreciated over 25% in the quarter include Valero

Energy Partners LP, Moelis & Company, Oasis Petroleum, Inc., Athlon

Energy, Inc., Vince Holding Corp. and GrubHub Inc.

Table III.


PercentImpact

Acxiom Corp. –0.45%Lumber Liquidators Holdings, Inc. –0.33Quiksilver, Inc. –0.31Core Laboratories N.V. –0.25The KEYW Holding Corp. –0.23

AAccxxiioomm CCoorrpp.., a leading provider of database marketing solutions, declined37% in the quarter after announcing disappointing results and a high pricedacquisition. Revenues from its core business were light and adoption of itsnew AOS platform was slower than expected. We are disappointed.However, we maintained our position because we still believe in the futureof AOS, think the acquisition of Live Ramp is complimentary and integral,and that the stock now trades at a sizeable discount to net asset value.

Shares of LLuummbbeerr LLiiqquuiiddaattoorrss HHoollddiinnggss,, IInncc.., the retailer of hardwood floors,declined 19% in the second quarter. First quarter sales were weak,seemingly because of bad weather. Subsequent to the end of June, thecompany reported a 7% decline in comparable store sales for the secondquarter, and the shares declined further. We believe much of the issue wasself-inflicted, in that the company changed requirements for its supplying

mills, which resulted in major disruptions in the supply chain and under-stocked inventory levels at the retail stores. This is being corrected, and weexpect sales and the stock, to recover in the back half of the year.

Shares of QQuuiikkssiillvveerr,, IInncc.., the manufacturer of athletic apparel, fell sharplyin the wake of an earnings miss in the first quarter. The company is in themidst of a turnaround under new management, which we really like.However, in this tough macro environment, it is taking longer than hoped.We trimmed our position.

CCoorree LLaabboorraattoorriieess NN..VV.. is a global leader in reservoir rock and fluid analysisand specialized well completion tools. The stock has been one of the topoverall performers for a decade, and the Fund had made over five times itsmoney on this investment. However, Core reported weaker than expectedresults and cut forward guidance due to an unexpected near-term delay inprojects it is supporting, and the stock fell 16%. We still love its prospectsand shareholder friendly approach to managing its free cash flow (they haverepurchased 30% of their shares over time).

Portfolio Structure

As of June 30, 2014, the Fund had $5.7 billion under management and wasinvested in 99 common equities. At the end of the quarter, the top 10positions represented 22.9% of the Fund’s assets.

Table IV.


Quarter EndInvestment Percent

Year Value of NetAcquired (millions) Assets

SBA Communications Corp. 2004 $204.6 3.6%TransDigm Group, Inc. 2006 158.9 2.8Gartner, Inc. 2007 158.7 2.8FleetCor Technologies, Inc. 2010 125.2 2.2Waste Connections, Inc. 2009 121.4 2.1Berry Plastics Group, Inc. 2012 116.1 2.0Acuity Brands, Inc. 2011 114.1 2.0Targa Resources Corp. 2010 104.7 1.8Gaming and Leisure Properties, Inc. 2005 101.9 1.8Bright Horizons Family Solutions, Inc. 2013 100.8 1.8

The portfolio has been built on a stock by stock basis over time. We lookacross many industries to find companies that have similar favorablecharacteristics: what we believe are special businesses with significantbarriers to entry, run by proven entrepreneurial managements, with biggrowth opportunities, trading at reasonable valuations so that stocks canappreciate nicely over the long term.

We play to our strengths, investing in industries where we have muchexperience, and we believe, expertise. Our investments are based on ourextensive fundamental research. We are long-term investors, have lowturnover, which now averages 17.72% over the last year and 23.18% overthe last three years.And we held onto our winners, as they grow - we “waterour flowers and cut our weeds” - which has proved to be a winning strategy.

All this leads to a portfolio that is pretty similar over time, but one thatvaries pretty significantly from the small cap growth indexes and othersmall cap growth funds to which we are often compared.

June 30, 2014 Baron Small Cap Fund

27

Recent Activity

Like the first quarter, we weren’t terribly active in the second quarter, andwe invested more capital into existing names than in adding new stocks tothe portfolio.We like our present holdings.We add to them when the stocksdecline in price yet we still see great upside over the long term or thatfundamentals are improving so that our upside is greater. We are spendinglots of time researching many attractive small cap growth companies, andhave many on our “hit list” but are being patient to invest when we believethey are attractively priced so that we can make an ample return.

Table V.


Quarter EndYear Market Cap Amount

Acquired (billions) (millions)

On Assignment, Inc. 2012 $1.9 $25.0Financial Engines, Inc. 2010 2.3 22.5MWI Veterinary Supply, Inc. 2014 1.8 21.5PBF Logistics LP 2014 0.9 19.3Moelis & Company 2014 1.8 17.6

We added to our holdings in OOnn AAssssiiggnnmmeenntt,, IInncc.., which is a leadingtemporary placement company focused on the IT industry. We wereinvestors in the business 13 years ago and returned to the stock in 2012,when the company made a transformative acquisition of Apex Systems. OnAssignment is benefitting from a secular shift in the IT services marketfavoring staff augmentation using temp firms as an alternative tooutsourcing, offshoring and use of consultants to do projects. Apex is thefastest growing player in this sector, and On Assignment has the highestmargins and best growth profit in its industry, so we consider it best ofbreed. The company recently laid out goals for the next five years, to growto $3 billion in revenues (from $1.8 billion now) and $4.00 of earnings pershare by 2018, which we believe are conservative and will likely beexceeded, as with the last five year targets set by management. We thinkthis high quality business can grow earnings 15-20%/year going forward,yet the company trades 17 times this year’s estimate for adjusted earningsand 15 times next, which we believe is too low a multiple for this high class,high growth business.

During the quarter, we added to our position in Financial Engines, Inc., whichprovides technology enabled personalized investment management andadvice to small investors in 401(K) plans. We have been shareholders in thisunique and innovative company since it went public over four years ago, andthe stock appreciated over five times from trough to peak. Last year alone thestock rose over 150%. First quarter results were slightly below estimates andthe stock sold off some 30%, creating an opportunity for the Fund.

Financial Engines business has wonderful characteristics – it’s the leader ina large growing market with powerful demographic driving growth, it hasdeveloped a scalable proprietary investment platform, and it’s a highgrowth business with recurring revenues, strong margins and highoperating leverage.

We expect revenues and profits to grow significantly over time, as moreemployers add to their retirement programs and the market appreciates,as more employees enroll for the company’s services, and as the companyrolls out new products (for example – Income Plus) and serves newmarkets (like Social Security and deferred benefits programs). At peak,

Financial Engines was valued at almost $3.5 billion, which was over 40times the forward cash flow estimate, obviously very expensive for thenear term. But we believe cash flow can grow towards $200 million in fiveyears, and way beyond in the future, so we now find the companyattractive after the recent pullback.

During the quarter, we started new positions in MWI Veterinary Supply,

Inc., PBF Logistics LP and Moelis & Company. MWI is the largest pure playdistributor of veterinary products, serving both the companion andproduction animal end markets. We have long admired the company’smanagement, market position and track record. We found what we believeis a good price to start building a position when the stock fell 21% afterreporting disappointing first quarter results that didn’t unnerve us.We thinkwe are buying into a terrific company that can double in time from here.

PBF Logistics is a newly formed MLP housing the midstream infrastructureassets of a growth refinery company founded by a seasoned operator. Webelieve PBF will be our new high growth MLP from which we expect rapiddividends and multiple expansion. The parent company owns drop downassets that we expect to be contributed to the partnership and increasecash flow three fold. Plus, we believe the company will be able to acquirecomplementary assets at accretive multiples and, in time, we believe theparent company will acquire additional refineries and the midstream assetswill be directed to the MLP.

Moelis & Co. is a premier global independent investment bank that wentpublic in the quarter and we bought a big stake. The firm was founded in2007 and has quickly grown to be a significant player because of clientdemand for unconflicted advice and deft development of a highly regardedgroup of top notch advisors. We expect business to accelerate as animproving economy and CEO confidence fuel an uptick in M&A activity,which is very palatable. We know senior management very well and admirenot just their prowess as advisors, but also appreciate the special cultureand shareholder orientation they have instilled in their business.

Table VI.


Quarter EndMarket Market Cap

Cap orWhen Market Cap Amount

Year Acquired When Sold SoldAcquired (billions) (billions) (millions)

Susser Petroleum Partners LP 2012 $0.5 $1.0 $–36.7

Susser Holdings Corp. 2012 0.7 1.7 –28.8Platform Specialty

Products Corp. 2013 0.9 3.8 –26.9SBA Communications Corp. 2004 0.2 13.2 –23.9Sunstone Hotel

Investors, Inc. 2013 1.9 2.5 –20.4

As we said earlier, Susser Holdings was acquired during the period and wepared our holdings in both the C Corp and its sister MLP. We trimmed ourposition in Platform Specialty Products into its big move to the upside. Wecut back a bit of our long-term holdings in SBA Communications,TTrraannssDDiiggmm GGrroouupp,, IInncc.. and LLiibbeerrttyy MMeeddiiaa CCoorrpp.. because all appreciated andare now large market caps. We sold out of SSuunnssttoonnee HHootteell IInnvveessttoorrss,, IInncc..when it hit our price target.

Outlook

As we write this report, there are seriously escalating geopoliticaltensions and some disappointing initial quarter earnings reports, whichare pressuring stocks. . . small stocks even more so. Though the marketsare jittery, unless political situations really explode, my sense is thatthe economy is improving (from a weak base), that earnings growthwill be solid, and so the bull market will remain intact. Growth is notrobust enough for inflation to be pronounced, nor for the Fed totighten monetary policies, so the same benign environment shouldcontinue.

The rotation we have seen year-to-date, favoring stocks of largercompanies over small caps was somewhat to be expected, since thesmall caps have performed so well the last couple of years. We observethat valuations of the small cap companies we own and track arebecoming more reasonable, as the stocks pause while their businessescontinue to grow. I suspect that the relative performance of small capswill improve.

Thank you very much for your investment in the Fund. And let there be

peace.

Cliff GreenbergPortfolio ManagerJuly 23, 2014


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 Fundmay 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 thisreport reflect those of the respective portfolio manager only through the end of the period stated in this report. The portfolio manager’s views are not intended asrecommendations or investment advice to any person reading this report and are subject to change at any time based on market and other conditions and Baron has noobligation 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 unlawfulunder the laws of that jurisdiction to make such offer or solicitation.

For more information about this Fundplease scan this QR code with anybar code reader on your mobile device.

28


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June 30, 2014 Baron Opportunity Fund

growing, innovative businesses – ended the quarter with solidoutperformance in June.

As we wrote in our March letter, we believe the March/April pullback wasdriven purely by market sentiment and profit taking – not fundamentals. Aslong-term fundamental investors, we don’t attempt to trade market sentimentshifts, nor do we believe in a profit-taking philosophy. We continue to believethe secular growth businesses in which we are invested have the potential todouble in size within four-to-five years, with many having the furtheropportunity to double again after that. To illustrate this point, revenues forCoStar Group, Inc., the leading provider of commercial real estate informationand marketing services, which we have owned for almost 13 years, have grownalmost 8-fold since our initial investment (2001 revenues vs. 2014 Baronresearch expected revenues). Over that period, the stock price has increasedfrom $18 to $158 (June 30), a return of just under 800%. If we had takenprofits early on – harvesting gains when the stock began to look expensivewhen measured against short-term Street expectations – we would havemissed out on the majority of this growth and surrendered most of the returnthis investment has generated for the portfolio.

Since its inception, the Fund’s consistent strategy has been to invest in fastgrowing businesses that are innovating and disrupting their industries. Weseek to identify secular growth themes across every sector of the economy.These themes include DNA sequencing, electric vehicles, cloud computing,software delivered as a service, e-commerce, the mobile Internet, data-driven advertising, unconventional oil & gas resources, informationdelivered as a service, social media, digital media, cyber-security, liquefiednatural gas, etc. We base our investments within these themes on our ownindependent research performed by our team of investment professionals.Our practice is to stay very close to our businesses and industries, but inlight of the recent growth-stock pullback, we doubleddown on our research, talking to each of ourmanagement teams and flying around the U.S. andacross the Atlantic to visit with our companies. Ourresearch confirmed that the fundamentals of ourcompanies are solid and that the secular themes in

Performance listed in the above table is net of annual operating expenses.Annual expense ratio for the Retail Shares as of September 30, 2013 was 1.37%.The performance data quoted represents past performance. Past performanceis no guarantee of future results. The investment return and principal value of aninvestment will fluctuate; an investor’s shares, when redeemed, may be worthmore 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 theFund’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 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 secondaryofferings. There is no guarantee that these results can be repeated or that the Fund’s level ofparticipation in IPOs and secondary offerings will be the same in the future.

1 The indexes are unmanaged. The Russell Midcap™ Growth Index measures the performanceof medium-sized U.S. companies that are classified as growth and the S&P 500 Index of 500widely held large-cap U.S. companies. The indexes and the Fund are with dividends, whichpositively impact the performance results. Russell Investment Group is the source and ownerof the trademarks, service marks and copyrights related to the Russell Indexes. Russell is atrademark of Russell Investment Group.


3 Not annualized.

Dear Baron Opportunity Fund Shareholder:

Performance

Baron Opportunity Fund had a relatively weak second quarter, as the sell-offin certain higher growth segments of the market that began in mid-March continued through the end of April. The portfolio performed better inMay and June, with June’s outperformance being just under 500 basis points,but it was not enough to make up for the weakness in April. For the quarter,the Fund gained 0.15%, trailing both the Russell Midcap Growth Index, whichrose 4.37% and the large cap S&P 500 Index, which increased 5.23%.

Table I.

Performance (Retail Shares)†


RussellBaron Midcap

Opportunity Growth S&P 500Fund1,2 Index1 Index1

Three Months3 0.15% 4.37% 5.23%Six Months3 (0.71)% 6.51% 7.14%One Year 20.31% 26.04% 24.61%Three Years 10.42% 14.54% 16.58%Five Years 18.53% 21.16% 18.83%Ten Years 10.12% 9.83% 7.78%Since Inception (February 29, 2000) 5.36% 3.48% 4.53%

Review & Outlook

As mentioned above, the second quarter of 2014 got off to a rough start,as the “flight to safety” that started in mid-March persisted through themonth of April. It appears that the March/April pullback was precipitatedlargely by concerns surrounding remarks by Federal Reserve ChairwomanJanet Yellen suggesting interest rates would rise sooner and more quicklythan anticipated. After the Fed tempered that statement, reassuringinvestors that interest rates would not increase any time soon, the marketbegan to rotate back into growth stocks, starting in May and picking upmomentum in June. Along those lines, the Fund – with its focus on faster

MICHAEL A. LIPPERT Retail Shares: BIOPX

PORTFOLIO MANAGER Institutional Shares: BIOIX

30


which we are investing are not just intact, but as powerful as ever. Weremain confident that these industry themes will provide the fuel for thenext generation of growth for many key sectors of the economy.Two recentquotes underscore our view:

• Illumina, Inc. CEO Jay Flatley on the company’s second quarterconference call: “The response we have seen to the $1,000 genomereinforces our view that, as far out as we can see, there is aninsatiable demand for whole genome sequencing.” (Emphasisadded).

• Silicon Valley VC investor, whose investments have includedFacebook and Netflix, during our visit with him in May: “Mobile isthe most fundamental platform shift we will see in ourgeneration.” (Emphasis added).

Like last quarter, the Fund’s investments in the Information Technologysector – which include many of the growth themes (Internet services,mobile, software-as-a-service) hit the hardest by the March/April sell-off -significantly impacted quarterly performance, accounting for over three-quarters of the Fund’s underperformance vs. the Russell Midcap GrowthIndex. On the other hand, the Energy sector was the Fund’s top contributorto performance, buoyed by overall sector strength driven by increasing oilprices and investor rotation into the sector.

Despite the challenging market conditions that prevailed this Spring, weremain committed to our proven strategy of long-term investing in fastgrowing, innovative businesses with sustainable competitive advantagesand strong management teams. We responded to the sell-off as we havedone in the past: carefully adding to our favorite holdings as their valuationsbecame more attractive and selectively making new investments at whatwe considered compelling prices. We are heartened that the Fundperformed well in June - with many of our holdings that had taken a hitfrom the March/April sell-off coming back strongly - but our focus remainson the long term, not monthly or quarterly performance, whether good orbad. Looking forward, we believe the steady improvement in the U.S.economy, continued low interest rates, accommodative U.S. monetarypolicies are all factors that should contribute to an environment that willincreasingly favor the types of innovative, fundamentally sound companiesin which we invest.

Table II.


PercentImpact

Illumina, Inc. 1.03%

Pacira Pharmaceuticals, Inc. 0.70

Zillow, Inc. 0.59

Golar LNG Ltd. 0.46Liberty Ventures Group 0.44

Shares of Illumina, Inc., the leading provider of next generation DNAsequencing instruments and consumables, performed well during thesecond quarter. Performance was driven by better than expected firstquarter financial results and strong 2014 financial guidance. The company’sannouncement of multiple new product introductions, including a newultra-high throughput sequencing platform called the HiSeq X Ten that is

the first to sequence a full human genome for less than $1,000, isgenerating momentum as well. (Neal Kaufman).

Pacira Pharmaceuticals, Inc. was a solid performer during the secondquarter. Sales of its injectable, long-lasting pain medication EXPARELcontinued to grow rapidly (up 221% in the first quarter), driven by greaterhospital adoption and more usage in surgical procedures. Pacira alsoreceived FDA approval for its new manufacturing facility, increasingproduction capacity from $100 to $400 million in sales. Run rate sales ofEXPAREL are now about $120 million and we think the market could beworth billions. We believe that the company has years of continued growthahead. (Randy Gwirtzman)

Shares of Zillow, Inc., the leading online real estate site in the U.S., were upsharply during the second quarter, due in part to favorable market reactionwhen a notable investor took a large position in the company in April. Webelieve Zillow has a substantial lead over its competitors, and continues tobuild brand awareness through mobile leadership and greater marketingspend.We expect the company to continue to build traction with its variousconstituents of realtors, homeowners, marketers, and consumers in theyears ahead. (Ashim Mehra)

Golar LNG Ltd. is an owner and operator of liquid natural gas (LNG)carriers and floating storage regasification units. The stock increasedsignificantly during the second quarter on investor confidence in the upsidepotential from possible liquefaction projects for Golar that could generateattractive returns and increase the use of LNG carriers. We continue tobelieve that, over the next decade, LNG will gain share of the overall globalenergy trade. (Gilad Shany)

Liberty Ventures Group is a holding company operated by John Malone,with a substantial stake in TripAdvisor, and lesser stakes in Expedia andInterval Leisure Holdings. We purchased shares during the second quarterbecause of improving fundamentals at TripAdvisor and Expedia and thesubstantial discount at which Liberty’s net asset value (NAV) was trading toits holdings. Shares of Liberty performed well based on the anticipation ofnew product enhancements at TripAdvisor and the planned spin-off ofLiberty’s stake in TripAdvisor later this year. (Ashim Mehra)

Table III.


PercentImpact

Acxiom Corp. –1.43%Imperva, Inc. –1.07Coupons.com Incorporated –0.78Guidewire Software, Inc. –0.69Splunk, Inc. –0.44

Acxiom Corp. is the leading provider of database marketing solutions andIT outsourcing services to large enterprise customers. Shares of Acxiom weredown significantly during the second quarter as adoption of the company’snew Audience Operating System (AOS) platform was somewhat slower thanoptimistic expectations. Based on our research, we expect AOS adoption andgrowth to accelerate as we move through the year. (Ashim Mehra)

Imperva, Inc. is a provider of a new category of business security solutionsfocused on high-value applications and data assets in physical and virtual

31

June 30, 2014 Baron Opportunity Fund

data centers. Imperva reported a weak start to 2014 with a profit warning.Since this is not the first execution miss we have seen with the company,we decided to exit our position. (Gilad Shany)

Coupons.com Incorporated is a leading digital couponing platform. Thecompany went public during the first quarter. The stock dropped in thesecond quarter, in part, due to market reaction when a change in Google’salgorithm caused a drop in the search results ranking of a perceivedcompetitor. The stock price was also impacted by the March/April sell-off ofhigh-growth companies. We sold our position. (Ashim Mehra)

Guidewire Software, Inc. shares declined in the quarter due to broadmultiple compression across a group of higher growth technology stocks.Guidewire is the gold standard of property and casualty core systemvendors, as evidenced by near-perfect retention rates, growing installedbase, and accelerating adoption of its complete product suite. We believethe company’s fundamental outlook remains robust, and that the companyis just 5% penetrated in its addressable market. (Neal Rosenberg)

Shares of machine data platform vendor Splunk, Inc. declined significantlyduring the second quarter as the result of a rotation from growth into valuestocks and from small cap into larger cap stocks. The impact wasparticularly acute in stocks that had been strong recent performers likeSplunk, as investors abandoned winners. (Neal Rosenberg)

Portfolio Structure

Baron Opportunity Fund had $488.4 million of assets under managementas of June 30, 2014. The Fund had investments in 59 securities. The top 10positions accounted for 31% of the portfolio. The Fund’s cash position was0.6% at quarter end. The median market cap of the Fund was $4.7 billion atthe end of the quarter.

Table IV.


Quarter EndInvestment Quarter End Percent

Value Market Cap of Net(millions) (billions) Assets

Illumina, Inc. $22.3 $22.9 4.6%Gartner, Inc. 20.4 6.4 4.2Guidewire Software, Inc. 15.4 2.8 3.1Red Hat, Inc. 14.3 10.4 2.9Benefitfocus, Inc. 14.3 1.2 2.9Shutterstock, Inc. 14.1 2.9 2.9SBA Communications Corp. 14.0 13.2 2.9Verisk Analytics, Inc. 12.5 10.0 2.6CarMax, Inc. 12.1 11.5 2.5Equinix, Inc. 11.7 10.5 2.4

As detailed above, we focus on investing the Fund’s assets in themes andindividual businesses that we believe will experience significant seculargrowth rates. As a result, the Fund’s sector weights are an output of ourprocess, not an input. Not surprisingly, most of our investments are in thoseindustry sectors more typically associated with growth. At quarter end,about 65% of the portfolio was invested in the Consumer Discretionary andInformation Technology sectors. We also have meaningful investmentsacross the Health Care, Industrials and Energy sectors. In thinking aboutdiversification, we pay little attention to sector weights as defined by GICS,instead focusing on the fundamental business drivers and end marketexposures for our investments.

Recent Activity

Table V.




Just Eat plc $ 2.5 $10.2Liberty Ventures Group 5.4 8.5Pacira Pharmaceuticals, Inc. 3.3 7.6Facebook Inc. 172.7 5.7Flotek Industries, Inc. 1.7 5.5

We participated in the IPO of Just Eat plc and further added to our positionas the stock participated in the growth sell-off. Just Eat is leadingonline/mobile restaurant delivery platform in Western Europe. Just Eat hassubstantial market share leads in 10 countries, and continues to growrevenues rapidly as food delivery undergoes a structural shift from over-the-phone to online ordering.

As stated above, we invested in Liberty Ventures Group because webelieved it was trading at a discount to the net asset value of its key assets,principally TripAdvisor. We believe Liberty Ventures provides an attractiveway to participate in the upside associated with TripAdvisor, the leadingonline and mobile provider of travel reviews, as the company innovates onits product set and significantly improves its user monetization.

We invested in Pacira Pharmaceuticals, Inc. (discussed previously) becauseof the significant growth potential of its FDA-approved, long-lasting painmedication EXPAREL.

We re-invested in Facebook Inc. on recent weakness after our recentresearch trip to Silicon Valley. With its unprecedented global scale (1.3billion monthly users), deep user engagement and its track record ofinnovation and investment, we believe Facebook will continue to cement itsposition as the world’s leading data-driven advertising platform.

Flotek Industries, Inc. is a diversified global supplier of oil and gas drillingand production-related products and services. A key growth opportunity forthe company is its carbon nanofiber (CnF) line of specialty chemicals, whichare patented combinations of surfactant, solvent and water that aredesigned to enhance oil and gas production. These CnF mixtures are madefrom citrus oil derivatives, and are both cost-effective and environmentallyfriendly. The CnF product is currently about a $100 million business and hasshown great efficacy in increasing both initial production and ultimaterecoverable reserves in a number of different oil and gas plays in the U.S.The product is gaining traction with existing and new users, and we believethe CnF franchise could triple over the next several years.

Table VI.


Market CapWhen Sold Amount(billions) (millions)

Coupons.com Incorporated $ 1.2 $–11.4salesforce.com, inc. 35.5 –7.3Shutterfly, Inc. 1.6 –7.3Angie’s List, Inc. 0.6 –7.0Citrix Systems, Inc. 9.2 –6.9

Given that we run the portfolio with very low levels of cash, to respond aswe described above to the March/April sell-off, we decided to make theabove-listed sales to fund increased and/or new investments in otherbusinesses benefitting from the same basic secular themes which weconsidered to be more attractive investment opportunities.

Thank you for your support and for trusting us with your assets. We

look forward to updating you in future letters.

Sincerely,

Michael A. LippertPortfolio ManagerJuly 23, 2014


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 bedifficult to predict for the long term. Securities issued by 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.


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 unlawfulunder the laws of that jurisdiction to make such offer or solicitation.



32

June 30, 2014 Baron Partners Fund

33

In the June quarter, the rotation from high growth technology andbiotechnology stocks that began in late March partially reversed. As wediscussed last quarter, investors in late March began selling growth stocksthat had achieved strong gains in 2013 and shifting into lower growth, so-called “value” stocks that had not performed as well in 2013. Although thistrend continued in April and early May, growth stocks began to recover inlate May and achieved good performance in June.

Our approach is to invest for the long term in businesses with large marketopportunities, sustainable competitive advantages and talented, visionarymanagement teams. We do not try to predict short-term “macro”developments or shift our investment approach because certain types ofstocks are in or out of favor. Many of the stocks that corrected in March,April and early May were biotech stocks that had performed strongly in2013, often increasing in price 50-100 percent. To date, we have avoidedsignificant investments in biotech stocks because we have found it difficultto predict whether these businesses would be successful.

In the second quarter, we took advantage of the decline in certain growthstocks by initiating or adding to positions in high quality businesses that weknow well. We initiated a position in The Middleby Corp., a long-termholding in Baron Growth Fund. We added to positions in Tesla Motors Inc.,Air Lease Corp., Dick’s Sporting Goods, Inc., CoStar Group, Inc., CarMax,

Inc., The Charles Schwab Corp., The Carlyle Group, and Gaming and

Leisure Properties, Inc. We summarize the investment theses for many ofthese companies in the Recent Portfolio Additions section below.

Despite the market’s intra-quarter volatility, the Fund increased 4.41%,roughly in line with the benchmark. The Fund’s investments within theConsumer Discretionary and Energy sectors were thelargest contributors to relative performance. One long-time portfolio holding, Windy City Investments Holdings,L.L.C. (also known as Nuveen Investments), appreciated63.76% after TIAA-CREF made an offer to purchase thecompany. The Fund’s investments within the InformationTechnology, Utilities, Industrials, Financials and Health

Performance listed in the above table is net of annual operating expenses.Annual expense ratio for the Retail Shares as of December 31, 2013 was1.67% (comprised of operating expenses of 1.38% and interest expense of0.29%). The performance data quoted represents past performance. Pastperformance is no guarantee of future results. The investment return andprincipal value of an investment will fluctuate; an investor’s shares, whenredeemed, may be worth more or less than their original cost. The Fund’stransfer agency expenses may be reduced by expenses offsets from anunaffiliated transfer agent, without which performance would have beenlower. Current performance may be lower or higher than the performancedata quoted. For performance information current to the most recent monthend, visit www.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 performancebenchmark. If the annual returns for the Fund did not reflect the performance fees for theyears the predecessor partnership charged a performance fee, the returns would be higher.TheFund’s shareholders will not be charged a performance fee. The predecessor partnership’sperformance is only for periods before the Fund’s registration statement was effective, whichwas 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 therequirements of the Internal Revenue Code relating to registered investment companies,which, if it were, might have adversely affected its performance.

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


4 Not annualized.

Dear Baron Partners Fund Shareholder:

Performance

Baron Partners Fund increased 4.41% during the second quarter of 2014,about the same as with the Russell Midcap Growth Index, the benchmarkagainst which we compare the performance of this Fund. Baron PartnersFund underperformed the better known S&P 500 Index, which measures theperformance of large cap companies, by 82 basis points in the period. Largecap “value” stocks generally outperformed mid-sized growth stocks in theperiod. Year-to-date through June 30, 2014, the Fund outperformed itsbenchmark by 351 basis points and the S&P 500 Index by 288 basis points.Baron Partners Fund has outperformed both its benchmark index and theS&P 500 Index on an annualized basis since its conversion from apartnership to a mutual fund on April 30, 2003, as well as over the last 10years, 15 years, 20 years, and since its inception on January 31, 1992.

RONALD BARON Retail Shares: BPTRX

CEO AND PORTFOLIO MANAGER Institutional Shares: BPTIX

Table I.



RussellBaron Midcap

Partners Growth S&P 500Fund1,2,3 Index2 Index2

Three Months4 4.41% 4.37% 5.23%Six Months4 10.02% 6.51% 7.14%One Year 34.48% 26.04% 24.61%Three Years 19.04% 14.54% 16.58%Five Years 23.62% 21.16% 18.83%Ten Years 11.65% 9.83% 7.78%Since Conversion (April 30, 2003) 15.06% 12.20% 9.25%Fifteen Years 8.07% 6.62% 4.35%Twenty Years 13.35% 10.35% 9.79%Since Inception (January 31,1992) 13.51% 9.70% 9.44%

Baron Partners Fund

34

Care sectors, and lack of investments in Telecommunication Services,Consumer Staples and Materials sectors, were the largest detractors fromrelative performance. 41.5% of the Fund’s average gross assets produceddouble digit returns and 19.9% advanced single digits, while 38.6% declined.

We try to explain the reasons certain stocks outperformed orunderperformed during the period in the “Top Contributors” and “TopDetractors” sections. In many instances, we regard gains and losses in theshort term as random. We continue to believe all the businesses in whichwe have invested have the potential to double in size in four to five years.As a result, we believe stocks that have recently underperformed willachieve above average returns and contribute positively to the Fund’sperformance in coming quarters, although we cannot guarantee it.

“The Long andWinding Road” “Here Comes

Bush Years the Sun”“Yesterday” 2000-2008 Obama Years

Clinton Years 9/11; Iraq; 2008-20141992-2000 Afghanistan; Recovery

Internet Bubble Housing Bubble; 6/30/2014 “Any Time12/31/99 P/E 33x Financial Panic P/E 15.6x at All”



Baron Partners Fund 22.45% 1.54% 22.15% 13.51%

Russell Midcap Growth Index 19.26% –4.69% 22.44% 9.70%

S&P 500 Index 20.21% –3.60% 17.65% 9.44%

Managing risk is a key part of our investment process.We manage risk froma company perspective by investing in businesses that are conservativelyfinanced with high barriers to entry and wide moats. Our proprietaryresearch regarding business’ long-term growth opportunities, competitiveadvantages, management teams and risks determines how much weallocate to individual securities. We invest in different industries that areaffected by different factors to attempt to achieve a portfolio ofinvestments with risks that are not correlated. This is part of our effort toreduce the volatility of a focused portfolio.

Further, the underlying businesses in which the Fund has investedhistorically have less volatile earnings than the Index. We continue tobelieve the outlook for businesses is strengthening. U.S. economic datacontinues to show broad signs of improvement, including gains inhousing prices, starts and existing sales from depressed levels (althoughthere is still a long way to go); increased industrial production; strongauto sales; rising consumer confidence; and lower unemployment claims.Interest rates remain at historically low levels. Lower energy prices, aresult of massive new domestic shale energy discoveries, are also having

a positive effect on businesses (lower input costs) and consumers (lowerprices at the pump).

Our outlook for stocks remains favorable. In our opinion, stocks remainattractively valued, trading at 15.6 times earnings, approximating theirmedian valuation for the past century, while business activity is accelerating.Historically, stocks have provided protection against inflation, as well as betterreturns than other asset classes. We think that will continue to be the case.

Table II.


MarketCap Quarter



Windy City Investments Holdings, L.L.C. 2007 $ 2.7 $4.0 63.76% 1.18%

Hyatt Hotels Corp. 2009 4.2 9.5 13.32 1.13Tesla Motors, Inc. 2014 21.9 29.8 15.17 1.12Concho Resources, Inc. 2013 8.7 16.1 17.96 1.09Illumina, Inc. 2013 6.8 22.9 20.10 0.69

Shares of Windy City Investments Holdings, L.L.C. (Nuveen Investments),an asset management firm, rose significantly in the second quarter. TIAA-CREF, a financial services firm, made an offer to purchase Nuveen and the dealis expected to close toward the end of the year. We believe the strategicpartner will use Nuveen’s unique capabilities to manage a portion of theTIAA-CREF sourced assets.These assets would be at risk of leaving TIAA-CREFwithout the acquisition, and therefore, we believe there is a high likelihood ofthe deal closing as planned. (Michael Baron)

Shares of Hyatt Hotels Corp., a global lodging company, increased in in thesecond quarter after reporting strong earnings growth driven by an uptickin group business bookings. Groups comprise 45% of the company’sdomestic bookings. Hyatt has also benefited from the sale of non-coreassets, generating excess cash that Hyatt has used to accelerate sharerepurchases and purchase underperforming quality assets in new locations.We think Hyatt’s growth in units and increased revenue per available room(RevPAR) are not yet reflected in its share price. (David Baron)

Tesla Motors Inc. designs, develops, manufactures and sells fully electricvehicles. Tesla reported what we considered to be strong results in the firstquarter, but investor reaction was negative and we took the opportunity toadd to our positions when the stock price dropped in early May. Teslacontinues to make progress with battery cost reduction and regulatoryapprovals to sell its cars directly to consumers. Both of these developmentswere viewed positively toward quarter end. We view Tesla as a “once in alifetime” disruptor to the car industry and believe this justifies its premiumvaluation. (Gilad Shany)


35

market appeal. Right after Tesla’s annual shareholder meeting, CEO ElonMusk announced Tesla is opening all of its intellectual property to thirdparties, in order to induce the electrification of the auto industry (to date,electric car programs at the major manufacturers are small to non-existent). Tesla is confident in its ability to out-innovate its competitors dueto its most formidable competitive advantage - people. As of today, webelieve Tesla is the only car Original Equipment Manufacturer that is ableto hire talent away from top tier technology companies. The ability to keepthis talent busy and engaged for the greater good, with consistentexecution and commercial success, will, we believe, build Tesla’s moats foryears to come. We often say “we invest in people.” Tesla invests in people,too. (Gilad Shany)

Air Lease Corp. purchases commercial aircraft to lease to airlines aroundthe world. AL currently owns 196 modern aircraft, with 331 new airplanes(worth $23 billion) on order to satisfy U.S. and European carriers’ demandfor more fuel-efficient models to replace their aging fleet and emergingmarkets’ need for more lift. Passenger traffic growth remains strong, up6.2% (IATA data) through May, consistent with historical trends ofoutpacing GDP growth. AL’s revenues (+28% in the first quarter of 2014)and earnings per share (+50%) are growing impressively as its fleet builds.An investment grade rating and strengthening credit profile should enableAL to continue to get favorable financing in the capital markets and de-riskits balance sheet with more unsecured, fixed rate debt. AL hasapproximately 91% of leases placed through 2016 and is well capitalizedfor a long “runway” of profitable growth. (David Goldsmith)

Dick’s Sporting Goods, Inc., the country’s largest sporting goods retailer,declined sharply after the company reported lower than anticipatedearnings and reduced expectations for yearly profits. The 14.5% decline inthe quarter provided an attractive price to increase our holdings. The salesshortfall was concentrated in the hunting and golf category, while otherhigher margin product segments have sales growth exceeding industryaverages. Hunting sales were down after abnormally high revenue in 2012related to fears of stricter regulations in the industry (that have so farappeared unwarranted). Golf sales were weak due to our belief that supplierproduct did not resonate with the customer. Both of these issues, in ouropinion, appear temporary. The core business for Dick’s is strong with samestore sales growth of 6.6%, excluding the hunting and golf categories. Thecompany is investing to improve store level profitability and productivitywhile growing the number of locations at a manageable pace. We believethe stock is very inexpensive for a top quality retailer, and we believe thecompany has $4 of earnings potential in a few years, once it managesthrough the current issues. (Michael Baron)

Investment Strategy

We invest for the long term in a non-diversified portfolio of competitivelyadvantaged, well-managed, growing businesses at what we think areattractive prices. Often, we have opportunities to purchase stocks ofbusinesses we have researched extensively and that we believe aremispriced or have fallen in price due to what we perceive to be temporaryissues. For example, in the June quarter, the Fund increased its investmentin Dick’s Sporting Goods, Inc., a long-time holding in the Fund as well asother Baron Funds, after the stock declined following an earnings shortfalland guidance cut due to weakness in golf and hunting sales. We believe

Table III.


QuarterMarket End Market

Cap Cap or When Market Cap

Year Acquired When Sold Total PercentAcquired (billions) (billions) Return Impact

athenahealth, Inc. 2014 $5.3 $4.3 –32.20% –1.09%CoStar Group, Inc. 2005 0.7 5.1 –15.45 –0.95Dick’s Sporting Goods, Inc. 2005 1.6 5.9 –14.69 –0.73Gaming and Leisure

Properties, Inc. 2008 1.7 3.8 –5.43 –0.23Discovery

Communications, Inc. 2009 6.2 25.4 –10.18 –0.22

Shares of athenahealth, Inc., a provider of cloud-based software-enabledbusiness services for physicians and other healthcare providers, fell afterreports of lower than expected first quarter revenues and earnings. A hedgefund manager also published a short thesis that the company’s long-termmargin potential is structurally lower than what many investors believe.Weexited the position during the quarter. (Neal Kaufman)

After doubling in 2013, real estate information and marketing servicesprovider CoStar Group, Inc. gave back gains in the second quarter. CoStarshares were negatively impacted by sudden and significant multiplecompression in high growth, highly valued stocks, which sold off acutelyearly in the quarter. CoStar also completed an equity offering in the quarter,which we expect will be used to finance accretive M&A over the next sixmonths. We continue to maintain conviction in CoStar. (Neal Rosenberg)

Shares of Dick’s Sporting Goods, Inc., a sporting goods retailer, declined inthe second quarter. The company reported quarterly earnings that weremodestly below Street expectations and reduced guidance for the rest ofthe year. The sales shortfall was concentrated in the hunting and golfcategories, while other higher margin product segments had sales growthexceeding industry averages. We believe the hunting and golf issues aretemporary and do not alter the long-term investment thesis. (MichaelBaron)

Recent Portfolio Additions

Table IV.





Tesla Motors Inc. 2014 $21.9 $29.8 $58.4Air Lease Corp. 2014 3.3 3.9 34.0Dick’s Sporting Goods, Inc. 2005 1.6 5.9 26.6CoStar Group, Inc. 2005 0.7 5.1 18.9CarMax, Inc. 2011 6.1 11.5 17.6

We had told you about our purchase of Tesla Motors Inc. shares in theprevious letter. During the quarter, we increased our level of confidence inTesla’s superior engineering and design, which we believe will lead to mass

these are temporary issues and the long-term outlook for Dick’s remainsstrong.We initiated a position in The Middleby Corp., a long-time holding inother Baron Funds, after the stock declined following an earnings miss dueto the integration of recently-acquired Viking Range distributors.We believethe margin weakness is a temporary issue and the Viking acquisition will bea positive long-term growth driver. We also added opportunistically to ourpositions in Tesla Motors Inc., Air Lease Corp., CoStar Group, Inc., CarMax,Inc., The Charles Schwab Corp., The Carlyle Group and Gaming and LeisureProperties, Inc. All are mid-sized, well-established, appropriately capitalized,growing companies, with strong positions in markets where there is stabledemand for their products and services.The Fund may use leverage to investin stable and well-capitalized growth companies, with the goal of enhancingits investments returns.

Another common theme for Baron Partners Funds’ investments is one ofbusinesses 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. Verisk Analytics, Inc.’sstartup investments in health care and real estate data services; CarMax,Inc.’s line of new stores coupled with efforts to grow sales in existing stores;and Hyatt Hotels Corp.’s investment in hotel renovations and improvedguest services, as well as its ongoing expansion in Asia, are noteworthy in thisregard. As long-term investors who hold stocks for an average of about fiveyears, we expect to benefit from these expenditures. In contrast, most othermid cap mutual funds are more trading oriented, turning over their entireportfolios on average every nine 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, allowing us to take positionsin these companies at prices we feel are especially attractive.

Baron Partners Fund also has significant investments in growing “C”corporations like Vail Resorts, Inc., Hyatt Hotels Corp. and ITC HoldingsCorp., whose shares we believe are undervalued when compared to similarbusinesses structured as REITs or master limited partnerships. The Fund’sinvestments in alternative investment money manager The Carlyle Group,and financial intermediary The Charles Schwab Corp., are benefiting fromstrong performance of equities, which has resulted in increased investorinterest in that asset class.

Portfolio Structure

The Fund’s non-diversified portfolio is currently invested in 25 businesses,principally mid cap companies. As of June 30, the weighted average marketcapitalization of the Fund’s portfolio investments was $11.66 billion

compared with $12.9 billion for the benchmark. The Fund currently hassignificantly larger investments in Financials, Utilities, ConsumerDiscretionary and Energy sectors than the Russell Midcap Growth Index.The Fund’s investments in Information Technology and Health Care areweighted less than the index. The Fund does not have investments inMaterials, Telecommunication Services or Consumer Staples. The Fund alsohas no investments in biotech businesses. Those businesses performedstrongly in 2013, often increasing in price 50-100%. The Fund, to date, hasavoided significant investments in businesses with volatile earnings orwhen it believes it is not apparent whether or not a business will besuccessful. We are not attempting to mirror any index with the Fund’sportfolio.

The Fund’s average portfolio turnover for the past three years was 21.18%.This implies an average holding period of roughly five years. The averagemid cap growth fund holds its investments for less than one year.

We think the businesses in which the Fund has invested have the potentialto double in size within four to five years. We think because of the unusualcompetitive advantages of those businesses it would take many years orcost a lot of money, and, therefore, not be economically feasible for newentrants to compete against them. We think these barriers enable ourcompanies to generate strong returns on capital and provide them with theability to grow consistently over the long term.

Table V.



When Market PercentYear Acquired Cap Amount of Total

Acquired (billions) (billions) (millions) Investments

Tesla Motors Inc. 2014 $21.9 $29.8 $162.0 7.6%Hyatt Hotels Corp. 2009 4.2 9.5 152.5 7.1ITC Holdings Corp. 2005 0.8 5.8 149.6 7.0Arch Capital

Group Ltd. 2002 0.6 7.7 140.7 6.6Air Lease Corp. 2014 3.3 3.9 115.9 5.4Concho Resources, Inc. 2013 8.7 16.1 115.6 5.4CarMax, Inc. 2011 6.1 11.5 104.0 4.9Dick’s Sporting

Goods, Inc. 2005 1.6 5.9 97.8 4.6CoStar Group, Inc. 2005 0.7 5.1 97.7 4.6The Charles

Schwab Corp. 1992 1.0 35.0 95.6 4.5

36

Baron Partners Fund


37


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 sellduring market downturns. Leverage is the degree to which an investor or business is utilizing borrowed money. 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 is not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in thisreport reflect those of the respective portfolio managers only through the end of the period stated in this report. The portfolio manager’s views are not intended asrecommendations or investment advice to any person reading this report and are subject to change at any time based on market and other conditions and Baron has noobligation 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 unlawfulunder the laws of that jurisdiction to make such offer or solicitation.



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 theirstocks’ prospects remain attractive. Of course, there can be no guaranteethis 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

about your investments in Baron Partners Fund if our roles were reversed.This is so you will be able to make an informed decision about whether thisFund remains an appropriate investment for you and your family.

Respectfully,

Ronald BaronCEO and Portfolio ManagerJuly 23, 2014

38


Performance listed in the table above is net of annual operating expenses.Annual operating expense ratio for the Retail Shares as of September 30,2013 was 1.47%, but the net annual expense ratio is 1.30% (net of theAdviser’s fee waivers). The performance data quoted represents pastperformance. Past performance is no guarantee of future results. Theinvestment return and principal value of an investment will fluctuate; aninvestor’s shares, when redeemed, may be worth more or less than theiroriginal cost. The Adviser has reimbursed certain Fund expenses (by contractas long as BAMCO, Inc. is the adviser to the Fund) and the Fund’s transferagency expenses may be reduced by expense offsets from an unaffiliatedtransfer agent, without which performance would have been lower. Currentperformance may be lower or higher than the performance data quoted. Forperformance information current to the most recent month-end, visitwww.BaronFunds.com or call 1-800-99BARON

1 The indexes are unmanaged. The S&P 500 Index measures the performance of 500 widelyheld large-cap U.S. companies and the Russell 1000® Growth Index of large-sized U.S.companies that are classified as growth. The indexes and the Fund are with dividends, whichpositively impact the performance results. Russell Investment Group is the source and ownerof the trademarks, service marks and copyrights related to the Russell Indexes. Russell is atrademark of Russell Investment Group.


3 Not annualized.

Table I.



Baron Fifth RussellAvenue 1000Growth S&P 500 GrowthFund1,2 Index1 Index1

Three Months3 3.78% 5.23% 5.13%Six Months3 4.04% 7.14% 6.31%One Year 31.71% 24.61% 26.92%Three Years 15.91% 16.58% 16.26%Five Years 17.83% 18.83% 19.24%Ten Years 7.35% 7.78% 8.20%Since Inception (April 30, 2004) 7.24% 8.00% 8.38%

performing segments of the market.While we are not concerned with sectorweightings and exposures in general, we are actively working on adding oneor two investments in the Energy space, as making a big bet against theEnergy sector, however unintentional, makes little sense to us. Amazon.com

is our only significant detractor on the year, costing the Fund just over ahundred basis points with the stock down 18.6% after a 60% rise in the prioryear. It remains a significant holding and one of our highest conviction long-term investments.

We did not make many changes to the portfolio this quarter. In fact, weonly replaced one investment. Our shareholder letters generally do nothave a “Lessons Learned” section, but our experience with eBay, Inc. wouldsurely qualify.

We spent most of the 2012 doing the work, building our models, andwatching the stock go up. We liked the fast growing electronic paymentspart of the business called PayPal, but were concerned about eBay’s maturecore marketplaces business that seemed to be highly penetrated. Weworried about lack of innovation and the perception of deteriorating cultureand employee morale, but no matter which way we sliced it, the stockseemed too cheap. There was also positive optionality with improvementsin the company’s capital structure, increased returns of cash to theshareholders and a potential spin out of PayPal. Finally, at an annualinvestor day, the company laid out an ambitious 5-year plan designed to re-invigorate (read turn-around) the core business, and we initiated a positionin late 2012. Almost two years later, we sold the shares at a small profit.While it has not been five years, the growth at eBay’s core retailing site hasremained anemic, PayPal’s competition has intensified, and the exodus oftalented executives from the company has increased. eBay may yet succeedin its efforts, but our shareholders are unlikely to benefit from it. We wereaware that turning around a company is hard to do,however, we may have underestimated the skill setrequired to successfully invest in these situations. Nexttime you read us getting all excited about a turn-aroundopportunity, feel free to drop us an e-mail and tell us to“cut it out!”

Dear BARON FIFTH AVENUE GROWTH FUND SHAREHOLDER:

PERFORMANCE

In some ways, the June quarter was a mirror image of the one that endedin March.The year started off with the markets continuing a steady advancefollowed by a sharp decline in the last month of the quarter. Headlinesabout the likely messy exit from Quantitative Easing (QE), slowdown ofGDP growth in China, and Russia’s belligerent activities in Ukrainedominated the news into April, and then it stopped. It’s not that theseproblems were resolved per se, but the sentiment changed, they became“priced in,” and the market resumed its grind higher. Similar to the firstquarter, value stocks significantly outperformed growth, an environment inwhich we typically struggle to keep up.The Baron Fifth Avenue Growth Fundreturned 3.8% for the quarter compared to 5.2% and 5.1% for the S&P 500and Russell 1000 Growth Indexes. After a very strong second half of lastyear, some reversion to the mean was probably unavoidable, especiallysince the portfolio remained largely unchanged. Though we trail themindless indexes year-to-date, the Fund is up 31.7% over the last 12months versus 24.6% and 26.9% for the benchmarks.

Our core holdings continued to perform very well, with Illumina, Google,Facebook, Monsanto, Apple, Starbucks and Brookfield Asset Management

all making sizeable contributions. We did get hurt with our meaningfulunderweights in Consumer Staples and especially Energy, the two best

ALEX UMANSKY Retail Shares: BFTHX

PORTFOLIO MANAGER Institutional Shares: BFTIX

39

June 30, 2014 Baron Fifth Avenue Growth Fund

Table II.


Quarter EndMarket Cap Percent

(billions) Impact

Illumina, Inc. $ 22.9 1.37%Apple, Inc. 560.3 1.00Facebook Inc. 172.7 0.69Monsanto Co. 65.4 0.46Equinix, Inc. 10.5 0.39

Shares of Illumina, Inc., the leading provider of next generation DNAsequencing instruments and consumables, increased 20.1% during thequarter and are up 61.4% year-to-date. Performance was driven by betterthan expected first quarter financial results and strong 2014 financialguidance. The company’s announcement of multiple new productintroductions, including a new ultra-high throughput sequencing platformcalled the HiSeq X Ten, which is the first to sequence a full human genomefor less than $1,000, is generating strong momentum. While the sharesappear to be fully priced over the short term, we believe the sequencingmarket is in its infancy, and Illumina has further distanced itself from itscompetitors and holds an effective monopoly on DNA sequencing at a timewhen demand is accelerating.

Apple, Inc.’s stock continued its recovery as the shares advanced a solid21.9%. While investors were undoubtedly excited about Apple’s return torevenue and earnings growth, and a much more robust capital return policy,we continue to hang on for one simple reason – new products. We expectthe 2nd half of the year to be by far the most exciting time for new productintroductions under the Tim Cook regime. Time will tell how innovative andsuccessful these products will be. The valuation remains undemanding, sowe continue to give Apple the benefit of the doubt.

Shares of Facebook Inc., the world’s largest social network, rose 11.7%during the quarter and are up a healthy 23.1% year-to-date. The stockreacted favorably to continued improvements in consumer engagementand mobile monetization.We believe that Facebook is in the early stages ofbuilding out its global advertising business and investing in its monetizationstrategy for Instagram, its online mobile photo-sharing service.We think thecompany has an attractive customer base and stands to benefit fromexpected improvements in the price of advertising on its platform.

Shares of Monsanto Co., an agricultural biotechnology company, increasedin the second quarter. Performance was driven by a strong earnings reportin June, when the company raised guidance and announced a $10 billionshare repurchase program. Management also set a long-term strategictarget to more than double earnings per share over the next five years.Monsanto is a highly cash generative franchise with high barriers to entrythat we believe will continue to compound earnings at a rate of 15-20%per year.

Equinix, Inc. owns and operates a global platform of high-end data centers.These data centers service over 100 international business exchanges andover 4,500 companies globally. Shares of Equinix were up 13.7% during the

quarter as the pricing environment improved and the likelihood and timingof a REIT conversion moved closer. We believe the company’s network ofdata centers is unique and hard-to-replicate with strong prospects forgrowth and attractive returns on invested capital.

Table III.


Quarter EndMarket Cap or

Market CapWhen Sold Percent(billions) Impact

Wynn Resorts Ltd. $ 21.0 –0.35%Las Vegas Sands Corp. 61.6 –0.22Amazon.com, Inc. 149.5 –0.18eBay, Inc. 65.8 –0.18Vmware, Inc. 41.7 –0.17

We had no significant detractors this quarter.

Shares of Wynn Resorts Ltd., and Las Vegas Sands Corp., casinocompanies with properties in Macau, Las Vegas, and Singapore (in the caseof Sands), declined 6% and 5%, respectively. Both stocks were affected byconcerns over a slowdown in VIP revenues and an apparent delay in thelegalization of gaming in Japan. We view these issues as mainly noise andone-time in nature, and think, VIP revenues and credit will improve andJapanese legislation should pass this fall. These cash generating “machines”have what we believe to be excellent management teams, above averagegrowth rates and excellent returns on invested capital. We are holding ontothe shares.

Shares of Amazon.com, Inc. were down 3.4% during the quarter. Amazoncontinues to scale their investments against what we believe to be massiveand growing markets. Cloud computing, consumer product goods, groceries,electronic devices, apparel, are all markets where Amazon has alreadybecome a significant player. With e-commerce still around 10% of retailsales, we believe the ongoing secular shift to online retailing represents amulti-year opportunity from which we expect Amazon to be one of thebiggest beneficiaries.

eBay, Inc. operates online marketplaces as well as online payment solutionsprovider called PayPal. The stock declined as the company’s growth ratescontinue to disappoint. We have exited this investment.

VMWare, Inc., is best known for creating the software virtualizationmarket. While the server virtualization market is mature, the companycontinues to innovate and grow its addressable market in data centervirtualization and cloud infrastructure. Shares were down 10.4% asinvestors reacted to slowing bookings growth in the first quarter of the year.We see VMWare as a best-of-breed software company with a largecustomer base and a leadership position in the emerging and disruptiveSoftware Defined Networking (SDN) space that we believe makes thecompany attractive.

40



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 wouldbe unlawful under the laws of that jurisdiction to make such offer or solicitation.


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 weights tend to be an outcome of theportfolio construction process and are not meant to indicate a positive or anegative “view.”

During the quarter, compared to the Russell 1000 Growth Index, the Fundwas overweight Information Technology, Consumer Discretionary andFinancials, and underweight Consumer Staples, Energy, Industrials andHealth Care. This has remained unchanged.

The top 10 positions represented 50.1% of the Fund, the top 20 were77.7% and we exited the quarter with 34 holdings.

Table IV.


Quarter End Quarter EndMarket Investment

Cap Value Percent of(billions) (millions) Net Assets

Illumina, Inc. $ 22.9 $7.6 7.3%Google, Inc. 390.9 6.5 6.2Facebook Inc. 172.7 6.1 5.9Apple, Inc. 560.3 5.2 5.0Amazon.com, Inc. 149.5 5.0 4.8Wynn Resorts Ltd. 21.0 4.8 4.6Monsanto Co. 65.4 4.8 4.6The Priceline Group, Inc. 63.1 4.4 4.2Starbucks Corp. 58.3 4.0 3.8Visa, Inc. 132.4 3.8 3.7

Recent Activity

Table V.




Twitter, Inc. $ 24.3 $0.7Google, Inc. 390.9 0.6Vmware, Inc. 41.7 0.5Biogen Idec, Inc. 74.8 0.5Arista Networks, Inc. 4.0 0.3

There were no meaningful changes to the portfolio during this quarter. Weeliminated the approximately 21⁄2% position in eBay for the reasons statedearlier in this letter and sprinkled it among the companies listed in the tableabove.

Table VI.




eBay, Inc. $65.8 $–2.2

Outlook

While there has been a notable pickup in market volatility, we remainconstructive on the overall environment. Most of the returns over the last twoyears had come from multiple expansions rather than earnings growth. Webelieve valuations remain reasonable and improved earnings growth is on deck.

Our goal remains to maximize long-term returns without taking significantrisks of permanent loss of capital. Our focus continues to be on identifyingand investing in unique companies with sustainable competitiveadvantages that we believe have the ability to reinvest capital at high ratesof return.We are bullish about the long-term prospects of the companies inwhich we are invested, and continue to search for new ideas andinvestment opportunities.

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

Sincerely,

Alex Umansky,Portfolio ManagerJuly 23, 2014

June 30, 2014 Baron Focused Growth Fund

41

unemployment and a declining budget deficit. Coupled with low interestrates, low cost energy and initial exploitation of massive domestic shalesupplies and stock prices at median valuations for the past hundred years,the environment seems favorable for our investments, although there is noguarantee that will be the case. But, despite these factors and a market thathas had strong returns over the past 18 months, most investors remaincautious and continue to maintain their several trillions in cash reserves.Whether cash reserves are $5 trillion or $6 trillion, they are a lot comparedto the current $18 trillion U.S. stock markets’ value.

With widespread investor concerns heightened by unsettled conditions inthe Mideast and the Ukraine, there was a rotation to perceived “safety” inthe period. Fast growing, but higher price-to-earnings small and mid capstocks underperformed larger, cyclical businesses with lower valuations inthe period. Real estate, energy, and emerging markets, all of whichunderperformed in 2013, were among the top performers in the quarterand year-to-date.

We attempted to take advantage of what we perceived as marketdislocations. We continue to adhere to Baron Focused Growth Fund’sinvestment process, including our effort to purchase stocks at attractiveprices. Baron Focused Growth Fund made significant new investments inIridium Communications Inc. and Concur Technologies, Inc. after theyhad fallen significantly in price.

Iridium, a satellite enabled voice and data communications company, haddeclined from over $9 per share in 2013 to $6.10 this year when we investedin that business. Iridium provides unique and valuable communicationsservices to the Department of Defense. It also enables machine to machinecommunications (The Internet of Things) as well as enabling flight safetyimprovements and improved airline economics.

Concur Technologies, a provider of integrated travel andexpense management software solutions, declined from$130 per share at the start of the year to $80 where wepurchased shares. The rotation from growth companiesgave us the opportunity to purchase the leading traveland expense management software provider with a

Performance listed in the above table is net of annual operating expenses.As of the last fiscal year ended December 31, 2013, annual operatingexpense ratio for the Retail Shares was 1.42%, but the net annual expenseratio was 1.35% (net of the Adviser’s fee waivers). The performance dataquoted represents past performance. Past performance is no guarantee offuture results. The investment return and principal value of an investment willfluctuate; an investor’s shares, when redeemed, may be worth more or lessthan their original cost. The Adviser has reimbursed certain Fund expenses (bycontract as long as BAMCO, Inc. is the adviser to the Fund) for and the Fund’stransfer agency expenses may be reduced by expense offsets from anunaffiliated transfer agent, without which performance would have beenlower. Current performance may be lower or higher than the performancedata quoted. For performance information current to the most recent monthend, 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 ofparticipation 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.Thepredecessor partnership charged a 15% performance fee through 2003 after reaching acertain performance benchmark. If the annual returns for the Fund did not reflect theperformance fees for the years the predecessor partnership charged a performance fee, thereturns would be higher. The Fund’s shareholders will not be charged a performance fee. Theperformance 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 notregistered under the Investment Company Act of 1940 and was not subject to itsrequirements or the requirements of the Internal Revenue Code relating to registeredinvestment companies, which, if it were, might have adversely affected its performance.

2 The indexes are unmanaged. The Russell 2500™ Growth Index measures the performance ofsmall to medium-sized companies that are classified as growth and the S&P 500 Index of 500widely held large-cap U.S. companies. The indexes and the Fund are with dividends, whichpositively impact the performance results. Russell Investment Group is the source and ownerof the trademarks, service marks and copyrights related to the Russell Indexes. Russell is atrademark of Russell Investment Group.

3 The performance data does not reflect the deduction of taxes that a shareholder would payon Fund distributions or redemption of Fund shares.

4 Not annualized.

Dear Baron Focused Growth Fund Shareholder:

Performance

Baron Focused Growth Fund increased in value 2.66% during the secondquarter. The Russell 2500 Growth Index, the benchmark against which wecompare the performance of the Fund, gained 2.90%. The Morningstar USOE Mid-Cap Growth, measuring the performance of all United States’ openend, mid cap growth mutual funds, gained 2.66% for the three monthsended June 30, 2014. Large cap companies outperformed small cap and midcap companies in the period. The S&P 500 Index, which measures theperformance of large cap companies, gained 5.23% in the quarter.

Baron Focused Growth Fund’s positive performance in the quarter wasachieved entirely during the final month of the period. A steadily improvingU.S. economy is evidenced by improving real estate prices, falling

Table I.



Baron RussellFocused 2500Growth Growth S&P 500Fund1,2,3 Index2 Index2

Three Months4 2.66% 2.90% 5.23%Six Months4 2.22% 3.97% 7.14%One Year 18.29% 26.26% 24.61%Three Years 11.56% 14.88% 16.58%Five Years 17.14% 21.65% 18.83%Ten Years 11.12% 9.94% 7.78%Fifteen Years 7.07% 7.22% 4.35%Since Inception (May 31,1996) 11.83% 7.63% 8.10%

RONALD BARON

CHIEF INVESTMENT OFFICER AND PORTFOLIO MANAGER

RONALD BARON Retail shares: BFGFX

CEO AND PORTFOLIO MANAGER Institutional Shares: BFGIX


42

multi-billion dollar opportunity at an attractive price. Concur remains in theearly stages of its growth. It has an ability to expand its customers, productsand geographies, while also providing suppliers with improved access topotential clients. These two opportunistic purchases were among our topperformers in the quarter.

Stock selection contributed to 0.53% outperformance while assetallocation (sector weighting) detracted 0.72% from relative performancecompared to the Russell 2500 Growth Index.We believe this stock selectionoutperformance is a key metric in evaluating a concentrated portfolio suchas Baron Focused Growth Fund.

The investor “rotation” from certain industries penalized the Fund this year.Consumer Discretionary was the weakest performing segment in the Indexand is the Fund’s largest weighting. While the Fund’s ConsumerDiscretionary stocks significantly outperformed comparable securities, theirlarge weighting made it the biggest detractor to relative performance.Interestingly, the best performing sector, Energy, was the Fund’s secondweakest relative performance from a stock selection standpoint. The Fund’sone Energy holding, Helmerich & Payne, Inc., increased 9% in the quarter,while lagging the 16% gain in the Index’s Energy sector. Helmerich & Payne,the leading horizontal driller that benefits from the exploitation of shaleenergy, has increased nearly 40% year to date. It has had the highest returnof the Fund’s holdings year to date.

“The Long andWinding Road” “Here Comes

Bush Years the Sun”“Yesterday” 2000-2008 Obama Years

Clinton Years 9/11; Iraq; 2008-20141992-2000 Afghanistan; Recovery

Internet Bubble Housing Bubble; 6/30/14 “Any Time 12/31/99 P/E 33x Financial Panic P/E 15.6x at All”



Baron FocusedGrowth Fund 27.87% 2.72% 17.78% 11.83%

Russell 2500 Growth Index 17.60% –3.99% 22.49% 7.63%

S&P 500 Index 26.58% –3.60% 17.65% 8.10%

Table II.


Market Quarter EndCap Market Cap or

When Market Cap Year Acquired When Sold Total Percent


Hyatt Hotels Corp. 2009 $4.2 $9.5 13.32% 0.97%Iridium

Communications Inc. 2014 0.6 0.8 29.24 0.87Zillow, Inc. 2013 3.0 4.1 18.18 0.61Vail Resorts, Inc. 2013 2.3 2.8 11.34 0.58FactSet Research

Systems, Inc. 2008 2.5 5.1 11.97 0.51

Shares of Hyatt Hotels Corp., a global lodging company, increased in in thesecond quarter after reporting strong earnings growth driven by an uptickin group business bookings. Groups comprise 45% of the company’s

domestic bookings. Hyatt has also benefited from the sale of non-coreassets, generating excess cash that Hyatt has used to accelerate sharerepurchases and purchase underperforming quality assets in new locations.We think Hyatt’s growth in units and increased revenue per available room(RevPAR) are not yet reflected in its share price. (David Baron)

Iridium Communications Inc. operates a group of satellites used forworldwide voice and data communication from hand-held satellite phonesand other transceiver units. The stock rose significantly in the secondquarter, driven by increasing investor confidence in its growth prospects.We participated in a capital raise by Iridium, purchasing its convertiblepreferred stock. Iridium used its proceeds to fund the build of an advancedsatellite constellation. We believe this will be a unique asset withsignificant growth opportunities around M2M (machine to machine) andflight safety and control (Aireon). Its Department of Defense businesseswill continue to provide significant cash flow. (Gilad Shany)

Shares of Zillow, Inc., the leading online real estate site in the U.S., were upsharply in the second quarter, due, in part, to a favorable market reactionwhen a notable investor took a large position in the company in April.(Ashim Mehra)

Table III.


MarketCap Quarter



Dick’s Sporting Goods, Inc. 2005 $1.6 $5.9 –14.50% –0.71%

CoStar Group, Inc. 2014 6.2 5.1 –15.26 –0.56Guidewire

Software, Inc. 2013 2.7 2.8 –17.10 –0.50AO World plc 2014 2.0 1.9 –15.92 –0.49CaesarStone

Sdot-Yam Ltd. 2013 1.5 1.7 –9.75 –0.33

Shares of Dick’s Sporting Goods, Inc., a sporting goods retailer, declined inthe second quarter. The company reported quarterly earnings that weremodestly below Street expectations and reduced guidance for the rest ofthe year. The sales shortfall was concentrated in the hunting and golfcategories, while other higher margin product segments had sales growthexceeding industry averages. We believe the hunting and golf issues aretemporary and do not alter the long-term investment thesis. (MichaelBaron)

After doubling in 2013, real estate information and marketing servicesprovider CoStar Group, Inc. gave back gains in the second quarter. CoStarshares were negatively impacted by sudden and significant multiplecompression in high growth, highly valued stocks, which fell sharply early inthe quarter. CoStar also completed an equity offering in the quarter, whichwe expect will be used to finance accretive M&A over the next six months.We continue to maintain conviction in CoStar. (Neal Rosenberg)

Guidewire Software, Inc. shares declined as investors rotated from growthinto value stocks and from small cap into larger cap stocks. The impact wasparticularly acute in stocks that had been strong recent performers, such asGuidewire, as investors abandoned winners in search of recentunderperformers. Guidewire is the gold standard of property & casualty

June 30, 2014 Baron Focused Growth Fund

43

core system vendors, as evidenced by near-perfect retention rates, growinginstalled base, and accelerating adoption of its complete product suite. Wemaintain conviction in the stock. (Neal Rosenberg)

Recent Purchases

Table IV.





Iridium Communications Inc. 2014 $0.6 $0.8 $5.8Concur Technologies, Inc. 2014 4.6 5.3 3.7CoStar Group, Inc. 2014 6.2 5.1 1.1AO World plc 2014 2.0 1.9 0.4CaesarStone Sdot-Yam Ltd. 2013 1.5 1.7 0.3

Iridium Communications Inc. provides mobile voice and datacommunication services using a constellation of low-earth orbiting (LEO)satellites. Due to its unique architecture, IRDM’s constellation is the onlynetwork with full coverage across the globe (including polar regions, openocean and other remote locations). Over the next three years, IRDM willdeploy its next generation constellation which will allow it to addsignificant capabilities and accelerate growth in new markets (M2M ormachine-to machine, aviation, maritime and more).We believe one of theseinitiatives (Aireon) has the potential to save billions of dollars throughcommercial aviation route optimization and improve its real time coverage.In today’s “always on, always connected” world, the need for connectivity isever growing. IRDM’s current business (government and commercial) iscontracted and recurring. Complementing this with growth opportunities,we believe, will allow IRDM to expand margins, improve its returns oninvestments and optimize its capital structure and returns to shareholders.(Gilad Shany)

We initiated a position in Concur Technologies, Inc. after the stock fell dueto a general rotation out of high growth stocks. Concur is a leading providerof integrated travel and expense management software solutions. Thecompany sells its software on a subscription basis and delivers the softwarethrough the Internet (i.e., through the “cloud”). We believe Concur has aunique offering and a multi-billion dollar market opportunity in its corebusiness. We expect the company to continue to grow rapidly throughadding new customers, cross-selling new products, expanding into the smallbusiness market, expanding outside the U.S., and expanding into thegovernment vertical. We also believe Concur has an opportunity to createan alternative distribution channel for travel suppliers and eliminate billionsof dollars of transactions costs that are incurred annually in the travelsupply chain. (Neal Kaufman)

The Fund added to its position in CoStar Group, Inc., the leading provider ofinformation and marketing services to the $50 trillion commercial realestate (CRE) industry.The company has spent 25 years building a proprietaryCRE database, which has grown to include information on over four millionproperties and nine billion square feet of listings. The company monetizes itsdata through subscriptions to analytical tools, which are deeply integratedinto clients’ workflows. Ongoing investments in R&D and a doubling of the

sales force should allow CoStar to sell an expanded array of tools to new andexisting customers. Additionally, the acquisitions of LoopNet andApartments.com extend CoStar’s reach into marketing services and multi-family lead generation, creating vast new opportunities and offering thecompany dramatic revenue and cost synergies. Finally, the company’s highfixed cost base creates significant operating leverage, which we believeshould help drive margins to above 40%. (Neal Rosenberg)

Portfolio Structure

The objective of Baron Focused Growth Fund is to double its value per sharewithin five years. Of course, the Fund may not achieve that objective. Ourstrategy to accomplish this is to invest for the long term in a focusedportfolio of appropriately capitalized, well-managed, small and mid capbusinesses at attractive prices.We attempt to create a portfolio of less thanthirty securities diversified by GICS sectors that will be approximately 85%as volatile as the market. These businesses are identified by our firm’sproprietary research.

We think the businesses in which Baron Focused Growth Fund has investedhave the potential to double in size within approximately five years anddouble again over the subsequent five years. We think these well-managedbusinesses have sustainable competitive advantages and strong, long-termgrowth opportunities. Considering current stock price valuations, we believewe have the opportunity to meet our performance goals during the nextdecade, although there is no guarantee that we will do so.

As of June 30, 2014, Baron Focused Growth Fund held 28 investments. Themedian market capitalization of those small and mid-sized growthcompanies was $5.20 billion. Compared to its benchmark, the Fund’sinvestments have higher profitability (as exhibited through greateroperating margin, EBITDA margin and net margin). They also exhibit betterinternal returns (higher return on invested capital and return on equity).And they are more conservatively financed (lower debt to marketcapitalization ratio) and achieve more consistent earnings results (lowerstandard deviation of earnings growth and lower beta). We find thesemetrics important in limiting risk for a focused portfolio. Interestingly, theFund’s holdings lag on a free cash flow margin (cash flow from operationsminus capital expenditures). This metric is often cited as crucial for today’sinvestors who value a company’s ability to return cash to shareholdersthrough dividends and/ or buybacks. While we do not minimize theimportance of cash generation, we generally prefer businesses in which theFund has invested to reinvest in their businesses for future growth. Weexpect to be long-term owners of these businesses that we believe candouble in value over the next five years. Without reinvesting in theirbusinesses, these firms stand little chance of fulfilling their ambitiousgrowth plans. The Fund is investing in companies like ITC, which is investingin additional transmission in order to expand its future regulated rate base;Vail Resorts, which is spending capital to make their resorts more appealingto a year round visitor and to improve recently acquired properties; orCarMax, which is accelerating unit expansion to meet pent up demand.While these investments result in lower free cash flow margin, we believethese businesses are well positioned for growth. We believe investing incompanies with strong current financial positions that are improving theirproduct to attack a large opportunity gives the Fund the best chance toachieve its long-term return goals.

For more information about this Fundplease scan this QR code with any bar code reader on your mobile device


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 riskof loss 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.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 thisreport reflect those of the respective portfolio managers only through the end of the period stated in this report. The portfolio manager’s views are not intended asrecommendations or investment advice to any person reading this report and are subject to change at any time based on market and other conditions and Baron has noobligation to update them.

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 beunlawful under the laws of that 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.


Table V.





Colfax Corp. 2012 $2.4 $9.2 $14.9 7.4%Hyatt Hotels Corp. 2009 4.2 9.5 14.6 7.3Vail Resorts, Inc. 2013 2.3 2.8 10.5 5.2Genesee &

Wyoming, Inc. 2007 1.1 5.6 10.0 5.0Pinnacle

Entertainment, Inc. 2013 1.1 1.5 9.1 4.5FactSet Research

Systems, Inc. 2008 2.5 5.1 9.0 4.5ITC Holdings Corp. 2008 2.2 5.8 8.8 4.4Manchester United plc 2012 2.1 2.9 8.7 4.4CarMax, Inc. 2011 5.7 11.5 8.3 4.2Helmerich & Payne, Inc. 2007 3.7 12.6 8.1 4.1

Thank you for investing in Baron Focused Growth Fund.

We are continuing to work hard to justify your confidence and trust in our

stewardship of your family’s hard-earned savings.We are also continuing to

try to provide you with information I would like to have if our roles were

reversed. This is so you can make an informed judgment about whether

Baron Focused Growth Fund remains an appropriate investment for your

family.

Respectfully,

Ronald Baron

CEO and Portfolio Manager

July 23, 2014

44


45

June 30, 2014 Baron International Growth Fund

MICHAEL KASS Retail Shares: BIGFX

PORTFOLIO MANAGER Institutional Shares: BINIX

Dear Baron International Growth Fund Shareholder:

Performance

The Baron International Growth Fund (the “Fund”) appreciated 3.80%, whileits principal benchmark index, the MCSI ACWI ex USA IMI Growth Index,gained 4.32% for the second quarter of 2014. Global equities broadly rallied,we believe, at least in part, driven by declining sovereign bond yields acrossthe globe. We believe the European Central Bank likely encouraged such adecline in yields as it clearly communicated both targeted liquidity programsand a willingness to engage in outright purchases of asset-backed securities ifdeemed necessary.While this communication was welcomed by fixed incomeand equity markets nearly worldwide, we would prefer markets clearly rootedin fundamentals rather than perhaps directed by monetary authorities.Geopolitical challenges appear on the rise in the Middle East, even ifstabilizing temporarily in Ukraine. During the quarter, China continued to flexits muscle over disputed territories in the South China Sea, revealing thecomplexity of maintaining U.S. influence in the region. Previous hotspots ofinstability did seem to at least stabilize: namely Turkey, Thailand andArgentina. Regardless of such long-tail matters, the global capital marketsappear tame under the influence of developed world policymakers. Volatilitymeasures have reached post-crisis lows coincident with major developedworld bond yields, and with dividend yields on equities now appearing quite

Table I.



MSCI Baron ACWI ex

International USA IMI MSCI Growth Growth ACWI ex Fund1,2 Index1 USA Index1

Three Months3 3.80% 4.32% 5.03%Six Months3 5.39% 5.02% 5.56%One Year 24.64% 20.05% 21.75%Three Years 7.58% 5.58% 5.73%Five Years 15.44% 11.70% 11.11%Since Inception (December 31, 2008) 16.07% 13.21% 12.69%

Performance listed in the above table is net of annual operating expenses.As of the last fiscal year ended December 31, 2013, annual operatingexpense ratio for the Retail Shares was 1.74%, but the net annual expenseratio was 1.50% (net of the Adviser’s fee waivers). The performance dataquoted represents past performance. Past performance is no guarantee offuture results. The investment return and principal value of an investment willfluctuate; an investor’s shares, when redeemed, may be worth more or lessthan their original cost. The Adviser has reimbursed certain Fund expenses (bycontract as long as BAMCO, Inc. is the adviser to the Fund) and the Fund’stransfer agency expenses may be reduced by expense offsets from anunaffiliated transfer agent, without which performance would have beenlower. Current performance may be lower or higher than the performancedata quoted. For performance information current to the most recent month-end, visit www.BaronFunds.com or call 1-800-99BARON.

1 The MSCI ACWI ex USA indexes cited are unmanaged, free float-adjusted marketcapitalization weighted indexes.The MSCI ACWI ex USA IMI Growth Index Net USD measuresthe equity market performance of large, mid and small cap growth securities across developedand emerging markets, excluding the United States. The MSCI ACWI ex USA Index Net USDmeasures the equity market performance of large and mid cap securities across developedand emerging markets, excluding the United States. The indexes and Baron InternationalGrowth Fund include reinvestment of dividends, net of foreign withholding taxes, whichpositively impact the performance results.


3 Not annualized.

attractive on a relative basis, we suspect equities can continue to rise. Further,most developed world economies continue to noticeably improve, whileequity multiples remain far from historic peak levels in such markets and nearhistoric lows in many emerging markets. As such, we remain enthusiasticregarding the prospects for global equities, and particularly for the companiesin which we have invested, notwithstanding the fact that many emergingmarket economies, as well as Japan, appear to be underachieving and/orslowing. Increasingly, we believe these shorter-term economic headwinds arebeing overlooked due to the building momentum of market-friendly reformin key markets such as Japan, China, Mexico and India, as well as the potentialfor improvement subsequent to upcoming elections in Indonesia and Brazil.Most importantly, the Fund’s results since inception suggest that ourinvestment discipline, focused on higher quality, capital-efficient growthcompanies driven by strong and entrepreneurial management teams, isparticularly well suited to capitalize on the extraordinary change andopportunity that we currently see in our markets.

We were satisfied with our second quarter absolute and relative performance,particularly given the notable underperformance of high-quality growth stocksthroughout the world early in the quarter. Our modest underperformanceduring the quarter was a result of a positive stock selection effect offset by anegative allocation and currency effect. By country, Brazil and India were thestandout contributors; in India, the markets clearly discounted the prospect ofmarket friendly reforms coincident with Narendra Modi’s landslide victory. Incontrast, we attribute the recent strength in Brazilian equities to the risingpossibility that Dilma Rousseff could be defeated in the upcoming election,which would then likely usher in a reversal of, in our view, damaging populistand protectionist policies. On the negative side, our United Kingdom and

46


Japan-related investments were the largest relative underperformers, withseveral of our Japan holdings consolidating the sharp gains of the priorcalendar year. By sector, Consumer Discretionary was our largest source ofoutperformance, which we attribute largely to continued strength ininvestments related to our Brazilian post-secondary education and Indiandigitization of media themes. We have commented at length on suchthemes and investments in prior letters. Further, Smiles SA, a leadingloyalty and reward program operator in Brazil, was a material driver ofstrength in Consumer Discretionary. Stock selection in the Financial sectorwas also a notable contributor to relative performance, driven by Axis Bank

Ltd. of India, Cetip SA-Mercados Organizados of Brazil, and PATRIZIA

Immobilien AG of Germany. The most notable detracting sectors duringthe quarter were Information Technology, where several of our broadbandInternet and e-commerce holdings declined in sympathy with the globalsell-off of such companies, and Industrials, where our European low-costairline investments, Ryanair Holdings plc and easyJet plc, both suffereddeclines largely related to concerns over rising fuel costs and uncertaindemand in response to geopolitical events.

Table II.


PercentImpact

Smiles SA 0.62%Kroton Educacional SA 0.51RIB Software AG 0.45Anhanguera Educacional Participações SA 0.35Suncor Energy, Inc. 0.33

Smiles SA is the second largest loyalty program provider in Brazil, sellingfrequent flyer miles to Brazil’s GOL airlines and financial partners. During thesecond quarter, Smiles posted earnings results that beat consensus expectationand announced plans for a special dividend, equivalent to a 20% dividend yield.We believe the company has a strong runway for growth, given theunderpenetration of both air transportation and loyalty programs in Brazil.Further, the company has an attractive business model, producing high margins,strong returns and good cash generation. (Kyuhey August)

Shares of Kroton Educacional SA rose significantly in the quarter, as itcontinued to execute exceptionally well, releasing earnings results 20% higherthan consensus estimates. The Brazilian antitrust authority recently approvedthe merger agreement between Kroton and Anhanguera, which will form oneof the largest for-profit education companies in the world. The combinedentity is expected to generate substantial synergies. (Kyuhey August)

Shares of RIB Software AG, a leading provider of construction and buildinginformation modeling software, rose in the second quarter, carrying forward itsstrong performance from 2013. RIB’s software is designed to streamline acustomer’s business while reducing error and expenses and speeding up delivery.Despite the superior product, adoption had been slow. In 2013, RIB beganallowing new clients to try the software in a mobile lab, dramatically shorteningthe sales process from one year to just 100 days. Since then, the company hasreported a sharp increase in the number of new contracts. (Kyuhey August)

Shares of Brazilian post-secondary education company Anhanguera

Educacional Participações SA rose sharply during the second quarter, as aresult of governmental approval of its merger with Brazilian educationcompany Kroton Educacional SA. The merger will form one of the largest

for-profit education businesses in the world. Since fixed costs are the largestcosts of an educational institution, we believe the merger will createsignificant synergies. (Kyuhey August)

Suncor Energy, Inc. is one of the largest integrated oil companies andoperators of oil sands production facilities in Canada. Suncor shares rose22.6% in the second quarter as investors appeared to grow more comfortablewith Suncor’s production growth forecasts.Although production is expected tobe flat this year, new projects are expected to deliver significant accelerationin growth in the next several years. Suncor shares also likely got a modestboost from higher oil prices in the second quarter. (Jamie Stone)

Table III.


PercentImpact

AO World plc –0.29%Sina Corporation –0.27SodaStream International Ltd. –0.24Kingdee International Software Group Co. Ltd. –0.22easyJet plc –0.21

AO World plc is the leading online seller of major domestic appliances inthe U.K. AO has 10% share of the U.K. market and is expected to enter theGerman market later this year.The company had its IPO in March 2014, andafter strong a post-IPO bump, the stock retreated in the second quarter.Webelieve that AO enjoys a competitive advantage due to its unique supplychain and customized software that will facilitate its expansion throughnew product categories and into continental Europe. (Ashim Mehra)

Shares of Sina Corporation fell in the second quarter. Sina operates aleading Chinese Internet portal that also controls the country’s biggestTwitter-like service, SINA Weibo. Performance was hurt by thegovernment’s revocation of two licenses that will impact Sina’s video andbook publishing business in the coming months. Sina also announcedincreased investments in its businesses that will hamper near-termprofitability. We believe Sina is trading at a significant discount to assetvalue and SINA Weibo’s earnings potential is not reflected in the stockprice. (Catherine Chen)

SodaStream International Ltd., the maker of a consumer homecarbonation product, had a slow start to the year in the U.S. Whilemanagement expects to ramp up the U.S. business in the second half of theyear, investor confidence in SodaStream and the category has been shakenover the last couple of quarters.We believe home carbonation is a categorythat is here to stay, and SodaStream has the potential to maintain itsleadership position. (Gilad Shany)

Kingdee International Software Group Co. Ltd. is a leading private sectorEnterprise Resource Planning (ERP) software developer in China.The company’sshares retreated during the second quarter, consistent with many othertechnology and Internet-related companies in China. We remain enthusiasticregarding Kingdee’s cloud-based, e-commerce and mobile initiatives, andbelieve the company remains well-positioned given China’s ongoing drive tosupport the local value-added software industry. (Michael Kass)

Shares of easyJet plc, a low-cost European airline, declined during the secondquarter, after the company provided a first-half trading update that counseled

47

June 30, 2014 Baron International Growth Fund

caution regarding the current competitive environment. Although averagefare prices can fluctuate on a short-term basis as incremental capacity shiftsfrom competitors over specific routes, the long-term consolidation underwaywill be difficult to reverse, and we expect EasyJet to continue stealing marketshare from larger, loss-making incumbent airlines. (Aaron Wasserman)

Portfolio Structure

Table IV.

Top 10 holdings as of June 30, 2014 - Developed Countries

Percent ofNet Assets

RIB Software AG 3.0%Eurofins Scientific SE 2.6SoftBank Corp. 2.5Constellation Software, Inc. 2.4Grifols SA 2.4Agilent Technologies, Inc. 2.1Check Point Software Technologies Ltd. 2.1Compagnie Financière Richemont SA 1.9Symrise AG 1.9FANUC Corp. 1.9

Table V.

Top five holdings as of June 30, 2014 - Developing Countries


Kroton Educacional SA 2.2%Smiles SA 2.1Steinhoff International Holdings Ltd. 2.1TOTVS SA 1.3Yandex N.V. 1.3

Exposure by Country: At the end of the second quarter of 2014, the Fund wasinvested 70.7% in developed countries and 25.1% in developing countries,with the remaining 4.2% in cash. The Fund seeks to maintain broaddiversification by country at all times.A detailed review of the Fund’s holdingsby country is available at the back of this Baron Funds Quarterly Report.

Table VI.

Percentage of securities in developed markets as of June 30, 2014


Japan 13.3%Germany 11.5United Kingdom 10.0Canada 5.7United States 5.2France 4.3Switzerland 4.2Israel 3.7Spain 3.5Norway 3.3Australia 2.7Ireland 1.3Hong Kong 1.3Sweden 0.7

Table VII.

Percentage of securities in developing markets as of June 30, 2014


Brazil 8.9%China 5.9India 4.6Indonesia 2.1South Africa 2.1Russia 1.3Mexico 0.2

The Fund may invest in companies of any market capitalization, and we striveto maintain broad diversification by market cap.As of June 30, 2014, the Fund’smedian market cap was $6.7 billion, and, excluding cash, we were investedapproximately 47.0% in large/giant cap companies, 36.9% in mid capcompanies, and 11.9% in small cap companies, as defined by Morningstar.

Recent Activity

During the second quarter, absent market fluctuations, we made nosignificant changes to our country exposures worthy of mention. From acompany-specific perspective, we participated in the initial public offeringof Just Eat plc, a fast-growing, U.K.-based online restaurant deliveryplatform with the leading market share in the U.K., Denmark, Ireland,France, Spain, Switzerland, Norway, Canada, Italy and Brazil. Just Eatgenerates commission revenues on every order, and we believe it stands tobenefit from the high population density of its markets. Further, itsnetwork-centric model, where it dominates both the number of restaurantsavailable and customers using the mobile app, provides an imposingcompetitive advantage, while its unique POS system acts as an additionalbarrier to entry. We recently visited the company’s London headquartersand were quite impressed with the innovative and energetic culture acrossthe organization. We also established a new position in Domino’s Pizza

Group plc, which holds the master franchise agreement for Domino’s Pizzain the U.K. as well as in Germany and Switzerland. We are quite familiarwith the business model given our successful investment in Domino’s Pizza

Enterprises Ltd. of Australia, and, after following this company for severalyears, we viewed the recent disappointing initial results in Germany as anopportunity to invest. We believe there remains plenty of growth potentialin the U.K., while the company’s dominant market position, high-returnfranchise model, and operational efficiency represent classic Baroninvestment attributes. Further, we suspect the company will ultimatelyprove successful in the new territories.

We also initiated a position in GOL Linhas Aéreas Inteligentes SA, thelow-cost Brazil-based airline. We became intrigued with GOL as a result ofour investment in Smiles SA, the Brazil-based loyalty and reward programoperator in which GOL holds a majority equity interest. As we conductedfurther due diligence on GOL, we found a parent company engaged in abroad shift in emphasis from capacity growth and market share towardsoperating and financial efficiency. It was precisely this transition that hadcatalyzed the IPO of the previously hidden Smiles asset.We are encouragedby recent trends in pricing and capacity utilization at the airline operation,and we believe our investment in GOL presents a unique opportunity toparticipate in value creation, synergy and optimization across both theairline and loyalty program businesses.

During the quarter, we modestly reduced our exposure to Japan and China.In Japan, we have been frustrated by the lack of follow-through inanticipated reforms; in China, though we do not expect a broad creditcontraction to take hold, we do believe the beneficial impact of announcedreforms to private sector entrepreneurs is increasingly being discounted,while the recent deterioration of the property market and related shadowfinance sector suggests some additional caution is now warranted. Inaddition, during the quarter, we eliminated our positions in Credit Suisse

Group and Criteo S.A. due to shifting fundamentals and valuations.

Outlook

The second quarter of 2014 largely represented a continuation of previousand ongoing economic and market trends. The absence of a major inflectionpoint is appreciated given the current “Goldilocks” scenario of modest growthand substantial global monetary support. While U.S. Federal Reserve taperingcontinues on plan, amid a steady domestic economy and a tightening labormarket, Japan remains on course with bold monetary stimulus and at leastthe promise of market friendly economic reform. The European Central Bankmoved significantly during the recent quarter, unveiling a targeted long-termrefinancing operation for non-financial private sector companies, which havesuffered limited access to bank credit during the recent deleveraging cycle.Further, the ECB has indicated a willingness to engage in direct purchases ofasset-backed securities if warranted, which we believe was a key driver of therecent record lows across most European sovereign bond yields. As such, theECB seems to be achieving a key effect of quantitative easing withoutactually pulling the trigger, and the recent decline in European bond yields hasdriven fixed income assets lower globally.

Such an environment, characterized by what appears to be a race to thebottom in all yield instruments, in our view, fosters complacency and risk-taking. While such an environment would be quite favorable for equityinvestors nearly everywhere, we must ponder whether such complacency isgrounded in solid fundamentals and valuation, or has been directed by well-intending political and monetary authorities. Volatility measures haverecently reached multi-year lows, returning to pre-crisis levels, yet we mustask whether sufficient deleveraging has occurred to warrant such a move.Last, we are monitoring what appears to be a deteriorating geopoliticalenvironment, where, in just the year-to-date, we have seen instability inUkraine/Russia threaten the status quo while driving Russia closer to China;rising insurgency devolving into a de facto civil war across much of theMiddle East; and China itself flexing its muscle over disputed territories in the

South China Sea, while initiating skirmishes with Japan, the Philippines andVietnam, which we read as a statement regarding U.S. regional influence.

Regardless of what appears to be a growing list of risks to the currentequilibrium, razor-thin sovereign bond yields have now moved belowdividend yields in many markets, a fairly rare phenomenon that we believeis not likely to sustain in the long run. Therefore, we think there is a stronglikelihood that global equity values continue to rise in the near term.Indeed, the decline in sovereign yields over the recent quarter extended tothe emerging markets, which we believe was a key factor in the return ofemerging market equity leadership. Another factor, of course, was furtherprogress on the reform agenda, which is now broadening out beyond Chinaand Mexico to include India, Indonesia, and possibly even Brazil. Wecontinue to believe that market friendly economic, labor and financialreform across many key emerging market countries is the key long-termcatalyst for sustainable growth and value creation in the developing world,and we are pleased to report that this theme seems to be gainingmomentum as we progress through a heavy election year.

More importantly, we also reiterate that the ongoing shift in opportunity,resources, capital and subsidies from the inefficient and capital-intensive,state-administered sector towards the more efficient private sector isperhaps the most important broad-reaching driver of global economicprogress and value creation. While perhaps more directly prevalent in thedeveloping world, given the much lower bar to begin with, thisphenomenon benefits both the developing and developed world.We believethis trend underlies our strong performance to date, as we invest nearlyexclusively in what we believe are value creating entrepreneurs, runningattractive businesses grounded in intellectual capital and competitiveadvantage rather than political favor.

Thank you for investing in the Baron International Growth Fund.

Sincerely,

Michael KassPortfolio ManagerJuly 23, 2014


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.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 thisreport reflect those of the respective portfolio manager only through the end of the period stated in this report. The portfolio manager’s views are not intended asrecommendations or investment advice to any person reading this report and are subject to change at any time based on market and other conditions and Baron has noobligation to update them.

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 wouldbe unlawful under the laws of that jurisdiction to make such offer or solicitation.



48

49

June 30, 2014 Baron Real Estate Fund

Dear Baron Real Estate Fund Shareholder:

We are pleased to report that the Baron Real Estate Fund (the “Fund”)generated solid performance for the six months ended June 30, 2014.During this period, the Fund gained 9.35%, outperforming both the MSCIUSA IMI Extended Real Estate Index (the “MSCI Real Estate Index”), whichgained 8.29%, and the S&P 500 Index, which gained 7.14%.

In the most recent quarter ended June 30, 2014, the Fund generated a 4.24%return, slightly outperforming the MSCI Real Estate Index, which gained4.03%, and underperforming the S&P 500 Index, which gained 5.23%.

In a recent Wall Street Journal report, the Baron Real Estate Fund earnedspecial recognition, as it was ranked 1st of 245 real estate funds based on itstotal return of 27.11% for the 12 months ended June 30, 2014, accordingto data supplied by Lipper. During this period, the Fund’s return of 27.11%compared favorably to the 13.05% average return for the 245 funds in theLipper real estate category.*

Also, since its inception on December 31, 2009, the Fund generated anaverage annual return of 22.86%, outpacing the average annual returns ofboth the MSCI Real Estate Index, 16.27%, and the S&P 500 Index, 15.78%.

Performance

Table I.



MSCI Baron USA IMIReal Extended

Estate Real Estate S&P 500Fund1,2 Index1 Index1

Three Months3 4.24% 4.03% 5.23%Six Months3 9.35% 8.29% 7.14%One Year 27.11% 16.22% 24.61%Three Years 22.91% 14.86% 16.58%Since Inception

(December 31, 2009) (Annualized) 22.86% 16.27% 15.78%Since Inception

(December 31, 2009) (Cumulative)3 152.53% 97.03% 93.32%

Performance listed in the above table is net of annual operating expenses.Annual expense ratio for the Retail Shares as of December 31, 2013 was1.35%. The performance data quoted represents past performance. Pastperformance is no guarantee of future results. The investment return andprincipal value of an investment will fluctuate; an investor’s shares, whenredeemed, may be worth more or less than their original cost. The Adviser hasreimbursed certain Fund expenses (by contract as long as BAMCO, Inc. is theadviser to the Fund) and the Fund’s transfer agency expenses may be reduced byexpense offsets from an unaffiliated transfer agent, without which performancewould have been lower. Current performance may be lower or higher than theperformance data quoted. For performance information current to the mostrecent month end, visit www.BaronFunds.com or call 1-800-99BARON.* Institutional share class ranked #1 and Retail share class ranked #2 in the Lipper Real Estate

Fund Category for the one-year period (out of 245 funds) ended June 30, 2014.1 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 andreal estate-related GICS classification securities. MSCI makes no express or implied warrantiesor representations and shall have no liability whatsoever with respect to any MSCI datacontained herein. The MSCI data may not be further redistributed or used as a basis for otherindexes or any securities or financial products. This report is not approved, reviewed orproduced by MSCI. The S&P 500 Index measures the performance of 500 widely held large-cap U.S. companies. The indexes and the Fund include reinvestment of interest, capital gainsand dividends, which positively impact the performance results.


3 Not annualized.

We continue to maintain that the prospects for the equity market, realestate-related securities, and the Baron Real Estate Fund are promising.Please see the “Outlook” section at the end of this letter for our perspectiveon the broader market, and the outlook for real estate-related securitiesand the Fund.

Table II.



(billions) Impact

Diamond Resorts International, Inc. $ 1.8 0.68%CBRE Group, Inc. 10.6 0.59Hyatt Hotels Corp. 9.5 0.52Tower Bersama Infrastructure Tbk PT 3.3 0.41Kennedy-Wilson Holdings, Inc. 2.5 0.39

Diamond Resorts International, Inc. operates in the hospitality andvacation ownership (timeshare) industry, with an ownership base of524,000 members, and a worldwide network of over 300 vacationdestinations located in 33 countries. We began acquiring shares one yearago at $14, and the stock has appreciated more than 60% since then to $23per share. We remain optimistic about the company’s long-term prospectsfor the following reasons: First, approximately 30 percent of the company’scash flow is recurring and predictable in nature because it is primarilyderived from three to five year management contracts. It is particularlynoteworthy that in the last 10 years, no resort has terminated a DiamondResorts contract. Second, by pursuing an “asset-light” timeshare model, thecompany does not require capital for development. Third, we believe thecompany has the opportunity to grow its cash flow from approximately$200 million to $300 million in the next few years andshould continue to generate significant free cash flow(we estimate approximately $150 million in 2014 ormore than an 8% free cash flow yield), which could beused for acquisitions, dividends, stock buybacks, or debtrepayment. Finally, we believe the shares are attractively

JEFFREY KOLITCH Retail Shares: BREFX

PORTFOLIO MANAGER Institutional Shares: BREIX

50


valued, and management’s interests are aligned with ours becausemanagement owns approximately 30 percent of the company.

We recently met with the management of CBRE Group, Inc., which servedto solidify our view that the company is well-positioned to benefit from thecontinued rebound in commercial real estate and the broader economy. Asthe world’s leading global commercial real estate firm, we believe thecompany will continue to grow and gain market share in its leasing,investment sales, property management, and investment managementbusinesses. We believe the company may almost double its earnings in thenext few years to approximately $2.60 per share in 2017 compared to$1.35 per share in 2013. At a reasonable 18 times earnings (versus itshistorical peak multiple of 20 times earnings), we believe these shares couldreach $47, or approximately 50% upside, from the current price of $32 pershare.

We remain optimistic about the prospects for the Fund’s hotel investments,including Hyatt Hotels Corp. Generally, we believe our hotel investmentsare well positioned because of low supply forecasts and expectations ofsolid demand. As economic growth improves, hotels should perform welldue to their ability to increase occupancy and nightly rates, resulting instrong cash flow growth. We believe Hyatt may continue to grow cash flowby approximately 15% per year given its strong development pipeline,relatively smaller portfolio versus its peers, and an improvement ineconomic activity.

We recently met with the management of Tower Bersama Infrastructure

Tbk PT, the second largest independent wireless tower owner and operatorin Indonesia. (The Fund also owns shares in the largest tower company inIndonesia called Sarana Menara Nusantara Tbk PT or “Protelindo”).Bersama’s core business is leasing space for antennas and other equipmentunder long-term lease agreements with Indonesian telecommunicationoperators for wireless signal transmission. The long-term nature of theselease agreements (contracts are typically 10 years) provides high visibilityto future revenues. We believe that Indonesia, with the fourth largestpopulation in the world, approximately 250 million people, presents anattractive wireless market opportunity because the country isunderpenetrated from a wireless infrastructure perspective. Managementbelieves it may double its tower count in the next 5 years.

The shares of Kennedy-Wilson Holdings, Inc. continue to perform well.The Fund first began acquiring shares in the company in 2011 at $11 pershare. Since then, the shares have more than doubled to $26 per share.Kennedy-Wilson is a global real estate asset management firm with animpressive 35-year track record. The company owns and manages a highquality diverse real estate portfolio that consists of approximately 17,000apartments, 10 million square feet of commercial buildings, 3,500 acres ofland (primarily located in Hawaii), 808 residential lots, 170 hotel rooms, and$1 billion of real estate loans. Investment revenues are generated primarilyfrom rental income and sale proceeds. Management has the ability to earnadditional income from its third-party investors if it achieves certainminimum investment return thresholds. The company’s investments arelocated in the U.S., U.K., Ireland and Japan. It also operates a servicesbusiness which generates income from managing real estate properties forinstitutional and individual clients, auctions, and other real estate services.We remain optimistic about the prospects for Kennedy-Wilson because we

believe management will continue to grow its cash flow through increasesin rent, occupancy, sale proceeds, new investments, and incentive-basedincome.

Table III.



(billions) Impact

Capital Senior Living Corp. $ 0.7 –0.33%Wynn Resorts Ltd. 21.0 –0.22Essent Group Ltd. 1.7 –0.21Builders FirstSource, Inc. 0.7 –0.18CaesarStone Sdot-Yam Ltd. 1.7 –0.17

In the most recent quarter, we took advantage of weakness in Capital

Senior Living’s shares to acquire more stock. The company is a smallcapitalization senior housing operator. We began acquiring its shares inJanuary 2010 at $5, and the shares have appreciated 400% since then to$25 per share. During the quarter, we met with the CEO, Larry Cohen. CapitalSenior Living continues to benefit by acquiring “mom and pop” seniorhousing operators (1-5 properties) that fall below the radars of the largersenior housing companies and REITs. Its recent acquisitions have been bothaccretive to earnings and have also generated significant cash flow growth.The company anticipates acquiring $150 million of senior housing facilitiesin 2014, which should add approximately $0.20 per share annually or a 15%increase versus the company’s $1.35 per share that was earned in 2013.

Additional growth should be generated by redeploying the company’s assetsto a more profitable, higher level of care (from independent living to assistedliving). For example, Capital Senior Living’s current plan to convert 360 seniorhousing units should result in at least $0.20 per share of additional earningsgrowth. The company should also continue to benefit from increases in rentand occupancy and by refinancing debt at a lower cost of capital. We believethe shares can generate mid-teen annual returns the next few years as itscash flow should grow by at least 20% annually in 2014 and 2015.

Following strong performance in the first quarter of 2014, the shares ofWynn Resorts Ltd. declined in the most recent quarter largely due to aslowdown in business trends in Macau, which we believe may be temporary.Longer term, we find Macau offers attractive supply and demand dynamics.Wynn may also benefit from improving business conditions in Las Vegas andnew gaming legislation in Japan and perhaps other countries. The company’snew development opportunity in Cotai should also result in increased cashflow over time. We remain optimistic about Wynn’s long-term prospects.

A slowdown in the housing recovery during the first six months of 2014contributed to weakness in the shares of some of the Fund’s housing-relatedsecurities such as Essent Group Ltd., Builders FirstSource, Inc., andCaesarStone Sdot-Yam Ltd. Several factors caused the slowdown includingthe unusually harsh winter, higher home prices, tight mortgage creditavailability, a short supply of available lots, construction bottlenecks due tolabor shortages, and a sluggish economy. However, we continue to believe thatthere is pent-up demand to purchase homes, and that business conditions willre-accelerate as some of the aforementioned conditions improve. We utilizedthe weakness in the share prices of some of our housing-related investmentsto acquire additional stock at what we believe are attractive valuations.

51


Portfolio Structure

The companies that we research, evaluate, and purchase for the Fundcomprise the following 11 real estate categories: Hotel & leisure companies,senior housing operators, REITs, real estate service companies, buildingproducts/services, casinos & gaming operators, real estate operatingcompanies, tower operators, homebuilders & land developers,infrastructure-related, and data centers.

In constructing the Fund’s portfolio, real estate category weightings are nottargeted in an absolute sense or relative to the Fund’s benchmark. They are,instead, principally a residual of stock selection.

In the most recent quarter ended June 30, the percentage of net assetsallocated to any individual real estate category remained relatively thesame as in the previous quarter.

Among the 11 real estate categories in our portfolio, our five largest are:

1. Hotel & Leisure (22.6% of the Fund): The Fund’s investments in thiscategory include Starwood Hotels & Resorts Worldwide, Inc., Hyatt

Hotels Corp., Wyndham Worldwide Corp., Sunstone Hotel Investors,

Inc., LaSalle Hotel Properties, Strategic Hotels & Resorts, Inc. andExtended Stay America, Inc. We believe our hotel & leisure companyinvestments remain well positioned amid expectations of solid demand,low supply forecasts, and reasonable current stock valuations. In ouropinion, as economic growth improves, hotels should perform quite wellas a result of higher occupancy and their opportunity to increase nightlyrates, both resulting in strong cash flow growth.

2. Senior Housing Operators (12.9% of the Fund): We remain quiteoptimistic about the outlook for senior housing operators Brookdale

Senior Living, Inc. and Emeritus Corp. (especially following theirrecently announced prospective merger) and Capital Senior Living

Corp. We believe these companies should benefit in the next few yearsfrom multiple tailwinds including:

a. favorable demographic trends (the rapidly increasing agingpopulation resulting in accelerated demand);

b. a cyclical recovery (lower unemployment accompanied byimprovement in the housing market); and

c. further industry consolidation through mergers and acquisitions.

3. REITs (12.2% of the Fund): Following disappointing absolute andrelative share price performance in 2013 and a decline in interest ratesin the first half of 2014, REITs have performed well in the first 6 monthsof the year due primarily to historically low interest rates. (We haveincreased the Fund’s investments in REITs by approximately 500 basispoints since the beginning of 2014). Generally, we continue to hold theview that REITs will be more vulnerable to an eventual rise in interestrates than most other non-REIT real estate-related companies, and weare therefore monitoring our REIT exposure accordingly. However, ifinterest rates remain at historically low levels, REITs may continue tooutperform relative to certain other real estate categories.

4. Real Estate Service Companies (11.9% of the Fund): We believe ourinvestments in real estate services companies such as CBRE Group, Inc.,Jones Lang LaSalle, Inc. and Kennedy-Wilson Holdings, Inc., offerstrong open-ended growth potential at attractive valuations.

5. Building Products/Services (11.4% of the Fund): We have continuedto invest in several residential-related real estate companies that webelieve will benefit from a multi-year recovery in housing. Within theresidential real estate category, we favor building product/servicecompanies such as Home Depot, Inc., Lowe’s Companies, Inc.,CaesarStone Sdot-Yam Ltd., and Owens Corning because theytypically benefit both from an increase in new and existing home salesand the acceleration in spending for home repair and remodeling. In themost recent quarter, we initiated a position in Mohawk Industries, Inc.,the world’s largest flooring manufacturer, and the largest supplier anddistributor of flooring in the United States. Please see the “RecentActivity” section for more details on the company.

The Fund’s real estate-related categories as of June 30, 2014 are as follows:

Table IV.

Fund investments in real estate categories as of June 30, 2014


Hotel & Leisure1 22.6%

Senior Housing Operators 12.9

REITs2 12.2

Real Estate Service Companies 11.9

Building Products/Services 11.4

Casinos & Gaming Operators 7.5

Real Estate Operating Companies 4.8

Tower Operators3 4.6

Homebuilders & Land Developers 3.5

Infrastructure-Related 3.0Data Centers4 2.0

96.4Cash and Cash Equivalents 3.6

100.0%

1 Includes 4.3% from hotel REITs Strategic Hotels & Resorts, Inc., Sunstone HotelInvestors, Inc., and LaSalle Hotel Properties.

2 Total would be 16.5% if included hotel REITs.3 Total would be 5.9% if included tower REIT American Tower Corp.4 Total would be 3.6% if included data center REIT CyrusOne, Inc.

At June 30, the Fund maintained 52 positions. Our 10 largest holdingscomprised 39.1% of the Fund, with an average position size of 3.9%, andour 20 largest holdings accounted for 60.1% of the Fund, with an averageposition size of 3.0%.

Recent Activity

Table V.




Mohawk Industries, Inc. $ 10.1 $30.3Home Depot, Inc. 110.7 13.8Starwood Hotels & Resorts Worldwide, Inc. 15.5 9.6Equinix, Inc. 10.5 9.3Builders FirstSource, Inc. 0.7 8.2

52


Following a recent decline in its share price from approximately $150 per shareto $130 per share, we initiated a position in Mohawk Industries, Inc., theworld’s largest flooring manufacturer and the largest supplier and distributorof flooring in the United States with a 22% market share.We believe Mohawkis an exceptionally well-run company that is poised to benefit from aneventual recovery in the housing and commercial construction markets. In2013, the company generated sales from the following sources: repair andremodel activity (58%), new residential construction (22%), and commercialconstruction (20%). We believe that Mohawk has several competitiveadvantages. CEO Jeff Loberbaum, and family have been in the flooring businesssince the 1950s and own approximately 14% of the company. Management’sexperience has resulted in a highly efficient operation (strong free cash flowgeneration) and a relatively clean balance sheet (net debt to ebitda of 2.3times, and an average interest rate on its debt of only 3.46%).

Mohawk operates in a duopolistic industry (Mohawk as #1, and #2competitor, Shaw, control approximately 43% of U.S. flooring). This hashistorically allowed for timely price increases. Mohawk is a leader in allthree of its business segments: (i) carpet (40% of sales) – #2 at 26% marketshare, (ii) ceramic (40% of sales) – #1 at 42% market share, with nextclosest competitor at 5% market share, and (iii) laminate & wood (20% ofsales) – leading market share. We believe Mohawk has an opportunity tocontinue to gain market share because most of its competitors are not aswell-capitalized (management has been acquisitive in the past).Management has assembled a major distribution network (300 distributionpoints, 1,500 sales representatives, 600 trucks) without committing capitalto buy/own retail stores. Most of its retail customers buy the bulk of theirflooring products from Mohawk in return for Mohawk providing marketing,sales training, software, etc. In the next few years, Mohawk should continueto grow through acquisitions, product innovations, international expansion,and a cyclical recovery in the U.S. housing and commercial real estatemarket. At approximately 13.7 times 2015 estimated earnings, we believethe shares are attractively valued and see a path to generating mid-teenannual returns in the next few years.

The Fund recently acquired additional shares in Home Depot, Inc. We believethe company is “best-in-class” and has several competitive advantages,including scale, distribution efficiencies, great management, interconnectedretail through stores and the Internet, excellent customer service, and a rock-solid balance sheet. Management recently raised $2 billion of long-term debtat a very attractive interest rate of only 3.2%. It is possible that the proceedsmay be used for share buy-backs that we believe are attractively valued. Atcurrent prices, the shares trade at less than 16 times our estimate of 2015earnings, which we expect to grow approximately 20%. In the next few years,we believe the company is well positioned to benefit from an improvementin home sales and repair and remodel activity.

Following a recent meeting with management, we purchased additionalshares of Starwood Hotels & Resorts Worldwide, Inc. Starwood is aleading hotel company, primarily in the luxury and upscale hotel segments.Its brands include St. Regis, Sheraton, Westin, W, Luxury Collection, LeMeridien, Four Points, Aloft, and Element. The company is benefiting fromstrong lodging conditions. Group demand, as well as transient business andleisure demand, has picked up, perhaps due to improved businessconfidence and economic conditions. Future growth should be supported byits 105,000 room pipeline and a current room count of approximately347,000 rooms. We believe management is committed to returning capitalto its shareholders, as evidenced by its recently announced intention to buyback more than $600 million of its stock by the end of 2014. Further cash

may be returned to shareholders through dividends, as the companyexecutes on its goal to sell $3 billion of hotels over a 4 year period.

In the most recent three month period, the Fund acquired additional sharesin Equinix, Inc., an owner and operator of data centers. We believe that theoutlook for data center fundamentals is attractive.The company continues tobenefit from several “demand drivers” including the increased utilization ofthe Internet, growth of digital photographs/videos, increased consumption ofdata on mobile devices, and increased corporate information technologyoutsourcing. The company owns and operates hard-to-replicate network-dense data center assets where supply is less of an issue than for morecommodity-like data center real estate. Equinix is planning to convert to aREIT by the end of the year. Should Equinix ultimately convert to a REIT, webelieve the shares would respond positively because Equinix currently tradesat a discounted valuation multiple to its REIT data center peers, despitesuperior growth and, in our opinion, a superior business model. We believethere is a path to 50% upside in the shares in the next 3 years.

Table VI.




CaesarStone Sdot-Yam Ltd. $1.7 $–7.8TRI Pointe Homes, Inc. 0.5 –5.4Boise Cascade Co. 1.0 –4.5CoStar Group, Inc. 5.1 –3.9Gaming and Leisure Properties, Inc. 4.0 –1.6

Following a more than 350% return in its stock price in just over 2 years,we took some profits in CaesarStone Sdot-Yam Ltd. by selling a portionof our holdings. We now believe the Fund’s position size is appropriate, andwe remain optimistic about the company’s long-term growth prospects. Asthe leading global manufacturer of higher quality engineered quartzsurfaces for residential and commercial applications, the company isbenefiting from both secular and cyclical tailwinds. Secularly, it is takingmarket share from other materials, such as granite and marble because,according to management, its quartz product offers superior scratch, stainand heat resistance, as well as a wider array of design options. Cyclically, inour opinion, CaesarStone presents a high-growth opportunity to benefitfrom the recovery of residential construction, repair and remodeling activity.

We decided to exit our investment in TRI Pointe Homes, Inc., a regionalhomebuilder that serves customers throughout the Western United States,and reallocate the capital to other residential-related real estate companiesthat we believe are more attractively valued and offer superior returnpotential.

We exited Boise Cascade Co. following our concerns regarding thecompany’s recent capital allocation decisions.

We decreased our position size in CoStar Group, Inc., the leading providerof information and marketing services to the commercial real estateindustry solely due to valuation. However, we are optimistic about thecompany’s long-term growth opportunities and may buy additional sharesat a more attractive valuation.

We exited our investment in Gaming and Leisure Properties, Inc. solely dueto valuation and have reallocated the capital to real estate-related investmentsthat we believe are more favorably valued and offer better return potential.

53



Outlook

Since the inception of the Baron Real Estate Fund four-and-a-half years ago,the Fund has appreciated 152.53% on a cumulative basis compared to itsprimary benchmark, the MSCI Real Estate Index, which has appreciated97.03%, and the S&P 500 Index which has risen 93.32% (see Table I at thebeginning of this letter; data as of June 30, 2014).

Q. Following this large appreciation in the value of the Fund and the

broader market, we ask rhetorically: “ Is the glass half empty or half full?”

A. Despite enjoying very strong total returns over the last four-and-a-halfyears, we believe the combination of moderate economic growth, decliningunemployment and a “friendly Fed” will contribute to a favorableenvironment for stocks. The European Central Bank has taken aggressivesteps to ease policy and has indicated a willingness to do more. Merger andacquisition activity has picked up, indicating that corporate executives aremore confident about the outlook for their businesses. Interest rates remainlow. Equity valuations are generally fair – not overly expensive, but nolonger cheap. While we are mindful that following the gains of the last fewyears, stock valuations are generally not as compelling today as they werefollowing the U.S. and international monetary crises in 2009, we continue to

believe that the intermediate to long-term prospects for the equity market

and the Fund remain attractive.

More specifically for real estate, we continue to be constructive about theprospects for many real estate-related securities and the Fund. Businessconditions and the capital environment are generally positive andsupportive of higher real estate values and share prices. Across mostcategories of real estate, prospects are improving, although more rapidly forcommercial real estate than residential real estate. We believe residentialreal estate will pick up over time. Low interest rates and improving capitalavailability continue to provide an attractive backdrop. Further, at this time,we do not detect major warning signs such as acceleration in constructionactivity, a spike in interest rates, dramatically reduced lending andunderwriting standards, or a weakening economy.

From our perspective, although we recognize that there may be someperiods of market weakness in the months ahead, we remain optimisticabout the long-term prospects for the Fund. Accordingly, we maintain that“the glass is only half full.”

We remain hard at work and energized in our efforts to producecontinued strong results. We look forward to reporting to you in a fewmonths.

Table VII.


Quarter EndMarket Investment

Cap Value Percent of(billions) (millions) Net Assets

Starwood Hotels & Resorts Worldwide, Inc. $ 15.5 $71.7 5.0%

Brookdale Senior Living, Inc. 4.2 69.1 4.8Emeritus Corp. 1.6 67.3 4.7Hyatt Hotels Corp. 9.5 54.8 3.8CBRE Group, Inc. 10.6 53.8 3.7Wyndham Worldwide Corp. 9.6 53.4 3.7Home Depot, Inc. 110.7 52.9 3.7Jones Lang LaSalle, Inc. 5.6 49.3 3.4Capital Senior Living Corp. 0.7 49.3 3.4Las Vegas Sands Corp. 61.6 41.3 2.9

Thank you for your continued support. I remain a major shareholder of

the Baron Real Estate Fund alongside you.

Sincerely,

Jeffrey KolitchPortfolio ManagerJuly 23, 2014


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 ofits returns 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 bythe strength of the real estate markets. Factors that could affect the value of the Fund’s holdings include the following: overbuilding and increasedcompetition; increases in property taxes and operating expenses; declines in the value of real estate; lack of availability of equity and debt financing torefinance maturing debt; vacancies due to economic conditions and tenant bankruptcies; losses due to costs resulting from environmental contaminationand its related cleanup; changes in interest rates; changes in zoning laws, casualty or condemnation losses; variations in rental income; changes inneighborhood values; and functional obsolescence and appeal of properties to tenants.The Fund may not achieve its objectives. Portfolio holdings are subjectto change. Current and future portfolio 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 reportreflect those of the respective portfolio managers only through the end of the period stated in this report. The portfolio manager’s views are not intended as recommendationsor investment advice to any person reading this 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 unlawfulunder the laws of that jurisdiction to make such offer or solicitation.

54


MICHAEL KASS Retail Shares: BEXFX

PORTFOLIO MANAGER Institutional Shares: BEXIX

Dear Baron Emerging Markets Fund Shareholder:

Performance

The Baron Emerging Markets Fund (the “Fund”) appreciated 6.56%, while itsprincipal benchmark index, the MCSI EM IMI Growth Index, gained 5.99% forthe second quarter of 2014. Global equities broadly rallied, we believe, atleast in part, driven by declining sovereign bond yields across the globe. Webelieve the European Central Bank likely encouraged such a decline in yieldsas it clearly communicated both targeted liquidity programs and awillingness to engage in outright purchases of asset-backed securities ifdeemed necessary. While this communication was welcomed by fixedincome and equity markets nearly worldwide, we would prefer marketsclearly rooted in fundamentals rather than perhaps directed by monetaryauthorities. Geopolitical challenges appear on the rise in the Middle Easteven if stabilizing temporarily in Ukraine. During the quarter, Chinacontinued to flex its muscle over disputed territories in the South China Sea,revealing the complexity of maintaining U.S. influence in the region. Previoushotspots of instability did seem to at least stabilize: namely Turkey, Thailandand Argentina. Regardless of such long-tail matters, the global capitalmarkets appear tame under the influence of developed world policymakers.Volatility measures have reached post-crisis lows coincident with majordeveloped world bond yields, and with dividend yields on equities now

appearing quite attractive on a relative basis, we suspect equities cancontinue to rise. Further, most developed world economies continue tonoticeably improve, while equity multiples remain far from historic peaklevels in such markets and near historic lows in many emerging markets. Assuch, we remain enthusiastic regarding the prospects for emerging marketequities, and particularly for the companies in which we have invested, evenif many emerging market economies appear to be underachieving and/orslowing. Increasingly, we believe these shorter-term economic headwindsare being overlooked due to the increasing momentum of market-friendlyreform in key emerging markets such as China, Mexico and India, as well asthe potential for improvement subsequent to upcoming election results inIndonesia and Brazil. Most importantly, we reiterate that the Fund’s resultsduring a challenging period for emerging market returns suggest that ourinvestment discipline, focused on higher quality, capital-efficient growthcompanies driven by strong and entrepreneurial management teams, isparticularly well suited to capitalize on the extraordinary change andopportunity that we currently see in our markets.

We were quite pleased with our second quarter absolute and relativeperformance, particularly given the notable underperformance of high-quality growth stocks throughout the world early in the quarter. Ouroutperformance during the quarter was driven, as usual, by stock selection,which is often influenced by our thematic views. By country, Brazil and Indiawere the standout contributors; in India, the markets clearly discounted theprospect of market friendly reforms coincident with Narendra Modi’slandslide general election victory. In contrast, we attribute the recent

Table I.



Baron MSCI Emerging EM IMI MSCI Markets Growth EM IMI Fund1,2 Index1 Index1

Three Months3 6.56% 5.99% 6.42%Six Months3 8.41% 6.52% 6.48%One Year 23.62% 14.27% 14.31%Three Years 8.48% 0.84% (0.27)%Since Inception

(December 31, 2010) 6.98% 0.83% (0.14)%

Performance listed in the above table is net of annual operating expenses.As of the last fiscal year ended December 31, 2013, the annual operatingexpense ratio for the Retail Shares was 1.90% but the net annual expenseratio was 1.50% (net of the Adviser’s fee waivers). The performance dataquoted represents past performance. Past performance is no guarantee offuture results. The investment return and principal value of an investment willfluctuate; an investor’s shares, when redeemed, may be worth more or lessthan their original cost. The Adviser has reimbursed certain Fund expenses (bycontract as long as BAMCO, Inc. is the adviser to the Fund) and the Fund’stransfer agency expenses may be reduced by expense offsets from anunaffiliated transfer agent, without which performance would have beenlower. Current performance may be lower or higher than the performancedata quoted. For performance information current to the most recent monthend, visit www.BaronFunds.com or call 1-800-99BARON.

1 The MSCI EM (Emerging Markets) IMI indexes cited are unmanaged, free float adjustedmarket capitalization weighted indexes reflected in U.S. dollars. The MSCI EM (EmergingMarkets) IMI Growth Index Net USD and the MSCI EM (Emerging Markets) IMI Index Net USDare designed to measure equity market performance of large-, mid- and small-cap securitiesin the emerging markets. The MSCI EM (Emerging Markets) IMI Growth Index Net USDscreens for growth-style securities. The indexes and Baron Emerging Markets Fund includereinvestment of dividends, net of foreign withholding taxes, which positively impact theperformance results.


3 Not annualized.

55

strength in Brazilian equities to the rising possibility that Dilma Rousseffcould be defeated in the upcoming election, which would then likely usherin a reversal of, in our view, damaging populist and protectionist policies. Onthe negative side, our China-related investments were the largest relativeunderperformers, and we concur that the risk equilibrium has deterioratedduring the year to date. By sector, Consumer Discretionary was our largestsource of outperformance, which we attribute largely to continued strengthin investments related to our Brazilian post-secondary education and Indianmedia digitization themes. We have commented at length on such themesand investments in prior letters. Further, Smiles SA and Multiplus S.A., thetwo leading loyalty and reward programs operating in Brazil, collectivelyhelped drive our recent strength in Consumer Discretionary. Stock selectionin the Financial sector was also a notable contributor to relativeperformance, driven by Axis Bank Ltd. of India, Cetip SA-Mercados

Organizados of Brazil, and Haitong Securities Co., Ltd. of China. The mostnotable detracting sector during the quarter was Information Technology,where several of our broadband Internet and e-commerce holdings declinedin sympathy with the global sell-off in such companies.

Table II.


PercentImpact

Smiles SA 0.79%CFR Pharmaceuticals SA 0.63Multiplus SA 0.54Kroton Educacional SA 0.53Tower Bersama Infrastructure Tbk PT 0.48

Smiles SA is the second largest loyalty program provider in Brazil, sellingfrequent flyer miles to Brazil’s GOL airlines and financial partners. During thesecond quarter, Smiles posted earnings results that beat consensusexpectation and announced plans for a special dividend, equivalent to a 20%dividend yield.We believe the company has a strong runway for growth, giventhe underpenetration of both air transportation and loyalty programs inBrazil. Further, the company has an attractive business model, producing highmargins, strong returns and good cash generation. (Kyuhey August)

Shares of CFR Pharmaceuticals SA increased significantly in the secondquarter. CFR Pharmaceuticals is a leading Latin American generic drugcompany. On May 16,Abbott Labs announced an agreement to acquire CFRPharmaceuticals for a purchase price of $2.9 billion plus the assumption ofnet debt of approximately $430 million. The purchase price representedover a 50% premium to CFR’s closing price on the prior day. We view theacquisition as validation of our investment thesis. (Neal Kaufman)

Multiplus SA is a leading loyalty program provider in Brazil that sellsfrequent flyer miles to TAM airlines and financial partners. The companyunderwent a tough 2013 due to a management shakeup and challengingfundamentals. We established a position with the view that both airtransport and loyalty programs are underpenetrated in Brazil and that thebad news of 2013 was already fully reflected in the share price. During thesecond quarter, Multiplus posted good earnings results and its shares roseover 40%. (Kyuhey August)

Shares of Kroton Educacional SA rose significantly in the quarter, as itcontinued to execute exceptionally well, releasing earnings results 20% higher

than consensus estimates. The Brazilian antitrust authority recently approvedthe merger agreement between Kroton and Anhanguera, which will form oneof the largest for-profit education companies in the world. The combinedentity is expected to generate substantial synergies. (Kyuhey August)

Shares of Tower Bersama Infrastructure Tbk PT, a telecommunicationtower provider in Indonesia, increased in the second quarter, after thecompany reported a strong quarter demonstrating its ability to secure largenew build contracts. We believe that Tower Bersama is an excellent partnerto the telecommunication companies, and that this close relationshipprovides an important competitive advantage. We think Tower Bersama willcontinue to secure new orders as telcos build out their nascent 3G networks,offering the company significant cash flow potential. (Aaron Wasserman)

Table III.


PercentImpact

Biostime International Holdings Ltd. –0.38%Sina Corporation –0.28Wemade Entertainment Co., Ltd. –0.24SHUAA Capital psc –0.21Kingdee International Software Group Co. Ltd. –0.19

Shares of Biostime International Holdings Ltd. declined in the secondquarter. The Chinese infant formula industry continues to experience amarked but temporary slowdown due to a contamination scare associatedwith products from a New Zealand dairy cooperative, from which Biostimedoes not source. As a fast growing player in China’s baby care industry, webelieve Biostime will benefit from increased sales of infant formula and is wellpositioned to double earnings in the next three-to-four years. (Anuj Aggarwal)

Shares of Sina Corporation fell in the second quarter. Sina operates aleading Chinese Internet portal that also controls the country’s biggestTwitter-like service, SINA Weibo. Performance was hurt by the government’srevocation of two licenses that will impact Sina’s video and book publishingbusiness in the coming months. Sina also announced increased investmentsin its businesses that will hamper near-term profitability. We believe Sina istrading at a significant discount to asset value and SINA Weibo’s earningspotential is not reflected in the stock price. (Catherine Chen)

Shares of Korean game developer WeMade Entertainment Co., Ltd.dropped in the second quarter, driven down by falling traffic of existinggames and weak performance of new games. We continue to hold WeMadedue to its domain expertise in multiplayer online role-playing games andpipeline of new game releases. The company is also emerging from anintense period of R&D investment, which we expect will propel revenueacceleration and margin expansion. (Catherine Chen)

SHUAA Capital psc is a U.A.E.-based finance and asset managementcompany with an emphasis on capital markets and mezzanine finance. Thecompany’s shares declined in the second quarter, largely reversing previousyear-to-date gains, in our view due to regional geopolitical concerns. Webelieve SHUAA’s fundamental outlook remains solid. (Michael Kass)

June 30, 2014 Baron Emerging Markets Fund

56


Kingdee International Software Group Co. Ltd. is a leading private sectorEnterprise Resource Planning (ERP) software developer in China.The company’sshares retreated during the second quarter, consistent with many othertechnology and Internet-related companies in China. We remain enthusiasticregarding Kingdee’s cloud-based, e-commerce and mobile initiatives, andbelieve the company remains well-positioned given China’s ongoing drive tosupport the local value-added software industry. (Michael Kass)

Portfolio Structure

Table IV.



Steinhoff International Holdings Ltd. 2.6%Smiles SA 2.6Biostime International Holdings Ltd. 2.2Kroton Educacional SA 2.1Cetip SA - Mercados Organizados 2.0Haitong Securities Co., Ltd. 2.0Divi’s Laboratories Ltd. 2.0Tower Bersama Infrastructure Tbk PT 1.9Fomento Económico Mexicano, S.A.B. de C.V. 1.8Torrent Pharmaceuticals Ltd. 1.7

Exposure by Country

Table V.

Percentage of securities by country as of June 30, 2014


India 16.6%Brazil 15.2China 14.5Taiwan 8.8Korea 6.9South Africa 5.4Indonesia 4.4Philippines 4.1Hong Kong 4.0Chile 2.3Mexico 1.8Thailand 1.8Singapore 1.2Norway 1.2Russia 1.1United Kingdom 0.6United Arab Emirates 0.4Canada 0.4Malaysia 0.2

Exposure by Market Cap: The Fund may invest in companies of any marketcapitalization, and we have generally been broadly diversified across large-,mid- and smaller-cap companies, as we believe developing worldcompanies of all sizes often exhibit attractive growth potential. At the endof the second quarter of 2014, the Fund’s median market cap was $3.3

billion, and we were invested approximately 53.8% in large/giant capcompanies, 31.5% in mid cap companies and 5.6% in small cap companiesas defined by Morningstar, with the remainder in cash.

Recent Activity

During the second quarter, consistent with our view of the shiftingequilibrium of risk and opportunity, we continued to increase our overallexposure to India and Brazil, largely at the expense China. From a company-specific perspective, we initiated three notable positions: GOL Linhas

Aéreas Inteligentes SA, a low-cost Brazil-based airline, Indonesian retailerPT Matahari Department Store Tbk, and Bidvest Group Ltd., a diversifiedSouth African holding company engaged in a broad variety of products andservices. We became intrigued with GOL as a result of our investment inSmiles SA, the Brazil-based loyalty and reward program operator in whichGOL holds a majority equity interest. We profiled Smiles in ourSeptember 2013 shareholder letter; subsequently, as we conducted furtherdue diligence on GOL, we found a parent company engaged in a broad shiftin emphasis from capacity growth and market share towards operating andfinancial efficiency. It was precisely this transition that had catalyzed theIPO of the previously hidden Smiles asset. We are encouraged by recenttrends in pricing and capacity utilization at the airline operation, and webelieve our investment in GOL presents a unique opportunity to participatein value creation, synergy and optimization across both the airline andloyalty program businesses.

Matahari Department Store appears to be a classic open-ended growthopportunity in a company with strong financial and strategic managementskills, impressive competitive barriers rooted in logistics expertise, andunique working capital efficiency that drives impressive financial returns andcompetitive barriers. We believe Matahari has the management andexecution skill, business model and strategic partners to enjoy many years ofattractive high-return growth. Bidvest Group, in contrast, strikes us as aSouth African version of Berkshire Hathaway; an impressive collection of highreturn businesses built up over the years through the skill and vision of BrianJoffee, one of South Africa’s leading entrepreneurs and acquisition experts.Bidvest is active in food services, distribution and logistics, auto dealerships,office supplies, consumer goods and health care. We were introduced toBidvest when Brian Joffee ran up against CFR Pharmaceuticals SA, anotherBaron Emerging Markets Fund holding, to take control of Adcock-Ingram, aleading South African pharmaceutical and OTC drug manufacturer. Webelieve Joffe and Bidvest have the vision, experience and assets to continuecreating shareholder value well into the future.

During the quarter, the majority of our sales were related to China, wherewe perceive the balance of risk and opportunity to be deteriorating on themargin. While we do not expect a broad credit contraction to take hold, wedo believe the beneficial impact of financial and economic reforms toprivate sector entrepreneurs is increasingly being discounted, while therecent deterioration of the property market and related shadow financesector suggests some additional caution is now warranted. In addition toreducing various positions in this market, during the quarter, we eliminatedour holdings in Baoxin Auto Group Ltd., Great Wall Motor Co. Ltd., andHollysys Automation Technologies Ltd., all of which we consider to haveabove average exposure to China’s economic and credit cycle.

57

Outlook

The second quarter of 2014 largely represented a continuation of previousand ongoing economic and market trends.The absence of a major inflectionpoint is appreciated given the current “Goldilocks” scenario of modestgrowth and substantial global monetary support.While U.S. Federal Reservetapering continues on plan, amid a steady domestic economy and atightening labor market, Japan remains on course with bold monetarystimulus and at least the promise of market friendly economic reform. TheEuropean Central Bank moved significantly during the recent quarter,unveiling a targeted long-term refinancing operation for non-financialprivate sector companies, which have suffered limited access to bank creditduring the recent deleveraging cycle. Further, the ECB has indicated awillingness to engage in direct purchases of asset-backed securities ifwarranted, which we believe was a key driver of the recent record lowsacross most European sovereign bond yields. As such, the ECB seems to beachieving a key effect of quantitative easing without actually pulling thetrigger, and the recent decline in European bond yields has driven fixedincome assets lower globally.

Such an environment, characterized by what appears to be a race to thebottom in all yield instruments, in our view, fosters complacency and risk-taking. While such an environment would be quite favorable for equityinvestors nearly everywhere, we must ponder whether such complacency isgrounded in solid fundamentals and valuation, or has been directed by well-intending political and monetary authorities. Volatility measures haverecently reached multi-year lows, returning to pre-crisis levels, yet we mustask whether sufficient deleveraging has occurred to warrant such a move.Last, we are monitoring what appears to be a deteriorating geopoliticalenvironment, where, in just the year-to-date, we have seen instability inUkraine/Russia threaten the status quo while driving Russia closer to China;rising insurgency devolving into a de facto civil war across much of theMiddle East; and China itself flexing its muscle over disputed territories in theSouth China Sea, while initiating skirmishes with Japan, the Philippines andVietnam, which we read as a statement regarding U.S. regional influence.

Regardless of what appears a growing list of risks to the current equilibrium,razor-thin sovereign bond yields have now moved below dividend yields in

many markets, a fairly rare phenomenon, which we believe is not likely to

sustain in the long run. Therefore, we think there is a strong likelihood that

global equity values continue to rise in the near term. Indeed, the decline in

sovereign yields over the recent quarter extended to the emerging markets,

which we believe was a key factor in the return of emerging market equity

leadership. Another factor, of course, was further progress on the reform

agenda, which is now broadening out beyond China and Mexico to include

India, Indonesia, and possibly even Brazil. We continue to believe that

market friendly economic, labor and financial reform across many key

emerging market countries is the key long-term catalyst for sustainable

growth and value creation in the developing world, and we are pleased to

report that this theme seems to be gaining momentum as we progress

through a heavy election year.

More importantly, we also reiterate that the ongoing shift in opportunity,

resources, capital and subsidies from the inefficient and capital-intensive,

state-administered sector towards the more efficient private sector is

perhaps the most important broad-reaching driver of developing world

value creation. We believe this trend underlies the Fund’s strong

performance to date, and, over time, broadens our universe of investment

opportunity, as we invest nearly exclusively in what we believe are value

creating entrepreneurs, running attractive businesses grounded in

intellectual capital and competitive advantage rather than political favor.

Thank you for investing in the Baron Emerging Markets Fund.

Sincerely,

Michael Kass

Portfolio Manager

July 23, 2014


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 inflationor deflation.The Fund invests in companies of all sizes, including small and medium sized companies whose securities may be thinly traded and more difficultto sell 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 beunlawful under the laws of that jurisdiction to make such offer or solicitation.


June 30, 2014 Baron Emerging Markets Fund


58

Dear Baron Energy And Resources Fund Shareholder:

Performance

The Baron Energy and Resources Fund posted a strong performance in thesecond quarter, rising 13.65% and modestly outpacing its principalbenchmark (S&P North American Natural Resources Sector Index) by 28basis points. More importantly, the Fund is now up 20.95% year-to-dateand 43.24% over the past year. During these periods of time, it has beatenits benchmark by 452 basis points and 1,010 basis points, respectively.Since inception, the Fund’s annualized return is 15.50% compared to13.95% for the benchmark.

The performance over the past year has placed the Fund’s Retail andInstitutional Class shares in the top 6% and the top 4%, respectively, of theUS OE Equity Energy Category as tracked by Morningstar.* In addition, theFund’s performance is within the top 5% of Global Natural Resource FundsClassification as tracked by Lipper* for its trailing one-year performance.

At the end of the quarter, assets under management were $65.0 million upfrom $43.4 million at the end of the first quarter and $33.2 million at year-end 2013. The increase in assets has been fueled by a combination offavorable performance and positive investor fund flows, and we are pleasedto welcome all of our new shareholders to the Fund.

For the first time in several years, Energy stocks have outshined much of therest of the market and during the second quarter, investor interest andsentiment toward the industry clearly improved. This improvement appearsto have been driven by several factors including: 1) the persistent strengthin oil and gas prices, especially relative to expectations; 2) continued growthin U.S. oil and gas production, amid the ongoing shale revolution; and 3)clear signs that earnings and cash flow fundamentals for a broad range ofenergy and energy-related companies had turned more favorable in recentmonths. We were not surprised by these shifts and believe that they areclearly reflected in our performance year-to-date.

The gains in the second quarter were led by strong performance of ourEnergy and Materials components, but we also saw strong performancefrom our Utilities and Information Technology positions. The stocks in theselatter two categories are really renewable energy and energy efficiency-related companies more so than typical utilities or technology companies.Our Energy holdings generated a total return of 16.45% and had an averageweighting of 79.31% during the quarter. Our Materials holdings generateda 9.56% return and represented an average weighting of 6.51% during thequarter.The one segment of the Fund where we had relatively disappointingperformance was in our Industrial stocks, which still posted gains of 2.08%.

On a sub-industry basis, there continued to be significant divergence inthe performance of the various sub-industries that make up the Energysector within the S&P 500 Index and those divergences were prettysimilar to what we saw in the first quarter. Midstream companies, oilfieldservice and equipment companies, and exploration and productioncompanies drove the majority of the performance within the Energysector in the quarter, while drilling companies, integrated oils andrefining/marketing companies all continued to underperform. The averagegain of the first three sub-industries mentioned above for the quarter was20.7% compared to only 3.1% for the latter three sub-industries. We believe this really is a reflection ofinvestor recognition of where the growth in thebusiness is occurring and the willingness to pay for it.

Table I.



S&P North Baron American

Energy and Natural Resources Resources S&P 500

Fund1,2 Sector Index1 Index1

Three Months3 13.65% 13.37% 5.23%Six Months3 20.95% 16.43% 7.14%One Year 43.24% 33.14% 24.61%Since Inception (December 30, 2011) 15.50% 13.95% 22.04%

Performance listed in the above table is net of annual operating expenses. Asof the last fiscal year ended December 31, 2013, annual operating expenseratio for the Retail Shares was 2.25%, but the net annual expense ratio was1.35% (net of the Adviser’s fee waivers). The performance data quotedrepresents past performance. Past performance is no guarantee of futureresults. The investment return and principal value of an investment willfluctuate; an investor’s shares, when redeemed, may be worth more or lessthan their original cost. The Adviser has reimbursed certain Fund expenses (bycontract as long as BAMCO, Inc. is the adviser to the Fund) and the Fund’stransfer agency expenses may be reduced by expense offsets from anunaffiliated transfer agent, without which performance would have beenlower. Current performance may be lower or higher than the performancedata quoted. For performance information current to the most recent monthend, visit www.BaronFunds.com or call 1-800-99BARON.* Institutional share class and Retail share class both ranked in the top 4% and 6%, respectively

in the Morningstar US OE Equity Energy Category (out of 89 funds), for the one-year periodended June 30, 2014. The Institutional and Retail share class ranked in the top 5% in theLipper Global Natural Resources Fund Category (out of 124 funds), for the one-year periodended June 30, 2014. These rankings are based on total returns.

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

2 The performance data in the table does not reflect the deduction of taxes that a shareholderwould pay on Fund distributions or redemptions of Fund shares.

3 Not annualized.

JAMES STONE Retail Shares: BENFX

PORTFOLIO MANAGER Institutional Shares: BENIX

June 30, 2014 Baron Energy and Resources Fund

59

One of the easiest ways to characterize our Fund and our investment styleis that we are focused on finding growth in a mature industry. This meansthat while the overall growth rate of the Energy sector and other Resource-related sectors may be GDP-like or slower, we still believe that there are lotsof companies capable of growing faster, for a lengthy period of time. Wefirst try to identify the drivers of differentiated growth, and then weidentify, research and value the companies that we think are bestpositioned to benefit from these key drivers.

Over the past several years, our research has led us to focus mostly on theexploration and production, oilfield equipment and services, and the storageand transportation sub-industries within Energy, as we believe that thesebusinesses are best positioned to benefit from the key growth drivers of:

1. the development of unconventional oil and gas resources, such asshales;

2. the increasing service and capital intensity of the exploration andproduction process;

3. the long-term opportunity in deepwater oilfield developments; and4. the investment opportunities in the oil and gas transportation and

processing infrastructure.

These have been our dominant investment themes for the past severalyears, and we do not expect them to change too much in the next severalyears. Energy has historically been a long-cycle business, and we believe weare still in the early innings of a long growth cycle based on thesethemes/drivers. As such, we think it pays to take a long-term approach andbe a long-term investor in these businesses.

We noted last quarter, and earlier in this letter, that investor sentimenttoward the Energy sector was beginning to improve. Despite the strongrelative performance of Energy compared to the broader market (Energysector within the S&P 500 Index gained 12.09%, compared to the 5.23%gain in the entire Index), this trend is still in its infancy. A recent report byBofA Merrill Lynch’s Equity Strategy team shows that the percentage ofactive fund managers that are characterized as “overweight” Energyactually fell a bit in the second quarter but that the average relativeexposure compared to the benchmark inched higher. Both the percentageof managers that are overweight Energy and the relative weighting are stillamong the lowest of any major market sector. The percentage that areoverweight is around 36% and the relative weighting is around 0.75 on ascale where 1.0 would be a market weighting.What this means to us is thatdespite the strong industry fundamentals and long-term growth drivers,there continues to be significant skepticism on the part of other investors.We view this as a positive sign that there is still a lot of potential liquiditythat could migrate toward Energy stocks in the months and years to come.

Table II.



Bonanza Creek Energy, Inc. 2013 1.17%Oasis Petroleum, Inc. 2012 0.91Rose Rock Midstream, L.P. 2012 0.78Concho Resources, Inc. 2012 0.71Golar LNG Ltd. 2012 0.68

Bonanza Creek Energy, Inc. is an oil and gas exploration and productioncompany focused on the DJ Basin in northeast Colorado. The company’sshares rose 28.8% in the second quarter, with much of that gain occurringfollowing its acquisition of acreage that is highly complementary to itsexisting operations in the basin. Bonanza also released additional well testdata that implies better potential to drill more wells than expected on itsacreage and increase ultimate recoverable reserves and net asset value.

Oasis Petroleum, Inc. is an oil and gas exploration and production companyand one of the largest companies operating in the Williston Basin BakkenShale oil play. The company’s shares rebounded strongly in the secondquarter, rising 33.9% as concerns revolving around resource productivity andnear-term operating costs faded. More importantly, new data on improvedwell productivity related to new completion designs began to attractincremental investor attention. Bakken producers also benefited from tighteroil price spreads and the overall strength of oil in the second quarter.

Rose Rock Midstream, L.P. is an MLP formed by its parent companySemGroup to acquire, develop and operate its midstream energy assets.Share price rose significantly in the second quarter, driven by strongoperating results and the close of Rose Rock’s acquisition of the White Cliffspipeline from its parent company. With a new CEO in place, Rose Rockappears to be poised for cash flows and distribution acceleration.

Concho Resources, Inc. is an oil and gas exploration and productioncompany focused on the Permian Basin in West Texas and New Mexico.Concho shares rose in the second quarter as the company appeared to beahead of plan on its three-year production acceleration program. Asincremental data has become available, investors have begun to grow moreconfident in the company’s long-term growth potential and the breadthand depth of its growing resource base. Concho shares were also probablyhelped by a favorable oil price backdrop during the second quarter.

Golar LNG Ltd. is an owner and operator of liquid natural gas (LNG) carriersand floating storage regasification units. The stock increased significantly inthe second quarter on investor confidence in the upside potential frompossible liquefaction projects for Golar that could generate attractive returnsand increase the use of LNG carriers. We continue to believe that over thenext decade, LNG will gain share of the overall global energy trade.

Table III.



Gulfport Energy Corp. 2013 –0.35%Core Laboratories N.V. 2012 –0.27Marathon Petroleum Corp. 2013 –0.16Badger Daylighting Ltd. 2014 –0.13SunCoke Energy, Inc. 2013 –0.10

Gulfport Energy Corp. is an oil and gas exploration and productioncompany with one of the largest acreage positions in the core of the UticaShale play in Ohio. The company has struggled to manage the rapid growthof its Utica operations from both an operational and financial modelingperspective, which has caused a series of forward guidance downgradeseven as the productive potential of the play and Gulfport’s exposure to ithas increased. Despite its challenges, we think Gulfport is well positionedfor rapid growth and enhanced value creation.


60

Core Laboratories N.V. is the global leader in reservoir rock and fluidanalysis and specialized well completion tools. The company suffered asetback early in the second quarter when it reduced forward guidance dueto an unexpected near-term slowdown in its onshore U.S. business andongoing delays to new projects in the U.S. Gulf of Mexico. Core continuesto generate exceptional returns on equity and capital along with substantialfree cash flow. Core has aggressively raised its dividend and bought backshares, both of which have enhanced shareholder value.

Marathon Petroleum Corp. is one of the largest independent oil refining andmarketing companies in the U.S. Refining companies generally suffered in thesecond quarter as margins failed to meet investor expectations.The fall in thepremium of international over U.S. crude oil prices during the quarter putpressure on profits for U.S. refining companies, since these refineries are nowpaying more for crude oil.We think Marathon is still well positioned to benefitfrom rising U.S. oil production and lower operating costs over the long-term.

Badger Daylighting Ltd. provides hydrovac excavation services for securedigging in areas with buried pipes and cables. First quarter revenue growthwas strong, but margins were pressured because of unexpectedly highoperating costs in Canada and severe winter weather in the eastern U.S. thatrequired equipment to be relocated to less-affected areas. The stock fell as aresult. We continue to own the stock because we believe these issues aretemporary, the demand outlook remains strong, and margins should improve.

SunCoke Energy, Inc. is North America’s largest independent producer ofmetallurgical coke, a raw material used to produce steel.The stock fell in thesecond quarter because of a weather-related reduction in full-yearguidance and a broader sell-off in the coal and steel sectors. On the positiveside, the company is progressing on the refurbishment of a large plant andselling assets to its affiliated MLP, which moves SunCoke closer to a pure-play general partner and should lead to a higher valuation. We expect thatthe corporate restructuring will unlock significant value.

Portfolio Structure

The structure of the portfolio remains consistent with past periods, andconsistent with how we intend to continue to manage the Fund. The Energysector remains the biggest weight in the Fund with 77.3% of the assets at theend of the second quarter, followed by Industrials at 7.8%, Materials at 6.1%,and Alternative Energy/Information Technology (related to Alternative Energy)at 1.9%. While our exposures to both the Materials and Industrials sectorsrepresent a meaningful portion of the portfolio, it should be noted that most ofthese investments have growth drivers that are either directly or tangentiallyrelated to the trends and themes that drive many of our Energy investments.We continue to eschew most investments in other “Resource” sectors such asMetals and Mining, including coal, gold and most industrial metals and minerals.We do not believe that the fundamentals of most of these sub-industries havebottomed, and we do not see the kind of growth potential in these areas thatwe see throughout the value chain of the Energy sector.

At the end of the second quarter, seven of the top 10 holdings were thesame as at the end of the first quarter. However, a combination ofperformance variances and decisions to increase or decrease the relativeweighting of a position did impact position sizes and the ranking of theseseven positions during the quarter. We ended the quarter with Bonanza

Creek Energy, Inc. as the top position in the Fund followed closely byConcho Resources, Inc. and Atlas Energy, L.P. Bonanza Creek rose to thattop position through a combination of capital appreciation (+28.8% for the

quarter) and increased capital allocation. The company is an oil and gasexploration and production firm that largely operates in the DJ Basin inNortheast Colorado. The stock has had a turbulent year due tomanagement changes and investor concerns about acquisition strategy andthe durability of its growth. However, during the quarter, the companyappeared to alleviate most of these concerns with the announcement of akey strategic acquisition, and several important well tests. The combinationof these items drove the upside reversal in the shares in the quarter and wethink should lead to further gains over time. We continue to believe thatBonanza Creek offers the best risk/reward opportunity within the portfolio.

Concho Resources has been a top five holding of the Fund for quite sometime. The company has consistently generated top tier growth inproduction and cash flow compared to its peers. Concho has one of thestrongest acreage positions and operational capabilities of any of thecompanies operating in the Permian Basin, and, in our view, is poised togrow in excess of 20% per annum for at least the next five years. WhileConcho shares have risen sharply year-to-date, the combination of a high,long duration growth and reasonable valuation make Concho sharescontinue to be attractive to us.

Atlas Energy had been the largest holding at the end of last quarter, andwhile the stock was not a great performer this past quarter, especiallyrelative to other publicly traded general partners (GPs) and other MLPs, weremain confident in the long-term growth potential of Atlas and its MLPsubsidiaries. Atlas’s shares continue to look meaningfully undervaluedrelative to our growth outlook for distributable cash flow and relative to thevaluations ascribed to other high-growth midstream companies.

On a sub-industry basis, we once again ended the quarter with a strongerrelative positioning in exploration and production companies (31.8%),which is up from 29.2% last quarter. The relative increase is due to acombination of continued strong share price performance, but also our viewthat the E&P industry is at the center of the most significant wealthcreation opportunity in Energy, which is converting unconventionalresource potential in the U.S. into reserves and cash flow growth. Our nextbiggest sub-industry continues to be oil and gas storage and transportationat 24.0%. The high relative weighting toward this sector continues to be adifferentiating factor for our Fund relative to the majority of other Energyand Resources mutual funds and has been a strong and vital contributor toour relative performance. One of our regrets in the first half of the year hasbeen not having even more exposure to the oil and gas equipment andservices sector. We ended the quarter at 18.1% allocated to this sub-industry and even though we have gotten strong contributions from ourholdings in the sub-industry, we have also missed out on some strong gains,as U.S. drilling and completion activity levels have accelerated in recentmonths. With many of the stocks in this sub-industry up sharply in the lastsix months and valuations moving to the higher end of historical ranges, wehave been less inclined to chase these stocks. However, with Halliburton

Co., Flotek Industries, Inc. (classified as Materials, but its business is drivenby oilfield activity), and Forum Energy Technologies, Inc. in our top 10positions, we still have a strong exposure to improving industry trends.

As we noted last quarter, we began to build exposure to thealternative/renewable energy business with our investment in SunEdison,

Inc. During the quarter, we continued to increase our exposure with anincrease in our SunEdison holdings, and with a new purchase of Abengoa Yieldplc, which was a recent IPO. Abengoa Yield is a new type of company dubbedby Wall Street as a “Yieldco” that seeks to mimic some of the characteristics


61

of Energy MLPs. The company offers investors a security that pays out themajority of its cash flow in dividends or distributions and is generally valuedon yield and the ability to grow distributable cash flow. Most of the growthat Abengoa Yield is expected to come from the acquisition of developedrenewable electricity generating and transmission assets that have stablecash flows and long-term contracts. The majority of these acquisitions will bein the form of “dropdown” acquisitions from its parent company AbengoaS.A. or the acquisition of similar projects from third party developers. Wethink that opportunities in renewable energy are increasing, and it is an areathat we continue to watch for investment opportunities.

Our cash position at quarter end is 6.5%, which is higher than normal andis largely the result of a large inflow on the last day of the quarter.

Table IV.




Acquired (billions) (billions) (thousands) Assets

Bonanza Creek Energy, Inc. 2013 $1.2 $2.3 $2,570.6 4.0%Concho Resources, Inc. 2012 10.1 16.1 2,456.4 3.8Atlas Energy, L.P. 2013 2.7 2.3 2,376.4 3.7Halliburton Co. 2012 31.4 60.0 2,300.4 3.5Flotek Industries, Inc. 2013 1.2 1.7 2,256.1 3.5Oasis Petroleum, Inc. 2012 2.8 5.7 2,098.0 3.2Rose Rock Midstream, L.P. 2012 0.3 1.8 2,078.6 3.2Gulfport Energy Corp. 2013 4.1 5.4 1,829.7 2.8SM Energy Co. 2012 4.9 5.6 1,795.4 2.8Forum Energy

Technologies, Inc. 2012 1.7 3.4 1,713.7 2.6

Recent Activity

Table V.



(billions) (thousands)

Tesco Corp. $0.9 $1,255.5PBF Logistics LP 0.9 938.0Parsley Energy, Inc. 2.8 929.0Rose Rock Midstream, L.P. 1.8 827.3Oasis Petroleum, Inc. 5.7 634.0

Once again, three of our top purchases in the quarter were new positionsfor the Fund and two of the purchases were initial public offerings. Our toppurchase this quarter is Tesco Corp. Tesco is a small cap, global oilfieldequipment manufacturing and service company.The company specializes inthe manufacture, rental and service of top drives, which are used on drillingrigs to enhance the efficiency of the rig. Top drives have become essentialtools for rigs that are drilling onshore horizontal and for offshore wells, andTesco is one of the world’s leading suppliers. The company has also beenexpanding its presence in the tubular services business. Tubular servicecompanies assist oil and gas companies in the installation of the steel tubesthat provide the structural integrity and production pathways for oil andgas wells. The company is growing its core business of top drives as thedemand for new, high efficiency drilling rigs continues to rise. It is also

expanding its rig related product and service offerings through new productdevelopment and acquisitions. Tesco’s growth strategy in Tubular Services isbased on its ability to bring its technology and service capabilities up to alevel where it can compete in the offshore market with the two principalcompetitors that control 65-70% of that market. This will enable Tesco toeither gain share from two players or begin to crowd out the other localcompetitors and “mom and pop” competitors that make up the majority ofthe rest of the market. Because the offshore tubular business is a virtualduopoly, it is a high margin business and share gains would likely beaccretive to Tesco’s overall margins. The company has a strong balancesheet with almost $100 million of cash and generates another $60 millionor more per year in free cash flow. During the second quarter, thecompany’s board initiated a cash return program that includes an inauguralcommon stock dividend of $0.05 per quarter and a $100 million sharebuyback program. We expect the share buyback to be accretive to earningsand be completed over the next 18 months. Tesco shares ended the secondquarter being valued at a 20-30% discount to its closest peers despite ourview that it is poised for a significant acceleration in earnings and cash flow.

Our next two largest purchases were PBF Logistics LP and Parsley Energy,

Inc. PBF Logistics, L.P. is an MLP that was formed by PBF Energy, Inc., aprimarily East Coast based U.S. refining company, which was founded byTom O’Malley and his partners. Mr. O’Malley is one of the legendaryentrepreneurs in the refining and marketing business in the past twentyyears. PBF Logistics is the enterprise designed to own and operate theparent company’s logistics, storage and transportation assets and provide asource of lower cost of capital to the parent. Over time, this advantagedsource of capital should enable PBF Energy to continue to invest inadditional refining and logistics-related assets and grow both businesses fora longer period of time. Refining and marketing logistics MLPs have been asignificant investment theme for the Fund for the last several years, as thesecompanies have been able to produce strong growth in distributable cashflow and a high level of forward visibility around the sustainability of thatgrowth. PBF Logistics fits well in this mold, as we believe the company hasa first class management team and an excellent opportunity to grow itsdistributable cash flow per unit. The primary growth driver in the near-termshould be the acquisition of existing PBF Energy portfolio assets. However,longer-term growth can be sourced through a combination of the organicdevelopment of new infrastructure assets, such as rail loading and dischargeassets, storage tanks and terminals and other qualifying assets or throughdropdowns of any logistics-related assets that PBF Energy may acquire inany future acquisitions of its own.

Parsley Energy is an independent exploration and production company thathas a superior acreage footprint in the Permian Basin in West Texas and ispoised to grow production rapidly over the next several years, as it rampsup the drilling on its acreage. The company has a young, entrepreneurialmanagement team, and is well positioned to continue to grow its acreagethrough a series of small acquisitions and acreage swaps with otherproducers in the region. The Permian is one of the most prospective basinsfor oil shale-related development and production growth, and, in our view,will ultimately eclipse the Eagle Ford and the Bakken shales as thedominant shale play in the U.S. Our main attraction to Parsley revolvesaround the size and quality of its acreage position relative to the marketvalue of the company and its ability to execute on a growth plan that weexpect will result in top tier production and cash flow growth over the nextthree-to-five years. Our investment in Parsley adds to our already strongexposure to Permian Basin focused exploration and production companies,


62

which includes Athlon Energy, Concho Resources, and RSP Permian, andrepresented about 10.3% of our portfolio at quarter-end.

Table VI.


Amount(thousands)

Tesoro Logistics LP $–619.6Susser Petroleum Partners LP –419.8Frank’s International N.V. –389.3Tesoro Corp. –200.6Seadrill Partners, LLC –94.4

Our top sale in the quarter was a reduction in our holdings of Tesoro

Logistics LP. Tesoro Logistics is an MLP that has been a successfulinvestment for the Fund over the past several years as the company hasgrown significantly through acquisitions and organic asset development.Wereduced our position size during the quarter due to the fact that the sharesreached our target value, and we wanted to redeploy those assets into otherideas such as PBF Logistics, which we mention above. We also significantlyreduced our position in Susser Petroleum Partners LP during the quarterfollowing the announcement that Energy Transfer Partners, L.P. had agreedto purchase Susser Holdings, Inc., the parent and general partner of SusserPetroleum Partners. This deal drove the value of the Susser Petroleum unitsto price levels where the risk/reward was no longer compelling relative toother investment opportunities.

Outlook

As we look into the second half of this year, we see improving underlyingfundamental momentum in the Energy sector that should lead to higherearnings and cash flows for most companies, and increased investmentlevels. Recent industry forecasts show overall oil industry capital investmentlevels rising by 6-7% this year, with faster growth in North America thanoverseas. This is consistent with our view that the best investmentopportunities in Energy are predominately in North America and revolvearound the shale revolution.

The first half of the year, and the second quarter have in particular beenstrongly influenced by persistently higher oil and natural gas prices thanmost investors had expected. As this phenomenon has played out, it haspositively impacted the valuations of Energy stocks and caused the shapeof the oil futures forward curve to be less steeply backward than it was atthe beginning of the year. As we move into the second half of this year, andinto 2015, we believe that forward price expectations in the oil market willeither stay consistent with these levels or continue to flatten further. Inaddition, we estimate that Energy company earnings and cash flowestimates will begin to trend higher, putting less pressure on multipleexpansions to drive share price performance. Higher realized commodityprices and stronger earnings and cash flows in the sector could give rise toa virtuous circle of even more upward revisions in investment, providingeven more opportunity for earnings and cash flow growth in the second halfof this year and into 2015.

As always, we continue to pay close attention to both macro and microfactors that could positively or negatively influence the performance of ourportfolio and individual stocks over both the short and long term. In our

outlook for the remainder of the year, these are some of the bigger pictureitems and issues that we will be paying keen attention to regarding theoutlook for the Energy sector and for the rest of the industries in which theFund invests:

1. Oil and natural gas supply/demand balances – We believe that oiland gas markets remain in good balance and expect prices to berelatively flat within the trading ranges we have seen for the pastseveral years;

2. Geopolitics represents varied risks in the second half of the year –Geopolitical tensions are on the rise but seem hardly priced into theoil market. Investors appear to be more complacent than in recentyears about the potential for supply disruptions. While this instabilitycan cause significant near-term volatility, the long-term effects areless clear and probably less significant to the performance of ourFund, especially given the low correlation of the Fund to spot oil pricesin the last several years;

3. U.S. oil export debate to heat up – U.S. exports of crude oil havebeen banned for 40 years, but recent events and increasing politicalchatter out of Washington leads us to believe that restrictions couldbe relaxed over time;

4. Earnings and operating performance will become more

important – Investors (ourselves included) have given somecompanies a pass on making numbers in the past several quarters.Given the improvement in rig count, well count and other indicatorsalong with the multiple expansions in the sector, we think investorswill be more demanding of performance in the second half of theyear;

5. Fracking ban risks – Hydraulic fracturing (fracking) has been the keydriver of the shale revolution. However, opposition to fracking stillexists and in some places is growing. Municipal fracking bans gotsome judicial support in New York State last month and need to bemonitored in Colorado, Pennsylvania and other states where industryactivity is strong. Banning fracking is nearly an existential risk formany U.S. based energy companies at this point;

6. China and emerging market growth – Slowing growth in China andother emerging market economies has been a headwind all year long,especially for metals and mining companies. Growth estimates appearto have stabilized and may create conditions for a rebound in thesesectors and some parts of the metals complex are showing signs ofimprovement. We continue to monitor stocks in these sectors, butcontinue to favor Industrial and Material related stocks over purecommodity metal and mining companies at this point; and

7. New financing structures and lower costs help alternatives – Thelevelized cost of energy equivalent or LCOE for alternatives such aswind and solar is continuing to fall and narrow the gap with otherconventional energy sources.This is especially true in emerging marketswhere electricity costs and energy costs tend to already be high and arehelping to create demand for wind and solar installations without theneed for subsidies.Aiding the growth is the sector’s increasing ability totap into new financing structures such as “YieldCos” and securitizedfinancing to both attract new investment capital into the industry andlower the cost of capital for project developers.


63

Given the strong year-to-date appreciation in the Energy sector, stocksare not as inexpensive as they were earlier in the year, and perhapsmultiple expansion opportunities will be less than what we have seen inthe last six months. However, we think that energy stocks are stillundervalued relative to the market and under-owned. We are still findingour best ideas in Energy and Energy-related stocks relative to othersectors. When we look at our estimates for production growth, thecontinued improvements in per well productivity and recovery rates, theupward trend in the rig count, the ongoing increases in completion andoilfield service intensity, and a strong demand for continuedinfrastructure build-out, we see a strong opportunity for value creationacross multiple parts of the Energy value chain and believe that Energystocks will continue to be strong performers.

I am pleased to have had the opportunity to share my thoughts with

you in this letter. Thank you for having the confidence to join me in

investing in Baron Energy and Resources Fund.

Sincerely,

James StonePortfolio ManagerJuly 23, 2014


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 canbe affected by fluctuations in energy prices and supply and demand of energy fuels. Resources industries can be affected by international political and economic developments,the success of exploration projects, and meteorological events.


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 wouldbe unlawful under the laws of that jurisdiction to make such offer or solicitation.


64


Dear Baron Global Advantage Shareholder:

Performance

The global markets continued their ascent in the second quarter of 2014, albeitwith increased volatility.After a difficult April, the Baron Global Advantage Funderased its earlier losses and finished the June quarter with a solid gain of5.06%, slightly ahead of its benchmarks. We were helped by strong stockselection in Financials and Health Care, which were offset to a large degree bypoorly performing stocks in the Information Technology and Industrialssectors. Our country exposures also helped us for a change, with overweightsin Brazil, India, and Russia, and an underweight in Japan all contributingpositively to relative performance. The Fund had its two-year anniversary onApril 30. Since inception, the Baron Global Advantage Fund has risen 43.40%on a cumulative basis, which compares favorably to 34.40% for the MSCI AllCountry World Growth Index, the Fund’s primary benchmark. During thequarter, we continued to benefit from the strong performance of our coreholdings: Illumina, Facebook, Cetip, Baidu, and Tower Bersama

Infrastructure.We were also happy to see some of our more recent additions,Smiles SA, Xoom, TAL Education Group and Pacira Pharmaceuticals makeimmediate positive contributions. Some of them are discussed in more detailbelow.

We entered the second quarter in the midst of a market correction andsignificant stock price fluctuations. Typically, it is during these times that

Table I.


Annualized for periods ended March 31, 2014

Baron MSCI Global ACWI MSCI

Advantage Growth ACWIFund1,2 Index1 Index1

Three Months3 5.06% 4.95% 5.04%Six Months3 6.14% 5.41% 6.18%One Year 34.65% 23.06% 22.95%Since Inception (April 30 , 2012) 18.10% 14.62% 15.60%

Performance listed in the table above is net of annual operating expenses.Annual operating expense ratio for the Retail Shares as of December 31, 2013was 5.51%, but the net annual expense ratio is 1.50% (net of the Adviser’s feewaivers). The performance data quoted represents past performance. Pastperformance is no guarantee of future results. The investment return andprincipal value of an investment will fluctuate; an investor’s shares, whenredeemed, may be worth more or less than their original cost. The Adviser hasreimbursed certain Fund expenses (by contract as long as BAMCO, Inc. is theadviser to the Fund) and the Fund’s transfer agency expenses may be reduced byexpense offsets from an unaffiliated transfer agent, without which performancewould have been lower. Current performance may be lower or higher than theperformance data quoted. For performance information current to the mostrecent 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 participationin 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-adjustedmarket capitalization weighted indexes reflected in US dollars.The MSCI ACWI Growth Index NetUSD measures the equity market performance of large- and mid-cap growth securities acrossdeveloped and emerging markets. The MSCI ACWI Index Net USD measures the equity marketperformance of large- and mid-cap securities across developed and emerging markets. Theindexes and the Baron Global Advantage Fund include reinvestment of dividends, net of foreignwithholding taxes, which positively impact the performance results.


3 Not annualized.

our investment theses and conviction levels truly get tested. During thisquarter, we made significant changes to the portfolio. While most of ourpositions were left unchanged, we doubled down on a few of ourinvestments where we had particularly high conviction and reduced thetotal number of holdings from 50 to 39.

For decades, Ron has been writing about what makes companies, and thepeople that run them, unique and attractive long-term investments. Thistime is no exception (please refer to Letter from Ron to see for yourself).During this quarter, Ashim Mehra, our senior Internet and Media analyst, setup a trip to the UK to visit a bunch of companies. Kass, Lippert and I taggedalong. We spent an entire day with AO World, the leading online retailer ofmajor domestic appliances (but really a next generation logistics company)in Great Britain. We visited their 360,000 sq. ft. national distribution centerin Crewe, where a robot took Lippert 200 feet in the air in a matter ofseconds causing a slightly pale Ashim to remark, “let’s hope these robotoperators are well trained.” (They were, and Mike was returned to us a fewanxious minutes later.) We also spent many hours with John Roberts, theCEO of the company, and his team at their headquarters in Bolton. Hewalked us through the history of the company, literally showed us where itis today, and explained in detail what he envisioned in the company’s future.What stuck out the most to us was the amazing culture and values that allthe employees seemed to share. In addition to quantitative measures (likeFree Cash Flow Yield and Returns On Invested Capital) that we use todetermine if a business has good prospects, we often look at qualitativethings like culture and vision. Would I want to work there? Would I want mychildren to work for this company? AO World was one of the fewinvestments that we decided to double down on, after spending the day inBolton, U.K. Lack of instant gratification notwithstanding, we think we willbe writing about this company in many quarterly letters to come.

ALEX UMANSKY Retail Shares: BGAFX

PORTFOLIO MANAGER Institutional Shares: BGAIX

64

65

June 30, 2014 Baron Global Advantage Fund

Table II.



(billions) Impact

Illumina, Inc. $ 22.9 0.81%Smiles SA 2.6 0.79Xoom Corporation 1.0 0.66Cetip SA - Mercados Organizados 3.7 0.64Facebook Inc. 172.7 0.51

Shares of Illumina, Inc., the leading provider of next generation DNAsequencing instruments and consumables, increased 20.1% during the quarterand are up 61.4% year-to-date. Performance was driven by better thanexpected first quarter financial results and strong 2014 financial guidance.Thecompany’s announcement of multiple new product introductions, including anew ultra-high throughput sequencing platform called the HiSeq X Ten, whichis the first to sequence a full human genome for less than $1,000, is generatingstrong momentum. While the shares appear to be fully priced over the shortterm, we believe the sequencing market is in its infancy, and Illumina hasfurther distanced itself from its competitors and holds an effective monopolyon DNA sequencing at a time when demand is accelerating.

We acquired a medium-size position in Smiles SA at the end of March of thisyear. Smiles is the second largest airline loyalty program provider in Brazil,selling frequent flyer miles to Brazil’s GOL airlines and financial partners.During the quarter, Smiles posted earnings results that beat consensusexpectations and announced plans for a special dividend, equivalent to a 20%dividend yield. The shares responded by rising 36.8%, propelling Smiles to theseventh largest position in the Fund. The company has an attractive businessmodel with high margins, good cash generation and strong returns on capital.We further believe the company has a long runway for growth, given the underpenetration of both air transportation and loyalty programs in Brazil. KyuheyAugust gets all the credit for discovering and analyzing this investment, andmaking sure that our shareholders have something else to “smile” about.

Count on Xoom Corporation, the leading online money transfer companyserving India, the Philippines, and Latin America to make an appearance on oneside of the ledger or the other.The shares “xoomed” 35.0% after the companyreported strong first quarter results, guiding slightly above expectations, andare now almost back to flat on the year. The stock has recovered from whatappeared to be investor fears of increasing competition, specifically WesternUnion’s reported plans to enter the India online money transfer market. Wecontinue to believe in Xoom’s ability to gain market share and execute againsta large opportunity, and we are encouraged by management’s progress withthe native mobile app development and instant delivery partnerships. Webelieve this is a high risk / high reward opportunity and will monitor and sizethis investment accordingly.

Cetip SA - Mercados Organizados is the largest fixed income exchange inBrazil. The company administers over-the-counter markets for trading andregistration of fixed income securities, derivatives, and auto liens. We believethat we are very early in the development of corporate debt and fixed incomesecurities trading in Brazil, as the penetration and liquidity of theseinstruments is still very, very low. Cetip is experiencing strong growth across

many of its products and is showing good pricing power and sustainably highmargins. The company is also paying down expensive debt and returningexcess capital to shareholders through dividends. The stock rose 21.9% on thestrength of good first quarter earnings results and a pick-up in the broaderBrazilian stock market. Apparently the Canarinhos’* two embarrassinglosses in the World Cup, after not having suffered a loss on home soil forTHIRTY NINE consecutive YEARS, have put significant dampers into DilmaRousseff’s re-election campaign. While the Brazilian market would likelywelcome Ms. Rousseff’s defeat, we like Cetip’s prospects even if Brazilianvoters will prove to be more forgiving.

Shares of Facebook Inc., the world’s largest social network, rose 11.7% duringthe quarter and are up a healthy 23.1% year-to-date. The stock reactedfavorably to continued improvements in consumer engagement and mobilemonetization. We believe that Facebook is in the early stages of building outits global advertising business and investing in its monetization strategy forInstagram, its online mobile photo-sharing service.We think the company hasan attractive customer base and stands to benefit from expectedimprovements in the price of advertising on its platform.

Table III.



Market CapWhen Sold Percent(billions) Impact

Yandex Acxiom Corp. $ 1.7 –1.25%Sina Corporation 2.9 –0.50Medidata Solutions, Inc. 2.3 –0.31AO World plc 1.9 –0.27Wynn Macau Ltd. 18.8 –0.24

Acxiom Corp., the leading provider of database marketing solutions and IToutsourcing services to large enterprise customers, was by far our worstcontributor this quarter after the shares declined 36.9%. We have nowessentially round-tripped this investment, as the slower-than-expectedcustomer adoption of the company’s new Audience Operating System (AOS)platform and weaker revenue guidance on its core database solutions businesssent less patient investors hurrying for the exits. We expect AOS growth toaccelerate through the year and a refocus on sales execution on the coredatabase sales to improve the pipeline.

Sina Corporation operates popular Chinese Internet portals and owns acontrolling stake in Sina Weibo, a Twitter-like service.Weibo was scheduled togo public during the quarter, and we thought the company’s true value andpotential were not reflected in the price of Sina. As we went through the IPOfilings, we realized that Weibo was a less attractive business than we thought.While the IPO was successful, and Sina appears to be trading at a meaningfuldiscount to its sum of the parts value, we believe their core businesses arefacing significant challenges and we have exited this position.

Medidata Solutions, Inc., is a leading provider of cloud-based clinicaldevelopment solutions for life sciences companies. The stock declined 21.2%after reporting first quarter results that were below Street estimates and adecline in backlog coverage, causing some investors to question full year

*Canarinho – little yellow canary, for the color of the Brazilian team’s shirts.

66


guidance. The stock was also impacted by the March-April sell-off of highvalue, high growth software stocks.We maintain conviction based on what webelieve is Medidata’s unique offering, large market opportunity and attractivebusiness model.We have increased the size of this investment.

AO World plc is the leading online retailer of major domestic appliances in theU.K. AO has a 10% share of the U.K. market and is expected to enter theGerman market later this year. We initiated a small position in this companywhen it went public in February 2014. After a strong debut, shares declined15.8% in the second quarter and now trade below their IPO price.We believethat AO enjoys significant and sustainable competitive advantages due to itsunique supply chain and customized software that will facilitate its expansioninto new product categories and new countries in continental Europe.We havemore than doubled the size of this investment.

Shares of Wynn Macau Ltd., a Macau gaming company, declined in thesecond quarter due to concerns over a slowdown in VIP revenue, whichcomprises half of the company’s earnings. We exited our position in favor ofcompanies in which we have greater conviction.

Portfolio Structure

The portfolio is constructed on a bottom-up basis with the quality of ideas andconviction level having the highest roles in determining the size of eachindividual investment. Sector or country weights tend to be an outcome of theportfolio construction process and are not meant to indicate a positive or anegative “view.”

During the quarter, compared to the MSCI ACWI Growth Index, the Fund wasoverweight Information Technology, Telecommunication Services andConsumer Discretionary, and underweight Consumer Staples, Industrials,Financials and Health Care.

The top 10 positions represented 42.2% of the Fund, the top 20 were 69.5%.We exited the quarter with 39 holdings.

Table IV.


Quarter End Quarter EndMarket Investment

Cap Value Percent of(billions) (thousands) Net Assets

Sarana Menara Nusantara Tbk PT $ 3.4 $374.5 5.3%Google, Inc. 390.9 365.9 5.1Facebook Inc. 172.7 316.4 4.4SoftBank Corp. 90.2 309.4 4.3Illumina, Inc. 22.9 305.3 4.3Amazon.com, Inc. 149.5 277.0 3.9Smiles SA 2.6 269.2 3.8Just Eat plc 2.5 266.4 3.7Cetip SA - Mercados Organizados 3.7 261.4 3.7TAL Education Group 2.1 261.0 3.7

Exposure by Country

Table V.

Percentage of securities by country as of June 30, 2014


United States 42.9%China 9.4Indonesia 8.5Brazil 7.5United Kingdom 7.4Japan 4.4India 4.3Canada 3.4Spain 3.0Russia 2.8Israel 2.7Netherlands 1.7Norway 1.1

Recent Activity

Table VI.



(billions) (thousands)

Just Eat plc $2.5 $275.1Pacira Pharmaceuticals, Inc. 3.3 137.9PBF Logistics LP 0.9 117.2AO World plc 1.9 72.2Arista Networks, Inc. 4.0 41.6

Just Eat plc is the leading online takeaway ordering services company forrestaurants and consumers outside of the U.S. (Seamless, owned by GrubHub,is a good compare), with leading market share in Western Europe, Canada, andBrazil. We believe that the penetration of online takeout food ordering anddelivery services is going to increase substantially and that Just Eat’s brand andstrong mobile offering will allow it to garner a disproportionate share of themarket.

Pacira Pharmaceuticals, Inc. is a specialty pharmaceutical company thatdeveloped a unique pain control drug called Exparel. The active ingredient inExparel is bupivacaine, a widely used analgesic (pain-killer), which is easilyobtained from multiple manufacturers, and in its native form, wears off afterabout 8 hours. Pacira’s proprietary component (the “wrapper”) allows for theslow release of bupivacaine, which makes it effective for 72 hours or more.Webelieve the company’s competitive advantage is centered in its manufacturingprocess that is either impossible or extremely difficult to replicate, which isevidenced by the lack of competitors or competing products.We think Exparel’sopportunity alone is large enough to justify Pacira’s current valuation and thatwe are getting all of their other products (DepoCyte, veterinary, etc.) for free.

PBF Logistics LP is a growth oriented MLP designed to acquire, manage,operate and grow PBF’s midstream assets. We are very fond of CEO TomO’Malley’s track record and believe PBFX has several years of substantialgrowth ahead of it.

AO World plc is a next generation logistics company masquerading as anonline retailer of domestic appliances in the UK. We think AO’s proprietarysoftware and logistics network will allow it to gain significant share (currentlyat about 10%) of the UK appliance retailing market and that it will be able toexpand and replicate its successful model to Germany and the rest of WesternEurope in the years to come.

Arista Networks, Inc. is a provider of high performance switches and othernetworking gear and solutions aimed at large-scale Internet companies andcloud service providers. Loaded with former Cisco exiles, the company hasbecome a viable alternative to the industry giant. We think Arista’s uniquearchitecture and strong partnerships will allow it to continue to gain share inthe fast growing switching markets for the next generation data centers andenterprises.

Table VII.



Market CapWhen Sold Amount(billions) (thousands)

MasterCard, Inc. $ 84.4 $–431.5Amazon.com, Inc. 149.5 –409.4Monsanto Co. 65.4 –381.5Google, Inc. 390.9 –352.5YUM! Brands, Inc. 35.2 –340.2

We continue to own sizable positions in the shares of Google andAmazon.com. The reductions in these positions as well as the eliminations ofMasterCard and YUM! Brands were done in the context of the portfoliorestructuring described earlier in this letter.

Outlook

As this Fund enters its third year, we remain constructive on the overallenvironment. Most of the returns over the last two years had come frommultiple expansions rather than earnings growth. We believe improvedearnings growth is on deck.

Our goal remains to maximize long-term returns without taking significantrisks of permanent loss of capital. Our focus continues to be on identifying andinvesting in unique companies with sustainable competitive advantages thatwe believe have the ability to reinvest capital at high rates of return. We arebullish about the long-term prospects of the companies we are invested in andcontinue to search for new ideas and investment opportunities.

Thank you for investing in the Baron Global Advantage Fund.

Sincerely,

Alex Umansky,Portfolio ManagerJuly 23, 2014

For more information about this Fund please scan this QR code with any bar code reader on your mobile device.


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 beunlawful under the laws of that jurisdiction to make such offer or solicitation.

67

June 30, 2014 Baron Global Advantage Fund


68

Dear Baron Discovery Fund Shareholder:

Performance

In the second quarter of 2014, the Baron Discovery Fund performedessentially in-line with the Russell 2000 Growth Index. It posted positivegains of 1.65% vs. 1.72% return of the index.

The second quarter was characterized by a strangely compressed up anddown market cycle. In our small cap growth universe, we saw an explosivebull market in the first quarter of the year turn into a painful bear marketstarting around the middle of March, as investors became nervous theFederal Reserve could begin tightening interest rates sooner than expected.As those fears dissipated in the middle of May, the market began a recoveryphase that has brought the index nearly all the way back to the highsachieved in mid-March. That being said, it was a rapidly changingenvironment that kept us on our toes. We believe that we have managedwell in this environment by sticking to our fundamentally focused, long-term horizon style of growth investing. We continue to find exciting,innovative growth companies across most sectors in the economy.

After a long period of outperformance for some of our higher growth (mostlytechnology) investments, we trimmed some of our holdings that reached whatwe believed were unsustainable valuation levels during the second quarter.Wereplaced those investments with companies that had not performed as wellover the previous twelve months, but where we felt we had great, multi-yeargrowth prospects and more reasonable valuations. Most of these newadditions were REITs, MLPs and Energy securities which, in turn, helped our

second quarter performance, since during the second quarter, these types ofsecurities significantly outperformed the overall market.

As we begin the third quarter, we remain excited by the overall portfolioconstruction and by the pipeline of small and innovative companies that weare analyzing as potential future investments.

Table II.


PercentImpact

Zoe’s Kitchen, Inc. 1.68%Pacira Pharmaceuticals, Inc. 1.39Rose Rock Midstream, L.P. 0.90Flotek Industries, Inc. 0.73BioScrip, Inc. 0.66

Zoe’s Kitchen, Inc., an operator of fast casual Mediterranean cuisinerestaurants, was a top contributor in the quarter. The company came publicin April and performed strongly throughout the quarter as investors gotmore comfortable with the company’s ability to execute its restaurantgrowth strategy. With only 111 restaurants at the end of February, webelieve the company has many years of growth before getting to its 1,600restaurant opportunity.

Pacira Pharmaceuticals, Inc., a specialty pharmaceutical company, was a solidperformer in the quarter. Sales of its injectable, long-lasting pain medicationEXPAREL continued to grow rapidly (up 221% in the first quarter of 2014).Growth was due to more hospital adoption and more usage in surgicalprocedures. Pacira also received FDA approval for an expansion of its San Diegobased manufacturing facility, increasing production capacity from $100 millionin sales to $400 million. The company also inked anagreement to expand future production in the U.K., whichcould add up to another $900 million in annualizedcapacity. Run rate sales of EXPAREL are now about $120million and the market could be worth billions. We believethe company has years of continued growth ahead.

Performance listed in the above table is net of annual operating expenses.Annual estimated expense ratio for the Retail Shares is 3.25%, but the netannual estimated expense ratio is 1.35% (net of the Adviser’s fee waivers).The performance data quoted represents past performance. Past performanceis no guarantee of future results. The investment return and principal value ofan investment will fluctuate; an investor’s shares, when redeemed, may beworth more or less than their original cost. The Adviser has reimbursed certainFund expenses (by contract as long as BAMCO, Inc. is the adviser to the Fund)and the Fund’s transfer agency expenses may be reduced by expense offsetsfrom an unaffiliated transfer agent, without which performance would havebeen lower. Current performance may be lower or higher than theperformance data quoted. For performance information current to the mostrecent month end, visit www.BaronFunds.com or call 1-800-99BARON.

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



3 Not annualized.

Table I.


For period ended June 30, 2014

Baron Russell Discovery 2000 S&P 500

Fund1,2 Growth Index1 Index1

Three Months3 1.65% 1.72% 5.23%Six Months3 10.71% 2.22% 7.14%Since Inception

(September 30, 2013)3 29.20% 10.57% 18.40%

RANDY GWIRTZMAN AND LAIRD BIEGER Retail Shares: BDFFX

PORTFOLIO MANAGERS Institutional Shares: BDFIX

June 30, 2014 Baron Discovery Fund

69

Rose Rock Midstream, L.P. is a growth oriented MLP formed by SEMG(SemGroup) to acquire, develop and operate its midstream energy assets asSEMG becomes an asset light General Partner of Rose Rock. During the secondquarter, Rose Rock reported strong operating results and completed itsacquisition of White Cliffs pipeline from SEMG. As a result, Rose Rock updatedits growth guidance higher. With a new CEO in place, and anticipation of cashflow and distribution acceleration, investors supported the stock.We continueto view Rose Rock as a long-term underappreciated growth story.

Flotek Industries, Inc. is a leading supplier of specialized chemicals to theoil & gas industry. Its proprietary citrus oil based products, such as itscomplex nano fluid, are experiencing rapid growth related to the boom inshale oil drilling in the U.S. and Canada. Flotek shares were up over 15% inthe quarter as investors increasingly recognized the significant revenue andearnings growth potential of Flotek’s products. Flotek is still early inpenetrating the market for its products, and, therefore, we continue to seestrong upside in the shares over time.

BioScrip, Inc. (a provider of specialty healthcare infusion services) is on thecusp of breaking out of some operating difficulties caused by its (inretrospect) overly aggressive acquisition strategy. We saw some early signsof this in the first quarter earnings report. We believe that the company willcontinue to post strong organic growth, and that the second quarter willmark a turnaround in its working capital flows. We made our last purchasein late March at market lows (and we were rewarded). We believemanagement has created a valuable asset, which could be acquired at muchhigher valuation levels (given other recent transactions in the space).

Table III.


PercentImpact

PowerSecure International, Inc. –1.56%The Spectranetics Corporation –0.94SciQuest, Inc. –0.85Imperva, Inc. –0.63TherapeuticsMD, Inc. –0.54

PowerSecure International, Inc., a utility services company, substantiallyunderperformed in the quarter. It reported a large quarterly miss andrevised full year guidance substantially downwards. The company disclosedthat it is struggling to execute a large utility contract at a profit. As aconsequence of this contract, and previously undisclosed issues with itsoperational reporting, the company chose to slow down its growth rate,which impacted full year guidance to a significant degree. We chose to exitthe position as the problems with the business versus the plan previouslycommunicated by management to investors gave us pause.

The Spectranetics Corporation is a provider of medical devices forperipheral atherectomy (removal of arterial plaque primarily in the legs andcoronary arteries) and lead removal (for heart regulating devices). Shareswere down in the quarter due to a stumble (temporary in our opinion) in leadremoval sales execution, as well as the issuance of $230 million in convertibledebt related to a strategic acquisition done in the quarter. Hedge fund buyersof convertible debt typically short stock against their long bond positions tohedge out some of the equity risk. This can pressure share price.We think thatthe execution issues were related to the rapid expansion of SPNC’s sales force(a good thing), and that these issues have been resolved (which we hope tohear about in the second quarter earnings call). The acquisition could be veryaccretive for SPNC, as it gives the company access to cutting balloons (used

to clear more hardened arterial clogs) and a pathway to gain approval for adrug coated balloon (the use of which has been shown by competitors toprovide better patient outcomes than regular balloon angioplasty). In themeantime, SPNC is on the cusp of gaining approval for a new application ofits laser atherectomy device (for clearing areas of arteries that werepreviously stented) which we think could substantially increase its currentmarket opportunity. This approval could come in August or sooner.Spectranetics will be the only company on the market with a solution. Webelieve it will continue to execute very well on its growth plan, so we werenet buyers of the stock when it sold off in the quarter.

SciQuest, Inc. provides subscription software that enables companies tosave money on internally purchased items (spend management). We exitedour position after SciQuest experienced some significant contract signingdelays in the quarter, and we realized that the company had far largercontract risk in its customer base than we initially believed.

Imperva, Inc. is a provider of security software focused on providing visibilityand control across critical systems within the data center. IMPV reported aweak start to 2014 with a profit warning related to its sales execution. Thiswas the second sales execution miss we witnessed with the company. Wesold the position as we determined that, even though the company has ahigh quality software solution and a visionary leader, revenue volatility andoperational risk were higher than we had originally believed.

TherapeuticsMD, Inc. is a specialty pharmaceutical company that isdeveloping drugs that address a multi-billion dollar hormone replacementtherapy (HRT) market. Shares were down in the quarter amidst a generalsell-off in the pharmaceutical and biotech industries. We believe that wewill see significant clinical trial data on the company’s two key drugs in2015 (one drug treats hot flashes related to menopause, and the othertreats vulvar/vaginal atrophy which is also related to menopause), and wethink FDA approvals are likely to come in 2016. TXMD’s drugs are bio-identical to natural hormones. Bio-identical hormones have been shown tobe safer than the FDA approved synthetic hormones currently on themarket. The active pharmaceutical ingredients (API’s) in these bio-identicaldrugs are already approved for use in the market (though not incombination). The Company has patented a process that allows it tocombine the two key bio-identical hormones needed to treat hot flashesinto one pill. No other drug company has been able to accomplish this.While women can get prescriptions for bio-identical combinationhormones through compounding pharmacies currently, due to recentlyenacted federal legislation, once an FDA approved bio-identical drug is onthe market, the compounders (representing an estimated $1.5 billion inrevenue) will no longer be able to sell compounded HRT drugs. We believethe opportunity for The Company is compelling. We added to our positionnear market lows.

Portfolio Structure

As of June 30, 2014, the Fund had $36.2 million under management andwas invested in 55 public stocks. At the end of the quarter, the top 10positions represented 32.9% of the Fund’s assets.

Our key sector weightings at the end of June 2014 were 23.5% Health Care(1.8% greater than the Russell 2000 Growth Index), 19.2% InformationTechnology (6.5% below the index), 16.3% Energy (11.1% greater than theindex), and 12.8% Consumer Discretionary (2.6% lower than the index).

Over the past two quarters, the most meaningful changes were toInformation Technology (went from 5.6% overweight at December 31, 2013to 6.5% underweight at June 30, 2014) and Energy (went from 4.3%


70

overweight to 11.1% overweight). The increase in Energy was mostly due toincreases in our Master Limited Partnership (MLP) investments. It isimportant to note, however, that our Energy MLP investments are notcorrelated to the price of oil. Our pure exploration and production companies(Parsley Energy, Inc. and RSP Permian, Inc.), which are correlated to theprice of oil, comprised 0% and 4.2% of assets in the respective periods.

Table IV.


Quarter EndInvestment Percent

Year Value of NetAcquired (thousands) Assets

Flotek Industries, Inc. 2013 $1,672.3 4.6%Pacira Pharmaceuticals, Inc. 2013 1,653.5 4.6The Spectranetics Corporation 2013 1,383.8 3.8Rose Rock Midstream, L.P. 2014 1,256.7 3.5BioScrip, Inc. 2013 1,201.0 3.3Foundation Medicine, Inc. 2013 1,013.7 2.8RSP Permian, Inc. 2014 973.2 2.7Qualys, Inc. 2013 944.7 2.6eHealth, Inc. 2014 918.9 2.5Amber Road, Inc. 2014 890.4 2.5

Our largest holdings have approached 5% of assets, largely due toappreciation. We remain mindful of maintaining adequate diversification,while at the same time looking to profit from the investments in which wehave the strongest conviction. Pacira Pharmaceuticals and Flotek Industriesare both stocks that are benefitting from distinct secular growthopportunities and are both stocks in which we have maintained anoverweight position due to high levels of conviction.

Some of our high conviction positions were weak in the quarter (includingQualys, Inc., The Spectranetics Corporation, eHealth, Inc. andFoundation Medicine, Inc.).We added to these positions as we believe thatthey all have very good prospects that are not reflected in their currentvaluations.

We added to Qualys, Inc., a provider of network security software, when weexited our position in Imperva. Qualys is free cash flow positive and isentering a period of accelerating growth from a significant new productcycle. Unlike Imperva, however, Qualys has a revenue stream that is nearlyentirely subscription based, so it is recurring with a high level of visibility.We think this was a significant upgrade.

Another exciting investment is Foundation Medicine, Inc., which is aprovider of high-end next-generation genetic tests for severe cancer (amarket that we believe could be worth well over $3 billion). FMI hasdeveloped a sophisticated solid tumor cancer test which looks at over 200genetic markers (and it is constantly adding more). The test looks at thecancer pathways caused by known and newly discovered geneticalterations. It also has a separate test for hematological (blood related)cancers. By looking at alterations, rather than the specific location of thetumor in the body, oncologists can better target biologic drugs fortreatment. In fact, numerous patients who were believed to be untreatableusing prior tests were able to find effective cancer drugs when FMI’s testilluminated treatable genetic alterations. And this is all supported bynumerous academic publications. On top of the test itself (which our duediligence indicates is extremely difficult to replicate), FMI is positioned tobe a database / informatics supplier, as it has developed a web-based portalthat links pharmaceutical companies (18 of which are currently partnered)

to oncologists around the country, and provides all constituents with broad-based and detailed information about discovered alterations and theeffectiveness of drugs used to treat them. The company also providesoncologists with the latest clinical trial information so that severely illpatients have opportunities to try targeted cancer treatments currently indevelopment. The more tests run by FMI, the greater the value of thegenetic database that it is generating (and it has already run tens ofthousands of tests).

Finally, we have been adding to our position in eHealth, Inc., the leading web-based health-care insurance broker in the U.S. While the enactment of theAffordable Care Act (ACA or Obamacare) has created some headwinds for thecompany, as well as another competitor in the form of the U.S. Government,we believe that eHealth can continue to take share in both the individual andfamily market and the Medicare Advantage (MA) insurance market (which isoutside of the ACA umbrella). We think that eHealth will take more than itsfair share of the individual market as its site is more reliable, easier to use andsafer from a cybersecurity standpoint than healthcare.gov – we think thatgiven the numerous warnings by cybersecurity experts, there could be a majorpersonal data breach of the government site. On top of this, the MA marketholds big promise for eHealth in our opinion, as incremental new membersare profitable and last for a long time. We believe also that the company ispoised for accelerated profitability as it has spent a lot of money in the pasttwo years gearing up its technology and call center staffing to prepare for theACA launch. Going forward, all of these fixed costs will be leveraged againstincreasing member premiums.

Recent Activity

Table V.


Quarter EndYear Market Cap Amount

Acquired (billions) (thousands)

Strategic Hotels & Resorts, Inc. 2014 $2.9 $706.6PBF Logistics LP 2014 0.9 673.8Foundation Medicine, Inc. 2013 0.8 585.9Fiesta Restaurant Group, Inc. 2014 1.2 544.7The Spectranetics Corporation 2013 1.0 543.9

Strategic Hotels & Resorts, Inc. is an equity real estate investment trust(REIT) that invests in luxury hotels and resorts. We believe the company’shotel portfolio is the best among the publicly traded hotel REITs. Withstrong brands such as Four Seasons and Ritz Carlton, we believe that thecompany will continue to benefit from increasing demand for luxury travel,which will in turn lead to higher than industry profit growth.We also believethat we purchased the stock at a significant discount to net asset value,which makes the company a potential takeout candidate.

PBF Logistics LP is an MLP that was formed by PBF Energy, Inc., a primarilyEast Coast based U.S. refining company. It was founded by Tom O’Malleyand his partners. Mr. O’Malley is one of the legendary entrepreneurs in therefining and marketing business in the past twenty years. PBF Logistics is anenterprise designed to own and operate its parent company’s logistics,storage and transportation assets and provide a source of lower cost capitalto the parent. Refining and marketing logistics companies have been able toproduce strong growth in distributable cash flow and a high level of forwardvisibility around the sustainability of that growth. PBF Logistics fits well inthis mold as the company has an excellent opportunity to grow itsdistributable cash flow per unit. The primary growth driver in the near-term

June 30, 2014 Baron Discovery Fund

71


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 Fundmay 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 thisreport reflect those of the respective portfolio manager only through the end of the period stated in this report. The portfolio managers’ views are not intended asrecommendations or investment advice to any person reading this report and are subject to change at any time based on market and other conditions and Baron has noobligation 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 unlawfulunder the laws of that jurisdiction to make such offer or solicitation.


should be the acquisition of existing PBF Energy portfolio assets. However,longer-term growth can be sourced through a combination of the organicdevelopment of new infrastructure assets, such as rail loading and dischargeassets, storage tanks and terminals and other qualifying assets or throughdropdowns of any logistics related assets that PBF Energy may acquire infuture acquisitions of its own.

We added to our position in Foundation Medicine, Inc., when it traded downduring the quarter. While some investors are worried that competitors willenter the market, we believe that FMI has significant competitiveadvantages. Shares rebounded nicely at the end of the quarter. We believethat investors grew more comfortable with FMI as they understood thatFMI has: (1) a significant product lead against its potential competitors;(2) very good traction in the community oncologist channel that representsmost of the market; and (3) a strong possibility of getting Medicarereimbursement over the next 12-18 months.

Fiesta Restaurant Group, Inc. owns and franchises two fast casual restaurantconcepts under the Pollo Tropical and Taco Cabana brand names. We believethe company is early in its growth with only 267 restaurants at the end of lastyear. With only 102 units at the end of last year and strong new uniteconomics, we believe that the Pollo Tropical concept will provide Fiesta withmore than a decade of profitable growth. The company recently startedopening its first units in Texas and our initial due diligence has indicated thatconsumer acceptance has been strong. The company is also experimentingwith a new version of its Taco Cabana concept (called Cabana Grill) in theAtlanta area. While still early, if this concept can also show a high return oninvestment, it would provide Fiesta with an additional leg of growth.

Table VI.


Quarter EndMarket Market Cap

Cap orWhen Market Cap Amount

Year Acquired When Sold SoldAcquired (billions) (billions) (thousands)

Coupons.com, Incorporated 2014 $1.1 $1.3 $–573.4SciQuest, Inc. 2013 0.5 0.4 –480.1Astronics Corp. 2013 0.9 0.9 –463.7Western Refining Logistics, LP 2013 0.5 1.5 –454.1Primoris Services Corp. 2013 1.3 1.4 –450.2

We sold our position in Astronics Corp. after a significant amount of duediligence convinced us that the long-term market opportunity was not aslarge or as recurring as we had originally believed. We sold our position inCoupons.com, Incorporated as we felt the valuation had becomeextended.We sold a portion of our position in Western Refining Logistics,

LP as we felt the valuation was less compelling than some of our other MLPinvestments.

Outlook

We are cautiously optimistic about the economy in the second half of2014. We see a lot of positive economic indicators (lower jobless claims,more consumer spending on autos, better existing home sales and betterconsumer confidence readings). That being said, we are also cognizant ofrising inflation and that the low levels of volatility we have experienced inrecent months can change very quickly. For example, geopolitical risks inIraq, Syria and Ukraine are still ever-present. We have constructed theportfolio with both these positive and negative factors in mind.

One positive development about which we are particularly excited is thepickup in the number of announced mergers and acquisitions. Webenefitted from this trend when, on June 13th, Priceline offered to purchaseOpen Table, a Baron Discovery Fund holding, for a 46% premium over theprior day’s closing price. We believe this is the start of a trend in whichsmall, fast growing companies with hard to replicate business models willcontinue to be acquisition targets. Since these are the types of companieswe are targeting as investments, we believe the Fund should continue tobenefit from this trend.

Thank you for investing in the Fund.

Randy Gwirtzman & Laird BiegerPortfolio ManagersJuly 23, 2014

72

Baron Funds

Portfolio Market Capitalization (Unaudited)

Baron Asset Fund

Baron Asset Fund is a diversified fund that invests primarily in medium-sized growth companies. Baron Asset Fund defines a medium-sized growth companyas one having a market capitalization of $1.5 billion to $12 billion.

Equity % ofMarket Cap Net

Company (in millions) Assets



Capitalization above $12 billion

The Priceline Group, Inc. . . . . . . . . . . . . . . . . . . . . . . $63,076 2.8%The Charles Schwab Corp. . . . . . . . . . . . . . . . . . . . . . 35,040 2.7Discovery Communications, Inc. . . . . . . . . . . . . . . . 25,411 1.8Illumina, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,925 3.6T. Rowe Price Group, Inc. . . . . . . . . . . . . . . . . . . . . . . 22,177 1.0Wynn Resorts Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,017 2.8LinkedIn Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,878 1.1Nielsen N.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,343 2.4Cerner Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,711 0.5Concho Resources, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 16,145 1.4Fastenal Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,681 2.1Roper Industries, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 14,570 1.5Ralph Lauren Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,208 1.6Western Gas Equity Partners LP . . . . . . . . . . . . . . . . 13,725 0.4SBA Communications Corp. . . . . . . . . . . . . . . . . . . . 13,177 3.0Tiffany & Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,937 1.6Helmerich & Payne, Inc. . . . . . . . . . . . . . . . . . . . . . . 12,557 1.5

31.8%Capitalization $1.5 billion to $12 billion

CarMax, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,484 1.4%FleetCor Technologies, Inc. . . . . . . . . . . . . . . . . . . . . 10,931 3.0CBRE Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,638 2.5Equinix, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,467 1.2Henry Schein, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,129 1.5Stericycle, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,029 1.1Verisk Analytics, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 9,987 2.9Hyatt Hotels Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,547 2.2Universal Health Services, Inc. . . . . . . . . . . . . . . . . . 9,461 1.3Pall Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,366 1.6Colfax Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,210 2.5Tractor Supply Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,365 1.2

Capitalization $1.5 billion to $12 billion (Continued)

Airgas, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,091 0.7%Westinghouse Air Brake Technologies Corporation 7,966 1.3Arch Capital Group Ltd. . . . . . . . . . . . . . . . . . . . . . . . 7,703 3.0First Republic Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,562 0.9Core Laboratories N.V. . . . . . . . . . . . . . . . . . . . . . . . . 7,497 1.1Mettler-Toledo International, Inc. . . . . . . . . . . . . . . 7,398 2.5Towers Watson & Co. . . . . . . . . . . . . . . . . . . . . . . . . . 7,394 0.9ANSYS, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,026 1.7Quintiles Transnational Holdings, Inc. . . . . . . . . . . . 6,935 0.8IDEXX Laboratories, Inc. . . . . . . . . . . . . . . . . . . . . . . . 6,853 4.0Norwegian Cruise Line Holdings, Ltd. . . . . . . . . . . . 6,506 0.5The Cooper Companies, Inc. . . . . . . . . . . . . . . . . . . . 6,497 1.3Verisign, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,416 1.1Gartner, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,363 4.2Dick’s Sporting Goods, Inc. . . . . . . . . . . . . . . . . . . . . 5,857 1.4Fossil Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,594 0.7Phillips 66 Partners LP . . . . . . . . . . . . . . . . . . . . . . . . 5,589 1.2FactSet Research Systems, Inc. . . . . . . . . . . . . . . . . . 5,093 2.3The Middleby Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,737 1.3Oil States International, Inc. . . . . . . . . . . . . . . . . . . . 3,400 0.3HomeAway, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,256 1.4United Natural Foods, Inc. . . . . . . . . . . . . . . . . . . . . 3,232 0.6Shutterstock, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,921 0.8MRC Global, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,884 1.0Vail Resorts, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,792 2.8Guidewire Software, Inc. . . . . . . . . . . . . . . . . . . . . . . 2,788 1.4Choice Hotels International, Inc. . . . . . . . . . . . . . . . 2,752 1.4DeVry Education Group Inc. . . . . . . . . . . . . . . . . . . . 2,688 0.5Civeo Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,672 0.3Alexander’s, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,887 1.2AO World plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,856 0.5Artisan Partners Asset Management Inc. . . . . . . . . 1,651 0.7

66.2%

Baron Funds

73

Baron Growth Fund

Baron Growth Fund is a diversified fund that invests primarily in small-sized growth companies. Baron Growth Fund defines a small-sized growth companyas one having a market capitalization of under $2.5 billion.






Under Armour, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,691 3.0%Helmerich & Payne, Inc. . . . . . . . . . . . . . . . . . . . . . . 12,557 1.1


Church & Dwight Co., Inc. . . . . . . . . . . . . . . . . . . . . . $9,507 1.3%IHS, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,242 0.6Colfax Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,210 2.1Edwards Lifesciences Corp. . . . . . . . . . . . . . . . . . . . . 9,056 0.4LKQ Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,057 1.3Arch Capital Group Ltd. . . . . . . . . . . . . . . . . . . . . . . . 7,703 2.8Core Laboratories N.V. . . . . . . . . . . . . . . . . . . . . . . . . 7,497 1.2Mettler-Toledo International, Inc. . . . . . . . . . . . . . . 7,398 1.7ANSYS, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,026 1.7IDEXX Laboratories, Inc. . . . . . . . . . . . . . . . . . . . . . . . 6,853 1.4Gartner, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,363 2.4MSC Industrial Direct Co., Inc. . . . . . . . . . . . . . . . . . 5,943 0.6Targa Resources Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 5,884 2.0Dick’s Sporting Goods, Inc. . . . . . . . . . . . . . . . . . . . . 5,857 2.3ITC Holdings Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,750 2.9Oasis Petroleum, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 5,655 0.2SM Energy Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,640 0.4Genesee & Wyoming, Inc. . . . . . . . . . . . . . . . . . . . . . 5,638 2.5Alexandria Real Estate Equities, Inc. . . . . . . . . . . . . 5,563 0.7MSCI, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,351 1.2Concur Technologies, Inc. . . . . . . . . . . . . . . . . . . . . . 5,309 0.9Community Health Systems, Inc. . . . . . . . . . . . . . . . 5,230 1.9FactSet Research Systems, Inc. . . . . . . . . . . . . . . . . . 5,093 2.3CoStar Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,091 1.9MPLX LP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,767 0.1The Middleby Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,737 2.5Eaton Vance Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,562 0.5Copart, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,533 1.5Penske Automotive Group, Inc. . . . . . . . . . . . . . . . . 4,482 0.4Brookdale Senior Living, Inc. . . . . . . . . . . . . . . . . . . . 4,181 0.1Panera Bread Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,115 0.8Valmont Industries, Inc. . . . . . . . . . . . . . . . . . . . . . . . 4,085 0.7Douglas Emmett, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 4,055 1.2American Campus Communities, Inc. . . . . . . . . . . . 4,012 0.3Air Lease Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,932 0.9FEI Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,834 0.7Gaming and Leisure Properties, Inc. . . . . . . . . . . . . 3,809 1.4SS&C Technologies Holdings, Inc. . . . . . . . . . . . . . . 3,756 1.6LaSalle Hotel Properties . . . . . . . . . . . . . . . . . . . . . . 3,672 0.7CARBO Ceramics, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 3,561 0.6TECHNE Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,425 1.0Generac Holdings, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 3,355 1.6United Natural Foods, Inc. . . . . . . . . . . . . . . . . . . . . 3,232 1.8Morningstar, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,212 1.0Booz Allen Hamilton Holding Corp. . . . . . . . . . . . . . 3,193 1.4VCA Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,099 0.1West Pharmaceutical Services, Inc. . . . . . . . . . . . . . 2,981 0.5TreeHouse Foods, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 2,945 1.7Shutterstock, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,921 0.4BRP, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,916 0.1


The Boston Beer Company, Inc. . . . . . . . . . . . . . . . . $2,914 0.5%MAXIMUS, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,912 1.6Landstar System, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 2,877 0.4Manchester United plc . . . . . . . . . . . . . . . . . . . . . . . 2,859 1.1Bright Horizons Family Solutions, Inc. . . . . . . . . . . . 2,819 1.2Vail Resorts, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,792 1.9Guidewire Software, Inc. . . . . . . . . . . . . . . . . . . . . . . 2,788 0.6CFR Pharmaceuticals SA . . . . . . . . . . . . . . . . . . . . . . 2,762 1.6Choice Hotels International, Inc. . . . . . . . . . . . . . . . 2,752 1.7DeVry Education Group Inc. . . . . . . . . . . . . . . . . . . . 2,688 1.0Primerica, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,604 1.6

73.5%Capitalization below $2.5 billion

RSP Permian, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,352 0.5%Financial Engines, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 2,330 1.1Atlas Energy, L.P. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,328 0.8Acadia Pharmaceuticals Inc. . . . . . . . . . . . . . . . . . . . 2,236 0.1The Carlyle Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,177 0.8Oaktree Capital Group, LLC . . . . . . . . . . . . . . . . . . . 2,173 0.7Lumber Liquidators Holdings, Inc. . . . . . . . . . . . . . . 2,083 1.1Marriott Vacations Worldwide Corp. . . . . . . . . . . . . 2,019 1.0DreamWorks Animation SKG, Inc. . . . . . . . . . . . . . . 1,949 0.7Imax Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,946 0.2Cohen & Steers, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,942 1.1The Advisory Board Company . . . . . . . . . . . . . . . . . . 1,898 0.3Alexander’s, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,887 0.6AO World plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,856 0.8Diamond Resorts International, Inc. . . . . . . . . . . . . 1,756 0.1Nord Anglia Education Inc. . . . . . . . . . . . . . . . . . . . . 1,737 0.5CaesarStone Sdot-Yam Ltd. . . . . . . . . . . . . . . . . . . . 1,711 1.0SEACOR Holdings, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 1,696 0.5Advent Software, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 1,676 0.8Masonite International Corp. . . . . . . . . . . . . . . . . . . 1,656 0.8Pegasystems, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,610 0.7Pinnacle Entertainment, Inc. . . . . . . . . . . . . . . . . . . . 1,501 0.9Neogen Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,484 0.2American Assets Trust, Inc. . . . . . . . . . . . . . . . . . . . . 1,449 0.3Castlight Health Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 1,360 0.0The Container Store Group, Inc. . . . . . . . . . . . . . . . . 1,333 0.7Interval Leisure Group, Inc. . . . . . . . . . . . . . . . . . . . . 1,267 0.8Badger Daylighting Ltd. . . . . . . . . . . . . . . . . . . . . . . . 1,220 0.7ClubCorp Holdings, Inc. . . . . . . . . . . . . . . . . . . . . . . . 1,194 0.0Bottomline Technologies (de), Inc. . . . . . . . . . . . . . . 1,178 0.4Benefitfocus, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,160 0.6Noodles & Company . . . . . . . . . . . . . . . . . . . . . . . . . 1,021 0.2Trex Company, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 968 0.6Penn National Gaming, Inc. . . . . . . . . . . . . . . . . . . . 954 0.6Iridium Communications Inc. . . . . . . . . . . . . . . . . . . 787 1.0Foundation Medicine, Inc. . . . . . . . . . . . . . . . . . . . . . 760 0.0IPC The Hospitalist Co., Inc. . . . . . . . . . . . . . . . . . . . 758 0.1Mistras Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 697 0.2Whistler Blackcomb Holdings, Inc. . . . . . . . . . . . . . 632 0.3Agrinos AS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 0.1

21.9%

74

Baron Funds


Baron Small Cap Fund is a diversified fund that invests primarily in small-sized growth companies. Baron Small Cap Fund defines a small-sized growth companyas one having a market capitalization of under $2.5 billion.






Wynn Resorts Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . $21,017 1.1%Liberty Media Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 15,625 1.4SBA Communications Corp. . . . . . . . . . . . . . . . . . . . 13,177 3.6FleetCor Technologies, Inc. . . . . . . . . . . . . . . . . . . . . 10,931 2.2CBRE Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,638 0.8SL Green Realty Corp. . . . . . . . . . . . . . . . . . . . . . . . . 10,530 0.7Equinix, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,467 1.5


TransDigm Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . $8,852 2.8%Core Laboratories N.V. . . . . . . . . . . . . . . . . . . . . . . . . 7,497 1.2Mettler-Toledo International, Inc. . . . . . . . . . . . . . . 7,398 1.1IDEXX Laboratories, Inc. . . . . . . . . . . . . . . . . . . . . . . . 6,853 1.6Gartner, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,363 2.8Waste Connections, Inc. . . . . . . . . . . . . . . . . . . . . . . 6,018 2.1Acuity Brands, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,974 2.0Targa Resources Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 5,884 1.8ITC Holdings Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,750 0.4Oasis Petroleum, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 5,655 0.4Genesee & Wyoming, Inc. . . . . . . . . . . . . . . . . . . . . . 5,638 1.5Fossil Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,594 1.2Phillips 66 Partners LP . . . . . . . . . . . . . . . . . . . . . . . . 5,589 1.0Nordson Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,105 1.0Covance, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,914 0.4The Madison Square Garden Co. . . . . . . . . . . . . . . . 4,800 1.4Graco, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,733 0.5Athlon Energy Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,633 0.3Brookdale Senior Living, Inc. . . . . . . . . . . . . . . . . . . . 4,181 1.7WEX Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,068 1.2Tesoro Logistics LP . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,997 0.5The Ultimate Software Group, Inc. . . . . . . . . . . . . . 3,917 1.7Clean Harbors, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,904 1.3Platform Specialty Products Corp. . . . . . . . . . . . . . . 3,848 1.1FEI Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,834 1.3Gaming and Leisure Properties, Inc. . . . . . . . . . . . . 3,809 1.8LaSalle Hotel Properties . . . . . . . . . . . . . . . . . . . . . . 3,672 0.9CARBO Ceramics, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 3,561 0.5Sarana Menara Nusantara Tbk PT . . . . . . . . . . . . . . 3,421 0.9Forum Energy Technologies, Inc. . . . . . . . . . . . . . . . 3,394 1.0Cepheid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,343 0.6Cognex Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,335 1.2HomeAway, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,256 1.4United Natural Foods, Inc. . . . . . . . . . . . . . . . . . . . . 3,232 1.6Berry Plastics Group, Inc. . . . . . . . . . . . . . . . . . . . . . . 3,031 2.0Abengoa Yield plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,026 0.2DexCom, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,971 0.9Valero Energy Partners LP . . . . . . . . . . . . . . . . . . . . . 2,897 0.6ICON plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,867 1.1Rexnord Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,851 1.2Bright Horizons Family Solutions, Inc. . . . . . . . . . . . 2,819 1.8GrubHub Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,790 0.2Guidewire Software, Inc. . . . . . . . . . . . . . . . . . . . . . . 2,788 1.1

51.3%

Capitalization below $2.5 billion

Knowles Corporation . . . . . . . . . . . . . . . . . . . . . . . . . $2,466 0.2%Financial Engines, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 2,330 1.7The Cheesecake Factory, Inc. . . . . . . . . . . . . . . . . . . 2,319 1.2Bonanza Creek Energy, Inc. . . . . . . . . . . . . . . . . . . . . 2,310 0.6ACI Worldwide, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,117 1.5DigitalGlobe, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,097 1.1Lumber Liquidators Holdings, Inc. . . . . . . . . . . . . . . 2,083 1.3Iconix Brand Group, Inc. . . . . . . . . . . . . . . . . . . . . . . 1,967 1.5On Assignment, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,932 1.1Scorpio Tankers Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,929 0.9The Advisory Board Company . . . . . . . . . . . . . . . . . . 1,898 0.8MWI Veterinary Supply, Inc. . . . . . . . . . . . . . . . . . . . 1,826 0.4Moelis & Company Class A . . . . . . . . . . . . . . . . . . . . 1,821 0.4RealPage, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,771 1.0Susser Holdings Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 1,747 0.8Essent Group Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,738 0.6Nord Anglia Education Inc. . . . . . . . . . . . . . . . . . . . . 1,737 0.8Flotek Industries, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 1,730 0.9Advent Software, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 1,676 1.1Acxiom Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,671 0.7Artisan Partners Asset Management Inc. . . . . . . . . 1,651 0.9Coherent, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,650 0.8Mattress Firm Holding Corp. . . . . . . . . . . . . . . . . . . . 1,629 1.2Emeritus Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,552 0.4Globe Specialty Metals, Inc. . . . . . . . . . . . . . . . . . . . 1,534 1.5Chesapeake Lodging Trust . . . . . . . . . . . . . . . . . . . . . 1,513 0.8Heartware International, Inc. . . . . . . . . . . . . . . . . . . 1,503 0.8SunCoke Energy, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 1,500 0.4Western Refining Logistics, LP . . . . . . . . . . . . . . . . . 1,492 0.6Tumi Holdings, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,366 0.7Vince Holding Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,345 0.2Masimo Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . 1,339 0.2The Container Store Group, Inc. . . . . . . . . . . . . . . . . 1,333 0.9Interface, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,252 0.5comScore, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,230 0.5National CineMedia, Inc. . . . . . . . . . . . . . . . . . . . . . . 1,065 0.5SunCoke Energy Partners, LP . . . . . . . . . . . . . . . . . . . 1,046 0.4Susser Petroleum Partners LP . . . . . . . . . . . . . . . . . . 1,031 0.1BJ’s Restaurants, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 993 0.6Penn National Gaming, Inc. . . . . . . . . . . . . . . . . . . . 954 0.6PBF Logistics LP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 874 0.4SFX Entertainment, Inc. . . . . . . . . . . . . . . . . . . . . . . . 723 0.6Del Frisco’s Restaurant Group, Inc. . . . . . . . . . . . . . 651 1.0Quiksilver, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 612 0.2The Chefs’ Warehouse, Inc. . . . . . . . . . . . . . . . . . . . . 495 0.7The KEYW Holding Corp. . . . . . . . . . . . . . . . . . . . . . . 470 0.4Fairway Group Holdings Corp. . . . . . . . . . . . . . . . . . 289 0.2Rally Software Development Corp. . . . . . . . . . . . . . 271 0.4Vitacost.com, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 0.0Viggle, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 0.0

35.1%

Baron Funds

75


Baron Opportunity Fund is a diversified fund that invests primarily in high-growth mid-sized businesses benefitting from innovation through developmentof pioneering, transformative or technologically advanced products and services. Baron Opportunity Fund invests at least 65% of its assets in equitysecurities of companies with market capitalization between $1 billion and $15 billion at the time of purchase.






Facebook Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $172,690 1.2%The Priceline Group, Inc. . . . . . . . . . . . . . . . . . . . . . . 63,076 1.7Tesla Motors Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,789 1.3Netflix, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,413 1.4Discovery Communications, Inc. . . . . . . . . . . . . . . . 25,411 1.2Twitter, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,270 1.0Illumina, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,925 4.6LinkedIn Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,878 1.0Workday, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,579 1.9Concho Resources, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 16,145 2.0Liberty Media Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 15,625 1.8

19.1%Capitalization $1 billion to $15 billion

SBA Communications Corp. . . . . . . . . . . . . . . . . . . . $13,177 2.9%Under Armour, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,691 1.0CarMax, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,484 2.5Equinix, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,467 2.4Red Hat, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,422 2.9Verisk Analytics, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 9,987 2.6IHS, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,242 1.5ANSYS, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,026 2.0Gartner, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,363 4.2Pandora Media, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 6,061 1.2Oasis Petroleum, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 5,655 1.7Zillow, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,643 1.0Golar LNG Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,606 1.2Fossil Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,594 1.1Liberty Ventures Group . . . . . . . . . . . . . . . . . . . . . . . 5,411 2.1Concur Technologies, Inc. . . . . . . . . . . . . . . . . . . . . . 5,309 1.6CoStar Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,091 1.9Tableau Software, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 4,848 1.0The Middleby Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,737 1.2athenahealth, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,728 1.3Restoration Hardware Holdings, Inc. . . . . . . . . . . . . 3,664 1.5CARBO Ceramics, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 3,561 1.5

Capitalization $1 billion to $15 billion (Continued)

Cepheid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,343 1.3%Pacira Pharmaceuticals, Inc. . . . . . . . . . . . . . . . . . . . 3,275 2.2HomeAway, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,256 1.6Berry Plastics Group, Inc. . . . . . . . . . . . . . . . . . . . . . . 3,031 1.5Shutterstock, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,921 2.9Manchester United plc . . . . . . . . . . . . . . . . . . . . . . . 2,859 1.5Guidewire Software, Inc. . . . . . . . . . . . . . . . . . . . . . . 2,788 3.1Just Eat plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,464 2.1Financial Engines, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 2,330 1.2Medidata Solutions, Inc. . . . . . . . . . . . . . . . . . . . . . . 2,316 1.5DigitalGlobe, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,097 1.5DreamWorks Animation SKG, Inc. . . . . . . . . . . . . . . 1,949 1.7AO World plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,856 1.5Flotek Industries, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 1,730 1.3CaesarStone Sdot-Yam Ltd. . . . . . . . . . . . . . . . . . . . 1,711 1.2Acxiom Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,671 2.1Mellanox Technologies Ltd. . . . . . . . . . . . . . . . . . . . . 1,553 1.1Castlight Health Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 1,360 0.7Masimo Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . 1,339 1.0comScore, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,230 1.9Benefitfocus, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,160 2.9Xoom Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,001 0.6

76.7%Capitalization below $1 billion

Qualys, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $839 1.3%Foundation Medicine, Inc. . . . . . . . . . . . . . . . . . . . . . 760 0.5Marchex, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 509 1.7Agrinos AS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 0.1

3.6%

76

Baron Funds


Baron Fifth Avenue Growth Fund is a diversified fund that invests primarily in large-sized growth companies. Baron Fifth Avenue Growth Fund defines a large-sized growth company as one having a market capitalization of over $10 billion.






Apple, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $560,337 5.0%Google, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 390,929 6.2Facebook Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172,690 5.9Amazon.com, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,453 4.8Visa, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,406 3.7SoftBank Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,241 2.7MasterCard, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,175 3.3Biogen Idec, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,792 2.0Monsanto Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,438 4.6The Priceline Group, Inc. . . . . . . . . . . . . . . . . . . . . . . 63,076 4.2Las Vegas Sands Corp. . . . . . . . . . . . . . . . . . . . . . . . . 61,576 3.3Starbucks Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,252 3.8Costco Wholesale Corp. . . . . . . . . . . . . . . . . . . . . . . . 50,474 1.3VMware, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,678 2.0ASML Holding N.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,675 2.6YUM! Brands, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,840 2.8Alexion Pharmaceuticals, Inc. . . . . . . . . . . . . . . . . . . 30,906 1.1Regeneron Pharmaceuticals, Inc. . . . . . . . . . . . . . . . 28,496 1.4Brookfield Asset Management, Inc. . . . . . . . . . . . . . 27,622 2.7

Capitalization above $10 billion (Continued)

Twitter, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24,270 1.9%CME Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,825 2.8Illumina, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,925 7.3T. Rowe Price Group, Inc. . . . . . . . . . . . . . . . . . . . . . . 22,177 1.7Wynn Resorts Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,017 4.6LinkedIn Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,878 1.0Concho Resources, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 16,145 2.1Liberty Media Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 15,625 2.0Fastenal Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,681 1.9Ralph Lauren Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,208 2.3Equinix, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,467 2.8Red Hat, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,422 2.3

96.1%Capitalization below $10 billion

Verisk Analytics, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . $9,987 1.9%FireEye, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,883 0.1Arista Networks, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 4,016 0.4

2.4%

Equity % ofMarket Cap Total

Company (in millions) Investments




The Charles Schwab Corp. . . . . . . . . . . . . . . . . $35,040 4.5%Tesla Motors Inc. . . . . . . . . . . . . . . . . . . . . . . . 29,789 7.6Discovery Communications, Inc. . . . . . . . . . . 25,411 1.4Illumina, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,925 3.3T. Rowe Price Group, Inc. . . . . . . . . . . . . . . . . . 22,177 1.6Concho Resources, Inc. . . . . . . . . . . . . . . . . . . 16,145 5.4Fastenal Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,681 4.2Helmerich & Payne, Inc. . . . . . . . . . . . . . . . . . 12,557 3.8CarMax, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,484 4.9


Verisk Analytics, Inc. . . . . . . . . . . . . . . . . . . . . . $9,987 4.2%Hyatt Hotels Corp. . . . . . . . . . . . . . . . . . . . . . . 9,547 7.1Edwards Lifesciences Corp. . . . . . . . . . . . . . . . 9,056 1.6


Arch Capital Group Ltd. . . . . . . . . . . . . . . . . . . $7,703 6.6%IDEXX Laboratories, Inc. . . . . . . . . . . . . . . . . . 6,853 3.3Gartner, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,363 2.1Dick’s Sporting Goods, Inc. . . . . . . . . . . . . . . . 5,857 4.6ITC Holdings Corp. . . . . . . . . . . . . . . . . . . . . . . 5,750 7.0FactSet Research Systems, Inc. . . . . . . . . . . . . 5,093 3.9CoStar Group, Inc. . . . . . . . . . . . . . . . . . . . . . . 5,091 4.6The Middleby Corp. . . . . . . . . . . . . . . . . . . . . . 4,737 0.8Air Lease Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 3,932 5.4Gaming and Leisure Properties, Inc. . . . . . . . 3,809 3.3Vail Resorts, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 2,792 3.3


The Carlyle Group . . . . . . . . . . . . . . . . . . . . . . $2,177 3.5%

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

Baron Funds

77


Baron Focused Growth Fund is a non-diversified fund that invests primarily in small- and medium-sized growth companies. Baron Focused Growth Funddefines a small-sized growth company as one having a market capitalization of under $2.5 billion and a medium-sized growth company as one having amarket capitalization of $2.5 billion to $10 billion.






Fastenal Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,681 3.0%Helmerich & Payne, Inc. . . . . . . . . . . . . . . . . . 12,557 4.1CarMax, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,484 4.2Henry Schein, Inc. . . . . . . . . . . . . . . . . . . . . . . 10,129 2.0


Verisk Analytics, Inc. . . . . . . . . . . . . . . . . . . . . . $9,987 2.7%Hyatt Hotels Corp. . . . . . . . . . . . . . . . . . . . . . . 9,547 7.3Church & Dwight Co., Inc. . . . . . . . . . . . . . . . 9,507 1.7Colfax Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,210 7.4Airgas, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,091 1.9Arch Capital Group Ltd. . . . . . . . . . . . . . . . . . . 7,703 2.9Dick’s Sporting Goods, Inc. . . . . . . . . . . . . . . . 5,857 3.5ITC Holdings Corp. . . . . . . . . . . . . . . . . . . . . . . 5,750 4.4Genesee & Wyoming, Inc. . . . . . . . . . . . . . . . . 5,638 5.0Concur Technologies, Inc. . . . . . . . . . . . . . . . . 5,309 2.1


FactSet Research Systems, Inc. . . . . . . . . . . . . $5,093 4.5%CoStar Group, Inc. . . . . . . . . . . . . . . . . . . . . . . 5,091 3.3TreeHouse Foods, Inc. . . . . . . . . . . . . . . . . . . . 2,945 3.2BRP, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,916 2.6Manchester United plc . . . . . . . . . . . . . . . . . . 2,859 4.4Vail Resorts, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 2,792 5.2Guidewire Software, Inc. . . . . . . . . . . . . . . . . . 2,788 2.1Choice Hotels International, Inc. . . . . . . . . . . 2,752 3.5


The Carlyle Group . . . . . . . . . . . . . . . . . . . . . . $2,177 3.4%AO World plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,856 2.3CaesarStone Sdot-Yam Ltd. . . . . . . . . . . . . . . 1,711 2.6Pinnacle Entertainment, Inc. . . . . . . . . . . . . . . 1,501 4.5Benefitfocus, Inc. . . . . . . . . . . . . . . . . . . . . . . . 1,160 2.5Iridium Communications Inc. . . . . . . . . . . . . . 787 3.7

19.0%

78

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 acrossall market capitalizations. The Fund invests principally in companies of developed countries and may invest up to 30% in companies of developing countries.Baron International Growth Fund defines a small-sized growth company as one having a market capitalization of under $2.5 billion and a medium-sizedgrowth company as one having a market capitalization of $2.5 billion to $10 billion.






Tencent Holdings, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . $142,479 1.2%Inditex SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,936 1.1SoftBank Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,241 2.5Suncor Energy Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,595 1.8Compagnie Financière Richemont SA . . . . . . . . . . . 60,250 1.9Deutsche Post AG . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,646 1.8FANUC Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,154 1.9Syngenta AG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,829 1.0Mitsui Fudosan Co. Ltd. . . . . . . . . . . . . . . . . . . . . . . . 33,258 1.5DNB ASA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,794 0.8Bridgestone Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,782 1.2Larsen & Toubro Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . 26,248 1.2Wynn Macau Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,349 1.3Agilent Technologies, Inc. . . . . . . . . . . . . . . . . . . . . . 19,143 2.1Crescent Point Energy Corp. . . . . . . . . . . . . . . . . . . . 18,611 1.6Sumitomo Mitsui Trust Holdings, Inc. . . . . . . . . . . . 18,072 1.0Grifols SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,346 2.4Rakuten, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,331 1.5Experian plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,760 1.0Ryanair Holdings plc . . . . . . . . . . . . . . . . . . . . . . . . . . 15,440 1.3Daiwa Securities Group, Inc. . . . . . . . . . . . . . . . . . . . 15,144 1.0Axis Bank Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,036 1.1Haitong Securities Co., Ltd. . . . . . . . . . . . . . . . . . . . . 14,249 1.0Brambles Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,470 1.3Check Point Software Technologies Ltd. . . . . . . . . . 12,887 2.1Steinhoff International Holdings Ltd. . . . . . . . . . . . 11,838 2.1Yandex N.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,455 1.3


ProSiebenSat.1 Media AG . . . . . . . . . . . . . . . . . . . . . $9,740 1.3%easyJet plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,270 1.0Julius Baer Group Ltd. . . . . . . . . . . . . . . . . . . . . . . . . 9,227 1.3Brenntag AG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,203 1.1Arch Capital Group Ltd. . . . . . . . . . . . . . . . . . . . . . . . 7,703 1.2Intertek Group plc . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,592 1.1Sony Financial Holdings, Inc. . . . . . . . . . . . . . . . . . . 7,536 1.2Kroton Educacional SA . . . . . . . . . . . . . . . . . . . . . . . . 7,535 2.2Core Laboratories N.V. . . . . . . . . . . . . . . . . . . . . . . . . 7,497 0.7Symrise AG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,044 1.9


Lundin Petroleum AB . . . . . . . . . . . . . . . . . . . . . . . . . $6,295 0.7%Fuchs Petrolub SE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,234 0.8Constellation Software, Inc. . . . . . . . . . . . . . . . . . . . 5,401 2.4Croda International PLC . . . . . . . . . . . . . . . . . . . . . . 5,115 1.1Inchcape plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,924 1.2Ingenico SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,687 1.7Eurofins Scientific SE . . . . . . . . . . . . . . . . . . . . . . . . . 4,636 2.6Kakaku.com, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,875 0.7Cetip SA - Mercados Organizados . . . . . . . . . . . . . . 3,717 1.2Anhanguera Educacional Participações SA . . . . . . . 3,640 1.2Sarana Menara Nusantara Tbk PT . . . . . . . . . . . . . . 3,421 0.6PT Matahari Department Store Tbk . . . . . . . . . . . . . 3,397 0.6Sina Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,317 1.0Tower Bersama Infrastructure Tbk PT . . . . . . . . . . . 3,257 1.0Sun TV Network Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . 3,007 0.5Premier Oil plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,990 1.1TOTVS SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,811 1.3Seadrill Partners, LLC . . . . . . . . . . . . . . . . . . . . . . . . . 2,780 1.3Sanrio Co. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,604 0.6Smiles SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,598 2.1


Just Eat plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,464 1.4%21Vianet Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 1,989 0.9Opera Software ASA . . . . . . . . . . . . . . . . . . . . . . . . . . 1,902 1.2AO World plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,856 1.3Domino’s Pizza Enterprises Ltd. . . . . . . . . . . . . . . . . 1,750 1.5GOL Linhas Aéreas Inteligentes SA . . . . . . . . . . . . . 1,554 0.9Mellanox Technologies Ltd. . . . . . . . . . . . . . . . . . . . . 1,553 0.9Domino’s Pizza Group plc . . . . . . . . . . . . . . . . . . . . . 1,484 1.0Perfect World Co., Ltd. Sponsored ADR Class B . . . 972 0.6Kingdee International Software Group Co. Ltd. . . . 840 1.2PATRIZIA Immobilien AG . . . . . . . . . . . . . . . . . . . . . . 836 1.5Hathway Cable & Datacom Ltd . . . . . . . . . . . . . . . . 800 0.5DEN Networks Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . 708 1.2SodaStream International Ltd. . . . . . . . . . . . . . . . . . 696 0.7RIB Software AG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 695 3.0Nomad Holdings Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . 506 1.1Agrinos AS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 0.2

19.1%

Baron Funds

79


Baron Real Estate Fund is a non-diversified fund that invests primarily in equity securities of U.S. and non-U.S. real estate and real estate-related companiesof any size.






Home Depot, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $110,722 3.7%Las Vegas Sands Corp. . . . . . . . . . . . . . . . . . . . . . . . . 61,576 2.9Simon Property Group, Inc. . . . . . . . . . . . . . . . . . . . . 51,656 1.2Lowe’s Companies, Inc. . . . . . . . . . . . . . . . . . . . . . . . 47,861 1.8American Tower Corp. . . . . . . . . . . . . . . . . . . . . . . . . 35,609 1.3Brookfield Asset Management, Inc. . . . . . . . . . . . . . 27,622 1.2Wynn Resorts Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,017 2.9Vornado Realty Trust . . . . . . . . . . . . . . . . . . . . . . . . . 20,002 1.1Starwood Hotels & Resorts Worldwide, Inc. . . . . . 15,517 5.0SBA Communications Corp. . . . . . . . . . . . . . . . . . . . 13,177 1.9CBRE Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,638 3.7SL Green Realty Corp. . . . . . . . . . . . . . . . . . . . . . . . . 10,530 0.7Equinix, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,467 2.0Mohawk Industries, Inc. . . . . . . . . . . . . . . . . . . . . . . . 10,075 2.2


Wyndham Worldwide Corp. . . . . . . . . . . . . . . . . . . . $9,640 3.7%Hyatt Hotels Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,547 3.8Toll Brothers, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,560 0.3Norwegian Cruise Line Holdings, Ltd. . . . . . . . . . . . 6,506 1.6Brookfield Infrastructure Partners L.P. . . . . . . . . . . . 6,264 1.3Howard Hughes Corp. . . . . . . . . . . . . . . . . . . . . . . . . 6,255 1.3ITC Holdings Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,750 1.0Jones Lang LaSalle, Inc. . . . . . . . . . . . . . . . . . . . . . . . 5,633 3.4Alexandria Real Estate Equities, Inc. . . . . . . . . . . . . 5,563 0.8CoStar Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,091 0.2Extended Stay America, Inc. . . . . . . . . . . . . . . . . . . . 4,742 1.3Owens Corning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,555 1.0Brookdale Senior Living, Inc. . . . . . . . . . . . . . . . . . . . 4,181 4.8Douglas Emmett, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 4,055 1.2


American Campus Communities, Inc. . . . . . . . . . . . $4,012 1.0%Forest City Enterprises, Inc. . . . . . . . . . . . . . . . . . . . . 3,981 1.4LaSalle Hotel Properties . . . . . . . . . . . . . . . . . . . . . . 3,672 1.1Sarana Menara Nusantara Tbk PT . . . . . . . . . . . . . . 3,421 1.1Tanger Factory Outlet Centers, Inc. . . . . . . . . . . . . . 3,352 1.1Tower Bersama Infrastructure Tbk PT . . . . . . . . . . . 3,257 1.6Sunstone Hotel Investors, Inc. . . . . . . . . . . . . . . . . . 3,007 1.6Strategic Hotels & Resorts, Inc. . . . . . . . . . . . . . . . . 2,895 1.6


Brookfield Residential Properties Inc. . . . . . . . . . . . $2,464 1.9%Kennedy-Wilson Holdings, Inc. . . . . . . . . . . . . . . . . . 2,459 2.2Golar LNG Partners L.P. . . . . . . . . . . . . . . . . . . . . . . . 2,305 0.7Marriott Vacations Worldwide Corp. . . . . . . . . . . . . 2,019 0.7Kennedy Wilson Europe Real Estate PLC . . . . . . . . 1,885 2.2RealPage, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,771 0.9Diamond Resorts International, Inc. . . . . . . . . . . . . 1,756 2.2Essent Group Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,738 1.5CaesarStone Sdot-Yam Ltd. . . . . . . . . . . . . . . . . . . . 1,711 1.6Emeritus Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,552 4.7Pinnacle Entertainment, Inc. . . . . . . . . . . . . . . . . . . . 1,501 1.7Education Realty Trust, Inc. . . . . . . . . . . . . . . . . . . . . 1,498 0.8Blackstone Mortgage Trust, Inc. . . . . . . . . . . . . . . . . 1,406 1.4CyrusOne Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 963 1.6Builders FirstSource, Inc. . . . . . . . . . . . . . . . . . . . . . . 733 1.1Capital Senior Living Corp. . . . . . . . . . . . . . . . . . . . . 692 3.4

28.6%

80

Baron Funds


Samsung Electronics Co., Ltd. . . . . . . . . . . . . . . . . . . $189,838 1.6%Tencent Holdings, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . 142,479 1.3Taiwan Semiconductor Manufacturing

Company Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,925 1.6Fomento Económico Mexicano, S.A.B. de C.V. . . . . 33,536 1.8MediaTek Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,571 1.7Larsen & Toubro Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . 26,248 1.5KIA Motors Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,436 1.3Bank Rakyat Indonesia (Persero) Tbk PT . . . . . . . . . 21,485 1.2Wynn Macau Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,349 1.1Axis Bank Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,036 1.4Haitong Securities Co., Ltd. . . . . . . . . . . . . . . . . . . . . 14,249 2.0Aspen Pharmacare Holdings Ltd. . . . . . . . . . . . . . . . 12,825 1.6Steinhoff International Holdings Ltd. . . . . . . . . . . . 11,838 2.6Qihoo 360 Technology Co. Ltd. . . . . . . . . . . . . . . . . 11,590 0.5Yandex N.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,455 1.1Bangkok Bank Public Co. Ltd. . . . . . . . . . . . . . . . . . . 11,351 1.0Global Logistic Properties Ltd. . . . . . . . . . . . . . . . . . 10,475 1.2


Ayala Land, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,912 1.0%China Mengniu Dairy Co. Ltd. . . . . . . . . . . . . . . . . . . 9,057 1.3Bidvest Group Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,801 1.2Sociedad Química y Minera de Chile SA . . . . . . . . 7,834 1.2Lupin Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,816 1.3Universal Robina Corp. . . . . . . . . . . . . . . . . . . . . . . . . 7,712 1.4BDO Unibank, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,670 0.6Kroton Educacional SA . . . . . . . . . . . . . . . . . . . . . . . . 7,535 2.1Far EasTone Telecommunications Co., Ltd. . . . . . . . 7,421 1.5Sihuan Pharmaceutical Holdings Group Ltd. . . . . . 6,339 0.7M. Dias Branco SA . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,018 1.6Melco International Development Ltd. . . . . . . . . . . 4,727 0.9Zee Entertainment Enterprises Ltd. . . . . . . . . . . . . . 4,686 1.1Shandong Weigao Group Medical Polymer Co. Ltd. 4,372 0.9Estácio Participações SA . . . . . . . . . . . . . . . . . . . . . . 3,937 0.9Cetip SA - Mercados Organizados . . . . . . . . . . . . . . 3,717 2.0Anhanguera Educacional Participações SA . . . . . . . 3,640 1.2Sarana Menara Nusantara Tbk PT . . . . . . . . . . . . . . 3,421 0.1PT Matahari Department Store Tbk . . . . . . . . . . . . . 3,397 1.2Biostime International Holdings Ltd. . . . . . . . . . . . . 3,350 2.2Sina Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,317 0.9


Tower Bersama Infrastructure Tbk PT . . . . . . . . . . . $3,257 1.9%Divi’s Laboratories Ltd. . . . . . . . . . . . . . . . . . . . . . . . . 3,220 2.0HIWIN Technologies Corp. . . . . . . . . . . . . . . . . . . . . 3,133 1.6Sun TV Network Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . 3,007 1.2Novatek Microelectronics Corp. . . . . . . . . . . . . . . . . 2,996 1.2Metro Pacific Investments Corp. . . . . . . . . . . . . . . . 2,989 1.2TOTVS SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,811 1.2CFR Pharmaceuticals SA . . . . . . . . . . . . . . . . . . . . . . 2,762 1.1Multiplus SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,678 1.5Smiles SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,598 2.6Grand Korea Leisure Co., Ltd. . . . . . . . . . . . . . . . . . . 2,583 1.2


WuXi PharmaTech (Cayman) Inc. . . . . . . . . . . . . . . $2,351 0.7%CJ O Shopping Co. Ltd. . . . . . . . . . . . . . . . . . . . . . . . 2,242 1.4TAL Education Group . . . . . . . . . . . . . . . . . . . . . . . . . 2,147 0.8Africa Oil Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,124 0.4Crompton Greaves Ltd. . . . . . . . . . . . . . . . . . . . . . . . 2,091 1.0Torrent Pharmaceuticals Ltd. . . . . . . . . . . . . . . . . . . 1,998 1.721Vianet Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 1,989 0.8Opera Software ASA . . . . . . . . . . . . . . . . . . . . . . . . . . 1,902 1.2Luk Fook Holdings (International) Ltd. . . . . . . . . . . 1,725 0.8Ginko International Co. LTD . . . . . . . . . . . . . . . . . . . 1,604 1.2GOL Linhas Aéreas Inteligentes SA . . . . . . . . . . . . . 1,554 1.1Man Wah Holdings Ltd. . . . . . . . . . . . . . . . . . . . . . . . 1,519 1.3Hartalega Holdings Bhd . . . . . . . . . . . . . . . . . . . . . . . 1,445 0.2Amara Raja Batteries Ltd. . . . . . . . . . . . . . . . . . . . . . 1,337 1.5Yashili International Holdings Ltd. . . . . . . . . . . . . . . 1,295 0.4Linx SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,092 0.9Dish TV India Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,056 1.0Perfect World Co., Ltd. Sponsored ADR Class B . . . 972 1.0L.P.N. Development PCL . . . . . . . . . . . . . . . . . . . . . . 923 0.8Kingdee International Software Group Co. Ltd. . . . 840 1.0Hathway Cable & Datacom Ltd . . . . . . . . . . . . . . . . 800 0.6DEN Networks Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . 708 1.0WeMade Entertainment Co., Ltd. . . . . . . . . . . . . . . . 643 1.3Lekoil, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 472 0.6PVR Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 458 1.3SHUAA Capital psc . . . . . . . . . . . . . . . . . . . . . . . . . . . 296 0.4Agrinos AS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 0.0

24.4%


Baron Emerging Markets Fund is a diversified fund that invests primarily in non-U.S. companies of all sizes with significant growth potential. The majority ofinvestments are in companies domiciled in developing nations and the Fund may invest up to 20% in companies in developed market countries and inFrontier Countries.





Baron Funds

81


Baron Energy and Resources Fund is a non-diversified fund that invests primarily in equity securities of U.S. and non-U.S. energy and resources companiesand related companies of any size.






EOG Resources, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . $63,865 1.1%Halliburton Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,969 3.5Anadarko Petroleum Corporation . . . . . . . . . . . . . . . 55,288 0.7Freeport-McMoRan Copper & Gold, Inc. . . . . . . . . 37,913 0.6National Oilwell Varco, Inc. . . . . . . . . . . . . . . . . . . . . 35,332 0.8Noble Energy, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,943 1.4Marathon Petroleum Corp. . . . . . . . . . . . . . . . . . . . . 22,534 1.3Antero Resources Corporation . . . . . . . . . . . . . . . . . 17,198 1.5Concho Resources, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 16,145 3.8Cabot Oil & Gas Corp. . . . . . . . . . . . . . . . . . . . . . . . . 14,246 0.9Western Gas Equity Partners LP . . . . . . . . . . . . . . . . 13,725 0.9Helmerich & Payne, Inc. . . . . . . . . . . . . . . . . . . . . . . 12,557 1.5Flowserve Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,211 1.0


Western Gas Partners, LP . . . . . . . . . . . . . . . . . . . . . $9,204 0.9%Cobalt International Energy, Inc. . . . . . . . . . . . . . . . 7,569 0.7Core Laboratories N.V. . . . . . . . . . . . . . . . . . . . . . . . . 7,497 1.7SunEdison, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,053 1.6Targa Resources Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 5,884 1.6Superior Energy Services, Inc. . . . . . . . . . . . . . . . . . . 5,660 2.5Oasis Petroleum, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 5,655 3.2SM Energy Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,640 2.8Golar LNG Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,606 1.8Phillips 66 Partners LP . . . . . . . . . . . . . . . . . . . . . . . . 5,589 1.3Gulfport Energy Corp. . . . . . . . . . . . . . . . . . . . . . . . . 5,365 2.8Athlon Energy Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,633 2.0Tesoro Logistics LP . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,997 1.0Kodiak Oil & Gas Corp. . . . . . . . . . . . . . . . . . . . . . . . 3,878 1.5CARBO Ceramics, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 3,561 2.4Oil States International, Inc. . . . . . . . . . . . . . . . . . . . 3,400 1.2


Forum Energy Technologies, Inc. . . . . . . . . . . . . . . . $3,394 2.6%Abengoa Yield plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,026 0.4Valero Energy Partners LP . . . . . . . . . . . . . . . . . . . . . 2,897 1.2MRC Global, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,884 0.9Parsley Energy, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,836 1.8Seadrill Partners, LLC . . . . . . . . . . . . . . . . . . . . . . . . . 2,780 0.6Civeo Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,672 1.3Chart Industries, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 2,521 1.9


RSP Permian, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,352 2.4%Atlas Energy, L.P. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,328 3.7Bonanza Creek Energy, Inc. . . . . . . . . . . . . . . . . . . . . 2,310 4.0Polypore International, Inc. . . . . . . . . . . . . . . . . . . . . 2,152 0.5Africa Oil Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,124 0.4Scorpio Tankers Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,929 1.5Rose Rock Midstream, L.P. . . . . . . . . . . . . . . . . . . . . . 1,788 3.2Flotek Industries, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 1,730 3.5Tallgrass Energy Partners, LP . . . . . . . . . . . . . . . . . . . 1,586 2.5SunCoke Energy, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 1,500 1.0Western Refining Logistics, LP . . . . . . . . . . . . . . . . . 1,492 2.5Primoris Services Corp. . . . . . . . . . . . . . . . . . . . . . . . . 1,490 1.2Badger Daylighting Ltd. . . . . . . . . . . . . . . . . . . . . . . . 1,220 1.0SunCoke Energy Partners, LP . . . . . . . . . . . . . . . . . . . 1,046 1.0Susser Petroleum Partners LP . . . . . . . . . . . . . . . . . . 1,031 0.4RigNet, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 946 1.2Opower, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 926 0.3PBF Logistics LP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 874 1.6Tesco Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 856 2.1Lekoil, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 472 0.8

34.8%

82

Baron Funds


Baron Global Advantage Fund is a diversified fund that invests mainly in growth companies of all sizes located throughout the world, primarily in establishedand emerging markets companies, with capitalizations within the range of companies included in the MSCI ACWI Growth Index Net.






Google, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $390,929 5.1%Facebook Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172,690 4.4Amazon.com, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,453 3.9SoftBank Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,241 4.3Baidu, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,460 2.7Monsanto Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,438 1.2The Priceline Group, Inc. . . . . . . . . . . . . . . . . . . . . . . 63,076 3.3ASML Holding N.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,675 1.7ICICI Bank Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,843 1.9Brookfield Asset Management, Inc. . . . . . . . . . . . . . 27,622 1.3Illumina, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,925 4.3ARM Holdings plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,232 1.5Grifols SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,346 3.0Yandex N.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,455 1.5


Constellation Software, Inc. . . . . . . . . . . . . . . . . . . . $5,401 2.2%Youku Tudou, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,029 1.3Arista Networks, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 4,016 0.8Cetip SA - Mercados Organizados . . . . . . . . . . . . . . 3,717 3.7Sarana Menara Nusantara Tbk PT . . . . . . . . . . . . . . 3,421 5.3Pacira Pharmaceuticals, Inc. . . . . . . . . . . . . . . . . . . . 3,275 2.6Tower Bersama Infrastructure Tbk PT . . . . . . . . . . . 3,257 3.3Qunar Cayman Islands Ltd. ADR . . . . . . . . . . . . . . . 3,256 1.7Seadrill Partners, LLC . . . . . . . . . . . . . . . . . . . . . . . . . 2,780 1.1Smiles SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,598 3.8

25.8%

Capitalization below $2.5 billion

Just Eat plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,464 3.7%Atlas Energy, L.P. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,328 3.0Medidata Solutions, Inc. . . . . . . . . . . . . . . . . . . . . . . 2,316 2.0Qiwi Plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,186 1.4TAL Education Group . . . . . . . . . . . . . . . . . . . . . . . . . 2,147 3.7Coupons.com Incorporated . . . . . . . . . . . . . . . . . . . . 2,040 1.8AO World plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,856 2.2Just Dial Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,705 1.1Acxiom Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,671 1.9Tallgrass Energy Partners, LP . . . . . . . . . . . . . . . . . . . 1,586 2.2Mellanox Technologies Ltd. . . . . . . . . . . . . . . . . . . . . 1,553 2.7MakeMyTrip Limited . . . . . . . . . . . . . . . . . . . . . . . . . . 1,452 1.3Benefitfocus, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,160 1.9Xoom Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,001 2.3PBF Logistics LP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 874 2.0

33.2%

Baron Funds

83


Baron Discovery Fund invests primarily in equity securities in the form of common stock of small sized growth companies with market capitalizations of lessthan $1.5 billion at the time of purchase selected for their capital appreciation potential.





Capitalization above $1.5 billion

Pacira Pharmaceuticals, Inc. . . . . . . . . . . . . . . . . . . . $3,275 4.6%Strategic Hotels & Resorts, Inc. . . . . . . . . . . . . . . . . 2,895 2.3Parsley Energy, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,836 1.5RSP Permian, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,352 2.7Polypore International, Inc. . . . . . . . . . . . . . . . . . . . . 2,152 1.5Mandarin Oriental Int’l. Ltd. . . . . . . . . . . . . . . . . . . . 1,912 1.3AO World plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,856 1.3Rose Rock Midstream, L.P. . . . . . . . . . . . . . . . . . . . . . 1,788 3.5Power Integrations, Inc. . . . . . . . . . . . . . . . . . . . . . . . 1,750 1.6Flotek Industries, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 1,730 4.6CaesarStone Sdot-Yam Ltd. . . . . . . . . . . . . . . . . . . . 1,711 1.2Envestnet, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,666 1.6Coherent, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,650 1.6Mattress Firm Holding Corp. . . . . . . . . . . . . . . . . . . . 1,629 0.4Churchill Downs Incorporated . . . . . . . . . . . . . . . . . 1,609 1.1Barracuda Networks, Inc. . . . . . . . . . . . . . . . . . . . . . . 1,595 0.6Tallgrass Energy Partners, LP . . . . . . . . . . . . . . . . . . . 1,586 1.8Chesapeake Lodging Trust . . . . . . . . . . . . . . . . . . . . . 1,513 1.4Pinnacle Entertainment, Inc. . . . . . . . . . . . . . . . . . . . 1,501 0.8


Western Refining Logistics, LP . . . . . . . . . . . . . . . . . $1,492 1.4%Ted Baker plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,353 1.3Masimo Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . 1,339 1.0The Container Store Group, Inc. . . . . . . . . . . . . . . . . 1,333 1.5Fiesta Restaurant Group, Inc. . . . . . . . . . . . . . . . . . . 1,243 1.8comScore, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,230 1.4Benefitfocus, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,160 0.6SunCoke Energy Partners, LP . . . . . . . . . . . . . . . . . . . 1,046 1.0

Capitalization below $1.5 billion (Continued)

The Spectranetics Corporation . . . . . . . . . . . . . . . . . $951 3.8%RigNet, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 946 1.9ESCO Technologies, Inc. . . . . . . . . . . . . . . . . . . . . . . . 920 1.5Ascent Capital Group, Inc. . . . . . . . . . . . . . . . . . . . . . 918 2.2Novadaq Technologies Inc. . . . . . . . . . . . . . . . . . . . . 913 0.2PBF Logistics LP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 874 2.0Tesco Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 856 1.6Qualys, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 839 2.6Iridium Communications Inc. . . . . . . . . . . . . . . . . . . 787 1.2Revance Therapeutics, Inc. . . . . . . . . . . . . . . . . . . . . . 770 1.9Foundation Medicine, Inc. . . . . . . . . . . . . . . . . . . . . . 760 2.8eHealth, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 722 2.5Park-Ohio Holdings Corp. . . . . . . . . . . . . . . . . . . . . . 722 1.0Varonis Systems, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 709 1.8Capital Senior Living Corp. . . . . . . . . . . . . . . . . . . . . 692 1.1Zoe’s Kitchen, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663 1.1PDF Solutions, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 648 1.7TherapeuticsMD, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 643 1.8E2open, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601 1.7BioScrip, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 571 3.3Marchex, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 509 1.5The KEYW Holding Corp. . . . . . . . . . . . . . . . . . . . . . . 470 0.9Inogen, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410 2.0Amber Road, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407 2.5Farmer Bros. Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 358 1.3MediWound Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 0.9ARC Group Worldwide, Inc. . . . . . . . . . . . . . . . . . . . . 227 1.0Craft Brew Alliance, Inc. . . . . . . . . . . . . . . . . . . . . . . . 210 0.8

58.6%

Baron Funds

84

Baron Asset Fund — PORTFOLIO HOLDINGS

June 30, 2014 (Unaudited)

Shares Cost Value Shares Cost Value

Common Stocks (97.98%)

Consumer Discretionary (24.60%)Apparel, Accessories &

Luxury Goods (2.25%)175,000 Fossil Group, Inc.1 $ 13,482,048 $ 18,291,000275,000 Ralph Lauren Corp. 4,972,904 44,189,750

18,454,952 62,480,750

Automotive Retail (1.40%)750,000 CarMax, Inc.1 14,772,082 39,007,500

Broadcasting (1.80%)675,000 Discovery Communications,

Inc., Cl A1 16,256,056 50,139,000

Casinos & Gaming (2.80%)375,000 Wynn Resorts Ltd. 0 77,835,000

Education Services (0.49%)325,000 DeVry Education Group, Inc. 546,016 13,760,500

Hotels, Resorts & Cruise Lines (4.15%)

800,000 Choice Hotels International, Inc. 3,577,372 37,688,0001,025,000 Hyatt Hotels Corp., Cl A1 30,808,659 62,504,500

482,471 Norwegian Cruise Line Holdings Ltd.1,2 9,166,949 15,294,331

43,552,980 115,486,831

Internet Retail (4.69%)2,972,068 AO World plc (United Kingdom)1,2 15,444,522 13,097,4711,125,000 HomeAway, Inc.1 30,129,637 39,172,500

65,000 The Priceline Group, Inc. (formerly,priceline.com, Inc.)1 10,503,278 78,195,000

56,077,437 130,464,971

Leisure Facilities (2.78%)1,000,000 Vail Resorts, Inc. 19,491,424 77,180,000

Specialty Stores (4.24%)825,000 Dick’s Sporting Goods, Inc. 25,648,809 38,412,000450,000 Tiffany & Co. 13,967,319 45,112,500570,000 Tractor Supply Co. 18,855,913 34,428,000

58,472,041 117,952,500

Total Consumer Discretionary 227,622,988 684,307,052

Consumer Staples (0.64%)Food Distributors (0.64%)

275,000 United Natural Foods, Inc.1 14,611,786 17,902,500

Energy (6.04%)Oil & Gas Drilling (1.54%)

370,000 Helmerich & Payne, Inc. 10,517,443 42,960,700Oil & Gas Equipment &

Services (1.46%)185,000 Core Laboratories N.V.2 12,671,507 30,906,100150,000 Oil States International, Inc.1 5,850,283 9,613,500

18,521,790 40,519,600

Oil & Gas Exploration & Production (1.42%)

274,500 Concho Resources, Inc.1 12,981,350 39,665,250

Oil & Gas Storage & Transportation (1.62%)

450,000 Phillips 66 Partners LP 12,772,374 34,002,000174,934 Western Gas Equity Partners LP 3,848,548 10,968,362

16,620,922 44,970,362

Total Energy 58,641,505 168,115,912

Common Stocks (continued)

Financials (11.96%)Asset Management & Custody

Banks (1.70%)350,000 Artisan Partners Asset

Management, Inc., Cl A $ 21,700,000 $ 19,838,000325,000 T. Rowe Price Group, Inc. 7,848,785 27,433,250

29,548,785 47,271,250

Investment Banking & Brokerage (2.71%)

2,800,000 The Charles Schwab Corp. 3,023,977 75,404,000

Office REITs (1.19%)89,500 Alexander’s, Inc.4 4,271,765 33,067,565

Property & Casualty Insurance (2.99%)

1,450,000 Arch Capital Group Ltd.1,2 15,819,917 83,288,000

Real Estate Services (2.48%)2,150,000 CBRE Group, Inc., Cl A1 29,247,253 68,886,000

Regional Banks (0.89%)450,000 First Republic Bank 11,878,902 24,745,500

Total Financials 93,790,599 332,662,315

Health Care (15.45%)Health Care Distributors (1.50%)

350,000 Henry Schein, Inc.1 9,382,832 41,534,500

Health Care Equipment (3.96%)825,000 IDEXX Laboratories, Inc.1 33,055,763 110,195,250

Health Care Facilities (1.34%)390,000 Universal Health

Services, Inc., Cl B 24,381,197 37,346,400

Health Care Supplies (1.29%)265,000 The Cooper Companies, Inc. 34,262,522 35,915,450

Health Care Technology (0.49%)265,000 Cerner Corp.1 5,777,893 13,668,700

Life Sciences Tools & Services (6.87%)

560,000 Illumina, Inc.1 24,448,454 99,982,400275,000 Mettler-Toledo International, Inc.1 17,214,470 69,624,500400,000 Quintiles Transnational

Holdings, Inc.1 18,309,703 21,316,000

59,972,627 190,922,900

Total Health Care 166,832,834 429,583,200

Industrials (18.98%)Construction Machinery &

Heavy Trucks (1.26%)425,000 Westinghouse Air Brake

Technologies Corporation 28,502,302 35,100,750

Diversified Support Services (0.27%)

300,000 Civeo Corporation1 4,182,253 7,509,000

Environmental & Facilities Services (1.06%)

250,000 Stericycle, Inc.1 7,016,768 29,605,000

Human Resource & Employment Services (0.94%)

250,000 Towers Watson & Co., Cl A 27,580,032 26,057,500

85

Baron Funds


Industrials (continued)Industrial Conglomerates (1.50%)

285,000 Roper Industries, Inc. $ 24,284,403 $ 41,612,850

Industrial Machinery (5.47%)950,000 Colfax Corp.1 30,771,922 70,813,000450,000 The Middleby Corp.1 23,539,575 37,224,000515,000 Pall Corp. 34,248,477 43,975,850

88,559,974 152,012,850

Research & Consulting Services (5.37%)

1,400,000 Nielsen N.V. (formerly, Nielsen Holdings N.V.)2 34,667,450 67,774,000

1,360,000 Verisk Analytics, Inc., Cl A1 35,122,903 81,627,200

69,790,353 149,401,200

Trading Companies & Distributors (3.11%)

1,175,000 Fastenal Co. 21,409,224 58,150,7501,000,000 MRC Global, Inc.1 23,725,008 28,290,000

45,134,232 86,440,750

Total Industrials 295,050,317 527,739,900

Information Technology (16.59%)Application Software (5.34%)

625,000 ANSYS, Inc.1 17,934,363 47,387,500525,000 FactSet Research Systems, Inc. 28,837,256 63,147,000935,000 Guidewire Software, Inc.1 43,250,976 38,017,100

90,022,595 148,551,600

Data Processing & Outsourced Services (2.96%)

625,000 FleetCor Technologies, Inc.1 22,818,671 82,375,000

Internet Software & Services (2.93%)

175,000 LinkedIn Corp., Cl A1 9,912,287 30,007,250267,500 Shutterstock, Inc.1 17,386,686 22,197,150600,000 Verisign, Inc.1 27,498,020 29,286,000

54,796,993 81,490,400

IT Consulting & Other Services (5.36%)

155,000 Equinix, Inc.1,4 10,768,505 32,563,9501,650,000 Gartner, Inc.1 36,183,876 116,358,000

46,952,381 148,921,950

Total Information Technology 214,590,640 461,338,950


Materials (0.72%)Industrial Gases (0.72%)

185,000 Airgas, Inc. $ 12,122,086 $ 20,148,350

Telecommunication Services (3.00%)Wireless Telecommunication

Services (3.00%)815,000 SBA Communications Corp., Cl A1 24,288,321 83,374,500

TOTAL COMMON STOCKS 1,107,551,076 2,725,172,679

Private Equity Investments (1.48%)


Banks (1.48%)7,056,223 Windy City

Investments Holdings, L.L.C.1,3,4 34,581,904 41,137,778

Principal Amount

Short Term Investments (0.53%)

$14,750,662 Repurchase Agreement with FixedIncome Clearing Corp.,

dated 6/30/2014, 0.00% due 7/1/2014; Proceeds at maturity – $14,750,662; (Fully collateralized by $15,880,000 U.S. Treasury Note, 1.75% due 5/15/2023; Market value – $15,046,300) 14,750,662 14,750,662

TOTAL INVESTMENTS (99.99%) $1,156,883,642 2,781,061,119

CASH AND OTHER ASSETS LESSLIABILITIES (0.01%) 184,481

NET ASSETS $2,781,245,600

RETAIL SHARES (Equivalent to $64.69 per share based on 32,925,955 shares outstanding) $2,129,824,997

INSTITUTIONAL SHARES (Equivalent to $65.78 per share based on 9,903,539 shares outstanding) $ 651,420,603

% Represents percentage of net assets.1 Non-income producing securities.2 Foreign corporation.3 At June 30, 2014, the market value of restricted and fair valued securities

amounted to $41,137,778 or 1.48% 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 or MSCI.

Baron Asset Fund — PORTFOLIO HOLDINGS (Continued)


Shares Cost ValueShares Cost Value

86

Baron Funds

Baron Growth Fund — PORTFOLIO HOLDINGS





Luxury Goods (2.96%)4,150,000 Under Armour, Inc., Cl A1 $ 32,915,217 $ 246,883,500

Automotive Retail (0.45%)750,000 Penske Automotive Group, Inc. 13,032,059 37,125,000

Casinos & Gaming (1.44%)3,870,620 Penn National Gaming, Inc.1 33,038,240 46,989,3272,900,000 Pinnacle Entertainment, Inc.1 47,133,881 73,022,000

80,172,121 120,011,327

Distributors (1.34%)4,175,000 LKQ Corp.1 24,361,393 111,430,750

Education Services (2.65%)2,257,170 Bright Horizons Family

Solutions, Inc.1 74,787,601 96,922,8802,000,000 DeVry Education Group, Inc. 29,820,976 84,680,0002,170,168 Nord Anglia Education, Inc.1,2 41,508,201 39,714,074

146,116,778 221,316,954

Home Improvement Retail (1.08%)

1,180,000 Lumber Liquidators Holdings, Inc.1 27,982,185 89,621,000


3,007,500 Choice Hotels International, Inc.4 73,061,456 141,683,325271,739 Diamond Resorts

International, Inc.1 3,804,346 6,323,3672,875,000 Interval Leisure Group, Inc. 55,667,992 63,077,5001,400,000 Marriott Vacations

Worldwide Corp.1 75,380,480 82,082,000

207,914,274 293,166,192

Internet Retail (0.79%)15,000,000 AO World plc (United Kingdom)1,2 74,208,328 66,102,817

Leisure Facilities (2.21%)140,607 ClubCorp Holdings, Inc. 2,456,520 2,606,854

2,064,800 Vail Resorts, Inc.4 59,870,980 159,361,2641,358,700 Whistler Blackcomb Holdings,

Inc. (Canada)2 15,542,103 22,588,761

77,869,603 184,556,879

Leisure Products (0.09%)300,000 BRP, Inc. (Canada)1,2 6,242,137 7,394,218

Movies & Entertainment (2.02%)2,400,000 DreamWorks Animation

SKG, Inc., Cl A1 66,148,085 55,824,000625,000 Imax Corporation1,2 18,512,773 17,800,000

5,422,299 Manchester United plc, Cl A1,2,6 76,721,822 94,619,118

161,382,680 168,243,118

Publishing (1.01%)1,175,000 Morningstar, Inc. 25,213,451 84,376,750

Restaurants (0.98%)408,000 Noodles & Co.1 13,628,055 14,031,120450,000 Panera Bread Co., Cl A1 15,602,751 67,423,500

29,230,806 81,454,620

Specialty Stores (3.00%)2,138,525 The Container Store Group, Inc.1,6 74,245,699 59,408,2244,100,000 Dick’s Sporting Goods, Inc. 69,383,822 190,896,000

143,629,521 250,304,224

Total Consumer Discretionary 1,050,270,553 1,961,987,349


Consumer Staples (5.32%)Brewers (0.54%)

201,400 The Boston Beer Co., Inc., Cl A1 $ 29,104,380 $ 45,016,928

Food Distributors (1.79%)2,290,237 United Natural Foods, Inc.1 98,857,949 149,094,429

Household Products (1.26%)1,500,000 Church & Dwight Co., Inc. 27,340,827 104,925,000

Packaged Foods & Meats (1.73%)

1,800,000 TreeHouse Foods, Inc.1 85,049,691 144,126,000

Total Consumer Staples 240,352,847 443,162,357


800,000 Helmerich & Payne, Inc. 17,917,319 92,888,000

Oil & Gas Equipment & Services (2.31%)

320,000 CARBO Ceramics, Inc. 20,507,880 49,318,400600,000 Core Laboratories N.V.2 13,859,283 100,236,000525,000 SEACOR Holdings, Inc.1 19,601,963 43,181,250

53,969,126 192,735,650


247,191 Oasis Petroleum, Inc.1 3,460,674 13,815,5051,250,000 RSP Permian, Inc.1 25,520,068 40,550,000

400,000 SM Energy Co. 13,315,693 33,640,000

42,296,435 88,005,505


1,435,350 Atlas Energy, L.P. 62,256,582 64,418,50870,000 MPLX LP 1,540,000 4,515,000

1,200,000 Targa Resources Corp. 36,086,844 167,484,000

99,883,426 236,417,508

Total Energy 214,066,306 610,046,663

Financials (15.08%)Asset Management &

Custody Banks (4.34%)1,994,899 The Carlyle Group 43,767,989 67,746,7702,175,000 Cohen & Steers, Inc. 58,249,032 94,351,5001,200,000 Eaton Vance Corp. 20,685,197 45,348,0002,049,712 Financial Engines, Inc. 56,684,247 92,810,9591,230,195 Oaktree Capital Group, LLC 53,958,848 61,497,448

233,345,313 361,754,677

Diversified REITs (0.29%)712,000 American Assets Trust, Inc. 13,797,057 24,599,600

Hotel & Resort REITs (0.70%)1,650,000 LaSalle Hotel Properties 38,657,293 58,228,500

Life & Health Insurance (1.55%)2,700,000 Primerica, Inc. 65,591,464 129,195,000

Office REITs (1.75%)135,000 Alexander’s, Inc.5 28,435,048 49,878,450

3,400,000 Douglas Emmett, Inc. 44,383,104 95,948,000

72,818,152 145,826,450


4,025,000 Arch Capital Group Ltd.1,2 39,451,760 231,196,000Residential REITs (0.29%)

625,000 American Campus Communities, Inc. 15,945,384 23,900,000


Baron Growth Fund — PORTFOLIO HOLDINGS (Continued)



Financials (continued)Specialized Finance (1.24%)

2,250,000 MSCI, Inc.1 $ 44,874,679 $ 103,162,500

Specialized REITs (2.15%)775,000 Alexandria Real Estate

Equities, Inc.5 29,318,982 60,171,0003,496,074 Gaming and Leisure

Properties, Inc. 89,454,330 118,761,634

118,773,312 178,932,634

Total Financials 643,254,414 1,256,795,361

Health Care (9.35%)Biotechnology (0.14%)

390,000 Acadia Pharmaceuticals, Inc.1 8,958,775 8,810,10098,921 Foundation Medicine, Inc.1 2,532,243 2,666,910

11,491,018 11,477,010

Health Care Equipment (1.85%)400,000 Edwards Lifesciences Corp.1 5,349,910 34,336,000900,000 IDEXX Laboratories, Inc.1 28,558,026 120,213,000

33,907,936 154,549,000

Health Care Facilities (2.10%)275,000 Brookdale Senior Living, Inc.1 5,469,421 9,168,500

3,500,000 Community Health Systems, Inc.1 65,297,992 158,795,000200,000 VCA, Inc. (formerly, VCA

Antech, Inc.)1 3,991,557 7,018,000

74,758,970 174,981,500

Health Care Services (0.08%)150,000 IPC The Hospitalist Co., Inc.1 3,121,418 6,633,000

Health Care Supplies (0.72%)365,038 Neogen Corp.1 8,075,677 14,773,088

1,077,686 West Pharmaceutical Services, Inc. 37,684,652 45,456,795

45,760,329 60,229,883

Health Care Technology (0.18%)828,286 Castlight Health, Inc., Cl A1,3 4,999,998 11,960,450225,000 Castlight Health, Inc., Cl B1 4,309,434 3,420,000

9,309,432 15,380,450


550,000 Mettler-Toledo International, Inc.1 27,486,940 139,249,000880,943 TECHNE Corp. 46,631,249 81,548,894

74,118,189 220,797,894

Pharmaceuticals (1.63%)4,150,000 CFR Pharmaceuticals

SA 144A, ADR2 96,966,145 135,663,500


Industrials (16.11%)Building Products (1.42%)

1,250,000 Masonite International Corp.1,2 69,861,758 70,325,0001,670,000 Trex Co., Inc.1 62,696,594 48,129,400

132,558,352 118,454,400

Construction & Engineering (0.73%)

1,845,000 Badger Daylighting Ltd. (Canada)2 67,574,781 60,776,674

Diversified Support Services (1.51%)

3,500,000 Copart, Inc.1 42,756,022 125,860,000


Industrials (continued)Electrical Components &

Equipment (1.64%)2,800,000 Generac Holdings, Inc.1 $ 9,994,546 $ 136,472,000

Industrial Machinery (5.33%)2,315,480 Colfax Corp.1 53,608,386 172,595,8792,550,000 The Middleby Corp.1 74,456,718 210,936,000

400,000 Valmont Industries, Inc. 32,589,034 60,780,000

160,654,138 444,311,879

Railroads (2.52%)2,000,000 Genesee & Wyoming, Inc., Cl A1 32,221,169 210,000,000


530,000 The Advisory Board Co.1 28,049,691 27,454,000375,000 IHS, Inc., Cl A1 15,320,116 50,876,250600,000 Mistras Group, Inc.1 7,563,468 14,712,000

50,933,275 93,042,250


2,000,000 Air Lease Corp. 47,523,423 77,160,000485,000 MSC Industrial Direct

Co., Inc., Cl A 17,282,737 46,385,400

64,806,160 123,545,400

Trucking (0.36%)475,000 Landstar System, Inc. 11,073,375 30,400,000

Total Industrials 572,571,818 1,342,862,603


2,109,430 Advent Software, Inc. 31,797,327 68,704,1351,850,000 ANSYS, Inc.1 44,326,673 140,267,0001,025,000 Bottomline Technologies (de),

Inc.1 28,295,337 30,668,000825,000 Concur Technologies, Inc.1 18,214,873 77,005,500

1,600,000 FactSet Research Systems, Inc. 80,624,740 192,448,0001,173,796 Guidewire Software, Inc.1 37,834,851 47,726,5452,850,000 Pegasystems, Inc. 43,434,855 60,192,0003,087,713 SS&C Technologies

Holdings, Inc.1 52,369,849 136,538,669

336,898,505 753,549,849

Data Processing & Outsourced Services (1.57%)

3,050,000 MAXIMUS, Inc. 58,567,377 131,211,000

Electronic Equipment & Instruments (0.71%)

650,000 FEI Company 24,367,636 58,974,500


1,166,670 Benefitfocus, Inc.1 53,314,259 53,923,488999,653 CoStar Group, Inc.1 44,116,616 158,115,115357,500 Shutterstock, Inc.1 23,928,368 29,665,350

121,359,243 241,703,953IT Consulting & Other

Services (3.79%)5,500,000 Booz Allen Hamilton

Holding Corp. 74,508,560 116,820,0002,825,000 Gartner, Inc.1 45,240,023 199,219,000

119,748,583 316,039,000

Total Information Technology 660,941,344 1,501,478,302

87

Baron Funds

88

Baron Funds

Baron Growth Fund — PORTFOLIO HOLDINGS (Continued)



Materials (1.06%)Construction Materials (1.01%)

1,725,000 CaesarStone Sdot Yam Ltd.1,2 $ 31,551,799 $ 84,663,000

Fertilizers & Agricultural Chemicals (0.05%)

4,907,918 Agrinos AS (Mexico)1,2,4 18,316,594 4,000,683

Total Materials 49,868,393 88,663,683

Telecommunication Services (0.76%)Alternative Carriers (0.76%)

7,493,437 Iridium Communications Inc.1,4 45,709,971 63,394,477

Utilities (2.94%)Electric Utilities (2.94%)

6,720,000 ITC Holdings Corp. 69,432,900 245,145,600


Preferred Stocks (0.16%)


41,074 Iridium Communications Inc.,Series B, 6.75%4 10,268,500 13,560,171



Custody Banks (0.17%)2,375,173 Windy City Investments

Holdings, L.L.C.1,3,5 8,630,998 13,847,261

Rights (0.00%)

Materials (0.00%)Fertilizers & Agricultural

Chemicals (0.00%)393,349 Agrinos AS (Mexico)

Exp 7/15/20151,2,3,4 0 69,258


Securities Lending Collateral (0.09%)

7,063,875 State Street Navigator Securities Lending Prime Portfolio7 $ 7,063,875 $ 7,063,875


CASH AND OTHER ASSETS LESS LIABILITIES (0.09%) 7,725,683

NET ASSETS $8,335,514,880


INSTITUTIONAL SHARES (Equivalent to $73.74 per share based on 49,779,321 shares outstanding) $3,670,824,022


amounted to $25,876,969 or 0.31% of net assets. None of these securitiesare deemed liquid..

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.

6 The value on loan at June 30, 2014 amounted to $6,692,764 or 0.08% of netassets.

7 Represents investment of cash collateral received from securities lendingtransactions.

ADR American Depositary Receipt.144A Security is exempt from registration pursuant to Rule 144A under the

Securities Act of 1933. This security may be resold in transactions that areexempt from registration, normally to qualified institutional buyers. Thissecurity has been deemed liquid pursuant to policies and proceduresapproved by the Board of Trustees, unless otherwise noted. At June 30, 2014,the market value of Rule 144A securities amounted to $135,663,500 or1.63% of net assets.


8989

Baron Funds


Baron Small Cap Fund — PORTFOLIO HOLDINGS



Consumer Discretionary (19.49%)Advertising (0.54%)

1,750,000 National CineMedia, Inc. $ 25,567,284 $ 30,642,500

Apparel, Accessories & Luxury Goods (3.74%)

650,000 Fossil Group, Inc.1 15,294,653 67,938,0002,000,000 Iconix Brand Group, Inc.1 29,279,689 85,880,0002,500,000 Quiksilver, Inc.1 6,297,743 8,950,0001,900,000 Tumi Holdings, Inc.1 37,991,512 38,247,000

350,000 Vince Holding Corp.1 7,985,127 12,817,000

96,848,724 213,832,000

Broadcasting (1.44%)600,000 Liberty Media Corp., Cl A1 7,138,003 82,008,000

Casinos & Gaming (1.73%)3,000,000 Penn National Gaming, Inc.1 17,926,778 36,420,000

300,000 Wynn Resorts Ltd. 1,271,840 62,268,000

19,198,618 98,688,000

Education Services (2.55%)2,347,847 Bright Horizons Family

Solutions, Inc.1 80,059,683 100,816,5502,451,980 Nord Anglia Education, Inc.1,2 43,015,369 44,871,234

123,075,052 145,687,784

Home Improvement Retail (1.33%)1,000,000 Lumber Liquidators Holdings, Inc.1 29,024,571 75,950,000

Homefurnishing Retail (1.17%)1,400,000 Mattress Firm Holding Corp.1 35,360,733 66,850,000

Internet Retail (1.37%)2,250,000 HomeAway, Inc.1 54,558,103 78,345,000

Movies & Entertainment (1.90%)1,250,000 The Madison Square

Garden Co., Cl A1 31,872,245 78,062,5003,750,000 SFX Entertainment, Inc.1 26,066,093 30,375,000

57,938,338 108,437,500

Restaurants (2.82%)1,000,000 BJ’s Restaurants, Inc.1 36,351,290 34,910,0001,500,000 The Cheesecake Factory, Inc. 34,778,286 69,630,0002,050,000 Del Frisco’s Restaurant

Group, Inc.1,4 42,350,887 56,498,000

113,480,463 161,038,000

Specialty Stores (0.90%)1,850,000 The Container Store Group, Inc.1,6 60,559,626 51,393,000

Total Consumer Discretionary 622,749,515 1,112,871,784

Consumer Staples (3.40%)Food Distributors (2.35%)

2,000,000 The Chefs’Warehouse, Inc.1,4 32,011,792 39,540,0001,450,000 United Natural Foods, Inc.1 62,683,145 94,395,000

94,694,937 133,935,000

Food Retail (1.05%)1,750,000 Fairway Group Holdings Corp.1 30,276,146 11,637,500

600,000 Susser Holdings Corp.1 23,228,015 48,432,000

53,504,161 60,069,500



Energy (9.89%)Oil & Gas Equipment &

Services (2.67%)200,000 CARBO Ceramics, Inc. $ 13,114,503 $ 30,824,000400,000 Core Laboratories N.V.2 15,025,706 66,824,000

1,500,000 Forum Energy Technologies, Inc.1 30,924,862 54,645,000

59,065,071 152,293,000


311,642 Athlon Energy, Inc.1 6,664,254 14,865,324650,000 Bonanza Creek Energy, Inc.1 21,498,889 37,173,500400,000 Oasis Petroleum, Inc.1 5,600,000 22,356,000

33,763,143 74,394,824


750,000 PBF Logistics LP1 19,261,183 20,640,000750,000 Phillips 66 Partners LP 20,967,947 56,670,000

5,000,000 Scorpio Tankers Inc.2 42,287,906 50,850,000164,552 Susser Petroleum Partners LP 3,373,316 7,722,425750,000 Targa Resources Corp. 17,965,719 104,677,500400,000 Tesoro Logistics LP 16,711,104 29,360,000707,200 Valero Energy Partners LP 18,492,945 35,579,232

1,000,000 Western Refining Logistics, LP 23,110,967 32,710,000

162,171,087 338,209,157

Total Energy 254,999,301 564,896,981


Custody Banks (2.57%)875,000 Artisan Partners Asset

Management, Inc., Cl A 36,710,498 49,595,0002,150,000 Financial Engines, Inc. 48,440,910 97,352,000

85,151,408 146,947,000

Hotel & Resort REITs (1.72%)1,500,000 Chesapeake Lodging Trust 25,751,746 45,345,0001,500,000 LaSalle Hotel Properties 34,882,420 52,935,000

60,634,166 98,280,000


700,000 Moelis & Co.1 17,573,577 23,527,000

Office REITs (0.67%)350,000 SL Green Realty Corp. 7,505,834 38,293,500

Real Estate Services (0.84%)1,500,000 CBRE Group, Inc., Cl A1 7,261,912 48,060,000

Specialized REITs (1.79%)3,000,000 Gaming and Leisure Properties, Inc. 60,149,822 101,910,000

Thrifts & Mortgage Finance (0.62%)1,750,000 Essent Group, Ltd.1,2 36,314,929 35,157,500



750,000 Cepheid1 24,504,439 35,955,000

Health Care Distributors (0.38%)152,873 MWI Veterinary Supply, Inc.1 21,471,657 21,706,437

90

Baron Funds

90


Health Care (continued)Health Care Equipment (3.42%)

1,250,000 DexCom, Inc.1 $ 17,100,777 $ 49,575,000500,000 HeartWare International, Inc.1 49,640,437 44,250,000670,922 IDEXX Laboratories, Inc.1 21,699,129 89,615,052500,000 Masimo Corp.1 9,376,530 11,800,000

97,816,873 195,240,052

Health Care Facilities (2.16%)2,985,000 Brookdale Senior Living, Inc.1 53,151,499 99,519,900

750,000 Emeritus Corp.1 19,131,389 23,737,500

72,282,888 123,257,400


300,000 Covance, Inc.1 10,515,514 25,674,0001,350,000 ICON plc1,2 43,388,030 63,598,500

250,000 Mettler-Toledo International, Inc.1 14,245,819 63,295,000

68,149,363 152,567,500


Industrials (16.33%)Aerospace & Defense (4.31%)

2,250,000 DigitalGlobe, Inc.1 66,689,631 62,550,0001,950,000 The KEYW Holding Corp.1,4 20,680,495 24,511,500

950,000 TransDigm Group, Inc.1 854,326 158,897,000

88,224,452 245,958,500

Electrical Components & Equipment (2.00%)

825,000 Acuity Brands, Inc. 44,094,137 114,056,250

Environmental & Facilities Services (3.42%)

1,150,000 Clean Harbors, Inc.1 29,600,019 73,887,5002,500,000 Waste Connections, Inc. 44,418,371 121,375,000

74,018,390 195,262,500

Human Resource & Employment Services (1.12%)

1,801,100 On Assignment, Inc.1 46,118,844 64,065,127

Industrial Machinery (2.76%)350,000 Graco, Inc. 7,828,497 27,328,000750,000 Nordson Corp. 22,985,460 60,142,500

2,500,000 Rexnord Corp.1 47,210,825 70,375,000

78,024,782 157,845,500

Office Services & Supplies (0.48%)

1,451,700 Interface, Inc. 19,551,249 27,350,028

Railroads (1.47%)800,000 Genesee & Wyoming, Inc., Cl A1 21,723,581 84,000,000


850,000 The Advisory Board Co.1 45,821,676 44,030,000



1,500,000 ACI Worldwide, Inc.1 57,419,462 83,745,0002,000,000 Advent Software, Inc. 29,073,517 65,140,0001,500,000 Guidewire Software, Inc.1 40,880,643 60,990,0002,500,000 RealPage, Inc.1 46,393,983 56,200,000

700,000 The Ultimate Software Group, Inc.1 17,611,027 96,719,000

191,378,632 362,794,000


Information Technology (continued)Data Processing & Outsourced

Services (3.39%)950,000 FleetCor Technologies, Inc.1 $ 23,597,570 $ 125,210,000650,000 WEX Inc.1 30,423,456 68,230,500

54,021,026 193,440,500

Electronic Components (0.17%)314,514 Knowles Corp.1 9,226,125 9,668,160

Electronic Equipment & Instruments (3.35%)

1,750,000 Cognex Corp.1 28,532,685 67,200,000708,767 Coherent, Inc.1 34,030,133 46,899,113850,000 FEI Company 33,259,652 77,120,500

95,822,470 191,219,613


850,000 comScore, Inc.1 27,834,214 30,158,000300,000 GrubHub, Inc.1 7,800,000 10,623,000

35,634,214 40,781,000


1,800,000 Acxiom Corp.1 44,648,394 39,042,000400,000 Equinix, Inc.1,5 23,435,720 84,036,000

2,250,000 Gartner, Inc.1 41,942,703 158,670,000

110,026,817 281,748,000

Systems Software (0.44%)2,300,000 Rally Software Development

Corp.1,4 51,687,216 25,047,000

Total Information Technology 547,796,500 1,104,698,273

Materials (6.19%)Diversified Metals &

Mining (1.46%)4,000,000 Globe Specialty Metals, Inc.4 46,608,066 83,120,000

Metal & Glass Containers (2.03%)4,500,000 Berry Plastics Group, Inc.1 75,853,854 116,100,000

Specialty Chemicals (1.97%)1,536,702 Flotek Industries, Inc.1 31,308,937 49,420,3362,250,000 Platform Specialty Products Corp.1 36,798,334 63,067,500

68,107,271 112,487,836

Steel (0.73%)1,000,000 SunCoke Energy, Inc.1 16,688,469 21,500,000

675,000 SunCoke Energy Partners LP 16,008,489 20,385,000

32,696,958 41,885,000

Total Materials 223,266,149 353,592,836


Services (4.46%)148,323,290 Sarana Menara Nusantara

Tbk PT (Indonesia)1,2 30,976,387 49,733,0312,000,000 SBA Communications

Corp., Cl A1 10,934,506 204,600,000

Total Telecommunication Services 41,910,893 254,333,031

Baron Small Cap Fund — PORTFOLIO HOLDINGS (Continued)



9191

Baron Funds

Shares Cost Value

Baron Small Cap Fund — PORTFOLIO HOLDINGS (Continued)




675,000 ITC Holdings Corp. $ 9,427,959 $ 24,624,000

Renewable Electricity (0.24%)363,937 Abengoa Yield plc 1,2 10,554,173 13,764,097

Total Utilities 19,982,132 38,388,097


Warrants (0.00%)

Consumer Discretionary (0.00%)Internet Retail (0.00%)

242,589 Vitacost.com, Inc.Warrants, Exp 2/15/20161,3 30,234 130,998

Total Consumer Discretionary 30,234 130,998

Information Technology (0.00%)Internet Software & Services (0.00%)

25,000 Viggle, Inc. Warrants,Callable Exp 8/22/20141,3 0 0

6,818 Viggle, Inc. Warrants,Non-Callable Exp 4/27/20151,3 0 0

Total Information Technology 0 0

TOTAL WARRANTS 30,234 130,998

Principal Amount


Repurchase Agreement (2.32%)

$132,420,801 Repurchase Agreement with Fixed Income Clearing Corp.,dated 6/30/2014, 0.00% due 7/1/2014; Proceeds at maturity – $132,420,801;(Fully collateralized by $88,335,000 U.S. Treasury Note, 1.75% due 5/15/2023;Market value – $83,697,413 and $50,000,000 U.S. Treasury Note, 2.75% due 11/15/2023;Market value – $51,375,000) 132,420,801 132,420,801

Short Term Investments (continued)


2,311,150 State Street Navigator Securities Lending Prime Portfolio7 $ 2,311,150 $ 2,311,150

Total Short Term Investments 134,731,951 134,731,951


LIABILITIES LESS CASH AND OTHER ASSETS (-0.02%) (1,207,971)

NET ASSETS $5,709,909,774


INSTITUTIONAL SHARES (Equivalent to $35.91 per share based on 56,153,190 shares outstanding) $2,016,291,593


amounted to $130,998 or 0.00% of net assets. None of these securities aredeemed liquid.

4 An “Affiliated” investment may include any company in which the Fund owns 5%or more of its outstanding shares.


6 The value on loan at June 30, 2014 amounted to $2,158,506 or 0.04% of netassets.


Shares Cost Value

Baron Funds

92

Baron Opportunity Fund — PORTFOLIO HOLDINGS





Luxury Goods (2.13%)51,000 Fossil Group, Inc.1 $ 4,117,544 $ 5,330,52085,500 Under Armour, Inc., Cl A1 2,166,660 5,086,395

6,284,204 10,416,915

Automobile Manufacturers (1.28%)26,000 Tesla Motors, Inc.1 4,954,533 6,241,560

Automotive Retail (2.48%)233,370 CarMax, Inc.1 7,159,100 12,137,574

Broadcasting (2.99%)80,500 Discovery Communications, Inc.,

Series C1 2,928,767 5,843,49564,000 Liberty Media Corp., Cl A1 3,835,479 8,747,520

6,764,246 14,591,015

Homefurnishing Retail (1.49%)78,000 Restoration Hardware Holdings, Inc.1 4,697,026 7,257,900


218,222 HomeAway, Inc.1 5,909,118 7,598,490141,500 Liberty Ventures Group, Series A1 8,533,763 10,442,700

16,000 Netflix, Inc.1 4,093,783 7,049,6006,950 The Priceline Group, Inc.

(formerly, priceline.com, Inc.)1 1,120,974 8,360,850

27,948,328 40,877,190

Movies & Entertainment (3.23%)356,000 DreamWorks Animation

SKG, Inc., Cl A1 9,423,381 8,280,560430,240 Manchester United plc, Cl A1,2,5 7,216,953 7,507,688

16,640,334 15,788,248



Services (1.46%)46,168 CARBO Ceramics, Inc. 3,031,381 7,115,412


69,000 Concho Resources, Inc.1 6,757,278 9,970,500146,381 Oasis Petroleum, Inc.1 3,417,167 8,181,234

10,174,445 18,151,734


95,200 Golar LNG Ltd.2 3,246,537 5,721,520

Total Energy 16,452,363 30,988,666


Banks (1.21%)130,500 Financial Engines, Inc. 7,580,804 5,909,040


132,500 Cepheid1 4,496,326 6,352,05083,690 Foundation Medicine, Inc.1 1,981,380 2,256,282

6,477,706 8,608,332

Health Care Equipment (1.02%)211,344 Masimo Corp.1 4,642,523 4,987,718


Health Care (continued)Health Care Technology (3.55%)

50,500 Athenahealth, Inc.1 $ 7,058,358 $ 6,319,065248,486 Castlight Health, Inc., Cl A1,3 1,500,001 3,588,138173,500 Medidata Solutions, Inc.1 9,047,426 7,427,535

17,605,785 17,334,738


125,115 Illumina, Inc.1 5,960,026 22,338,032

Pharmaceuticals (2.19%)116,500 Pacira Pharmaceuticals, Inc.1 7,571,748 10,701,690



268,546 DigitalGlobe, Inc.1 7,695,025 7,465,579

Industrial Machinery (1.17%)69,000 The Middleby Corp.1 3,369,094 5,707,680


53,700 IHS, Inc., Cl A1 5,053,191 7,285,479208,500 Verisk Analytics, Inc., Cl A1 10,452,879 12,514,170

15,506,070 19,799,649



127,150 ANSYS, Inc.1 4,076,156 9,640,51383,000 Concur Technologies, Inc.1 7,540,423 7,747,220

378,500 Guidewire Software, Inc.1 11,655,881 15,389,810102,500 Workday, Inc., Cl A1 9,049,810 9,210,650

32,322,270 41,988,193


309,214 Benefitfocus, Inc.1 15,462,005 14,291,871269,000 comScore, Inc.1 8,621,791 9,544,120

58,000 CoStar Group, Inc.1 2,739,070 9,173,86084,500 Facebook Inc., Cl A1 5,675,096 5,686,005

2,366,182 Just Eat plc (United Kingdom)1,2 10,174,849 10,326,18329,000 LinkedIn Corp., Cl A1 5,372,914 4,972,630

676,408 Marchex, Inc., Cl B 7,049,594 8,130,424201,500 Pandora Media, Inc.1 4,870,305 5,944,250169,492 Shutterstock, Inc.1 7,772,701 14,064,446122,500 Twitter, Inc.1 4,788,050 5,018,825109,000 Xoom Corp.1 2,898,129 2,873,240

36,000 Zillow, Inc., Cl A1 2,390,665 5,145,480

77,815,169 95,171,334

IT Consulting & Other Services (8.61%)462,575 Acxiom Corp.1 8,384,182 10,033,252

55,500 Equinix, Inc.1,4 2,175,892 11,659,995289,144 Gartner, Inc.1 7,006,185 20,390,435

17,566,259 42,083,682

Semiconductors (1.08%)151,500 Mellanox Technologies Ltd.1,2 6,416,650 5,281,290

Systems Software (5.24%)243,500 Qualys, Inc.1 5,099,855 6,250,645259,500 Red Hat, Inc.1 13,428,637 14,342,565

70,000 Tableau Software, Inc., Cl A1 2,170,000 4,993,100

20,698,492 25,586,310


93

Baron Funds



121,569 CaesarStone Sdot-Yam Ltd.1,2 $ 3,583,731 $ 5,966,606

Fertilizers & Agricultural Chemicals (0.15%)

879,340 Agrinos AS (Mexico)1,2 5,398,763 716,793

Metal & Glass Containers (1.48%)280,706 Berry Plastics Group, Inc.1 4,839,531 7,242,215

Specialty Chemicals (1.28%)194,000 Flotek Industries, Inc.1 5,480,353 6,239,040

Total Materials 19,302,378 20,164,654


Services (2.87%)137,000 SBA Communications Corp., Cl A1 1,706,613 14,015,100

TOTAL COMMON STOCKS 343,136,746 485,442,089



310,250 State Street Navigator Securities Lending Prime Portfolio6 $ 310,250 $ 310,250

TOTAL INVESTMENTS (99.47%) $343,446,996 485,752,339

CASH AND OTHER ASSETS LESS LIABILITIES (0.53%) 2,607,149

NET ASSETS $488,359,488

RETAIL SHARES (Equivalent to $19.46 per share based on 19,549,607 shares outstanding) $380,504,937

Institutional Shares (Equivalent to $19.75 per share based on 5,461,640 shares outstanding) $107,854,551




5 The value on loan at June 30, 2014 amounted to $296,650 or 0.06% of netassets.


Baron Opportunity Fund — PORTFOLIO HOLDINGS (Continued)


Shares Cost ValueShares Cost Value

9494

Baron Funds

Baron Partners Fund — PORTFOLIO HOLDINGS



Consumer Discretionary (33.60%)Automobile

Manufacturers (8.82%)675,000 Tesla Motors, Inc.1 $ 139,824,903 $ 162,040,500

Automotive Retail (5.66%)2,000,000 CarMax, Inc.1 69,489,756 104,020,000

Broadcasting (1.62%)400,000 Discovery

Communications, Inc., Cl A1 8,755,655 29,712,000


2,500,000 Hyatt Hotels Corp., Cl A1 67,148,542 152,450,000

Leisure Facilities (3.89%)925,800 Vail Resorts, Inc. 27,801,851 71,453,244

Specialty Stores (5.32%)2,100,000 Dick’s Sporting Goods, Inc. 58,896,964 97,776,000





800,000 Concho Resources, Inc.1 66,533,353 115,600,000

Total Energy 90,638,118 196,877,000


Custody Banks (5.93%)2,200,000 The Carlyle Group 53,572,667 74,712,000

407,200 T. Rowe Price Group, Inc. 33,934,696 34,371,752

87,507,363 109,083,752


3,550,000 The Charles Schwab Corp. 42,624,454 95,601,500


2,450,000 Arch Capital Group Ltd.1,2 33,071,318 140,728,000

Specialized REITs (3.88%)2,097,245 Gaming and Leisure Properties, Inc. 68,376,557 71,243,413


Health Care (9.50%)Health Care Equipment (5.68%)

400,000 Edwards Lifesciences Corp.1 26,838,347 34,336,000525,000 IDEXX Laboratories, Inc.1 45,812,786 70,124,250

72,651,133 104,460,250


393,000 Illumina, Inc.1 21,587,710 70,166,220



Industrials (16.96%)Industrial Machinery (0.91%)

201,687 The Middleby Corp.1 $ 15,562,569 $ 16,683,549


1,500,000 Verisk Analytics, Inc., Cl A1 40,826,579 90,030,000


3,004,866 Air Lease Corp. 101,578,986 115,927,7301,800,000 Fastenal Co. 31,516,561 89,082,000

133,095,547 205,009,730



685,000 FactSet Research Systems, Inc. 39,877,102 82,391,800


617,542 CoStar Group, Inc.1 38,009,600 97,676,618


649,000 Gartner, Inc.1 41,264,138 45,767,480



4,100,000 ITC Holdings Corp. 41,833,832 149,568,000




Custody Banks (2.40%)7,579,130 Windy City Investments

Holdings, L.L.C.1,3,4 41,134,888 44,186,328



NET ASSETS $1,837,669,672





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.


959595

Baron Funds

Baron Fifth Avenue Growth Fund — PORTFOLIO HOLDINGS




Consumer Discretionary (27.80%)Apparel, Accessories & Luxury

Goods (2.26%)14,613 Ralph Lauren Corp. $ 2,327,673 $ 2,348,163

Broadcasting (2.03%)15,441 Liberty Media Corp., Cl A1 842,208 2,110,476

Casinos & Gaming (7.89%)44,622 Las Vegas Sands Corp. 2,451,380 3,401,08923,175 Wynn Resorts Ltd. 2,745,411 4,810,203

5,196,791 8,211,292

Internet Retail (8.98%)15,274 Amazon.com, Inc.1 3,273,879 4,960,689

3,641 The Priceline Group, Inc.(formerly, priceline.com, Inc.)1 2,100,984 4,380,123

5,374,863 9,340,812

Restaurants (6.64%)51,782 Starbucks Corp. 3,152,384 4,006,89135,679 YUM! Brands, Inc. 2,148,807 2,897,135

5,301,191 6,904,026


Consumer Staples (1.29%)Hypermarkets & Super Centers (1.29%)

11,648 Costco Wholesale Corp. 835,362 1,341,384

Energy (2.10%)Oil & Gas Exploration &

Production (2.10%)15,072 Concho Resources, Inc.1 1,595,780 2,177,904

Financials (7.26%)Asset Management & Custody Banks (1.75%)

21,535 T. Rowe Price Group, Inc. 1,657,492 1,817,770

Diversified Real Estate Activities (2.69%)63,653 Brookfield Asset Management, Inc., Cl A2 1,981,357 2,802,005

Specialized Finance (2.82%)41,355 CME Group, Inc. 2,291,930 2,934,137



7,373 Alexion Pharmaceuticals, Inc.1 1,019,688 1,152,0316,454 Biogen Idec, Inc.1 1,936,103 2,035,0115,235 Regeneron Pharmaceuticals, Inc.1 1,551,542 1,478,730

4,507,333 4,665,772

Life Sciences Tools & Services (7.33%)42,692 Illumina, Inc.1 1,663,349 7,622,230


Industrials (3.85%)Research & Consulting Services (1.93%)

33,526 Verisk Analytics, Inc., Cl A1 1,392,842 2,012,231

Trading Companies & Distributors (1.92%)40,286 Fastenal Co. 1,188,272 1,993,754


Information Technology (37.13%)Communications Equipment (0.39%)

6,521 Arista Networks, Inc.1 280,403 406,845


Information Technology (continued)Data Processing & Outsourced

Services (6.97%)46,400 MasterCard, Inc., Cl A $ 1,803,993 $ 3,409,00818,230 Visa, Inc., Cl A 1,816,915 3,841,243

3,620,908 7,250,251

Internet Software & Services (14.98%)91,363 Facebook Inc., Cl A1 2,333,912 6,147,816

5,019 Google, Inc., Cl A1 1,256,798 2,934,4596,118 Google, Inc., Cl C1 1,865,799 3,519,5636,126 LinkedIn Corp., Cl A1 507,226 1,050,425

47,123 Twitter, Inc.1 1,481,695 1,930,630

7,445,430 15,582,893

IT Consulting & Other Services (2.80%)13,883 Equinix, Inc.1,3 1,591,750 2,916,679

Semiconductor Equipment (2.62%)29,187 ASML Holding N.V.2 1,960,743 2,722,272

Systems Software (4.40%)3,460 FireEye, Inc.1 69,200 140,303

42,692 Red Hat, Inc.1 2,166,568 2,359,58721,425 VMware, Inc., Cl A1 2,055,938 2,074,154

4,291,706 4,574,044

Technology Hardware, Storage & Peripherals (4.97%)

55,573 Apple, Inc. 2,186,665 5,164,399


Materials (4.58%)Fertilizers & Agricultural

Chemicals (4.58%)38,220 Monsanto Co. 3,345,354 4,767,563

Telecommunication Services (2.72%)Wireless Telecommunication Services (2.72%)

38,000 SoftBank Corp. (Japan)2 2,955,677 2,829,416


Principal Amount


$1,955,284 Repurchase Agreement with Fixed Income Clearing Corp., dated 6/30/2014,0.00% due 7/1/2014; Proceeds at maturity – $1,955,284; (Fully collateralized by $2,105,000 U.S.Treasury Note, 1.75% due 5/15/2023;Market value – $1,994,488) 1,955,284 1,955,284


LIABILITIES LESS CASH AND OTHER ASSETS (-0.42%) (432,690)

NET ASSETS $104,018,912

RETAIL SHARES (Equivalent to $16.74 per share based on 3,194,132 shares outstanding) $ 53,470,579


% 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 or MSCI.

9696

Baron Funds

Baron Focused Growth Fund — PORTFOLIO HOLDINGS



Consumer Discretionary (37.80%)Automotive Retail (4.18%)

160,000 CarMax, Inc.1 $ 4,693,294 $ 8,321,600

Casinos & Gaming (4.56%)360,509 Pinnacle Entertainment, Inc.1 7,020,464 9,077,617


150,000 Choice Hotels International, Inc. 5,080,139 7,066,500240,000 Hyatt Hotels Corp., Cl A1 7,807,007 14,635,200

12,887,146 21,701,700


Leisure Facilities (5.28%)136,230 Vail Resorts, Inc. 8,272,836 10,514,231

Leisure Products (2.60%)210,000 BRP, Inc. (Canada)1,2 5,303,082 5,175,952

Movies & Entertainment (4.39%)500,000 Manchester United plc, Cl A1,2,3 7,906,006 8,725,000

Specialty Stores (3.57%)152,500 Dick’s Sporting Goods, Inc. 4,219,565 7,100,400


Consumer Staples (4.98%)Household Products (1.76%)

50,000 Church & Dwight Co., Inc. 1,274,171 3,497,500

Packaged Foods & Meats (3.22%)80,000 TreeHouse Foods, Inc.1 5,584,620 6,405,600





Custody Banks (3.41%)200,000 The Carlyle Group 4,721,843 6,792,000


100,000 Arch Capital Group Ltd.1,2 1,800,056 5,744,000


Health Care (2.03%)Health Care Distributors (2.03%)

34,000 Henry Schein, Inc.1 1,353,700 4,034,780

Industrials (18.20%)Industrial Machinery (7.49%)

200,000 Colfax Corp.1 6,735,985 14,908,000

Railroads (5.01%)95,000 Genesee & Wyoming, Inc., Cl A1 3,087,329 9,975,000


90,000 Verisk Analytics, Inc., Cl A1 2,549,137 5,401,800


120,000 Fastenal Co. 3,138,162 5,938,800




45,000 Concur Technologies, Inc.1 $ 3,665,705 $ 4,200,30075,000 FactSet Research Systems, Inc. 5,828,282 9,021,000

101,870 Guidewire Software, Inc.1 4,816,691 4,142,034

14,310,678 17,363,334

Internet Software & Services (5.82%)106,934 Benefitfocus, Inc.1 3,036,812 4,942,490

42,000 CoStar Group, Inc.1 8,501,198 6,643,140

11,538,010 11,585,630



105,000 CaesarStone Sdot-Yam Ltd.1,2 4,611,409 5,153,400

Industrial Gases (1.92%)35,000 Airgas, Inc. 2,176,188 3,811,850

Total Materials 6,787,597 8,965,250


240,000 ITC Holdings Corp. 5,358,002 8,755,200




22,300 Iridium Communications Inc.Series B, 6.75% 5,814,082 7,362,122


Securities Lending Collateral (0.18%)365,000 State Street Navigator Securities Lending

Prime Portfolio4 365,000 365,000



NET ASSETS $198,982,115


INSTITUTIONAL SHARES (Equivalent to $14.43 per share based on 10,453,829 shares outstanding) $150,810,388

% Represents percentage of net assets.1 Non-income producing securities.2 Foreign corporation.3 The value on loan at June 30, 2014 amounted to $349,000 or 0.18% of net

assets.4 Represents investment of cash collateral received from securities lending

transactions.


9797

Baron Funds


Baron International Growth Fund — PORTFOLIO HOLDINGS



Australia (2.75%)105,000 Brambles Ltd. $ 913,020 $ 909,899

50,869 Domino’s Pizza Enterprises Ltd. 371,035 1,029,370

Total Australia 1,284,055 1,939,269

Brazil (8.89%)105,000 Anhanguera Educacional Participações SA 475,502 874,406

59,051 Cetip SA - Mercados Organizados 688,805 840,531120,000 GOL Linhas Aéreas Inteligentes SA, ADR1 693,354 657,600

54,000 Kroton Educacional SA 380,652 1,514,29870,000 Smiles SA 876,903 1,488,39152,000 TOTVS SA 343,786 894,320

Total Brazil 3,459,002 6,269,546

Canada (5.71%)6,600 Constellation Software, Inc. 965,153 1,682,148

25,000 Crescent Point Energy Corp. 1,063,398 1,107,96129,000 Suncor Energy, Inc. 1,048,283 1,236,270

Total Canada 3,076,834 4,026,379

China (5.89%)21,000 21Vianet Group, Inc., ADR1 235,814 629,370

474,971 Haitong Securities Co., Ltd., Cl H 700,465 735,4012,500,000 Kingdee International Software

Group Co. Ltd.1 340,555 819,31320,000 Perfect World Co. Ltd., ADR 428,754 392,60014,000 Sina Corporation1 682,055 696,78057,500 Tencent Holdings Ltd. 101,016 879,148

Total China 2,488,659 4,152,612

France (4.35%)6,000 Eurofins Scientific SE 363,491 1,845,269

14,000 Ingenico SA 224,422 1,218,267

Total France 587,913 3,063,536

Germany (11.46%)4,500 Brenntag AG 692,884 804,121

35,000 Deutsche Post AG 702,081 1,265,71314,000 Fuchs Petrolub SE 567,653 597,63177,660 PATRIZIA Immobilien AG1 445,649 1,031,49720,000 ProSiebenSat.1 Media AG 946,205 891,004

118,000 RIB Software AG 790,885 2,124,74325,000 Symrise AG 313,128 1,362,283

Total Germany 4,458,485 8,076,992

Hong Kong (1.26%)225,400 Wynn Macau Ltd. 296,122 887,012

India (4.60%)25,000 Axis Bank Ltd. 581,281 797,593

210,000 DEN Networks Ltd.1 546,278 834,65872,067 Hathway Cable and Datacom Ltd.1 210,644 379,11730,000 Larsen & Toubro Ltd. 613,894 848,79950,000 Sun TV Network Ltd. 357,194 381,536

Total India 2,309,291 3,241,703

Indonesia (2.14%)350,000 Matahari Department Store Tbk PT 432,994 407,423

1,250,000 Sarana Menara Nusantara Tbk PT1 260,297 419,1271,000,000 Tower Bersama Infrastructure Tbk PT 369,228 679,038

Total Indonesia 1,062,519 1,505,588

Ireland (1.35%)17,000 Ryanair Holdings plc, ADR1 412,174 948,600

Israel (3.70%)22,000 Check Point Software Technologies Ltd.1 1,072,479 1,474,66018,000 Mellanox Technologies Ltd.1 700,701 627,48015,000 SodaStream International Ltd.1 490,415 504,000

Total Israel 2,263,595 2,606,140


Japan (13.25%)25,000 Bridgestone Corp. $ 480,797 $ 874,83485,000 Daiwa Securities Group, Inc. 827,003 735,847

7,800 FANUC Corp. 708,043 1,345,10630,000 Kakaku.com, Inc. 262,395 525,64032,000 Mitsui Fudosan Co. Ltd. 614,419 1,079,03980,000 Rakuten, Inc. 1,090,392 1,033,71015,000 Sanrio Co. Ltd. 481,671 435,76323,500 SoftBank Corp. 794,072 1,749,77050,000 Sony Financial Holdings, Inc. 805,778 852,870

155,000 Sumitomo Mitsui Trust Holdings, Inc. 709,054 708,405

Total Japan 6,773,624 9,340,984

Mexico (0.24%)211,336 Agrinos AS1 957,702 172,270

Norway (3.32%)30,000 DNB ASA 473,763 548,75865,600 Opera Software ASA 421,332 874,83127,624 Seadrill Partners, LLC 607,728 916,012

Total Norway 1,502,823 2,339,601

Russian Federation (1.26%)25,000 Yandex N.V., Cl A1 688,424 891,000

South Africa (2.05%)260,000 Steinhoff International Holdings Ltd. 1,213,107 1,448,519

Spain (3.47%)38,000 Grifols SA, ADR 749,116 1,673,900

5,000 Inditex SA 745,728 769,547

Total Spain 1,494,844 2,443,447

Sweden (0.72%)25,000 Lundin Petroleum AB1 355,350 505,871

Switzerland (4.18%)13,000 Compagnie Financière Richemont SA 240,098 1,364,06222,067 Julius Baer Group Ltd. 562,219 909,753

9,000 Syngenta AG, ADR 408,857 673,200

Total Switzerland 1,211,174 2,947,015

United Kingdom (9.97%)209,738 AO World plc1 995,050 924,285

20,000 Croda International plc 825,408 753,35875,000 Domino’s Pizza Group plc 672,424 672,58030,000 easyJet plc 679,563 700,81840,000 Experian plc 242,809 676,34575,000 Inchcape plc 639,289 814,41316,000 Intertek Group plc 274,140 752,742

220,028 Just Eat plc1 948,611 960,218135,000 Premier Oil plc 660,385 771,439

Total United Kingdom 5,937,679 7,026,198

United States (5.16%)26,000 Agilent Technologies, Inc. 710,610 1,493,44015,000 Arch Capital Group Ltd.1 293,022 861,600

3,000 Core Laboratories N.V. 127,140 501,18075,000 Nomad Holdings Ltd.1 749,250 781,875

Total United States 1,880,022 3,638,095


Warrants (0.05%)

United States (0.05%)75,000 Nomad Holdings Ltd.

Warrants Exp 4/10/20171 750 33,750


$2,832,908 Repurchase Agreement with Fixed Income Clearing Corp.,dated 6/30/2014, 0.00% due 7/1/2014; Proceeds at maturity – $2,832,908;(Fully collateralized by $3,050,000 U.S. Treasury Note, 1.75% due 5/15/2023; Market value – $2,889,875) $ 2,832,908 $ 2,832,908


CASH AND OTHER ASSETS LESS LIABILITIES (0.21%) 146,715

NET ASSETS $70,483,750


INSTITUTIONAL SHARES (Equivalent to $20.10per share based on 2,418,604 shares outstanding) $48,611,047

% Represents percentage of net assets.1 Non-income producing securities.ADR American Depositary Receipt.

Summary of Investments by Sector Percentage of

as of June 30, 2014 Net Assets

Consumer Discretionary 24.9%Information Technology 20.8%Financials 12.9%Industrials 12.6%Energy 7.2%Health Care 7.1%Materials 5.1%Telecommunication Services 4.0%Unclassified 1.2%Cash and Cash Equivalents* 4.2%

100.0%

* Includes short term investments.

Principal Amount Cost Value

Baron International Growth Fund — PORTFOLIO HOLDINGS (Continued)


Baron Funds

98

9999

Baron Funds

Baron Real Estate Fund — PORTFOLIO HOLDINGS



Consumer Discretionary (35.67%)Casinos & Gaming (7.42%)

541,850 Las Vegas Sands Corp. $ 31,290,930 $ 41,299,807961,017 Pinnacle Entertainment, Inc.1 16,290,835 24,198,408198,200 Wynn Resorts Ltd. 25,624,890 41,138,392

73,206,655 106,636,607Home Furnishings (2.18%)

226,520 Mohawk Industries, Inc.1 30,312,517 31,336,777

Home Improvement Retail (5.44%)

653,207 The Home Depot, Inc. 51,825,757 52,883,639529,200 Lowe’s Companies, Inc. 21,535,101 25,396,308

73,360,858 78,279,947Homebuilding (2.28%)

1,349,400 Brookfield Residential Properties, Inc.1,2 28,316,314 28,000,050

130,200 Toll Brothers, Inc.1 4,298,973 4,804,380

32,615,287 32,804,430Hotels, Resorts &

Cruise Lines (18.35%)1,364,999 Diamond Resorts

International, Inc.1 20,718,965 31,763,527818,886 Extended Stay America, Inc. 17,821,804 18,965,400898,900 Hyatt Hotels Corp., Cl A1 38,946,993 54,814,922178,039 Marriott Vacations Worldwide

Corp.1 8,057,025 10,438,426722,400 Norwegian Cruise Line

Holdings Ltd.1,2 20,923,106 22,900,080887,350 Starwood Hotels &

Resorts Worldwide, Inc. 60,366,597 71,715,627704,700 Wyndham Worldwide Corp. 43,793,799 53,359,884

210,628,289 263,957,866


Energy (0.70%)Oil & Gas Storage &

Transportation (0.70%)271,432 Golar LNG Partners L.P.2 8,618,762 10,002,269

Financials (33.46%)Diversified Real Estate

Activities (1.24%)403,900 Brookfield Asset

Management, Inc., Cl A2 14,780,240 17,779,678

Diversified REITs (1.10%)148,600 Vornado Realty Trust 12,733,744 15,860,078

Hotel & Resort REITs (4.22%)433,500 LaSalle Hotel Properties 11,655,547 15,298,215

1,947,450 Strategic Hotels & Resorts, Inc.1 15,864,403 22,804,6401,515,600 Sunstone Hotel Investors, Inc. 18,156,530 22,627,908

45,676,480 60,730,763Mortgage REITs (1.43%)

706,757 Blackstone Mortgage Trust, Inc., Cl A 19,208,904 20,495,953

Office REITs (3.47%)943,386 CyrusOne, Inc. 20,156,937 23,490,311595,886 Douglas Emmett, Inc. 14,022,825 16,815,903

87,100 SL Green Realty Corp. 7,457,121 9,529,611

41,636,883 49,835,825Real Estate Development (1.27%)

115,777 The Howard Hughes Corp.1 14,011,053 18,273,084


Financials (continued)Real Estate Operating

Companies (3.64%)1,000,000 Forest City Enterprises, Inc., Cl A1 $ 18,559,663 $ 19,870,0001,726,114 Kennedy Wilson Europe Real

Estate plc (United Kingdom)1,2,3 29,710,342 32,494,783

48,270,005 52,364,783Real Estate Services (9.37%)

1,679,000 CBRE Group, Inc., Cl A1 38,173,991 53,795,160390,430 Jones Lang LaSalle, Inc. 37,171,257 49,346,448

1,180,700 Kennedy-Wilson Holdings, Inc. 19,285,994 31,666,374

94,631,242 134,807,982Residential REITs (1.75%)

372,434 American Campus Communities, Inc. 13,242,797 14,241,876

1,016,888 Education Realty Trust, Inc. 9,912,699 10,921,377

23,155,496 25,163,253Retail REITs (2.33%)

108,600 Simon Property Group, Inc. 15,831,421 18,058,008442,800 Tanger Factory Outlet Centers, Inc. 14,535,649 15,484,716

30,367,070 33,542,724Specialized REITs (2.13%)

155,550 Alexandria Real Estate Equities, Inc.3 10,306,502 12,076,902

206,396 American Tower Corp. 16,026,272 18,571,512

26,332,774 30,648,414Thrifts & Mortgage

Finance (1.51%)1,083,659 Essent Group, Ltd.1,2 23,040,989 21,770,709


Health Care (12.91%)Health Care Facilities (12.91%)

2,073,000 Brookdale Senior Living, Inc.1 56,069,206 69,113,8202,068,463 Capital Senior Living Corp.1,4 44,782,144 49,312,1582,127,000 Emeritus Corp.1 54,952,603 67,319,550


Industrials (2.04%)Building Products (2.04%)

2,062,300 Builders FirstSource, Inc.1 14,077,133 15,426,004359,759 Owens Corning 13,443,960 13,915,478



569,700 RealPage, Inc.1 11,937,386 12,806,856


16,164 CoStar Group, Inc.1 2,952,063 2,556,660


139,504 Equinix, Inc.1,3 25,790,782 29,308,395



463,700 CaesarStone Sdot-Yam Ltd.1,2 12,140,817 22,758,396




Services (4.62%)49,211,650 Sarana Menara Nusantara

Tbk PT (Indonesia)1,2, $ 12,509,675 $ 16,500,743262,600 SBA Communications

Corp., Cl A1 20,853,350 26,863,98034,047,909 Tower Bersama Infrastructure

Tbk PT (Indonesia)2 17,742,224 23,119,837

Total Telecommunication Services 51,105,249 66,484,560


457,800 Brookfield Infrastructure Partners L.P.2 16,989,780 19,099,416

391,300 ITC Holdings Corp. 11,965,190 14,274,624

Total Utilities 28,954,970 33,374,040


Shares Cost Value


$57,345,407 Repurchase Agreement with Fixed Income Clearing Corp.,dated 6/30/2014, 0.00% due 7/1/2014; Proceeds at maturity – $57,345,407;(Fully collateralized by $61,815,000 U.S. Treasury Note, 1.625% due 11/15/2022;Market value – $58,492,444) $ 57,345,407 $ 57,345,407



NET ASSETS $1,438,288,575



% 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 An “Affiliated” investment may include any company in which the Fund owns5% or more of its outstanding shares.


Baron Real Estate Fund — PORTFOLIO HOLDINGS (Continued)


Baron Funds

100

101101

Baron Funds


Baron Emerging Markets Fund — PORTFOLIO HOLDINGS



Brazil (15.16%)1,384,000 Anhanguera Educacional

Participações SA $ 8,879,903 $ 11,525,5041,421,275 Cetip SA - Mercados Organizados 16,441,842 20,230,413

651,000 Estácio Participações SA 6,178,316 8,618,1262,076,000 GOL Linhas Aéreas Inteligentes SA, ADR111,914,683 11,376,480

746,000 Kroton Educacional SA 13,446,764 20,919,738403,000 Linx SA 8,052,130 9,446,196351,000 M. Dias Branco SA 14,442,364 15,523,747914,000 Multiplus SA 11,789,862 15,094,755

1,213,000 Smiles SA 18,821,095 25,791,690725,000 TOTVS SA 11,398,815 12,468,884

Total Brazil 121,365,774 150,995,533

Canada (0.44%)645,000 Africa Oil Corp.1 5,198,389 4,412,633

Chile (2.32%)34,340,642 CFR Pharmaceuticals SA 7,521,584 11,270,628

2,615 CFR Pharmaceuticals SA 144A, ADR 47,627 85,485402,000 Sociedad Química y

Minera de Chile SA, ADR 11,168,633 11,782,620

Total Chile 18,737,844 23,138,733

China (13.84%)270,900 21Vianet Group, Inc., ADR1 5,181,778 8,118,873

2,906,000 Biostime International Holdings Ltd. 21,592,857 16,122,7812,818,000 China Mengniu Dairy Co. Ltd. 13,292,850 13,016,670

12,861,000 Haitong Securities Co., Ltd., Cl H 20,158,733 19,912,77930,480,000 Kingdee International

Software Group Co. Ltd.1 9,408,671 9,989,058520,000 Perfect World Co. Ltd., ADR 10,678,999 10,207,600

50,000 Qihoo 360 Technology Co. Ltd., ADR1 4,202,245 4,602,0008,759,000 Shandong Weigao Group Medical

Polymer Co. Ltd. 9,845,629 8,532,52111,000,600 Sihuan Pharmaceutical Holdings

Group Ltd. 4,507,007 6,699,374184,400 Sina Corporation1 11,560,460 9,177,588275,000 TAL Education Group, ADR1 7,081,595 7,562,500858,000 Tencent Holdings Ltd. 11,177,543 13,118,420201,500 WuXi PharmaTech (Cayman), Inc., ADR1 6,383,375 6,621,290

11,571,000 Yashili International Holdings Ltd. 5,351,536 4,210,134

Total China 140,423,278 137,891,588

Hong Kong (4.06%)2,698,000 Luk Fook Holdings International Ltd. 9,077,656 7,902,1217,818,000 Man Wah Holdings Ltd. 13,112,537 12,487,9803,097,000 Melco International Development Ltd. 10,131,317 9,390,4192,698,000 Wynn Macau Ltd. 11,145,836 10,617,387

Total Hong Kong 43,467,346 40,397,907

India (16.61%)1,962,000 Amara Raja Batteries Ltd. 12,261,649 15,358,045

446,000 Axis Bank Ltd. 11,524,546 14,229,0652,941,000 Crompton Greaves Ltd. 8,067,247 9,813,9282,390,551 DEN Networks Ltd.1 6,486,058 9,501,392

10,063,000 Dish TV India Ltd.1 9,268,200 9,980,180805,000 Divi’s Laboratories Ltd. 16,870,045 19,529,732

1,154,000 Hathway Cable and Datacom Ltd.1 5,093,897 6,070,756521,000 Larsen & Toubro Ltd. 11,847,413 14,740,805732,664 Lupin Ltd. 12,037,496 12,766,955

1,145,000 PVR Ltd. 10,358,816 12,735,9711,594,000 Sun TV Network Ltd. 10,284,101 12,163,3771,466,371 Torrent Pharmaceuticals Ltd. 13,496,197 17,311,4432,304,000 Zee Entertainment Enterprises Ltd. 9,921,790 11,241,313

Total India 137,517,455 165,442,962

Indonesia (4.43%)13,792,000 Bank Rakyat Indonesia

(Persero) Tbk PT 9,680,342 12,012,01210,401,000 Matahari Department Store Tbk PT 13,229,891 12,107,448

4,131,350 Sarana Menara Nusantara Tbk PT1 1,103,293 1,385,248


Indonesia (continued)27,500,000 Tower Bersama Infrastructure Tbk PT $ 14,605,402 $ 18,673,556

Total Indonesia 38,618,928 44,178,264

Korea, Republic of (6.88%)38,000 CJ O Shopping Co., Ltd. 13,694,046 13,723,266

301,000 Grand Korea Leisure Co., Ltd. 12,690,525 12,375,568236,800 KIA Motors Corp. 12,477,046 13,246,570

12,500 Samsung Electronics Co., Ltd. 16,666,319 16,332,279343,000 WeMade Entertainment Co., Ltd.1 13,056,899 12,831,143

Total Korea, Republic of 68,584,835 68,508,826

Malaysia (0.19%)1,000,300 Hartalega Holdings Bhd 2,102,619 1,934,557

Mexico (1.79%)90,042 Agrinos AS1 344,476 73,398

190,000 Fomento Económico Mexicano S.A.B. de C.V., ADR 17,645,948 17,793,500

Total Mexico 17,990,424 17,866,898

Norway (1.16%)865,000 Opera Software ASA 10,809,174 11,535,496

Philippines (4.12%)14,105,000 Ayala Land, Inc. 9,116,472 9,855,727

2,698,000 BDO Unibank, Inc. 5,604,806 5,779,221100,450,000 Metro Pacific Investments Corp. 10,599,712 11,529,313

3,922,000 Universal Robina Corp. 11,110,488 13,864,023

Total Philippines 36,431,478 41,028,284

Russian Federation (1.07%)300,000 Yandex N.V., Cl A1 10,046,643 10,692,000

Singapore (1.20%)5,500,000 Global Logistic Properties Ltd. 12,236,771 11,909,536

South Africa (5.36%)560,000 Aspen Pharmacare Holdings Ltd. 14,378,245 15,738,448442,000 Bidvest Group Ltd. 12,096,415 11,744,275

4,646,000 Steinhoff International Holdings Ltd. 20,713,125 25,883,921

Total South Africa 47,187,785 53,366,644

Taiwan, Province of China (8.76%)6,371,000 Far EasTone

Telecommunications Co., Ltd. 13,617,082 14,509,612692,000 Ginko International Co., Ltd. 13,318,223 11,982,182

1,256,000 HIWIN Technologies Corp. 11,481,343 15,501,239979,000 MediaTek Inc. 14,790,423 16,558,209

2,511,000 Novatek Microelectronics Corp. 11,133,675 12,362,416767,000 Taiwan Semiconductor

Manufacturing Co. Ltd., ADR 14,242,545 16,406,130

Total Taiwan, Province of China 78,583,291 87,319,788

Thailand (1.77%)1,671,000 Bangkok Bank Public Co., Ltd., NVDR 9,432,162 9,936,928

12,254,000 L.P.N. Development PCL, Cl F 6,479,333 7,664,649

Total Thailand 15,911,495 17,601,577

United Arab Emirates (0.45%)16,062,000 SHUAA Capital psc1 5,404,264 4,460,695

United Kingdom (0.60%)4,625,000 Lekoil Ltd.1 5,426,900 6,015,570



India (0.04%)30,983,400 Zee Entertainment Enterprises Ltd.,

6% due 3/5/2022 367,971 391,510

Convertible Bonds (0.63%)

China (0.63%)$50,000,000 Biostime International Holdings Ltd.,

0.00% due 2/20/20191 $ 6,590,206 $ 6,248,064


112,901,562 Repurchase Agreement with Fixed Income Clearing Corp.,dated 6/30/2014, 0.00% due 7/1/2014; Proceeds at maturity – $112,901,562;(Fully collateralized by $81,170,000 U.S. Treasury Bond, 7.625% due 11/15/2022;Market value – $115,159,938) 112,901,562 112,901,562

TOTAL INVESTMENTS (102.21%) $935,904,432 1,018,238,627


NET ASSETS $ 996,267,921



% Represents percentage of net assets.1 Non-income producing securities.ADR American Depositary Receipt.NVDR Non-Voting Depositary Receipt.144A Security is exempt from registration pursuant to Rule 144A under 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 June 30, 2014, the market value ofRule 144A securities amounted to $85,485 or 0.01% of net assets.



Consumer Discretionary 27.0%Information Technology 17.5%Financials 12.8%Health Care 11.3%Consumer Staples 8.7%Industrials 7.9%Telecommunication Services 3.5%Materials 1.2%Energy 1.0%Cash and Cash Equivalents* 9.1%

100.0%

* Includes short term investments.

Baron Emerging Markets Fund — PORTFOLIO HOLDINGS (Continued)



Baron Funds

102

103103

Baron Funds

Baron Energy and Resources Fund — PORTFOLIO HOLDINGS





8,346 Helmerich & Payne, Inc. $ 608,600 $ 969,05411,567 Seadrill Partners, LLC2 314,470 383,562

923,070 1,352,616

Oil & Gas Equipment & Services (18.11%)10,039 CARBO Ceramics, Inc. 1,035,733 1,547,210

6,450 Core Laboratories N.V.2 985,532 1,077,53747,042 Forum Energy Technologies, Inc.1 1,300,473 1,713,74032,396 Halliburton Co. 1,653,572 2,300,440

5,943 National Oilwell Varco, Inc. 367,682 489,40612,631 Oil States International, Inc.1 688,976 809,52115,090 RigNet, Inc.1 554,019 812,14445,557 Superior Energy Services, Inc. 1,252,654 1,646,43064,800 Tesco Corp.2 1,255,550 1,382,832

9,094,191 11,779,260

Oil & Gas Exploration & Production (31.77%)42,462 Africa Oil Corp. (Canada)1,2 288,924 290,495

4,239 Anadarko Petroleum Corporation 347,084 464,04314,500 Antero Resources Corp.1 751,359 951,63527,876 Athlon Energy, Inc.1 780,356 1,329,68544,948 Bonanza Creek Energy, Inc.1 1,897,987 2,570,57618,000 Cabot Oil & Gas Corp. 626,779 614,52025,295 Cobalt International Energy, Inc.1 538,257 464,16316,999 Concho Resources, Inc.1 1,695,120 2,456,356

6,068 EOG Resources, Inc. 492,744 709,10629,136 Gulfport Energy Corp.1 1,743,749 1,829,74165,302 Kodiak Oil & Gas Corp.1,2 638,948 950,144

375,400 Lekoil Ltd. (United Kingdom)1,2 400,689 488,26911,649 Noble Energy, Inc. 718,226 902,33237,538 Oasis Petroleum, Inc.1 1,593,276 2,097,99948,800 Parsley Energy, Inc., Cl A1 929,029 1,174,61648,500 RSP Permian, Inc.1 1,028,604 1,573,34021,348 SM Energy Co. 1,449,073 1,795,367

15,920,204 20,662,387

Oil & Gas Refining & Marketing (1.33%)11,078 Marathon Petroleum Corp. 928,799 864,859

Oil & Gas Storage & Transportation (24.00%)52,950 Atlas Energy, L.P. 2,412,797 2,376,39618,935 Golar LNG Ltd.2 701,499 1,137,99336,921 PBF Logistics LP1 938,027 1,016,06611,340 Phillips 66 Partners LP 323,570 856,85038,042 Rose Rock Midstream, L.P. 1,545,462 2,078,61599,104 Scorpio Tankers Inc.2 913,315 1,007,888

5,133 Susser Petroleum Partners LP 130,595 240,89242,540 Tallgrass Energy Partners, LP 1,099,619 1,650,552

7,346 Targa Resources Corp. 461,634 1,025,2818,428 Tesoro Logistics LP 413,807 618,615

15,500 Valero Energy Partners LP 364,033 779,8059,176 Western Gas Equity Partners LP 332,717 575,3357,937 Western Gas Partners, LP 459,572 607,022

50,139 Western Refining Logistics, LP 1,330,205 1,640,047

11,426,852 15,611,357

Total Energy 38,293,116 50,270,479

Industrials (7.83%)Construction & Engineering (2.17%)

18,800 Badger Daylighting Ltd. (Canada)2 630,212 619,29627,502 Primoris Services Corp. 631,136 793,158

1,261,348 1,412,454

Diversified Support Services (1.30%)33,862 Civeo Corporation1 697,322 847,566

Electrical Components & Equipment (0.47%)6,363 Polypore International, Inc.1 250,997 303,706


Industrials (continued)Industrial Machinery (2.95%)

15,194 Chart Industries, Inc.1 $ 1,236,428 $ 1,257,1518,900 Flowserve Corp. 641,599 661,715

1,878,027 1,918,866

Trading Companies & Distributors (0.94%)21,600 MRC Global, Inc.1 604,608 611,064


Information Technology (1.90%)Internet Software & Services (0.34%)

11,809 Opower, Inc.1 253,193 222,600

Semiconductor Equipment (1.56%)44,700 SunEdison, Inc.1 897,986 1,010,220


Materials (6.07%)Diversified Metals & Mining (0.63%)

11,237 Freeport-McMoRan Copper & Gold, Inc. 390,365 410,151


Steel (1.97%)20,977 SunCoke Energy Partners LP 482,370 633,50530,217 SunCoke Energy, Inc.1 571,703 649,666

1,054,073 1,283,171


Utilities (0.40%)Renewable Electricity (0.40%)

6,948 Abengoa Yield plc1,2 201,492 262,773


Principal Amount


$3,874,970 Repurchase Agreement with Fixed Income Clearing Corp., dated 6/30/2014, 0.00% due 7/1/2014;Proceeds at maturity – $3,874,970;(Fully collateralized by $4,180,000 U.S. Treasury Note, 1.625% due 11/15/2022; Market value – $3,955,325) 3,874,970 3,874,970



NET ASSETS $65,038,661


INSTITUTIONAL SHARES (Equivalent to $14.42 per share based on 722,586 shares outstanding) $10,417,268

% Represents percentage of net assets.1 Non-income producing securities.2 Foreign corporation.

104104

Baron Funds


Baron Global Advantage Fund — PORTFOLIO HOLDINGS



Brazil (7.46%)18,367 Cetip SA - Mercados Organizados $ 196,454 $ 261,43612,663 Smiles SA 202,747 269,250

Total Brazil 399,201 530,686

Canada (3.44%)2,056 Brookfield Asset Management, Inc., Cl A 67,930 90,505

604 Constellation Software, Inc. 139,461 153,942

Total Canada 207,391 244,447

China (9.35%)1,037 Baidu, Inc., ADR1 143,994 193,7224,150 Qunar Cayman Islands Ltd., ADR1 62,250 118,4829,490 TAL Education Group, ADR1 216,236 260,9753,846 Youku Tudou, Inc., ADR1 92,586 91,766

Total China 515,066 664,945

India (4.31%)2,699 ICICI Bank Limited, ADR 95,316 134,6803,291 Just Dial Ltd.1 49,159 79,9842,625 MakeMyTrip, Ltd.1 52,793 92,216

Total India 197,268 306,880

Indonesia (8.55%)1,116,770 Sarana Menara Nusantara Tbk PT1 321,392 374,454

343,836 Tower Bersama Infrastructure Tbk PT 157,981 233,478

Total Indonesia 479,373 607,932

Israel (2.70%)5,499 Mellanox Technologies Ltd.1 216,341 191,695

Japan (4.35%)4,156 SoftBank Corp. 324,658 309,449

Netherlands (1.72%)1,316 ASML Holding N.V. 91,106 122,554

Norway (1.12%)2,392 Seadrill Partners, LLC 54,857 79,319

Russian Federation (2.83%)2,417 QIWI plc, ADR 83,717 97,4782,921 Yandex N.V., Cl A1 84,280 104,104

Total Russian Federation 167,997 201,582

Spain (2.97%)4,800 Grifols SA, ADR 192,456 211,440

United Kingdom (7.42%)35,617 AO World plc1 178,111 156,959

6,934 ARM Holdings plc 113,571 104,54761,037 Just Eat plc1 263,150 266,370

Total United Kingdom 554,832 527,876


United States (42.91%)6,218 Acxiom Corp.1 $ 128,573 $ 134,868

853 Amazon.com, Inc.1 231,846 277,037968 Arista Networks, Inc.1 41,624 60,394

4,765 Atlas Energy, L.P. 198,828 213,8532,969 Benefitfocus, Inc.1 134,141 137,2275,026 Coupons.com Incorporated1 80,416 132,2344,702 Facebook Inc., Cl A1 126,568 316,398

636 Google, Inc., Cl C1 322,674 365,8781,710 Illumina, Inc.1 74,766 305,3033,304 Medidata Solutions, Inc.1 150,875 141,444

689 Monsanto Co. 56,646 85,9462,020 Pacira Pharmaceuticals, Inc.1 149,936 185,5575,126 PBF Logistics LP1 120,443 141,068

197 The Priceline Group, Inc.(formerly, priceline.com, Inc.)1 167,416 236,991

3,975 Tallgrass Energy Partners, LP 92,964 154,2306,216 Xoom Corporation1 123,464 163,854

Total United States 2,201,180 3,052,282

TOTAL INVESTMENTS (99.13%) $ 5,601,726 7,051,087


NET ASSETS $ 7,112,843

RETAIL SHARES (Equivalent to $14.34 per share based on 223,045 shares outstanding) $ 3,198,864

INSTITUTIONAL SHARES (Equivalent to $14.41 per share based on 271,627 shares outstanding) $ 3,913,979

% Represents percentage of net assets.1 Non-income producing securities.ADR American Depositary Receipt.



Information Technology 36.3%Consumer Discretionary 21.7Telecommunication Services 12.9Health Care 11.9Energy 8.3Financials 6.8Materials 1.2Cash and Cash Equivalents 0.9

100.0%

105

Baron Funds


Baron Discovery Fund — PORTFOLIO HOLDINGS




Luxury Goods (1.33%)15,500 Ted Baker plc

(United Kingdom)2 $ 515,884 $ 480,399

Casinos & Gaming (1.87%)4,500 Churchill Downs, Inc. 397,387 405,495

10,830 Pinnacle Entertainment, Inc.1 269,448 272,699

666,835 678,194

Homefurnishing Retail (0.42%)3,200 Mattress Firm Holding Corp.1 128,546 152,800


250,000 Mandarin Oriental International Ltd. (Singapore)2 454,442 476,250

Internet Retail (1.28%)105,000 AO World plc (United Kingdom)1,2 479,844 462,720

Restaurants (2.93%)14,000 Fiesta Restaurant Group, Inc.1 544,745 649,74012,000 Zoe’s Kitchen, Inc.1 180,000 412,560

724,745 1,062,300

Specialized Consumer Services (2.22%)

12,200 Ascent Capital Group, Inc., Cl A1 926,025 805,322

Specialty Stores (1.46%)19,000 The Container Store Group, Inc.1 603,355 527,820


Consumer Staples (2.02%)Brewers (0.77%)

25,000 Craft Brew Alliance, Inc.1 378,863 276,500

Packaged Foods & Meats (1.25%)

21,000 Farmer Bros Co.1 429,692 453,810

Total Consumer Staples 808,555 730,310


Services (3.45%)12,500 RigNet, Inc.1 561,771 672,75027,000 Tesco Corp.2 513,035 576,180

1,074,806 1,248,930


22,000 Parsley Energy, Inc., Cl A1 410,240 529,54030,000 RSP Permian, Inc.1 750,301 973,200

1,160,541 1,502,740


26,000 PBF Logistics LP1 670,045 715,52023,000 Rose Rock Midstream, L.P. 940,456 1,256,72017,000 Tallgrass Energy Partners, LP 494,038 659,60016,000 Western Refining Logistics, LP 398,577 523,360

2,503,116 3,155,200

Total Energy 4,738,463 5,906,870


Financials (6.22%)Hotel & Resort REITs (3.68%)

17,000 Chesapeake Lodging Trust $ 421,454 $ 513,91070,000 Strategic Hotels & Resorts, Inc.1 706,561 819,700

1,128,015 1,333,610Insurance Brokers (2.54%)

24,200 eHealth, Inc.1 1,082,602 918,874



37,600 Foundation Medicine, Inc.1 971,553 1,013,696

Health Care Equipment (3.26%)32,400 Inogen, Inc.1 526,301 730,94415,760 Masimo Corp.1 425,065 371,936

4,680 Novadaq Technologies, Inc.(Canada)1,2 76,354 77,126

1,027,720 1,180,006

Health Care Facilities (1.12%)17,000 Capital Senior Living Corp.1 404,745 405,280

Health Care Services (3.32%)144,010 BioScrip, Inc.1 1,064,630 1,201,043

Health Care Supplies (3.82%)60,480 The Spectranetics Corp.1 1,509,925 1,383,783

Pharmaceuticals (9.13%)27,300 MediWound Ltd.1,2 380,060 310,67418,000 Pacira Pharmaceuticals, Inc.1 1,114,868 1,653,48020,000 Revance Therapeutics, Inc.1 476,614 680,000

148,900 TherapeuticsMD, Inc.1 810,237 658,138

2,781,779 3,302,292



25,519 The KEYW Holding Corp.1 384,323 320,774

Air Freight & Logistics (0.96%)6,000 Park-Ohio Holdings Corp. 278,999 348,660

Electrical Components & Equipment (1.52%)

11,520 Polypore International, Inc.1 378,279 549,849

Industrial Machinery (2.54%)25,000 ARC Group Worldwide, Inc.1 429,035 380,00015,600 ESCO Technologies, Inc. 548,221 540,384

977,256 920,384


Information Technology (19.24%)Electronic Equipment &

Instruments (1.57%)8,560 Coherent, Inc.1 552,261 566,415


55,200 Amber Road, Inc.1 714,424 890,3764,500 Benefitfocus, Inc.1 146,631 207,990

14,500 comScore, Inc.1 455,084 514,46030,000 E2open, Inc.1 682,996 620,10011,778 Envestnet, Inc.1 454,233 576,18045,000 Marchex, Inc., Cl B 429,286 540,900

2,882,654 3,350,006

106

Baron Funds


Information Technology (continued)Semiconductor

Equipment (1.75%)29,840 PDF Solutions, Inc.1 $ 596,665 $ 633,205

Semiconductors (1.65%)10,400 Power Integrations, Inc. 513,620 598,416

Systems Software (5.01%)7,200 Barracuda Networks, Inc.1 212,297 223,344

36,800 Qualys, Inc.1 863,917 944,65622,300 Varonis Systems, Inc.1 577,307 646,923

1,653,521 1,814,923



9,000 CaesarStone Sdot Yam Ltd.1,2 425,855 441,720


Steel (1.00%)12,000 SunCoke Energy Partners LP 311,048 362,400



50,800 Iridium Communications Inc.1 390,514 429,768



$ 2,475,965 Repurchase Agreement with Fixed Income Clearing Corp.,dated 6/30/2014, 0.00% due 7/1/2014; Proceeds at maturity – $2,475,965;(Fully collateralized by $2,670,000 U.S. Treasury Note, 1.625% due 11/15/2022; Market value – $2,526,488) $ 2,475,965 $ 2,475,965

TOTAL INVESTMENTS (100.86%) $ 33,102,498 36,506,374

LIABILITIES LESS CASH AND OTHER ASSETS (-0.86%) (312,674)

NET ASSETS $ 36,193,700



% Represents percentage of net assets.1 Non-income producing securities.2 Foreign corporation.

Baron Discovery Fund — PORTFOLIO HOLDINGS (Continued)


Shares Cost Value Principal Amount Cost Value

Notes

Notes

Notes

Notes

Notes

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