Baron Emerging Markets Fund | Q1 2026

Dear Baron Emerging Markets Fund Shareholder,

Baron Emerging Markets Fund® (the Fund) gained 0.47% (Institutional Shares) during the first quarter of 2026, while its primary benchmark, the MSCI Emerging Markets Index (the Benchmark), declined a modest 0.17%. The MSCI Emerging Markets IMI Growth Index (the Proxy Benchmark) retreated by 1.45% for the quarter. The Fund outperformed both the Benchmark and the Proxy Benchmark during a quarter marked by substantial volatility. We were comfortable with our final result, particularly in light of the ongoing challenging period for particular growth sub-sectors such as software, e-commerce, and other digital/online and data-driven businesses, though the unwelcome and abrupt March correction in equities in general reversed what had been a very promising quarter through February.

As noted, for the first two months of the quarter emerging markets (EM) equities extended prior year outperformance while logging solid, double-digit returns, in our view largely on the strength of AI-related technology names as well as broad-based strength in industrials/defense and commodities. While the war in Iran triggered a steep rise in oil prices and an inflection point in global equities, EM equities still comfortably outperformed the S&P 500 Index (down 4.33%) for the quarter, and we maintain our optimism regarding the outlook for both relative forward earnings and performance for the asset class. For EM investors, the principal near-term risk is an extended disruption to oil flows and a further spike in energy prices, as much of Asia, including Taiwan, Korea, China, and India, are reliant on Middle East imports. As of now, we are not materially adding to nor reducing investments in such jurisdictions as we calibrate the likely path forward, though we maintain confidence that the longer-term fundamentals for the companies in which we are invested are quite sound, which allows us to maintain conviction in periods of heightened volatility and short-term earnings risk. We remain quite encouraged by the strong absolute performance of the Fund over the past year and the solid outperformance of EM equities in general, and remain optimistic that our fundamental, theme-driven and bottom-up approach can continue to deliver solid results in the ever-evolving technological and geopolitical environment.

For the first quarter of 2026, we modestly outperformed the Benchmark, while comfortably outpacing our all-cap EM growth Proxy Benchmark. From a sector or theme perspective, solid stock selection effect in the Information Technology sector, primarily attributable to various investments in our advanced semiconductors/AI (ISC Co., Ltd., Taiwan Semiconductor Manufacturing Compamy Limited, Delta Electronics, Inc., Chroma ATE Inc., eMemory Technology Inc., and ASPEED Technology Inc.) theme, was the largest contributor to relative performance this quarter. In addition, positive allocation effect combined with favorable stock selection in the Industrials sector, owing to select holdings in our global security/supply chain diversification (Hanwha Systems Co., Ltd. and Korea Aerospace Industries, Ltd.) and digitization (InPost S.A.) themes, also bolstered relative results. Partially offsetting the above was adverse stock selection effect across multiple themes in Financials (Bajaj Finance Limited, Pine Labs Limited, and JM Financial Limited), Consumer Discretionary (Swiggy Limited and Zhejiang Shuanghuan Driveline Co., Ltd.), and Communication Services (Tencent Music Entertainment Group and Kuaishou Technology).

From a country perspective, strong stock selection effect in Taiwan, driven by some of the above-mentioned holdings, added the most value this quarter. In addition, our overweight positioning together with positive stock selection in Korea was also a notable contributor to relative performance. Lastly, good stock selection effect in Poland, owing solely to InPost, which received a buyout offer at a material premium, also bolstered relative results. Partly offsetting the above was adverse allocation effect along with weak stock selection in India, which was the largest detractor during the quarter. Poor stock selection effect in China, which we believe largely reflects the recent weakness in software and digitization names globally, and our lack of exposure to Saudi Arabia, which outperformed in a period of rising energy prices, also weighed on relative results. We are encouraged by the resilience and outperformance of our investments in Taiwan and Korea that are key beneficiaries of increasing global AI application development and capex. While markets have questioned the likely return on capital for such investments by the U.S. hyperscalers, supply constraints in critical AI infrastructure such as memory and other bottleneck technologies are likely to continue to benefit the most strategically positioned and important companies. Despite the recent underperformance, we remain excited about India’s structural growth story while acknowledging the near-term headwinds of rising energy prices related to the Iran war. That said, we would expect a sharp recovery in many of our India holdings upon a sustained de-escalation of the conflict in the Middle East. Lastly, a rebound in government infrastructure spending, targeted tax relief for the middle class, and more recently the announcement of the U.S.-India trade deal are supportive of an earnings upgrade cycle, in our view.

Semiconductor giant Taiwan Semiconductor Manufacturing Company Limited (TSMC) contributed to performance as revenue growth exceeded expectations due to surging demand for AI chips. TSMC dominates the advanced semiconductor foundry market, controlling over 90% share of cutting-edge sub-7 nanometer (nm) nodes that power AI servers, flagship smartphones, and autonomous vehicles. The company benefits from a virtuous cycle in which its massive scale and profitability generate the capital necessary to fund industry-leading R&D and capex, in turn widening its technological moat and reinforcing its pricing power. As the ultimate "picks and shovels" provider of the AI era, TSMC remains insulated from the competitive dynamics of the AI chip design ecosystem. Whether hyperscalers develop custom accelerators or deploy merchant graphics processing units from companies like NVIDIA and Advanced Micro Devices, nearly all advanced AI accelerators are manufactured exclusively at TSMC’s 3nm and 5nm nodes. We believe TSMC will deliver 20% earnings growth over the next several years, supported by secular AI-driven demand for leading-edge manufacturing capacity.

Shares of South Korean conglomerate Samsung Electronics Co., Ltd. increased during the quarter on surging dynamic random-access memory (DRAM) and NAND flash memory pricing, improved execution in DRAM and High Bandwidth Memory (HBM) technology development, and a stronger outlook for the company’s logic semiconductor foundry business. We are confident Samsung will remain a key beneficiary of long-term growth in global semiconductor demand and a leader in memory chips, 5G smartphones, and semiconductor foundry services.

ISC Co., Ltd. is a South Korean manufacturer of semiconductor testing equipment. The stock contributed to performance during the quarter as revenue growth accelerated due to surging demand for AI chips. The company is the dominant global supplier of elastomer test sockets, which serve as the electrical interface used to test semiconductor devices. Historically, the industry relied on pogo pin sockets; however, as chips have become more complex and operate at increasingly higher speeds, this technology is approaching its electromechanical limits. By contrast, elastomer test sockets offer meaningful advantages, including superior electrical performance, faster time to market, and lower cost. We believe ISC is well positioned to be the primary long-term beneficiary of the industry’s shift from pogo pin to elastomer socket technology. We also expect the company to maintain over 70% market share, supported by strong first-mover advantages, superior technology, and unmatched manufacturing scale. In addition, ISC’s growth is levered to the booming leading-edge processor market, driven by secular demand for AI and high-performance computing.

Tencent Holdings Limited operates China’s leading social network and messaging platforms (WeChat and QQ), the country’s largest online gaming business, and one of its dominant online entertainment and media platforms. Shares declined amid a broader selloff in Chinese internet stocks and increased AI investment, which has reduced near-term profitability. Even so, fundamentals remain healthy, with solid growth in core gaming and advertising revenue. We believe these AI investments reflect a position of strength, as AI is already improving Tencent’s core advertising technology through better targeting, content ranking, and new forms of engagement. We remain confident in the company’s ability to compound earnings over time, supported by its growth structure, massive scale, and focus on efficient operations. Longer term, we believe Tencent could be the leading beneficiary of generative AI in China, given its ability to enhance existing products and enter adjacent markets with significant scale and distribution. We continue to monitor the regulatory environment.

Bajaj Finance Limited is a leading non-bank financial company in India. Shares declined during the quarter as geopolitical tensions over the past month raised expectations of higher inflation and disrupted India’s easing interest rate environment, which could negatively impact consumption-led credit growth. We retain conviction in the company due to its best-in-class management team, robust long-term growth outlook, and conservative risk management frameworks. We believe Bajaj is well positioned to benefit from growing demand for consumer financial services in India, including mortgages, personal loans, credit cards, and other related products.

Bharti Airtel Limited is a leading telecommunications company with operations across Asia and Africa. The company’s offerings include wireless services, mobile commerce, and fixed-line broadband. While Bharti Airtel reported strong quarterly earnings and provided visibility into robust future free cash flow generation, shares declined during the quarter due to concerns around capital allocation to the company’s new non-banking financial company venture. In our view, as India’s dominant mobile operator, Bharti Airtel is benefiting from ongoing industry consolidation. In particular, competitor Vodafone Idea appears to be on the verge of bankruptcy amid severe pricing pressure and an unsustainable balance sheet. We retain conviction in Bharti Airtel’s outlook as it transforms into a digital services company and capitalizes on rising mobile tariffs.

* The Fund’s exposure to Russia was less than 0.1%.

During a quarter marked by elevated market volatility, we opportunistically added several new investments to our existing themes, while also increasing exposure to various positions that we established in earlier periods. We continue our endeavor to add to our highest conviction ideas.

We were active in adding to our global security/supply chain diversification theme by initiating positions in Vista Energy, S.A.B. de C.V., Prio S.A., and The Japan Steel Works, Ltd. (JSW). Vista is a founder-led energy producer with a leading market share in Argentina oil production. Its acreage in the Vaca Muerta formation has world-class well productivity, with year one oil production per lateral foot superior to local and global peers. By continuing to develop this prolific acreage, we expect Vista will grow oil production at a mid-teens compound growth rate through the end of the decade and generate highly accretive rates of return. Beyond its organic opportunity, Vista has an impressive track record of growth through M&A, and we see the potential to further extend its attractive growth profile via additional acquisitions. Based on current long-dated prices, we see Vista trading below 4 times 2027 EBITDA, a very modest valuation in our view, given its attractive growth and return profile.

Prio is a leading energy producer in Brazil with its primary oil and gas acreage located in the Campos basin. The company’s relatively mature asset base offers modest production growth over the next few years, but it is highly cash generative. We estimate that at current futures prices it will take less than five years for Prio to generate free cash flow equivalent to its entire enterprise value. Historically, Prio has been able to acquire mature producing assets that were non-core to larger companies and harvest upside by leveraging its existing infrastructure and reducing operating costs per barrel. Given the company’s strong free cash flow outlook, we expect management to continue its strategy to reinvest capital to acquire value accretive assets from larger corporations, particularly if the upcoming election results in an administration that is more amenable to divestitures of state-owned enterprise assets.

JSW is a diversified industrial equipment manufacturer. The company's Materials & Engineering (M&E) segment is a market leader in specialty steel components with end use in power generation facilities. Owing to rising global electricity demand, downstream manufacturers of large gas turbines have seen significant backlog expansion. We view the M&E segment as a key beneficiary as these companies are now meaningfully expanding capacity to address growing order visibility. The segment is also a critical supplier in the construction of nuclear power plants where we see unprecedented U.S. investment in nuclear power as a secular growth driver. In addition, the company's Industrial Machinery Products segment has a broader set of end markets, and we are constructive on the diversified growth drivers for these businesses as well. For the Defense Equipment division, we see an expanding defense budget in Japan and potential export opportunities driving top-line growth. In the Plastics Machinery Business, we see both top-line and margin upside from expanding aftermarket services for its Plastics Processing equipment, and a potential refresh cycle for the battery separator equipment it supplies. We expect the company to grow earnings at a compound rate of over 20% for the next three to five years.

During the quarter, we also initiated a position in Banco Bradesco S.A., one of Brazil’s largest private-sector banks, serving customers through a diversified offering that includes lending, insurance, pensions, and asset management, among others. We believe Bradesco is in the early stages of a multi-year recovery in profitability, with ROE expected to expand from the mid-teens toward the high teens as the bank executes its transformation plan. The turnaround is being driven by the company’s shift in the loan mix toward higher-quality, collateralized products, which is enhancing risk-adjusted returns. We also see meaningful upside from cost initiatives that have yet to be fully reflected, including branch rationalization and increased digital adoption, which should drive operating leverage and efficiency gains over time. Additional support comes from continued growth in higher-return lending segments, lower funding costs and capital benefits from the use of deferred tax assets, all of which should support earnings growth. These factors provide a clear path for Bradesco to return to high-teens ROE, which we believe is not yet fully reflected in the current valuation.

As part of our China value-added theme, we initiated a position in WuXi AppTec Co., Ltd., the world's largest contract research, development, and manufacturing organization (CRDMO) for small molecules and increasingly for new modalities such as peptides and oligonucleotides. The company offers end-to-end services from drug discovery through commercial manufacturing for global pharmaceutical and biotechnology clients. WuXi AppTec’s competitive moat is grounded in technology depth, scale, and modality breadth that are operationally difficult to replicate outside China, including entrenched cost advantages, proven U.S. Food and Drug Administration execution, and integrated capability that drive faster development timelines and high client stickiness. Over the past three years, the stock came under pressure owing to perceived headwinds from the BIOSECURE Act, while underlying fundamentals remained intact: U.S. clients were retained and backlog kept compounding. We initiated a position because we believe the geopolitical risk is ebbing and that WuXi AppTec is entering a multi-year earnings up-cycle. The dominant driver is the obesity drug super-cycle, where WuXi AppTec is the leading external manufacturer for both injectable GLP-1 peptides and the next wave of oral small-molecule GLP-1 drugs. Layered on top are oligonucleotides as an emerging multi-year pillar and a re-accelerating small-molecule franchise as global biotechnology funding recovers. We expect the company to compound earnings at a mid-to-high-teens pace while the stock could more than double over the next five years, given its current meaningful discount to global CRDMO peers.

During the quarter, we also increased exposure to our advanced semiconductors/AI theme by building a position in Montage Technology Co., Ltd., a Chinese semiconductor design company and the leading global supplier of memory interface chips, which sit between a server's processors and memory chips, regenerating and routing high-speed electrical signals billions of times per second. Montage Technology holds a commanding global market share, protected by an extensive patent portfolio, two decades of accumulated design learning, and deep customer trust in a mission-critical application. The company generates the majority of its revenue outside China, a rare distinction among Chinese semiconductor companies, reflecting technology that is highly competitive on a global basis. Several compounding drivers underpin our conviction. First, surging demand for AI infrastructure, including the rapid proliferation of agentic AI applications, is driving a dramatic acceleration in server deployments globally. Second, AI servers require significantly more memory modules than traditional servers, to support more intensive computations. Third, each memory module requires one Montage Technology interface chip, and as next-generation servers demand ever-higher bandwidth and performance, those chips command meaningfully higher prices. Together, these factors are driving a step-change in Montage Technology's revenue per server relative to just a few years ago. The company is also leveraging its world-class intellectual property in high-speed signal processing to expand into PCIe retimers and switches - the critical interconnects between CPUs and GPUs - addressing markets several times the size of its core memory interface business. China's drive toward technology self-sufficiency creates a natural and immediate demand base for these new products, but management is building for global competitiveness, and we believe the technology can replicate the international success of the flagship product. We expect Montage Technology to grow earnings at a compound rate of over 30% over the next three to five years.

Adding to our EM consumer theme, we initiated an investment in d'Alba Global Co., Ltd., a South Korean premium skincare brand. The company is best known for its flagship white truffle–based franchise, anchored by products including facial mist spray, sunscreen, and cream. Unlike most K-Indie peers that chase viral ingredients and launch new products every cycle, d'Alba has built a cohesive, ingredient-led brand identity that supports premium pricing and industry-leading repurchase rates. By strategically leveraging Korea’s sophisticated, high-speed original equipment manufacturer ecosystem, the company maintains a structurally asset-light model that delivers best-in-class gross margins and a distinct competitive speed advantage over global incumbents. We initiated a position because we see d'Alba as one of the few K-Beauty brands positioned to evolve from a single hit product into a durable global franchise, supported by a structural "masstige" tailwind and three compounding growth levers: a massive geographic runway in the U.S. and Europe where the brand is still in its infancy; a strategic channel expansion from "online-first" business-to-consumer (B2C) into global offline retailers, with business-to-business (B2B) mix targeted to scale toward 50% by 2028, a meaningful margin lever given B2B margins are roughly triple B2C; and product extension into higher-average selling price premium lines and more localized stock-keeping units that reduce concentration of the core mist franchise. We expect revenue and earnings to compound at a 25% to 30% rate through 2030, effectively tripling earnings within the next four years.

We also added to several of our existing positions during the quarter, including XP Inc., HPSP Co., Ltd., BYD Company Limited, Bharat Electronics Limited, Eternal Limited, Cummins India Limited, eMemory Technology Inc., Doosan Enerbility Co., Ltd., and Power Grid Corporation of India Limited.

During the quarter, we also exited several positions including MercadoLibre, Inc., Mahindra & Mahindra Limited, Godrej Consumer Products Limited, Jio Financial Services Limited, XPeng Inc., SRF Limited, Talabat Holding plc, Samsung Epis Holdings Co., Ltd., and DCW Limited, as we continue our endeavor to allocate capital to our highest convictions ideas.

The first quarter of 2026 began on solid ground, with EM and international equities impressively extending prior year outperformance while logging solid double-digit returns through the end of February, in our view largely on the strength of advanced semiconductor and other AI-related technology names as well as broad-based strength in industrials/defense and commodities. Then, on Saturday, February 28, the U.S. and Israel launched an initiative in Iran that was soon termed a war, triggering an inflection point in global equities and a leadership reversal. Oil and the U.S. dollar rallied and EM/international equities trailed the S&P 500 Index into quarter end, closing the full quarter down modestly. By the end of the quarter, only technology and energy-related stocks held on to material gains. Notwithstanding this turn of events, EM equities still comfortably outperformed the S&P 500 Index for the quarter, and we maintain our optimism regarding the outlook for both relative forward earnings and performance for the asset class.

Regarding the Iran war, we note that while volatility has spiked in the short term, longer-dated oil prices and inflation expectations remain fairly contained – suggesting that markets currently anticipate a de-escalation in the relatively near term. We would agree that this is the most likely outcome given the considerable economic, financial, and political pressure that applies to all parties. For now, we are monitoring progress as the stakes are high and a wide range of outcomes remain possible. For EM investors, the principal risk is an extended disruption to oil flows and a further spike in energy prices, as much of Asia, including Taiwan, Korea, China, and India, are reliant on Middle East oil imports. As of now, we are not materially adding to nor reducing our investments in such jurisdictions as we calibrate the likely path forward, though we maintain confidence that the longer-term fundamentals for the companies in which we are invested are quite sound, which allows us to maintain conviction in periods of heightened volatility and short-term earnings risk. Further, while the war has triggered near-term disruption and risk to equity and credit markets, we believe there is a reasonable likelihood that on the other side is a significant improvement in Middle East stability, normalization of relations, and generally lower global risk premium given that the threat of Iran and its proxies is likely to be substantially diminished.

Perhaps most important, the war in Iran in our view does not impact either the long-term improvement in earnings growth potential across EM or the structural dollar weakness that we anticipate, both of which we often elaborate on. Both phenomena, which support EM and international equity outperformance, have been catalyzed by a geopolitics-first, national security driven environment that has marked the end of the age of globalization. We believe the Iran war does support our worldview of geopolitical priorities superseding economic and corporate optimization and triggering a global industrial renaissance – a principal catalyst for improving EM earnings growth. As such, we see the recent retracement of EM equities on both an absolute and relative basis as likely an attractive opportunity for investors who are underweight the asset class to begin to rebalance. We will of course monitor longer-dated oil prices and inflation expectations because economic growth would be at risk should oil as a share of global GDP sustain at above 7% (a historic level which precipitates demand destruction), though our base case remains that the stress of high oil prices is likely to be a short-lived phenomenon.

As mentioned, EM returns were again buttressed during the quarter by positive fundamental developments in AI. What began as a training-led buildout is increasingly being validated by surging inferencing workloads and revenue, while the emergence of agentic AI and multi-modal applications has enhanced visibility of demand for compute. Memory and leading-edge logic, the two most critical enabling technologies, are disproportionately supplied by EM companies, which is driving “EM’s share” of AI spend higher. While Taiwan Semiconductor Manufacturing Company Limited, SK hynix Inc., and Samsung Electronics Co., Ltd. have become household names, we have also invested in several niche companies with critical or enabling technologies that are beneficiaries of the tightness in both memory and leading-edge logic: leading-edge process complexity is driving adoption of HPSP Co., Ltd.'s high-pressure hydrogen annealing technology, while Park Systems Corporation’s atomic force microscopes are among the few tools capable of characterizing features at sub-nanometer tolerances. On the testing side, ISC Co., Ltd.'s test sockets benefit from surging GPU and AI ASIC shipments as well as rising pin count per chip, while Chroma ATE Inc.’s system-level test equipment is among its fastest-growing product lines. ASPEED Technology Inc., whose baseboard management controller chips handle remote monitoring and management of servers, has seen its addressable market expand with every incremental increase in rack-level complexity. All five companies were solid contributors to performance in the recent quarter.

We look forward to our next communication and thank you for investing in the Baron Emerging Markets Fund®.

Sincerely,