UNITED STATES OMB APPROVAL
SECURITIES AND EXCHANGE COMMISSION OMB Number: 3235 -0570
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FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-21296
BARON SELECT FUNDS
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(Exact name of registrant as specified in charter)
767 Fifth Avenue, 49th Floor
New York, NY 10153
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(Address of Principal Executive Offices) (Zip Code)
Linda S. Martinson, Esq.
c/o Baron Select Funds
767 Fifth Avenue,49th Floor
New York, New York 10153
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(Name and Address of Agent for Service)
Registrant's Telephone Number, including Area Code 212-583-2000
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Date of fiscal year end: December 31
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Date of reporting period: December 31, 2004
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Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17CRF 270.30e-1). The
Commission may use the information provided on Form N-CSR in its regulatory,
disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and suggestions for reducing the burden
to Secretary, Securities and Exchange Commission, 450 5th Street, NW,
Washington, D.C. 20549-6009. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
Potential persons who are to respond to the collection of
information contained in this form are not required to respond
unless the form displays a currently valid OMB control number.
SEC 2569 (3-03)
Item 1. Baron Select Funds Annual Report for the period ended
December 31, 2004.
[Registered Logo]
B A R O N
S E L E C T
F U N D S
BARON PARTNERS FUND
MANAGEMENT DISCUSSION OF
FUND PERFORMANCE ............................................................3
STATEMENT OF NET ASSETS.......................................................5
STATEMENT OF ASSETS AND
LIABILITIES .................................................................6
STATEMENT OF OPERATIONS.......................................................7
STATEMENTS OF CHANGES IN
NET ASSETS ..................................................................8
STATEMENT OF CASH FLOWS.......................................................9
NOTES TO FINANCIAL
STATEMENTS .................................................................10
REPORT OF INDEPENDENT
REGISTERED PUBLIC
ACCOUNTING FIRM ............................................................13
TAX INFORMATION..............................................................14
MANAGEMENT OF THE FUND.......................................................14
767 Fifth Avenue
NY, NY 10153
212.583.2100
1.800.99.BARON
BaronFunds.com
ANNUAL FINANCIAL REPORT DECEMBER 31, 2004
Dear Baron Partners Fund Shareholder:
Attached you will find audited financial statements for Baron Partners Fund for
its fiscal year ended December 31, 2004. The Securities and Exchange Commission
requires mutual funds to furnish these statements semi-annually to their
shareholders.
We thank you for choosing to join us as fellow shareholders in Baron Partners
Fund. We will continue to work hard to justify your confidence.
Sincerely,
/s/ Ronald Baron
Ronald Baron
Chairman and Portfolio Manager
February 24, 2005
/s/ Peggy Wong
Peggy Wong
Treasurer and CFO
February 24, 2005
A description of the Fund's proxy voting policies and procedures is available
without charge on the Fund's website, www.BaronFunds.com, or by calling 1-800-
------------------
99-BARON and on the SEC's website at www.sec.gov. The Fund's most current proxy
-----------
voting record, Form N-PX, is also available on the Fund's website,
www.BaronFunds.com and on the SEC's website at www.sec.gov.
- ------------------ -----------
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Form N-Q is
available on the SEC's website www.sec.gov. The Fund's Form N-Q may also be
-----------
reviewed and copied at the SEC's Public Reference Room in Washington, DC;
information on the operation of the SEC's Public Reference Room may be obtained
by calling 800-SEC-0330.
Some of our comments are based on current management expectations and are
considered "forward-looking statements." Actual future results, however, may
prove to be different from our expectations. You can identify forward-looking
statements by words such as "estimate", "may", "expect", "should", "could",
"believe", "plan" and other similar terms. We cannot promise future returns and
our opinions are a reflection of our best judgment at the time this report is
compiled.
The views expressed in this report reflect those of the Company only through the
end of the period stated in this report. The views are not intended as
recommendations or investment advice to any person reading this report and are
subject to change at any time based on market and other conditions and Baron has
no obligation to update them.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. The investment return and
principal value of an investment will fluctuate; an investor's shares, when
redeemed, may be worth more or less than their original cost. For more complete
information about Baron Partners Fund, including charges and expenses, call or
write for a prospectus. Read it carefully before you invest or send money. This
report is not authorized for use as an offer of sale or a solicitation of an
offer to buy shares of Baron Partners Fund unless accompanied or preceded by the
Fund's current prospectus.
BARON PARTNERS FUND
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COMPARISON OF THE CHANGE IN VALUE OF $10,000 INVESTMENT IN
BARON PARTNERS FUND+** IN RELATION TO THE S&P 500* AND THE RUSSELL 2000*
[Graph]
Baron
Partners Russell S & P
Fund 2000 500
1/31/1992 10,000 10,000 10,000
12/31/1992 11,963 10,958 10,953
12/31/1993 16,210 12,059 13,021
12/31/1994 16,895 12,213 12,784
12/31/1995 24,612 16,797 16,421
12/31/1996 29,452 20,656 19,130
12/31/1997 47,671 27,544 23,407
12/31/1998 53,059 35,418 22,812
12/31/1999 64,247 42,865 27,661
12/31/2000 67,123 38,943 26,825
12/31/2001 56,347 34,306 27,492
12/31/2002 45,982 26,707 21,861
12/31/2003 61,963 34,350 32,191
12/31/2004 88,203 38,091 38,099
Average Annual Total Return
for the periods ended December 31, 2004
Since Inception
One Year Five Years Ten Years 01/31/1992+
Baron Partners Fund** 42.35% 6.54% 17.97% 18.36%
Russell 2000* 18.33% 6.61% 11.54% 10.91%
S & P 500* 10.83% -2.32% 12.05% 10.91%
+ Since inception, January 31, 1992, Baron Partners Fund's predecessor was a
limited investment partnership, which imposed different advisory fees,
operating expenses, and no dividend or capital gain distribution schedules.
The restated performance information reflects the imposition of the same
advisory fees and expenses that would have been applied historically if the
Fund had had its current structure since inception in accordance with SEC
guidelines. The performance data include the predecessor partnership's
performance for the periods before the Fund's registration statement became
effective on April 30, 2003. The predecessor partnership was not registered
under the 1940 Act. Hence it was not subject to certain investment
restrictions imposed by the 1940 Act and by the Internal Revenue Code of
1986, which if applicable, might have adversely affected the performance of
the Fund.
* S&P 500, Russell 2000, and the Fund are with dividends. The inclusion of
dividends positively impacts the performance results of the Fund and the
indexes. The S&P 500 and the Russell 2000 are unmanaged indexes. The S&P
500 measures the performance of larger cap equities in the stock market in
general; the Russell 2000 of small companies.
** The performance data in the table does not reflect the deduction of taxes
that a shareholder would pay on dividends, capital gain distributions, or
redemption of Fund shares.
2
BARON PARTNERS FUND
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Top Ten Holdings (as a percentage of Net Assets) as of
December 31, 2004
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Apollo Group, Inc., Cl A 9.9%
Wynn Resorts, Ltd. 7.2%
ChoicePoint, Inc. 5.8%
Charles Schwab Corp. 4.9%
Toll Brothers, Inc. 4.9%
Centex Corp. 4.7%
Manor Care, Inc. 4.5%
Axis Capital Holdings, Ltd. 4.3%
Arch Capital Group, Ltd. 3.7%
Hewitt Associates, Inc. 3.2%
-----
53.1%
=====
Top Ten Industry Groups
as of December 31, 2004
(as a percentage of Net Assets)
Education 12.3%
Home Building 9.6%
Recreation and Resorts 9.2%
Business Services 8.6%
Financial Services - Insurance 8.0%
Financial Services - Brokerage & Exchanges 7.1%
Retail - Specialty Stores 5.2%
Health Care Services - Insurance 4.6%
Health Care Facilities 4.5%
Transportation 4.4%
Other 10.9%
Cash and cash equivalents 15.6%
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MANAGEMENT DISCUSSION OF FUND PERFORMANCE
Baron Partners Fund performed well in the year ended December 31, 2004. The Fund
gained 42.35%. The S&P 500, an index of large cap stocks, gained 10.83% and the
Russell 2000, an index of small cap companies, gained 18.33% in the same period.
Baron Partners Fund has performed well since it converted into an open-end
mutual fund on April 30, 2003 and even earlier, when it was an investment
partnership. The Fund has significantly outperformed both the Russell 2000 and
the S&P 500 since its inception in January, 1992 (see graph).
The Fund's performance was especially strong in the first quarter, +12.69%, and
in the fourth quarter, +18.58%. The Fund significantly outperformed the S&P 500
and Russell 2000 in every quarter of 2004.
The Fund's performance was not uniform across sectors. The Fund's performance
was led by its investments in Recreation & Resorts. In addition, the Fund
performed well with its investments in Education, Financial Services-Brokerage &
Exchanges, Health Services-Insurance and Homebuilding. The Fund's performance
was not negatively impacted by its investments in any sector.
The Fund's short positions did not have a significant impact on the Fund's
performance in 2004.
In fiscal year 2005, the Fund will continue to invest in a concentrated manner
in companies that in our opinion are undervalued relative to their long-term
growth prospects and ability to sustain superior levels of profitability. The
Fund will establish short positions in companies we believe have limited growth
prospects, are poorly managed, have a highly leveraged balance sheet, or are
overpriced. We are looking forward to a successful 2005.
3
BARON PARTNERS FUND
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FUND EXPENSES (UNAUDITED)
As a shareholder of the Fund, you may incur two types of costs: ongoing
expenses and transaction costs. Ongoing expenses include advisory fees,
distribution and service (12b-1) fees and other Fund expenses. The information
on this page is intended to help you understand your ongoing costs of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds.
This example is based on an investment of $1,000 invested on July 1, 2004
and held for the six months ended December 31, 2004.
ACTUAL EXPENSES
The table below titled "Based on Actual Total Return" provides information
about actual account values and actual expenses. You may use the information
provided in this table, together with the amount you invested, to estimate the
expenses that you paid over the period. To estimate the expenses you paid on
your account, divide your ending account value by $1,000 (for example, an $8,600
ending account value divided by $1,000 = 8.6), then multiply the result by the
number under the heading titled "Expenses Paid During the Period".
BASED ON ACTUAL TOTAL RETURN(1)
BEGINNING ENDING ANNUALIZED EXPENSES
ACTUAL TOTAL ACCOUNT VALUE ACCOUNT VALUE EXPENSE PAID DURING
RETURN JULY 1, 2004 DECEMBER 31, 2004 RATIO THE PERIOD(2)
------------ ------------- ----------------- ---------- -------------
BARON PARTNERS FUND 21.34% $1,000 $1,213 1.34% $7.46
- ---------------
(1) For the six months ended December 31, 2004. Assumes all reinvestment of
dividends and capital gain distributions, if any.
(2) Expenses are equal to the Fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by the number of days in
the most recent fiscal half-year, then divided by 366.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below titled "Based on Hypothetical Total Return" provides
information about hypothetical account values and hypothetical expenses based on
the actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Fund's actual return. The hypothetical account values
and expenses may not be used to estimate the actual ending account values and
expenses you paid for the period. You may use the information provided in this
table to compare the ongoing costs of investing in the Fund and other funds. To
do so, compare the 5% hypothetical example relating to the Fund with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table below are meant to highlight
your ongoing costs and do not reflect any transactional costs, such as
redemption fees, if any. Therefore, the table is useful in comparing ongoing
costs only and will not help you determine your relative total costs of owning
different mutual funds. In addition, if these transactional costs were included,
your costs would have been higher.
BASED ON HYPOTHETICAL TOTAL RETURN(1)
HYPOTHETICAL BEGINNING ENDING ANNUALIZED EXPENSES
ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE EXPENSE PAID DURING
TOTAL RETURN JULY 1, 2004 DECEMBER 31, 2004 RATIO THE PERIOD(2)
------------ ------------- ----------------- ---------- -------------
BARON PARTNERS FUND 5.00% $1,000 $1,018 1.34% $6.80
- ---------------
(1) For the six months ended December 31, 2004.
(2) Expenses are equal to the Fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by the number of days in
the most recent fiscal half-year, then divided by 366.
4
BARON PARTNERS FUND
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STATEMENT OF NET ASSETS
DECEMBER 31, 2004
Shares Cost Value
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COMMON STOCKS (81.93%)
BUSINESS SERVICES (8.59%)
800,000 ChoicePoint, Inc.*+ $ 20,549,531 $ 36,792,000
575,000 Iron Mountain, Inc.* 17,429,849 17,531,750
------------ ------------
37,979,380 54,323,750
CONSULTING (3.16%)
625,000 Hewitt Associates, Inc.* 17,829,023 20,006,250
EDUCATION (12.27%)
775,000 Apollo Group, Inc., Cl A* 42,262,248 62,550,250
125,000 Education Mgmt. Corp.* 561,094 4,126,250
100,000 Strayer Education, Inc. 10,185,851 10,979,000
------------ ------------
53,009,193 77,655,500
ENERGY & ENERGY SERVICES (4.33%)
275,000 Ultra Petroleum Corp.* 13,601,138 13,235,750
400,000 XTO Energy, Inc. 12,140,285 14,152,000
------------ ------------
25,741,423 27,387,750
FINANCIAL SERVICES -
BROKERAGE
& EXCHANGES (7.07%)
2,590,000 Charles Schwab Corp. 22,565,183 30,976,400
60,000 Chicago Mercantile Exchange
Holdings, Inc. 4,329,601 13,722,000
------------ ------------
26,894,784 44,698,400
FINANCIAL SERVICES -
INSURANCE (7.99%)
600,000 Arch Capital Group, Ltd.* 21,296,185 23,220,000
1,000,000 Axis Capital Holdings, Ltd. 26,683,954 27,360,000
------------ ------------
47,980,139 50,580,000
FINANCIAL SERVICES -
MISCELLANEOUS (2.00%)
225,000 First Marblehead Corp.* 9,953,291 12,656,250
HEALTH CARE FACILITIES
(4.48%)
800,000 Manor Care, Inc. 25,604,777 28,344,000
HEALTH CARE SERVICES -
INSURANCE (4.57%)
200,000 AMERIGROUP Corp.* 8,264,447 15,132,000
120,000 Wellpoint, Inc.* (formerly
Anthem, Inc.) 8,334,661 13,800,000
------------ ------------
16,599,108 28,932,000
HOME BUILDING (9.59%)
500,000 Centex Corp. 28,802,511 29,790,000
450,000 Toll Brothers, Inc.* 19,733,577 30,874,500
------------ ------------
48,536,088 60,664,500
RECREATION AND RESORTS
(6.75%)
210,000 Kerzner Intl., Ltd.* 4,653,485 12,610,500
450,000 Wynn Resorts, Ltd. *+ 5,809,907 30,114,000
------------ ------------
10,463,392 42,724,500
RETAIL - CONSUMER STAPLES (1.51%)
100,000 Whole Foods Market, Inc. 4,808,122 9,535,000
RETAIL - SPECIALTY STORES (5.22%)
300,000 Blue Nile, Inc.* 7,760,546 8,286,000
350,000 Cabela's, Inc.* 8,134,596 7,959,000
250,000 Carmax, Inc.* 5,987,411 7,762,500
200,000 O'Reilly Automotive, Inc.* 8,758,600 9,010,000
------------ ------------
30,641,153 33,017,500
TRANSPORTATION (4.40%)
250,000 C. H. Robinson Worldwide, Inc. 12,152,270 13,880,000
250,000 Expeditors Intl. of Wash., Inc. 12,828,499 13,970,000
------------ ------------
24,980,769 27,850,000
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TOTAL COMMON STOCKS 381,020,642 518,375,400
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Notional Amount Cost Value
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Swap Contracts (0.00%)
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($1,383,790) Total Return Swap Contract
on a Variety of Short
Securities Terminating
06/30/2005 $ 0 $ 0
------------ ------------
Principal Amount
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Corporate Bonds (2.42%)
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Recreation and Resorts
$ 5,000,000 Wynn Resorts, Ltd. 6.00%
Sub. Conv. Deb.
due 07/15/2015 4,908,626 15,325,000
------------ ------------
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Short Term Money Market Instruments (13.61%)
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41,104,861 AIG Funding, Inc. 1.50%
due 1/03/2005 41,104,861 41,104,861
45,007,501 Prudential Funding Co.
1.50% due 1/03/2005 45,007,501 45,007,501
------------ ------------
Total Short Term Money Market
Instruments 86,112,362 86,112,362
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Total Investments (97.96%) $472,041,630 619,812,762
============
Cash and Other Assets
Less Liabilities (2.04%) 12,919,037
------------
Net Assets (Equivalent to $16.85 per
share based on 37,550,594 shares
outstanding) $632,731,799
============
% Represents percentage of net assets
* Non-income producing securities
+ Represents security, or a portion thereof, segregated with broker for as
collateral for swap contracts.
See Notes to Financial Statements.
5
BARON PARTNERS FUND
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STATEMENT OF ASSETS AND LIABILITIES
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DECEMBER 31, 2004
ASSETS:
Investments in securities, at value (Cost $472,041,630) $619,812,762
Cash 9,689,811
Dividends and interest receivable 314,176
Due from broker 1,418,081
Receivable for securities sold 7,135,964
Receivable for shares sold 11,891,818
------------
650,262,612
------------
LIABILITIES:
Due to broker 102,840
Payable for securities purchased 17,069,229
Payable for shares redeemed 265,916
Accrued expenses and other payables 92,828
------------
17,530,813
------------
NET ASSETS $632,731,799
============
NET ASSETS CONSIST OF:
Capital paid-in $459,175,002
Undistributed net realized gain 25,785,665
Net unrealized appreciation on investments 147,771,132
------------
NET ASSETS $632,731,799
============
SHARES OUTSTANDING
($.01 PAR VALUE; INDEFINITE SHARES AUTHORIZED) 37,550,594
============
NET ASSET VALUE PER SHARE $ 16.85
============
See Notes to Financial Statements.
6
BARON PARTNERS FUND
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STATEMENT OF OPERATIONS
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FOR THE YEAR ENDED
DECEMBER 31, 2004
------------------
INVESTMENT INCOME:
INCOME:
Interest $ 547,932
Dividends 1,150,108
------------
Total income 1,698,040
------------
EXPENSES:
Investment advisory fees 2,698,473
Distribution fees 674,618
Shareholder servicing agent fees 50,176
Reports to shareholders 29,486
Professional fees 37,500
Registration and filing fees 79,799
Custodian fees 9,600
Trustee fees 39,594
Miscellaneous 5,574
------------
Total operating expenses 3,624,820
------------
Interest expense 325,355
------------
Total expenses 3,950,175
------------
Net investment loss (2,252,135)
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments sold 40,120,593
Change in net unrealized appreciation of investments 72,084,684
------------
Net gain on investments 112,205,277
------------
Net increase in net assets resulting from operations $109,953,142
============
See Notes to Financial Statements.
7
BARON PARTNERS FUND
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STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE PERIOD
APRIL 30, 2003
For the (COMMENCEMENT OF
Year Ended OPERATIONS)
December 31, 2004 TO DECEMBER 31, 2003
------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss $ (2,252,135) $ (1,324,910)
Net realized gain on investments sold 40,120,593 18,327,938
Net change in unrealized appreciation
on investments 72,084,684 25,585,770
------------ ------------
Increase in net assets resulting from
operations 109,953,142 42,588,798
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net realized gain on investments (11,165,295) (16,580,197)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued in
reorganization of Baron Capital
Partners, L.P. 0 116,349,026
Proceeds from the sale of shares 405,169,767 17,581,834
Net asset value of shares issued in
reinvestment of dividends 10,479,556 14,240,517
Cost of shares redeemed (45,968,023) (9,917,326)
------------ ------------
Increase in net assets derived from
capital share transactions 369,681,300 138,254,051
------------ ------------
Net increase in net assets 468,469,147 164,262,652
NET ASSETS:
Beginning of year 164,262,652 0
------------ ------------
End of year $632,731,799 $164,262,652
============ ============
SHARES OF BENEFICIAL INTEREST:
Shares issued in reorganization of
Baron Capital Partners, L.P. 0 11,634,903
Shares sold 26,676,880 1,527,459
Shares issued in reinvestment of
dividends 678,541 1,202,746
Shares redeemed (3,306,451) (863,484)
------------ ------------
Net increase 24,048,970 13,501,624
============ ============
See Notes to Financial Statements.
8
BARON PARTNERS FUND
- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED
DECEMBER 31, 2004
------------------
CASH PROVIDED (USED) BY FINANCING ACTIVITIES:
Sales of capital shares $ 393,689,978
Cash distributions paid (685,739)
Redemption of capital shares (45,708,601)
-------------
Cash provided by capital share transactions 347,295,638
-------------
Increase in due from broker (720,108)
Decrease in due to custodian bank (31,500,000)
-------------
315,075,530
-------------
CASH PROVIDED (USED) BY OPERATIONS:
Purchases of portfolio securities (385,976,480)
Proceeds from sales of portfolio securities 169,329,943
Cash paid in connection with swap transactions (236,652)
Other decreases (6,003)
-------------
(216,889,192)
-------------
Net investment loss (2,252,135)
Net change in receivables/payables related to operations (169,207)
-------------
(219,310,534)
-------------
NET INCREASE IN CASH AND CASH EQUIVALENTS: 95,764,996
-------------
Cash and cash equivalents beginning of year 37,177
-------------
Cash and cash equivalents end of year $ 95,802,173
=============
Supplemental cash flow information:
Interest paid $ 364,406
=============
Non-cash financing activities:
Net asset value of shares issued in reinvestment of
dividends $ 10,479,556
=============
See Notes to Financial Statements.
9
BARON PARTNERS FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements
- -------------------------------------------------------------------------------
(1) ORGANIZATION.
Baron Select Funds (the "Trust") is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open-end management investment
company established as a Delaware statutory trust on April 30, 2003. Baron
Partners Fund (the "Fund") is a separate non-diversified series of the Trust.
The Fund may employ "leverage" by borrowing money and using it for the purchase
of additional securities. Borrowing for investment increases both investment
opportunity and investment risk. The Fund's investment objective is to seek
capital appreciation.
The Fund was organized originally as a limited partnership in January 1992,
under the laws of the State of Delaware (the "Partnership"). Effective as of the
close of business on April 30, 2003, the Partnership was reorganized into a
Delaware statutory trust. The Fund commenced operations with an initial tax-
free contribution of assets and liabilities, including securities-in-kind from
the Partnership. On the date of contribution, the Partnership had net assets of
$116,349,026 including unrealized appreciation of $50,100,678.
(2) SIGNIFICANT ACCOUNTING POLICIES.
The following is a summary of significant accounting policies followed by the
Fund. The policies are in conformity with accounting principles generally
accepted in the United States of America.
(a) SECURITY VALUATION. Portfolio securities traded on any national stock
exchange are valued based on the last sale price. For securities traded on
NASDAQ, the Fund uses the NASDAQ Official Closing Price. Where market quotations
are not readily available, securities are valued based on fair value as
determined by the Adviser, using procedures established by the Board of
Trustees. Debt instruments having a remaining maturity greater than sixty days
will be valued at the highest bid price from the dealer maintaining an active
market in that security or on the basis of prices obtained from a pricing
service approved by the Board of Trustees. Money market instruments held by the
Fund with a remaining maturity of sixty days or less are valued at amortized
cost, which approximates value.
(b) SECURITIES TRANSACTIONS, INVESTMENT INCOME AND EXPENSE ALLOCATION.
Securities transactions are recorded on a trade date basis. Realized gain and
loss from securities transactions are recorded on an identified cost basis for
financial reporting and federal income tax purposes. Dividend income/expense is
recognized on the ex-dividend date and interest income is recognized on an
accrual basis.
(c) FEDERAL INCOME TAXES. It is the policy of the Fund to continue to qualify as
a regulated investment company under Subchapter M of the Internal Revenue Code
and to distribute all of its taxable income, including net realized capital
gains, if any, to its shareholders. No federal income tax provision is therefore
required.
(d) DISTRIBUTIONS. Income distributions and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due to
differing treatments for net operating losses and realized gains (losses) from
swap transactions. For the year ended December 31, 2004, the following amounts
were reclassified for federal income tax purposes:
UNDISTRIBUTED UNDISTRIBUTED
NET INVESTMENT INCOME REALIZED GAIN/LOSS CAPITAL-PAID-IN
--------------------- ------------------ ---------------
$2,252,135 ($4,090,815) $1,838,680
(e) USE OF ESTIMATES. The preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements, and
the amounts of income and expenses during the period. Actual results could
differ from those estimates.
(f) CASH AND CASH EQUIVALENTS. The Fund considers all short term liquid
investments with a maturity of three months or less when purchased to be cash
equivalents. The cash equivalents at December 31, 2004 consist of overnight
interest bearing securities.
(3) PURCHASES AND SALES OF SECURITIES.
For the year ended December 31, 2004, purchases and sales of securities, other
than short term securities, aggregated $388,901,202 and $159,320,008,
respectively.
10
BARON PARTNERS FUND
- --------------------------------------------------------------------------------
(4) INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
(a) INVESTMENT ADVISORY FEES. BAMCO, Inc. (the "Adviser"), a wholly owned
subsidiary of Baron Capital Group, Inc. ("BCG"), serves as investment adviser to
the Fund. As compensation for services rendered, the Adviser receives a fee
payable monthly from the assets of the Fund equal to 1% per annum of the Fund's
average daily net asset value. The Adviser has contractually agreed to reduce
its fee to the extent required to limit the expense ratio for the Fund to 1.45%,
excluding portfolio transaction costs, interest and extraordinary expenses.
(b) DISTRIBUTION FEES. Baron Capital, Inc. ("BCI"), a wholly owned subsidiary of
BCG, is a registered broker-dealer and the distributor of the shares of the Fund
pursuant to a distribution plan under Rule 12b-1 of the 1940 Act. The
distribution plan authorizes the Fund to pay BCI a distribution fee equal on an
annual basis to 0.25% of the Fund's average daily net assets.
Brokerage transactions for the Fund may be effected by or through BCI. During
the year ended December 31, 2004, BCI earned gross brokerage commissions of
$430,685.
(c) TRUSTEE FEES. Certain Trustees of the Fund may be deemed to be affiliated
with or interested persons (as defined by the 1940 Act) of the Fund's Adviser or
of BCI. None of the Trustees so affiliated received compensation for his or her
services as a Trustee of the Fund. None of the Fund's officers received
compensation from the Fund.
(5) LINE OF CREDIT. The Fund has a line of credit with the custodian bank, in
the amount of $60,000,000, to be used for investment purposes. Interest is
charged to the Fund, based on its borrowings, at a rate per annum equal to the
Federal Funds Rate plus a margin of 1.50%.
During the year ended December 31, 2004, the Fund had an average daily balance
on the line of credit of $11,429,781 at a weighted average interest rate of
2.85%. At December 31, 2004, there were no loans outstanding under the line of
credit.
(6) SWAP CONTRACTS. The Fund may enter into equity swap transactions as a
substitute for investing or selling short directly in securities. A swap
transaction is entered into with a counterparty to exchange the returns on a
particular security or a basket of securities. The gross returns to be exchanged
or "swapped" between the parties are calculated with respect to a "notional
amount". The counterparty will generally agree to pay the Fund the amount, if
any, by which the notional amount of the swap contract would have increased had
it been invested or decreased if sold short in the particular stocks. Upon
entering into the swap contract, the Fund is required to pledge to the broker an
amount of cash and/or other assets equal to a certain percentage of the contract
amount. During the period the swap contract is open, the Fund marks to market
the underlying instruments, including accrued dividends, and recognizes any
unrealized gain or loss. Net payments made or received periodically are
recognized as realized gain or loss. Swap contracts may involve exposure to loss
in excess of the amount recognized in the Statement of Assets and Liabilities.
The notional amount reflects the exposure the Fund has in the underlying
securities. These transactions are subject to credit risks in addition to the
various risks related to the underlying securities.
The notional value of the contract with respect to the Fund's outstanding equity
swap contract as of December 31, 2004 was ($1,383,790).
(7) SHORT SALES. The Fund may sell securities short. When the Fund sells short,
the Fund records a liability for securities sold short and records an asset
equal to the proceeds received. The amount of the liability is subsequently
marked to market to reflect the market value of the securities sold short. The
Fund may incur dividend expense if a security that has been sold short declares
a dividend. The Fund is exposed to market risk based on the amount, if any, that
the market value of the securities sold short exceeds the proceeds received. The
Fund is required to maintain collateral in a segregated account for the
outstanding short sales. Short sales involve elements of market risks and
exposure to loss in excess of the amount recognized in the Statement of Assets
and Liabilities. The Fund's risk of loss in these types of short sales is
unlimited because there is no limit to the cost of replacing the borrowed
security.
11
BARON PARTNERS FUND
- --------------------------------------------------------------------------------
(8) INCOME TAXES AND DISTRIBUTIONS TO SHAREHOLDERS.
As of December 31, 2004, the components of net assets on a tax basis were as
follows:
Cost of investments $472,315,330
============
Gross tax unrealized appreciation 148,696,551
Gross tax unrealized depreciation (1,199,119)
------------
Net tax unrealized appreciation $147,497,432
------------
Undistributed long term capital gain $ 26,059,365
============
During the tax year ending December 31, 2004, the Fund made a long-term capital
gain distribution of $11,165,295.
Net investment loss and realized and unrealized gains and losses differ for
financial statement and tax purposes due to differing treatments of wash sale
losses deferred, net operating losses and realized gains (losses) from swap
transactions.
In addition, the Fund utilized earnings and profits distributed to shareholders
on redemptions of shares as part of the dividend paid deduction for tax
purposes.
(9) FINANCIAL HIGHLIGHTS.
Selected data for a share of beneficial interest outstanding throughout each
year:
FOR THE PERIOD
FOR THE APRIL 30, 2003
YEAR ENDED (COMMENCEMENT OF OPERATIONS)
DECEMBER 31, 2004 TO DECEMBER 31, 2003
----------------- ----------------------------
NET ASSET VALUE, BEGINNING
OF YEAR $12.17 $10.00
------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net investment loss (0.06) (0.10)
Net realized and unrealized
gain on investments 5.17 3.63
------ ------
TOTAL FROM INVESTMENT
OPERATIONS 5.11 3.53
------ ------
LESS DISTRIBUTIONS
Dividends from net
investment income 0.00 0.00
Distributions from net
realized gains (0.43) (1.36)
------ ------
TOTAL DISTRIBUTIONS (0.43) (1.36)
------ ------
NET ASSET VALUE, END OF
YEAR $16.85 $12.17
====== ======
TOTAL RETURN 42.3% 35.7%+
------ ------
RATIOS/SUPPLEMENTAL DATA
Net assets (in millions),
end of year $632.7 $164.3
Ratio of total expenses to
average net assets 1.46% 1.77%**
Less: Ratio of interest
expense and dividend
expense to average net
assets (0.12%) (0.37%)**
------ ------
Ratio of operating expenses
to average net assets 1.34% 1.40%**
====== ======
Ratio of net investment
loss to average net assets (0.83%) (1.39%)**
Portfolio turnover rate 57.77% 36.67%+
** Annualized.
+ Not annualized.
12
BARON PARTNERS FUND
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- -------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of Baron Partners Fund
In our opinion, the accompanying statements of assets and liabilities and
statements of net assets, and the related statements of operations and of
changes in net assets and cash flows, and the financial highlights present
fairly, in all material respects, the financial position of Baron Partners Fund
(the "Fund"), at December 31, 2004, the results of its operations, the changes
in its net assets and its cash flows, and the financial highlights for each of
the periods presented, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2004 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers, LLP
New York, New York
February 24, 2005
13
BARON PARTNERS FUND
- --------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)
- -------------------------------------------------------------------------------
We are required by the Internal Revenue Code to advise you within 60 days
of the Fund's fiscal year end as to the federal tax status of distributions paid
by the Fund during such fiscal year.
During the fiscal year ended December 31, 2004, the Fund designated
$14,395,228 as long-term capital gain distribution. Pursuant to the Jobs and
Growth Tax Relief Reconciliation Act of 2003, this distribution is eligible for
a maximum allowable rate of 15% for individuals.
The information and distributions reported may differ from the information
and distributions taxable to the shareholders for the calendar year ended
December 31, 2004. The information necessary to complete your income tax return
for the calendar year ended December 31, 2004 is listed on Form 1099- DIV which
was mailed to you in January 2005.
MANAGEMENT OF THE FUNDS
- -------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS
The Board of Trustees oversees the management of the Fund. The following table
lists the Trustees and executive officers of the Fund, their date of birth,
current positions held with the Fund, length of time served, principal
occupations during the past five years and other Trusteeships/Directorships held
outside the Fund complex. Unless otherwise noted, the address of each executive
officer and Trustee is Baron Funds, 767 Fifth Avenue, 49th Floor, New York, NY
10153. Trustees who are not deemed to be "interested persons" of the Fund as
defined in the 1940 Act are referred to as "Disinterested Trustees." Trustees
who are deemed to be "interested persons" of the Fund are referred to as
"Interested Trustees." All Trustees listed below, whether Interested or
Disinterested, serve as trustee for the Fund.
INTERESTED TRUSTEES
POSITION(S) LENGTH
HELD WITH OF TIME PRINCIPAL OCCUPATION(S)
NAME, ADDRESS & DATE OF BIRTH THE FUNDS SERVED DURING THE PAST FIVE YEARS
- ----------------------------- --------- ------ --------------------------
Ronald Baron *+ President, Chief 2 years Chairman, CEO, and Director,
767 Fifth Avenue Executive Officer, Baron Capital, Inc. (1982-
New York, NY 10153 Chief Investment Present), Baron Capital
DOB: May 23, 1943 Officer, Trustee and Management, Inc. (1983-Present),
Portfolio Manager Baron Capital Group, Inc. (1984-
Present), BAMCO, Inc. (1987-
Present); Portfolio Manager,
Baron Asset Fund (1987-Present),
Baron Growth Fund (1995-
Present); President (2004-
Present), Chairman (1999-2004),
CIO and Trustee (1987-Present),
Baron Investment Funds Trust;
President (2004-Present),
Chairman (1997-2004), CIO and
Trustee (1997-Present), Baron
Funds Trust; President (2004-
Present), Chairman (2003-2004),
CIO and Trustee (2003-Present),
Baron Select Funds.
OTHER TRUSTEE/
DIRECTORSHIPS
NAME, ADDRESS & DATE OF BIRTH HELD BY THE TRUSTEE
- ----------------------------- -------------------
Ronald Baron *+ None outside the Baron
767 Fifth Avenue Funds Complex.
New York, NY 10153
DOB: May 23, 1943
14
BARON PARTNERS FUND
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
POSITION(S) LENGTH
HELD WITH OF TIME PRINCIPAL OCCUPATION(S)
NAME, ADDRESS & DATE OF BIRTH THE FUNDS SERVED DURING THE PAST FIVE YEARS
- ----------------------------- --------- ------ --------------------------
Linda S. Martinson*+ Vice President, 2 years General Counsel, Vice President
767 Fifth Avenue Secretary, General and Secretary, Baron Capital,
New York, NY 10153 Counsel and Trustee Inc. (1983-Present), BAMCO, Inc.
DOB: February 22, 1955 (1987-Present), Baron Capital
Group, Inc. (1984-Present),
Baron Capital Management, Inc.
(1983-Present); Vice President,
Secretary, General Counsel and
Trustee, Baron Investment Funds
Trust (1987-Present); Vice
President, Secretary, General
Counsel and Trustee, Baron
Capital Funds Trust (1997-
Present); Vice President,
General Counsel, Secretary and
Trustee, Baron Select Funds
(2003-Present).
Morty Schaja*+ Executive Vice 2 years President and Chief Operating
767 Fifth Avenue President, Chief Officer, Baron Capital, Inc.
New York, NY 10153 Operating Officer and (1999-Present); Senior Vice
DOB: October 30, 1954 Trustee President and Chief Operating
Officer, Baron Capital, Inc.
(1997-1999); Managing Director,
Vice President, Baron Capital,
Inc. (1991-1999); and Director,
Baron Capital Group, Inc., Baron
Capital Management, Inc., and
BAMCO, Inc. (1997-Present);
Executive Vice President (2004-
Present), President (1999-2004),
COO (1999-Present) and Trustee
(1996-Present), Baron Investment
Funds Trust; Executive Vice
President (2004-Present),
President (1999-2004), COO
(1999-Present) and Trustee
(1997-Present) Baron Capital
Funds Trust; Executive Vice
President (2004-Present),
President, COO and Trustee
(2003-Present), Baron Select
Funds.
OTHER TRUSTEE/
DIRECTORSHIPS
NAME, ADDRESS & DATE OF BIRTH HELD BY THE TRUSTEE
- ----------------------------- -------------------
Linda S. Martinson*+ None outside the Baron
767 Fifth Avenue Funds Complex.
New York, NY 10153
DOB: February 22, 1955
Morty Schaja*+ None outside the Baron
767 Fifth Avenue Funds Complex.
New York, NY 10153
DOB: October 30, 1954
15
BARON PARTNERS FUND
- --------------------------------------------------------------------------------
DISINTERESTED TRUSTEES
POSITION(S) LENGTH
HELD WITH OF TIME PRINCIPAL OCCUPATION(S)
NAME, ADDRESS & DATE OF BIRTH THE FUNDS SERVED DURING THE PAST FIVE YEARS
- ----------------------------- --------- ------ --------------------------
Steven B. Dodge^** Trustee Elected CEO, Windover Development
239 Summer Street 10/22/04 Corporation (2004-Present)
Manchester, MA 01944 (private real estate development
DOB: July 12, 1945 company); Founder and Chairman,
American Tower Corporation
(1998-Present); Founder,
Chairman and CEO, American Radio
Systems (1988-1998); Founder,
Chairman and CEO, American
Cablesystems (1978-1988);
Chairman of Audit Committee,
member of Executive and Special
Independent Committees,
Sotheby's Holdings, Inc. (2000-
Present); Chairman of Audit
Committee, Nextel Partners, Inc.
(2000-Present).
Norman S. Edelcup(+)^** Trustee 2 years Senior Vice President and
244 Atlantic Isles Director, Florida Savings
Sunny Isles Beach, FL 33160 Bancorp (2001-Present); Mayor
DOB: May 8, 1935 (October 2003-Present),
Commissioner, Sunny Isles Beach,
Florida (2001-2003); Senior Vice
President, Item Processing of
America (1999-2000) (a
subsidiary of The Intercept
Group); Chairman, Item
Processing of America (1989-
1999) (a financial institution
service bureau); Director,
Valhi, Inc. (1975-Present)
(diversified company); Director,
Artistic Greetings, Inc. (1985-
1998); Trustee (1987-Present),
Baron Investment Funds Trust;
Trustee (1997-Present), Baron
Capital Funds Trust; Trustee
(2003-Present) Baron Select
Funds.
David I. Fuente^** Trustee Elected Director (1987-Present),
701 Tern Point Circle 10/22/04 Chairman (1987-2001) and CEO
Boca Raton, FL 33431 (1987-2000) Office Depot;
DOB: September 10, 1945 Director, Ryder Systems, Inc.
(1998-Present); Director, Dick's
Sporting Goods, Inc. (1993-
Present).
OTHER TRUSTEE/
DIRECTORSHIPS
NAME, ADDRESS & DATE OF BIRTH HELD BY THE TRUSTEE
- ----------------------------- -------------------
Steven B. Dodge^** Chairman of the Audit
239 Summer Street Committee, Member of
Manchester, MA 01944 Executive and Special
DOB: July 12, 1945 Independent
Committees,
Sotheby's Holdings,
Inc. (2000-Present);
Chairman of Audit
Committee,
Nextel Partners, Inc.
(2000-Present)
Norman S. Edelcup(+)^** Director, Florida
244 Atlantic Isles Savings Bancorp (2001-
Sunny Isles Beach, FL 33160 Present); Director,
DOB: May 8, 1935 Valhi, Inc. (1975-
Present) (diversified
company).
David I. Fuente^** Director (1987-Present)
701 Tern Point Circle Office Depot; Director,
Boca Raton, FL 33431 Ryder System, Inc.
DOB: September 10, 1945 (1998-Present);
Director, Dick's
Sporting Goods, Inc.
(1993-Present).
16
BARON PARTNERS FUND
- --------------------------------------------------------------------------------
DISINTERESTED TRUSTEES
POSITION(S) LENGTH
HELD WITH OF TIME PRINCIPAL OCCUPATION(S)
NAME, ADDRESS & DATE OF BIRTH THE FUNDS SERVED DURING THE PAST FIVE YEARS
- ----------------------------- --------- ------ --------------------------
Charles N. Mathewson^** Chairman and Trustee 2 years; Chairman Emeritus (October 2003-
9295 Prototype Road Elected as Present), Chairman,
Reno, NV 89521 Chairman International Game Technology,
DOB: June 12, 1928 08/04 Inc. (1986-2003) (manufacturer
of microprocessor-controlled
gaming machines and monitoring
systems); Chairman, American
Gaming Association (1994-2002);
Chairman (2004-Present) Trustee
(1987-Present) Baron Investment
Funds Trust; Chairman (2004-
Present), Trustee (1997-Present)
Baron Capital Funds Trust;
Chairman (2004-Present) Trustee
(2003-Present) Baron Select
Funds.
Harold W. Milner^** Trustee 2 years Retired; President and CEO,
2293 Morningstar Drive Kahler Realty Corporation (1985-
Park City, UT 84060 1997) (hotel ownership and
DOB: November 11, 1934 management); Trustee (1987-
Present) Baron Investment Funds
Trust; Trustee (1997-Present)
Baron Capital Funds Trust;
Trustee (2003-Present) Baron
Select Funds.
Raymond Noveck+(+)^** Trustee 2 years Private Investor (1999-Present);
31 Karen Road President, The Medical
Waban, MA 02168 Information Line, Inc. (1997-
DOB: May 4, 1943 1998) (health care information);
President, Strategic Systems,
Inc. (1990-1997) (health care
information); Director, Horizon/
CMS Healthcare Corporation
(1987-1997); Trustee (1987-
Present) Baron Investment Funds
Trust; Trustee (1997-Present)
Baron Capital Funds Trust;
Trustee (2003-Present) Baron
Select Funds.
David A. Silverman, MD^** Trustee 2 years Physician and Faculty, New York
146 Central Park West University School of Medicine
New York, NY 10024 (1976-Present) Trustee (1987-
DOB: March 14, 1950 Present) Baron Investment Funds
Trust; Trustee (1997-Present)
Baron Capital Funds Trust;
Trustee (2003-Present) Baron
Select Funds.
OTHER TRUSTEE/
DIRECTORSHIPS
NAME, ADDRESS & DATE OF BIRTH HELD BY THE TRUSTEE
- ----------------------------- -------------------
Charles N. Mathewson^** None outside the Baron
9295 Prototype Road Funds Complex.
Reno, NV 89521
DOB: June 12, 1928
Harold W. Milner^** None outside the Baron
2293 Morningstar Drive Funds Complex.
Park City, UT 84060
DOB: November 11, 1934
Raymond Noveck+(+)^** None outside the Baron
31 Karen Road Funds Complex.
Waban, MA 02168
DOB: May 4, 1943
David A. Silverman, MD^** Director, New York
146 Central Park West Blood Center (1999-
New York, NY 10024 Present).
DOB: March 14, 1950
17
BARON PARTNERS FUND
- --------------------------------------------------------------------------------
OFFICERS OF THE FUNDS
POSITION(S) LENGTH
HELD WITH OF TIME PRINCIPAL OCCUPATION(S)
NAME, ADDRESS & DATE OF BIRTH THE FUNDS SERVED DURING THE PAST FIVE YEARS
- ----------------------------- --------- ------ --------------------------
Clifford Greenberg Senior Vice President and 2 years Senior Vice President, Baron
767 Fifth Avenue Portfolio Manager Capital, Inc., Baron Capital
New York, NY 10153 Group, Inc., BAMCO, Inc.,
DOB: April 30, 1959 (2003-Present)(Vice
President, 1997-2003),
Portfolio Manager, Baron
Small Cap Fund (1997-
Present); General Partner,
HPB Associates, LP (1984-
1996) (investment
partnership).
Andrew Peck Vice President and Co- 2 years Vice President and Co-
767 Fifth Avenue Portfolio Manager Portfolio Manager, Baron
New York, NY 10153 Asset Fund (2003-Present),
DOB: March 25, 1969 Analyst, Baron Capital, Inc.
(1998-Present).
Susan Robbins Vice President 2 years Senior Analyst, Vice
767 Fifth Avenue President and Director, Baron
New York, NY 10153 Capital, Inc. (1982-Present),
DOB: October 19, 1954 Baron Capital Management,
Inc. (1984-Present).
Mitchell J. Rubin Vice President and 2 years Vice President and Senior
767 Fifth Avenue Portfolio Manager Analyst, Baron Capital, Inc.
New York, NY 10153 (1997-Present), Portfolio
DOB: September 22, 1966 Manager of Baron iOpportunity
Fund (2000-Present);
Portfolio Manager of Baron
Fifth Avenue Growth Fund
(2004-Present).
Peggy C. Wong Treasurer and Chief 2 years Treasurer and Chief Financial
767 Fifth Avenue Financial Officer Officer, Baron Capital, Inc.,
New York, NY 10153 Baron Capital Group, Inc.,
DOB: April 30, 1961 BAMCO, Inc. and Baron Capital
Management, Inc. (1987-
Present).
OTHER TRUSTEE/DIRECTORSHIPS
NAME, ADDRESS & DATE OF BIRTH HELD BY THE TRUSTEE
- ----------------------------- -------------------
Clifford Greenberg None
767 Fifth Avenue
New York, NY 10153
DOB: April 30, 1959
Andrew Peck None
767 Fifth Avenue
New York, NY 10153
DOB: March 25, 1969
Susan Robbins None
767 Fifth Avenue
New York, NY 10153
DOB: October 19, 1954
Mitchell J. Rubin None
767 Fifth Avenue
New York, NY 10153
DOB: September 22, 1966
Peggy C. Wong None
767 Fifth Avenue
New York, NY 10153
DOB: April 30, 1961
- -------------------------------------------------------------------------------
* Trustees deemed to be "interested persons" of the Fund as that term is
defined in the Investment Company Act of 1940 by reason of their employment
with the Funds' Adviser and Distributor.
+ Members of the Executive Committee, which is empowered to exercise all of
the powers, including the power to declare dividends, of the full Board of
Trustees when the full Board of Trustees is not in session.
(+) Members of the Audit Committee.
^ Members of the Nominating Committee.
** Members of the Independent Committee.
18
[registered logo]
B A R O N
S E L E C T
F U N D S
AR04
Item 2. Code of Ethics.
Filed herewith pursuant to Item 10(a) (1) of Item 2 to Form N-CSR. The
Fund will provide a copy of the Code of Ethics to any person without
charge, upon written request to info@baronfunds.com or by calling
1-800-992-2766.
Item 3. Audit Committee Financial Expert.
The Board of Trustees of the Fund has determined that Norman S.
Edelcup, and Raymond Noveck, both members of the Audit Committee,
possess the technical attributes identified in Instruction 2(b) of
Item 3 to Form N-CSR to qualify as "Audit Committee Financial Expert"
and has designated both Mr. Edelcup and Raymond Noveck as the Audit
Committee's Financial Experts. Both Mr. Noveck and Mr. Edelcup is an
"idependent" Trustees pursuant to paragraph (a)(2) of Item 3 to Form
N-CSR.
Item 4. Principal Accountant Fees and Services.
The following table shows the fees paid to PricewaterhouseCoopers,
LLP, the registrant's prinicpal accounting firm during the fiscal year
January 1, 2004 to December 31, 2004 (a) for profesional services
rendered for the audit of the registrant's annual financial statements
or services that are normally provided in connection with statutory
and regulatory filings or engagements ("Audit Fees"), (b) for
assurance and related services that are reasonably related to the
performance of the audit and are not included as Audit Fees
("Audit-Related Fees"), (c) for professional services rendered for tax
compliance, tax advice and tax planning ("Tax Fees"), and (d) for
products and services provided by such accounting firm that are not
included in (a), (b) or (c) above ("All Other Fees").
For the Fiscal Year Ended December 31, 2004:
Audit Fees Tax Fees
----------- ---------
Baron Partners Fund $21,745.00 $20,800.00
Pursuant to its charter, the Audit Committee shall pre-approve all audit
and non-audit services provided by the independent auditors and in
connection therewith to review and elvaluate the qualifications,
independence and performance of the Fund's independent auditors.
Item 5. Audit Committee of Listed Registrants.
The members of the Fund's Audit Committee are Norman Edelcup and Raymond
Noveck, both "idependent" Trustees pursuant to paragraph (a)(2) of Item 3
to Form N-CSR.
Item 6. Schedule of Investments.
Please see Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
NOT APPLICABLE.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
NOT APPLICABLE.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
NOT APPLICABLE.
Item 10. Submission of Matters to a Vote of Security Holders.
NOT APPLICABLE.
Item 11. Controls and Procedures.
a). The Registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company
Act of 1940) are effective based on their evaluation of these controls
and procedures as of a date within 90 days of the filing date of this
report.
b). There were no changes in the Registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the
Investment Company Act of 1940) that occurred during the Registrant's
second fiscal quarter of the period covered by this report that have
materially affected, or are reasonably likely to materially affect,
the Registrant's internal control over financial reporting.
Item 11. Exhibits.
a). Ex-99.COE
Current copy of the Fund's Code of Ethics pursuant to Item 2 of the
Form N-CSR.
b). Ex-99.CERT
Certification pursuant to Item 10(b) of the Form N-CSR.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
BARON SELECT FUNDS
By: /s/ Ronald Baron
-------------------
Ronald Baron
President and Chief Executive Officer
Date: March 11, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Ronald Baron
--------------------
Ronald Baron
President and Chief Executive Officer
Date: March 11, 2005
By: /s/ Peggy Wong
--------------------
Peggy Wong
Treasurer and Chief Financial Officer
Date: March 11, 2005
A signed original of this written statement has been provided to Baron Select
Funds and will be retained by Baron Select Funds and furnished to the Securities
and Exchange Commission or its staff upon request.