BAMCO Inc

Fees and Compensation
Fees for the Baron Funds Clients are based on a percentage of daily average net assets under
management. Management fees range from 0.30% to 1.75%, per year, of the investment company’s
average daily net asset value. Fees are payable monthly or quarterly at the end of each period
investment advisory services are provided. Daily net asset values are determined as of the close of
the New York Stock Exchange (the “Exchange”) on each day the Exchange is open. The Retail Share
Class is the only share class that charges a distribution fee. Shareholders of Baron Funds incur
mutual fund expenses specific to the share class in which they are invested. Specific fees are
disclosed in the prospectuses for the Baron Funds. BAMCO has an agreement to waive expenses for
certain Baron Funds when they exceed certain thresholds.

Fees for the Baron CITs are based on the average class level and daily net asset value of the
Participating Plan’s investment in the Fund(s). Fees range from .60% annually to .75% annually.

Fees for the Baron UCITS funds are based on the average class level and daily net asset value of the
Fund. Fees range from .75% to 1.75% annually.

For other accounts where BAMCO is the adviser or sub-adviser, the fees range from 0.375% to .70%
per year based on average daily net assets. Fees are payable quarterly, after the end of each month
investment advisory services are provided. When an account is terminated, the fee is determined on
the basis of the average daily net asset value of the account for the number of days BAMCO has
provided investment advisory services during the month in which the account is terminated,
including the date of termination. Sub-Advised Clients may select whether fees are deducted from
their assets or billed separately. Sub-Advised Clients may incur other fees, including distribution,
mutual fund administration fee, or custodial fees. The fee arrangements for such Sub-Advised Clients
are described in their prospectuses and other offering documents and are separately negotiated by
each such Client.

Fees for UMA program sponsors to which BAMCO provides model portfolios range from .28% to
.45% per year.

Advisory fees may be subject to breakpoints as negotiated by each Sub-Advised Client. BAMCO
reserves the right, in its sole discretion, to negotiate and charge different advisory fees for different
accounts. Advisory fees may vary due to the inception date of a Sub-Advised Client’s account, the
initial or potential size of the account, and the entirety of the Client’s or any of its affiliates’
relationship with BAMCO or BCM. BAMCO’s Sub-Advised Clients do not pay advisory fees in
advance.

BAMCO’s Clients pay brokerage commissions to the executing broker-dealer pursuant to the
Adviser’s commission schedule that typically ranges from $0.04 per share to less than $0.01 per
share for stocks traded on exchanges in the U.S. Additional information about brokerage and
transaction costs can be found under “Brokerage Practices” below.

Performance-Based Fees and Side-By-Side Management
BAMCO does not manage any accounts that charge a performance-based fee. BAMCO has trade
allocation and portfolio performance dispersion review procedures in place to ensure that all
BAMCO accounts are traded equitably.

Types of Clients
BAMCO provides investment advice to registered investment companies, the Baron CITs, UCITS
funds, and other pooled investment vehicles. The investment companies for which BAMCO acts as
an investment adviser may impose account minimums.

BAMCO provides model portfolios to certain UMA program sponsors for various Baron strategies.
We are responsible for periodically updating these model portfolios. BAMCO does not execute any
trades on behalf of UMA program Clients and has no relationship or agreement with these UMA
Clients. BAMCO provides the UMA Sponsor with its recommendations as to the securities to be
purchased, sold, and held from time to time in each UMA, as well as the percentage of the model
portfolio that would be invested in each security. It is the policy of BAMCO to provide this
information to the UMA Sponsors after updating its model portfolios. BAMCO will provide that
information to UMA Sponsors of a particular strategy on a rotation basis. So as not to favor any one
UMA Sponsor, the order in which UMA Sponsors are selected is rotated. Accordingly, each UMA
Sponsor has an equal chance of being notified first, in the middle, or last. BAMCO will adjust and
release the model changes during the UMA Sponsor’s turn in the rotation. BAMCO will send
notification to the UMA Sponsors when their placement in the rotation arrives but will not wait for
the UMA Sponsor to confirm receipt of the model changes or complete their trading. BAMCO will
continue to trade at or near the same time it provides model changes to the first UMA Sponsor in the
rotation.

Security Analysis
Our investment professionals are focused on fundamental analyses of businesses. Our primary
objective is to understand the key drivers of growth and profitability of each company in which we
invest. We perform exhaustive proprietary due diligence to evaluate opportunities and affirm our
investment theses.

We analyze the following financial information: income statement, cash flow statement, balance
sheet, turnover and ROE metrics, unit economics, and other company-specific data. This information
is filtered through our valuation models, which we use to extrapolate long-term trends. We
continually monitor these metrics to confirm that a company’s performance is meeting our objectives
and that it can sustain its growth and competitive advantages.

We evaluate a company to determine the:

 •    Business opportunities and growth prospects
 •    Business model
 •    Uniqueness of the company’s products or services
 •    Predictability of revenue and earnings growth
 •    Appropriateness of the company’s use of capital
 •    Barriers to replication
 •    Regulatory environment

Meeting with management

Meeting with management is a critical element of our research process, and we maintain contact with
management teams throughout the life of an investment. These meetings help our investment
professionals understand a company’s business model, its product or service, how difficult it is for
others to do what they do, the costs it incurs to grow, and the relevant regulatory environment. On-
site research is particularly important during the phase when analysts are testing and verifying their
investment theses.

We assess management’s:

 •    Character
 •    Vision
 •    Competence
 •    Business practices
 •    Management style
 •    Ownership
 •    Experience and track record

Valuation models

We build five-year proprietary valuation models to quantify a company’s opportunity and risks and to
estimate the intrinsic value of its business. Each financial model includes five years of historical data
and five years of forward-looking estimates. The models project revenues, earnings, and free cash
flow.

We consider the following factors, among others:

Investment Strategies and Risk of Loss

BAMCO employs 18 portfolio managers who are responsible for managing assets in more than 25
investment strategies.

An account managed by BAMCO is not a balanced investment plan. BAMCO’s investment strategy
is to invest in growth businesses for capital appreciation potential. Each portfolio manager’s ability
to choose appropriate investments for an account has a significant impact on our ability to achieve an
account’s investment objective.

All accounts invest primarily in common stocks and other equity securities. Over time, common
stocks have shown greater growth than other types of securities. In the short term, however, stock
prices may fluctuate in response to company, market, economic or other news. Certain accounts may
have a higher percentage of their total assets invested in a particular region, sector, or industry.
Changes affecting that region, sector or industry may have a significant impact on the performance of
such accounts.

Set forth below are descriptions of BAMCO’s marketed investment strategies. These descriptions of
specific strategies and investments should not be deemed to limit BAMCO’s investment activities.
BAMCO may engage in any investment strategy and make any investment, including any not
described in this Brochure, that BAMCO considers appropriate, subject to each Sub-Advised Client’s
agreement with BAMCO, or for any fund that BAMCO advises to the extent consistent with such
fund’s offering documents. Fund offering documents contain additional specific information about
investments and risks and should be read prior to making an investment. There can be no assurance
that the investment objectives of any Client will be achieved. Investing in equity securities involves
risk of loss that Clients should be prepared to bear.

Discovery
The Strategy invests primarily in small-sized U.S. companies. It invests in a select number of high-
growth businesses that tend to be in an early phase of their lifecycles. Diversified. Specific risks
associated with investing in securities of smaller companies include that the securities may be thinly
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