Baron Partners Fund (BPTRX) N-CSRCertified annual shareholder report (management investment company)

significant percentage of the portfolio, and the Fund uses leverage, both of which increase risk. In addition, the Fund may be subject to risk associated with potentially being concentrated in the securities of a single issuer or a small number of issuers, including in a particular industry. Of course, there can be no assurance that we will be successful in achieving the Fund’s investment goals.

The past year was dominated by the COVID-19 pandemic, the resulting economic and social fallout, and the government response. The market continued the prior year’s rally uninterrupted until the peak in February, when news of the rapid and alarming spread of the virus plunged the market into an unprecedented decline until the trough in March. Then, encouraged by massive fiscal and monetary stimulus, stocks staged an equally unprecedented recovery through the end of the year. Growth companies outperformed, driven by lower interest rates and in many cases improving business fundamentals. The pandemic also proved to be a strong accelerant for companies engaged in modernization and digital transformation, many of which we are invested in.

At the sector level, Consumer Discretionary, Communication Services, Health Care, and Industrials contributed the most to performance. Financials and Real Estate detracted.

Tesla, Inc. was the top contributor. Shares of this manufacturer of electric vehicles, solar products, and energy storage solutions increased 743% on strong financial results, including profitability that exceeded market forecasts and strong growth across different geographies and vehicle programs. With reduced business model risks, the stock is benefiting from Tesla’s investments in growth as evidenced by its opportunities around Model Y and CyberTruck and its localization of manufacturing in China and Europe. Tesla also joined the S&P 500 Index, a meaningful milestone that expands the potential shareholder base.

As of December 31, 2020, 47.0% of the Fund’s net assets are invested in Tesla stock. Therefore, the Fund is exposed to the risk that were Tesla stock to lose significant value, which could happen rapidly, the Fund’s performance would be adversely affected. Before investing in the Fund, investors should carefully consider publicly available information about Tesla. There can be no assurances that the Fund will maintain its investment in Tesla, as the Adviser maintains discretion to actively manage the Fund’s portfolio, including by decreasing or liquidating the Fund’s investment in Tesla at any time. However, for so long as the Fund maintains a substantial investment in Tesla, the Fund’s performance will be significantly affected by the performance of Tesla stock and any decline in the price of Tesla stock would materially and adversely affect your investment in the Fund.

Baron Focused Growth Fund invests in a non-diversified portfolio of companies that we believe are well capitalized and have exceptional management, significant growth potential, and sustainable barriers to competition. The Fund is non-diversified, which is a riskier investment strategy. In addition, the Fund may be subject to risk associated with potentially being concentrated in the securities of a single issuer or a small number of issuers, including in a particular industry. Of course, there can be no assurance that we will be successful in achieving the Fund’s investment goals.

The past year was dominated by the COVID-19 pandemic, the resulting economic and social fallout, and the government response. The market continued the prior year’s rally uninterrupted until the peak in February, when news of the rapid and alarming spread of the virus plunged the market into an unprecedented decline until the trough in March. Then, encouraged by massive fiscal and monetary stimulus, stocks staged an equally unprecedented recovery through the end of the year. Growth companies outperformed, driven by lower interest rates and in many cases improving business fundamentals. The pandemic also proved to be a strong accelerant for companies engaged in modernization and digital transformation, many of which we are invested in.

At the sector level, Consumer Discretionary, Industrials, and Information Technology contributed the most to performance. Health Care and Real Estate were slight detractors.

Tesla, Inc. was the top contributor. Shares of this manufacturer of electric vehicles, solar products, and energy storage solutions increased 743% on strong financial results, including profitability that exceeded market forecasts and strong growth across different geographies and vehicle programs. With reduced business model risks, the stock is benefiting from Tesla’s investments in growth as evidenced by its opportunities around Model Y and CyberTruck and its localization of manufacturing in China and Europe. Tesla also joined the S&P 500 Index, a meaningful milestone that expands the potential shareholder base.

As of December 31, 2020, 38.4% of the Fund’s net assets are invested in Tesla stock. Therefore, the Fund is exposed to the risk that were Tesla stock to lose significant value, which could happen rapidly, the Fund’s performance would be adversely affected. Before investing in the Fund, investors should carefully consider publicly available information about Tesla. There can be no assurances that the Fund will maintain its investment in Tesla, as the Adviser maintains discretion to actively manage the Fund’s portfolio, including by decreasing or liquidating the Fund’s investment in Tesla at any time. However, for so long as the Fund maintains a substantial investment in Tesla, the Fund’s performance will be significantly affected by the performance of Tesla stock and any decline in the price of Tesla stock would materially and adversely affect your investment in the Fund.

Baron International Growth Fund is a diversified fund that invests for the long term primarily in securities of non-U.S. growth companies. The Fund expects to diversify among several developed countries and developing countries throughout the world, although the Fund’s total exposure to developing countries will not exceed 35%. The Fund may purchase securities of companies of any size. Of course, there can be no guarantee that we will be successful in achieving the Fund’s investment goals.

The past year has been dominated by the COVID-19 pandemic, the resulting global shutdown, and the impact of both on equity markets. Early on in 2020, we witnessed the epoch of economic and market uncertainty while the year ended in a pinnacle of confidence and optimism. In November, news of multiple COVID-19 vaccines and the U.S. election results triggered a strong rally in global financial markets. Despite an alarming spike in cases, investors remained focused on the potential for a vaccine-driven return to economic and social normalcy. Fiscal support to bridge the gap to normalcy also boosted the markets.

On a country basis, China, the United Kingdom, and Japan contributed the most to performance. Brazil, Norway, and Italy detracted the most.

On a sector basis, Information Technology, Health Care, and Communication Services contributed the most. Financials and Energy detracted.

Zai Lab Limited contributed the most. Zai Lab is a China-based biotechnology company in-licensing drugs from developed countries to bring to the Chinese health care market that is still massively underdeveloped. Shares rose as Zai Lab benefited from its transition to a commercial stage company, with both Zejula and Optune launched or launching in cancer indications, and increased investor awareness of the future potential of a Chinese health care/biotechnology market.

Azul S.A. was the top detractor. Shares of this leading Brazilian airline declined sharply due to the pandemic, with airlines in Brazil grounding up to 90% of flights. We exited our position.

Looking forward, we believe the COVID-19 crisis has pushed global policymakers through the portal of “Modern Monetary Theory,” and that this development, concurrent with the transfer of policy/stimulus leadership to elected officials, suggests a sustainable period of dollar weakness and relative outperformance for international equities. Likely debt mutualization and the easing of fiscal constraints in Europe, in addition to the recent Brexit resolution, should further support the relative return potential of international equities. With relative valuations near historic lows, and the risk premium on non-dollar assets elevated after years of U.S. foreign policy aggression, we believe we have entered the early innings of a typical international relative bull market.

the time of investment. The Fund seeks to invest in well-managed companies that we believe have significant long-term growth opportunities. The Fund’s investment universe extends beyond real estate investment trusts (REITs) to include hotels, senior housing operators, casino and gaming operators, tower operators, infrastructure-related companies and master limited partnerships, data centers, building products companies, real estate service companies, and real estate operating companies. Of course, there can be no guarantee that we will be successful in achieving the Fund’s investment goals.

The past year was dominated by the COVID-19 pandemic, the resulting economic and social fallout, and the government response. After falling sharply on COVID-19-related fears in February and March, the market embarked on a remarkable rally that continued through to year end. REITs and real estate-related companies, however, lagged the broader market by a wide margin. Investor concerns that many tenants would not meet rent obligations, fears of a prolonged slowdown in commercial real estate business fundamentals, and balance sheet concerns as many REITs maintain relatively high leverage all pressured the sector. A dramatic turnaround in the wake of vaccine-related news in mid-November helped propel the Real Estate sector into positive territory for the full year.

Casinos & gaming operators, data centers, and building products/services contributed the most. Real estate operating companies detracted.

Penn National Gaming, Inc., a U.S. regional casino company that also owns a 36% stake in online sports betting company Barstool Sports, was the top contributor. Strong performance was driven by a quick recovery in revenue and margins at properties that have re-opened after shuttering early in the pandemic. The likely expansion of legalized online sports betting as state legislators look for new tax revenue sources to help reduce large budget deficits also boosted the share price.

Jones Lang LaSalle Incorporated was the top detractor. Jones Lang is a leading global provider of commercial real estate services. Weak performance was driven by concerns that near-term financial performance would be negatively impacted by the global slowdown in leasing and transaction activity. We retain conviction because of the company’s high-quality platform, scale advantages, and strong liquidity position.

The current vaccine rollout suggests an end to the pandemic is on the horizon. For the real estate market in particular, historically low interest rates should also help boost growth. We believe this is an opportune time to invest with active managers in real estate who have the flexibility to shift into growth areas while avoiding others facing a longer and more uncertain recovery. We also believe our philosophy of structuring a more inclusive and unique real estate fund – one that includes REITs but is more expansive, balanced, and diversified than a typical “REIT only” fund – is a compelling long-term strategy.

countries. The Fund may invest up to 20% of its net assets in developed and frontier countries. The Fund seeks to invest in companies that have significant long-term growth prospects and to purchase them at prices we believe to be favorable. Of course, there can be no guarantee that we will be successful in achieving the Fund’s investment goals.

The past year has been dominated by the COVID-19 pandemic, the resulting global shutdown, and the impact of both on equity markets. Early on in 2020, we witnessed the epoch of economic and market uncertainty while the year ended in a pinnacle of confidence and optimism. In November, news of multiple COVID-19 vaccines and the U.S. election results triggered a strong rally in global financial markets. Despite an alarming spike in cases, investors remained focused on the potential for a vaccine-driven return to economic and social normalcy. Fiscal support to bridge the gap to normalcy also boosted the emerging markets.

On a country basis, China, India, and Taiwan contributed the most to performance, while Brazil, South Africa, and Panama were the largest detractors.

On a sector basis, Information Technology, Health Care, and Consumer Discretionary contributed the most, while Financials, Energy, and Industrials detracted the most.

Zai Lab Limited contributed the most. Zai Lab is a China-based biotechnology company in-licensing drugs from developed countries to bring to the Chinese health care market that is still massively underdeveloped. Shares rose as Zai Lab benefited from its transition to a commercial stage company, with both Zejula and Optune launched or launching in cancer indications, and increased investor awareness of the future potential of a Chinese health care/biotechnology market.

Cogna Educacao SA was the top detractor. Cogna is a post-secondary company in Brazil offering on-site and distance learning programs for higher education as well as a smaller K-12 program. It has been a leader in its business with high Ministry of Education quality metrics for many years. However, the stock declined sharply after the company had to shut down its campuses due to the pandemic. We exited our position.

Looking forward, we believe the COVID-19 crisis has pushed global policymakers through the portal of “Modern Monetary Theory,” and that this development, concurrent with the transfer of policy/stimulus leadership to elected officials, suggests a sustainable period of dollar weakness and relative outperformance for emerging market (EM) equities. Multi-year catalysts from major reforms in countries such as India, China, and Brazil, as well as from China’s pivot to consumption and value-added economic development, and away from low-value manufacturing, infrastructure, and export-oriented activity, should further support the relative return potential of EM equities. With relative valuations near historic lows, and the risk premium on non-dollar assets elevated after years of U.S. foreign policy aggression, we believe we have entered the early innings of a typical EM relative bull market.

throughout the world, with capitalizations within the range of companies included in the MSCI ACWI Index. At all times, the Fund will have investments in equity securities of companies in at least three countries outside of the U.S. Under normal conditions, at least 40% of the Fund’s net assets will be invested in stocks of companies outside the U.S. (at least 30% if foreign market conditions are not favorable). The Adviser seeks to invest in businesses it believes have significant opportunities for growth, sustainable competitive advantages, exceptional management, and an attractive valuation. Of course, there can be no guarantee that we will be successful in achieving the Fund’s investment goals.

The past year was dominated by the COVID-19 pandemic, the resulting economic and social fallout, and the government response. The markets continued the prior year’s rally uninterrupted until the peak in February, when news of the rapid and alarming global spread of the virus plunged stocks into an unprecedented decline until the trough in March. Then, encouraged by massive fiscal and monetary stimulus, stocks staged an equally unprecedented recovery through the end of the year. Growth companies outperformed, driven by lower interest rates and in many cases improving business fundamentals. The pandemic also proved to be a strong accelerant for companies engaged in modernization and digital transformation, many of which we are invested in.

On a country basis, the United States, China, and Israel contributed most to performance. India and the United Arab Emirates detracted the most.

On a sector basis, Information Technology, Consumer Discretionary, and Health Care were the top contributors while Financials detracted.

Fiverr International Ltd., an online marketplace for freelance services, contributed the most. Shares increased 736% as the company benefited from pandemic-driven work arrangements. Over the long term, should Fiverr become the leading online freelancer marketplace as this market grows and procurement continues to shift online, we think it will benefit from strong network effects and have continued material upside.

The largest detractor was Bajaj Finance Limited. Shares of this leading non-banking financial corporation sank as the pandemic spread into India. We maintain conviction. Bajaj is fast transforming into India’s largest fintech player by leveraging its proprietary technology platform to provide a “supermarket of financial products” and is well positioned to benefit from growing demand for consumer financial services, in our view.

While the current COVID-19 vaccine rollout holds the promise of an end in sight, we still have a way to go before we can confidently and safely put this pandemic in the rear view mirror. We think companies benefiting from the pandemic-driven acceleration of digital trends should continue to see strong growth as these trends play out. Our goal remains to maximize long-term returns without taking significant risks of permanent loss of capital.

estate income-producing securities, and any other real estate-related yield securities. The Fund is likely to maintain a significant portion of its assets in real estate investment trusts (“REITs”). REITs pool money to invest in properties (“equity REITs”) or mortgages (“mortgage REITs”), and their revenue primarily consists of rent derived from owned, income producing real estate properties, and capital gains from the sale of such properties. The Fund generally invests in equity REITs. Of course, there can be no guarantee that we will be successful in achieving the Fund’s investment goals.

The past year was dominated by the COVID-19 pandemic, the resulting economic and social fallout, and the government response. After falling sharply on COVID-19-related fears in February and March, the market embarked on a remarkable rally that continued through to year end. REITs, however, lagged the broader market by a wide margin. Investor concerns that many tenants would not meet rent obligations, balance sheet concerns as many REITs maintain relatively high leverage, and fears of a prolonged slowdown in commercial real estate business fundamentals all pressured REITs. Although REITs staged a recovery in the wake of vaccine-related news in mid-November, the sector ended in the red for the full year.

Investments in non-REIT real estate companies, data center REITs, and other REITs contributed the most. Office REITs, multi-family REITs, and manufactured housing REITs detracted the most.

Penn National Gaming, Inc., a U.S. regional casino company that also owns a 36% stake in online sports betting company Barstool Sports, was the top contributor. Strong performance was driven by a quick recovery in revenue and margins at properties that have re-opened after shuttering early in the pandemic. The likely expansion of legalized online sports betting as state legislators look for new tax revenue sources to help reduce large budget deficits also boosted the share price.

The top detractor was Kilroy Realty Corporation, a REIT that owns a portfolio of high-quality office, life sciences, and multi-family properties in California and Seattle. Weak performance was driven by concerns that office real estate fundamentals would weaken in Kilroy’s key markets as a result of the pandemic as well as a potential paradigm shift towards work-from-home arrangements. We exited our position.

The ongoing vaccine rollout suggests an end to the pandemic is on the horizon. For the real estate market in particular, historically low interest rates should also help boost growth. We believe this is an opportune time to invest with active managers in real estate who have the flexibility to shift into growth areas while avoiding others facing a longer and more uncertain recovery. We also believe our philosophy of structuring a more inclusive and unique real estate income fund – one that focuses on REITs but includes other types of real estate investments – is a compelling long-term strategy.

potential the Fund sees within each area. The Adviser seeks to invest in businesses it believes have significant growth opportunities, sustainable competitive advantages, exceptional management, and attractive valuations. The Fund may purchase securities of companies of any market capitalization and may invest in foreign stocks. Of course, there can be no guarantee that we will be successful in achieving the Fund’s investment goals.

The Health Care sector was mostly in line with the broader market in 2020 although performance among sub-industries was mixed due to the impact of the pandemic. The cancellation or deferral of elective procedures hurt profits of hospitals and medical device companies. As academic labs shut down, life sciences companies that sell products to these labs also suffered. The shuttering of clinical trials negatively impacted contract research organizations. On the positive side, managed care companies benefited from lower costs as they did not have to pay for canceled procedures. Telemedicine profited from strong demand, and we believe it will become more widely accepted after the pandemic subsides. Companies that provide remote monitoring technology also saw increased utilization.

Biotechnology, life sciences tools & services, and health care equipment were the largest contributing sub-industries. Health care facilities detracted.

Pacific Biosciences of California, Inc. (“PacBio”) was the top contributor. Shares of this provider of long-read DNA sequencing systems soared more than 436% for the period held on increasing excitement about the potential for its platform as the company successfully lowers sequencing costs and seeks to move beyond its current commercial niche. Recently appointed CEO Christian Henry previously served as CFO and Chief Commercial Officer at Illumina, Inc., and we think he is well qualified to commercially execute on PacBio’s differentiated platform.

Top detractor Applied Therapeutics, Inc. is a biotechnology company developing a class of drugs called aldose reductase inhibitors for galactosemia, a rare genetic disorder, and diabetes complications. Shares fell due to a slew of short reports that highlighted risks and management messaging mistakes. We exited our position.

We think the pandemic will result in more investment in scientific research and pandemic preparedness. Even pre-COVID-19, we expected to see advancements in cures and treatments over the next decade driven by major breakthroughs in gene therapy, and we think the pandemic will accelerate these trends. NIH funding has been increasing. The FDA has implemented regulatory pathways that speed drug approvals. The increasing use of therapies that target genetic alterations or use biomarkers and predictive modeling and data analytics software drive higher probabilities of success and faster drug development timelines. For all these reasons, we think the long-term outlook for the sector is favorable.

Baron FinTech Fund is a non-diversified Fund that invests in companies of any market capitalization that develop or use innovative technologies related in a significant way to financial services. The Fund invests principally in U.S. securities but may invest up to 25% in non-U.S. securities. Of course, there can be no guarantee that we will be successful in achieving the Fund’s investment goals.

The past year was dominated by the COVID-19 pandemic, the resulting economic and social fallout, and the government response. The market continued the prior year’s rally uninterrupted until the peak in February, when news of the rapid and alarming spread of the virus plunged the market into an unprecedented decline until the trough in March. Then, encouraged by massive fiscal and monetary stimulus, stocks staged an equally unprecedented recovery through the end of the year. Growth companies outperformed, driven by lower interest rates and in many cases improving business fundamentals. The pandemic also proved to be a strong accelerant for companies engaged in modernization and digital transformation, many of which we are invested in.

At the sector level, Information Technology, Financials, and Industrials contributed the most to performance. No sector detracted.

Adyen NV was the top contributor. Shares of this provider of technology that enables merchants to accept electronic payments appreciated on strong financial results and news of significant investments in headcount and marketing campaigns to sustain its high growth rate. Investors also expected COVID-19 disruptions to have relatively less impact on the stock due to Ayden’s mostly e-commerce clientele.

Network International Holdings Ltd. detracted the most. Shares of this payment processor in the Middle East and Africa fell in concert with the collapse in oil prices generated by the Russia-Saudi Arabia oil price war in March of this year. The stock price has recaptured a portion of its losses with the rebound in oil prices after Saudi Arabia and Russia agreed to production cuts and as economic activity revived.

We continue to believe the FinTech sector offers attractive investment opportunities. The events of the last year have vividly demonstrated the need for every business to better incorporate technology to operate in any environment. Many of the companies in the Fund are providing the necessary tools for businesses and consumers to thrive in the digital economy. These tools include business management software, electronic payment services, digital banking, e-commerce marketplaces, trading platforms, data, and analytics. We believe demand for these tools has only been accelerated by the pandemic and will continue growing for many years. A plethora of privately held FinTech companies are also benefiting from these same trends. After following these companies for years, we expect many of them to go public in the months ahead, further expanding our investment opportunity set.

All securities are Level 1, unless otherwise noted.