Baron India Fund | Q1 2026

Baron India Fund® (the Fund) declined 14.86% (Institutional Shares) during the first quarter of 2026, while its relevant benchmark, the MSCI AC Asia ex Japan/India Linked Index (the Linked Benchmark), was down 18.13%. As a reminder to investors, as of market close on August 30, 2024, Baron New Asia Fund was converted into Baron India Fund®, necessitating a Linked Benchmark to allow the predecessor track record to attach to the new Fund. In essence, our reported performance represents the return of Baron New Asia Fund from July 30, 2021 (Fund inception date) through August 31, 2024 and that of the reconstituted Baron India Fund beginning thereafter. Similarly, the Linked Benchmark, effective September 1, 2024, will reflect the performance of the MSCI India Index, the primary benchmark of Baron India Fund, while the period from July 30, 2021 through August 31, 2024 will reflect the performance of the MSCI AC Asia ex Japan Index. Baron India Fund® has outperformed the MSCI India Index by 3.71% on an annualized basis since Fund conversion (effective September 1, 2024).

For the first quarter, we comfortably outperformed our Linked Benchmark. While absolute returns were impacted by the onset of the Iran conflict, which drove a sharp increase in energy prices and elevated equity risk premium, we are encouraged by our relative performance during a period marked by heightened volatility and geopolitical uncertainty. We are particularly pleased with the continued effectiveness and validation of our proprietary risk management frameworks — especially our thematic investment approach and “S-curve analysis” (refer to Portfolio Structure section) — which have played a critical role in providing downside protection since Fund conversion. While our primary objective remains the generation of superior returns through the cycle, our ability to manage risk and preserve investor capital during challenging environments is equally important. In this regard, we take comfort in our solid relative performance over the past 18 months, a period characterized by volatility and consolidation in Indian equities following a cycle peak in September 2024.

On a more constructive note, the U.S. and India announced an interim trade agreement in February, reducing tariffs on Indian goods from a peak of 50% to 18%. This development removes a key overhang, alleviating investor concerns around the durability of the U.S.-India strategic partnership built over the past 25 years. In addition, India finalized a comprehensive Free Trade Agreement (FTA) with the European Union (EU) eliminating duties on over 90% of Indian exports. The FTA also incentivizes European corporates to position India as a strategic manufacturing hub, supporting supply chain diversification away from China amid an evolving geopolitical landscape. In our view, the U.S. and EU trade deals are likely to enhance India’s annual GDP growth trajectory by 40 to 50 basis points, further reinforcing its position as the world’s fastest growing large economy and a compelling long-term investment destination.

From a sector or theme perspective, positive allocation effect together with strong stock selection in the Industrials sector, primarily attributable to select holdings in our Make in India/ supply chain diversification (Precision Wires India Limited), power reforms (Kirloskar Oil Engines Limited and Cummins India Limited), and national security (Bharat Electronics Limited) themes, contributed the most to relative performance during the quarter. We are excited about our investment in Precision Wires, the largest manufacturer of copper winding wires in India. We believe the company is primed for success by leveraging its economies of scale and vertically integrated business model to increase customer wallet share in high growth segments such as transformers, electric vehicles (EVs), and consumer durable goods. Favorable allocation effect combined with solid stock selection in the Information Technology (IT) sector, largely driven by our exposure to Centum Electronics Limited, as part of our national security theme, was also a notable contributor to relative results. In addition, our call to remain materially underweight IT consulting & other services companies within the sector, owing to structural growth headwinds related to the advancement of AI, also bolstered relative performance. Lastly, our overweight positioning in the Health Care sector, which typically outperforms during periods of market uncertainty, also bolstered relative performance during the quarter. Partly offsetting the above was our large underweight positioning in the Materials sector, which benefited from rising commodity and precious metal prices during the period. Adverse stock selection in Financials (Cholamandalam Investment and Finance Company Limited and 360 ONE WAM Limited), along with negative allocation effect in Energy also weighed on relative results.

According to Bloomberg, the MSCI India Index was trading at just below 19 times one-year forward price/earnings as of quarter end — more than two standard deviations below its five-year average. This represents a sharp reversal from September 2024, when valuations were more than two standard deviations above historical norms. Assuming a credible path toward de-escalation in the Middle East and a normalization of energy prices, we believe Indian equities are at or near cycle bottom — presenting an attractive entry point for long-term investors.

Precision Wires India Limited is the largest manufacturer of enameled copper winding wire in India, with approximately 30% market share. The company’s products—critical inputs for power transformers, generators, and electric motors—are supplied across automotive, aerospace and defense, power, electronics, home appliances, and infrastructure end markets. Shares rose during the quarter, driven by robust sales growth, strong profitability, and an announced capacity expansion. We believe Precision Wires is well positioned to capitalize on India’s power-sector upcycle, with accelerated power generation capacity additions expected to drive sustained demand for winding wire. Growth in India’s EV market should also support increasing demand for highgrade winding wire, reinforcing our view that the company can deliver 15% to 20% compounded revenue growth over the next three to five years. Long term, we think Precision Wires will continue to benefit from its scale of operations, strong innovation capabilities, and relationships with original equipment manufacturers.

Centum Electronics Limited is a leading electronics manufacturing services provider in India, providing design and manufacturing solutions for mission-critical applications across defense, aerospace, industrial, and automotive industries. Shares rose during the quarter, driven by robust quarterly results and the divestiture of the company’s loss-making Canadian subsidiary. We remain invested, as we believe Centum is well positioned to benefit from the Indian government’s “Make in India” initiative, which promotes domestic manufacturing of electronic products and components through attractive tax subsidies and infrastructure support. Amid escalating global geopolitical tensions, we see additional upside from India’s push to indigenize defense equipment design and production, a trend that should benefit electronic system providers like Centum. Looking ahead, we expect the company to deliver 18% to 20% compounded revenue growth and 25% to 30% compounded EBITDA growth over the next three to five years.

Acutaas Chemicals Limited is a manufacturer of pharmaceutical intermediates and specialty chemicals in India. Shares were up during the quarter, driven by upbeat quarterly results and an upward revision to full-year growth and profitability guidance. We retain conviction in Acutaas, as the company continues to scale its pharmaceutical contract development and manufacturing operations through its contract with Fermion to supply chemical intermediates for darolutamide, a fast-growing patented drug for prostate cancer marketed by Bayer. We are also encouraged by Acutaas’ expansion into electrolyte additives and semiconductor chemicals, which should support strong growth momentum over the next few years. In our view, Acutaas could deliver more than 25% compounded revenue and earnings growth over the next three to five years.

HDFC Bank Limited is one of India’s largest and most recognized private sector banks, offering a broad range of financial services to retail and commercial clients. Shares fell during the quarter due to both company-specific and geopolitical events. The unexpected resignation of HDFC Bank’s chairman created a governance overhang as investors sought clarity on his departure. Subsequent communication from the board and management helped restore confidence by emphasizing that there were no underlying wrongdoing issues and that governance standards remain strong. On the macro side, the ongoing conflict in the Middle East, resulting in elevated energy prices, has created near-term uncertainty on India’s growth outlook given the country’s heavy reliance on imported crude. Despite these near-term headwinds, HDFC Bank remains a compelling long-term investment, supported by its best-in-class underwriting, strong liability franchise, and long runway for growth in an underpenetrated banking market, positioning it well to compound earnings as liquidity conditions normalize and macro pressures ease.

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.

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, consumer durable loans, and other related products.

* Individual weights may not sum to the displayed total due to rounding.

We combine a bottom-up investment approach with a thematic overlay to construct and manage a portfolio of high-quality, competitively advantaged companies located in India. Consistent with the “Baron Approach,” we invest behind value-creating, private sector entrepreneurs with significant ownership stakes, whose businesses are either gaining market share, disrupting, or consolidating their respective industries. We leverage our deep relationships in India to discover and invest in growth-oriented businesses for the long term.

The Fund is a diversified, all-cap strategy with the flexibility to invest across market caps, especially in small- and mid-cap stocks where we see significant mispricing due to limited sell-side coverage and/or those that remain “under the radar.” We typically invest across 30 to 50 stocks and concentrate capital toward our highest conviction ideas. As of March 31, 2026, we held 41 positions with our 10 largest investments comprising 47.2% of net assets.

Our principal investment themes with respective weightings (as of March 31, 2026) are as follows:

• Consumer Finance (22.8% of net assets): Low penetration levels; industry poised to grow mid-to high teens over the next several years; well managed private sector players to gain market share
• Formalization of the Economy (17.8%): Economic reforms are accelerating formalization leading to market share gains for organized, branded players across various industries
• Digitization (17.0%): India’s rising middle class and smartphone penetration (over 700 million and growing) is creating significant opportunities across e-commerce, food tech, digital streaming, and fintech
• Power Reforms (13.2%): Market friendly reforms along with growing demand for electricity in India (real estate, manufacturing, data centers, AC penetration) is necessitating a multi-year investment cycle in power generation and transmission
• Make in India/Supply Chain Diversification (12.3%): Tectonic shifts in geopolitics are accelerating import substitution and supply chain diversification (ex-China); significant opportunity for Indian players to gain market share in local and global supply chains
• National Security (9.0%): Rising global conflicts and recent military skirmishes with neighboring countries is leading India to accelerate defense spending with increased focus on domestic manufacturing
• Financialization of Savings (7.4%): Structural shift in household savings from gold/real estate into financial products such as equities/mutual funds/life insurance savings policies; capital market proxies along with asset managers/life insurers to benefit

We also segment the portfolio based on a S-curve analysis to serve as a form of risk management framework with respective weightings (as of March 31, 2026) as follows:

• Phase 1 (19.8% of net assets): “Under the Radar” or in “Investment Mode” – a phase of market mispricing/time arbitrage and an opportunity for significant alpha generation as these businesses enter Phase 2
• Phase 2 (14.7%): “Disruptors” or “Scale Builders” – this is a period when our holdings should generate non-linear growth and continued alpha capture on price discovery, earnings upgrades, and/or market disruption
• Phase 3 (47.0%): “Compounders” – post scale up, our companies have gained durable competitive moats and are well positioned to compound capital and earnings over the next several years
• Phase 4 (18.0%): “Market Performers/Mature Businesses” – period of stable growth with good earnings visibility; allocation to this segment will be viewed from a risk management / portfolio beta perspective

We had an exceptionally busy quarter as we took advantage of market volatility to initiate several new positions in existing themes while also rebalancing weights of a few holdings based on company specific fundamentals. As always, we strive to concentrate capital toward our highest conviction ideas.

We were active in adding to our consumer finance theme by initiating a position in Axis Bank Limited, a leading private sector bank in India offering a full suite of banking services to retail and corporate clients. While smaller in scale compared to top-tier peers, we like its greater emphasis on retail lending and a higher mix of fee-based revenues, which supports diversification and operating leverage. Management has been actively reshaping the balance sheet by tightening underwriting parameters and pivoting toward higher-quality retail credit. This is driving a sustained improvement in asset quality and overall risk profile. We believe this positions the bank to narrow the profitability and valuation gap versus peers over time. Recent underlying trends and management commentary support this view. Loan growth remains solid in the mid-teens and is expected to outpace the industry through continued momentum in retail segments and improving mix. Asset quality has stabilized, with non-performing loans trending lower and early stress indicators showing signs of improvement. At the same time, the bank is benefiting from operating leverage through disciplined cost control and investments in digitization. With profitability metrics already improving and further scope for margin expansion, lower credit costs and better cost efficiency, we see a clear path to higher ROE. Combined with a valuation that remains at a discount to leading peers, we believe the risk/reward is attractive for Axis Bank.

During the quarter, we also increased exposure to our Make in India/supply chain diversification theme by accumulating positions in Divi's Laboratories Limited, Acutaas Chemicals Limited, and Amber Enterprises India Limited. Divi’s is a leading global active pharmaceutical ingredients (APIs) and intermediates manufacturer. The company specializes in generic API production, custom synthesis, and nutraceuticals. By leveraging its deep capabilities in process chemistry, scale manufacturing, and strong execution in complex molecules, Divi’s has built strong relationships with global innovators and big pharma companies and plays a key role in the global pharmaceutical value chain. In our view, the company is a key beneficiary of global supply chain realignment, as innovator and generic customers diversify their API sourcing away from China. We are encouraged that Divi’s has been onboarded by large global innovators and pharma companies into the oral GLP 1 and GLP-1 injectables value chain as a supplier of complex intermediates and custom manufactured peptides. This opportunity underscores Divi’s strengths in large scale, late stage commercial manufacturing and provides multi year revenue visibility as GLP 1 demand continues to expand worldwide. We are also excited by the company’s commitment to capacity expansion and its sustained focus on R&D. In our view, the company is well positioned to deliver mid-teens compounded revenue growth and 20% earnings growth over the next three to five years.

Acutaas is a leading manufacturer of advanced pharmaceutical intermediates (intermediates) and specialty chemicals in India. The company plays a vital role in the global pharmaceutical value chain, with a 50% to 90% market share in several critical intermediates up to the N 1 stage of the API synthesis chain. To drive sustainable long term growth, Acutaas proactively invests in R&D to build a durable pipeline of intermediates with API patents that expire through 2040 and beyond. In addition to its core intermediates business, the company is actively ramping up its higher margin contract development and manufacturing organization (CDMO) vertical in collaboration with global innovators. For example, Acutaas became the primary intermediates vendor for darolutamide, a fast-growing, patented prostate cancer drug marketed by Bayer with estimated peak sales of more than $4 billion. This long-term contract under the CDMO model provides strong revenue visibility over the next few years. We are also excited about Acutaas’ new ventures into electrolyte additives and semiconductor chemicals, which should support strong growth momentum. In our view, the company is well positioned to deliver over 20% compounded revenue and earnings growth over the next three to five years.

Amber is a leading contract manufacturer and component supplier for consumer durable goods, particularly room air conditioners (RACs). The company currently commands over 25% market share in the domestic RAC manufacturing value chain and has increasingly pivoted from a box build/turnkey model to a business-to-business component supplier to leading original equipment manufacturers (OEMs). This has enabled Amber to gain customer wallet share as OEMs are increasingly shifting toward in house assembly and reducing reliance on imports by sourcing components from accredited local vendors. In our view, Amber is also transforming into a leading electronics manufacturing services (EMS) company by investing in power electronics, bare printed circuity board (PCB) manufacturing, and PCB assembly capabilities. We believe Amber is well positioned to benefit from the government’s “Make in India” initiative, which encourages domestic manufacturing of electronic components through attractive tax incentives and manufacturing infrastructure support. We expect the company to deliver 20% compounded revenue growth and 25% compounded EBITDA growth over the next three to five years.

As part of our digitization theme, we reinitiated a position in Indus Towers Limited, a leading telecommunications tower operator in India. The telecom towers sector in India in currently structured as a quasi-duopoly, with Indus and a key competitor accounting for over 75% market share. The company has been a primary beneficiary of accelerating 4G, and more recently 5G services in India. However, its valuation has remained deeply discounted compared to global tower peers, primarily due to a key customer, Vodafone Idea (VI), experiencing share losses that triggered insolvency concerns for the telco. With recent improvement in financial viability, VI resumed monthly payments to Indus, removing a key overhang for Indus’ stock. Additionally, as VI completes another round of equity and debt financing, Indus will benefit from the telecom operator’s planned 4G expansion and 5G rollout, driving tower additions, tenancy ratio improvement, and consequently higher operating leverage and free-cash generation. We expect Indus to deliver high single-digit revenue growth and approximately 10% compounded earnings growth over the next three to five years, with nearly all the incremental free cash flow enhancing distributions to shareholders.

During the quarter, we also increased exposure to our power reforms theme by building a position in JSW Energy Limited, a leading power generation company in India with a rapidly expanding renewable energy platform. The company plans to more than double its generation capacity from the current 13 GW to approximately 28 GW over the next four years, with roughly 80% of incremental capacity from renewable sources. With about 90% of the planned capacity expansion already secured under long-term PPAs (power purchase agreements), JSW Energy has strong visibility into revenue growth and stable cash flows over the long term. In addition to generation, the company is building strategic capabilities in pumped hydro and battery energy storage, which we believe will be critical enablers as renewable penetration increases and grid stability becomes more important. Leveraging the broader JSW Group’s execution strength and balance sheet support, JSW Energy is scaling capacity efficiently with access to attractive rates of debt financing. We expect the company to deliver over 25% compounded EBITDA growth over the next three to five years, driven by capacity additions, a rising renewable mix, and operating leverage.

Adding to our national security theme, we initiated a position in Aditya Infotech Limited, India’s largest video surveillance manufacturer with approximately 40% market share. Founded over three decades ago, the company has evolved from a distributor into a vertically integrated security solutions provider, with the world’s largest CCTV (closed circuit television) production capacity outside China. In 2025, the Government of India enforced the STQC (Standardization Testing and Quality Certification) norms, which impose stringent supply chain transparency requirements and restrict the use of Chinese-origin SoCs (systems on chips), effectively disqualifying most Chinese CCTV brands from government and commercial use cases in India. Aditya Infotech’s domestic manufacturing capabilities and proactive non-China sourcing of key components enabled it to build a broad STQC-certified product portfolio, helping it nearly double its market share over the past year. In our view, the company will continue to gain share as a key beneficiary of regulatory change and outpace industry growth of 15% to 20%. In addition, as the revenue mix shifts away from distribution of third-party products toward higher-margin own-brand SKUs, and as the company deepens localization and backward integration, we expect sustained margin expansion. In our view, Aditya Infotech is well positioned to deliver over 20% compounded earnings growth over the next three to five years.

Finally, we added to several of our existing positions during the quarter, most notably 360 ONE WAM Limited, Bharat Electronics Limited, Kirloskar Oil Engines Limited, SBI Life Insurance Company Limited, HealthCare Global Enterprises Limited, Tata Consumer Products Limited, and Power Grid Corporation of India Limited. During the quarter, we also exited positions in Coforge Limited, Tata Communications Limited, DCW Limited, and Le Travenues Technology Limited due to uncertainties over durability of earnings growth and/or competitive positioning going forward.

As we write this letter, Indian equities have staged a notable recovery, with the MSCI India Index appreciating nearly 10% from the March 2026 quarter-end lows. While we cannot predict geopolitical outcomes, we are cautiously optimistic about an eventual resolution of the Middle East conflict or, at a minimum, a normalization of oil and energy prices from current elevated levels. The recent ceasefire between the U.S. and Iran is an encouraging initial step, although the path to durable peace will not be easy, and setbacks should be expected along the way. That said, this too shall pass. As history has consistently shown, markets eventually recover and go on to thrive following global and/or financial dislocations — be it the Global Financial Crisis, the COVID-19 pandemic, or the Ukraine war, among many others. We firmly believe the current conflict will be no different.

Taking advantage of market volatility and a material drawdown in Indian equities, we were active in acquiring high-quality businesses led by visionary management teams at attractive prices. At the same time, we are pleased with the continued effectiveness and validation of our proprietary risk management frameworks, which have provided downside protection during periods of market turbulence.

Since the previous cycle peak in September 2024, Foreign Institutional Investors (FIIs) have sold an unprecedented $46 billion of Indian equities over the past 18 months, while domestic institutions have purchased approximately $140 billion. Further, we are encouraged by the patience and maturity of local retail investors, who have continued allocating over $3 billion to Systematic Investment Plans (SIPs) — automated monthly investments into mutual funds — despite experiencing double-digit drawdowns this past quarter. SIP inflows reached a new record in March at approximately $3.4 billion, up 8% month-over-month and 24% year-over-year. With the accelerating financialization of domestic savings, FII ownership at a decadal low, and valuation multiples for Indian equities trading one to two standard deviations below long-term averages, we believe we are at or near a cycle bottom – presenting an attractive entry point for long-term investors.

We remain excited about India’s structural growth story, and barring the near-term impact of the Iran conflict, we believe the market is entering a potential earnings upgrade cycle. This is supported by a rebound in government infrastructure spending, targeted tax relief for the middle class, benign inflation trends, and the rollout of "GST 2.0,” which has boosted consumption and economic activity. As several leading economic indicators have turned favorable, we expect earnings transmission to follow with a lag—making the current period an opportune time to build positions ahead of what we believe will be a tangible uplift in earnings trajectory for our holdings. We caveat this view with the assumption that oil/energy prices will not remain elevated beyond the near term. The Ukraine war serves as a useful precedent, where oil prices normalized within six to nine months of the onset of the conflict.

Finally, from a trade perspective, we believe India will benefit significantly from the recently announced trade agreement with the U.S. and the comprehensive FTA signed with the EU. We estimate these developments could add 40 to 50 basis points to India’s annual GDP growth over time, further reinforcing its position as the world’s fastest growing large economy and a compelling long-term investment destination. We believe the U.S.-India strategic partnership, built over the past 25 years, remains firmly intact and should continue to strengthen following the signing of these agreements.

Thank you for investing in the Baron India Fund®. We truly appreciate your partnership.

Sincerely,