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September 30, 2016 Baron Asset Fund

Dear Baron Asset Fund Shareholder:


Performance
Equity markets were strong during the quarter ended September 30, 2016.
Baron Asset Fund (the Fund) Retail Shares gained 5.06% and the Institutional
Shares gained 5.15%; the Russell Midcap Growth Index (the Index) gained
4.59%, and the S&P 500 Index gained 3.85%.
As discussed below, the investments that had the most significant positive
impact on performance included businesses in the Consumer Discretionary
sector that rose on both encouraging company-specific earnings, as well as the
markets more optimistic outlook for ongoing strength in consumer spending
patterns on a global basis. Beneficiaries included ski resort owner Vail Resorts,
Inc., online travel agency The Priceline Group, Inc. and jewelry retailer
Tiffany & Co. Rising equity markets and increased speculation that the Federal
Reserve would raise interest rates provided a tailwind for most of the Funds
Financials sector investments. These included brokerage firm The Charles
Schwab Corp., insurer Arch Capital Group Ltd., and MarketAxess Holdings
Inc., an electronic trading platform for fixed-income securities. Several stocks
in the Health Care sector gained on good earnings results, including IDEXX ANDREW PECK Retail Shares: BARAX
Laboratories, Inc., a veterinary diagnostic firm, and Mettler-Toledo Institutional Shares: BARIX
International, Inc., which manufacturers advanced weighing devices. PORTFOLIO MANAGER R6 Shares: BARUX

The worst performers included stocks in the Information Technology (IT)


sector that reported earnings Wall Street perceived to be disappointing. Table II.
These included IT research firm Gartner, Inc. and Guidewire Software, Inc., Top contributors to performance for the quarter ended September 30, 2016
which sells various solutions to the global insurance industry. Retailer Tractor Year Percent
Supply Co. also reported weak earnings, and Verisign, Inc., which operates Acquired Impact
internet domain name registries, fell on fears of adverse regulatory changes. IDEXX Laboratories, Inc. 2006 1.31%
Illumina, Inc. 2012 0.75
Table I. The Charles Schwab Corp. 1992 0.64
Performance FleetCor Technologies, Inc. 2012 0.61
Annualized for periods ended September 30, 2016 Vail Resorts, Inc. 1997 0.58
Baron Baron
Asset Asset Russell
Fund Fund Midcap S&P Shares of veterinary diagnostics leader IDEXX Laboratories, Inc. increased
Retail Institutional Growth 500 after the company reported impressive financial results, which led to a
Shares1,2 Shares1,2,3 Index1 Index1 meaningful expansion in its trading multiple. We believe the companys
Three Months5 5.06% 5.15% 4.59% 3.85% competitive position is strong and improving, as evidenced by its
Nine Months5 6.22% 6.44% 6.84% 7.84% accelerating organic revenue growth, the robust placements of its diagnostic
One Year 11.14% 11.44% 11.24% 15.43% instruments into veterinary clinics, and the higher prices it is capturing
Three Years 8.73% 9.02% 8.90% 11.16% across its product portfolio. In addition, IDEXXs results demonstrated
Five Years 15.30% 15.61% 15.85% 16.37% operating margin expansion, which is finally being recognized after several
Ten Years 7.30% 7.51% 8.51% 7.24% years of intensive investment into its business. Looking forward, we expect
Since Inception to witness sustained double-digit organic revenue growth during the next
(June 12, 1987) 11.07% 11.15% 9.73%4 9.40% several years, driven by productivity benefits from its move to a direct sales

Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares and Institutional Shares as of
September 30, 2015 was 1.31% and 1.04%, 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 investors shares, when redeemed, may be worth more or less than their
original cost. 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.
1 The indexes are unmanaged. The Russell Midcap Growth Index measures the performance of medium-sized U.S. companies that are classified as growth and the S&P 500
Index of 500 widely held large cap U.S. companies. The indexes and the Fund are with dividends, which positively impact the performance results. Russell Investment
Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell is a trademark of Russell Investment Group.
2 The performance data in the table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
3 Performance for the Institutional Shares prior to May 29, 2009 is based on the performance of the Retail Shares, which have a distribution fee. The Institutional Shares do
not have a distribution fee. If the annual returns for the Institutional Shares prior to May 29, 2009 did not reflect this fee, the returns would be higher.
4 For the period June 30,1987 to September 30, 2016.
5 Not annualized.
Baron Asset Fund

model in the U.S., the companys persistent innovation pipeline, and returns Shares of Gartner, Inc., a provider of syndicated information technology
on its intensive investment into international markets. research, fell after reporting results that were challenged by tougher annual
comparisons and slightly more challenging macroeconomic conditions. We
Shares of Illumina, Inc., the leading provider of DNA sequencing technology believe that Gartners key revenue metrics remain solid. The company has
to academic and commercial laboratories, gained after the company significant financial flexibility, and we believe it will aggressively deploy capital
reported financial results that exceeded Wall Streets expectations. The for ongoing share repurchases or accretive acquisitions. We believe that over
results confirmed strong demand both for the companys sequencing time Gartner will demonstrate accelerating revenue growth, faster growth in its
instruments in the Americas and China, as well as for its products in clinical earnings and free cash flow, and persistent returns of capital to shareholders.
applications, such as oncology screening and diagnosis. Management also
demonstrated its ability to rein in expenses, which helped lead to Tractor Supply Co. is a chain of more than 1,500 stores that sell
accelerating EPS growth. We continue to believe Illumina has a long runway equipment, tools, feed, and clothing to a largely rural customer base of
for growth, driven by increasing adoption of DNA sequencing technologies, farmers and ranchers. The companys shares declined after it reported weak
particularly in clinical markets. results, partly influenced by depressed farm incomes due to unusually low
crop prices and some stores exposure to deflated energy-related markets.
Shares of brokerage firm The Charles Schwab Corp. appreciated as rising Although we reduced our position, we believe these factors will prove largely
equity markets led to growth in its client assets and the revenue streams transitory. We believe Tractor Supply offers the potential for ongoing
stemming from those assets. The firm also continued to grow its percentage earnings growth based on its ability to meaningfully expand its store base,
of assets that charge for fee-based advice, a move that we believe creates while also growing its assortment of higher-margin private label goods and
greater revenue visibility and the potential for increased profitability. In increasing its sales mix of consumable goods.
addition, ongoing speculation of an interest rate hike by the U.S. Federal
Reserve was a positive for Schwab, which we believe would experience Shares of internet infrastructure services provider Verisign, Inc. fell over
significant, rapid profit growth should interest rates increase to higher concerns that it might face difficulties extending its contract to administer
historical levels. the .com domain registry with the National Telecommunications and
Information Administration (NTIA) as the result of some U.S. senators
FleetCor Technologies, Inc. issues commercial charge cards that allow the objections. We believe this concern has been overblown and that Verisign
employees of primarily small- and mid-sized businesses to buy fuel and will successfully extend this contract on favorable terms.
maintenance at participating gasoline retailers. Fleetcor also manages
commercial fleet card programs for major oil companies (such as BP, Arco, Shares of Henry Schein, Inc., a global distributor of dental, medical, and
Chevron, and Citgo), which themselves maintain a great many end- animal health products, declined after reporting an unexpected slowdown in
customer relationships. Its shares performed well after the company its North American dental and equipment sales. No specific reasons for the
reported good quarterly results and raised its full-year earnings guidance. slowdown have emerged, and we believe that it is too early to extrapolate a
FleetCor also benefited from its recent acquisition of STP, the leading trend. While performance in other divisions was solid, Scheins earnings
electronic toll company in Brazil. We believe that improved results at its guidance was revised downward for the first time in several years. We are
Comdata division, the likelihood of further acquisitions, rising fuel prices, monitoring events but remain positive given, in our opinion, the companys
and stabilizing foreign exchange rates could lead to an ongoing acceleration strong management, consistent performance, and large market opportunities.
in FleetCors earnings. Shares of health care data and analytics vendor, Inovalon Holdings, Inc.,
Shares of Vail Resorts, Inc., the largest operator of ski resorts, increased detracted from performance, as its financial results fell short of investor
principally on news that Vail had entered into an agreement to acquire expectations and the company reduced its guidance for the remainder of
Whistler Blackcomb, a major Canadian ski resort operator. After this 2016. Management attributed the shortfall to two issues: price reductions in
transaction closes, Vail will own several of the leading ski resorts in North its retrospective risk adjustment unit, and a margin shortfall stemming from
America, including, of course, Vail, Beaver Creek, Park City, and now investments designed to drive long-term growth. We are hopeful that the
Whistler. The acquisition affords Vail not only greater scale to leverage its companys latent earnings power will soon become apparent.
corporate infrastructure, but also the chance to expand its successful Epic
Pass season ticket offering (which allows ticket holders to ski at all of the Portfolio Structure
companys resorts) to a larger group of skiers.
At September 30, 2016, Baron Asset Fund held 55 positions. The Funds 10
largest holdings represented 43.0% of assets, and the 20 largest represented
Table III. 65.9% of assets. The Funds largest weighting was the Health Care sector at
Top detractors from performance for the quarter ended September 30, 2016 25.3% of assets. This sector includes life sciences companies, health care
Year Percent equipment and supplies companies, and health care technology companies. The
Acquired Impact
Fund held 22.8% of its assets in the Information Technology sector, which
Gartner, Inc. 2007 -0.54% includes investments in software companies, IT consulting firms, and data
Tractor Supply Co. 2011 -0.33 processing firms. The Fund held 16.7% of its assets in the Financials sector,
Verisign, Inc. 2013 -0.21 which includes investments in insurance companies, investment brokers and
Henry Schein, Inc. 2003 -0.19 financial exchanges. The Fund also had significant weightings in Industrials at
Inovalon Holdings, Inc. 2015 -0.16 14.1% of assets and Consumer Discretionary at 11.7% of assets.
September 30, 2016 Baron Asset Fund

Table IV. modest single-digit organic revenue growth, and believe it can supplement
Top 10 holdings as of September 30, 2016 that growth with acquisitions. Industry price increases are estimated to be
1.5% to 2% per year, largely driven by the price insensitivity of customers.
Market Quarter Commercial pest control volumes are likely to benefit from increasing
Cap End
When Market Percent regulation, with the Food Safety Modernization Act providing increased
Year Acquired Cap Amount of Net business opportunities in food and beverage segments. In addition, Rollins
Acquired (billions) (billions) (millions) Assets scale and financial resources should enable it to gain share by utilizing its
IDEXX Laboratories, Inc. 2006 $2.5 $10.1 $188.3 7.4% brand building initiatives, internet search engine optimization capabilities,
Gartner, Inc. 2007 2.9 7.3 137.1 5.4 and BOSS, the companys new customer and workforce management
Vail Resorts, Inc. 1997 0.2 5.7 123.2 4.9 software platform. Furthermore, Rollins has expanded its product offerings
Verisk Analytics, Inc. 2009 4.0 13.7 105.7 4.2 into the wildlife, bed bug, and mosquito control segments. While smaller than
Mettler-Toledo the core business, we believe these markets represent high growth
International, Inc. 2008 2.4 11.1 105.0 4.1 opportunities that can drive overall company growth as penetration
Arch Capital Group Ltd. 2003 0.9 9.7 101.1 4.0 increases. Moreover, Rollins can grow through international expansion, since
FleetCor Technologies, Inc. 2012 2.9 16.1 86.9 3.4 international markets represented only 7% of 2015 revenue. Beyond organic
Illumina, Inc. 2012 5.3 26.6 83.0 3.3 growth, the company can leverage M&A to drive low-single digit incremental
The Charles Schwab Corp. 1992 1.0 41.8 80.5 3.2 revenue growth. Rollins adjusted EBITDA margins are currently ~20%, but
FactSet Research we believe that Rollins has the chance to grow EBITDA margins into the mid-
Systems, Inc. 2006 2.5 6.6 79.4 3.1 20% range, through natural operating leverage, tight sales, general and
administrative expense control, and the positive impact stemming from the
new BOSS workforce management system.
Recent Activity
The management team has impressive experience both at the company and
During the past quarter, the Fund established two new positions and added
in the pest and termite control business more generally. Moreover, the
to one other. The Fund also sold two positions and reduced its holdings of
Rollins family has run the company for more than 50 years and still
15 others.
maintains greater than 50% ownership. We view the Rollins family
ownership as an opportunity to invest alongside a controlling shareholder
Table V. whose interests are aligned with ours.
Top net purchases for the quarter ended September 30, 2016
Quarter End Amount
Market Cap Purchased Table VI.
(billions) (millions) Top net sales for the quarter ended September 30, 2016
Expedia, Inc. $17.5 $15.6 Amount
Rollins, Inc. 6.4 15.5 Sold
(millions)
Vantiv, Inc. 10.8 2.1
Inovalon Holdings, Inc. $20.3
Rollins, Inc. is a leading provider of pest and termite control services for Tractor Supply Co. 11.7
more than two million residential and commercial customers, primarily SS&C Technologies Holdings, Inc. 10.1
located in North America. We believe that Rollins operates in an industry Norwegian Cruise Line Holdings, Ltd. 9.5
with high barriers to entry and a fragmented competitive landscape, and we Willis Towers Watson Public Limited Company 7.3
believe Rollins should be able to consistently increase its market share over
time. In North America, Rollins is the number one player in commercial and We reduced our position in health care data and analytics vendor Inovalon
residential pest control and wildlife control, and the number two player in Holdings, Inc. after the company reported financial results that fell short of
termite control. Developing a well-regarded national brand requires investor expectations and reduced its guidance for the remainder of 2016.
meaningful investment in sales, marketing, employee training and We also reduced our position in retailer Tractor Supply Co. and exited
technology, which smaller players simply cannot afford. Norwegian Cruise Line Holdings, Ltd. after each reported weakened
business trends. We reduced our holdings of SS&C Technologies Holdings,
Pests are a major headache for residential customers, and they can lead to Inc. on concerns about negative business trends impacting its hedge fund
meaningful business issues for commercial customers, like restaurants and clients. We trimmed our position in Willis Towers Watson Public Limited
hotels. Thus, customers are typically willing to pay for these services, Company on concerns about its meaningful exposure to the British market
regardless of how the economy is performing. As a result, Rollins has in the aftermath of Brexit.
demonstrated impressive operating performance across all market
conditions, including positive revenue growth during the 2008 and 2009
recession. Furthermore, Rollins has focused significant effort to improve its Outlook
retention of employees and customers, which has led recurring revenues to
represent approximately 80% of the companys total. We continue to believe that high-quality, mid-sized growth stocks represent
an attractive long-term investment opportunity. During the past 30 years,
We estimate that Rollins has just a 20% share of a large and growing mid-cap growth stocks, as a category, have outperformed small-cap and
addressable market. We think Rollins has several avenues for generating large-cap growth stocks. We believe that this trend will continue.
Baron Asset Fund

The U.S. economy continues to rank among the worlds healthiest, and its Our entire Firm and our research department, in particular, are committed
equity market multiples are within the range of their long-term averages. to justifying your ongoing confidence and support. I remain a significant
Perhaps the most prevalent concern among equity investors is uncertainty investor in the Fund alongside you.
about what will happen to stocks when interest rates finally begin to Sincerely,
increase. We believe that equity markets often perform well during a rising
rate environment. Separately, employment and housing trends have
improved throughout 2016, and energy prices remain meaningfully below
recent levels. We think our portfolio of what we believe are well-managed,
competitively advantaged, fast growing companies will continue to perform
Andrew Peck
well in this environment, although we cannot guarantee that they will.
Portfolio Manager
Thank you for investing in Baron Asset Fund. October 17, 2016

Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary
prospectus contains this and other information about the Funds. You may obtain them from its distributor, Baron Capital, Inc., by calling 1-800-99BARON or
visiting 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 associated
with investing in mid-sized companies include that the securities may be thinly traded and they may be more difficult to sell during market downturns. Prior to
February 15, 2007, the Funds strategy was to invest primarily in small and mid-sized growth companies. Since then, the Funds investment strategy has
shifted to mid-sized companies. The Fund may not achieve its objectives. Portfolio holdings are subject to change. Current and future portfolio holdings are
subject to risk.
The discussions of the companies herein are not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of the
respective portfolio managers only through the end of the period stated in this report. The portfolio managers views are not intended as recommendations or investment advice to any person 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 Asset Fund by anyone in any jurisdiction where it would be unlawful under the laws of that
jurisdiction to make such offer or solicitation.

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