ADVISORY AGREEMENT
------------------
THIS ADVISORY AGREEMENT, made this 30th day of September, 1997, by and
between BAMCO, Inc., a New York corporation ("BAMCO") and Baron Small Cap Fund
("Client") a series of Baron Asset Fund,
WHEREAS Client is an open-end, diversified management investment company
and is registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), that wishes to employ BAMCO to manage Client's portfolio (the
"Account"), upon the terms and subject to the conditions hereinafter set forth;
and
WHEREAS BAMCO is an investment adviser registered under the Investment
Advisers Act of 1940, as amended, that is willing to manage the Account in the
manner, upon the terms and subject to the conditions hereinafter set forth;
NOW THEREFORE in consideration of the promises and mutual agreements
hereinafter set forth, the parties hereby agree as follows:
1. The Account shall consist of such cash, stocks, bonds and other securities
which, from time to time, Client places under the supervision of BAMCO
and/or which shall become part of the Account as a result of transactions
therein, deposits of cash proceeds from the sale of Client's shares or
otherwise.
2. Subject to the supervision of the Trustees of the Client, BAMCO shall have
full discretion and authority to manage the Account, subject to such
policies as set forth in Client's prospectus. Client shall provide the
Adviser with copies of its current prospectus and statement of additional
information which set forth the investment objectives, policies and
investment restrictions of the Account, Declaration of Trust and By-laws.
BAMCO, as Client's agent and attorney in fact and at Client's expense, is
duly authorized without further approval with respect to the Account,
except as otherwise required by law, (a) to make all investment decisions;
(b) to vote all proxies with respect to portfolio securities in the
Account; (c) to buy, sell and otherwise trade in securities; and (d) in
furtherance of the foregoing, to do anything which BAMCO shall deem
requisite, appropriate or advisable, including, without limitation, the
submission of instructions to the custodian of the Account, and the
selection of such brokers or dealers as BAMCO shall determine.
3.(a)For BAMCO's services as investment adviser to Client, Client shall pay
BAMCO an advisory fee computed daily and payable monthly from Client's
assets equal to 1% per annum of the Client's average daily net asset value.
The fee shall be paid in arrears, within thirty (30) days after the end of
each month. The net asset value is determined as of the close of the New
York Stock Exchange on each day the Exchange is open. Securities traded on
any national stock exchange or quoted on the NASDAQ National Market System
are valued on the basis of the last sale price, or in the absence of any
sale on the date of valuation, the last sale price on the date the security
last traded. Other securities will be valued at the mean of the most recent
bid and asked prices if market quotations are not readily available. Where
market quotations are not readily available the securities will be valued
at their fair value as determined in good faith by Client's Trustees or
their delegate. Odd lot differentials and brokerage commissions will be
excluded in calculating net asset value.
(b)If BAMCO should serve for less than the whole of any month,its compensation
shall be determined on the basis of the average daily net asset value of
the Account for the month up to and including the date of termination.
(c)If Client's expenses (exclusive of interest, taxes, brokerage,
extraordinary expenses and amounts paid by Client pursuant to its
distribution plan) in any fiscal year exceed the limits prescribed by any
state in which Client's shares of common stock ("Shares") are qualified for
sale, BAMCO shall, at each contract payment date, reduce its fee by the
amount of any excess up to the amount of BAMCO's advisory fee as determined
hereunder. Client undertakes to notify BAMCO of each state in which
Client's Shares are qualified for sale.
4.(a)BAMCO shall furnish office space and all necessary office facilities,
equipment and executive personnel for managing the Account without
reimbursement from Client.
(b)BAMCO shall pay the salaries and fees of all officers and trustees of
Client who are "interested persons" (as defined in the 0000 Xxx) of BAMCO.
(c)BAMCO shall not be obligated to pay the following expenses: (a) audit,
accounting and legal fees; (b) custodian fees; (c) fees for registering and
qualifying Client's Shares with federal and state securities commissions;
(d) fees for preparing shareholder reports and proxy solicitation
materials; (e) fees associated with Client's Shares such as dividend
disbursing, transfer agent and registrar fees; (f) insurance for [blank];
(g) compensation of Trustees of Client who are not "interested persons" of
BAMCO; (h) miscellaneous business expenses that are not within paragraph
4(a) above; (i) costs associated with the public offering of Client's
Shares, including registration, filing, legal and accounting fees and costs
of printing Client's prospectus and other offering documents; (j) taxes;
and (k) brokerage commissions and fees incurred in connection with
portfolio transactions.
(d)BAMCO shall maintain all books and records with respect to Client's
securities transactions required by subparagraphs (b)(5), (6), (9) and (10)
and paragraph (f) of Rule 31a-1 under the 1940 Act and shall render to
Client's Trustees such periodic and special reports as the Trustees may
reasonably request.
(e)BAMCO shall provide Client's Custodian on each business day with
information relating to the execution of all portfolio transactions
pursuant to standing instructions.
(f)The investment management services provided by the Adviser hereunder are
not to be deemed exclusive, and BAMCO shall be free to render similar
services to others.
5. Client has delivered to BAMCO copies of each of the following documents and
will deliver to it all future amendments and supplements, if any:
(a)Declaration of Trust of the Trust, filed with the Secretary of The
Commonwealth of Massachusetts (such Declaration of Trust, as in effect on
the date hereof and as amended from time to time, is herein called the
"Declaration of Trust");
(b)By-laws of the Trust (such By-laws, as in effect on the date hereof and as
amended from time to time, are herein called the "By-laws");
(c)Certified resolutions of the Trustees of Client authorizing the appointment
of BAMCO and approving the form of this Agreement;
(d)Registration Statement under the 1940 Act and the Securities Act of 1933,
as amended, on Form N-1A (the "Registration Statement"), as filed with the
Securities and Exchange Commission (the "Commission") relating to Client
and Client's Shares and all amendments thereto;
(e)Notification of Registration of the Client under the 1940 Act on Form N-8A
as filed with the Commission and all amendments thereto; and
(f)Prospectus and Statement of Additional Information of the Trust (such
Prospectus and Statement of Additional Information, as currently in effect
and as amended or supplemented from time to time, being herein called the
"Prospectus").
6. BAMCO shall keep Client's books and records required to be maintained by it
pursuant to paragraph 9 hereof. BAMCO agrees that all records which it
maintains for Client are the property of the Client, and it will surrender
promptly to the Client any of such records upon Client's request. BAMCO
further agrees to preserve for the periods prescribed by Rule 31a-2 as
promulgated by the Commission under the 1940 Act any such records as are
required to be maintained by BAMCO pursuant to paragraph 9 hereof.
7.(a)BAMCO understands that it is the policy of Client to obtain the best net
results for Client's shareholders in the execution of brokerage
transactions for the Account. BAMCO shall select all brokers in accordance
with such policy and as set forth below.
(b)BAMCO may use Baron Capital, Inc. ("BCI"), a broker-dealer affiliated with
BAMCO, as broker as long as BCI's execution of transactions is consistent
with Client's policy referred to above.
(c)Client represents and warrants that it has adopted procedures in conformity
with Rule 17e-1 ("Procedures") of the 1940 Act to ensure that all brokerage
commissions paid to BCI are reasonable and fair. Client shall inform BAMCO
of such Procedures and any amendments thereto. BAMCO shall provide Client
with such information as is required by the Procedures, including, among
other things, a written record of each portfolio transaction effected
pursuant to Rule 17e-1, setting forth the amount and source of the
commission, fee or other remuneration received or to be received; the
identity of the person acting as broker; the terms of the transaction; and,
each quarter, such information as is necessary to enable Client to
determine whether its procedures have been followed.
(d)For BCI's services as broker to Client, Client shall pay to BCI brokerage
commissions consistent with Rule 17e-1 that are fair and reasonable
compared to the commission, fee or other remuneration received by other
brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a
comparable period of time.
(e)Where brokers and dealers other than BCI are used to effect portfolio
transactions, BAMCO may pay to those brokers and dealers, in return for
research analysis, advice and similar services and/or promotion of the
Client's Shares, a higher commission or spread than may be charged by BCI
or other brokers or dealers, if BAMCO determines that such commission or
spread is reasonable and consistent with the Client's policies. Client
agrees that such research and information may be used by BAMCO to
supplement the services it is required to perform hereunder. Whether using
BCI or others, BAMCO shall have no obligation to seek the lowest commission
cost to Client. BAMCO's selection of a broker other than BCI will take into
account factors such as: price, reliability, financial responsibility,
commission rates, the ability of the broker to effect particular securities
transactions, and research and similar services, all of which may enhance
general portfolio management capabilities for BAMCO and/or its affiliates,
notwithstanding that Client may not be the direct or exclusive beneficiary
of such services.
8. BAMCO and/or BCI shall direct the clearing broker to send promptly to
Client confirmations of purchases and sales and monthly statements prepared
by the clearing broker. BAMCO shall provide Client with monthly and
quarterly statements. On the written request of Client, BAMCO and/or BCI
will send or direct the sending of any copies of the foregoing to any other
person.
9. BAMCO shall keep the books of account of the Fund and compute the net asset
value per share of the outstanding Shares. BAMCO shall also calculate daily
the net investment income of the Fund as described in the Fund's currently
effect Prospectus and shall advise the Fund and the transfer agent daily of
the total amounts of such investment income and, if instructed in writing
by an officer of the Fund to do so, shall advise the transfer agent
periodically of the division of such net investment income among its
various components. The calculations of the net asset value per share and
the daily income of the Fund shall be made at the time or times described
from time to time in the Fund's currently effective Prospectus. BAMCO shall
submit to all regulatory and administrative bodies having jurisdiction over
the services provide pursuant to this Agreement, present or future, any
information, reports, or other material which any such body by reason of
this Agreement may request or require pursuant to applicable laws and
regulations. BAMCO shall not disclose or use any records it has prepared by
reason of this Agreement in any manner except as expressly authorized
herein or directed by the Fund and shall keep confidential any information
obtained by reason of this Agreement.
10. Client understands and agrees that: (a) BAMCO is a wholly owned subsidiary
of Baron Capital Management, Inc. a registered investment adviser; (b)
BAMCO and/or its affiliates will manage accounts and perform advisory
services for others; (c) depending upon investment objectives and cash
availability and requirements, BAMCO and/or its affiliates may direct the
sale of a particular security for certain accounts and direct the purchase
of such security for other accounts, and, accordingly, transactions in
particular accounts may not be consistent with transactions in other
accounts; (d) where there is a limited supply of a security, BAMCO in
conjunction with its affiliates will allocate investment opportunities in a
matter deemed equitable by BAMCO; (e) BAMCO and/or its affiliates,
principals and employees may from time to time have an interest, direct or
indirect, in a security which is purchased, sold or otherwise traded for
the Account, and BAMCO and/or its affiliates may effect transactions in
said security for the Account which may be the same as or different from
the action which BAMCO, its affiliates or such other persons may take with
respect thereto for its or their accounts.
11. Client and BAMCO represent and warrant that each (i) has adopted and
supplied to one another a copy of a written code of ethics complying with
Rule 17j-1 of the Investment Company Act of 1940, and (ii) will obtain such
reports and maintain such records as are specified in Rule 17j-1.
12. Client acknowledges that the word "Baron" in Client's name is derived from
the name of the entities controlling, directly and indirectly, BAMCO, which
derive their names from Xx. Xxxxxx Xxxxx; and that such name is the
property of BAMCO, its affiliated companies and Xxxxxx Xxxxx for copyright
and/or other similar purposes. Client understands and agrees that Client
may use "Baron" as part of its name for so long as BAMCO serves as
investment adviser to Client, and if BAMCO ceases to be Client's investment
adviser, Client will promptly take all steps necessary to change its name
(to the extent it lawfully can) to one that does not include "Baron,"
absent BAMCO's written consent.
13. BAMCO shall have no liability to Client or its shareholders for any error
of judgment or mistake of law or for any loss suffered by Client, provided
that BAMCO shall not be protected against liabilities arising by virtue of
willful misfeasance, bad faith or gross negligence, or reckless disregard
of BAMCO's obligations hereunder.
14. Nothing in this Agreement shall limit or restrict the right of any of
BAMCO's directors, officers, or employees who may also be a Trustee,
officer or employee of Client to engage in any other business or to devote
his time and attention in part to the management or other aspects of any
business, whether of a similar or a dissimilar nature, nor limit or
restrict BAMCO's right to engage in any other business or to render
services of any kind to any other corporation, trust, firm, individual or
association.
15. Except as otherwise provided herein or authorized by the Trustees of Client
from time to time, BAMCO shall for all purposes herein be deemed to be an
independent contractor and shall have no authority to act for or represent
Client in any way or otherwise be deemed an agent of Client.
16. During the term of this Agreement, Client agrees to furnish BAMCO at its
principal office all prospectuses, proxy statements, reports to
shareholders, sales literature or other material prepared for distribution
to shareholders of Client or to the public, which refer to BAMCO in any
way, prior to use thereof and not to use such material if BAMCO reasonably
objects in writing within five business days (or such other time as may be
mutually agreed) after receipt thereof. In the event of termination of this
Agreement, Client will continue to furnish to BAMCO copies of any of the
above-mentioned materials which refer in any way to BAMCO. Client shall
furnish or otherwise make available to BAMCO such other information
relating to the business affairs of Client as BAMCO at any time, or from
time to time, reasonably requests in order to discharge its obligations
hereunder.
17. This Agreement shall continue in effect for a period of two years from the
date of its execution, and thereafter only so long as such continuance is
specifically approved at least annually by Client's Trustees or by a vote
of a majority of the Trustees who are not parties to this Agreement or
interested persons of any such party.
18. This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees of Client or by vote of a majority of the
outstanding voting Shares of Client (as defined in the 0000 Xxx) on not
more than sixty days' written notice to BAMCO or by BAMCO on not more than
sixty days' written notice to Client.
19. This Agreement shall terminate automatically in the event of its assignment
(as defined in the 0000 Xxx) by either party.
20. This Agreement shall be construed in accordance with and governed by the
laws of the State of New York, to the extent federal law does not apply.
21. BAMCO shall have no responsibility of liability with respect to custody
arrangements or the acts, omissions or other conduct of the custodian.
22. It is understood and expressly stipulated that none of the Trustees,
officers, agents or shareholders of the Fund shall be personally liable
hereunder. The name "Baron Asset Fund" is the designation of the Trustees
for the time being under a Declaration of Trust dated February 19, 1987,
and all persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither the
Trustees, officers, agents or shareholders assume any personal liability
for obligations entered into on behalf of the Fund.
23. Any notice or other communication required to be given pursuant to this
Agreement shall be deemed duly given if delivered or mailed by registered
mail, postage prepaid, (1) to BAMCO at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000; or (2) to the Client at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
24. This Agreement contains the entire agreement and may not be amended or
modified in any respect unless in a writing signed by both parties obtained
in conformity with the requirements of the 1940 Act and the Rules
thereunder. In the event that any provision of this Agreement is declared
to be invalid such declaration shall not be deemed to affect the validity
of any of the provisions.
25. Client acknowledges receipt of Part II of BAMCO's Form ADV which is filed
with the Securities and Exchange Commission, and which contains information
concerning BAMCO's services and fees.
Agreed to as of September 30, 0000
Xxx Xxxx, Xxx Xxxx
BAMCO, INC.
By:
/s/ Xxxxx X. Xxxx
-----------------------------------
Xxxxx X. Xxxx
Baron Small Cap Fund
By:
/s/ Xxxxxx Xxxxx
-----------------------------------
Xxxxxx Xxxxx
