Baron Large Cap Growth Strategy December 31, 2019 Dear Investor: Many things went right for the Strategy, and we had many sizable winners in Performance 2019. Amazon, Mastercard, Alibaba, Veeva, Worldpay,andASML Holding each contributed over 200 basis points (bps) to the Strategy’s total return. Baron Large Cap Growth Strategy gained 7.57% (net of fees) in the fourth EPAM, Visa, Facebook, Equinix, Alphabet, PagSeguro Digital, S&P Global, quarter and 34.36% over the calendar year 2019. This compares to gains of RingCentral,andIntuitive Surgical contributed over 100 bps each to the 10.62% and 36.39%, respectively, for the Russell 1000 Growth Index (the Strategy’s total return. Fourteen of our investments were up over 50% on “Index”) and 9.07% and 31.49%, respectively, for the S&P 500 Index, the the year and seven of those were up over 74%. That was enough to Fund’s benchmarks. outperform the S&P 500 Index. However, we failed to keep up with the We were reasonably happy with the Strategy’s returns. Ordinarily, an Russell 1000 Growth Index. Performance attribution suggests that it was due annual gain of 34% would be celebrated as exceptional, and we would be to sector allocation effect, which detracted 310 bps, while stock selection highlighting all the things that went right that enabled us to accomplish this contributed 86 bps. We think it came down to three stocks, we eliminated result. However, 2019 was no ordinary year. Every sector in the economy Apple in January and did not own it for almost the entire year, we did not recorded gains. For the Russell 1000 Growth Index, Financials and own Microsoft at all, and we owned too much Amazon. Communication Services sectors recorded gains of 35% each, while Amazon is easy. After appreciating 384% from 2015 through 2018, the Information Technology, by far the largest sector of the Index at over 35%, stock was up “only” 23% this year. We have been trimming it since the posted a staggering return of 52%. Even Real Estate and Materials were up fourth quarter of 2016 and suspected the stock was due for a breather. 34% each. This benchmark was tough to beat in 2019. Nonetheless, it remains our highest conviction long-term investment idea. Table I. Apple and Microsoft were the two largest contributors to the Index and at a Performance 7% weighting each, were up 89% and 58%, respectively. Not owning Apple Annualized for periods ended December 31, 2019 for most of the year cost the Strategy 270 bps of relative performance and Baron Baron Large Cap Large Cap Russell not owning Microsoft detracted another 107 bps for a total of 377 bps Growth Growth 1000 S&P (we underperformed by a total of 224 bps). While we believe both are high- Strategy Strategy Growth 500 quality businesses, we did not think either company qualified as a “big idea” (net)1 (gross)1 Index1 Index1 anymore. Apple, in particular, has been growing revenues at about 3.5% Three Months2 7.57% 7.74% 10.62% 9.07% since 2015, while EPS has compounded at about 8%, largely due to massive One Year 34.36% 35.24% 36.39% 31.49% share buybacks. Three Years 24.31% 25.11% 20.49% 15.27% Five Years 15.16% 15.96% 14.63% 11.70% As we pointed out earlier, 2019 was not an ordinary year. The intrinsic Ten Years 14.98% 15.74% 15.22% 13.56% values of our portfolio holdings did not rise by 34%, nor did the intrinsic Fifteen Years 9.99% 10.82% 10.50% 9.00% value of our benchmark holdings rise by similar amounts. As context, the Since Inception3 Strategy was up just over 1% in 2018, and the indexes were down 1.5% to (September 30, 2004) 10.52% 11.42% 10.96% 9.48% 4.4%, whereas the intrinsic values of both surely did better than that. In the For Strategy reporting purposes, the Firm is defined as all accounts managed by Baron Capital Management, Inc. (“BCM”) and BAMCO, Inc. (“BAMCO”), registered investment advisers wholly owned by Baron Capital Group, Inc. As of December 31, 2019, total Firm assets under management are approximately $31.1 billion. The Strategy is a time-weighted, total return composite of all large-cap accounts greater than $1 million using our standard investment process. Since 2010, accounts in the Strategy are market-value weighted and are included on the first day of the month following one full month under management. Prior to 2010, accounts were included on the first day of the quarter after one full quarter. Gross performance figures do not reflect the deduction of investment advisory fees. Actual client returns will be reduced by the advisory fees and any other expenses incurred in the management of the investment advisory account. A full description of investment advisory fees is supplied in our Form ADV Part 2A. Valuations and returns are computed and stated in U.S. dollars. Performance figures reflect the reinvestment of dividends and other earnings. The Strategy is currently composed of one mutual fund managed by BAMCO and separately managed accounts managed by BCM. BAMCO and BCM claim compliance with the Global Investment Performance Standards (GIPS®). To receive a complete list and description of the Firm’s strategies or a GIPS compliant presentation please contact us at 1-800-99BARON. Performance data quoted represents past performance. Current performance may be lower or higher than the performance data quoted. Past performance is no guarantee of future results. † The Strategy’s historical performance was impacted by gains from IPOs and/or secondary offerings, and there is no guarantee that these results can be repeated or that the Strategy’s level of participation in IPOs and secondary offerings will be the same in the future. 1 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 that are classified as growth. The indexes and the Strategy 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 Not annualized. 3 The Strategy has a different inception date than its underlying portfolio, which is April 30, 2004. 4 According to analysis using MSCI Barra’s USE3-L factor model. For Institutional Use Only 1 Baron Large Cap Growth Strategy short term, markets and stock prices react to all kinds of stimuli, but in the Alibaba revenue growth % long run stock prices typically reflect the businesses’ underlying intrinsic 70% values. In this Strategy, we focus on investing in “big ideas” that we believe 60% Actual have an opportunity to grow and compound their intrinsic values for 50% extended periods of time, typically faster and longer than what we believe is being priced in by the market. Amazon was a good example of this at the 40% end of 2014, when the consensus among the Street’s analysts was that the 30% company’s growth rate would moderate and decline. This is how it played 20% Expectations out1: 10% Amazon revenue growth % 35.0% 0% 2015 2016 2017 2018 30.0% Actual 25.0% Over that time, Facebook outperformed the S&P 500 Index by 36%, Google 20.0% (now Alphabet) outperformed by 65%, and Alibaba performed in line with 15.0% the S&P 500 Index (tensions with China and trade wars affecting this one Expectations 10.0% more than the others). Despite the outperformance, during that time frame, each one of these stocks had periods of significant underperformance, with 5.0% prices down anywhere between 20% and 40%. Intrinsic values were not as 0.0% 2015 2016 2017 2018 volatile, and over the longer periods of time, stock prices followed the growth in intrinsic values. Amazon’s stock was up nearly 12x as much as the S&P 500 Index over that time and proved to be a really big idea. We thought Facebook, Google, and Table II. Alibaba were being similarly misjudged and that their growth would prove Top contributors to performance for the quarter ended December 31, 2019 to be both more resilient and more durable. We got those right as well: Quarter End Facebook revenue growth % Market Cap Percent (billions) Impact 60% Alibaba Group Holding Limited $569.0 1.36% 50% Amazon.com, Inc. 916.2 0.71 Actual Splunk, Inc. 23.4 0.67 40% Vertex Pharmaceuticals Incorporated 56.3 0.64 30% ASML Holding N.V. 126.0 0.63 20% Expectations Alibaba Group Holding Limited is the largest retailer and e-commerce 10% company in China. Alibaba operates shopping platforms Taobao and Tmall and owns 33% of Ant Financial, which operates Alipay, the largest digital 0% payment provider in China with over 1 billion active users. Shares of Alibaba 2015 2016 2017 2018 were up 27% in the quarter and recorded a 55% gain in 2019, contributing 280 bps to our annual performance. The strong quarterly performance was Alphabet revenue growth % driven by continued revenue and earnings growth (revenues and adjusted 25% EBITDA were up 40% and 39% year-over-year, respectively) which was helped by traction in less developed regions, continued cost discipline, and 20% Actual an aggressive reinvestment strategy, with tailwinds from strong mobile and advertising revenue growth. We believe that Alibaba has the most 15% comprehensive ecosystem of commerce platforms, logistics, and payments infrastructures that support the digital transformation of the retail sector.