Baron Capital Management Inc

Fees and Compensation
Advisory fees are charged based on a percentage of assets under management. The advisory fees vary
with the inception date of a Client’s account, the initial or potential size of the account, the
product/strategy, the entirety of the Client’s or any of its affiliates’ relationship with BAMCO, BCM or
BCI, and other factors that BCM deems relevant. All advisory fees are subject to negotiation but
typically range from .35% to 1.15%. For separately managed accounts and accounts that are managed
by reference to a model or representative account, fees typically decrease as asset levels increase. BCM
reserves the right, in its sole discretion, to negotiate and charge different advisory fees for different
accounts.

BCM Clients who have uninvested cash balances swept into money market funds at their custodian
broker-dealers or custodian banks may pay two fees, to the extent that the money market funds charge a
fee and deduct expenses. BCM’s fees are based on total assets under management, which may include
the cash swept into money market funds by the custodian.

Fees are generally payable quarterly, after the end of each quarter investment advisory services are
provided. When an account is terminated, the fee is determined on the basis of the net asset value of the
account for the number of days BCM has provided investment advisory services in the quarter during
which the account is terminated, including the date of termination. Clients may select whether fees are
deducted from their assets or billed on a quarterly basis. Generally, BCM’s Clients do not pay advisory
fees in advance.

BCM’s clients pay brokerage commissions to the executing broker-dealer for portfolio security
transactions that typically range 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
BCM does not manage any accounts that charge a performance-based fee. BCM has trade allocation
and portfolio dispersion review procedures in place to ensure that all BCM accounts are treated
equitably.

Types of Clients
BCM provides advisory services to high-net-worth individuals, pension and profit-sharing plans,
charitable organizations, corporations, wrap fee programs, and other entities. BCM offers separately
managed accounts and accounts that are managed by reference to a model portfolio or representative
account. BCM markets the following investment strategies and requires the corresponding new account
minimums:

               Strategy                                      New Account Minimum*
               Baron SMID Cap                                     $ 10 million
               Baron Asset                                        $ 10 million
               Baron Fifth Avenue Growth                          $ 100 million
               Baron Growth                                       $ 10 million
               Baron International Growth                         $ 100 million
               Baron Emerging Markets                             $ 100 million
               Baron Real Estate                                  $ 25 million
               Baron Real Estate Income                           $ 10 million
               Baron Opportunity                                  $ 10 million
               Baron Global Opportunity                           $ 100 million
               Baron Durable Advantage                            $ 100 million
               Baron Global Durable Advantage                     $ 10 million
               Baron Discovery                                    $ 100 million

               Baron Health Care                                    $ 10 million
               Baron Financials                                     $ 10 million
               Baron India                                          $ 10 million
               Baron Technology                                     $ 10 million
               BaronX, L.P.                                         $ 1 million
               BaronX, L.P. Cayman                                  $ 1 million
               Baron Small Cap                                      $ 25 million
               Baron All Cap Focused Growth                         $ 25 million
               BaronX II, L.P.                                      $ 1 million
               BaronX II Cayman, L.P.                               $ 1 million

*BCM may waive the account minimum or require a higher minimum at its discretion.

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

An account managed by BCM is not a balanced investment plan. BCM invests on behalf of Clients 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. 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 BCM’s marketed investment strategies. These descriptions of
specific strategies and investments should not be deemed to limit BCM’s investment activities. BCM

may engage in any investment strategy and make any investment, including any not described in this
Brochure, that BCM considers appropriate, subject to each Client’s investment objectives as agreed
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