Baron India Fund | Q3 2025

Dear Baron India Fund Shareholder,

Baron India Fund® (the Fund) declined 6.34% (Institutional Shares) during the third quarter of 2025, while its relevant benchmark, the MSCI AC Asia ex Japan/India Linked Index (the Linked Benchmark), was down 7.61%. 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.

As we celebrate the Fund’s first anniversary as an India dedicated strategy, we are pleased with our relative performance during a period of increased market volatility and consolidation. We are also encouraged by the validation of our proprietary risk management frameworks, especially our thematic approach to investing and “S-curve analysis” (refer to Portfolio Structure section), that have played a key role in generating solid relative performance and downside protection over the past year. Baron India Fund has outperformed the MSCI India Index by 660 basis points cumulatively since Fund conversion (effective September 1, 2024).

For the third quarter, we outperformed our Linked Benchmark. During the period, Indian equities corrected approximately 8% and underperformed emerging market peers owing to trade related uncertainties as the U.S. administration levied a 50% tariff on most goods imported from India. In addition, the imposition of a $100,000 fee on new H-1B visas (Indian citizens comprise around 70% of the skills based non-immigrant visa) also weighed on market sentiment. While such headlines seem concerning, the adverse economic impact on India’s GDP at about 50 to 60 basis points is not meaningful, in our view. Assuming a worst-case scenario, wherein there in no trade resolution, India’s real GDP will continue to grow 6.0% to 6.5% versus its current trajectory of 6.5% to 7.0%, still positioning the country as the world’s fastest growing large economy. Taking a contrarian view, we believe the H-1B fee could accelerate investment into India’s established global capability centers (GCCs) as U.S. corporates increasingly outsource information technology (IT) services to GCCs and bolster the local job market. This trend is likely to incur market share losses for Indian IT services companies, which we remain materially underweight, supporting relative performance during the period. In addition, the Fund’s limited exposure to export-oriented businesses, especially those that supply goods to the U.S., also contributed to relative results.

On a positive front, in the aftermath of trade tariffs, India unleashed a new wave of economic reforms by simplifying and lowering the Goods and Services Tax (GST), effectively reducing prices on the consumer basket by 5% to 10%. Based on sell-side estimates, “GST 2.0” is likely to bolster real consumer spend and contribute 70 to 80 basis points to GDP, essentially neutralizing growth headwinds due to elevated U.S. tariffs. Toward the end of the quarter, President Trump also took a more conciliatory approach to India with both countries resuming active negotiations to sign a bilateral trade agreement and lower tariffs. In our view, the U.S.-India strategic partnership remains intact with growing signs of a trade truce in the coming months. Any such resolution on trade will likely create a significant repricing of Indian equities, especially as we enter an earnings upgrade cycle as discussed in our June 2025 quarterly letter.

From a sector or theme perspective, strong stock selection in the Information Technology sector, primarily attributable to select holdings in our national security (Centum Electronics Limited) and “Make in India”/supply chain diversification (Kaynes Technology India Limited) themes, contributed the most to relative performance during the quarter. Centum is a leading electronics manufacturing services provider that is transforming into an integral supplier of mission critical components and sub-systems to India’s burgeoning aerospace and defense ecosystem. With over three decades of industry expertise and a core emphasis on quality control, the company is well positioned to benefit from rising defense spending and the government’s “Make in India” initiative, which encourages localization of electronics manufacturing and related supply chains by providing attractive financial subsidies and logistics infrastructure. In addition, we remain materially underweight IT services companies within the sector, owing to structural growth headwinds related to the advancement of AI and more recently due to the prohibitive H-1B visa fee, which will impact near-term profitability for such businesses.

Favorable stock selection in the Financials sector, driven mostly by our investment in Bajaj Finance Limited, as part of our consumer finance theme, also stood out as a key contributor to relative results. Lastly, solid stock selection effect in the Industrials sector, owing to a few holdings in our “Make in India”/supply chain diversification (Shaily Engineering Plastics Limited) and power reforms (Cummins India Limited and Siemens Energy India Limited) themes, also bolstered relative performance during the period. Shaily, as a leading supplier of proprietary injection pens for generic GLP-1s, should deliver strong earnings growth over the next two to three years as branded anti-obesity drugs such as Ozempic and Wegovy begin to go off-patent in India and Brazil, among other countries. Partly offsetting the above was poor stock selection in the Consumer Discretionary (Trent Limited) sector. Adverse allocation effect together with subpar stock selection in Materials (DCW Limited) and Communication Services (Bharti Airtel Limited) also weighed on relative results.

Eternal Limited is India’s leading food delivery and quick commerce platform, with roughly 55% and 40% market share in these respective categories. Shares rose during the quarter, driven by Eternal’s continued leadership in the race toward profitability in quick commerce, as well as its strong balance sheet in an increasingly competitive industry. We retain conviction, as we believe Eternal is well positioned for long-term growth in quick commerce, given its first-mover advantage, scale, and superior execution. We think Eternal will continue to benefit from structural growth in online food delivery in India, potentially doubling its revenue, while also improving profitability and growing earnings over the next three to five years.

Shaily Engineering Plastics Limited is a leading Indian manufacturer of precision injection-molded plastic components, with diverse product offerings spanning categories such as furniture, pharmaceuticals, and various industrial applications. Shares increased during the quarter, driven by strong quarterly results and the company’s plans to significantly expand its GLP-1 pen manufacturing capacity. We remain invested in Shaily, as we believe the company will benefit from global supply chain diversification away from China and strong growth opportunities in GLP-1 pen manufacturing.

Centum Electronics Limited is a leading electronics system design and manufacturing services provider in India, offering solutions for mission-critical applications across defense, aerospace, industrial, and automotive industries. Shares rose on strong quarterly results. 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 financial subsidies and infrastructure support. Amid rising 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. We are also encouraged by management’s commitment to restructuring its loss-making Canadian subsidiary and enhancing operational efficiency at its French subsidiary. Looking ahead, we expect Centum to deliver 18% to 20% compounded revenue growth and 25% to 30% compounded EBITDA growth over the next three to five years.

Max Healthcare Institute Limited is a leading hospital services chain in India. Shares detracted from performance during the quarter due to a slight profit miss, owing to upfront business expenses as it ramps up new bed capacity. We remain investors. Under the leadership of CEO and restructuring specialist Abhay Soi, management has focused on cost optimization at mature facilities while improving profitability at greenfield projects along with realizing synergies at recently acquired hospitals. These efforts have helped Max Healthcare differentiate itself among peers with best-in-class EBITDA margins, average revenue per occupied bed, and return on invested capital. We remain optimistic about the multi-year growth opportunity in Indian hospital services and retain conviction in Max Healthcare as a key beneficiary of ongoing industry consolidation. We expect the company to more than double EBITDA and sustain mid-teens revenue growth over the next three to five years.

Bharti Airtel Limited is India’s leading telecommunications service provider with over 40% revenue market share in mobile services. The company’s offerings include wireless services, mobile commerce, and fixed-line broadband. Shares declined during the quarter as subscriber additions came in slightly below expectations. We remain share holders. As India’s dominant mobile operator, Bharti Airtel is benefiting from ongoing industry consolidation. In particular, competitor Vodafone Idea appears on the verge of bankruptcy amid severe pricing pressure and an unsustainable balance sheet. We retain conviction in Bharti Airtel’s outlook given its visibility into strong free cash flow generation, having moved past its peak capex intensity, and its continued transformation into a digital services provider positioned to benefit from rising mobile tariffs.

Trent Limited is a leading retailer in India that sells private-label apparel direct-to-consumer through its proprietary network. Shares declined during the quarter following lower-than-expected quarterly sales, as retail activity was partly affected by above-normal rainfall. We remain invested as we believe the company can sustain over 20% revenue growth in the near to medium term, driven by same-store-sales growth and outlet expansion. In addition, we expect operating leverage and a growing share of franchisee-operated stores to support stronger profitability and return on capital, driving 25%-plus compounded annual EBITDA growth over the next three to five years.

* 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 September 30, 2025, we held 41 positions with our 10 largest investments comprising 49.0% of net assets.

Our principal investment themes with respective weightings (as of September 30, 2025) are as follows:

• Formalization of the Economy (25.1% of net assets): Economic reforms are accelerating formalization leading to market share gains for organized, branded players across various industries
• Consumer Finance (24.3%): 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
• Digitization (20.6%): 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
• Make in India/Supply Chain Diversification (8.5%): Tectonic shifts in geopolitics are accelerating supply chain diversification (ex-China); significant opportunity for Indian players to gain market share in global supply chains
• National Security (7.4%): Rising global conflicts and recent military skirmishes with neighboring countries are leading India to accelerate defense spending with increased focus on domestic manufacturing
• Power Reforms (7.1%): 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
• Financialization of Savings (4.1%): 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 September 30, 2025) as follows:

• Phase 1 (12.9% 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 (19.3%): “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 (45.4%): “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 (19.3%): “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

During the third quarter, we recategorized our global security/supply chain diversification related investments into two new themes, namely national security and “Make in India”/supply chain diversification. The increasing allocation to aerospace and defense-related businesses in the portfolio warranted a dedicated theme for such holdings. While adding one new investment, we also rebalanced weights of a few positions based on company specific fundamentals during the period. We strive to concentrate capital toward our highest conviction ideas.

We increased exposure to our national security theme by initiating a position in Astra Microwave Products Limited (AMPL), a leading designer and manufacturer of radio frequency and microwave components in India. With over three decades of technological expertise, AMPL has developed a core competency in radar electronics, while it is also actively engaged in other mission-critical applications, including satellites, electronic warfare, and meteorological devices. The company is a trusted supplier to key Indian government entities, including the Defense Research and Development Organization and the Indian Space Research Organization, as well as prominent global clients, such as Raytheon and ELTA Systems. In our view, AMPL is well positioned to benefit from the Indian government’s “Make in India” initiative, which encourages domestic manufacturing of electronic products and components by providing attractive tax subsidies and logistics infrastructure. In addition, amid escalating global geopolitical tensions, we see further upside from India’s accelerated efforts to localize the design, development, and production of defense equipment, such as radars for the indigenously developed Tejas Light Combat Aircraft, where AMPL emerged as a winning bidder. We are also encouraged by AMPL’s strategic vision to move up the value chain from a component supplier to a subsystem and full system integrator, which should support higher business growth and margin expansion. We expect the company to deliver 18% to 20% compounded revenue growth and 20% to 25% compounded EBITDA growth over the next three to five years.

Finally, we added to several of our existing positions during the quarter, most notably Eternal Limited, ICICI Bank Limited, Bharat Electronics Limited, Precision Wires India Limited, Siemens Energy India Limited, HDFC Bank Limited, and Centum Electronics Limited.

During the quarter, we also exited positions in Indus Towers Limited, REC Limited, Siemens Limited, and Thermax Limited due to uncertainties over durability of earnings growth and/or competitive positioning going forward.

While the global geopolitical landscape and evolving trade dynamics remain fluid, and enthusiasm around the AI megacycle continues to build, we view the recent underperformance in Indian equities as a timely opportunity to initiate or increase exposure to the market. Following a year of consolidation, price-to-earnings valuations have reverted to long-term averages, offering an attractive entry point for long-term investors. We remain excited about India’s structural growth story and 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, a normal monsoon improving rural demand, and the rollout of “GST 2.0,” which is expected to further boost 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.

From a trade perspective, as discussed earlier in the letter, the impact of elevated U.S. tariffs is not material given India is primarily a domestic consumer driven economy with a low share of global trade. Goods exported to the U.S. account for only around 2% of India’s GDP with certain tariff exemptions (including on iPhones and generic pharmaceuticals) further mitigating the economic impact. “GST 2.0” should also offset any trade related headwinds, supporting India’s high-growth trajectory. The Reserve Bank of India recently upgraded India’s fiscal year 2026 real GDP growth forecast to 6.8% (earlier at 6.5%) which validates our view above.

The Fund has limited exposure to export-oriented businesses, especially those that supply goods to the U.S., creating further downside protection for our investors. That said, we view the current trade impasse as temporary and are encouraged by the recent conciliatory approach of the U.S. administration toward India, with both sides reengaging in active discussions to sign a bilateral trade agreement and lower tariffs. While we cannot predict policy or trade outcomes, the risk/reward for Indian equities has become increasingly attractive as markets, in our view, have already discounted a worst-case scenario leading to the recent underperformance.

Our optimism about India remains firmly intact. We believe the country has emerged as a “breakout” investment destination, driven by productivity-enhancing economic reforms that are catalyzing a virtuous investment cycle and positioning India as the fastest-growing large economy of the decade. Accelerating digitization—fueled by over 700 million smartphone users—is amplifying growth across sectors, particularly in e-commerce, digital payments, food delivery, and streaming services. A structural shift in household savings is also reshaping India’s financial landscape. Increasingly, savings are moving away from traditional assets like gold, real estate, and fixed deposits toward equities, mutual funds, and life insurance products. This transformation has fostered a more resilient and vibrant domestic capital markets ecosystem—one that provides a stabilizing force during episodes of foreign capital outflows and global market volatility.

Year to date, domestic institutional investors have allocated about $65 billion to Indian equities, even as foreign investors (FIIs) have withdrawn more than $17 billion. Post the recent capital outflow, FII ownership of Indian equities is at a decadal low as investors remain cautious on trade dynamics and continue to favor the “AI trade.” Quoting legendary investor Warren Buffett, as also highlighted in the 1986 Berkshire Hathaway shareholder letter,—“be fearful when others are greedy, and greedy when others are fearful”—aptly summarizes our view on India’s attractive risk/reward at current levels.

Finally, despite recent trade-related setbacks, we believe the U.S.-India strategic partnership remains robust. Anchored in the shared objective of counterbalancing a rising and more assertive China, this alliance should continue to strengthen, with a growing number of global corporates viewing India as a compelling destination to diversify manufacturing and supply chains beyond China.

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

Sincerely,