ADVISORY AGREEMENT
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THIS ADVISORY AGREEMENT, made this 10th day of March, 2004, by and between
BAMCO, Inc., a New York corporation ("BAMCO") and Baron Fifth Avenue Growth
Fund, a series of Baron Asset Fund, a Massachusetts business trust ("Client"),
WHEREAS Client is a series of an open-end, non-diversified management
invest- ment 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 premises 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 according to the following schedule, on a per annum basis, based on
average daily net asset value:
under $1 billion 1.00%
over $1 billion, less than $2 billion 0.95%
over $2 billion, less than $3 billion 0.90%
over $3 billion, less than $4 billion 0.85%
over $4 billion 0.80%
The fee shall be paid in arrears, within thirty (30) days after the end of each
month. BAMCO agrees that for so long as it serves as the investment adviser to
Client, it will limit its fees so that clients' total annual operating expenses
are 1.40%. Transactional expenses such as interest expense and brokerage costs
are excluded from the fee limitation. 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.
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(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 administrative
servicing, dividend disbursing, transfer agent and registrar fees; (f) insurance
; (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
State of Delaware (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
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(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
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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 affiliated with
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
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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
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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. 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.
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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 March 10, 0000
Xxx Xxxx, Xxx Xxxx
BAMCO, Inc.
By:
_____________________________________
Baron Asset Fund on behalf of Baron Fifth Avenue
Growth Fund
By:
_____________________________________
