File No. 333-40839
File No. 811-8505
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. __ [ ]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
Amendment No. 1__ [X]
BARON CAPITAL FUNDS TRUST
(Exact Name of Registrant as Specified in Charter)
767 Fifth Avenue
New York, New York 10153
(Address of Principal Executive Offices)(zip code)
Registrant's Telephone Number, including Area Code: (212) 583-2000
Linda S. Martinson
BARON ASSET FUND
767 Fifth Avenue
New York, New York 10153
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: On effective date
It is proposed that this filing will become effective (check appropriate box)
____ immediately upon filing pursuant to paragraph (b)
____ on (date) pursuant to paragraph (b)
____ 60 days after filing pursuant to paragraph (a)(1)
____ on (date) pursuant to paragraph (a)(1)
____ 75 days after filing pursuant to paragraph (a)(2)
____ on (date) pursuant to paragraph (a)(2) of rule 485
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended, Registrant is registering an indefinite number of shares of
beneficial interest, $0.01 par value, of securities of the Fund, now
existing or hereafter established, under the Securities Act of 1933.
BARON CAPITAL FUNDS TRUST
CROSS-REFERENCE SHEET
Items Required by Form N-1A
PART A
Caption in
Item No. Item Caption Prospectus
1. Cover Page COVER PAGE
2. Synopsis FUND EXPENSES
3. Condensed Financial
Information
4. General Description of INVESTMENT OBJECTIVE
Registrant AND PHILOSOPHY;
INVESTMENT POLICIES
AND RISKS;
DISTRIBUTION PLAN;
INVESTMENT
PERFORMANCE; GENERAL
INFORMATION
5. Management of the Fund MANAGEMENT OF THE
FUNDS; INVESTMENT
OBJECTIVES AND
PHILOSOPHY; INVESTMENT
POLICIES AND RISKS;
FUND EXPENSES
6. Capital Stock and DIVIDENDS AND
Other Securities DISTRIBUTIONS; TAXES;
GENERAL INFORMATION
7. Purchase of Securities PURCHASES AND
Being Offered REDEMPTIONS;
DETERMINING YOUR SHARE
PRICE; DISTRIBUTION
PLAN; GENERAL
INFORMATION
8. Redemption or PURCHASES AND
Repurchase REDEMPTIONS;
DETERMINING YOUR SHARE
PRICE; GENERAL
INFORMATION
9. Pending Legal NOT APPLICABLE
Proceedings
PART B
Caption in Statement
Item No. Item Caption of Additional
Information
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information NOT APPLICABLE
and History
13. Investment Objectives INVESTMENT OBJECTIVES
and Policies AND POLICIES
14. Management of the MANAGEMENT OF THE
Registrant FUNDS
15. Control Persons and MANAGEMENT OF THE
Principal Holders of FUNDS
Securities
19. Purchase, Redemption MANAGEMENT OF THE
and Pricing of FUNDS; ; NET ASSET
Securities Being VALUE
Offered
20. Tax Status NOT APPLICABLE
21. Underwriters MANAGEMENT OF THE
FUNDS
22. Calculation of CALCULATION OF
Performance Data PERFORMANCE DATA
23. Financial Statements
P R O S P E C T U S
BARON CAPITAL FUNDS TRUST
INSURANCE SHARES
BARON CAPITAL ASSET FUND
767 Fifth Avenue, New York, New York 10153
1-800-99-BARON 212-583-2100
BARON CAPITAL FUNDS TRUST (the "Trust") is an open-end, diversified
management investment company, commonly referred to as a mutual fund.
The Trust currently consists of one series, BARON CAPITAL ASSET FUND
(the "Fund"). There are currently two classes of shares. The Fund's
investment objective is to seek capital appreciation through
investments in securities of small and medium sized companies, with
undervalued assets or favorable growth prospects. The Fund has
recently been organized and has no operating history, but the Fund's
investment adviser, BAMCO, Inc., has been an investment advisor to
registered mutual funds for over ten years.
The shares of the Fund offered by this prospectus ("Insurance Shares")
are not offered directly to the public; they are sold only in
connection with investments in and payments under variable annuity
contracts and variable life insurance contracts (collectively
"variable insurance contracts") issued by life insurance companies
("Participating Insurance Companies"). Shares of the Fund are also
offered under a separate prospectus in connection with certain
qualified retirement plans ("Retirement Shares"). The Trust sells and
redeems its shares at net asset value without any sales charges or
redemption fees. The minimum initial investment is $2,000 for each
contract owner allocating money to the Fund. There is no minimum for
subsequent purchases.
This Prospectus sets forth concisely the essential information a
prospective purchaser of a variable insurance contract should consider
before allocating premiums to the Fund. Investors are advised to read
this Prospectus and retain it for future reference and to read the
separate account prospectus of the specific insurance product. A
Statement of Additional Information, dated August 3, 1998, containing
additional and more detailed information about the Fund, has been
filed with the Securities and Exchange Commission and is hereby
incorporated by reference into this Prospectus. A copy of the
Statement of Additional Information may be obtained without charge by
writing or calling the insurance company.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
August 3, 1998
TABLE OF CONTENTS
FUND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT OBJECTIVES AND PHILOSOPHY . . . . . . . . . . . . . . . . . . 4
INVESTMENT POLICIES AND RISKS . . . . . . . . . . . . . . . . . . . . . . 5
INVESTMENT PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . 9
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . 9
DISTRIBUTION PLAN AND OTHER EXPENSES . . . . . . . . . . . . . . . . . . 12
PURCHASES AND REDEMPTIONS . . . . . . . . . . . . . . . . . . . . . . . . 12
DETERMINING YOUR SHARE PRICE . . . . . . . . . . . . . . . . . . . . . . 13
DIVIDENDS AND DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . 13
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
The net asset value per share and the value of a shareholder's holding in
the Fund will vary with economic and market conditions. The dividends paid
by the Fund will increase or decrease in relation to the income received by
the Fund from its investments and the expenses incurred by the Fund.
Investment in the Fund involves risk, including the possible loss of
principal.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, nor are they federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other
agency.
There is no assurance that the Fund will achieve its respective objective.
The Fund does not purport to offer a complete investment program to which
investors should commit all of their investment capital. Please see the
section entitled "Investment Policies and Risks" starting on page 5 for a
discussion of the risks associated with the Fund.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection
with the offer contained in the Prospectus and, if given or made, such
information or representations may not be relied upon as authorized by the
Fund, its Investment Adviser or any affiliate thereof. This Prospectus does
not constitute an offer to sell or a solicitation of any offer to buy
securities in any state to any person to whom it is unlawful to make such
offer in such state.
FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES:
Sales Load Imposed on Purchases........................ NONE
Redemption Fee......................................... NONE
Deferred Sales Load.................................... NONE
Exchange Fees.......................................... NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS):
MANAGEMENT 12B-1 FEES OTHER TOTAL
FEES EXPENSES OPERATING
(AFTER EXPENSE EXPENSES
REIMBURSEMENT) (AFTER EXPENSE
REIMBURSEMENT)
BARON CAPITAL
ASSET FUND 1.00%* 0.25% 0.25% 1.50%*
Because Baron Capital Asset Fund is a new fund, "other expenses" and
"total operating expenses" are based on estimated amounts for the
current fiscal year.
*The Adviser will reduce its fee to the extent required to limit Baron
Capital Asset Fund's total operating expenses to 1.5% for the first
$250 million of assets in the Fund, 1.35% for the Fund assets over
$250 million and up to $500 million, and 1.25% for Fund assets over
$500 million. Without the expense limitations, the Fund estimates that
actual expenses would be 1.6%.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return, (2) the 1.5% expense ratio, and (3) redemption
at the end of each time period:
1 Year 3 Years 5 Years 10 Years
Baron Capital Asset Fund $ 15 $ 47 $ 82 $ 179
Owners of variable insurance contracts that invest in the Fund should
refer to the variable insurance contract prospectus for a description
of costs and expenses, as the tables and example do not reflect
deductions at the separate account level or contract level for any
charges that may be incurred under a contract. This information should
not be considered a representation of past or future expenses, as
actual expenses fluctuate and may be greater or less than those shown.
The example assumes a 5% annual return as required by SEC regulations
applicable to all mutual funds. The actual performance of the Fund
will vary and may result in an actual return greater or less than 5%.
The Fund has a plan of distribution pursuant to Rule 12b-1 pursuant to
which the Fund pays the Distributor a fee for distribution-related
services at the annual rate of .25% of the Fund's average daily net
assets. As a result, long-term shareholders of the Fund may pay more
than the economic equivalent of the maximum front-end sales load
permitted by the rules of the National Association of Securities
Dealers, Inc. ("NASD"). For a description of the various costs and
expenses incurred in the operation of the Fund, as well as any expense
reimbursement or reduction arrangements, see "Management of the Fund"
and "Distribution Plan."
INVESTMENT OBJECTIVES AND PHILOSOPHY
The investment objective of BARON CAPITAL ASSET FUND is to seek
capital appreciation through investments in securities of small and
medium sized companies with undervalued assets or favorable growth
prospects. Production of income, if any, is incidental to this
objective. The investment objective and philosophy of the Fund is
similar to those of Baron Asset Fund, a publicly offered "retail" fund
managed by the Fund's adviser. Although it is anticipated that the
Fund and the corresponding retail fund will hold similar securities,
differences in asset size and cash flow needs resulting from purchases
and redemptions of Fund shares may result in different security
selections, differences in the relative weightings of securities or
differences in the prices paid for particular portfolio securities.
The Fund's stated fundamental policies and other non-fundamental
policies may differ from Baron Asset Fund's, but it presently
anticipates that the investment selections made for the Fund will be
similar to those made by Baron Asset Fund. Expenses of the Fund and
its corresponding retail fund are also expected to differ. The
performance results are also expected to differ. The variable
insurance contract owner will also bear various insurance-related
costs at the insurance company level and should refer to the
accompanying separate account prospectus for a summary of contract
fees and expenses. The investment objective is fundamental and, as
such, may not be changed without the approval of a majority of the
Fund's outstanding shares. There is no assurance that the Fund will
achieve its investment objective. Investment decisions are made by the
Fund's investment adviser, BAMCO, Inc. (the "Adviser").
The Fund seeks to achieve its investment objective by investing its
assets in a diversified portfolio of primarily common stocks. The Fund
invests primarily in the securities of small sized companies with
market capitalizations of approximately $100 million to $1 billion and
medium sized companies with market values of $1 billion to $2 billion.
Although the Fund invests primarily in small and medium sized
companies, it will not sell positions just because their market values
have increased. The other kinds of investments the Fund makes and the
risks associated therewith are discussed starting on page 5 in
connection with the Fund's investment policies.
The Fund seeks to purchase securities judged by their Adviser to have
favorable price to value characteristics based on the Adviser's
assessment of their prospects for future growth and profitability. The
Adviser seeks securities that the Adviser believes have the potential
to increase in value at least 50% over two subsequent years, although
that goal may not be achieved. As a guide in selecting such
investments, the Adviser studies and considers such fundamentals as
business profitability, balance sheet strength, undervalued and
unrecognized assets, price multiples of free cash flow and income,
perceived management skills, unit growth, and the potential to
capitalize upon anticipated economic trends. Securities are selected
for investment after thorough research of the issuers, the industries
in which they operate, and their managements. The Fund invests
principally in businesses for the long term; it is not a short-term
trader of securities.
When the Adviser determines that opportunities for profitable
investments are limited or that adverse market conditions exist and
believes that investing for temporary defensive purposes is
appropriate, all or a portion of the Fund's assets may be invested in
money market instruments, which include U.S. Government securities,
certificates of deposit, time deposits, bankers' acceptances,
short-term investment grade corporate bonds and other short-term debt
instruments, and repurchase agreements. Investment grade obligations
would be classified at the time of the investment within the four
highest ratings of Standard & Poor's Corporation ("S&P") or Moody's
Investor's Service, Inc. ("Moody's"), or, if unrated, would be
determined by the Adviser to be of comparable high quality and
liquidity. The Fund may also invest in money market instruments in
anticipation of investing cash positions or of meeting redemptions. To
the extent the Fund is so invested its investment objectives may not
be achieved.
INVESTMENT POLICIES AND RISKS
In seeking to achieve its investment objective of capital
appreciation, the Fund invests primarily in common stocks but may also
invest in other equity-like securities such as convertible bonds and
debentures, preferred stocks, warrants and convertible preferred
stocks. Securities are selected solely for their capital appreciation
potential, and investment income is not a consideration.
GENERAL POLICIES SMALL AND MEDIUM SIZED COMPANIES
The Fund invests primarily in small to medium sized companies with
market values between $100 million and $2 billion. The Adviser
believes there is more potential for capital appreciation in smaller
companies, but there also may be more risk. Securities of smaller
companies may not be well known to most investors and may be thinly
traded. There is more reliance on the skills of a company's management
and on their continued tenure. Investments may be attractively priced
relative to the Adviser's assessment of a company's growth prospects,
management expertise, and business niche, yet have modest or no
current cash flows or earnings. Although the Adviser concentrates on a
company's growth prospects, it also focuses on cash flow, asset value
and reported earnings. This investment approach requires a long-term
outlook and may require shareholders to assume more risk and to have
more patience than investing in the securities of larger, more
established companies. From time to time the Adviser may purchase
securities of larger, more widely followed companies for the Fund if
it believes such investments meet the Adviser's investment criteria
and the Fund's investment objective. The Fund may invest up to 35% of
its total assets in larger companies if the Adviser perceives an
attractive opportunity in a larger company. The Fund may continue to
make investments in a company even though its market capitalization
has increased beyond the limits stated, if, in the Adviser's judgment,
the company is still an attractive investment.
Equity securities may fluctuate in value, often based on factors
unrelated to the value of the issuer or its securities. Since
convertible securities combine the investment characteristics of both
bonds and common stocks, the Fund absorbs the market risks of both
stocks and bonds. The combination does, however, make the investment
less sensitive to interest rate changes than straight bonds of
comparable maturity and quality. Because of these factors, convertible
securities are likely to perform differently than broadly-based
measures of the stock and bond markets.
DEBT SECURITIES
The debt securities in which the Fund may invest include rated and
unrated securities and convertible instruments. In making investment
selections, the Adviser, in addition to using nationally recognized
statistical rating organizations ("NRSROs"), also makes its own
independent judgments about a security and its issuer. Securities
which are not rated by an NRSRO are purchased based solely on the
Adviser's assessment of the security and its issuer. The Fund may
invest up to 35% of its total assets in non-investment grade debt
securities, commonly referred to as "junk bonds." There is no minimum
rating for the debt securities that may be purchased. Lower rated
securities may have a higher yield and the potential for a greater
return than investment grade securities but may also have more risk.
Lower rated securities are generally meant for longer-term investing
and may be subject to certain risks with respect to the issuing entity
and to market fluctuations. The NRSROs may characterize these
securities as speculative, with moderate or little protection as to
the payment of interest and principal. See the Statement of Additional
Information for a general description of NRSRO ratings of debt
obligations. The ratings by these NRSROs represent their opinions as
to the quality of the debt obligations which they undertake to rate.
It should be emphasized that ratings are relative and subjective, and
although ratings may be useful in evaluating the safety of interest
and principal payments, they do not evaluate the market value risks of
these securities. The Adviser will also evaluate the securities and
the ability of the issuers to pay interest and principal. The Fund's
ability to achieve its investment objective may be more dependent on
the Adviser's credit analysis than might be the case with higher rated
securities. The market price and yield of lower rated securities are
generally more volatile than those of higher rated securities. Factors
adversely affecting the market price and yield of these securities
will adversely affect the Fund's net asset value. The trading market
for these securities may be less liquid than that of higher rated
securities. Companies that issue lower rated securities may be highly
leveraged or may have unstable earnings, and consequently the risk of
the investment in the securities of such issuers may be greater than
with higher rated securities.
With respect to debt securities generally, the interest bearing features
of such securities carry a promise of income flow, but the price of the
securities are inversely affected by changes in interest rates and are
therefore subject to the risk of market price fluctuations. The market
values of debt securities may also be affected by changes in the credit
ratings or financial condition of the issuers.
The Fund from time to time may also purchase indebtedness and
participations therein, both secured and unsecured, of debtor
companies in reorganization or financial restructuring. Such
indebtedness may be in the form of loans, notes, bonds or debentures.
Participations normally are made available only on a nonrecourse basis
by financial institutions, such as banks or insurance companies, or by
governmental institutions, such as the Resolution Trust Corporation or
the Federal Deposit Insurance Corporation or the Pension Benefit
Guaranty Corporation. When the Fund purchases a participation interest
it assumes the credit risk associated with the bank or other financial
intermediary as well as the credit risk associated with the issuer of
any underlying debt instrument. The Fund may also purchase trade and
other claims against, and other unsecured obligations of, such debtor
companies, which generally represent money due a supplier of goods or
services to such company. Some debt securities purchased by the Fund
may have very long maturities. The length of time remaining until
maturity is one factor the Adviser considers in purchasing a
particular indebtedness. The purchase of indebtedness of a troubled
company always involves a risk as to the creditworthiness of the
issuer and the possibility that the investment may be lost. The
Adviser believes that the difference between perceived risk and actual
risk creates the opportunity for profit which can be realized through
thorough analysis. There are no established markets for some of this
indebtedness and it is less liquid than more heavily traded
securities. Indebtedness of the debtor company to a bank are not
securities of the banks issuing or selling them. The Fund may purchase
loans from national and state chartered banks as well as foreign ones.
The Fund may invest in senior indebtedness of the debtor companies,
although on occasion subordinated indebtedness may also be acquired.
The Fund may also invest in distressed first mortgage obligations and
other debt secured by real property. The Fund does not currently
anticipate investing more than 5% of its assets in trade and other
claims.
OPTIONS
The Fund may purchase put and call options and write (sell) covered
put and call options on equity and/or debt securities. A call option
gives the purchaser of the options the right to buy, and when
exercised obligates the writer to sell, the underlying security at the
exercise price. A put option gives the purchaser of the option the
right to sell, and when exercised obligates the writer to buy, the
underlying security at the exercise price. The writing of put options
will be limited to situations where the Adviser believes that the
exercise price is an attractive price at which to purchase the
underlying security. A put option sold by the Fund would be considered
covered by the Fund's placing cash or liquid securities in a
segregated account with the custodian in an amount necessary to
fulfill the obligation undertaken. Options may fail as hedging
techniques in cases where the price movements of the securities
underlying the options do not follow the price movements of the
portfolio securities subject to the hedge. Gains on investments in
options depend on the Adviser's ability to predict correctly the
direction of stock prices, interest rates, and other economic factors.
The Adviser could be wrong in its predictions. Where a liquid
secondary market does not exist, the Fund would likely be unable to
control losses by closing its position.
The Fund may engage in options transactions on specific securities
that may be listed on national securities exchanges or traded in the
over-the-counter market. Options not traded on a national securities
exchange are treated as illiquid securities and may be considered to
be "derivative securities." Options transactions will not exceed 25%
of the Fund's net assets, as measured by the securities covering the
options, or 5% of net assets, as measured by the premiums paid for the
options, at the time the transactions are entered into.
BORROWINGS
The Fund may borrow up to 5% of its net assets for extraordinary or
emergency temporary investment purposes or to meet redemption requests
which might otherwise require an untimely sale of portfolio
securities. The Fund may also borrow for other short-term purposes. To
the extent the Fund borrows, it must maintain continuous asset
coverage of 300% of the amount borrowed. The Fund will not borrow in
an amount exceeding 25% of the value of its net assets, including the
amount borrowed, as of the time the borrowing is made. Such borrowing
has special risks. Any amount borrowed will be subject to interest
costs that may or may not exceed the appreciation of the securities
purchased.
SHORT SALES AGAINST THE BOX
For the purpose of either protecting or deferring unrealized gains on
portfolio securities, the Fund may make short sales "against the box"
where the Fund sells short a security it already owns or has the right
to obtain without payment of additional consideration an equal amount
of the same type of securities sold. The proceeds of the short sale
will be held by the broker until the settlement date, at which time
the Fund delivers the security to close the short position. If the
Fund sells securities short against the box, it may protect unrealized
gains, but will lose the opportunity to profit on such securities if
the price rises. The Fund will not sell short against the box in
excess of 25% of its net assets.
LENDING
The Fund may lend its portfolio securities to broker-dealers and other
institutions as a means of earning additional income. In lending its
portfolio securities, the Fund may incur delays in recovery of loaned
securities or a loss of rights in the collateral. To minimize such
risks, such loans will only be made if the Fund deems the other party
to be of good standing and determines that the income justifies the
risk. The Fund will not lend more than 25% of its total assets.
ILLIQUID SECURITIES
The Fund may invest up to 15%, of its net assets in securities that
are not readily marketable or are otherwise restricted. The absence of
a trading market could make it difficult to ascertain a market value
for illiquid positions. The Fund's net asset value could be adversely
affected if there were no ready buyer at an acceptable price at the
time the Fund decided to sell. Time-consuming negotiations and
expenses could occur in disposing of the shares.
FOREIGN SECURITIES
The Fund may invest up to 10% of its total assets directly in the
securities of foreign issuers which are not publicly traded in the
U.S. and may also invest in foreign securities in domestic markets
through depositary receipts without regard to this limitation. The
Adviser currently intends to invest not more than 10% of the Fund's
assets in foreign securities, including both direct investments and
investments made through depositary receipts. These securities may
involve additional risks not associated with securities of domestic
companies, including exchange rate fluctuations, political or economic
instability, the imposition of exchange controls, or expropriation or
confiscatory taxation. Issuers of foreign securities are subject to
different, often less detailed, accounting, reporting and disclosure
requirements than are domestic issuers.
SHORT-TERM TRADING AND TURNOVER
The Fund may engage in short-term trading where the Adviser believes
that the anticipated gains outweigh the costs of short-term trading.
The Adviser expects that the average turnover rate of the Fund's
portfolio should not exceed 100%. The turnover rate may vary from year
to year depending on how the Adviser anticipates portfolio securities
will perform. Short-term trading will increase the amount of brokerage
commissions paid by the Fund and the amount of possible short-term
capital gains. The amount of portfolio activity will not be a limiting
factor in making portfolio decisions.
REAL ESTATE INVESTMENT TRUSTS
The Fund may invest in the equity securities of real estate investment
trusts ("REITs"). A REIT is a corporation or business trust that
invests substantially all of its assets in real estate and derives
most of its income from rents from real property or interest on loans
secured by mortgages on real property. REITs which meet certain
specific requirements of the Internal Revenue Code effectively do not
pay corporate level federal income tax. REITs may be affected
adversely by changes in the value of their underlying properties and
by defaults by borrowers or tenants. REITs are dependent on the skills
of their management and have limited diversification. REITs also rely
on their ability to generate cash flow to make distributions to
shareholders and some REITs may have self-liquidation provisions
allowing mortgages to be paid in full. The market value of REITs may
also be affected by changes in the tax laws or by their inability to
qualify for the tax-free pass-through of their income. The REIT
portion of the portfolio may also be affected by general fluctuations
in real estate values.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with certain banks or
non-bank dealers. In a repurchase agreement the Fund buys a security
at one price, and at the time of sale, the seller agrees to repurchase
that security at a mutually agreed upon time and price. Repurchase
agreements could involve certain risks in the event of the failure of
the seller to repurchase the securities as agreed, which may cause a
fund to suffer a loss, including loss of interest on or principal of
the security, and costs associated with delay and enforcement of the
repurchase agreement. Repurchase agreements with a duration of more
than seven days are considered illiquid securities and are subject to
the restrictions stated above.
WHEN-ISSUED SECURITIES
The Fund may invest up to 5% of its assets in debt and equity
securities purchased on a when-issued basis. Although the payment and
interest terms of when-issued securities are established at the time
the purchaser enters into the commitment, the actual payment for and
delivery of when-issued securities generally takes place within 45
days. The Fund bears the risk that interest rates on debt securities
at the time of delivery may be higher or lower than those contracted
for on the when-issued security. Failure of the issuer to deliver the
security purchased on a when-issued basis may result in a loss or
missed opportunity to make an alternative investment.
SPECIAL SITUATIONS
The Fund may invest in "special situations." A special situation
arises when, in the opinion of the Adviser, the securities of a
company will be recognized and appreciate in value due to a specific
anticipated development at that company. Such developments might
include a new product, a management change, an acquisition or a
technological advancement. Investments in special situations may carry
an additional risk of loss in the event that the anticipated
development does not occur or does not attract the expected attention.
The special situation may involve securities of companies with higher
market capitalizations.
INVESTMENT PERFORMANCE
The investment results of the Fund quoted in advertisements and other
sales literature may refer to average annual total return and actual
return. Average annual total return assumes that an investment in the
Fund was purchased with an initial payment of $1,000 and that the
investment was redeemed at the end of a stated period of time, after
giving effect to the reinvestment of all dividends and distributions
during the period at the net asset value on the reinvestment date. The
return is expressed as a percentage rate which, if applied on a
compounded annual basis, would result in the redeemable value of the
investment at the end of the period. Because average annual returns
are annualized they tend to even out variations in the returns, and
are not the same as actual year-by-year results. The actual return
performance calculations, which also may be quoted in advertising,
reflect the results of a continuous shareholder who does not redeem.
It measures the percentage change between the net asset value of a
hypothetical $1,000 investment in the Fund at the beginning of a
period and the net asset value of that investment at the end of a
period, assuming reinvestment of all dividend and capital gain
distributions at the net asset value on the reinvestment date. The
performance of major market indices such as the Dow Jones Industrial
Average, Russell 2000, and Standard & Poor's 500 may also be included
in advertising so that the Fund's results may be compared with those
of groups of unmanaged securities widely regarded by investors as
measures of market performance. Brokerage fees are not factored into
the performance of the indices. The performance data of the Fund
include all recurring fees such as brokerage and investment advisory
fees. Data and rankings from Lipper Analytical Services, Inc., CDA
Investment Technologies, Morningstar or other industry publications
may also be used in advertising. See the Statement of Additional
Information.
Performance results represent past performance and are not necessarily
representative of future results. Investment return and principal
value will fluctuate so that shares may be worth more or less than
their original cost when redeemed.
The annual report contains additional performance information which is
available upon request without charge by writing or calling the Fund
at the address and telephone number set forth on the back of this
Prospectus.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER
BAMCO, Inc., the Adviser, is located at 767 Fifth Avenue, New York,
New York 10153, and is responsible for portfolio management. It is a
wholly owned subsidiary of Baron Capital Group, Inc. ("BCG"). Baron
Capital, Inc. ("Baron Capital"), a registered broker-dealer and the
distributor of the shares of the Fund, is also a wholly owned
subsidiary of BCG.
Under an advisory agreement with the Fund (the "Advisory Agreement"),
the Adviser furnishes continuous investment advisory services and
management to the Fund. Mr. Ronald Baron is the chief investment
officer of the Adviser and is primarily responsible for the day-to-day
management of the portfolio of the Fund. Mr. Baron also has primary
responsibility for the investments of two of the retail funds, Baron
Asset Fund and Baron Growth & Income Fund. He has managed the
portfolios of those Funds since their inception. The Adviser also
keeps the books of account of each series, and calculates daily the
income and net asset value per share of each Fund.
As compensation for the services rendered under each Advisory
Agreement, the Adviser receives a fee payable monthly from the assets
of each Fund equal to 1% per annum of each Fund's respective average
daily net asset value. The Adviser has agreed to waive its advisory
fee to the extent necessary so that total operating expenses of the
Fund do not exceed 1.50% for the first $250 million of assets in the
Fund, 1.35% for Fund assets over $250 million and up to $500 million,
and 1.25% for Fund assets over $500 million.
BROKERAGE
Brokerage transactions for the Fund are effected chiefly by or through
its Adviser's affiliate, Baron Capital, when consistent with the
policy of obtaining the best net results for the Fund and subject to
the conditions and limitations of the 1940 Act. Baron Capital is a
registered broker-dealer and a member of the NASD. In determining the
best net results for the Fund, the Adviser will examine factors such
as price (including the applicable brokerage commission or dealer
spread), size of order, efficiency and reliability of execution. The
Fund's Board of Trustees has adopted procedures in conformity with
Rule 17e-1 under the 1940 Act to ensure that all brokerage commissions
paid to Baron Capital are reasonable and fair 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. The Fund will also consider sales of its shares as a
factor in the selection of broker-dealers to execute portfolio
transactions. See Statement of Additional Information for a
description of the commissions paid to Baron Capital.
TRUSTEES AND EXECUTIVE OFFICERS
The Trust's Board of Trustees has overall responsibility for the
management of the Fund. The Trustees and executive officers of the
Fund and their principal occupations during the last five years are
set forth below.
<TABLE>
<CAPTION>
Name and Address Position Held With Principal Occupation(s) During
Baron Funds Past Five Years
<S> <C> <C>
Ronald Baron*+ President, Chief President and Director of: Baron Capital, Inc.
767 Fifth Avenue Investment Officer (1982-Present), Baron Capital Management, Inc.
New York, NY 10153 and Trustee (1983-Present), Baron Capital Group, Inc.
(1984-Present), BAMCO, Inc. (1987-Present).
Norman S. Edelcup Trustee Chairman, Item Processing of America (1989-Present),
244 Atlantic Isle (financial institution service bureau); Director, Valhi, Inc.
N. Miami Beach, FL (1975-Present) (diversified company); Director, Artistic Greetings,
33160 Inc.(1985-Present).
Mark M. Feldman Trustee President and Chief Executive Officer, Cold Spring Group,
444 Madison Ave, Inc.(1993-Present) (reorganization and restructuring consulting); Executive
Ste 703 Vice President and Chief Restructuring Officer, Lomas Financial Corp. and
New York, N.Y. 10020 subsidiaries (1995-1996) (reorganizing debtors-in-possession); Trustee,
Aerospace Creditors Liquidating Trust (1993-Present) (administers and
liquidates assets).
Irwin Greenberg Trustee Chairman, Lehigh Valley Hospital Board (1991-Present); Retail
3048 Congress Street Consultant, (1990- Present); Director, Cedar Crest College(1990-Present);
Allentown, PA 18101 President and Chief Executive Officer, Hess's Department Stores
(1976-1990).
Clifford Greenberg Vice President Vice President, Baron Capital, Inc., Baron Capital Group, Inc., BAMCO,
767 Fifth Avenue Inc. (1997-Present); General Partner, HPB Associates, L.P. (1984-1996)
New York, NY 10153 (investment partnership).
Linda S. Martinson*+ Secretary, Vice General Counsel and Secretary of: Baron Capital, Inc. (1983-Present),
767 Fifth Avenue President and Trustee BAMCO, Inc. (1987-Present), Baron Capital Group, Inc. (1984-Present),
New York, NY 10153 Baron Capital Management, Inc. (1983-Present).
Charles N. Mathewson Trustee Chairman of the Board, International Game Technology (1986-
5270 Neil Road Present) (manufacturer of microprocessor-controlled gaming
Reno, NV 89502-4169 machines and monitoring systems).
Harold W. Milner Trustee Retired; President and Chief Executive Officer, Kahler Realty
2293 Morningstar Drive Corporation (1985-1997) (hotel ownership and management).
Park City, UT 84060
Raymond Noveck+ Trustee President, Strategic Systems, Inc. (1990-Present) (health
31 Karen Road care information); director, Horizon/CMS Healthcare
Waban, MA 02168 Corporation (1987-Present).
Susan Robbins Vice President Senior Analyst, Vice President and Director of: Baron Capital, Inc.
767 Fifth Avenue (1982- Present), Baron Capital Management, Inc. (1983-Present), Baron
New York, NY 10153 Capital Group, Inc. (1984-Present).
Morty Schaja* Senior Vice Senior Vice President and Chief Operating Officer of Baron
767 Fifth Avenue President, Chief Capital, Inc. (1997-Present), Managing Director, Vice President, Baron
New York, NY 10153 Operating Officer Capital, Inc. (1991-Present) and Director, Baron Capital Group, Inc., Baron
and Trustee Capital Management, Inc., and BAMCO, Inc. (1997-Present).
David A. Silverman, M.D. Trustee Physician (1976-Present).
239 Central Park West
New York, NY 10024
Peggy Wong Treasurer and Chief Treasurer and Chief Financial Officer of: Baron Capital, Inc., Baron
767 Fifth Avenue Financial Officer Capital Group, Inc., BAMCO, Inc., Baron Capital Management, Inc.
New York, NY 10153 (1987-Present).
* Trustees deemed to be "interested persons" of the Fund as that
term is defined in the Investment Company Act of 1940.
+ 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.
DISTRIBUTION PLAN AND OTHER EXPENSES
The Fund's Insurance Shares are distributed by Baron Capital, which is
the principal underwriter of the shares of the Baron retail funds,
pursuant to a distribution plan under Rule 12b-1 of the 1940 Act
("Distribution Plan"). The Distribution Plan authorizes the Fund to
pay the Principal Underwriter a distribution fee equal on an annual
basis to 0.25% of each Fund's average daily net assets. The
distribution fee is paid to the Principal Underwriter in connection
with its activities or expenses primarily intended to result in the
sale of shares, including, but not limited to, compensation to
registered representatives or other employees of the Principal
Underwriter who engage in or support the distribution of shares or who
service shareholder accounts; telephone expenses; interest expenses;
preparing, printing and distributing promotional and advertising
material; preparing, printing and distributing the Prospectus and
reports to other than current shareholders; and commissions and other
fees to broker-dealers or other persons (excluding banks) who have
introduced investors to the Funds. See the Statement of Additional
Information for a more detailed listing of the expenses covered by the
Distribution Plan.
From time to time the Adviser or the Distributor may compensate
Participating Insurance Companies or their affiliates whose customers
hold the Insurance Shares for providing a variety of administrative
services, such as record-keeping and accounting, and investor support
services, such as responding to inquiries and preparing mailings to
shareholders. The compensation may be paid as either a per account fee
or a percentage of the average daily assets invested by the
participating Insurance Company. The compensation will be paid out of
the assets of the Fund.
The Fund pays a fee to its custodian, the Bank of New York, 48 Wall
Street, New York, NY 10015. The Fund also pays a fee to its transfer
and dividend distributing agent, DST Systems, Inc. P.O. Box 419946,
Kansas City, MO 64141. In their respective capacities both
institutions maintain certain financial and accounting records
pursuant to agreements with the Trust. They do not assist in and are
not responsible for investment decisions involving assets of the Fund.
PURCHASES AND REDEMPTIONS
The Insurance Shares of the Fund are offered on a continuous basis to
separate accounts of Participating Insurance Companies and the
Retirement Shares are offered on a continuous basis through qualified
plans. Investors may not purchase or redeem shares of the Fund
directly, but only through variable insurance contracts offered
through the separate accounts of Participating Insurance Companies or
through qualified retirement plans. You should refer to the applicable
Separate Account Prospectus or your plan documents for information on
how to purchase or surrender a contract, make partial withdrawals of
contract values, or change existing allocations.
All investments in the Fund are credited to a Participating Insurance
Company's separate account or a qualified plan immediately upon
acceptance of the investment by the Transfer Agent. Investments will
be processed at the net asset value next determined after an order is
received and accepted by the Transfer Agent. The Fund reserves the
right to reject any purchase order.
Redemptions are processed at the net asset value next calculated after
receipt and acceptance of the redemption order by the Transfer Agent.
Redemption proceeds will normally be wired to the qualified plan the
business day following receipt of the redemption order, but in no
event later than seven days after receipt of such order.
DETERMINING YOUR SHARE PRICE
Your purchases, sales or exchanges will be processed at the net asset
value per share of the Fund as of the close of the New York Stock
Exchange (the "Exchange") (currently 4:00 p.m., New York City time) on
each day that the Exchange is open for trading by dividing the current
market value of the Fund's total assets less all of its liabilities by
the total number of shares outstanding at the time the determination
is made. Valid purchase and redemption orders placed prior to the
close of the Exchange on a day the Exchange is open for trading are
executed at the net asset value determined as of the close that day,
and orders placed after that time are valued as of the close of the
next trading day. The Fund may have arrangements with certain
institutional entities with respect to the actual receipt of orders.
The Fund reserves the right to change the time at which orders are
priced if the Exchange closes at a different time or an emergency
exists.
The Fund's portfolio 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 on the date of valuation or, in the absence of
any sale on that date, the last sale price on the date the security
last traded. Other securities are valued at the mean of the most
recent bid and asked prices if market quotations are readily
available. Where market quotations are not readily available the
securities are valued at their fair value as determined in good faith
by the Board of Trustees, or by the Adviser, pursuant to procedures
established by the Board. Money market instruments and debt securities
with a remaining maturity of sixty days or less are valued by the
amortized cost method unless such method does not represent fair
value. Odd lot differentials and brokerage commissions are excluded in
calculating net asset value. Securities quoted in a foreign currency
are valued daily in U.S. dollars at the foreign currency exchange
rates that are prevailing at the time the daily net asset value per
share is determined. If events that materially affect the value of the
Fund's foreign investments occur, the investments will be valued at
their fair value as determined in good faith by the Board of Trustees.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute all of its net investment income and
realized capital gains, if any, to its shareholders in a single,
combined distribution by December 31 of each year. After every
distribution, the value of a share is automatically reduced by the
amount of the distribution. All your dividends and capital gains
distributions from the Fund are automatically reinvested in additional
shares of the Fund at the next computed net asset value at the close
of business on the payment date.
TAXES
The Fund intends to qualify each year as a regulated investment
company under the Internal Revenue Code of 1986 (the "Code").
Qualification as a regulated investment company relieves the Fund of
federal income and excise taxes on the portion of its net ordinary
income and net realized capital gain distributed to shareholders. The
Fund also intends to qualify under the Code with respect to the
diversification requirements for tax deferral with respect to
insurance company separate accounts.
Because the Insurance Shares may be purchased only through variable
insurance contacts and the Retirement Shares may be purchased only
through qualified plans, it is anticipated that any dividends derived
from net investment income and distributions of capital gains will be
exempt from current taxation if left to accumulate within the variable
insurance contract or qualified plan. Generally, withdrawals from such
contracts may be subject to ordinary income tax and, if made before
age 591/2, a 10% penalty tax. The tax status of your investment in the
Insurance Shares depends on the features of the variable insurance
contracts purchased from a Participating Insurance Company. Please see
the separate account prospectus for additional information.
The foregoing is only a summary of some important tax considerations
generally affecting the Fund and its shareholders. Prospective
shareholders are urged to consult their tax advisers concerning the
tax consequences of this investment.
GENERAL INFORMATION
The Trust is a diversified open-end management investment company
registered under the Investment Company Act of 1940 ("1940 Act"), it
was organized as a Delaware business trust on November 20, 1997. The
Trust is authorized to have separate series, but currently has only
the Fund. It is authorized to issue an indefinite number of shares of
beneficial interest. The Declaration of Trust permits the Trustees to
establish additional series. The Fund currently offers two classes of
shares, one of which, the Insurance Shares offered through
Participating Insurance Companies, are offered pursuant to this
Prospectus. The shares offered hereby are available only in connection
with investments in and payments under variable contracts and life
insurance contracts. Retirement Shares of the Fund are also available
to participant directed plans through a separate prospectus. Because
the expenses of each class may differ, the performance of each class
is expected to differ. Each share of the Fund has one vote on all
matters for which a shareholder vote is required, and participates
equally in dividend and capital gain distributions when and if
declared by the Fund and in the Fund's net assets upon liquidation.
Shares are fully paid and non-assessable and there are no preemptive,
conversion or exchange rights. Shares do not have cumulative voting
rights and, as a result, holders of at least 50% of the shares voting
for Trustees can elect all Trustees and the remaining shareholders
would not be able to elect any Trustees.
As a Delaware business trust, annual shareholder meetings are not
required. Shareholders have certain rights, as set forth in the
Declaration of Trust, including the right to call a meeting of
shareholders for the purpose of voting on the removal of one or more
Trustees on the written request of not less than 10% of the
outstanding shares. Such removal can be effected upon the action of
two-thirds of the outstanding shares. An insurance company issuing a
variable contract invested in the Fund requests voting instructions
from the variable contract holders. Under current law, the insurance
company must vote all shares of the Fund held by the Separate Accounts
in proportion to the voting instructions received.
CONFLICTS OF INTEREST
Each Portfolio's Shares are available only to variable annuity and
variable life separate accounts of insurance companies that are
unaffiliated with the Adviser and to certain qualified retirement
plans. The Retirement Shares, offered through a separate prospectus,
are available to certain participant directed qualified plans.
Although the Fund currently does not anticipate any disadvantages to
policy owners or plan participants arising out of the fact that the
Fund offers its shares to such entities, there is a possibility that a
material conflict may arise. The Trustees monitor events in order to
identify any anticipated disadvantages or material irreconcilable
conflicts to determine what action, if any, should be taken in
response. If a material disadvantage or conflict occurs, the Trustees
may require one or more insurance company separate accounts or plans
to withdraw its investments in the Fund. If this occurs, the Fund may
be forced to sell securities at disadvantageous prices. The Trustees
may refuse to sell shares of the Fund to any separate account or
qualified plan or may suspend or terminate the offering of a Fund's
shares if such action is required by law or regulatory authority or is
in the best interests of the Fund's shareholders. It is possible that
a qualified plan investing in the Retirement Shares of the Fund could
lose its qualified plan status under the Internal Revenue Code, which
could have adverse tax consequences on insurance company separate
accounts investing in the Fund. The Adviser intends to monitor such
qualified plans and the Fund may discontinue sales to a qualified plan
and require plan participants with existing investments in the
retirement shares to redeem those investments if a plan loses (or in
the opinion of the Adviser is at risk losing) its qualified plan
status.
MASTER/FEEDER OPTION
The Trust may in the future seek to achieve the Fund's or any future
series' investment objective by investing all of that series' assets
in another investment company having the same investment objective and
substantially the same investment policies and restrictions as those
applicable to that series. It is expected that any such investment
company would be managed by the Adviser in substantially the same
manner as the existing series. The initial shareholder(s) of each
series voted to vest the authority to convert to a master/feeder
structure in the sole discretion of the Trustees. No further approval
of the shareholders of the series of the Trust is required. You will
receive at least 30 days' prior notice of any such investment. Such
investment would be made only if the Trustees determine it to be in
the best interests of a series and its shareholders. In making that
determination, the Trustees will consider, among other things, the
benefits to shareholders and/or the opportunity to reduce costs and
achieve operational efficiencies. Although the Adviser believes the
Trustees will not approve an arrangement that is likely to result in
higher costs, no assurance is given that costs will be materially
reduced if this option is implemented.
SHAREHOLDER INFORMATION
Shareholder inquiries about general Fund information should be
directed to the Funds' office at 1-800-99-BARON or 212-583-2100.
Owners of variable insurance contracts and plan participants will be
provided semi-annual unaudited and annual audited reports, including
the financial statements of the Fund. Each report will include a
listing of portfolio securities held. The Trust's fiscal year ends
September 30.
P R O S P E C T U S
BARON CAPITAL FUNDS TRUST
RETIREMENT SHARES
BARON CAPITAL ASSET FUND
767 Fifth Avenue, New York, New York 10153
1-800-99-BARON 212-583-2100
BARON CAPITAL FUNDS TRUST (the "Trust") is an open-end,
diversified management investment company, commonly referred to as
a mutual fund. The Trust currently consists of one series, BARON
CAPITAL ASSET FUND (the "Fund"). There are currently two classes
of shares. The Fund's investment objective is to seek capital
appreciation through investments in securities of small and medium
sized companies, with undervalued assets or favorable growth
prospects. The Fund has recently been organized and has no
operating history, but the Fund's investment adviser, BAMCO, Inc.,
has been an investment adviser to registered mutual funds for over
ten years.
The shares of the Fund offered by this prospectus ("Retirement
Shares") are not offered directly to the public; they are sold
only in connection with certain participant directed qualified
retirement plans and, under a separate prospectus, investments in
and payments under variable annuity contracts and variable life
insurance contracts (collectively "variable insurance contracts")
issued by life insurance companies ("Institutional Shares"). The
Trust sells and redeems its shares at net asset value without any
sales charges or redemption fees. The minimum initial investment
is $2,000. There is no minimum for subsequent purchases.
This Prospectus sets forth concisely the essential information a
plan participant should consider before allocating purchase
payments to the Fund. Investors are advised to read this
Prospectus and retain it for future reference and to read the plan
documents. A Statement of Additional Information, dated August 3,
1998, containing additional and more detailed information about
the Fund, has been filed with the Securities and Exchange
Commission and is hereby incorporated by reference into this
Prospectus. A copy of the Statement of Additional Information may
be obtained without charge by writing or calling the plan sponsor.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
August 3, 1998
TABLE OF CONTENTS
FUND EXPENSES.....................................................3
INVESTMENT OBJECTIVES AND PHILOSOPHY..............................4
INVESTMENT POLICIES AND RISKS.....................................5
INVESTMENT PERFORMANCE............................................9
MANAGEMENT OF THE FUND............................................9
DISTRIBUTION PLAN AND OTHER EXPENSES.............................12
PURCHASES AND REDEMPTIONS........................................12
DETERMINING YOUR SHARE PRICE.....................................12
DIVIDENDS AND DISTRIBUTIONS......................................13
TAXES............................................................13
GENERAL INFORMATION..............................................13
The net asset value per share and the value of a shareholder's holding in
the Fund will vary with economic and market conditions. The dividends paid
by the Fund will increase or decrease in relation to the income received by
the Fund from its investments and the expenses incurred by the Fund.
Investment in the Fund involves risk, including the possible loss of
principal.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, nor are they federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other
agency.
There is no assurance that the Fund will achieve its respective objective.
The Fund does not purport to offer a complete investment program to which
investors should commit all of their investment capital. Please see the
section entitled "Investment Policies and Risks" starting on page 5 for a
discussion of the risks associated with the Fund.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection
with the offer contained in the Prospectus and, if given or made, such
information or representations may not be relied upon as authorized by the
Fund, its Investment Adviser or any affiliate thereof. This Prospectus does
not constitute an offer to sell or a solicitation of any offer to buy
securities in any state to any person to whom it is unlawful to make such
offer in such state.
FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES:
Sales Load Imposed on Purchases......................NONE
Redemption Fee.......................................NONE
Deferred Sales Load..................................NONE
Exchange Fees........................................NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS):
MANAGEMENT FEES OTHER TOTAL
(AFTER EXPENSE EXPENSES OPERATING
REIMBURSEMENT) EXPENSES
(AFTER EXPENSE
REIMBURSEMENT)
BARON CAPITAL
ASSET FUND 1.00% 2.5% 1.25%
Because Baron Capital Asset Fund is a new fund, "other expenses" and "total
operating expenses" are based on estimated amounts for the current fiscal
year.
*The Adviser will reduce its fee to the extent required to limit Baron
Capital Asset Fund's total operating expenses to 1.25%. Without the expense
limitation, the Fund estimates that actual expenses would be 1.35%.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) a
5% annual return, and (2) redemption
at the end of each time period:
1 Year 3 Years 5 Years 10 Years
Baron Capital Asset Fund $13 $40 $69 $151
This information should not be considered a representation of past or
future expenses, as actual expenses fluctuate and may be greater or less
than those shown. The example assumes a 5% annual return as required by SEC
regulations applicable to all mutual funds. The actual performance of the
Fund will vary and may result in an actual return greater or less than 5%.
For a description of the various costs and expenses incurred in the
operation of the Fund, as well as any expense reimbursement or reduction
arrangements, see "Management of the Fund" and "Distribution Plan."
INVESTMENT OBJECTIVES AND PHILOSOPHY
The investment objective of BARON CAPITAL ASSET FUND is to seek capital
appreciation through investments in securities of small and medium sized
companies with undervalued assets or favorable growth prospects. Production
of income, if any, is incidental to this objective. The investment
objective and philosophy of the Fund is similar to those of Baron Asset
Fund, a publicly offered "retail" fund managed by the Fund's adviser.
Although it is anticipated that the Fund and the corresponding retail fund
will hold similar securities, differences in asset size and cash flow needs
resulting from purchases and redemptions of Fund shares may result in
different security selections, differences in the relative weightings of
securities or differences in the prices paid for particular portfolio
securities. The Fund's stated fundamental policies and other
non-fundamental policies may differ from Baron Asset Fund's, but it
presently anticipates that the investment selections made for the Fund will
be similar to those made by Baron Asset Fund. Expenses of the Fund and its
corresponding retail fund are also expected to differ. The performance
results are also expected to differ. The variable insurance contract owner
will also bear various insurance-related costs at the insurance company
level and should refer to the accompanying separate account prospectus for
a summary of contract fees and expenses. The investment objective is
fundamental and, as such, may not be changed without the approval of a
majority of the Fund's outstanding shares. There is no assurance that the
Fund will achieve its investment objective. Investment decisions are made
by the Fund's investment adviser, BAMCO, Inc. (the "Adviser").
The Fund seeks to achieve its investment objective by investing its assets
in a diversified portfolio of primarily common stocks. The Fund invests
primarily in the securities of small sized companies with market
capitalizations of approximately $100 million to $1 billion and medium
sized companies with market values of $1 billion to $2 billion. Although
the Fund invests primarily in small and medium sized companies, it will not
sell positions just because their market values have increased. The other
kinds of investments the Fund makes and the risks associated therewith are
discussed starting on page 5 in connection with the Fund's investment
policies.
The Fund seeks to purchase securities judged by their Adviser to have
favorable price to value characteristics based on the Adviser's assessment
of their prospects for future growth and profitability. The Adviser seeks
securities that the Adviser believes have the potential to increase in
value at least 50% over two subsequent years, although that goal may not be
achieved. As a guide in selecting such investments, the Adviser studies and
considers such fundamentals as business profitability, balance sheet
strength, undervalued and unrecognized assets, price multiples of free cash
flow and income, perceived management skills, unit growth, and the
potential to capitalize upon anticipated economic trends. Securities are
selected for investment after thorough research of the issuers, the
industries in which they operate, and their managements. The Fund invests
principally in businesses for the long term; it is not a short-term trader
of securities.
When the Adviser determines that opportunities for profitable investments
are limited or that adverse market conditions exist and believes that
investing for temporary defensive purposes is appropriate, all or a portion
of the Fund's assets may be invested in money market instruments, which
include U.S. Government securities, certificates of deposit, time deposits,
bankers' acceptances, short-term investment grade corporate bonds and other
short-term debt instruments, and repurchase agreements. Investment grade
obligations would be classified at the time of the investment within the
four highest ratings of Standard & Poor's Corporation ("S&P") or Moody's
Investor's Service, Inc. ("Moody's"), or, if unrated, would be determined
by the Adviser to be of comparable high quality and liquidity. The Fund may
also invest in money market instruments in anticipation of investing cash
positions or of meeting redemptions. To the extent the Fund is so invested
its investment objectives may not be achieved.
INVESTMENT POLICIES AND RISKS
In seeking to achieve its investment objective of capital appreciation, the
Fund invests primarily in common stocks but may also invest in other
equity-like securities such as convertible bonds and debentures, preferred
stocks, warrants and convertible preferred stocks. Securities are selected
solely for their capital appreciation potential, and investment income is
not a consideration.
GENERAL POLICIES SMALL AND MEDIUM SIZED COMPANIES
The Fund invests primarily in small to medium sized companies with market
values between $100 million and $2 billion. The Adviser believes there is
more potential for capital appreciation in smaller companies, but there
also may be more risk. Securities of smaller companies may not be well
known to most investors and may be thinly traded. There is more reliance on
the skills of a company's management and on their continued tenure.
Investments may be attractively priced relative to the Adviser's assessment
of a company's growth prospects, management expertise, and business niche,
yet have modest or no current cash flows or earnings. Although the Adviser
concentrates on a company's growth prospects, it also focuses on cash flow,
asset value and reported earnings. This investment approach requires a
long-term outlook and may require shareholders to assume more risk and to
have more patience than investing in the securities of larger, more
established companies. From time to time the Adviser may purchase
securities of larger, more widely followed companies for the Fund if it
believes such investments meet the Adviser's investment criteria and the
Fund's investment objective. The Fund may invest up to 35% of its total
assets in larger companies if the Adviser perceives an attractive
opportunity in a larger company. The Fund may continue to make investments
in a company even though its market capitalization has increased beyond the
limits stated, if, in the Adviser's judgment, the company is still an
attractive investment.
Equity securities may fluctuate in value, often based on factors unrelated
to the value of the issuer or its securities. Since convertible securities
combine the investment characteristics of both bonds and common stocks, the
Fund absorbs the market risks of both stocks and bonds. The combination
does, however, make the investment less sensitive to interest rate changes
than straight bonds of comparable maturity and quality. Because of these
factors, convertible securities are likely to perform differently than
broadly-based measures of the stock and bond markets.
DEBT SECURITIES
The debt securities in which the Fund may invest include rated and unrated
securities and convertible instruments. In making investment selections,
the Adviser, in addition to using nationally recognized statistical rating
organizations ("NRSROs"), also makes its own independent judgments about a
security and its issuer. Securities which are not rated by an NRSRO are
purchased based solely on the Adviser's assessment of the security and its
issuer. The Fund may invest up to 35% of its total assets in non-investment
grade debt securities, commonly referred to as "junk bonds." There is no
minimum rating for the debt securities that may be purchased. Lower rated
securities may have a higher yield and the potential for a greater return
than investment grade securities but may also have more risk. Lower rated
securities are generally meant for longer-term investing and may be subject
to certain risks with respect to the issuing entity and to market
fluctuations. The NRSROs may characterize these securities as speculative,
with moderate or little protection as to the payment of interest and
principal. See the Statement of Additional Information for a general
description of NRSRO ratings of debt obligations. The ratings by these
NRSROs represent their opinions as to the quality of the debt obligations
which they undertake to rate. It should be emphasized that ratings are
relative and subjective, and although ratings may be useful in evaluating
the safety of interest and principal payments, they do not evaluate the
market value risks of these securities. The Adviser will also evaluate the
securities and the ability of the issuers to pay interest and principal.
The Fund's ability to achieve its investment objective may be more
dependent on the Adviser's credit analysis than might be the case with
higher rated securities. The market price and yield of lower rated
securities are generally more volatile than those of higher rated
securities. Factors adversely affecting the market price and yield of these
securities will adversely affect the Fund's net asset value. The trading
market for these securities may be less liquid than that of higher rated
securities. Companies that issue lower rated securities may be highly
leveraged or may have unstable earnings, and consequently the risk of the
investment in the securities of such issuers may be greater than with
higher rated securities.
With respect to debt securities generally, the interest bearing features of
such securities carry a promise of income flow, but the price of the
securities are inversely affected by changes in interest rates and are
therefore subject to the risk of market price fluctuations. The market
values of debt securities may also be affected by changes in the credit
ratings or financial condition of the issuers.
The Fund from time to time may also purchase indebtedness and
participations therein, both secured and unsecured, of debtor companies in
reorganization or financial restructuring. Such indebtedness may be in the
form of loans, notes, bonds or debentures. Participations normally are made
available only on a nonrecourse basis by financial institutions, such as
banks or insurance companies, or by governmental institutions, such as the
Resolution Trust Corporation or the Federal Deposit Insurance Corporation
or the Pension Benefit Guaranty Corporation. When the Fund purchases a
participation interest it assumes the credit risk associated with the bank
or other financial intermediary as well as the credit risk associated with
the issuer of any underlying debt instrument. The Fund may also purchase
trade and other claims against, and other unsecured obligations of, such
debtor companies, which generally represent money due a supplier of goods
or services to such company. Some debt securities purchased by the Fund may
have very long maturities. The length of time remaining until maturity is
one factor the Adviser considers in purchasing a particular indebtedness.
The purchase of indebtedness of a troubled company always involves a risk
as to the creditworthiness of the issuer and the possibility that the
investment may be lost. The Adviser believes that the difference between
perceived risk and actual risk creates the opportunity for profit which can
be realized through thorough analysis. There are no established markets for
some of this indebtedness and it is less liquid than more heavily traded
securities. Indebtedness of the debtor company to a bank are not securities
of the banks issuing or selling them. The Fund may purchase loans from
national and state chartered banks as well as foreign ones. The Fund may
invest in senior indebtedness of the debtor companies, although on occasion
subordinated indebtedness may also be acquired. The Fund may also invest in
distressed first mortgage obligations and other debt secured by real
property. The Fund does not currently anticipate investing more than 5% of
its assets in trade and other claims.
OPTIONS
The Fund may purchase put and call options and write (sell) covered put and
call options on equity and/or debt securities. A call option gives the
purchaser of the options the right to buy, and when exercised obligates the
writer to sell, the underlying security at the exercise price. A put option
gives the purchaser of the option the right to sell, and when exercised
obligates the writer to buy, the underlying security at the exercise price.
The writing of put options will be limited to situations where the Adviser
believes that the exercise price is an attractive price at which to
purchase the underlying security. A put option sold by the Fund would be
considered covered by the Fund's placing cash or liquid securities in a
segregated account with the custodian in an amount necessary to fulfill the
obligation undertaken. Options may fail as hedging techniques in cases
where the price movements of the securities underlying the options do not
follow the price movements of the portfolio securities subject to the
hedge. Gains on investments in options depend on the Adviser's ability to
predict correctly the direction of stock prices, interest rates, and other
economic factors. The Adviser could be wrong in its predictions. Where a
liquid secondary market does not exist, the Fund would likely be unable to
control losses by closing its position.
The Fund may engage in options transactions on specific securities that may
be listed on national securities exchanges or traded in the
over-the-counter market. Options not traded on a national securities
exchange are treated as illiquid securities and may be considered to be
"derivative securities." Options transactions will not exceed 25% of the
Fund's net assets, as measured by the securities covering the options, or
5% of net assets, as measured by the premiums paid for the options, at the
time the transactions are entered into.
BORROWINGS
The Fund may borrow up to 5% of its net assets for extraordinary or
emergency temporary investment purposes or to meet redemption requests
which might otherwise require an untimely sale of portfolio securities. The
Fund may also borrow for other short-term purposes. To the extent the Fund
borrows, it must maintain continuous asset coverage of 300% of the amount
borrowed. The Fund will not borrow in an amount exceeding 25% of the value
of its net assets, including the amount borrowed, as of the time the
borrowing is made. Such borrowing has special risks. Any amount borrowed
will be subject to interest costs that may or may not exceed the
appreciation of the securities purchased.
SHORT SALES AGAINST THE BOX
For the purpose of either protecting or deferring unrealized gains on
portfolio securities, the Fund may make short sales "against the box" where
the Fund sells short a security it already owns or has the right to obtain
without payment of additional consideration an equal amount of the same
type of securities sold. The proceeds of the short sale will be held by the
broker until the settlement date, at which time the Fund delivers the
security to close the short position. If the Fund sells securities short
against the box, it may protect unrealized gains, but will lose the
opportunity to profit on such securities if the price rises. The Fund will
not sell short against the box in excess of 25% of its net assets.
LENDING
The Fund may lend its portfolio securities to broker-dealers and other
institutions as a means of earning additional income. In lending its
portfolio securities, the Fund may incur delays in recovery of loaned
securities or a loss of rights in the collateral. To minimize such risks,
such loans will only be made if the Fund deems the other party to be of
good standing and determines that the income justifies the risk. The Fund
will not lend more than 25% of its total assets.
ILLIQUID SECURITIES
The Fund may invest up to 15%, of its net assets in securities that are not
readily marketable or are otherwise restricted. The absence of a trading
market could make it difficult to ascertain a market value for illiquid
positions. The Fund's net asset value could be adversely affected if there
were no ready buyer at an acceptable price at the time the Fund decided to
sell. Time-consuming negotiations and expenses could occur in disposing of
the shares.
FOREIGN SECURITIES
The Fund may invest up to 10% of its total assets directly in the
securities of foreign issuers which are not publicly traded in the U.S. and
may also invest in foreign securities in domestic markets through
depositary receipts without regard to this limitation. The Adviser
currently intends to invest not more than 10% of the Fund's assets in
foreign securities, including both direct investments and investments made
through depositary receipts. These securities may involve additional risks
not associated with securities of domestic companies, including exchange
rate fluctuations, political or economic instability, the imposition of
exchange controls, or expropriation or confiscatory taxation. Issuers of
foreign securities are subject to different, often less detailed,
accounting, reporting and disclosure requirements than are domestic
issuers.
SHORT-TERM TRADING AND TURNOVER
The Fund may engage in short-term trading where the Adviser believes that
the anticipated gains outweigh the costs of short-term trading. The Adviser
expects that the average turnover rate of the Fund's portfolio should not
exceed 100%. The turnover rate may vary from year to year depending on how
the Adviser anticipates portfolio securities will perform. Short-term
trading will increase the amount of brokerage commissions paid by the Fund
and the amount of possible short-term capital gains. The amount of
portfolio activity will not be a limiting factor in making portfolio
decisions.
REAL ESTATE INVESTMENT TRUSTS
The Fund may invest in the equity securities of real estate investment
trusts ("REITs"). A REIT is a corporation or business trust that invests
substantially all of its assets in real estate and derives most of its
income from rents from real property or interest on loans secured by
mortgages on real property. REITs which meet certain specific requirements
of the Internal Revenue Code effectively do not pay corporate level federal
income tax. REITs may be affected adversely by changes in the value of
their underlying properties and by defaults by borrowers or tenants. REITs
are dependent on the skills of their management and have limited
diversification. REITs also rely on their ability to generate cash flow to
make distributions to shareholders and some REITs may have self-liquidation
provisions allowing mortgages to be paid in full. The market value of REITs
may also be affected by changes in the tax laws or by their inability to
qualify for the tax-free pass-through of their income. The REIT portion of
the portfolio may also be affected by general fluctuations in real estate
values.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with certain banks or
non-bank dealers. In a repurchase agreement the Fund buys a security at one
price, and at the time of sale, the seller agrees to repurchase that
security at a mutually agreed upon time and price. Repurchase agreements
could involve certain risks in the event of the failure of the seller to
repurchase the securities as agreed, which may cause a fund to suffer a
loss, including loss of interest on or principal of the security, and costs
associated with delay and enforcement of the repurchase agreement.
Repurchase agreements with a duration of more than seven days are
considered illiquid securities and are subject to the restrictions stated
above.
WHEN-ISSUED SECURITIES
The Fund may invest up to 5% of its assets in debt and equity securities
purchased on a when-issued basis. Although the payment and interest terms
of when-issued securities are established at the time the purchaser enters
into the commitment, the actual payment for and delivery of when-issued
securities generally takes place within 45 days. The Fund bears the risk
that interest rates on debt securities at the time of delivery may be
higher or lower than those contracted for on the when-issued security.
Failure of the issuer to deliver the security purchased on a when-issued
basis may result in a loss or missed opportunity to make an alternative
investment.
SPECIAL SITUATIONS
The Fund may invest in "special situations." A special situation arises
when, in the opinion of the Adviser, the securities of a company will be
recognized and appreciate in value due to a specific anticipated
development at that company. Such developments might include a new product,
a management change, an acquisition or a technological advancement.
Investments in special situations may carry an additional risk of loss in
the event that the anticipated development does not occur or does not
attract the expected attention. The special situation may involve
securities of companies with higher market capitalizations.
INVESTMENT PERFORMANCE
The investment results of the Fund quoted in advertisements and other sales
literature may refer to average annual total return and actual return.
Average annual total return assumes that an investment in the Fund was
purchased with an initial payment of $1,000 and that the investment was
redeemed at the end of a stated period of time, after giving effect to the
reinvestment of all dividends and distributions during the period at the
net asset value on the reinvestment date. The return is expressed as a
percentage rate which, if applied on a compounded annual basis, would
result in the redeemable value of the investment at the end of the period.
Because average annual returns are annualized they tend to even out
variations in the returns, and are not the same as actual year-by-year
results. The actual return performance calculations, which also may be
quoted in advertising, reflect the results of a continuous shareholder who
does not redeem. It measures the percentage change between the net asset
value of a hypothetical $1,000 investment in the Fund at the beginning of a
period and the net asset value of that investment at the end of a period,
assuming reinvestment of all dividend and capital gain distributions at the
net asset value on the reinvestment date. The performance of major market
indices such as the Dow Jones Industrial Average, Russell 2000, and
Standard & Poor's 500 may also be included in advertising so that the
Fund's results may be compared with those of groups of unmanaged securities
widely regarded by investors as measures of market performance. Brokerage
fees are not factored into the performance of the indices. The performance
data of the Fund include all recurring fees such as brokerage and
investment advisory fees. Data and rankings from Lipper Analytical
Services, Inc., CDA Investment Technologies, Morningstar or other industry
publications may also be used in advertising. See the Statement of
Additional Information.
Performance results represent past performance and are not necessarily
representative of future results. Investment return and principal value
will fluctuate so that shares may be worth more or less than their original
cost when redeemed.
The annual report contains additional performance information which is
available upon request without charge by writing or calling the Fund at the
address and telephone number set forth on the back of this Prospectus.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER
BAMCO, Inc., the Adviser, is located at 767 Fifth Avenue, New York, New
York 10153, and is responsible for portfolio management. It is a wholly
owned subsidiary of Baron Capital Group, Inc. ("BCG"). Baron Capital, Inc.
("Baron Capital"), a registered broker-dealer and the distributor of the
shares of the Fund, is also a wholly owned subsidiary of BCG.
Under an advisory agreement with the Fund (the "Advisory Agreement"), the
Adviser furnishes continuous investment advisory services and management to
the Fund. Mr. Ronald Baron is the chief investment officer of the Adviser
and is primarily responsible for the day-to-day management of the portfolio
of the Fund. Mr. Baron also has primary responsibility for the investments
of two of the retail funds, Baron Asset Fund and Baron Growth & Income
Fund. He has managed the portfolios of those Funds since their inception.
The Adviser also keeps the books of account of each series, and calculates
daily the income and net asset value per share of each Fund.
As compensation for the services rendered under each Advisory Agreement,
the Adviser receives a fee payable monthly from the assets of each Fund
equal to 1% per annum of each Fund's respective average daily net asset
value. The Adviser has agreed to waive its advisory fee to the extent
necessary so that total operating expenses of the Fund do not
exceed 1.25% of the Fund's average net assets.
BROKERAGE
Brokerage transactions for the Fund are effected chiefly by or through its
Adviser's affiliate, Baron Capital, when consistent with the policy of
obtaining the best net results for the Fund and subject to the conditions
and limitations of the 1940 Act. Baron Capital is a registered
broker-dealer and a member of the NASD. In determining the best net results
for the Fund, the Adviser will examine factors such as price (including the
applicable brokerage commission or dealer spread), size of order,
efficiency and reliability of execution. The Fund's Board of Trustees has
adopted procedures in conformity with Rule 17e-1 under the 1940 Act to
ensure that all brokerage commissions paid to Baron Capital are reasonable
and fair 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. The Fund will also consider sales of its shares
as a factor in the selection of broker-dealers to execute portfolio
transactions. See Statement of Additional Information for a description of
the commissions paid to Baron Capital.
TRUSTEES AND EXECUTIVE OFFICERS
The Trust's Board of Trustees has overall responsibility for the management
of the Fund. The Trustees and executive officers of the Fund and their
principal occupations during the last five years are set forth below.
</TABLE>
<TABLE>
<CAPTION>
Name and Address Position Held With Principal Occupation(s) During Past Five
<S> <C> <C>
Ronald Baron*+ President, Chief President and Director of: Baron Capital, Inc.
767 Fifth Avenue Investment Officer (1982-Present), Baron Capital Management,
New York, NY 10153 and Trustee Inc. (1983-Present), Baron Capital Group, Inc.
(1984-Present), BAMCO, Inc. (1987-Present).
Norman S. Edelcup Trustee Chairman, Item Processing of America
244 Atlantic Isle (1989-Present), (financial institution service
N. Miami Beach, FL bureau); Director, Valhi, Inc. (1975-Present)
33160 (diversified company); Director, Artistic
Greetings, Inc.(1985-Present).
Mark M. Feldman Trustee President and Chief Executive Officer, Cold
444 Madison Ave, Ste 703 Spring Group, Inc.(1993-Present)
New York, N.Y. 10020 (reorganization and restructuring consulting);
Executive Vice President and Chief
Restructuring Officer, Lomas Financial Corp.
and subsidiaries (1995-1996) (reorganizing
debtors-in-possession); Trustee, Aerospace
Creditors Liquidating Trust (1993-Present)
(administers and liquidates assets).
Irwin Greenberg Trustee Chairman, Lehigh Valley Hospital Board
3048 Congress Street (1991-Present); Retail Consultant, (1990-
Allentown, PA 18101 Present); Director, Cedar Crest College
(1990-Present); President and Chief Executive
Officer, Hess's Department Stores (1976-1990).
Clifford Greenberg Vice President Vice President, Baron Capital, Inc., Baron
767 Fifth Avenue Capital Group, Inc., BAMCO, Inc.
New York, NY 10153 (1997-Present); General Partner, HPB
(1997-Present); General Partner, HPB
Associates, L.P. (1984-1996) (investment
partnership).
Linda S. Martinson*+ Secretary, Vice General Counsel and Secretary of: Baron
767 Fifth Avenue President and Trustee Capital, Inc. (1983-Present), BAMCO, Inc.
New York, NY 10153 (1987-Present), Baron Capital Group, Inc.
(1987-Present), Baron Capital Group, Inc.
(1984-Present), Baron Capital Management,
Inc. (1983-Present).
Charles N. Mathewson Trustee Chairman of the Board, International Game
5270 Neil Road Technology (1986-Present) (manufacturer of
Reno, NV 89502-4169 microprocessor-controlled gaming machines
and monitoring systems).
Harold W. Milner Trustee Retired; President and Chief Executive
2293 Morningstar Drive Officer, Kahler Realty Corporation
Park City, UT 84060 (1985-1997) (hotel ownership and management).
Raymond Noveck+ Trustee President, Strategic Systems, Inc. (1990-
31 Karen Road Present) (health care information); Director,
Waban, MA 02168 Horizon/CMS Healthcare Corporation (1987-Present).
Susan Robbins Vice President Senior Analyst, Vice President and Director
767 Fifth Avenue of: Baron Capital, Inc. (1982-Present),Baron
New York, NY 10153 Capital Management, Inc. (1983-Present),
Baron Capital Group, Inc. (1984-Present).
Morty Schaja* Senior Vice Senior Vice President and Chief Operating
767 Fifth Avenue President, Chief Officer of Baron Capital, Inc. (1997-Present),
New York, NY 10153 Operating Officer Managing Director, Vice President, Baron
and Trustee Capital, Inc. (1991-Present) and Director,
Baron Capital Group, Inc., Baron Capital
Management, Inc., and BAMCO, Inc.
(1997-Present).
David A. Silverman, M.D. Trustee Physician (1976-Present).
239 Central Park West
New York, NY 10024
Peggy Wong Treasurer and Chief Treasurer and Chief Financial Officer of:
767 Fifth Avenue Financial Officer Baron Capital, Inc., Baron Capital Group,
New York, NY 10153 Inc., BAMCO, Inc., Baron Capital
Management, Inc. (1987-Present).
* Trustees deemed to be "interested persons" of the Fund as that
term is defined in the Investment Company Act of 1940.
+ 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.
</TABLE>
DISTRIBUTION PLAN AND OTHER EXPENSES
The Fund's Retirement Shares are distributed by Baron Capital, which is the
principal underwriter of the shares of the Baron retail funds. From time to
time the Adviser or the Distributor may compensate plan administrators or
their affiliates whose participants hold the Retirement Shares for
providing a variety of administrative services, such as record-keeping and
accounting, and investor support services, such as responding to inquiries
and preparing mailings to shareholders. The compensation may be paid as
either a per account fee or a percentage of the average daily assets
invested by the retirement plan. The compensation will be paid out of the
assets of the Fund.
The Fund pays a fee to its custodian, the Bank of New York, 48 Wall Street,
New York, NY 10015. The Fund also pays a fee to its transfer and dividend
distributing agent, DST Systems, Inc. P.O. Box 419946, Kansas City, MO
64141. In their respective capacities both institutions maintain certain
financial and accounting records pursuant to agreements with the Trust.
They do not assist in and are not responsible for investment decisions
involving assets of the Fund.
PURCHASES AND REDEMPTIONS
The Retirement Shares of the Fund are offered on a continuous basis through
qualified plans. Investors may not purchase or redeem shares of the Fund
directly, but only through qualified retirement plans. You should refer to
your plan documents for information on how to invest in or redeem the
Retirement Shares of the Fund.
All investments in the Fund are credited to a qualified plan immediately
upon acceptance of the investment by the Transfer Agent. Investments will
be processed at the net asset value next determined after an order is
received and accepted by the Transfer Agent. The Fund reserves the right to
reject any purchase order.
Redemptions are processed at the net asset value next calculated after
receipt and acceptance of the redemption order by the Transfer Agent.
Redemption proceeds will normally be wired to the qualified plan the
business day following receipt of the redemption order, but in no event
later than seven days after receipt of such order.
DETERMINING YOUR SHARE PRICE
Your purchases, sales or exchanges will be processed at the net asset value
per share of the Fund as of the close of the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m., New York City time) on each day that the
Exchange is open for trading by dividing the current market value of the
Fund's total assets less all of its liabilities by the total number of
shares outstanding at the time the determination is made. Valid purchase
and redemption orders placed prior to the close of the Exchange on a day
the Exchange is open for trading are executed at the net asset value
determined as of the close that day, and orders placed after that time are
valued as of the close of the next trading day. The Fund may have
arrangements with certain institutional entities with respect to the actual
receipt of orders. The Fund reserves the right to change the time at which
orders are priced if the Exchange closes at a different time or an
emergency exists.
The Fund's portfolio 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 on the date of valuation or, in the absence of any sale on
that date, the last sale price on the date the security last traded. Other
securities are valued at the mean of the most recent bid and asked prices
if market quotations are readily available. Where market quotations are not
readily available the securities are valued at their fair value as
determined in good faith by the Board of Trustees, or by the Adviser,
pursuant to procedures established by the Board. Money market instruments
and debt securities with a remaining maturity of sixty days or less are
valued by the amortized cost method unless such method does not represent
fair value. Odd lot differentials and brokerage commissions are excluded in
calculating net asset value. Securities quoted in a foreign currency are
valued daily in U.S. dollars at the foreign currency exchange rates that
are prevailing at the time the daily net asset value per share is
determined. If events that materially affect the value of a Fund's foreign
investments occur, the investments will be valued at their fair value as
determined in good faith by the Board of Trustees.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute all of its net investment income and
realized capital gains, if any, to its shareholders in a single, combined
distribution by December 31 of each year. After every distribution, the
value of a share is automatically reduced by the amount of the
distribution. All your dividends and capital gains distributions from the
Fund are automatically reinvested in additional shares of the Fund at the
next computed net asset value at the close of business on the payment date.
TAXES
The Fund intends to qualify each year as a regulated investment company
under the Internal Revenue Code of 1986 (the "Code"). Qualification as a
regulated investment company relieves the Fund of federal income and excise
taxes on the portion of its net ordinary income and net realized capital
gain distributed to shareholders. Because of the Institutional Shares, the
Fund also intends to qualify under the Code with respect to the
diversification requirements for tax deferral with respect to insurance
company separate accounts.
Because the Retirement Shares may be purchased only through qualified
plans, it is anticipated that any dividends derived from net investment
income and distributions of capital gains will be exempt from current
taxation if left to accumulate within the qualified plan. Generally,
withdrawals from such contracts may be subject to ordinary income tax and,
if made before age 59 1/2, a 10% penalty tax. The tax status of your
investment in the Retirement Shares depends on the features of the
qualified plan. Please see your plan sponsor for additional information.
The foregoing is only a summary of some important tax considerations
generally affecting the Fund and its shareholders. Prospective shareholders
are urged to consult their tax advisers concerning the tax consequences of
this investment.
GENERAL INFORMATION
The Trust is a diversified open-end management investment company
registered under the Investment Company Act of 1940 ("1940 Act"), it was
organized as a Delaware business trust on November 20, 1997. The Trust is
authorized to have separate series, but currently has only the Fund. It is
authorized to issue an indefinite number of shares of beneficial interest.
The Declaration of Trust permits the Trustees to establish additional
series. The Fund currently offers two classes of shares, one of which, the
Institutional Shares offered through Participating Insurance Companies, are
offered pursuant to this Prospectus. The shares offered hereby are
available only in connection with investments in and payments under
variable contracts and life insurance contracts. Retirement Shares of the
Fund are also available to participant directed plans through a separate
prospectus. Because the expenses of each class may differ, the performance
of each class is expected to differ. Each share of the Fund has one vote on
all matters for which a shareholder vote is required, and participates
equally in dividend and capital gain distributions when and if declared by
the Fund and in the Fund's net assets upon liquidation. Shares are fully
paid and non-assessable and there are no preemptive, conversion or exchange
rights. Shares do not have cumulative voting rights and, as a result,
holders of at least 50% of the shares voting for Trustees can elect all
Trustees and the remaining shareholders would not be able to elect any
Trustees.
As a Delaware business trust, annual shareholder meetings are not required.
Shareholders have certain rights, as set forth in the Declaration of Trust,
including the right to call a meeting of shareholders for the purpose of
voting on the removal of one or more Trustees on the written request of not
less than 10% of the outstanding shares. Such removal can be effected upon
the action of two-thirds of the outstanding shares. An insurance company
issuing a variable contract invested in the Fund requests voting
instructions from the variable contract holders. Under current law, the
insurance company must vote all shares of the Fund held by the Separate
Accounts in proportion to the voting instructions received.
CONFLICTS OF INTEREST
Each Portfolio's Shares are available only to certain qualified retirement
plans. Institutional Shares of the Fund are available to variable annuity
and variable life separate accounts of insurance companies through a
separate prospectus. Although the Fund currently does not anticipate any
disadvantages to plan participants or policy owners arising out of the fact
that the Fund offers its shares to such entities, there is a possibility
that a material conflict may arise. The Trustees monitor events in order to
identify any anticipated disadvantages or material irreconcilable conflicts
to determine what action, if any, should be taken in response. If a
material disadvantage or conflict occurs, the Trustees may require one or
more insurance company separate accounts or plans to withdraw its
investments in the Fund. If this occurs, the Fund may be forced to sell
securities at disadvantageous prices. The Trustees may refuse to sell
shares of the Fund to any separate account or qualified plan or may suspend
or terminate the offering of a Fund's shares if such action is required by
law or regulatory authority or is in the best interests of the Fund's
shareholders.
MASTER/FEEDER OPTION
The Trust may in the future seek to achieve the Fund's or any future
series' investment objective by investing all of that series' assets in
another investment company having the same investment objective and
substantially the same investment policies and restrictions as those
applicable to that series. It is expected that any such investment company
would be managed by the Adviser in substantially the same manner as the
existing series. The initial shareholder(s) of each series voted to vest
the authority to convert to a master/feeder structure in the sole
discretion of the Trustees. No further approval of the shareholders of the
series of the Trust is required. You will receive at least 30 days' prior
notice of any such investment. Such investment would be made only if the
Trustees determine it to be in the best interests of a series and its
shareholders. In making that determination, the Trustees will consider,
among other things, the benefits to shareholders and/or the opportunity to
reduce costs and achieve operational efficiencies. Although the Adviser
believes the Trustees will not approve an arrangement that is likely to
result in higher costs, no assurance is given that costs will be materially
reduced if this option is implemented.
SHAREHOLDER INFORMATION
Shareholder inquiries about general Fund information should be directed to
the Funds' office at 1-800-99-BARON or 212-583-2100.
Owners of variable insurance contracts and plan participants will be
provided semi-annual unaudited and annual audited reports, including the
financial statements of the Fund. Each report will include a listing of
portfolio securities held. The Trust's fiscal year ends September 30.
BARON CAPITAL FUNDS TRUST
BARON CAPITAL ASSET FUND
INSURANCE SHARES
767 Fifth Avenue
New York, New York 10153
(800) 99-BARON
212-583-2100
STATEMENT OF ADDITIONAL INFORMATION
August 3, 1998
BARON CAPITAL FUNDS TRUST is an open-end, diversified management
investment company organized as a series fund with one series currently
available, BARON CAPITAL ASSET FUND (the "Fund"). There are currently two
classes of shares. BARON CAPITAL ASSET FUND'S investment objective is to
seek capital appreciation through investments in securities of small and
medium sized companies with undervalued assets or favorable growth
prospects. The Fund has recently been organized and has no operating
history.
The shares of the Fund may be purchased only by the separate accounts
of insurance companies for the purpose of funding variable life insurance
policies and variable annuity contracts (collectively, "variable insurance
contracts") and by certain other qualified retirement plans ("Insurance
shares"). The Fund also offers a second class of shares to certain other
participant directed qualified plans.
This Statement of Additional Information is not a prospectus and is
only authorized for distribution when preceded or accompanied by the Fund's
prospectus dated August 3, 1998 as amended or supplemented from time to
time with respect to the Insurance Shares of the Fund. (the "Prospectus").
This Statement of Additional Information contains additional and more
detailed information than that set forth in the Prospectus and should be
read in conjunction with the Prospectus. Additional copies of the
Prospectus may be obtained without charge from the insurance company.
No dealer, salesman or any other person has been authorized to give
any information or to make any representations, other than those contained
in this Statement of Additional Information or in the related Prospectus,
in connection with the offer contained herein, and, if given or made, such
other information or representations must not be relied upon as having been
authorized by the Funds or the Distributor. This Statement of Additional
Information and the related Prospectus do not constitute an offer by the
Funds or by the Distributor to sell or a solicitation of any offer to buy
any of the securities offered hereby in any jurisdiction to any person to
whom it is unlawful to make such offer in such jurisdiction.
TABLE OF CONTENTS
Page in
Statement
of
Additional Page in
Information Prospectus
----------- ----------
Investment Objectives and Policies ......... 3 4
Investment Restrictions .............. 3 --
Short Sales Against the Box ........... 4 7
Option Transactions .................. 4 6
Use of Segregated and Other
Special Accounts .................... 6 --
Depository Receipts .................. 6 --
Medium and Lower Rated Corporate
Debt Securities .......................... 7 5
Turnover Rate ........................ 8 8
Management of the Funds .................... 9 9
Board of Trustees and Officers ......... 9 10
Principal Holders of Shares ............ 11 --
Investment Adviser ..................... 11 9
Distributor ........................... 12 12
Distribution Plan ..................... 12 12
Brokerage ............................. 14 10
Custodian, Transfer Agent and
Dividend Agent ......................... 15 12
Redemption of Shares ....................... 15 12
Net Asset Value ............................. 15 --
Taxes ....................................... 16 13
Organization and Capitalization ............. 16 14
General ............................... 16 14
Shareholder and Trustee Liability ...... 16 --
Other Information ........................... 16 --
Independent Accountants ............... 16 --
Calculation of Performance Data ......... 17 --
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of the Fund's
investment objectives and policies set forth on pages of the Prospectus.
Unless otherwise specified, the investment programs and restrictions are
not fundamental policies. Such operating policies are subject to change by
the Fund's Board of Trustees without the approval by the shareholders.
Shareholders will, however, be notified prior to any material changes.
Fundamental policies may be changed only with the approval of a majority of
the Fund's outstanding voting securities.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions, which
include those described in the Prospectus. These restrictions represent
fundamental policies of the Fund and may not be changed without the
approval of the Fund's shareholders. Unless otherwise noted, all
percentage restrictions are as of the time of the investment after giving
effect to the transaction.
The Fund may not:
1. Issue senior securities or borrow money or utilize leverage in
excess of 25% of its net assets (plus 5% for emergency or other
short-term purposes) from banks from time to time.
2. Except as described in the prospectus, engage in short-sales,
purchase securities on margin or maintain a net short position.
3. Purchase or sell commodities or commodity contracts except for
hedging purposes and in conformity with regulations of the
Commodities Futures Trading Commission such that the Fund would
not be considered a commodity pool.
4. Purchase or sell oil and gas interests or real estate. Debt or
equity securities issued by companies engaged in the oil, gas or
real estate business are not considered oil or gas interests or
real estate for purposes of this restriction. First mortgage
loans and other direct obligations secured by real estate are not
considered real estate for purposes of this restriction.
5. Invest more than 25% of the value of its total assets in any one
industry, except investments in U.S. government securities.
6. Purchase the securities of any one issuer other than the U.S.
government or any of its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of the
Fund's total assets would be invested in such issuer or the Fund
would own more than 10% of the outstanding voting securities of
such issuer, except that up to 25% of the value of the Fund's
total assets may be invested without regard to the 5% and 10%
limitations.
7. Underwrite securities of other issuers.
8. Make loans, except to the extent the purchase of debt obligations
of any type (including repurchase agreements and corporate
commercial paper) are considered loans and except that the Fund
may lend portfolio securities to qualified institutional
investors in compliance with requirements established from time
to time by the Securities and Exchange Commission and the
securities exchanges where such securities are traded.
9. Participate on a joint, or a joint and several, basis in any
securities trading account.
10. Mortgage, pledge or hypothecate any of its assets, except as may
be necessary in connection with options, loans of portfolio
securities, or other permitted borrowings.
11. Purchase securities of any issuer with a record of less than
three years' continuous operations, including predecessors,
except obligations issued or guaranteed by the U.S. government or
its agencies or instrumentalities, if such purchase would cause
the investments of the Fund in all such issuers to exceed 5% of
the value of the total assets of the Fund.
12. Invest more than 15% of its net assets in restricted or illiquid
securities, including repurchase agreements maturing in more than
seven days.
As a non-fundamental policy, The Fund will not:
1. Invest in securities of other registered investment companies
(except in connection with a merger, consolidation or other
reorganization and except for the purchase of shares of
registered open-end money market funds if double advisory fees
are not assessed), invest more than 5% of the value of the Fund's
total assets in more than 3% of the total outstanding voting
securities of another investment company or more than 10% of the
value of the Fund's total assets in securities issued by other
investment companies.
2. Invest more than 5% of its total assets in warrants to purchase
common stock.
3. Purchase the securities of any issuer of which any officer or
director of the Fund owns 2 of 1% of the outstanding securities
or in which the officers and directors in the aggregate own more
than 5%.
The Securities and Exchange Commission currently requires that the
following conditions be met whenever portfolio securities are loaned: (1)
the Fund must receive at least 100% cash collateral from the borrower; (2)
the borrower must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (3) the Fund must be
able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any dividends, interest or
other distributions on the loaned securities, and any increase in market
value; (5) the Fund may pay only reasonable custodian fees in connection
with the loan; and (6) while voting rights on the loaned securities may
pass to the borrower, the Fund's trustees must terminate the loan and
regain the right to vote the securities if a material event adversely
affecting the investment occurs. These conditions may be subject to future
modifications. The portfolio of the Fund is valued every day the New York
Stock Exchange is open for trading.
With respect to investments in warrants, the Fund will not invest in
excess of 2% of the value of its net assets in warrants that are not
listed on the New York or American Stock Exchanges. Warrants are
essentially options to purchase equity securities at a specified price
valid for a specific period of time. Their prices do not necessarily move
parallel to the prices of the underlying securities. Warrants have no
voting rights, receive no dividends and have no rights with respect to the
assets of the issuer.
SHORT SALES AGAINST THE BOX
The Fund may sell short "against the box" to protect or defer an
unrealized gain in a security. At the time of the short sale, the Fund
will either own or have the unconditional right to acquire at no additional
cost the identical security sold short. The Fund may use this technique in
connection with convertible securities as well as common stock. The Fund
may have to pay a fee to borrow securities, which would partially offset
any gain thereon.
OPTIONS TRANSACTIONS
The Fund may purchase or write put or call options. The purpose of
writing covered call options is to reduce the effect of price fluctuations
of the securities owned by the Fund (and involved in the options) on the
Fund's net asset value per share. A put option gives the purchaser of the
option, upon payment of a premium, the right to sell, and the writer the
obligation, when exercised, to buy, the underlying security, at the
exercise price. For instance, the Fund's purchase of a put option on a
security might be designed to protect its holdings in the underlying
security against a substantial decline in the market value by giving the
Fund the right to sell such security at the exercise price. A call option,
upon payment of a premium, gives the purchaser of the option the right to
buy, and the seller if exercised, the obligation to sell, the underlying
security at the exercise price. The Fund's purchase of a call option on a
security might be intended to protect the Fund against an increase in the
price of the underlying security that it intends to purchase in the future
by fixing the price at which it may purchase such security or to limit the
loss to the extent of the premium for a security it might otherwise
purchase. An American style put or call option may be exercised at any
time during a fixed period while a European style put or call option may be
exercised only upon expiration or during a fixed period prior thereto, and
the Fund may engage in either style option. The Fund is authorized to
engage in transactions with respect to exchange-listed options and over-
the-counter options ("OTC options"). Exchange-listed options are issued by
a regulated intermediary such as the Options Clearing Corporation ("OCC"),
which guarantees the performance of the obligations of the parties to such
options. The discussion below uses the OCC as an example, but is also
applicable to other financial intermediaries.
With certain exceptions, OCC-issued and exchange-listed options
generally settle by physical delivery of the underlying security, although
in the future cash settlement may become available. Rather than taking or
making delivery of the underlying security through the process of
exercising the option, listed options are usually closed by entering into
offsetting purchase or sale transactions that do not result in ownership of
the new option.
The Fund's ability to close out its position as a purchaser or seller
of an OCC or exchange-listed put or call option is dependent, in part, upon
the liquidity of the option market. Among the possible reasons for the
absence of a liquid option market on an exchange are: (i) insufficient
trading interest in certain options; (ii) restrictions on transactions
imposed by an exchange; (iii) trading halts, suspensions or other
restrictions imposed with respect to particular classes or series of
options or underlying securities including reaching daily price limits;
(iv) interruption of the normal operations of the OCC or an exchange; (v)
inadequacy of the facilities of an exchange or OCC to handle current
trading volume; or (vi) a decision by one or more exchanges to discontinue
the trading of options (or a particular class or series of options), in
which event the relevant market for that option on that exchange would
cease to exist, although outstanding options on that exchange would
generally continue to be exercisable in accordance with their terms. The
hours of trading for listed options may not coincide with the hours during
which the underlying instruments are traded. To the extent that the option
markets close before the markets for the underlying instruments,
significant price and rate movements can take place in the underlying
markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers,
financial institutions or other parties ("Counterparties") through direct
bilateral agreement with the Counterparty. In contrast to exchange-listed
options, which generally have standardized terms and performance mechanics,
all the terms of an OTC option, including terms such as method of
settlement, term, exercise price, premium, guarantees and security, are
negotiated by the parties. The Funds expect generally to enter into OTC
options that have cash settlement provisions, although they are not
required to do so.
Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails
to make or take delivery of the security, or other instrument underlying an
OTC option it has entered into with a Fund or fails to make a cash
settlement payment due in according with the option, the Fund will lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, the Adviser must assess the creditworthiness of
each such Counterparty or any guarantor or credit enhancement of the
Counterparty's credit to determine the likelihood that the terms of the OTC
option will be satisfied. The Funds will engage in OTC option transactions
only with United States securities dealers recognized by the Federal
Reserve Bank of New York as "primary dealers" or broker dealers, domestic
or foreign banks or other financial institutions which have received (or
the guarantors of the obligations of which have received) a short-term
credit rating of "A-1" from Standard & Poor's Corporation ("S&P") or "P-1"
from Moody's Investor Services ("Moody's") or an equivalent rating from any
nationally recognized statistical rating organization ("NRSRO"). The staff
of the SEC currently takes the position that OTC options purchased by a
fund, and portfolio securities "covering" the amount of the fund's
obligation pursuant to an OTC option sold by it (the cost of the sell-back
plus the in-the-money amount, if any,) are illiquid, and are subject to a
fund's limitations on investments in illiquid securities.
If a Fund sells a call option, the premium that it receives may serve
as a partial hedge, to the extent of the option premium, against a decrease
in the value of the underlying securities in its portfolio or will increase
the Fund's income. The sale of put options can also provide income.
The Fund may purchase and sell call options on corporate debt
securities and equity securities (including convertible securities). All
calls sold by the Fund must be "covered" (i.e., the Fund must own the
underlying securities) or must meet the asset segregation requirements
described below as long as the call is outstanding. Even though the Fund
will receive the option premium to help protect it against loss, a call
sold by the Fund exposes the Fund during the term of the option to possible
loss of opportunity to realize appreciation in the market price of the
underlying security or instrument and may require the Fund to hold a
security or instrument which it might otherwise have sold.
The Fund may purchase and sell put options on corporate debt
securities and equity securities (including convertible securities). All
put options must be covered. In selling put options, there is a risk that
the Fund may be required to buy the underlying security at a
disadvantageous price above the market price.
USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS
Many hedging transactions, in addition to other requirements, require
that the Fund segregate liquid high grade assets with its custodian to the
extent Fund obligations are not otherwise "covered" through ownership of
the underlying security or instrument. In general, either the full amount
of any obligation by the Fund to pay or deliver securities or assets must
be covered at all times by the securities or instruments required to be
delivered, or, subject to any regulatory restrictions, an amount of cash or
liquid high grade securities at least equal to the current amount of the
obligation must be segregated with the custodian. The segregated assets
cannot be sold or transferred unless equivalent assets are substituted in
their place or it is no longer necessary to segregate them. For example, a
call option written by the Fund will require that Fund to hold the
securities subject to the call (or securities convertible into the needed
securities without additional consideration) or to segregate liquid high
grade securities sufficient to purchase and deliver the securities if the
call is exercised. A put option written requires that the Fund segregate
liquid, high grade assets equal to the exercise price. Hedging
transactions may be covered by other means when consistent with applicable
regulatory policies.
OTC options entered into by the Fund will generally provide for cash
settlement. As a result, when the Fund sells these instruments it will
only segregate an amount of assets equal to its accrued net obligations, as
there is no requirement for payment or delivery of amounts in excess of the
net amount. These amounts will equal 100% of the exercise price in the
case of a noncash settled put, the same as an OCC guaranteed listed option
sold by the Fund, or the in-the-money amount plus any sell-back formula
amount in the case of a cash-settled put or call. OCC-issued and exchange-
listed options sold by a Fund other than those above generally settle with
physical delivery, or with an election of either physical delivery, or cash
settlement and the Fund will segregate an amount of assets equal to the
full value of the option. OTC options settling with physical delivery, or
with an election of either physical delivery or cash settlement, will be
treated the same as other options settling with physical delivery.
DEPOSITORY RECEIPTS
The Fund may invest in securities commonly known as American
Depository Receipts ("ADRs"), and in European Depository Receipts ("EDRs")
or other securities convertible into securities of foreign issuers. ADRs
are certificates issued by a United States bank or trust company and
represent the right to receive securities of a foreign issuer deposited in
a domestic bank or foreign branch of a United States bank and traded on a
United States exchange or in an over-the-counter market. EDRs are receipts
issued in Europe generally by a non-U.S. bank or trust company that
evidence ownership of non-U.S. or domestic securities. Generally, ADRs are
in registered form and EDRs are in bearer form. There are no fees imposed
on the purchase or sale of ADR's or EDRs although the issuing bank or trust
company may impose on the purchase of dividends and the conversion of ADRs
and EDRs into the underlying securities. Investment in ADRs has certain
advantages over direct investment in the underlying non-U.S. securities,
since (i) ADRs are U.S. dollar denominated investments which are easily
transferable and for which market quotations are readily available and (ii)
issuers whose securities are represented by ADRs are subject to the same
auditing, accounting and financial reporting standards as domestic issuers.
EDRs are not necessarily denominated in the currency of the underlying
security.
MEDIUM AND LOWER RATED CORPORATE DEBT SECURITIES
The Fund may invest in securities that are rated in the medium to
lowest rating categories by S&P and Moody's, some of which may be known as
"junk bonds." The Fund may invest in securities of distressed issuers when
the intrinsic values of such securities have, in the opinion of the
Adviser, warranted such investment. Corporate debt securities rated Baa
are regarded by Moody's as being neither highly protected nor poorly
secured. Interest payments and principal security appears adequate to
Moody's for the present, but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time. Such
securities are regarded by Moody's as lacking outstanding investment
characteristics and having speculative characteristics. Corporate debt
securities rated BBB are regarded by S&P as having adequate capacity to pay
interest and repay principal. Such securities are regarded by S&P as
normally exhibiting adequate protection parameters, although adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for securities in
this rating category than in higher rated categories.
Corporate debt securities which are rated B are regarded by Moody's as
generally lacking characteristics of the desirable investment. In Moody's
view, assurance of interest and principal payments or of maintenance of
other terms of the security over any long period of time may be small.
Corporate debt securities rated BB, B, CCC, CC and C are regarded by S&P on
balance as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the
obligation. In S&P's view, although such securities likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions. BB and B are
regarded by S&P as indicating the two lowest degrees of speculation in this
group of ratings. Securities rated D by S&P or C by Moody's are in default
and are not currently performing.
The Fund will rely on the Adviser's judgment, analysis and experience
in evaluating debt securities. Ratings by S&P and Moody's evaluate only
the safety of principal and interest payments, not market value risk.
Because the creditworthiness of an issuer may change more rapidly than is
able to be timely reflected in changes in credit ratings, the Adviser
monitors the issuers of corporate debt securities held in the Funds'
portfolio. The credit ratings assigned by a rating agency to a security is
a factor considered by the Adviser in selecting a security, but the
intrinsic value in light of market conditions and the Adviser's analysis of
the fundamental values underlying the issuer are of more significance.
Because of the nature of medium and lower rated corporate debt securities,
achievement by the Fund of its investment objectives when investing in such
securities is dependent on the credit analysis of the Adviser. If the Fund
purchased primarily higher rated debt securities, risks would be
substantially reduced.
A general economic downturn or a significant increase in interest
rates could severely disrupt the market for medium and lower grade
corporate debt securities and adversely affect the market value of such
securities. Securities in default are relatively unaffected by such events
or by changes in prevailing interest rates. In addition, in such
circumstances, the ability of issuers of medium and lower grade corporate
debt securities to repay principal and to pay interest, to meet projected
business goals and to obtain additional financing may be adversely
affected. Such consequences could lead to an increased incidence of
default for such securities and adversely affect the value of the corporate
debt securities in the Fund's portfolio. The secondary market prices of
medium and lower grade corporate debt securities are less sensitive to
changes in interest rates than are higher rated debt securities, but are
more sensitive to adverse economic changes or individual corporate
developments. Adverse publicity and investor perceptions, whether or not
based on rational analysis, may also affect the value and liquidity of
medium and lower grade corporate debt securities, although such factors
also present investment opportunities when prices fall below intrinsic
values. Yields on debt securities in the portfolio that are interest rate
sensitive can be expected to fluctuate over time. In addition, periods of
economic uncertainty and changes in interest rates can be expected to have
an impact on the market price of any medium to lower grade corporate debt
securities in the portfolio and thus could have an effect on the net asset
value of the Fund if other types of securities did not show offsetting
changes in values. The secondary market value of corporate debt securities
structured as zero coupon securities or payment-in-kind securities may be
more volatile in response to changes in interest rates than debt securities
which pay interest periodically in cash. Because such securities do not
pay current interest, but rather, income is accrued, to the extent that the
Fund does not have available cash to meet distribution requirements with
respect to such income, it could be required to dispose of portfolio
securities that it otherwise would not. Such disposition could be at a
disadvantageous price. Investment in such securities also involves certain
tax considerations.
To the extent that there is no established market for some of the
medium or low grade corporate debt securities in which the Fund may invest,
there may be thin or no trading in such securities and the ability of the
Adviser to value accurately such securities may be adversely affected.
Further, it may be more difficult for the Fund to sell securities for which
no established retail market exists as compared with securities for which
such a market does exist. During periods of reduced market liquidity and
in the absence of readily available market quotations for medium and lower
grade corporate debt securities held in the Fund's portfolio, the
responsibility of the Adviser to value the Fund's securities becomes more
difficult and the Adviser's judgment may play a greater role in the
valuation of the Fund's securities due to a reduced availability of
reliable objective data. To the extent that the Fund purchases illiquid
corporate debt securities or securities which are restricted as to resale,
the Fund may incur additional risks and costs. Illiquid and restricted
securities may be particularly difficult to value and their disposition may
require greater effort and expense than more liquid securities. The Fund
may be required to incur costs in connection with the registration of
restricted securities in order to dispose of such securities, although
under Rule 144A under the Securities Act of 1933 certain securities may be
determined to be liquid pursuant to procedures adopted by the Board of
Trustees under applicable guidelines.
TURNOVER RATE
The adviser expects that the average annual turnover rate of the
portfolio of the Fund should not exceed 100%. A portfolio turnover rate of
100% would occur if all the securities in the portfolio were replaced in a
one year period. The portfolio turnover rate is calculated by dividing the
lesser of portfolio purchases or sales by the average monthly value of
portfolio securities, excluding short term securities. The Fund has no
historical rates to report at this time. The turnover rate will fluctuate
depending on market conditions.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES AND OFFICERS
The Trustees and executive officers of the Fund and their principal
occupations during the last five years are set forth below.
Position Principal
Held With Occupation(s)
Name and Address the Fund During Past Five Years
---------------- --------- -----------------------
Ronald Baron *+ President President and Director
767 Fifth Avenue and Trustee of: Baron Capital,
New York, NY 10153 Inc. (1982-Present),
Baron Capital
Management, Inc.
(1983-Present), Baron
Capital Group, Inc.
(1984-Present), BAMCO,
Inc. (1987-Present).
Norman S. Edelcup Trustee Chairman, Item
244 Atlantic Isle Processing of America
N. Miami Beach, FL (1989-Present),
33160 (financial institution
service bureau);
Director, Valhi Inc.
(1975-Present)
(diversified company);
Director, Artistic
Greetings, Inc. (1985-
Present).
Mark M. Feldman Trustee President and Chief
444 Madison Avenue, Executive Officer,
Ste 703 Cold Spring Group,
New York, NY 10020 Inc. (1993-Present)
(reorganization and
restructuring
consulting); Executive
Vice President and
Chief Restructuring
Officer, Lomas
Financial Corp. and
subsidiaries (1995-
1996) (reorganizing
debtors-in-
possession); Trustee,
Aerospace Creditors
Liquidating Trust
(1993-Present)
(administers and
liquidates assets).
Irwin Greenberg Trustee Chairman, Lehigh
3048 Congress Street Valley Hospital Board
Allentown, PA 18101 (1991-Present); Retail
Consultant, (1990-
Present); Director,
Cedar Crest College
(1990-Present);
President and Chief
Executive Officer,
Hess's Department
Stores (1976-1990).
Clifford Greenberg Vice Vice President, Baron
767 Fifth Avenue President Capital, Inc., BAMCO,
new York, NY 1015311 Inc. (1997-Present);
General Partner, HPB
Associates, L.P.
(1984-1996)
(investment
partnership).
Linda S. Martinson *+ Secretary, General Counsel and
767 Fifth Avenue Vice Secretary of: Baron
New York, NY 10153 President, Capital, Inc. (1983-
and Trustee Present), BAMCO, Inc.
(1987-Present), Baron
Capital Group, Inc.
(1984-Present),Baron
Capital Management,
Inc. (1983-Present).
Charles N. Mathewson Trustee Chairman of the Board,
5270 Neil Road International Game
Reno, NV 89502-4169 Technology (1986-
Present) (manufacturer
of microprocessor-
controlled gaming
machines and
monitoring systems).
Harold W. Milner Trustee Retired; President and
2293 Morningstar Drive Chief Executive
Park City, UT 84060 Officer, Kahler Realty
Corporation (1985-
1997) (hotel ownership
and management).
Raymond Noveck + Trustee President, Strategic
31 Karen Road Systems, Inc.
Waban, MA 02168 (1990-Present) (health
care information);
Director, Horizon/CMS
Healthcare Corporation
(1987-Present).
Susan Robbins Vice Senior Analyst, Vice
767 Fifth Avenue President President, Secretary
New York, NY 10153 and Director of:
Baron Capital, Inc.
(1982-Present), Baron
Capital Management,
Inc. (1983-Present),
Baron Capital Group,
Inc. (1984-Present).
Morty Schaja * Vice Managing Director,
767 Fifth Avenue President Vice President, Baron
New York, NY 10153 and Trustee Capital, Inc. (1991-
Present), and
Director, Baron
Capital Group, Inc.,
Baron Capital
Management, Inc., and
BAMCO, Inc. (1997-
Present).
David A. Silverman, Trustee Physician (1976-
M.D. Present).
239 Central Park West
New York, NY 10024
Peggy Wong Treasurer Treasurer and Chief
767 Fifth Avenue and Financial Officer of:
New York, NY 10153 Chief Baron Capital, Inc.,
Financial Baron Capital Group,
Officer Inc., BAMCO, Inc.,
Baron Capital
Management, Inc.,
(1987-Present).
___________________________________________________________________________
* Trustees deemed to be "interested persons" of the Fund as that term is
defined in the Investment Company Act of 1940.
+ 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.
The Trustees who are not affiliated with or interested persons of the
Fund's investment adviser receive fees of $5,000 annually plus an
attendance fee of $500 for each meeting attended in person ($250 for
telephone participation). The Trustees who are interested persons of the
Funds' investment adviser receive no compensation from the Fund. As
indicated in the above table, certain Trustees and officers also hold
positions with the Fund's adviser and distributor.
PRINCIPAL HOLDERS OF SHARES
As of July 5, 1998 the Fund had no shareholders.
INVESTMENT ADVISER
The investment adviser to the Fund is BAMCO, Inc. (the "Adviser"), a
New York corporation with its principal offices at 767 Fifth Avenue, New
York, N.Y. 10153 and a subsidiary of Baron Capital Group, Inc. ("BCG").
Mr. Ronald Baron is the controlling stockholder of BCG and is BAMCO's chief
investment officer. Mr. Baron has over 25 years of experience as a Wall
Street analyst and has managed money for others for over 20 years. He has
been a participant in Barron's Roundtable and has been a featured guest on
Wall Street Week, CNN and CNBC/FNN. Pursuant to an Advisory Agreement with
the Fund (the "Advisory Agreement"), the Adviser furnishes continuous
investment advisory services and management to the Fund, including making
the day-to-day investment decisions and arranging portfolio transactions
for the Fund subject to such policies as the Trustees may determine. The
Fund has no operating history at this time.
Under the Advisory Agreement, the Adviser, at its own expense and
without reimbursement from the Fund furnishes office space and all
necessary office facilities, equipment and executive personnel for managing
the Fund, and pays the salaries and fees of all officers and Trustees who
are interested persons of the Adviser. The Adviser presently anticipates
that "Year 2000" issues will have no material effect on the ability of the
Adviser to provide services to the Fund.
The Fund pays all operating and other expenses not borne by the
Adviser such as audit, accounting and legal fees; custodian fees; expenses
of registering and qualifying its shares with federal and state securities
commissions; expenses in preparing shareholder reports and proxy
solicitation materials; expenses associated with the Fund's shares such as
dividend disbursing, transfer agent and registrar fees; certain insurance
expenses; compensation of Trustees who are not interested persons of the
Adviser; and other miscellaneous business expenses. The Fund also pays the
expenses of offering the shares of the Fund, including the registration and
filing fees, legal and accounting fees and costs of printing the prospectus
and related documents. The Fund also pays all taxes imposed on it and all
brokerage commissions and expenses incurred in connection with its
portfolio transactions.
Ronald Baron is the controlling stockholder, President and a Director
of BCG. The Adviser utilizes the staffs of Baron Capital and Baron
Capital's subsidiary Baron Capital Management, Inc. ("BCM") to provide
research. Directors, officers or employees of the Adviser and/or its
affiliates may also serve as officers or Trustees of the Fund. BCM is an
investment adviser to institutional and individual accounts. Clients of
BCM and Baron Capital have investment objectives which may vary only
slightly from those of each other and of the Fund. BCM and Baron Capital
invest assets in such clients' accounts and in the accounts of principals
and employees of BCM and Baron Capital in investments substantially similar
to, or the same as, those which constitute the principal investments of the
Fund. When the same securities are purchased for or sold by the Fund and
any of such other accounts, it is the policy of the Adviser, BCM and Baron
Capital to allocate such transactions in a manner deemed equitable by the
Adviser, and for the Adviser's, BCM's and Baron Capital's principals and
employees to take either the same or least favorable price of the day.
The Advisory Agreement provides that the Fund may use "Baron" as part
of its name for so long as the Adviser serves as investment adviser to the
Fund. The Fund acknowledges that the word "Baron" in its name is derived
from the name of the entities controlling, directly and indirectly, the
Adviser, which derive their name from Ronald Baron; that such name is the
property of the Adviser and its affiliated companies for copyright and/or
other purposes; and that if for any reason the Adviser ceases to be the
Fund's investment adviser, the Fund will promptly take all steps necessary
to change its name to one that does not include "Baron," absent the
Adviser's written consent.
The Advisory Agreement provides that the Adviser shall have no
liability to the Fund or its shareholders for any error of judgment or
mistake of law or for any loss suffered by the Fund; provided, that the
Adviser shall not be protected against liabilities arising by virtue of
willful misfeasance, bad faith or gross negligence, or reckless disregard
of the Adviser's obligations under the Advisory Agreement.
The Advisory Agreement with respect to the Fund was approved by a
majority of the Trustees, including a majority of the non-interested
Trustees, on April 28, 1998. The Fund's Advisory Agreement is for an
initial two year period but the Advisory Agreements must normally be
approved annually by the Trustees or a majority of the Fund's shares and by
a majority of the Trustees who are not parties to the Advisory Agreement or
interested persons of any such party.
The Advisory Agreement is terminable without penalty by either the
Fund (when authorized by majority vote of either its outstanding shares or
the Trustees) or the Adviser on 60 days' written notice. The Advisory
Agreement shall automatically terminate in the event of its "assignment"
(as defined by 1940 Act).
Distributor
The Fund has a distribution agreement with Baron Capital, Inc.,
("Baron Capital" or the "Distributor") a New York corporation and a
subsidiary of BCG (controlled by Ronald Baron), located at 767 Fifth
Avenue, New York, N.Y. 10153. Baron Capital is affiliated with the
Adviser. The Distributor acts as the agent for the Fund for the continuous
public offering of its shares on a best efforts basis pursuant to a
distribution plan adopted under Rule 12b-1 under the 1940 Act
("Distribution Plan").
Distribution Plan
The Distribution Plan authorizes the Fund to pay the Distributor a
distribution fee equal on an annual basis to 0.25% of the Fund's average
daily net assets. The distribution fee is paid to the Distributor in
connection with its activities or expenses primarily intended to result in
the sale of Institutional Shares, including, but not limited to,
compensation to registered representatives or other employees of the
Distributor; compensation to and expenses of employees of the Distributor
who engage in or support the distribution of shares or who service
shareholder accounts; telephone expenses; interest expenses; preparing,
printing and distributing promotional and advertising material; preparing,
printing and distributing the Prospectus and reports to other than current
shareholders; and commissions and other fees to broker-dealers or other
persons (excluding banks) who have introduced investors to the Fund.
If and to the extent the expenses listed below are considered to be
primarily intended to result in the sale of shares within the meaning of
Rule 12b-1, they are exempted from the limits set forth above: (a) the
costs of preparing, printing or reproducing and mailing all required
reports and notices to shareholders; (b) the costs of preparing, printing
or reproducing and mailing all proxy statements and proxies (whether or not
such proxy materials include any item relating to or directed toward the
sale of shares); (c) the costs of preparing, printing or reproducing and
mailing all prospectuses and statements of additional information; (d) all
legal and accounting fees relating to the preparation of any such report,
prospectus, and proxy materials; (e) all fees and expenses relating to the
qualification of the Funds and/or their shares under the securities or
"Blue Sky" laws of any jurisdiction; (f) all fees under the 1940 Act and
the Securities Act of 1933, including fees in connection with any
application for exemption relating to or directed toward the sale of
Shares; (g) all fees and assessments, if any, of the Investment Company
Institute or any successor organization, whether or not its activities are
designed to provide sales assistance; (h) all costs of preparing and
mailing confirmations of shares sold or redeemed and reports of share
balances; (i) all costs of responding to telephone or mail inquiries of
shareholders or prospective shareholders.
The Distribution Plan requires that while it is in effect the
Distributor report in writing, at least quarterly, the amounts of all
expenditures, the identity of the payees and the purposes for which such
expenditures were made for the preceding fiscal quarter.
The Distribution Plan has been approved by the Fund's Board of
Trustees, including a majority of the Trustees who are not interested
persons of the Funds and who have no direct or indirect financial interest
in the operation of the Distribution Plan or in any agreements related
thereto. In approving the Distribution Plan, the Trustees considered
various factors and determined that there is a reasonable likelihood that
the Plan will benefit the Funds and their shareholders.
Baron Capital is authorized to make payments to authorized dealers,
banks and other financial institutions who have rendered distribution
assistance and ongoing shareholder support services, shareholder servicing
assistance or record keeping. Certain states may require that any such
person be registered as a dealer with such state. The Fund may execute
portfolio transactions with and purchase securities issued by depository
institutions that receive payments under the Distribution Plan. No
preference will be shown in the selection of investments for the
instruments of such depository institutions. Baron Capital may also retain
part of the distribution fee as compensation for its services and expenses
in connection with the distribution of shares.
Baron Capital anticipates that its actual expenditures will
substantially exceed the distribution fee received by it. If the Fund's
average daily net asset value were $2 million, even if Baron Capital
incurred $50,000 of distribution expenses, it would receive only $10,000 as
its fee. Alternatively, if, the Fund's daily average net assets were $25
million, and Baron Capital incurred $60,000 of distribution expenses, it
would receive $125,000 as its fee giving Baron Capital a $65,000 profit.
If the Distribution Plan is terminated, the Fund will owe no payments to
Baron Capital other than any portion of the distribution fee accrued
through the effective date of termination but then unpaid.
Unless terminated in accordance with its terms, the Distribution Plan
shall continue in effect until, and from year to year thereafter if, such
continuance is specifically approved at least annually by its Trustees and
by a majority of the Trustees who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of
the Distribution Plan or in any agreements related thereto, such votes cast
in person at a meeting called for the purpose of such vote.
The Distribution Plan may be terminated at any time by the vote of a
majority of the members of the Fund's Board of Trustees who are not
interested persons of the Fund and have no direct or indirect financial
interest in the operation of the Distribution Plan or in any agreements
related thereto or by the vote of a majority of the outstanding shares.
The Distribution Plan may not be amended to increase materially the amount
of payments to be made without the approval of a majority of the
shareholders. All material amendments must be approved by a vote of the
Trustees and of the Trustees who are not interested persons of the Fund and
have no direct or indirect financial interest in the operation of the
Distribution Plan or in any agreements related thereto, such votes cast in
person at a meeting called for the purpose of such vote.
The Glass-Steagall Act and other applicable laws, among other things,
prohibit banks from engaging in business of underwriting, selling or
distributing securities. Accordingly, the Distributor will enter into
agreements with banks only to provide administrative assistance. However,
changes in federal or state statues and regulations pertaining to the
permissible activities of banks and their affiliates, as well as judicial
or administrative decisions or interpretations could prevent a bank from
continuing to perform all or a part of the contemplated services. If a
bank were prohibited from so acting, the Trustees would consider what
actions, if any, would be necessary to continue to provide efficient and
effective shareholder services. It is not expected that shareholders would
suffer any adverse financial consequences as a result of these occurrences.
BROKERAGE
The Adviser is responsible for placing the portfolio brokerage
business of the Fund with the objective of obtaining the best net results
for the Fund, taking into account prompt, efficient and reliable executions
at a favorable price. Brokerage transactions for the Fund are effected
chiefly by or through the Adviser's affiliate, Baron Capital, when
consistent with this objective and subject to the conditions and
limitations of the 1940 Act. Baron Capital is a member of the National
Association of Securities Dealers, Inc., but is not a member of any
securities exchange.
The Fund's Board of Trustees has adopted procedures pursuant to Rule
17e-1 of the 1940 Act which are reasonably designed to provide that the
commissions paid to Baron Capital are reasonable and fair compared to the
commission, fee or other enumeration 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. The Board reviews no less frequently than quarterly that all
transactions effected pursuant to Rule 17e-1 during the preceding quarter
were effected in compliance with such procedures. The Fund and the Adviser
furnish such reports and maintain such records as required by Rule 17e-1.
The Fund does not deal with Baron Capital in any portfolio transaction in
which Baron Capital acts as principal. The Fund has no operating history.
Under the Investment Advisory Agreement and as permitted by Section
28(e) of the Securities and Exchange Act of 1934, the Adviser may cause
the Fund to pay a broker-dealer (except Baron Capital) which provides
brokerage and research services to the Adviser an amount of commission for
effecting a securities transaction for the Fund in excess of the amount
other broker-dealers would have charged for the transaction if the Adviser
determines in good faith that the greater commission is consistent with the
Fund's policies and is reasonable in relation to the value of the brokerage
and research services provided by the executing broker-dealer viewed in
terms of either a particular transaction or the Adviser's overall
responsibilities to the Fund or to its other clients. The term "brokerage
and research services" includes advice as to the value of securities, the
advisability of investing in, purchasing, or selling securities, and the
availability of securities or of purchasers or sellers of securities;
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of
accounts; and effecting securities transactions and performing functions
incidental thereto such as clearance and settlement. Such research and
information may be used by the Adviser or its affiliates to supplement the
services it is required to perform pursuant to the Advisory Agreement in
serving the Fund and/or other advisory clients of affiliates.
Broker-dealers may be willing to furnish statistical research and
other factual information or services to the Adviser for no consideration
other than brokerage or underwriting commissions. Securities may be bought
or sold through such broker-dealers, but at present, unless otherwise
directed by the Fund, a commission higher than one charged elsewhere will
not be paid to such a firm solely because it provided research to the
Adviser. Research provided by brokers is used for the benefit of all of
the Adviser's or its affiliates' clients and not solely or necessarily for
the benefit of the Fund. The Adviser's investment management personnel
attempt to evaluate the quality of research provided by brokers. Results
of this effort are sometimes used by the Adviser as a consideration the in
the selection of brokers to execute portfolio transactions.
Baron Capital acts as broker for, in addition to the Fund, accounts of
BCM and Baron Capital, including accounts of principals and employees of
Baron Capital, BCM and the Adviser. Investment decisions for the Fund and
for investment accounts managed by BCM, are made independent of each other
in light of differing considerations for the various accounts. The same
investment decision may, however, be made for two or more of the Adviser's
and or BCM's accounts. In such event, simultaneous transactions are
inevitable. Purchases and sales are averaged as to price where possible
and allocated to account in a manner deemed equitable by the Adviser in
conjunction with BCM and Baron Capital. This procedure could have a
detrimental effect upon the price or value of the security for the Fund,
but may have a beneficial effect.
The investment advisory fee that the Fund pays to the Adviser is not
reduced as a consequence of the Adviser's receipt of brokerage and research
services. To the extent the Fund's portfolio transactions are used to
obtain such services, the brokerage commissions paid by the Fund will
exceed those that might otherwise be paid by an amount that cannot be
presently determined. Such services would by useful and of value to the
Adviser in serving both the Fund and other clients and, conversely, such
services obtained by the placement of brokerage business of other clients
would by useful to the Adviser in carrying out its obligations to the Fund.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT
The Bank of New York, 48 Wall Street, New York, NY, is the custodian
for the Fund's cash and securities. DST Systems, Inc., CT-7 Tower, 1004
Baltimore, Kansas City, MO 64105, is the transfer agent and dividend agent
for the Fund's shares. Neither institution assists in or is responsible
for investment decisions involving assets of the Fund. Both institutions
are responsible for the maintenance of the Fund's portfolios and general
accounting records, and provide certain shareholder services.
REDEMPTION OF SHARES
The Fund expects to make all redemptions in cash, but have reserved
the right to make payment, in whole or in part, in portfolio securities.
Payment will be made other than all in cash if the Fund's Board of Trustees
determines that economic conditions exist which would make payment wholly
in cash detrimental to a particular fund's best interests. Portfolio
securities to be so distributed, if any, would be selected in the
discretion of the Fund's Board of Trustees and priced as described under
"Determining Your Share Price" herein and in the Prospectus.
NET ASSET VALUE
As more fully set forth in the Prospectus under "Determining Your
Share Price," the net asset value per share of the Fund is determined as of
the close of the New York Stock Exchange on each day that the Exchange is
open. The Exchange is open all week days that are not holidays, which it
announces annually. The most recent announcement states it will not be
open on New Year's Day, Martin Luther King, Jr.'s Day, Washington's
Birthday, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
Securities traded on more than one national securities exchange are
valued at the last sale price of the day as of which such value is being
determined as reflected at the close of the exchange which is the principal
market for such securities.
U.S. Government obligations and other debt instruments having sixty
days or less remaining until maturity are stated at amortized cost. Debt
instruments having a greater remaining maturity 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.
TAXES
The Fund intends to qualify each year as a regulated investment
company under the Internal Revenue Code of 1986 (the "Code").
Qualification as a regulated investment company relieves the Funds of
federal income and excise taxes on the portion of its net ordinary income
and net realized capital gain distributed to shareholders. The Fund also
intends to qualify under the Code with respect to the diversification
requirements for tax deferral regarding insurance company separate
accounts.
Because the Insurance Shares may be purchased only through variable
insurance contacts and the Retirement Shares may be purchased only through
qualified plans, it is anticipated that any dividends derived from net
investment income and distributions of capital gains will be exempt from
current taxation if left to accumulate within the variable insurance
contract or qualified plan. Generally, withdrawals from such contracts may
be subject to ordinary income tax and, if made before age 591/2, a 10%
penalty tax. The tax status of an investment in the Insurance Shares
depends on the features of the variable insurance contracts purchased from
a Participating Insurance Company. Please see the separate account
prospectus for additional information.
The foregoing is only a summary of some important tax considerations
generally affecting the Fund and its shareholders. Prospective
shareholders are urged to consult their tax advisers concerning the tax
consequences of this investment.
ORGANIZATION AND CAPITALIZATION
GENERAL
The Trust is an open-end diversified investment company organized as a
series fund and established under the laws of The state of Delaware by a
Declaration of Trust dated November 20, 1997. The one series currently
available is Baron Capital Asset Fund. Shares entitle their holders to one
vote per share. Shares have noncumulative voting rights, which means that
holders of more than 50% of the shares voting for the election of Trustees
can elect all Trustees and, in such event, the holders of the remaining
shares voting for the election of Trustees will not be able to elect any
person or persons as Trustees. Shares have no preemptive or subscription
rights, and are transferable.
TRUSTEE LIABILITY
The Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law, but nothing in
the Declaration of trust protects a trustee against liability to which he
or she would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.
OTHER INFORMATION
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers L.L.P., 1301 Avenue of the Americas, New York,
New York 10019, has been selected as independent accountants of the Fund.
Calculations of Performance Data
Advertisements and other sales literature for the Fund may refer to
average annual total return and actual return. Average annual total return
is computed by finding the average annual compounded rates of return over a
given period that would equate a hypothetical initial investment to the
ending redeemable value thereof, as follows:
P (1+T)N =ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = Number of years
ERV = ending redeemable value at the end of the
period of a Hypothetical $1,000 investment
made at the beginning of the period
Actual return is computed by measuring the percentage change between
the net asset value of a hypothetical $1,000 investment in the Fund at the
beginning of a period and the net asset value of that investment at the end
of a period. All performance calculations assume that dividends and
distributions are reinvested at the net asset value on the appropriate
reinvestment dates and include all recurring fees. The Fund has no
operating history.
Performance results represent past performance and are not necessarily
representative of future results. Investment return and principal value
will fluctuate so that shares may be worth more or less than their original
cost when redeemed.
In addition to advertising average annual and actual return data,
comparative performance information may be used in advertising materials
about the Funds, including data and other information from Lipper
Analytical Services, Inc., CDA Investment Technologies, Morningstar Inc.,
Money, Forbes, SEI, Ibbotson, No Load Investor, Growth Fund Guide, Fortune,
Barron's, The New York Times, The Wall Street Journal, Changing Times,
Medical Economics, Business Week, Consumer Digest, Dick Davis Digest,
Dickenson's Retirement Letter, Equity Fund Outlook, Executive Wealth
Advisor, Financial World, Investor's Daily, Time, Personal Finance,
Investment Advisor, Smartmoney, Rukeyser, Kiplinger's, NAPFA News, US News,
Bottomline, Investors Business Daily, Bloomberg Radio, CNBC, and/or USA
Today. The Fund may also use comparative performance data from indexes such
as the Dow Jones Industrial Average, Standard & Poor's 400, 500, Small Cap
600, 1,500, or Midcap 400, Value Line Index, Wilshire 4,500, 5000, or Small
Cap; NASDAQ/OTC Composite, New York Stock Exchange; and the Russell 1000,
2000, 2500, 3000, 2000 Growth, 2000 Value, or Midcap. With respect to the
rating services, the Fund may use performance information that ranks the
Fund in any of the following categories: all funds, aggressive growth
funds, value funds, mid-cap funds, small-cap funds, growth and income
funds, equity income funds, and any combination of the above listed
categories.
BARON CAPITAL ASSET FUND
Statement of Assets and Liabilities
July 6, 1998
ASSETS:
Cash $100,000
--------
Total assets $100,000
--------
--------
LIABILITIES: $ 0
--------
Net assets $100,000
--------
--------
Insurance shares (net asset value, offering
and redemption price per share-$100,000/10,000 shares) $ 10.00
--------
--------
---------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENT
1. Baron Capital Funds Trust (the "Trust"), was organized as a Delaware
business trust on November 20, 1997, and has been inactive since that
date except for matters relating to its organization and registration
under the Investment Company Act of 1940 as a diversified, open-end
management investment company and the sale of 10,000 Insurance shares
of beneficial interest of Baron Capital Asset Fund (the "Fund"), a
Series of the Trust, to BAMCO, Inc., the Fund's investment adviser (the
"Adviser") for $100,000. The Fund offers Insurance and Retirement shares.
2. The organization expenses of the Trust will be paid for by the Adviser.
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Shareholder and
Board of Trustees of Baron Capital Asset Fund:
In our opinion, the accompanying statements of assets and liabilities
presents fairly, in all material respects, the financial position of Baron
Capital Asset Fund as of July 6, 1998, in conformity with generally
accepted accounting principles. This financial statement is the
responsibility of the Fund's management; our responsibility is to express
an opinion on this financial statement based on our audit. We conducted
our audit in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statement is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statement, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
July 6, 1998
BARON CAPITAL FUNDS TRUST
BARON CAPITAL ASSET FUND
RETIREMENT SHARES
767 Fifth Avenue
New York, New York 10153
(800) 99-BARON
212-583-2100
STATEMENT OF ADDITIONAL INFORMATION
August 3, 1998
BARON CAPITAL FUNDS TRUST is an open-end, diversified management
investment company organized as a series fund with one series currently
available, BARON CAPITAL ASSET FUND (the "Fund"). There are currently two
classes of shares. BARON CAPITAL ASSET FUND'S investment objective is to
seek capital appreciation through investments in securities of small and
medium sized companies with undervalued assets or favorable growth
prospects. The Fund has recently been organized and has no operating
history.
The shares of the Fund may be purchased only in connection with
certain participant directed qualified retirement plans ("Retirement
Shares"). The Fund also offers a second class of shares in connection with
investments in and payments under variable annuity contracts and variable
life insurance contracts (collectively "variable insurance contracts")
issued by life insurance companies ("Institutional Shares"). The Trust
sells and redeems its shares at net asset value without any sales charges
or redemption fees. The minimum initial investment is $2,000. There is no
minimum for subsequent purchases.
This Statement of Additional Information is not a prospectus and is
only authorized for distribution when preceded or accompanied by the Fund's
prospectus dated August 3, 1998 as amended or supplemented from time to
time with respect to the Retirement Shares of the Fund. (the "Prospectus").
This Statement of Additional Information contains additional and more
detailed information than that set forth in the Prospectus and should be
read in conjunction with the Prospectus. Additional copies of the
Prospectus may be obtained without charge from the retirement plan sponsor.
No dealer, salesman or any other person has been authorized to give
any information or to make any representations, other than those contained
in this Statement of Additional Information or in the related Prospectus,
in connection with the offer contained herein, and, if given or made, such
other information or representations must not be relied upon as having been
authorized by the Funds or the Distributor. This Statement of Additional
Information and the related Prospectus do not constitute an offer by the
Funds or by the Distributor to sell or a solicitation of any offer to buy
any of the securities offered hereby in any jurisdiction to any person to
whom it is unlawful to make such offer in such jurisdiction.
TABLE OF CONTENTS
Page in
Statement
of
Additional Page in
Information Prospectus
Investment Objectives and Policies................. 3 4
Investment Restrictions.................... 3 --
Short Sales Against the Box................ 4 7
Option Transactions........................ 4 6
Use of Segregated and Other Special Accounts. 6 --
Depository Receipts........................ 6 --
Medium and Lower Rated Corporate Debt Securities... 7 5
Turnover Rate.............................. 8 8
Management of the Funds............................. 9 9
Board of Trustees and Officers............. 9 10
Principal Holders of Shares................ 11 --
Investment Adviser......................... 11 9
Distributor................................ 12 12
Distribution Plan.......................... 13 12
Brokerage.................................. 13 9
Custodian, Transfer Agent and
Dividend Agent............................. 14 12
Redemption of Shares............................... 14 12
Net Asset Value.................................... 14 --
Taxes ........................................... 15 13
Organization and Capitalization.................... 15 13
General.................................... 15 13
Shareholder and Trustee Liability.......... 15 --
Other Information.................................. 16 --
Independent Accountants.................... 16 --
Calculation of Performance Data............ 17 --
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of the Fund's
investment objectives and policies set forth on pages of the Prospectus.
Unless otherwise specified, the investment programs and restrictions are
not fundamental policies. Such operating policies are subject to change by
the Fund's Board of Trustees without the approval by the shareholders.
Shareholders will, however, be notified prior to any material changes.
Fundamental policies may be changed only with the approval of a majority of
the Fund's outstanding voting securities.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions, which
include those described in the Prospectus. These restrictions represent
fundamental policies of the Fund and may not be changed without the
approval of the Fund's shareholders. Unless otherwise noted, all percentage
restrictions are as of the time of the investment after giving effect to
the transaction.
The Fund may not:
1. Issue senior securities or borrow money or utilize leverage
in excess of 25% of its net assets (plus 5% for emergency or
other short-term purposes) from banks from time to time.
2. Except as described in the prospectus, engage in
short-sales, purchase securities on margin or maintain a net
short position.
3. Purchase or sell commodities or commodity contracts except
for hedging purposes and in conformity with regulations of
the Commodities Futures Trading Commission such that the
Fund would not be considered a commodity pool.
4. Purchase or sell oil and gas interests or real estate. Debt
or equity securities issued by companies engaged in the oil,
gas or real estate business are not considered oil or gas
interests or real estate for purposes of this restriction.
First mortgage loans and other direct obligations secured by
real estate are not considered real estate for purposes of
this restriction.
5. Invest more than 25% of the value of its total assets in any
one industry, except investments in U.S. government
securities.
6. Purchase the securities of any one issuer other than the
U.S. government or any of its agencies or instrumentalities,
if immediately after such purchase more than 5% of the value
of the Fund's total assets would be invested in such issuer
or the Fund would own more than 10% of the outstanding
voting securities of such issuer, except that up to 25% of
the value of the Fund's total assets may be invested without
regard to the 5% and 10% limitations.
7. Underwrite securities of other issuers.
8. Make loans, except to the extent the purchase of debt
obligations of any type (including repurchase agreements and
corporate commercial paper) are considered loans and except
that the Fund may lend portfolio securities to qualified
institutional investors in compliance with requirements
established from time to time by the Securities and Exchange
Commission and the securities exchanges where such
securities are traded.
9. Participate on a joint, or a joint and several, basis in any
securities trading account.
10. Mortgage, pledge or hypothecate any of its assets, except as
may be necessary in connection with options, loans of
portfolio securities, or other permitted
borrowings.
11. Purchase securities of any issuer with a record of less than
three years' continuous operations, including predecessors,
except obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, if such
purchase would cause the investments of the Fund in all such
issuers to exceed 5% of the value of the total assets of the
Fund.
12. Invest more than 15% of its net assets in restricted or
illiquid securities, including repurchase agreements
maturing in more than seven days.
As a non-fundamental policy, The Fund will not:
1. Invest in securities of other registered investment
companies (except in connection with a merger, consolidation
or other reorganization and except for the purchase of
shares of registered open-end money market funds if double
advisory fees are not assessed), invest more than 5% of the
value of the Fund's total assets in more than 3% of the
total outstanding voting securities of another investment
company or more than 10% of the value of the Fund's total
assets in securities issued by other investment companies.
2. Invest more than 5% of its total assets in warrants to
purchase common stock.
3. Purchase the securities of any issuer of which any officer
or director of the Fund owns 2 of 1% of the outstanding
securities or in which the officers and directors in the
aggregate own more than 5%.
The Securities and Exchange Commission currently requires that the
following conditions be met whenever portfolio securities are loaned: (1)
the Fund must receive at least 100% cash collateral from the borrower; (2)
the borrower must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (3) the Fund must be
able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any dividends, interest or
other distributions on the loaned securities, and any increase in market
value; (5) the Fund may pay only reasonable custodian fees in connection
with the loan; and (6) while voting rights on the loaned securities may
pass to the borrower, the Fund's trustees must terminate the loan and
regain the right to vote the securities if a material event adversely
affecting the investment occurs. These conditions may be subject to future
modifications. The portfolio of the Fund is valued every day the New York
Stock Exchange is open for trading.
With respect to investments in warrants, the Fund will not invest
in excess of 2% of the value of its net assets in warrants that are not
listed on the New York or American Stock Exchanges. Warrants are
essentially options to purchase equity securities at a specified price
valid for a specific period of time. Their prices do not necessarily move
parallel to the prices of the underlying securities. Warrants have no
voting rights, receive no dividends and have no rights with respect to the
assets of the issuer.
SHORT SALES AGAINST THE BOX
The Fund may sell short "against the box" to protect or defer an
unrealized gain in a security. At the time of the short sale, the Fund will
either own or have the unconditional right to acquire at no additional cost
the identical security sold short. The Fund may use this technique in
connection with convertible securities as well as common stock. The Fund
may have to pay a fee to borrow securities, which would partially offset
any gain thereon.
OPTIONS TRANSACTIONS
The Fund may purchase or write put or call options. The purpose of
writing covered call options is to reduce the effect of price fluctuations
of the securities owned by the Fund (and involved in the options) on the
Fund's net asset value per share. A put option gives the purchaser of the
option, upon payment of a premium, the right to sell, and the writer the
obligation, when exercised, to buy, the underlying security, at the
exercise price. For instance, the Fund's purchase of a put option on a
security might be designed to protect its holdings in the underlying
security against a substantial decline in the market value by giving the
Fund the right to sell such security at the exercise price. A call option,
upon payment of a premium, gives the purchaser of the option the right to
buy, and the seller if exercised, the obligation to sell, the underlying
security at the exercise price. The Fund's purchase of a call option on a
security might be intended to protect the Fund against an increase in the
price of the underlying security that it intends to purchase in the future
by fixing the price at which it may purchase such security or to limit the
loss to the extent of the premium for a security it might otherwise
purchase. An American style put or call option may be exercised at any time
during a fixed period while a European style put or call option may be
exercised only upon expiration or during a fixed period prior thereto, and
the Fund may engage in either style option. The Fund is authorized to
engage in transactions with respect to exchange-listed options and
over-the-counter options ("OTC options"). Exchange-listed options are
issued by a regulated intermediary such as the Options Clearing Corporation
("OCC"), which guarantees the performance of the obligations of the parties
to such options. The discussion below uses the OCC as an example, but is
also applicable to other financial intermediaries.
With certain exceptions, OCC-issued and exchange-listed options
generally settle by physical delivery of the underlying security, although
in the future cash settlement may become available. Rather than taking or
making delivery of the underlying security through the process of
exercising the option, listed options are usually closed by entering into
offsetting purchase or sale transactions that do not result in ownership of
the new option.
The Fund's ability to close out its position as a purchaser or
seller of an OCC or exchange-listed put or call option is dependent, in
part, upon the liquidity of the option market. Among the possible reasons
for the absence of a liquid option market on an exchange are: (i)
insufficient trading interest in certain options; (ii) restrictions on
transactions imposed by an exchange; (iii) trading halts, suspensions or
other restrictions imposed with respect to particular classes or series of
options or underlying securities including reaching daily price limits;
(iv) interruption of the normal operations of the OCC or an exchange; (v)
inadequacy of the facilities of an exchange or OCC to handle current
trading volume; or (vi) a decision by one or more exchanges to discontinue
the trading of options (or a particular class or series of options), in
which event the relevant market for that option on that exchange would
cease to exist, although outstanding options on that exchange would
generally continue to be exercisable in accordance with their terms. The
hours of trading for listed options may not coincide with the hours during
which the underlying instruments are traded. To the extent that the option
markets close before the markets for the underlying instruments,
significant price and rate movements can take place in the underlying
markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers,
financial institutions or other parties ("Counterparties") through direct
bilateral agreement with the Counterparty. In contrast to exchange-listed
options, which generally have standardized terms and performance mechanics,
all the terms of an OTC option, including terms such as method of
settlement, term, exercise price, premium, guarantees and security, are
negotiated by the parties. The Funds expect generally to enter into OTC
options that have cash settlement provisions, although they are not
required to do so.
Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails
to make or take delivery of the security, or other instrument underlying an
OTC option it has entered into with a Fund or fails to make a cash
settlement payment due in according with the option, the Fund will lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, the Adviser must assess the creditworthiness of
each such Counterparty or any guarantor or credit enhancement of the
Counterparty's credit to determine the likelihood that the terms of the OTC
option will be satisfied. The Funds will engage in OTC option transactions
only with United States securities dealers recognized by the Federal
Reserve Bank of New York as "primary dealers" or broker dealers, domestic
or foreign banks or other financial institutions which have received (or
the guarantors of the obligations of which have received) a short-term
credit rating of "A-1" from Standard & Poor's Corporation ("S&P") or "P-1"
from Moody's Investor Services ("Moody's") or an equivalent rating from any
nationally recognized statistical rating organization ("NRSRO"). The staff
of the SEC currently takes the position that OTC options purchased by a
fund, and portfolio securities "covering" the amount of the fund's
obligation pursuant to an OTC option sold by it (the cost of the sell-back
plus the in-the-money amount, if any,) are illiquid, and are subject to a
fund's limitations on investments in illiquid securities.
If a Fund sells a call option, the premium that it receives may
serve as a partial hedge, to the extent of the option premium, against a
decrease in the value of the underlying securities in its portfolio or will
increase the Fund's income. The sale of put options can also provide
income.
The Fund may purchase and sell call options on corporate debt
securities and equity securities (including convertible securities). All
calls sold by the Fund must be "covered" (i.e., the Fund must own the
underlying securities) or must meet the asset segregation requirements
described below as long as the call is outstanding. Even though the Fund
will receive the option premium to help protect it against loss, a call
sold by the Fund exposes the Fund during the term of the option to possible
loss of opportunity to realize appreciation in the market price of the
underlying security or instrument and may require the Fund to hold a
security or instrument which it might otherwise have sold.
The Fund may purchase and sell put options on corporate debt
securities and equity securities (including convertible securities). All
put options must be covered. In selling put options, there is a risk that
the Fund may be required to buy the underlying security at a
disadvantageous price above the
market price.
USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS
Many hedging transactions, in addition to other requirements,
require that the Fund segregate liquid high grade assets with its custodian
to the extent Fund obligations are not otherwise "covered" through
ownership of the underlying security or instrument. In general, either the
full amount of any obligation by the Fund to pay or deliver securities or
assets must be covered at all times by the securities or instruments
required to be delivered, or, subject to any regulatory restrictions, an
amount of cash or liquid high grade securities at least equal to the
current amount of the obligation must be segregated with the custodian. The
segregated assets cannot be sold or transferred unless equivalent assets
are substituted in their place or it is no longer necessary to segregate
them. For example, a call option written by the Fund will require that Fund
to hold the securities subject to the call (or securities convertible into
the needed securities without additional consideration) or to segregate
liquid high grade securities sufficient to purchase and deliver the
securities if the call is exercised. A put option written requires that the
Fund segregate liquid, high grade assets equal to the exercise price.
Hedging transactions may be covered by other means when consistent with
applicable regulatory policies.
OTC options entered into by the Fund will generally provide for
cash settlement. As a result, when the Fund sells these instruments it will
only segregate an amount of assets equal to its accrued net obligations, as
there is no requirement for payment or delivery of amounts in excess of the
net amount. These amounts will equal 100% of the exercise price in the case
of a noncash settled put, the same as an OCC guaranteed listed option sold
by the Fund, or the in-the-money amount plus any sell-back formula amount
in the case of a cash-settled put or call. OCC-issued and exchange-listed
options sold by a Fund other than those above generally settle with
physical delivery, or with an election of either physical delivery, or cash
settlement and the Fund will segregate an amount of assets equal to the
full value of the option. OTC options settling with physical delivery, or
with an election of either physical delivery or cash settlement, will be
treated the same as other options settling with physical delivery.
DEPOSITORY RECEIPTS
The Fund may invest in securities commonly known as American
Depository Receipts ("ADRs"), and in European Depository Receipts ("EDRs")
or other securities convertible into securities of foreign issuers. ADRs
are certificates issued by a United States bank or trust company and
represent the right to receive securities of a foreign issuer deposited in
a domestic bank or foreign branch of a United States bank and traded on a
United States exchange or in an over-the-counter market. EDRs are receipts
issued in Europe generally by a non-U.S. bank or trust company that
evidence ownership of non-U.S. or domestic securities. Generally, ADRs are
in registered form and EDRs are in bearer form. There are no fees imposed
on the purchase or sale of ADR's or EDRs although the issuing bank or trust
company may impose on the purchase of dividends and the conversion of ADRs
and EDRs into the underlying securities. Investment in ADRs has certain
advantages over direct investment in the underlying non-U.S. securities,
since (i) ADRs are U.S. dollar denominated investments which are easily
transferable and for which market quotations are readily available and (ii)
issuers whose securities are represented by ADRs are subject to the same
auditing, accounting and financial reporting standards as domestic issuers.
EDRs are not necessarily denominated in the currency of the underlying
security.
MEDIUM AND LOWER RATED CORPORATE DEBT SECURITIES
The Fund may invest in securities that are rated in the medium to
lowest rating categories by S&P and Moody's, some of which may be known as
"junk bonds." The Fund may invest in securities of distressed issuers when
the intrinsic values of such securities have, in the opinion of the
Adviser, warranted such investment. Corporate debt securities rated Baa are
regarded by Moody's as being neither highly protected nor poorly secured.
Interest payments and principal security appears adequate to Moody's for
the present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
securities are regarded by Moody's as lacking outstanding investment
characteristics and having speculative characteristics. Corporate debt
securities rated BBB are regarded by S&P as having adequate capacity to pay
interest and repay principal. Such securities are regarded by S&P as
normally exhibiting adequate protection parameters, although adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for securities in
this rating category than in higher rated categories.
Corporate debt securities which are rated B are regarded by Moody's
as generally lacking characteristics of the desirable investment. In
Moody's view, assurance of interest and principal payments or of
maintenance of other terms of the security over any long period of time may
be small. Corporate debt securities rated BB, B, CCC, CC and C are regarded
by S&P on balance as predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of the
obligation. In S&P's view, although such securities likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions. BB and B are
regarded by S&P as indicating the two lowest degrees of speculation in this
group of ratings. Securities rated D by S&P or C by Moody's are in default
and are not currently performing.
The Fund will rely on the Adviser's judgment, analysis and
experience in evaluating debt securities. Ratings by S&P and Moody's
evaluate only the safety of principal and interest payments, not market
value risk. Because the creditworthiness of an issuer may change more
rapidly than is able to be timely reflected in changes in credit ratings,
the Adviser monitors the issuers of corporate debt securities held in the
Funds' portfolio. The credit ratings assigned by a rating agency to a
security is a factor considered by the Adviser in selecting a security, but
the intrinsic value in light of market conditions and the Adviser's
analysis of the fundamental values underlying the issuer are of more
significance. Because of the nature of medium and lower rated corporate
debt securities, achievement by the Fund of its investment objectives when
investing in such securities is dependent on the credit analysis of the
Adviser. If the Fund purchased primarily higher rated debt securities,
risks would be substantially reduced.
A general economic downturn or a significant increase in interest
rates could severely disrupt the market for medium and lower grade
corporate debt securities and adversely affect the market value of such
securities. Securities in default are relatively unaffected by such events
or by changes in prevailing interest rates. In addition, in such
circumstances, the ability of issuers of medium and lower grade corporate
debt securities to repay principal and to pay interest, to meet projected
business goals and to obtain additional financing may be adversely
affected. Such consequences could lead to an increased incidence of default
for such securities and adversely affect the value of the corporate debt
securities in the Fund's portfolio. The secondary market prices of medium
and lower grade corporate debt securities are less sensitive to changes in
interest rates than are higher rated debt securities, but are more
sensitive to adverse economic changes or individual corporate developments.
Adverse publicity and investor perceptions, whether or not based on
rational analysis, may also affect the value and liquidity of medium and
lower grade corporate debt securities, although such factors also present
investment opportunities when prices fall below intrinsic values. Yields on
debt securities in the portfolio that are interest rate sensitive can be
expected to fluctuate over time. In addition, periods of economic
uncertainty and changes in interest rates can be expected to have an impact
on the market price of any medium to lower grade corporate debt securities
in the portfolio and thus could have an effect on the net asset value of
the Fund if other types of securities did not show offsetting changes in
values. The secondary market value of corporate debt securities structured
as zero coupon securities or payment-in-kind securities may be more
volatile in response to changes in interest rates than debt securities
which pay interest periodically in cash. Because such securities do not pay
current interest, but rather, income is accrued, to the extent that the
Fund does not have available cash to meet distribution requirements with
respect to such income, it could be required to dispose of portfolio
securities that it otherwise would not. Such disposition could be at a
disadvantageous price. Investment in such securities also involves certain
tax considerations.
To the extent that there is no established market for some of the
medium or low grade corporate debt securities in which the Fund may invest,
there may be thin or no trading in such securities and the ability of the
Adviser to value accurately such securities may be adversely affected.
Further, it may be more difficult for the Fund to sell securities for which
no established retail market exists as compared with securities for which
such a market does exist. During periods of reduced market liquidity and in
the absence of readily available market quotations for medium and lower
grade corporate debt securities held in the Fund's portfolio, the
responsibility of the Adviser to value the Fund's securities becomes more
difficult and the Adviser's judgment may play a greater role in the
valuation of the Fund's securities due to a reduced availability of
reliable objective data. To the extent that the Fund purchases illiquid
corporate debt securities or securities which are restricted as to resale,
the Fund may incur additional risks and costs. Illiquid and restricted
securities may be particularly difficult to value and their disposition may
require greater effort and expense than more liquid securities. The Fund
may be required to incur costs in connection with the registration of
restricted securities in order to dispose of such securities, although
under Rule 144A under the Securities Act of 1933 certain securities may be
determined to be liquid pursuant to procedures adopted by the Board of
Trustees under applicable guidelines.
TURNOVER RATE
The adviser expects that the average annual turnover rate of the
portfolio of the Fund should not exceed 100%. A portfolio turnover rate of
100% would occur if all the securities in the portfolio were replaced in a
one year period. The portfolio turnover rate is calculated by dividing the
lesser of portfolio purchases or sales by the average monthly value of
portfolio securities, excluding short term securities. The Fund has no
historical rates to report at this time. The turnover rate will fluctuate
depending on market conditions.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES AND OFFICERS
The Trustees and executive officers of the Fund and their principal
occupations during the last five years are set forth below.
<TABLE>
<CAPTION>
Position Held Principal Occupation(s)
NAME AND ADDRESS With the Fund During Past Five Years
<S> <C> <C>
Ronald Baron *+ President and President and Director of: Baron
767 Fifth Avenue Trustee Capital, Inc. (1982-Present),
New York, NY 10153 Baron Capital Management, Inc. (1983-
Present), Baron Capital Group, Inc.
(1984-Present), BAMCO, Inc. (1987-
Present).
Norman S. Edelcup Trustee Chairman, Item Processing of
244 Atlantic Isle America (1989-Present),
N. Miami Beach, FL 33160 (financial institution service bureau);
Director, Valhi Inc. (1975-Present)
(diversified company); Director,
Artistic Greetings, Inc.
(1985-Present).
Mark M. Feldman Trustee President and Chief Executive
444 Madison Avenue, Ste 703 Officer, Cold Spring Group, Inc.
New York, NY 10020 (1993-Present) (reorganization
and restructuring consulting);
Executive Vice President and Chief
Restructuring Officer, Lomas Financial
Corp. and subsidiaries (1995-1996)
(reorganizing debtors- in-possession);
Trustee, Aerospace Creditors
Liquidating Trust (1993- Present)
(administers and liquidates assets).
Irwin Greenberg Trustee Chairman, Lehigh Valley Hospital
3048 Congress Street Board (1991-Present); Retail
Allentown, PA 18101 Consultant, (1990-Present);
Director, Cedar Crest College
(1990-Present); President and Chief
Executive Officer, Hess's Department
Stores (1976-1990).
Clifford Greenberg Vice President Vice President, Baron Capital,
767 Fifth Avenue Inc., BAMCO, Inc. (1997-Present);
New York, NY 10153 General Partner, HPB Associates,
L.P. (1984-1996) (investment
partnership).
Linda S. Martinson *+ Secretary, General Counsel and Secretary of:
767 Fifth Avenue Vice President, Baron Capital, Inc. (1983-Present),
New York, NY 10153 and Trustee BAMCO, Inc. (1987-Present), Baron
Capital Group, Inc. (1984-
Present),Baron Capital
Management, Inc. (1983-Present).
Charles N. Mathewson Trustee Chairman of the Board,
5270 Neil Road International
Reno, NV 89502-4169 Game Technology (1986-Present)
(manufacturer of microprocessor-
controlled gaming machines and
monitoring systems).
Harold W. Milner Trustee Retired; President and Chief
2293 Morningstar Drive Executive Officer, Kahler Realty
Park City, UT 84060 Corporation (1985-1997) (hotel
ownership and management).
Raymond Noveck + Trustee President, Strategic Systems,
31 Karen Road Inc. (1990-Present) (health care
Waban, MA 02168 information); Director,
Horizon/CMS Healthcare Corporation
(1987-Present).
Susan Robbins Vice President Senior Analyst, Vice President,
767 Fifth Avenue Secretary and Director of: Baron
New York, NY 10153 Capital, Inc. (1982-Present),
Baron Capital Management, Inc. (1983-
Present), Baron Capital Group,
Inc. (1984-Present).
Morty Schaja * Vice President Managing Director, Vice
767 Fifth Avenue and Trustee President,
New York, NY 10153 Baron Capital, Inc.
(1991-Present),
and Director, Baron Capital
Group, Inc., Baron Capital Management,
Inc., and BAMCO, Inc. (1997-
Present).
David A. Silverman, M.D. Trustee Physician (1976-Present).
239 Central Park West
New York, NY 10024
Peggy Wong Treasurer and Treasurer and Chief Financial
767 Fifth Avenue Chief Financial Officer of: Baron Capital, Inc.,
New York, NY 10153 Officer Baron Capital Group, Inc., BAMCO, Inc.,
Baron Capital Management, Inc.,
(1987-Present).
- ------------------------------------------------------------------------------
* Trustees deemed to be "interested persons" of the Fund as that term
is defined in the Investment Company Act of 1940.
+ 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.
</TABLE>
The Trustees who are not affiliated with or interested persons of
the Fund's investment adviser receive fees of $5,000 annually plus an
attendance fee of $500 for each meeting attended in person ($250 for
telephone participation). The Trustees who are interested persons of the
Funds' investment adviser receive no compensation from the Fund. As
indicated in the above table, certain Trustees and officers also hold
positions with the Fund's adviser and distributor.
PRINCIPAL HOLDERS OF SHARES
As of July 5, 1998 the Fund had no shareholders.
INVESTMENT ADVISER
The investment adviser to the Fund is BAMCO, Inc. (the "Adviser"),
a New York corporation with its principal offices at 767 Fifth Avenue, New
York, N.Y. 10153 and a subsidiary of Baron Capital Group, Inc. ("BCG"). Mr.
Ronald Baron is the controlling stockholder of BCG and is BAMCO's chief
investment officer. Mr. Baron has over 25 years of experience as a Wall
Street analyst and has managed money for others for over 20 years. He has
been a participant in Barron's Roundtable and has been a featured guest on
Wall Street Week, CNN and CNBC/FNN. Pursuant to an Advisory Agreement with
the Fund (the "Advisory Agreement"), the Adviser furnishes continuous
investment advisory services and management to the Fund, including making
the day-to-day investment decisions and arranging portfolio transactions
for the Fund subject to such policies as the Trustees may determine. The
Fund has no operating history at this time.
Under the Advisory Agreement, the Adviser, at its own expense and
without reimbursement from the Fund furnishes office space and all
necessary office facilities, equipment and executive personnel for managing
the Fund, and pays the salaries and fees of all officers and Trustees who
are interested persons of the Adviser. The Adviser presently anticipates
that "Year 2000" issues will have no material effect on the ability of the
Adviser to provide services to the Fund.
The Fund pays all operating and other expenses not borne by the
Adviser such as audit, accounting and legal fees; custodian fees; expenses
of registering and qualifying its shares with federal and state securities
commissions; expenses in preparing shareholder reports and proxy
solicitation materials; expenses associated with the Fund's shares such as
dividend disbursing, transfer agent and registrar fees; certain insurance
expenses; compensation of Trustees who are not interested persons of the
Adviser; and other miscellaneous business expenses. The Fund also pays the
expenses of offering the shares of the Fund, including the registration and
filing fees, legal and accounting fees and costs of printing the prospectus
and related documents. The Fund also pays all taxes imposed on it and all
brokerage commissions and expenses incurred in connection with its
portfolio transactions.
Ronald Baron is the controlling stockholder, President and a
Director of BCG. The Adviser utilizes the staffs of Baron Capital and Baron
Capital's subsidiary Baron Capital Management, Inc. ("BCM") to provide
research. Directors, officers or employees of the Adviser and/or its
affiliates may also serve as officers or Trustees of the Fund. BCM is an
investment adviser to institutional and individual accounts. Clients of BCM
and Baron Capital have investment objectives which may vary only slightly
from those of each other and of the Fund. BCM and Baron Capital invest
assets in such clients' accounts and in the accounts of principals and
employees of BCM and Baron Capital in investments substantially similar to,
or the same as, those which constitute the principal investments of the
Fund. When the same securities are purchased for or sold by the Fund and
any of such other accounts, it is the policy of the Adviser, BCM and Baron
Capital to allocate such transactions in a manner deemed equitable by the
Adviser, and for the Adviser's, BCM's and Baron Capital's principals and
employees to take either the same or least favorable price of the day.
The Advisory Agreement provides that the Fund may use "Baron" as
part of its name for so long as the Adviser serves as investment adviser to
the Fund. The Fund acknowledges that the word "Baron" in its name is
derived from the name of the entities controlling, directly and indirectly,
the Adviser, which derive their name from Ronald Baron; that such name is
the property of the Adviser and its affiliated companies for copyright
and/or other purposes; and that if for any reason the Adviser ceases to be
the Fund's investment adviser, the Fund will promptly take all steps
necessary to change its name to one that does not include "Baron," absent
the Adviser's written consent.
The Advisory Agreement provides that the Adviser shall have no
liability to the Fund or its shareholders for any error of judgment or
mistake of law or for any loss suffered by the Fund; provided, that the
Adviser shall not be protected against liabilities arising by virtue of
willful misfeasance, bad faith or gross negligence, or reckless disregard
of the Adviser's obligations under the Advisory Agreement.
The Advisory Agreement with respect to the Fund was approved by a
majority of the Trustees, including a majority of the non-interested
Trustees, on April 28, 1998. The Fund's Advisory Agreement is for an
initial two year period but the Advisory Agreements must normally be
approved annually by the Trustees or a majority of the Fund's shares and by
a majority of the Trustees who are not parties to the Advisory Agreement or
interested persons of any such party.
The Advisory Agreement is terminable without penalty by either the
Fund (when authorized by majority vote of either its outstanding shares or
the Trustees) or the Adviser on 60 days' written notice. The Advisory
Agreement shall automatically terminate in the event of its "assignment"
(as defined by 1940 Act).
DISTRIBUTOR
The Fund has a distribution agreement with Baron Capital, Inc.,
("Baron Capital" or the "Distributor") a New York corporation and a
subsidiary of BCG (controlled by Ronald Baron), located at 767 Fifth
Avenue, New York, N.Y. 10153. Baron Capital is affiliated with the Adviser.
The Distributor acts as the agent for the Fund for the continuous public
offering of its shares on a best efforts basis.
The Glass-Steagall Act and other applicable laws, among other
things, prohibit banks from engaging in business of underwriting, selling
or distributing securities. Accordingly, the Distributor will enter into
agreements with banks only to provide administrative assistance. However,
changes in federal or state statues and regulations pertaining to the
permissible activities of banks and their affiliates, as well as judicial
or administrative decisions or interpretations could prevent a bank from
continuing to perform all or a part of the contemplated services. If a bank
were prohibited from so acting, the Trustees would consider what actions,
if any, would be necessary to continue to provide efficient and effective
shareholder services. It is not expected that shareholders would suffer any
adverse financial consequences as a result of these occurrences.
BROKERAGE
The Adviser is responsible for placing the portfolio brokerage
business of the Fund with the objective of obtaining the best net results
for the Fund, taking into account prompt, efficient and reliable executions
at a favorable price. Brokerage transactions for the Fund are effected
chiefly by or through the Adviser's affiliate, Baron Capital, when
consistent with this objective and subject to the conditions and
limitations of the 1940 Act. Baron Capital is a member of the National
Association of Securities Dealers, Inc., but is not a member of any
securities exchange.
The Fund's Board of Trustees has adopted procedures pursuant to
Rule 17e-1 of the 1940 Act which are reasonably designed to provide that
the commissions paid to Baron Capital are reasonable and fair compared to
the commission, fee or other enumeration 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. The Board reviews no less frequently than quarterly that all
transactions effected pursuant to Rule 17e-1 during the preceding quarter
were effected in compliance with such procedures. The Fund and the Adviser
furnish such reports and maintain such records as required by Rule 17e-1.
The Fund does not deal with Baron Capital in any portfolio transaction in
which Baron Capital acts as principal. The Fund has no operating history.
Under the Investment Advisory Agreement and as permitted by Section
28(e) of the Securities and Exchange Act of 1934, the Adviser may cause the
Fund to pay a broker-dealer (except Baron Capital) which provides brokerage
and research services to the Adviser an amount of commission for effecting
a securities transaction for the Fund in excess of the amount other
broker-dealers would have charged for the transaction if the Adviser
determines in good faith that the greater commission is consistent with the
Fund's policies and is reasonable in relation to the value of the brokerage
and research services provided by the executing broker-dealer viewed in
terms of either a particular transaction or the Adviser's overall
responsibilities to the Fund or to its other clients. The term "brokerage
and research services" includes advice as to the value of securities, the
advisability of investing in, purchasing, or selling securities, and the
availability of securities or of purchasers or sellers of securities;
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of
accounts; and effecting securities transactions and performing functions
incidental thereto such as clearance and settlement. Such research and
information may be used by the Adviser or its affiliates to supplement the
services it is required to perform pursuant to the Advisory Agreement in
serving the Fund and/or other advisory clients of affiliates.
Broker-dealers may be willing to furnish statistical research and
other factual information or services to the Adviser for no consideration
other than brokerage or underwriting commissions. Securities may be bought
or sold through such broker-dealers, but at present, unless otherwise
directed by the Fund, a commission higher than one charged elsewhere will
not be paid to such a firm solely because it provided research to the
Adviser. Research provided by brokers is used for the benefit of all of the
Adviser's or its affiliates' clients and not solely or necessarily for the
benefit of the Fund. The Adviser's investment management personnel attempt
to evaluate the quality of research provided by brokers. Results of this
effort are sometimes used by the Adviser as a consideration the in the
selection of brokers to execute portfolio transactions.
Baron Capital acts as broker for, in addition to the Fund, accounts
of BCM and Baron Capital, including accounts of principals and employees of
Baron Capital, BCM and the Adviser. Investment decisions for the Fund and
for investment accounts managed by BCM, are made independent of each other
in light of differing considerations for the various accounts. The same
investment decision may, however, be made for two or more of the Adviser's
and or BCM's accounts. In such event, simultaneous transactions are
inevitable. Purchases and sales are averaged as to price where possible and
allocated to account in a manner deemed equitable by the Adviser in
conjunction with BCM and Baron Capital. This procedure could have a
detrimental effect upon the price or value of the security for the Fund,
but may have a beneficial effect.
The investment advisory fee that the Fund pays to the Adviser is
not reduced as a consequence of the Adviser's receipt of brokerage and
research services. To the extent the Fund's portfolio transactions are used
to obtain such services, the brokerage commissions paid by the Fund will
exceed those that might otherwise be paid by an amount that cannot be
presently determined. Such services would by useful and of value to the
Adviser in serving both the Fund and other clients and, conversely, such
services obtained by the placement of brokerage business of other clients
would by useful to the Adviser in carrying out its obligations to the Fund.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT
The Bank of New York, 48 Wall Street, New York, NY, is the
custodian for the Fund's cash and securities. DST Systems, Inc., CT-7
Tower, 1004 Baltimore, Kansas City, MO 64105, is the transfer agent and
dividend agent for the Fund's shares. Neither institution assists in or is
responsible for investment decisions involving assets of the Fund. Both
institutions are responsible for the maintenance of the Fund's portfolios
and general accounting records, and provide certain shareholder services.
REDEMPTION OF SHARES
The Fund expects to make all redemptions in cash, but have reserved
the right to make payment, in whole or in part, in portfolio securities.
Payment will be made other than all in cash if the Fund's Board of Trustees
determines that economic conditions exist which would make payment wholly
in cash detrimental to a particular fund's best interests. Portfolio
securities to be so distributed, if any, would be selected in the
discretion of the Fund's Board of Trustees and priced as described under
"Determining Your Share Price" herein and in the Prospectus.
NET ASSET VALUE
As more fully set forth in the Prospectus under "Determining Your
Share Price," the net asset value per share of the Fund is determined as of
the close of the New York Stock Exchange on each day that the Exchange is
open. The Exchange is open all week days that are not holidays, which it
announces annually. The most recent announcement states it will not be open
on New Year's Day, Martin Luther King, Jr.'s Day, Washington's Birthday,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
Securities traded on more than one national securities exchange are
valued at the last sale price of the day as of which such value is being
determined as reflected at the close of the exchange which is the principal
market for such securities.
U.S. Government obligations and other debt instruments having sixty
days or less remaining until maturity are stated at amortized cost. Debt
instruments having a greater remaining maturity 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.
TAXES
The Fund intends to qualify each year as a regulated investment
company under the Internal Revenue Code of 1986 (the "Code"). Qualification
as a regulated investment company relieves the Funds of federal income and
excise taxes on the portion of its net ordinary income and net realized
capital gain distributed to shareholders. The Fund also intends to qualify
under the Code with respect to the diversification requirements for tax
deferral regarding insurance company separate accounts.
Because the Retirement Shares may be purchased only through
qualified plans and the Insurance Shares may be purchased only through
variable insurance contacts, it is anticipated that any dividends derived
from net investment income and distributions of capital gains will be
exempt from current taxation if left to accumulate within the qualified
plan or variable insurance contract. Generally, withdrawals from such
contracts may be subject to ordinary income tax and, if made before age
591/2, a 10% penalty tax. The tax status of an investment in the Retirement
Shares depends on the features of the qualified plan. Please see the plan
sponsor for additional information.
The foregoing is only a summary of some important tax
considerations generally affecting the Fund and its shareholders.
Prospective shareholders are urged to consult their tax advisers concerning
the tax consequences of this investment.
ORGANIZATION AND CAPITALIZATION
GENERAL
THE TRUST is an open-end diversified investment company organized
as a series fund and established under the laws of The state of Delaware by
a Declaration of Trust dated November 20, 1998. The one series currently
available is BARON CAPITAL ASSET FUND. Shares entitle their holders to one
vote per share. Shares have noncumulative voting rights, which means that
holders of more than 50% of the shares voting for the election of Trustees
can elect all Trustees and, in such event, the holders of the remaining
shares voting for the election of Trustees will not be able to elect any
person or persons as Trustees. Shares have no preemptive or subscription
rights, and are transferable.
TRUSTEE LIABILITY
The Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law, but nothing in
the Declaration of trust protects a trustee against liability to which he
or she would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.
OTHER INFORMATION
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers L.L.P., 1301 Avenue of the Americas, New
York, New York 10019, has been selected as independent accountants of the
Fund.
Calculations of Performance Data
Advertisements and other sales literature for the Fund may refer to
average annual total return and actual return. Average annual total return
is computed by finding the average annual compounded rates of return over a
given period that would equate a hypothetical initial investment to the
ending redeemable value thereof, as follows:
P (1+T)N =ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return N =
n = Number of years
ERV = ending redeemable value at the end of the
period of a Hypothetical $1,000 investment
made at the beginning of the period
Actual return is computed by measuring the percentage change
between the net asset value of a hypothetical $1,000 investment in the Fund
at the beginning of a period and the net asset value of that investment at
the end of a period. All performance calculations assume that dividends and
distributions are reinvested at the net asset value on the appropriate
reinvestment dates and include all recurring fees. The Fund has no
operating history.
Performance results represent past performance and are not
necessarily representative of future results. Investment return and
principal value will fluctuate so that shares may be worth more or less
than their original cost when redeemed.
In addition to advertising average annual and actual return data,
comparative performance information may be used in advertising materials
about the Funds, including data and other information from Lipper
Analytical Services, Inc., CDA Investment Technologies, Morningstar Inc.,
Money, Forbes, SEI, Ibbotson, No Load Investor, Growth Fund Guide, Fortune,
Barron's, The New York Times, The Wall Street Journal, Changing Times,
Medical Economics, Business Week, Consumer Digest, Dick Davis Digest,
Dickenson's Retirement Letter, Equity Fund Outlook, Executive Wealth
Advisor, Financial World, Investor's Daily, Time, Personal Finance,
Investment Advisor, Smartmoney, Rukeyser, Kiplinger's, NAPFA News, US News,
Bottomline, Investors Business Daily, Bloomberg Radio, CNBC, and/or USA
Today. The Fund may also use comparative performance data from indexes such
as the Dow Jones Industrial Average, Standard & Poor's 400, 500, Small Cap
600, 1,500, or Midcap 400, Value Line Index, Wilshire 4,500, 5000, or Small
Cap; NASDAQ/OTC Composite, New York Stock Exchange; and the Russell 1000,
2000, 2500, 3000, 2000 Growth, 2000 Value, or Midcap. With respect to the
rating services, the Fund may use performance information that ranks the
Fund in any of the following categories: all funds, aggressive growth
funds, value funds, mid-cap funds, small-cap funds, growth and income
funds, equity income funds, and any combination of the above listed
categories.
BARON CAPITAL ASSET FUND
Statement of Assets and Liabilities
July 6, 1998
ASSETS:
Cash $100,000
--------
Total assets $100,000
--------
--------
LIABILITIES: $ 0
--------
Net assets $100,000
--------
--------
Insurance shares (net asset value, offering
and redemption price per share-$100,000/10,000 shares) $ 10.00
--------
--------
---------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENT
1. Baron Capital Funds Trust (the "Trust"), was organized as a Delaware
business trust on November 20, 1997, and has been inactive since that
date except for matters relating to its organization and registration
under the Investment Company Act of 1940 as a diversified, open-end
management investment company and the sale of 10,000 Insurance shares
of beneficial interest of Baron Capital Asset Fund (the "Fund"), a
Series of the Trust, to BAMCO, Inc., the Fund's investment adviser (the
"Adviser") for $100,000. The Fund offers Insurance and Retirement shares.
2. The organization expenses of the Trust will be paid for by the Adviser.
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Shareholder and
Board of Trustees of Baron Capital Asset Fund:
In our opinion, the accompanying statements of assets and liabilities
presents fairly, in all material respects, the financial position of Baron
Capital Asset Fund as of July 6, 1998, in conformity with generally
accepted accounting principles. This financial statement is the
responsibility of the Fund's management; our responsibility is to express
an opinion on this financial statement based on our audit. We conducted
our audit in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statement is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statement, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
July 6, 1998
BARON CAPITAL FUNDS TRUST
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a. Financial Statements:
Included in Part B of this Registration Statement:
Report of Independent Accountants
Statement of Assets and Liabilities at July 6, 1998
Notes to the Financial Statements
Supplementary Information (condensed financial information)
(also included in Part A of this Registration Statement)
b. Exhibits:
1. Declaration of Trust dated November 20, 1997.
2. By-laws dated November 20, 1997.
3. Inapplicable.
4. (a) Investment Advisory Agreement between
Baron Capital Asset Fund and BAMCO, Inc.
5. Distribution Agreement with Baron Capital, Inc.
6. Inapplicable.
7. (a) Custodian Agreement with The Bank of New York.
(b) Fee Schedule for Exhibit 7(a).
8. (a) Transfer Agency Agreement with DST Services, Inc.
(b) Fee Schedule for Exhibit 8(a).
9. Opinion and consent of counsel as to legality of shares
being registered.
10. Consent of Independent Certified Public Accountants.
11. Inapplicable.
12. Letter agreement between the Registrant and the
Purchaser of the Initial Shares.
13. Distribution Plan pursuant to Rule 12b-1.
14. Financial Data Schedule.
15. Rule 18f-3 Plan.
16. Power of Attorney.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The following diagram indicates the persons under common control with
Registrant, all of which are incorporated in New York.
/Ronald Baron/
90%
/Baron Capital Group, Inc./
100% 100% 100%
/ Baron Capital /
/Baron Capital, Inc./ /Management, Inc./ /BAMCO, Inc./
Baron Capital, Inc. serves as distributor of Registrant's shares and
performs brokerage services for Registrant. BAMCO, Inc. serves as
investment adviser to Registrant. Ronald Baron, President of Registrant,
is the controlling shareholder of Baron Capital Group, Inc. and serves as
President of all the above entities.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES (AS OF JULY 24, 1998)
(1) (2)
Title of Class of Series Number of Shareholders(approx)
Shares of beneficial interest
($.01 par value),
Baron Capital Asset Fund
ITEM 27. INDEMNIFICATION
Article IV of Registrant's Declaration of Trust states as follows:
Section 4.1. No Personal Liability of Shareholders, Trustees, Etc.
No shareholder shall be subject to any personal liability whatsoever
to any Person in connection with Trust Property or the acts,
obligations or affairs of the Trust. No Trustee, officer, employee or
agent of the Trust shall be subject to any personal liability
whatsoever to any Person, other than to the Trust of its shareholders,
in connection with Trust Property of the affairs of the Trust, save
only that arising from bad faith, willful misfeasance, gross
negligence or reckless disregard of his duties with respect to such
Person; and all such Persons shall look solely to the Trust Property,
or to the Property of one or more specific series of the Trust if the
claim arises from the conduct of such Trustee, officer, employee or
agent with respect to only such Series, for satisfaction of claims of
any nature arising in connection with the affairs of the Trust. If
any shareholder, Trustee, officer, employee, or agent, as such, of the
Trust, is made a party to any suit or proceeding to enforce any such
liability of the Trust, he shall not, on account thereof, be held to
any personal liability. The Trust shall indemnify and hold each
shareholder harmless from and against all claims and liabilities, to
which such shareholder may become subject by reason of his being or
having been a shareholder, and shall reimburse such shareholder out of
the Trust Property for all legal and other expenses reasonably
incurred by him in connection with any such claim or liability.
Indemnification and reimbursement required by the preceding sentence
shall be made only out of assets of the one of more Series whose
shares were held by said shareholder at the time the act or event
occurred which gave rise to the claim against or liability of said
shareholder. The rights accruing to a shareholder under this Section
4.1 be lawfully entitled, nor shall anything herein contained restrict
the right of the Trust to indemnify or reimburse a shareholder in any
appropriate situation even though not specifically provided herein.
Section 4.2. Non-Liability of Trustees, Etc.
No Trustee, officer, employee or agent of the Trust shall be liable to
the Trust, its shareholders, or to any shareholder, Trustee, officer,
employee, or agent thereof for any action or failure to act (including
without limitation the failure to compel in any way any former or
acting Trustee to redress any breach of trust) except for his own bad
faith, willful misfeasance, gross negligence or reckless disregard of
the duties involved in the conduct of his office.
Section 4.3. Mandatory Indemnification.
(a) Subject to the exceptions and limitations contained in paragraph
(b) below:
(i) every person who is, or has been, a Trustee or officer of the
Trust shall be indemnified by the Trust, or by one or more Series
thereof if the claim arises from his or her conduct with respect
to only such Series to the fullest extent permitted by law
against all liability and against all expenses reasonably
incurred or paid by him in connection with any claim, action,
suit or proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been a Trustee or
officer and against amounts paid or incurred by him in the
settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil,
criminal, or other, including appeals), actual or threatened; and
the words "liability" and "expenses" shall include, without
limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or
officer:
(i) against any liability to the Trust or a Series thereof or the
shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office;
(ii) with respect to any matter as to which he shall have been
finally adjudicated not the have acted in good faith in the
reasonable belief that his action was in the best interest of the
Trust or a Series thereof;
(iii) in the event of a settlement or other disposition not
involving a final adjudication as provided in paragraph (b)(ii)
resulting in a payment by a Trustee or officer, unless there has
been a determination that such Trustee or officer did not engage
in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office:
(A) by the court or other body approving the settlement
or other disposition; or
(B) based upon a review of readily available facts (as
opposed to a full trial-type inquiry) by (x) vote of a
majority of the Non-interested Trustees acting on the
matter (provided that a majority of the Non-interested
Trustees then in office act on the matter) or (y)
written opinion of independent legal counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall
not affect any other rights to which any Trustee or officer may now or
hereafter be entitled, shall continue as to a person who has ceased to
be such Trustee or officer and shall inure to the benefit of the
heirs, executors, administrators and assigns of such a person.
Nothing contained herein shall affect any rights to indemnification to
which personnel of the Trust other than Trustees and officers may be
entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any
claim, action, suit or proceeding of the character described in
paragraph (a) of this Section 4.3 may be advanced by the Trust or a
Series thereof prior to final disposition thereof upon receipt of an
undertaking by or on behalf of the recipient to repay such amount if
it is ultimately determined that he is not entitled to indemnification
under this Section 4.3, provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security provided by the recipient, or the Trust or
Series thereof shall be insured against losses arising out of any
such advances; or
(ii) a majority of the Non-interested Trustees acting on the
matter (provided that a majority of the Non-interested Trustees
act on the matter) or an independent legal counsel in a written
opinion shall determine, based upon a review of readily available
facts (as opposed to a full trial-type inquiry), that there is
reason to believe that the recipient ultimately will be found
entitled to indemnification.
As used in this Section 4.3, a "Non-interested Trustee" is one who is
not (i) an "Interested Person" of the Trust (including anyone who has been
exempted from being an "Interested Person" by any rule, regulation or order
of the Commission), or (ii) involved in the claim, action, suit or
proceeding.
ITEM 28. BUSINESS OR OTHER CONNECTIONS OF INVESTMENT ADVISER
The business and other connections of BAMCO, Inc. is summarized under
"The Adviser" in the Prospectus constituting Part A of the Registration
Statement, which summary is incorporated herein by reference.
The business and other connections of the officers and directors of
BAMCO, Inc. is currently listed in the investment adviser registration on
Form ADV for BAMCO, Inc. (File No. 801-29080) and is incorporated herein by
reference.
ITEM 29. PRINCIPAL UNDERWRITERS AND OFFICERS
(a) Inapplicable.
(b)
(1) (2) (3)
POSITIONS AND POSITIONS AND
NAME AND PRINCIPAL OFFICES WITH OFFICES WITH
BUSINESS ADDRESS UNDERWRITER REGISTRANT
Ronald Baron President and
767 Fifth Avenue Trustee
York, N.Y. 10153
Norman S. Edelcup None Trustee
244 Atlantic Isle
N. Miami Beach, FL 33160
Bridgeport, CT 06604
Mark M. Feldman None Trustee
444 Madison Avenue,
Suite 703
New York, NY 10020
Irwin Greenberg None Trustee
3048 Congress Street
Allentown, PA 18101
Morty Schaja Vice President Vice President
767 Fifth Avenue and Trustee
New York, N.Y. 10153
Clifford Greenberg Vice President Vice President
767 Fifth Avenue
New York, N.Y. 10153
Linda S. Martinson General Counsel Secretary, Vice
767 Fifth Avenue and Secretary President and
New York, N.Y. 10153 Trustee
Charles N. Matthewson None Trustee
5270 Neil Road
Reno, NV 89502-4169
Harold Milner None Trustee
2293 Morningstar Drive
Park City, UT 84060
Raymond Noveck None Trustee
31 Karen Road
Waban, MA 02168
Susan Robbins Senior Analyst, Vice President
767 Fifth Avenue Vice President,
New York, NY 10153 Secretary and
Director
David A. Silverman, M.D. None Trustee
239 Central Park West
New York, NY 10024
Peggy Wong Treasurer and Treasurer and
767 Fifth Avenue Chief Financial Chief Financial
New York, NY 10153 Officer Officer
(c) Inapplicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Certain accounts, books and other documents required to be maintained
by Section 31 (a) of the Investment Company Act of 1940 and the Rules
promulgated thereunder are maintained at the offices of the Registrant,
BAMCO, Inc. and Baron Capital, Inc., 767 Fifth Avenue, New York, NY 10153.
Records relating to the duties of the Registrant's transfer agent are
maintained by DST Systems, Inc. 1004 Baltimore Avenue, Kansas City, MO
64105 and of the Registrant's custodian are maintained by The Bank of New
York, 48 Wall Street, New York, N.Y. 10015.
ITEM 31. MANAGEMENT SERVICES
Inapplicable.
ITEM 32. UNDERTAKINGS
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a Trustee, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such Trustee, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Registrant undertakes to file an amendment to the Registration
Statement which includes financial statements (which need not be certified)
within four to six months from the effective date of Registrant's 1933 Act
Registration Statement.
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
amendment to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City and State of New York,
on the 27 day of July, 1997.
BARON CAPITAL FUNDS TRUST
By s/Ronald Baron
--------------------------
Ronald Baron, President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signatures Title Date
/s/ Ronald Baron President (Principal July 27, 1998
---------------------- Executive Officer) &
Ronald Baron Trustee
/s/ Linda S. Martinson Secretary, July 27, 1998
---------------------- Vice President &
Linda S. Martinson Trustee
/s/ Peggy Wong Treasurer (Principal July 27, 1998
---------------------- Financial & Accounting
Peggy Wong Officer)
EXHIBITS INDEX
1. Declaration of Trust dated November 20, 1997.
2. By-laws dated November 20, 1997.
3. Inapplicable.
4. (a) Investment Advisory Agreement between
Baron Capital Asset Fund and BAMCO, Inc.
5. Distribution Agreement with Baron Capital, Inc.
6. Inapplicable.
7. (a) Custodian Agreement with The Bank of New York.
(b) Fee Schedule for Exhibit 7(a).
8. (a) Transfer Agency Agreement with DST Services, Inc.
(b) Fee Schedule for Exhibit 8(a).
9. Opinion and consent of counsel as to legality of shares being
registered.
10. Consent of Independent Certified Public Accountants.
11. Inapplicable.
12. Letter agreement between the Registrant and the Purchaser of the
Initial Shares.
13. Distribution Plan pursuant to Rule 12b-1.
14. Financial Data Schedule.
15. Rule 18f-3 Plan.
16. Power of Attorney.
BARON CAPITAL FUNDS TRUST
____________________________________________
AGREEMENT AND DECLARATION OF TRUST
____________________________________________
TABLE OF CONTENTS
ARTICLE I
The Trust
1.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
Trustees
2.1 Number and Qualification . . . . . . . . . . . . . . . . . . . 4
2.2 Term and Election . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Resignation and Removal . . . . . . . . . . . . . . . . . . . . 4
2.4 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Meetings and Action without Meetings . . . . . . . . . . . . . 5
2.6 Committees . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.7 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III
Powers and Duties of Trustees
3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Legal Title . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 Issuance and Repurchase of Shares . . . . . . . . . . . . . . . 9
3.5 Service Liabilities . . . . . . . . . . . . . . . . . . . . . . 9
3.6 Delegation; Committees . . . . . . . . . . . . . . . . . . . . 9
3.7 Collection and Payment . . . . . . . . . . . . . . . . . . . . 10
3.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.9 By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.10 Miscellaneous Powers . . . . . . . . . . . . . . . . . . . . . 11
3.11 Further Powers . . . . . . . . . . . . . . . . . . . . . . . . 11
3.12 Parties to Contract . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV
Limitations of Liability
and Indemnification
4.1 No Personal Liability of Shareholders, Trustees,
Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.2 Mandatory Indemnification . . . . . . . . . . . . . . . . . . . 13
4.3 No Bond Required of Trustees . . . . . . . . . . . . . . . . . 15
4.4 No Duty of Investigation; Notice in Trust
Instruments, etc. . . . . . . . . . . . . . . . . . . . . . . 15
4.5 Reliance on Experts, etc. . . . . . . . . . . . . . . . . . . 16
4.6 Indemnification of Shareholders . . . . . . . . . . . . . . . . 16
ARTICLE V
Shares of Beneficial Interest
5.1 Beneficial Interest . . . . . . . . . . . . . . . . . . . . . . 17
5.2 Series Designation . . . . . . . . . . . . . . . . . . . . . . 17
5.3 Class Designation . . . . . . . . . . . . . . . . . . . . . . . 17
5.4 Description of Shares . . . . . . . . . . . . . . . . . . . . . 18
5.5 Rights of Shareholders . . . . . . . . . . . . . . . . . . . . 20
5.6 Trust Only . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.7 Issuance of Shares . . . . . . . . . . . . . . . . . . . . . . 22
5.8 Register of Shares . . . . . . . . . . . . . . . . . . . . . . 22
5.9 Transfer Agent and Registrar . . . . . . . . . . . . . . . . . 23
5.10 Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . 23
5.11 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VI
Redemption
6.1 Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.2 Disclosure of Holding . . . . . . . . . . . . . . . . . . . . . 25
6.3 Redemptions at Option of Trust . . . . . . . . . . . . . . . . 25
ARTICLE VII
Determination of Net Asset Value
Net Income and Distributions
7.1 Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2 Distributions to Shareholders . . . . . . . . . . . . . . . . . 26
7.3 Constant Net Asse Value; Reduction of Outstanding
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.4 Power to Modify Foregoing Procedures . . . . . . . . . . . . . 27
ARTICLE VIII
Shareholders
8.1 Meetings of Shareholders . . . . . . . . . . . . . . . . . . . 28
8.2 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.3 Notice of Meeting and Record Date . . . . . . . . . . . . . . . 28
8.4 Quorum and Required Vote . . . . . . . . . . . . . . . . . . . 29
8.5 Proxies, etc. . . . . . . . . . . . . . . . . . . . . . . . . 29
8.6 Inspection of Records . . . . . . . . . . . . . . . . . . . . . 30
8.7 Shareholder Action by Written Consent . . . . . . . . . . . . . 30
ARTICLE IX
Duration: Termination of Trust;
Amendment; Mergers, Etc.
9.1 Duration . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.3 Amendment Procedure . . . . . . . . . . . . . . . . . . . . . . 32
9.4 Merger, Consolidation and Sale of Assets . . . . . . . . . . . 33
9.5 Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE X
Miscellaneous
10.1 Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.2 Resident Agent . . . . . . . . . . . . . . . . . . . . . . . . 35
10.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.5 Reliance by Third Parties . . . . . . . . . . . . . . . . . . . 35
10.6 Provisions in Conflict with Law or Regulation . . . . . . . . . 36
BARON CAPITAL FUNDS TRUST
AGREEMENT AND DECLARATION OF TRUST
AGREEMENT AND DECLARATION OF TRUST made on the 20TH day of
November, 1997, by the Trustees hereunder, and by the holders of shares of
beneficial interest issued hereunder as hereinafter provided.
WHEREAS, this Trust has been formed to carry on business as set
forth more particularly hereinafter;
WHEREAS, this Trust is authorized to issue its shares of
beneficial interest in separate series and classes of each such series,
each separate series to be a sub-trust hereunder, all in accordance with
the provisions hereinafter set forth;
WHEREAS, the Trustees have agreed to manage all property coming
into their hands as Trustees of a Delaware business trust in accordance
with the provisions hereinafter set forth; and
WHEREAS, the parties hereto intend that the Trust created by this
Declaration shall constitute a business trust under the Delaware Business
Trust Statute and that this Declaration shall constitute the governing
instrument of such business trust.
NOW, THEREFORE, the Trustees hereby declare that they will hold
all cash, securities, and other assets which they may from time to time
acquire in any manner as Trustees hereunder IN TRUST to manage and dispose
of the same upon the following terms and conditions for the benefit of the
holders from time to time of shares of beneficial interest in this Trust or
sub-trusts created hereunder as hereinafter set forth.
ARTICLE I
The Trust
1.1 Name. This Trust shall be known as the Baron Capital Funds
Trust and the Trustees shall conduct the business of the Trust under that
name or any other name or names as they may from time to time determine.
1.2 Definitions. As used in this Declaration, the following
terms shall have the following meanings:
The terms "Affiliated Person", "Assignment", "Commission",
"Interested Person" and "Principal Underwriter" shall have the meanings
given them in the 1940 Act.
"By-Laws" shall mean the By-Laws of the Trust as amended from
time to time by the Trustees.
"Class" shall mean a portion of Shares of the Trust or a Series
of the Trust established in accordance with Section 6.3 hereof.
"Code" shall mean the Internal Revenue Code of 1986, and the
regulations promulgated thereunder, as amended from time to time.
"Declaration" shall mean this Agreement and Declaration of Trust,
as amended from time to time.
"Delaware Business Trust Statute" shall mean the provisions of
the Delaware Business Trust Act, 12 Del. C. section3801, et. seq., as
amended from time to time.
"Fundamental Policies" shall mean the investment policies and
restrictions as set forth from time to time in any Prospectus of the Trust
or any Series and designated as fundamental policies therein as they may be
awarded in accordance with the requirements of 1940 Act.
"Majority Shareholder Vote" shall mean a vote of a majority of
the outstanding voting securities (as such term is defined in the 1940 Act)
of the Trust, any Series of the Trust or any Class thereof, as applicable.
"Person" shall mean and include natural persons, corporations,
partnerships, trusts, limited liability companies, associations, joint
ventures and other entities, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
"Prospectus" shall mean the Prospectus of the Trust, any Series
of the Trust or any Class thereof as in effect from time to time.
"Series" shall mean the separate sub-trusts that may be
established and designated as series pursuant to Section 6.2 hereof or any
one of such sub-trusts.
"Shareholders" shall mean as of any particular time the holders
of record of Outstanding Shares of the Trust, any Series of the Trust or of
any Class thereof, as applicable, at such time.
"Shares" shall mean the transferable units of interest into which
the beneficial interest in the Trust or in a Series of the Trust shall be
divided from time to time and includes fractions of Shares as well as whole
Shares, which Shares may be divided into Classes. All references to Shares
shall be deemed to be Shares of any or all Series or Classes as the context
may require. Outstanding Shares means those Shares shown from time to time
on the books of the Trust or its Transfer Agent as then issued and
outstanding, but shall not include Shares which have been redeemed or
repurchased by the Trust for any Series or Class and which are at the time
held in the Treasury of the Trust for any Series or Class.
"Trust" shall mean the trust established by this Declaration, as
amended from time to time, inclusive of each such amendment and every sub-
trust established as a Series hereunder.
"Trustees" shall mean the signatories to this Declaration, so
long as they shall continue in office in accordance with the terms hereof,
and all other persons who at the time in question have been duly elected or
appointed and have qualified as trustees in accordance with the provisions
hereof and are then in office.
"Trust Property" shall mean as of any particular time any and all
property, real or personal, tangible or intangible, which at such time is
owned or held by or for the account of the Trust, any Series thereof or the
Trustees in such capacity.
The "1940 Act" refers to the Investment Company Act of 1940 and
the rules and regulations promulgated thereunder and exemptions granted
therefrom, as amended from time to time.
ARTICLE II
Trustees
2.1 Number and Qualification. Prior to a public offering of
Shares, there may be a sole Trustee and thereafter, the number of Trustees
shall be no less than one or more than fifteen, provided, however, that the
number of Trustees may be increased or decreased by a written instrument
signed by a majority of the Trustees then in office. No reduction in the
number of Trustees shall have the effect of removing any Trustee from
office prior to the expiration of his term. An individual nominated as a
Trustee shall be at least 21 years of age and not older than 70 years of
age at the time of appointment or election and not under legal disability.
Trustees need not own Shares or reside in any particular jurisdiction and
may succeed themselves in office.
2.2 Term and Election. Each person who becomes a Trustee shall
serve until death, resignation, removal, adjudication of incompetency or
failure to be elected a successor Trustee at any meeting of Shareholders at
which one or more Trustees are being elected. Election of Trustees at a
meeting of Shareholders shall be by the affirmative vote of the holders of
a plurality of the Shares of the Trust present in person or by proxy. Each
individual elected or appointed as a Trustee of the Trust shall by such
election or appointment also be elected or appointed, as the case may be,
as a Trustee of each Series of the Trust then in existence. By
participating in the affairs of the Trust, each Trustee shall have agreed
to be bound by the terms of this Declaration.
2.3 Resignation and Removal. Any Trustee may resign his trust
(without need for prior or subsequent accounting) by an instrument in
writing signed by him and delivered or mailed to the other Trustees, the
President or the Secretary and such resignation shall be effective upon
such delivery, or at a later date according to the terms of the instrument.
Any of the Trustees may be removed (provided the aggregate number of
Trustees after such removal shall not be less than the minimum number
required by Section 2.1 hereof) with or without cause by the action of
two-thirds of the remaining Trustees or the holders of a majority of the
Shares. Upon the resignation or removal of a Trustee, or such person
otherwise ceasing to be a Trustee, such person or his legal representative
shall execute and deliver such documents as the remaining Trustees shall
require for the purpose of conveying to the Trust or the remaining Trustees
any Trust Property held in the name of the resigning or removed Trustee.
2.4 Vacancies. Whenever a vacancy in the Board of Trustees
shall occur, including by reason of an increase in the numbers of Trustees,
the remaining Trustees may fill such vacancy by appointing an individual
having the qualifications described in this Article by a written instrument
signed by a majority of the Trustees then in office, or may leave such
vacancy unfilled or may reduce the number of Trustees (provided the
aggregate number of Trustees after such reduction shall not be less than
the minimum number required by Section 2.1 hereof) or such vacancy may be
filled by election at a meeting of Shareholders. No vacancy shall operate
to annul this Declaration or to revoke any existing agency created pursuant
to the terms of this Declaration. Whenever a vacancy in the number of
Trustees shall occur, until such vacancy is filled as provided herein, the
Trustees in office, regardless of their number, shall have all the powers
granted to the Trustees and shall discharge all the duties imposed upon the
Trustees by this Declaration.
2.5 Meetings and Action without Meetings. Meetings of the
Trustees shall be held from time to time upon the call of the Chairman, if
any, the President, the Secretary or by any one of the Trustees. Regular
meetings of the Trustees may be held without call or notice at a time and
place fixed by the By-Laws or by resolution of the Trustees. Notice of any
other meeting shall be mailed to each Trustee not less than 48 hours before
the meeting or otherwise actually delivered orally or in writing by
registered or certified first-class mail, or by telex, telecopy or similar
means of same day delivery to each Trustee not less than 24 hours before
the meeting, but may be waived in writing by any Trustee either before or
after such meeting. The attendance of a Trustee at a meeting shall
constitute a waiver of notice of such meeting except where a Trustee
attends a meeting for the express purpose of objecting to the transaction
of any business on the ground that the meeting has not been lawfully called
or convened. A quorum for all meetings of the Trustees shall be a majority
of the Trustees. Unless provided otherwise in this Declaration of Trust,
any action of the Trustees may be taken at a meeting by vote of a majority
of the Trustees present (a quorum being present) or without a meeting by
written consent of a majority of the Trustees.
Any committee of the Trustees may act with or without a meeting.
A quorum for all meetings of any such committee shall be a majority of the
members thereof. Unless provided otherwise in this Declaration, any action
of any such committee may be taken at a meeting by vote of a majority of
the members present (a quorum being present) or without a meeting by
written consent of a majority of the members.
With respect to actions of the Trustees and any committee of the
Trustees, Trustees who are Interested Persons in any action to be taken may
be counted for quorum purposes under this Section and shall be entitled to
vote to the extent not prohibited by the 1940 Act.
All or any one or more Trustees may participate in a meeting of
the Trustees or any committee thereof by means of a conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear each other; participation in a
meeting pursuant to any such communications system shall constitute
presence in person at such meeting.
2.6 Committees. The Trustees may designate, and appoint and
remove with or without cause the members of, one or more committees having
all or such lesser portion of the powers of the Trustees as the Trustees
shall determine and consisting of such number of the Trustees as the
Trustees shall determine.
2.7 Officers. The Trustees shall elect a President, a Secretary
and a Treasurer, who shall serve at the pleasure of the Trustees or until
their successors are elected. The Trustees may elect or appoint or may
authorize the President to appoint such other officers or agents with such
powers as the Trustees may deem to be advisable. The President, Secretary
and Treasurer may, but need not, be a Trustee.
ARTICLE III
Powers and Duties of Trustees
3.1 General. The Trustees shall owe to the Trust and its
Shareholders the same fiduciary duties as are owed by directors of
corporations to such corporations and their stockholders under the general
corporation law of the State of Delaware and shall not have any of the
duties or be subject to any of the requirements, qualifications or
obligations applicable to trustees under the laws of the State of Delaware.
The Trustees shall have exclusive and absolute control over the Trust
Property and over the business of the Trust or any Series thereof to the
same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may
be permitted by this Declaration. The Trustees may perform such acts as in
their sole discretion are proper for conducting the business of the Trust
or any Series thereof. The enumeration of any specific power herein shall
not be construed as limiting the aforesaid power. Such powers of the
Trustees may be exercised without order of or resort to any court.
3.2 Investments. The Trustees shall have power, subject to the
Fundamental Policies in effect from time to time with respect to the Trust
or a Series of the Trust, to:
(a) manage, conduct, operate and carry on the business of
an investment company and exercise all power necessary and appropriate to
conduct such operations;
(b) subscribe for, invest in, reinvest in, purchase or
otherwise acquire, hold, pledge, sell, assign, transfer, exchange,
distribute or otherwise deal in or dispose of any and all sorts of
property, tangible or intangible, including but not limited to securities
of any type whatsoever, whether equity or non-equity, of any issuer,
evidences of indebtedness of any person, commodities and any other rights,
interests, instruments or property of any sort and to exercise any and all
rights, powers and privileges of ownership or interest in respect of any
and all such investments of every kind and description, including, without
limitation, the right to consent and otherwise act with respect thereto,
with power to designate one or more Persons to exercise any of said rights,
powers and privileges in respect of any of said investments. The Trustees
shall not be limited by any law limiting the investments which may be made
by fiduciaries.
(c) To enter into, amend and terminate investment advisory,
administrative, custodial, transfer agent, dividend paying agent,
shareholders service, distribution service and other agreements and
arrangements of any type whatsoever.
(d) In general to carry on any other business in connection
with or incidental to any of the foregoing powers, to do everything
necessary, suitable or proper for the accomplishment of any purpose or the
attainment of any object or the furtherance of any power hereinbefore set
forth, either alone or in association with others, and to do every other
act or thing incidental or appurtenant to or growing out of or connected
with the aforesaid business or purposes, objects or powers.
3.3 Legal Title. Legal title to all the Trust Property shall be
vested in the name of the Trust or any Series thereof, in the Trustees as
joint tenants, in one or more of the Trustees or in the name of any other
Person as nominee, custodian or pledgee, on such terms as the Trustees may
determine, provided that the interest of the Trust or any Series thereof
therein is appropriately protected.
Any right, title and interest of any Trustee in any Trust
Property shall vest automatically in each person who may hereafter become a
successor Trustee upon his due election or appointment and qualification.
Upon the ceasing of any person to be a Trustee for any reason, such person
shall automatically cease to have any right, title or interest in any of
the Trust Property, and any right, title and interest of such Trustee in
any Trust Property shall vest automatically in the remaining Trustees.
Such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered.
3.4 Issuance and Repurchase of Shares. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in, Shares,
including Shares in fractional denominations, shall have the power to
establish from time to time in accordance with the provisions of Section
6.3 hereof two or more Classes representing interests in the Trust or a
Series thereof and, subject to the more detailed provisions set forth in
Articles VIII and IX, to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares any funds or property of
the applicable Class or Series of the Trust, whether capital or surplus or
otherwise, to the full extent now or hereafter permitted by the laws of the
State of Delaware.
3.5 Service Liabilities. Subject to the Fundamental Policies in
effect from time to time with respect to the Trust or a particular Series,
the Trustees shall have the power to incur liabilities, borrow money or
otherwise obtain credit or utilize leverage to the maximum extent permitted
by law and to secure the same by mortgaging, pledging or otherwise
subjecting as security any of the assets of the Trust or any Series
thereof, and to endorse, guarantee, or undertake the performance of any
obligation, contract or engagement of any other person, firm, association
or corporation; provided, however, that the assets of any particular Series
shall not be used as security for any credit extended to one or more other
Series.
3.6 Delegation. The Trustees shall have power, consistent with
their continuing exclusive authority over the management of the Trust and
the Trust Property, to delegate from time to time to such of their number
or to officers, employees or agents of the Trust the doing of such things
and the execution of such instruments either in the name of the Trust or
the names of the Trustees or otherwise as the Trustees may deem necessary,
useful or incidental in connection with the business of the Trust.
3.7 Collection and Payment. The Trustees shall have power to
collect all property due to the Trust or any Series of the Trust or any
Class thereof; to pay all claims, including taxes, against the Trust
Property, the Trust or any Series of the Trust or any Class thereof, the
Trustees or any officer, employee or agent of the Trust; to prosecute,
defend, compromise or abandon any claims relating to the Trust Property,
the Trust or any Series of the Trust or any Class thereof, or the Trustees
or any officer, employee or agent of the Trust; to foreclose any security
interest securing any obligations, by virtue of which any property is owed
to the Trust or any Series of the Trust or any Class thereof; and to enter
into releases, agreements and other instruments. The Shareholders shall
have no power to vote as to whether or not a court action, legal proceeding
or claim should or should not be brought or maintained derivatively or as a
class action on behalf of the Trust or the Shareholders.
3.8 Expenses. The Trustees shall have power to incur and pay
out of the assets or income of the Trust or any Series of the Trust or any
Class thereof, any expenses which in the opinion of the Trustees are
necessary or incidental to carry out any of the purposes of this
Declaration, and the business of the Trust or any Series of the Trust or
any Class thereof, and to pay reasonable compensation from the funds of the
Trust to themselves as Trustees. The Trustees shall fix the compensation
of all officers, employees and Trustees. The Trustees may pay themselves
such compensation for special services, including legal, underwriting,
syndicating and brokerage services, as they in good faith may deem
reasonable and reimbursement for expenses reasonably incurred by themselves
on behalf of the Trust. The Trustees shall have the power, as frequently
as they may determine, to cause each Shareholder, or each Shareholder of
any particular Series or Class thereof, to pay directly, in advance or
arrears, for charges of distribution, of the custodian or transfer agent,
Shareholder servicing or similar agent of such Series or Class, a pro rata
amount as defined from time to time by the Trustees, by setting off such
charges due from such Shareholder from declared but unpaid dividends owed
such Shareholder and/or by reducing the number of shares in the account of
such Shareholder by that number of full and/or fractional Shares which
represents the outstanding amount of such charges due from such
Shareholder.
3.9 By-Laws. The Trustees may adopt and from time to time amend
or repeal By-Laws for the conduct of the business of the Trust.
3.10 Miscellaneous Powers. The Trustees shall have the power
to: (a) employ or contract with such Persons as the Trustees may deem
desirable for the transaction of the business of the Trust or any Series
thereof; (b) enter into joint ventures, partnerships and any other
combinations or associations; (c) purchase, and pay for out of Trust
Property, insurance policies insuring the Shareholders, Trustees, officers,
employees, agents, investment advisors, distributors, selected dealers or
independent contractors of the Trust or any Series thereof against all
claims arising by reason of holding any such position or by reason of any
action taken or omitted by any such Person in such capacity, whether or not
the Trust would have the power to indemnify such Person against such
liability; (d) establish pension, profit-sharing, share purchase, and other
retirement, incentive and benefit plans for any Trustees, officers,
employees and agents of the Trust; (e) make donations, irrespective of
benefit to the Trust, for charitable, religious, educational, scientific,
civic or similar purposes; (f) to the extent permitted by law, indemnify
any Person with whom the Trust or any Series thereof has dealings,
including without limiting any advisor, administrator, manager, distributor
or selected dealer, to such extent as the Trustees shall determine; (g)
guarantee indebtedness or contractual obligations of others; (h) determine
and change the fiscal year of the Trust and the method in which its
accounts shall be kept; and (i) adopt a seal for the Trust but the absence
of such seal shall not impair the validity of any instrument executed by or
on behalf of the Trust.
3.11 Further Powers. The Trustees shall have power to conduct
the business of the Trust or any Series of the Trust or any Class thereof
and carry on its operations in any and all of its branches and maintain
offices both within and without the State of Delaware, in any and all
states of the United States of America, in the District of Columbia, and in
any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America
and of foreign governments, and to do all such other things and execute all
such instruments as they deem necessary, proper or desirable in order to
promote the interests of the Trust or any Series of the Trust or any Class
thereof although such things are not herein specifically mentioned. Any
determination as to what is in the interests of the Trust or any Series of
the Trust or any Class thereof made by the Trustees in good faith shall be
conclusive. In construing the provisions of this Declaration, the
presumption shall be in favor of a grant of power to the Trustees. The
Trustees will not be required to obtain any court order to deal with the
Trust Property.
3.12 Parties to Contract. Any agreement of the Trust may be
entered into with any Person, although one or more of the Trustees,
officers or employees of the Trust may be an officer, director, trustee,
shareholder, or member of such other party to the agreement or may have a
direct or indirect financial or other interest in such agreement, and no
such agreement shall be invalidated or rendered voidable by reason of the
existence of any such relationship or interest, nor shall any Person
holding such relationship or interest be liable merely by reason of such
relationship for any loss or expense to the Trust or any Series of the
Trust or any Class thereof under or by reason of said agreement or
accountable for any profit realized directly or indirectly therefrom,
provided that the agreement when entered into was reasonable and fair.
ARTICLE IV
Limitations of Liability
and Indemnification
4.1 No Personal Liability of Shareholders, Trustees, Etc. The
Shareholders shall be entitled to the same limitation of personal liability
extended to stockholders of private corporations for profit organized under
the general corporation law of the State of Delaware pursuant to Section
3803 of the Delaware Business Trust Statute or any successor, but in no
event shall this liability be increased. No Trustee, officer, employee or
agent of the Trust shall be subject to any personal liability whatsoever to
any Person in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, willful misfeasance, gross
negligence or reckless disregard of his duties with respect to such Person;
and all Persons shall look solely to the Trust Property, or to the Property
of one or more specific Series of the Trust if the claim arises from the
conduct of such Trustee, officer, employee or agent with respect to only
such Series for satisfaction of claims of any nature arising in connection
with the affairs of the Trust; provided, however, that the foregoing
exculpation and limitation shall not constitute a waiver by the Trust or
any Shareholder of any rights which may not be waived under applicable law.
4.2 Mandatory Indemnification. To the maximum extent permitted
by law, the Trust shall indemnify from the assets of the Trust or the
respective Series thereof in question each of its Trustees, officers,
employees, agents, associates and controlling persons and the partners,
officers, employers and agents thereof (including persons who serve at its
request as directors, officers, partners, trustees or the like of another
organization) and any person controlling such person against all
liabilities and expenses (including amounts paid in satisfaction of
judgments, in compromise, as fines and penalties, and as counsel fees)
reasonably incurred by him in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or criminal, before any
court or administrative or investigative body, in which he may be involved
or with which he may be threatened, while in office or thereafter, by
reason of his being or having been such a trustee, officer, employee or
agent, except with respect to any matter as to which he shall have been
adjudicated not to have acted in good faith in the reasonable belief that
his action was in the best interest of the Trust or the respective Series
of the Trust or Class thereof and furthermore, in the case of any criminal
proceeding, he had no reasonable cause to believe that the conduct was
unlawful, provided that:
(1) no indemnitee shall be indemnified hereunder against any
liability to the Trust or any Series of the Trust or the Shareholders of
the Trust by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his position;
(2) as to any matter disposed of by settlement or a compromise
payment by such indemnitee, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless there has been a determination that such compromise is in
the best interests of the Trust or the respective Series of the Trust or
Class thereof and that such indemnitee appears to have acted in good faith
in the reasonable belief that his action was in the best interests of the
Trust or the respective Series of the Trust or Class thereof and did not
engage in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his position; and
(3) with respect to any action, suit or other proceeding
voluntarily prosecuted by any indemnitee as plaintiff, indemnification
shall be mandatory only if the prosecution of such action, suit or other
proceeding by such indemnitee was authorized by a majority of the Trustees.
All determinations that the applicable standards of conduct have been met
for indemnification hereunder, or that advance payments in connection with
the expense of defending any action shall be authorized, shall be made (a)
by a final decision on the merits by a court or other body before whom the
proceeding was brought that such indemnitee is not liable by reason of
disabling conduct or, (b) in the absence of such a decision, by (i) a
majority vote of a quorum consisting of Trustees who are neither Interested
Persons of the Trust nor parties to the proceeding ("disinterested
non-party Trustees"), or (ii) if such a quorum is not obtainable or even,
if obtainable, if a majority vote of such quorum so directs, independent
legal counsel in a written opinion. All determinations that advance
payments in connection with the expense of defending any proceeding shall
be authorized and shall be made in accordance with clause (b) above.
The rights accruing to any indemnitee under these provisions
shall not exclude any other right to which he may be lawfully entitled.
The Trustees may make advance payments in connection with the expense of
defending any action with respect to which indemnification might be sought
under this Section, provided that the Trustees shall receive a written
affirmation of the indemnified indemnitee's good faith belief that the
standard of conduct necessary for indemnification has been met and a
written undertaking to reimburse the Trust or the respective Series of the
Trust in the event it is subsequently determined that he is not entitled to
such indemnification and provided further that the Trustees determine that
the facts then known to them would not preclude indemnification. In
addition, at least one of the following conditions must be met:
(a) the indemnitee shall provide a security for his
undertaking,
(b) the Trust or the respective Series thereof, as
applicable, shall be insured against losses arising by reason of any lawful
advances, or
(c) a majority of a quorum of the disinterested non-party
Trustees or an independent legal counsel in a written opinion, shall
determine, based on a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to believe that the
indemnitee ultimately will be found entitled to indemnification.
4.3 No Bond Required of Trustees. No Trustee shall, as such, be
obligated to give any bond or other security for the performance of any of
his duties hereunder.
4.4 No Duty of Investigation; Notice in Trust Instruments, etc.
No purchaser, lender, transfer agent or other person dealing with the
Trustees or with any officer, employee or agent of the Trust or any Series
of the Trust or Class thereof shall be bound to make any inquiry concerning
the validity of any transaction purporting to be made by the Trustees or by
said officer, employee or agent or be liable for the application of money
or property paid, loaned, or delivered to or on the order of the Trustees
or of said officer, employee or agent. Every obligation, contract,
undertaking, instrument, certificate, Share, other security of the Trust or
any Series of the Trust or any Class thereof, and every other act or thing
whatsoever executed in connection with the Trust or any Series of the Trust
or Class thereof shall be conclusively taken to have been executed or done
by the executors thereof only in their capacity as Trustees under this
Declaration or in their capacity as officers, employees or agents of the
Trust.
4.5 Reliance on Experts, etc. Each Trustee and officer or
employee of the Trust or any Series of the Trust shall, in the performance
of his duties, be fully and completely justified and protected with regard
to any act or any failure to act resulting from reliance in good faith upon
the books of account or other records of the Trust or any Series of the
Trust or Class thereof, upon an opinion of counsel, or upon reports made to
the Trust or any Series thereof by any of the Trust's officers or employees
or by any advisor, administrator, manager, distributor, selected dealer,
accountant, appraiser or other expert or consultant selected with
reasonable care by the Trustees, officers or employees of the Trust,
regardless of whether such counsel or expert may also be a Trustee.
4.6 Indemnification of Shareholders. If any Shareholder or
former Shareholder of the Trust or any Series of the Trust or any Class
thereof shall be held personally liable solely by reason of his being or
having been a Shareholder and not because of his acts or omissions or for
some other reason, the Shareholder or former Shareholder (or his heirs,
executors, administrators or other legal representatives or in the case of
any entity, its general successor) shall be entitled out of the assets
belonging to the applicable Series to be held harmless from and indemnified
to the maximum extent permitted by law against all loss and expense arising
from such liability. The Trust, on behalf of the affected Series, shall,
upon request by such Shareholder, assume the defense of any claim made
against such Shareholder for any act or obligation of the Series and
satisfy any judgment thereon from the assets of the Series.
ARTICLE V
Shares of Beneficial Interest
5.1 Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into an unlimited number of transferable shares
of beneficial interest. All Shares issued in accordance with the terms
hereof, including, without limitation, Shares issued in connection with a
dividend in Shares or a split of Shares, shall be fully paid and, except as
provided in the last sentence of Section 3.8, nonassessable when the
consideration determined by the Trustees (if any) therefor shall have been
received by the Trust.
5.2 Series Designation. The Trustees, in their discretion from
time to time, may authorize the division of Shares into two or more Series,
each Series relating to a separate portfolio of investments and each of
which Series shall be a separate and distinct subtrust of the Trust. Each
Series so established hereunder shall be deemed to be a separate trust
under the provisions of Delaware law. The Trustees shall have exclusive
power without the requirement of Shareholder approval to establish and
designate such separate and distinct Series and to fix and determine the
relative rights and preferences as between the different Series. The
establishment and designation of any Series shall be effective upon the
approval by the Trustees of an instrument setting forth the establishment
and designation of such Series. Such instrument shall also set forth any
rights and preferences of such Series which are in addition to the rights
and preferences of Shares set forth in this Declaration. At any time that
there are no Shares outstanding of any particular Series previously
established and designated, the Trustees may by an instrument approved by
them abolish or alter that Series and the establishment and designation
thereof. Each instrument referred to in this paragraph shall have the
status of an amendment to this Declaration.
5.3 Class Designation. The Trustees, in their discretion from
time to time, may authorize the division of Shares of any Series into two
or more Classes of Shares all the assets of which shall be commingled with
the other classes of such Series. The Trustees shall have exclusive power
without the requirement of Shareholder approval to establish and designate
such separate and distinct Classes and to fix and determine the relative
rights, terms, conditions and expenses applicable to each Class of Shares
to the maximum extent permitted by law. At any time that there are no
Shares outstanding of any particular Class previously established and
designated, the Trustees may abolish or alter that Class and the
establishment and designation thereof.
5.4 Description of Shares. If the Trustees shall create
sub-trusts and divide the Shares into one or more Series or create Classes
of Shares, the following provisions shall be applicable:
(a) Number of Shares. The number of Shares of each Series
or Class that may be issued shall be unlimited. The Trustees may classify
or reclassify any unissued Shares or any Shares previously issued and
reacquired of any Series or Class into one or more Series or Classes that
may be established and designated from time to time. The Trustees may hold
as treasury Shares (of the same or some other Series or Class), reissue for
such consideration and on such terms as they may determine, or cancel any
Shares of any Series or Class reacquired by the Trust at their discretion
from time to time.
(b) Investment of Property. The power of the Trustees to
invest and reinvest the Trust Property of each Series that may be
established shall be governed by Section 3.2 of this Declaration.
(c) Allocation of Assets. All consideration received by
the Trust for the issue or sale of Shares of a particular Series or Class
thereof, together with all assets in which such consideration is invested
or reinvested, all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of
such assets, and any funds or payment derived from any reinvestment of such
proceeds in whatever form the same may be, shall be held by the Trustees
and Trust for the benefit of the Shareholders of such Series or Class and,
subject to the rights of creditors of such Series or Class only, shall
irrevocably belong to that Series for all purposes, and shall be so
recorded upon the books of account of the Trust. In the event that there
are any assets, income, earnings, profits, and proceeds thereof, funds or
payments which are not readily identifiable as belonging to any particular
Series or Class, the Trustees shall allocate them among any one or more of
the Series or Classes established and designated from time to time in such
manner and on such basis as they, in their sole discretion, deem fair and
equitable, and anything so allocated to a Series shall belong to such
Series or Class. Each such allocation by the Trustees shall be conclusive
and binding upon the Shareholders of all Series and Classes for all
purposes.
(d) Allocation of Expenses. The assets belonging to each
particular Series or attributable to each particular Class shall be charged
with the liabilities of the Trust in respect of that Series or Class and
all expenses, costs, charges and reserves attributable to that Series or
Class, and any general liabilities, expenses, costs, charges or reserves of
the Trust which are not readily identifiable as belonging to any particular
Series or attributable to any particular Class shall be allocated and
charged by the Trustees to and among any one or more of the Series or
Classes established and designated from time to time in such manner and on
such basis as the Trustees in their sole discretion deem fair and
equitable; provided that any incremental expenses allocated to one or more
Classes of a Series on a basis other than the relative net asset values of
the respective Classes of such Series shall be allocated in a manner
consistent with the 1940 Act. Each allocation of liabilities, expenses,
costs, charges and reserves by the Trustees shall be conclusive and binding
upon the Shareholders of all Series and Classes for all purposes. The
Trustees shall have full discretion, to the extent not inconsistent with
the 1940 Act, to determine which items shall be treated as income and which
items as capital; and each such determination and allocation shall be
conclusive and binding upon the Shareholders. Under no circumstances shall
the assets allocated or belonging to a particular Series or attributable to
a particular Class be charged with any liabilities attributable to another
Series or Class. Any creditor may look only to the assets of the
particular Series or Class with respect to which such person is a creditor
for satisfaction of such creditor's debt.
(e) Dividends. The power of the Trustees to pay dividends
and make distributions with respect to any one or more Series or Classes
shall be governed by Section 9.2. Dividends and distributions on Shares of
a particular Series may be paid with such frequency as the Trustees may
determine, which may be daily or otherwise, pursuant to a standing
resolution or resolutions adopted only once or with such frequency as the
Trustees may determine, to the holders of Shares of that Series, from such
of the income and capital gains, accrued or realized, from the assets
belonging to that Series, as the Trustees may determine, after providing
for actual and accrued liabilities belonging to that Series. All dividends
and distributions on each Class of a Series shall be distributed pro rata
to the holders of Shares of that Class in proportion to the number of
Shares of that Class held by such holders at the date and time of record
established for the payment of such dividends or distributions, and such
dividends and distributions need not be pro rata with respect to dividends
and distributions paid to Shares of any other Class of such Series.
Dividends and distributions shall be paid with respect to Shares of a given
Class only out of lawfully available assets attributable to such Class.
Consistent with Section 3.6, the Trustees may (as is the case with any
other power of the Trustees) delegate any or all of their powers under this
Section 6.4(e) and Section 9.2.
5.5 Rights of Shareholders. The Shares shall be personal
property giving only the rights in this Declaration specifically set forth.
The ownership of the Trust Property of every description and the right to
conduct any business herein before described are vested exclusively in the
Trustees, and the Shareholders shall have no interest therein other than
the beneficial interest conferred by their Shares with respect to a
particular Series or Class, and they shall have no right to call for any
partition or division of any property, profits, rights or interests of the
Trust nor can they be called upon to share or assume any losses of the
Trust or, subject to the right of the Trustees to charge certain expenses
directly to Shareholders, as provided in the last sentence of Section 3.8,
suffer an assessment of any kind by virtue of their ownership of Shares.
The Shares shall not entitle the holder to preference, preemptive,
appraisal, conversion or exchange rights (except as specified in this
Section 6.5). Notwithstanding anything to the contrary contained herein:
(i) Shares of any Class denominated as being
convertible automatically, and without any action or choice
on the part of the holder thereof or Shares of any Class
denominated as being convertible based on an election of the
holder thereof, into Shares (or fractions thereof) of any
other Class pursuant to such terms, conditions and
restrictions as may be established by the Trustees and set
forth from time to time in the applicable Prospectus shall
be convertible on such terms as are described in such
Prospectus.
(ii) The number of Shares into which each such
convertible Share shall convert pursuant to the foregoing
paragraph shall equal the number (including for this purpose
fractions of a Share) obtained by dividing the net asset
value per share of the convertible Share for purposes of
sales and redemptions thereof on the date of such conversion
(the "Conversion Date") by the net asset value per share of
the Class of Shares being converted into for purposes of
sales and redemptions thereof on the conversion date.
(iii) On the conversion date, those Shares which are
converted into Shares of another Class shall cease to accrue
dividends and will no longer be deemed outstanding and the
rights of the holders thereof (except the right to receive
dividends declared prior to the conversion date but unpaid
as of the conversion date) will cease. Certificates
representing Shares resulting from conversion may be issued
pursuant to such terms and conditions as may be established
from time to time by the Trustees.
5.6 Trust Only. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and
each Shareholder from time to time. It is not the intention of the
Trustees to create a general partnership, limited partnership, joint stock
association, corporation, bailment or any form of legal relationship other
than a trust. Nothing in this Declaration shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or
members of a joint stock association.
5.7 Issuance of Shares. The Trustees, in their discretion, may
from time to time without vote of the Shareholders issue Shares with
respect to any Series or Class that may have been established pursuant to
Section 6.2, or Section 6.3 in addition to the then issued and outstanding
Shares and Shares held in the treasury, to such Person or Persons and for
such amount and type of consideration, including cash or property, at such
time or times, and on such terms as the Trustees may determine, and may in
such manner acquire other assets (including the acquisition of assets
subject to, and in connection with the assumption of, liabilities) and
businesses. The Trustees may from time to time divide or combine the
Shares of any Series or Class into a greater or lesser number without
thereby changing the proportionate beneficial interest in such Series or
Class. Issuances and redemptions of Shares may be made in whole Shares
and/or any fractions or multiples thereof as the Trustees may determine.
5.8 Register of Shares. A register shall be kept at the Trust
or any duly appointed transfer agent which shall contain the names and
addresses of the Shareholders and the number of Shares held by them
respectively and a record of all transfers thereof. Separate registers
shall be established and maintained for each Series of the Trust and each
Class thereof. Each such register shall be conclusive as to who are the
holders of the Shares of the applicable Series and Class thereof and who
shall be entitled to receive dividends or distributions or otherwise to
exercise or enjoy the rights of Shareholders. No Shareholder shall be
entitled to receive payment of any dividend or distribution, nor to have
notice given to him as herein provided, until he has given his address to a
transfer agent or such other officer or agent of the Trustees as shall keep
the register for entry thereon. It is not contemplated that certificates
will be issued for the Shares; however, the Trustees, in their discretion,
may authorize the issuance of share certificates and promulgate appropriate
fees therefore and rules and regulations as to their use.
5.9 Transfer Agent and Registrar. The Trustees shall have power
to employ a transfer agent or transfer agents, and a registrar or
registrars, with respect to the Shares of the various Series and Classes
thereof. The transfer agent or transfer agents may keep the applicable
register and record therein the original issues and transfers, if any, of
the said Shares of the applicable Series and Classes thereof. Any such
transfer agent and registrars shall perform the duties usually performed by
transfer agents and registrars of certificates of stock in a corporation,
as modified by the Trustees.
5.10 Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent
thereto duly authorized in writing, upon delivery to the Trustees or a
transfer agent of the Trust of a duly executed instrument of transfer,
together with such evidence of the genuineness of each such execution and
authorization and of other matters as may reasonably be required. Upon
such delivery the transfer shall be recorded on the applicable register of
the Trust. Until such record is made, the Shareholder of record shall be
deemed to be the holder of such Shares for all purposes hereof and neither
the Trustees nor any transfer agent or registrar nor any officer, employee
or agent of the Trust shall be affected by any notice of the proposed
transfer. The Trustees may subject any Shares to such restrictions on
transfer as they may deem necessary or appropriate.
Any person becoming entitled to any Shares in consequence of the
death, bankruptcy, or incompetence of any Shareholder, or otherwise by
operation of law, shall be recorded on the applicable register of Shares as
the holder of such Shares upon production of the proper evidence thereof to
the Trustees or a transfer agent of the Trust, but until such record is
made, the Shareholder of record shall be deemed to be the holder of such
for all purposes hereof, and neither the Trustees nor any transfer agent or
registrar nor any officer or agent of the Trust shall be affected by any
notice of such death, bankruptcy or incompetence, or other operation of
law.
5.11 Notices. Any and all notices to which any Shareholder
hereunder may be entitled and any and all communications shall be deemed
duly served or given if mailed, postage prepaid, addressed to any
Shareholder of record at his last known address as recorded on the
applicable register of the Trust.
ARTICLE VI
Redemption
6.1 Redemptions. All outstanding Shares of any Series or Class
may be redeemed at the option of the holders thereof, upon and subject to
the terms and conditions provided in this Article VIII. The Trust shall,
upon application by any Shareholder or pursuant to authorization from any
Shareholder of a particular Series or Class, redeem or repurchase from such
Shareholder outstanding Shares of such Series or Class for an amount per
share determined by the application of a formula adopted for such purpose
by the Trustees with respect to such Series (which formula shall be
consistent with the 1940 Act); provided that (a) such amount per share
shall not exceed the cash equivalent of the proportionate interest of each
share in the assets of the Series or Class of the Trust at the time of the
repurchase or redemption and (b) if so authorized by the Trustees, the
Trust may, at any time and from time to time, charge fees for effecting
such redemption, at such rates as the Trustees may establish, as and to the
extent permitted under the 1940 Act, and may, at any time and from time to
time, pursuant to such Act, suspend such right of redemption. The
procedures for effecting redemption shall be as set forth in the Prospectus
with respect to the applicable Series from time to time. The proceeds of
the redemption of Shares shall be paid in cash or property (tangible or
intangible) or any combination thereof in the sole discretion of the
Trustees. The proceeds of the redemption of Shares subject to a contingent
deferred sales charge (including fractional shares) shall be reduced by the
amount of any applicable contingent deferred sales charge payable on such
redemption with respect to the respective Class of such Shares as set forth
in the applicable Prospectus (to the extent consistent with the 1940 Act)
or such other charges, fees or expenses as may be applicable thereto.
6.2 Disclosure of Holding. The holders of Shares or other
securities of the Trust shall upon demand disclose to the Trustees in
writing such information with respect to direct and indirect ownership of
Shares or other securities of the Trust as the Trustees deem necessary to
comply with applicable law.
6.3 Redemptions at Option of Trust. The Trustees shall have the
power to redeem shares of any Series or Class at a redemption price
determined in accordance with Section 8.1, (i) if at any time the total
investment in such account does not have a value of at least such minimum
amount as may be specified in the Prospectus for such Series or Class from
time to time, (ii) as provided by Section 3.8, or (iii) to the extent a
Shareholder owns Shares equal to or in excess of a percentage of Shares of
the Trust or any Series determined from time to time by the Trustees and
specified in the applicable Prospectus. In the event the Trustees
determine to exercise their power to redeem Shares provided in this Section
8.3(i), the Shareholder shall be notified that the value of his account is
less than the applicable minimum amount and shall be allowed 30 days to
make an appropriate investment before redemption is processed.
ARTICLE VII
Determination of Net Asset Value
Net Income and Distributions
7.1 Net Asset Value. The net asset value of each outstanding
Share of each Series and Class of the Trust shall be determined at such
time or times on such days as the Trustees may determine, in accordance
with the 1940 Act, with respect to each Series and Class. The method of
determination of net asset value shall be determined by the Trustees and
shall be as set forth in the Prospectus with respect to the applicable
Series or Class. As is the case with all powers of the Trustees, the power
to make the net asset value calculations for any Series or Class may be
delegated by the Trustees to such person or persons as the Trustees may
determine. The Trustees may suspend the determination of net asset value
to the extent permitted by the 1940 Act.
7.2 Distributions to Shareholders.
(a) In the event a Series has outstanding only one Class of
Shares, the Trustees shall from time to time distribute ratably among the
Shareholders of such Series such proportion of the net profits, surplus
(including paid-in surplus), capital, or assets with respect to such Series
as they may deem proper. Such distribution may be made in cash or property
(including without limitation any type of obligations of the Trust or any
assets thereof) or any combination thereof, and the Trustees may distribute
ratably among the Shareholders of any Series additional Shares of such
Series in such manner, at such times, and on such terms as the Trustees may
deem proper.
(b) In the event the Trust or a Series has outstanding more
than one Class of Shares, the Trustees shall from time to time distribute
ratably among each Class of Shareholders of such Series such proportion of
the net profits, surplus (including paid-in surplus), capital or assets
attributable to such Class held by the Trustees as they may deem proper,
and the Trustees may distribute ratably among the Shareholders of each such
Class additional Shares of such Class in such manner, at such times, and on
such terms as the Trustees may deem proper. Such distributions to one
Class need not be ratable with respect to distributions to Shares of any
other Class of the Trust or any Series.
(c) Distributions pursuant to this Section 9.2 may be among
the Shareholders of record at the time of declaring a distribution or among
the Shareholders of record at such later date as the Trustees shall
determine and specify at the time of declaration.
(d) The Trustees may always retain from the assets of the
Trust or any Series or Class such amount as they may deem necessary to pay
the debts or expenses of the Trust or to meet obligations of the Trust, or
as they otherwise may deem desirable to use in the conduct of its affairs
or to retain for future requirements or extensions of the business.
7.3 Constant Net Asset Value; Reduction of Outstanding Shares.
If, for any reason, the net income attributable to any Series or Class of
the Trust determined at any time is a negative amount and the Trustees wish
to maintain the net asset value per Share of such Series or Class at a
targeted amount, the Trustees shall have the power with respect to such
Series (i) to offset each Shareholder's pro rata share of such negative
amount from the accrued dividend account of such Shareholder, or (ii) to
reduce the number of Outstanding Shares of such Series by reducing the
number of Shares in the account of such Shareholder by that number of full
and fractional Shares which represents the amount of such excess negative
net income or (iii) to cause to be recorded on the books of the Trust an
asset account in the amount of such negative net income, which account may
be reduced by the amount (provided that the same shall thereupon become the
property of the Trust with respect to such Series or Class and shall not be
paid to any Shareholder) of dividends declared upon the Outstanding Shares
of such Series with respect to the day such negative net income is
experienced, until such asset account is reduced to zero; or (iv) to
combine the methods described in clauses (i) and (ii) and (iii) of this
sentence, in order to cause the net asset value per Share of such Series to
remain at a targeted amount per Outstanding Share immediately after each
such determination and declaration. The Trustees shall also have the power
to fail to declare a dividend out of net income for the purpose of causing
the net asset value per share to be increased to a targeted amount. The
Trustee shall also have the power to fail to declare a dividend out of net
income for the purpose of causing the net asset value per share to be
increased to a targeted amount.
7.4 Power to Modify Foregoing Procedures. Notwithstanding any
of the foregoing provisions of this Article IX, the Trustees may prescribe,
in their absolute discretion except as may be required by the 1940 Act,
such other bases and times for determining the per share asset value of any
of the Trust's Shares or net income, or the declaration and payment of
dividends and distributions as they may deem necessary or desirable for any
reason, including to enable the Trust to comply with any provision of the
1940 Act or of any securities association registered under the Securities
Exchange Act of 1934.
ARTICLE VIII
Shareholders
8.1 Meetings of Shareholders. The Trust shall not be required
to hold annual meetings of the Trust or any Series or Class of the
Shareholders. A Special Meeting of Shareholders may be called at any time
by the President or the Secretary at the request in writing or by the
Trustees and shall be called by any Trustee for any proper purpose upon
written request of Shareholders of the Trust or such Series or Class
holding in the aggregate not less than 51% of the Outstanding Shares of the
Trust, Series or Class as the case may be, such request specifying the
purpose or purposes for which such meeting is to be called. Any
shareholder meeting, including a Special Meeting, shall be held within or
without the State of Delaware on such day and at such time as the Trustees
shall designate. Notwithstanding the foregoing, the Trustees shall call a
Special Meeting to the extent required by the 1940 Act or any undertaking
by Trust to the U.S. Securities and Exchange Commission.
8.2 Voting. Shareholders of the Trust or any Series or Class
thereof shall have no power to vote on any matter except matters on which a
vote of such Shareholders is required by applicable law, this Declaration
or resolution of the Trustees. Any matter required to be submitted to
Shareholders and affecting one or more Series or Classes of such Series
differently from another Series or Class of such Series shall require
separate approval by the required vote of Shareholders of each affected
Series or Class; provided, however, that except to the extent required by
the 1940 Act, there shall be no separate Series or Class votes on the
election or removal of Trustees, the selection of auditors for the Trust,
approval of any agreement or contract entered into by the Trust or any
action to liquidate or dissolve the Trust. Shareholders of a particular
Series or Class shall not be entitled to vote on any matter that affects
only one or more other Series or Classes. There shall be no cumulative
voting in the election or removal of Trustees.
8.3 Notice of Meeting and Record Date. Notice of all meetings
of Shareholders, stating the time, place and purposes of the meeting, shall
be given by the Trustees by mail to each Shareholder of record entitled to
vote thereat at his registered address, mailed at least 10 days before the
meeting. Only the business stated in the notice of the meeting shall be
considered at such meeting. Any adjourned meeting may be held as adjourned
one or more times without further notice not later than 130 days after the
record date thereof. For the purposes of determining the Shareholders who
are entitled to notice of and to vote at any meeting the Trustees may,
without closing the transfer books, fix a date not more than 90 days prior
to the date of convening such meeting of Shareholders as a record date for
the determination of the Persons to be treated as Shareholders of record
for such purposes.
8.4 Quorum and Required Vote.
(a) The holders of one-third of the Outstanding Shares of
the Trust eligible to vote present in person or by proxy shall constitute a
quorum at any meeting of the Shareholders for purposes of conducting a vote
of Shareholders of the Trust on such matter. The holders of one-third of
the Outstanding Shares of the applicable Series or Class eligible to vote
present in person or by proxy shall constitute a quorum at any meeting of
Shareholders for purposes of conducting a separate vote of Shareholders of
such Series or Class on such matter.
(b) Subject to any provision of applicable law, this
Declaration or resolution of the Trustees specifying a greater or lesser
vote requirement for the transaction of any item of business at any meeting
of Shareholders, (i) the affirmative vote of a majority of the Shares
present in person or represented by proxy and entitled to vote on the
subject matter shall be required to approve such matter and (ii) where a
separate vote of any Series is also required on any matter, the affirmative
vote of a majority of the Shares of such Series present in person or
represented by proxy at the meeting shall be required to approve such
matter.
8.5 Proxies, etc. At any meeting of Shareholders, the Shares of
any holder of Shares entitled to vote thereat may be voted as provided in
any valid and unrevoked proxy, provided that no proxy shall be voted at any
meeting unless it shall have been placed on file with the Secretary, or
with such other officer or agent of the Trust as the Secretary may direct,
for verification prior to the time at which such vote shall be taken.
Pursuant to a resolution of a majority of the Trustees, proxies may be
solicited in the name of one or more Trustees or one or more of the
officers or employees of the Trust. Only Shareholders of record shall be
entitled to vote. Each full Share shall be entitled to one vote and each
fractional Shares shall be entitled to a vote of the fraction represented
thereby. When any Share is held jointly by several persons, any one of
them may vote at any meeting in person or by proxy in respect of such
Share, but if more than one of them shall be present at such meeting in
person or by proxy, and such joint owners or their proxies so present
disagree as to any vote to be cast, such vote shall not be received in
respect of such Share. A proxy purporting to be executed by or on behalf
of a Shareholder shall be deemed valid unless challenged at or prior to its
exercise, and the burden of proving invalidity shall rest on the
challenger. A facsimile or electronic form of proxy shall be valid and any
Person may execute a proxy on behalf of another Person on written or oral
instructions from such other Person. If the holder of any such Share is a
minor or a person of unsound mind, and subject to guardianship or to the
legal control of any other person as regards the charge or management of
such Share, he may vote by his guardian or such other person appointed or
having such control, and such vote may be given in person or by proxy.
8.6 Inspection of Records. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
shareholders of a Delaware business corporation.
8.7 Shareholder Action by Written Consent. Any action which may
be taken by Shareholders by vote may be taken without a meeting if the
holders entitled to vote thereon of the proportion of Shares required for
approval of such action at a meeting of Shareholders pursuant to Section
10.4 consent to the action in writing and the written consents are filed
with the records of the meetings of Shareholders. Such consent shall be
treated for all purposes as a vote taken at a meeting of Shareholders.
ARTICLE IX
Duration: Termination of Trust;
Amendment; Mergers, Etc.
9.1 Duration. Subject to possible termination in accordance
with the provisions of Section 11.2 hereof, the Trust created hereby shall
have perpetual existence.
9.2 Termination.
(a) The Trust may be terminated, after the Trustees have
approved a resolution therefor, upon approval by a majority of the Shares
outstanding on the record date therefor voting as one Class. Any Series
may be terminated, after the Trustees have approved a resolution therefor,
upon approval by a majority of the Shares of such Series outstanding on the
record date therefor and its Classes, all voting as one Class. Any Class
may be terminated, after the Trustees have approved a resolution therefor,
by vote of a majority of the Shares of that Class outstanding on the record
date therefor. Upon the termination of the Trust or any Series:
(i) The Trust or such Series or Class shall carry
on no business except for the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the
affairs of the Trust or such Series or Class and all of the
powers of the Trustees under this Declaration shall continue
until the affairs of the Trust or such Series or Class shall have
been wound up, including the power to fulfill or discharge the
applicable contracts of the Trust, collect its assets, sell,
convey, assign, exchange, transfer or otherwise dispose of all or
any part of the remaining Trust Property to one or more persons
at public or private sale for consideration which may consist in
whole or in part in cash, securities or other property of any
kind, discharge or pay its liabilities, and do all other acts
appropriate to liquidate its business; provided that any sale,
conveyance, assignment, exchange, transfer or other disposition
of all or substantially all the Trust Property of the Trust or
any Series shall require approval of the principal terms of the
transaction and the nature and amount of the consideration by
Shareholders.
(iii) After paying or adequately providing for
the payment of all applicable liabilities, and upon receipt of
such releases, indemnities and refunding agreements, as they deem
necessary for their protection, the Trustees may distribute the
remaining Trust Property of any Series or Class, in cash or in
kind or partly each, among the Shareholders of such Series or
Class according to their respective rights.
(b) After termination of the Trust or any Series or Class
and distribution to the Shareholders as herein provided, a majority of the
Trustees shall execute and lodge among the records of the Trust an
instrument in writing setting forth the fact of such termination. Upon
termination of the Trust, the Trustees shall thereupon be discharged from
all further liabilities and duties hereunder, and the rights and interests
of all Shareholders shall thereupon cease. Upon termination of any Series
or Class, the Trustees shall thereunder be discharged from all further
liabilities and duties with respect to such Series or Class, and the rights
and interests of all Shareholders of such Series or Class shall thereupon
cease.
9.3 Amendment Procedure.
(a) This Declaration may be amended, after approval of an
instrument reflecting such amendment by the Trustees without any vote by
Shareholders of the Trust except as required by law. Without limiting the
foregoing authority, the matters with respect to which the Trustees may
amend this Declaration without any vote of Shareholders including to divide
the Trust into one or more Series or additional Series, to divide the
Shares of any Series into one or more Classes or additional Classes, to
change the name of the Trust or any Series or Class thereof, to make any
change that does not adversely affect the relative rights or preferences of
any Series or Class or, as they may deem necessary, to conform this
Declaration to the requirements of the 1940 Act or any other applicable
federal laws or regulations or the requirements of the regulated investment
company provisions of the Code, but the Trustees shall not be liable for
failing to do so.
(b) No amendment may be made under Section 11.3(a) above,
which would change any rights with respect to any Shares of the Trust or
any Series or Class thereof by reducing the amount payable thereon upon
liquidation of the Trust or by diminishing or eliminating any voting rights
pertaining thereto, except with the vote of the holders of a majority of
the Outstanding Shares of the Trust or such Series or Class, as applicable.
Nothing contained in this Declaration shall permit the amendment of this
Declaration to impair the exemption from personal liability of the
Shareholders, Trustees, officers, employees and agents of the Trust or to
permit assessments upon Shareholders other than as provided by Section 3.8.
(c) An amendment duly adopted by the requisite vote of the
Trustees and, if required, the Shareholders as aforesaid, shall become
effective at the time of such adoption or at such other time as may be
designated by the Trustees or Shareholders, as the case may be. A
certification in recordable form signed by one or more of Trustees setting
forth an amendment and reciting that it was duly adopted by the Trustees
and, if required, the Shareholders as aforesaid, or a copy of the
Declaration, as amended, in recordable form, and executed by one or more
Trustees, shall be conclusive evidence of such amendment when lodged among
the records of the Trust or at such other time designated by the Trustees.
9.4 Merger, Consolidation and Sale of Assets. The Trust or, any
Series or Class may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all
or substantially all of the Trust Property or the portion thereof
applicable to such Series or Class, including good will, upon such terms
and conditions and for such consideration when and as authorized by the
Trustees and any such merger, consolidation, sale, lease or exchange shall
be determined for all purposes to have been accomplished under and pursuant
to the statutes of the State of Delaware.
9.5 Incorporation. The Trustees may cause to be organized or
assist in organizing a corporation or corporations under the laws of any
jurisdiction or any other trust, partnership, association or other
organization to take over all of the Trust Property or to carry on any
business in which the Trust shall directly or indirectly have any interest,
and to sell, convey and transfer the Trust Property to any such
corporation, trust, limited liability company, association or organization
in exchange for the shares or securities thereof, or otherwise, and to lend
money to, subscribe for the shares or securities of, and enter into any
contracts with any such corporation, trust, limited liability company,
partnership, association or organization, or any corporation, partnership,
trust, limited liability company, association or organization in which the
Trust holds or is about to acquire shares or any other interests. The
Trustees may also cause a merger or consolidation between the Trust or any
successor thereto and any such corporation, trust, limited liability
company, partnership, association or other organization if and to the
extent permitted by law, as provided under the law then in effect. Nothing
contained herein shall be construed as requiring approval of Shareholders
for the Trustees to organize or assist in organizing one or more
corporations, trusts, limited liability companies, partnerships,
associations or other organizations and selling, conveying or transferring
a portion of the Trust Property to such organizations or entities.
ARTICLE X
Miscellaneous
10.1 Filing. Neither this Declaration nor any amendment hereto
shall be required to be filed in the office of the Secretary of the State
of Delaware or in any other place. A restated Declaration, containing the
original Declaration and all amendments theretofore made and in effect, may
be approved by the Trustees and executed from time to time by one or more
of the Trustees and shall, upon filing with the books and records of the
Trust, be conclusive evidence of all amendments contained therein and may
thereafter be referred to in lieu of the original Declaration and the
various amendments thereto. The Trust shall file a certificate of trust in
the office of the Secretary of State of Delaware as set forth in
section3810 of the Delaware Business Trust Statute.
10.2 Resident Agent. The Trust shall maintain a resident agent
in the State of Delaware, which agent shall initially be Wilmington Trust
Company, Wilmington Trust Center, Rodney Square North, Wilmington, Delaware
19890. The Trustees may designate a successor resident agent, provided,
however, that such appointment shall not become effective until written
notice thereof is delivered to the office of the Secretary of the State.
10.3 Governing Law. This Declaration is executed by a majority
of the Trustees and with reference to the rights of all parties and the
validity and construction of every provision hereof shall be subject to and
construed according to laws of the State of Delaware
10.4 Counterparts. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the
same instrument, which shall be sufficiently evidenced by any such original
counterpart.
10.5 Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust, or of any recording
office in which this Declaration may be recorded, appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or
Shareholders, (b) the name of the Trust or any Series thereof, (c) the
establishment of any Series, (d) the due authorization of the execution of
any instrument or writing, (e) the form of any vote passed at a meeting of
Trustees or Shareholders, (f) the fact that the number of Trustees or
Shareholders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (g) the form of any By Laws
adopted by or the identity of any officers elected by the Trustees, or (h)
the existence of any fact or facts which in any manner relate to the
affairs of the Trust or any Series, shall be conclusive evidence as to the
matters so certified in favor of any person dealing with the Trustees and
their successors.
10.6 Provisions in Conflict with Law or Regulation.
(a) The provisions of this Declaration are severable, and
if the Trustees shall determine, with the advice of counsel, that any of
such provisions is in conflict with the 1940 Act, the regulated investment
company provisions of the Code or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have
constituted a part of this Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior
to such determination.
(b) If any provision of this Declaration shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction
and shall not in any manner affect such provision in any other jurisdiction
or any other provision of this Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned have caused these presents to
be executed as of the day and year first above written.
By: ________________________________
Name: Linda S. Martinson
Title: Trustee
BY-LAWS
OF
BARON CAPITAL FUNDS TRUST
TABLE OF CONTENTS
Page
ARTICLE I - Shareholder Meetings . . . . . . . . . . . . . . . . . . 1
1.1 Chairman . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Proxies; Voting . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Fixing Record Dates . . . . . . . . . . . . . . . . . . . . 1
1.4 Inspectors of Election . . . . . . . . . . . . . . . . . . 1
1.5 Records at Shareholder Meetings . . . . . . . . . . . . . . 2
ARTICLE II - Trustees . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Annual and Regular Meetings . . . . . . . . . . . . . . . . 3
2.2 Chairman; Records . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III - Officers . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Officers of the Trust . . . . . . . . . . . . . . . . . . . 3
3.2 Election and Tenure . . . . . . . . . . . . . . . . . . . . 3
3.3 Removal of Officers . . . . . . . . . . . . . . . . . . . . 4
3.4 Bonds and Surety . . . . . . . . . . . . . . . . . . . . . 4
3.5 Chairman, President, and Vice Presidents . . . . . . . . . 4
3.6 Secretary . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.7 Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.8 Other Officers and Duties . . . . . . . . . . . . . . . . . 6
3.9 Compensation of Officers and Trustees and
Members of the Advisory Board . . . . . . . . . . . . . . . . 6
ARTICLE IV - Miscellaneous . . . . . . . . . . . . . . . . . . . . . 6
4.1 Depositories . . . . . . . . . . . . . . . . . . . . . . . 6
4.2 Signatures . . . . . . . . . . . . . . . . . . . . . . . . 6
4.3 Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V - Stock Transfers . . . . . . . . . . . . . . . . . . . . . 7
5.1 Transfer Agents, Registrars and the Like . . . . . . . . . 7
5.2 Transfer of Shares . . . . . . . . . . . . . . . . . . . . 7
5.3 Registered Shareholders . . . . . . . . . . . . . . . . . . 8
ARTICLE VI - Amendment of By-Laws . . . . . . . . . . . . . . . . . . 8
6.1 Amendment and Repeal of By-Laws . . . . . . . . . . . . . . . 8
BARON CAPITAL FUNDS TRUST
BY-LAWS
These By-Laws are made and adopted pursuant to Section 3.9 of the
Declaration of Trust establishing Baron Capital Funds Trust dated November
20, 1997, as from time to time amended (hereinafter called the
"Declaration"). All words and terms capitalized in these By-Laws shall
have the meaning or meanings set forth for such words or terms in the
Declaration.
ARTICLE I
Shareholder Meetings
1.1 Chairman. The Chairman, if any, shall act as chairman at
all meetings of the Shareholders; in the Chairman's absence, the Trustee or
Trustees present at each meeting may elect a temporary chairman for the
meeting, who may be one of themselves.
1.2 Proxies; Voting. Shareholders may vote either in person or
by duly executed proxy and each full share represented at the meeting shall
have one vote, all as provided in Article 10 of the Declaration.
1.3 Fixing Record Dates. For the purpose of determining the
Shareholders who are entitled to notice of or to vote or act at any
meeting, including any adjournment thereof, or who are entitled to
participate in any dividends, or for any other proper purpose, the Trustees
may from time to time, without closing the transfer books, fix a record
date in the manner provided in Section 10.3 of the Declaration. If the
Trustees do not prior to any meeting of Shareholders so fix a record date
or close the transfer books, then the date of mailing notice of the meeting
or the date upon which the dividend resolution is adopted, as the case may
be, shall be the record date.
1.4 Inspectors of Election. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the Chairman, if any, of any meeting of Shareholders may, and on
the request of any Shareholder or Shareholder proxy shall, appoint
Inspectors of Election of the meeting. The number of Inspectors shall be
either one or three. If appointed at the meeting on the request of one or
more Shareholders or proxies, a majority of Shares present shall determine
whether one or three Inspectors are to be appointed, but failure to allow
such determination by the Shareholders shall not affect the validity of the
appointment of Inspectors of Election. In case any person appointed as
Inspector fails to appear or fails or refuses to act, the vacancy may be
filled by appointment made by the Trustees in advance of the convening of
the meeting or at the meeting by the person acting as chairman. The
Inspectors of Election shall determine the number of Shares outstanding,
the Shares represented at the meeting, the existence of a quorum, the
authenticity, validity and effect of proxies, shall receive votes, ballots
or consents, shall hear and determine all challenges and questions in any
way arising in connection with the right to vote, shall count and tabulate
all votes or consents, determinate the results, and do such other acts as
may be proper to conduct the election or vote with fairness to all
Shareholders. If there are three Inspectors of Election, the decision, act
or certificate of a majority is effective in all respects as the decision,
act or certificate of all. On request of the Chairman, if any, of the
meeting, or of any Shareholder or Shareholder proxy, the Inspectors of
Election shall make a report in writing of any challenge or question or
matter determined by them and shall execute a certificate of any facts
found by them.
1.5 Records at Shareholder Meetings. At each meeting of the
Shareholders, there shall be made available for inspection at a convenient
time and place during normal business hours, if requested by Shareholders,
the minutes of the last previous Annual or Special Meeting of Shareholders
of the Trust and a list of the Shareholders of the Trust, as of the record
date of the meeting or the date of closing of transfer books, as the case
may be. Such list of Shareholders shall contain the name of each
Shareholder in alphabetical order and the address of Shares owned by such
Shareholder. Shareholders shall have such other rights and procedures of
inspection of the books and records of the Trust as are granted to
shareholders of a Delaware business corporation.
ARTICLE II
Trustees
2.1 Regular Meetings. Meetings of the Trustees shall be held
from time to time upon the call of the Chairman, if any, the President, the
Secretary or any one of the Trustees. Regular meetings of the Trustees may
be held without call or notice and shall generally be held quarterly.
Neither the business to be transacted at, nor the purpose of, any meeting
of the Board of Trustees need be stated in the notice or waiver of notice
of such meeting, and no notice need be given of action proposed to be taken
by written consent.
2.2 Chairman; Records. The Chairman, if any, shall act as
chairman at all meetings of the Trustees; in absence of a chairman, the
Trustees present shall elect one of their number to act as temporary
chairman. The results of all actions taken at a meeting of the Trustees,
or by written consent of the Trustees, shall be recorded by the person
appointed by the Board of Trustees as the meeting secretary.
ARTICLE III
Officers
3.1 Officers of the Trust. The officers of the Trust shall
consist of a President, a Secretary, a Treasurer and such other officers or
assistant officers as may be elected or authorized by the Trustees. Any
two or more of the offices may be held by the same Person, except that the
same person may not be both President and Secretary.
3.2 Election and Tenure. At the initial organization meeting,
the Trustees shall elect the President, Secretary, Treasurer and such other
officers as the Trustees shall deem necessary or appropriate in order to
carry out the business of the Trust. Such officers shall serve at the
pleasure of the Trustees or until their successors have been duly elected
and qualified. The Trustees may fill any vacancy in office or add any
additional officers at any time.
3.3 Removal of Officers. Any officer may be removed at any
time, with or without cause, by action of a majority of the Trustees. Any
officer or agent appointed by an officer or committee may be removed with
or without cause by such appointing officer or committee. This provision
shall not prevent the making of a contract of employment for a definite
term with any officer and shall have no effect upon any cause of action
which any officer may have as a result of removal in breach of a contract
of employment. Any officer may resign at any time by notice in writing
signed by such officer and delivered or mailed to the President or
Secretary, and such resignation shall take effect immediately upon receipt
by the President or Secretary, or at a later date according to the terms of
such notice in writing.
3.4 Bonds and Surety. Any officer may be required by the
Trustees to be bonded for the faithful performance of such officer's duties
in such amount and with such sureties as the Trustees may determine.
3.5 President and Vice Presidents. The President shall be the
chief executive officer of the Trust and, subject to the control of the
Trustees, shall have general supervision, direction and control of the
business of the Trust and of its employees and shall exercise such general
powers of management as are usually vested in the office of President of a
corporation. Subject to direction of the Trustees, the President shall
have power in the name and on behalf of the Trust or any of its Series to
execute any and all loans, documents, contracts, agreements, deeds,
mortgages, registration statements, applications, requests, filings and
other instruments in writing, and to employ and discharge employees and
agents of the Trust. Unless otherwise directed by the Trustees, the
President shall have full authority and power, on behalf of all of the
Trustees, to attend and to act and to vote, on behalf of the Trust at any
meetings of business organizations in which the Trust holds an interest, or
to confer such powers upon any other persons, by executing any proxies duly
authorizing such persons. The President shall have such further
authorities and duties as the Trustees shall from time to time determine.
In the absence or disability of the President, the Vice-Presidents in order
of their rank as fixed by the Trustees or, if more than one and not ranked,
the Vice-President designated by the Trustees, shall perform all of the
duties of the President, and when so acting shall have all the powers of
and be subject to all of the restrictions upon the President. Subject to
the direction of the Trustees, and of the President, each Vice-President
shall have the power in the name and on behalf of the Trust to execute any
and all instruments in writing, and, in addition, shall have such other
duties and powers as shall be designated from time to time by the Trustees
or by the President.
3.6 Secretary. The Secretary shall maintain the minutes of all
meetings of, and record all votes of, Shareholders and Trustees. The
Secretary shall be custodian of the seal of the Trust, if any, and the
Secretary (and any other person so authorized by the Trustees) may affix
the seal, or if permitted, facsimile thereof, to any instrument executed by
the Trust but need not do so and may attest the seal and the signature or
signatures of the officer or officers executing such instrument on behalf
of the Trust. The Secretary shall also perform any other duties commonly
incident to such office in a Delaware business corporation, and shall have
such other authorities and duties as the Trustees shall from time to time
determine.
3.7 Treasurer. Except as otherwise directed by the Trustees,
the Treasurer shall have and exercise under the supervision of the Trustees
and of the President all powers and duties normally incident to the office.
The Treasurer may endorse for deposit or collection all notes, checks and
other instruments payable to the Trust or to its order. The Treasurer
shall deposit all funds of the Trust in such depositories as the Trustees
shall designate. The Treasurer shall be responsible for such disbursement
of the funds of the Trust as may be ordered by the Trustees or the
President. The Treasurer shall keep accurate account of the books of the
Trust's transactions which shall be the property of the Trust, and which
together with all other property of the Trust in the Treasurer's
possession, shall be subject at all times to the inspection and control of
the Trustees. Unless the Trustees shall otherwise determine, the Treasurer
shall be the principal accounting officer of the Trust and shall also be
the principal financial officer of the Trust. The Treasurer shall have
such other duties and authorities as the Trustees shall from time to time
determine. Notwithstanding anything to the contrary herein contained, the
Trustees may authorize any adviser, administrator, manager or transfer
agent to maintain bank accounts and deposit and disburse funds of any
Series of the Trust on behalf of such Series.
3.8 Other Officers and Duties. The Trustees may elect such
other officers and assistant officers as they shall from time to time
determine to be necessary or desirable in order to conduct the business of
the Trust. Assistant officers shall act generally in the absence of the
officer whom they assist and shall assist that officer in the duties of the
office. Each officer, employee and agent of the Trust shall have such
other duties and authority as may be conferred upon such person by the
Trustees or delegated to such person by the President.
3.9 Compensation of Officers and Trustees and Members of the
Advisory Board. Subject to any applicable provisions of the Declaration,
the compensation of the officers and Trustees and members of any Advisory
Board shall be fixed from time to time by the Trustees or, in the case of
officers, by any Committee or officer upon whom such power may be conferred
by the Trustees. No officer shall be prevented from receiving such
compensation as such officer by reason of the fact that he is also a
Trustee.
ARTICLE IV
Miscellaneous
4.1 Depositories. In accordance with Section 7.1 of the
Declaration, the funds of the Trust shall be deposited with such custodians
as the Trustees shall designate and shall be drawn out on checks, drafts or
other orders signed by such officer, officers, agent or agents (including
the adviser, administrator or manager), as the Trustees may from time to
time authorize.
4.2 Signatures. All contracts and other instruments shall be
executed on behalf of the Trust by its properly authorized officers, agent
or agents, as provided in the Declaration or By-laws or as the Trustees may
from time to time by resolution provide.
4.3 Seal. The Trust is not required to have any seal, and the
adoption or use of a seal shall be purely ornamental and be of no legal
effect. The seal, if any, of the Trust, or any Series of the Trust, if
any, may be affixed to any instrument, and the seal and its attestation may
be lithographed, engraved or otherwise printed on any document with the
same force and effect as if it had been imprinted and affixed manually in
the same manner and with the same force and effect as if done by a Delaware
business corporation. The presence or absence of a seal shall have no
effect on the validity, enforceability or binding nature of any document or
instrument that is otherwise duly authorized, executed and delivered.
4.4 Offices. Until changed by the Trustees, the principal
office of the Trust shall be in the City and State of New York. The Trust
may have offices in such other places without as well as within the State
of New York as the Trustees may from time to time determine.
ARTICLE V
Stock Transfers
5.1 Transfer Agents, Registrars and the Like. As provided in
Section 5.9 of the Declaration, the Trustees shall have authority to employ
and compensate such transfer agents and registrars with respect to the
Shares of the various Series of the Trust as the Trustees shall deem
necessary or desirable. In addition, the Trustees shall have power to
employ and compensate such dividend disbursing agents, warrant agents and
agents for the reinvestment of dividends as they shall deem necessary or
desirable. Any of such agents shall have such power and authority as is
delegated to any of them by the Trustees.
5.2 Transfer of Shares. The Shares of the Trust shall be
transferable on the books of the Trust only upon delivery to the Trustees
or a transfer agent of the Trust of proper documentation as provided in
Section 6.10 of the Declaration. The Trust, or its transfer agents, shall
be authorized to refuse any transfer unless and until presentation of such
evidence as may be reasonably required to show that the requested transfer
is proper.
5.3 Registered Shareholders. The Trust may deem and treat the
holder of record of any Shares as the absolute owner thereof for all
purposes and shall not be required to take any notice of any right or claim
of right of any other person.
ARTICLE VI
Amendment of By-Laws
6.1 Amendment and Repeal of By-Laws. In accordance with Section
3.9 of the Declaration, the Trustees shall have the power to amend or
repeal the By-Laws or adopt new By-Laws at any time; provided, however,
that By-Laws adopted by the Shareholders may, if such By-Laws so state, be
altered, amended or repealed only by the Shareholders by an affirmative
vote of a majority of the outstanding voting securities of the Trust, and
not by the Trustees. Action by the Trustees with respect to the By-Laws
shall be taken by an affirmative vote of a majority of the Trustees. The
Trustees shall in no event adopt By-Laws which are in conflict with the
Declaration, and any apparent inconsistency shall be construed in favor of
the related provisions in the Declaration.
END OF BY-LAWS
EXHIBIT 4
ADVISORY AGREEMENT
THIS ADVISORY AGREEMENT, made this 18th day of June, 1998, by and
between BAMCO, Inc., a New York corporation ("BAMCO") and Baron Capital
Funds Trust , a Delaware business trust ("Client") and all series thereof
("Series"),
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 1940
Act) 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 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
(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 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 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 Mr. Ronald Baron; and that such name
is the property of BAMCO, its affiliated companies and Ronald Baron 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 1940 Act) 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 1940 Act) 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 767 Fifth Avenue, New
York, New York 10153; or (2) to the Client at 767 Fifth Avenue, New York,
New York 10153.
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 July , 1998
New York, New York
BAMCO, INC.
By:
----------------------------------
BARON CAPITAL FUND TRUST
By:
---------------------------------
EXHIBIT 5
Distribution Agreement
This Distribution Agreement, made this ___ day of June, 1998, by and
between Baron Capital, Inc. a New York corporation ("BCI") and Baron
Capital Funds Trust, a Delaware business trust and all series thereof (the
"Fund"),
WHEREAS, the Fund is an open-end diversified management series
investment company and is registered under the Investment Company Act of
1940, as amended (the "1940 Act") that wishes to employ BCI to distribute
certain of the shares of the Fund's shares of beneficial interest (the
"Shares") pursuant to a Plan of Distribution pursuant to Rule 12b-1 under
the 1940 Act (the "Plan"); and
WHEREAS, BCI is a registered broker dealer and member of the National
Association of Securities Dealers, Inc. and is willing to distribute the
Shares pursuant to the Plan;
NOW THEREFORE, in consideration of the promises and mutual agreements
hereinafter set forth, the parties hereby agree as follows:
1. The Fund represents that the Plan is a written plan contemplated
by Rule 12b-1 under the 1940 Act and has been duly approved by
the Fund's Board of Trustees including a majority of whom are not
interested persons of the Fund.
2. a. BCI shall act as the exclusive agent for the Fund for the
continuous public offering of its Shares to commence after
the effectiveness of the Fund's initial registration
statement filed pursuant to the Securities Act of 1933 as
amended (the "1933 Act") and the 1940 Act. BCI shall use
its best efforts to sell the Shares.
b. BCI in its discretion may purchase from the Fund as
principal and may sell Shares to such registered and
qualified retail dealers as it may select. In making
agreements with such dealers, the Fund shall act only as
principal and not as agent for the Fund.
c. BCI is authorized on behalf of the Fund to purchase Shares
presented to it by dealers at the price determined in
accordance with, and in the manner set forth in the
Prospectus.
3. a. The Fund agrees to sell its Shares so long as it has Shares
available for sale except for such times at which the sale
of its Shares has been suspended by order of the Trustees or
order of the Securities and Exchange Commission; and to
deliver certificates (if any) for, or cause the Fund's
transfer and dividend disbursing agent to issue
confirmations evidencing, such Shares registered in such
names and amounts as BCI has requested in writing, as
promptly as practicable after receipt by the Fund of payment
therefor at the net asset value thereof and written request
of BCI therefor.
b. The Fund shall keep BCI fully informed with regard to its
affairs and shall furnish to BCI copies of all information,
financial statements and other papers which BCI may
reasonably request for use in connection with the
distribution of Shares of the Fund, and this shall include
one certified copy, upon request by BCI, of all financial
statements prepared by the Fund and audited by its
independent accountants and such reasonable number of copies
of its most current Prospectusand statement of additional
information (collectively the "Prospectus") and annual and
interim reports as BCI may request and shall cooperate fully
in the efforts of BCI to sell and arrange for the sale of
the Fund's Shares and in the performance of BCI under this
Agreement.
c. The Fund shall take, from time to time, all such steps,
including payment of the related filing fee, as may be
necessary to register the Shares under the 1933 Act and to
make available for sale such number of Shares as BCI may be
expected to sell. The Fund agrees to file from time to time
such amendments, reports and other documents as may be
necessary in order that there may be no untrue statement of
a material fact in a Registration Statement or Prospectus,
or as may be necessary in order that there may be no
omission to state a material fact in the Registration
Statement or Prospectus which omission would make the
statements therein misleading.
d. The Fund shall use its best efforts to qualify and maintain
the qualification of an appropriate number of its Shares for
sale under the securities laws of such states as BCI and the
Fund may approve, and, if necessary or appropriate in
connection therewith, to qualify and maintain the
qualification of the Fund as a broker or dealer in such
states; provided that the Fund shall not be required to
amend its Declaration of Trust or By-laws to comply with the
laws of any state, to maintain an office in any state, to
change the terms of the offering of its Shares in any state
from the terms set forth in its Registration Statement and
Prospectus, to qualify as a foreign corporation in any state
or to consent to service of process in any state other than
with respect to claims arising out of the offering of its
Shares. BCI shall furnish such information and other
material relating to its affairs and activities as may be
required by the Fund in connection with such qualifications.
4. a. The Fund shall bear all costs and expenses of the continuous
offering of its Shares in connection with: (i) fees and
disbursements of its counsel and independent accountants,
(ii) the preparation, filing and printing of any
registration statements and/or prospectuses required by and
under the federal securities laws, (iii) the preparation and
mailing of annual and interim reports, Prospectuses and
proxy materials to shareholders, (iv) the qualifications of
the Shares for sale and of the Fund pursuant to Section 3(d)
hereof and the cost and expenses payable to each such state
for continuing qualification therein and (v) any expenses
assumed by the Fund pursuant to the Plan.
b. BCI shall bear: (i) the costs and expenses of preparing,
printing and distributing any materials not prepared by the
Fund and other materials used by BCI in connection with its
offering of Shares for sale to the public, including the
additional cost of printing copies of the Prospectus and of
annual and interim reports to shareholders, other than
copies thereof required for distribution to existing
shareholders of for filing with any federal securities
authorities, (ii) any expenses of advertising incurred by
BCI in connection with such offering and (iii) the expenses
of registration or qualification of BCI as a dealer or
broker under federal or state laws and the expenses of
continuing such registration or qualification.
5. All orders for the purchase or redemption of any Shares shall be
executed promptly at the then current net asset value per share,
in each case described in the Fund's Prospectus including any
supplements or amendments thereto. The minimum initial and
subsequent purchase orders shall be as set forth in the
Prospectus. All orders are subject to acceptance by the Fund.
6. BCI shall not make any representations concerning the Shares
other than those contained in the Prospectus or in promotional
materials furnished to BCI by the Fund. BCI shall not furnish or
cause to be furnished to any person any information or materials
relating to the Fund except such information or materials as may
be provided to BCI by the Fund.
7. BCI shall not offer or sell Shares except pursuant to the terms
of the Prospectus and in compliance with applicable federal and
state securities laws. In connection with the offer to sell and
sale of Shares, BCI shall deliver or cause to be delivered to
each person to whom any such offer or sale is made, at or prior
to the time of such offer or sale, a copy of the Prospectusand,
upon request, the statement of additional information. BCI shall
request from each customer to whom it sells Shares a taxpayer
identification number certification and shall notify the Fund or
its designee of any failure to obtain such identification number.
The Fund agrees to supply BCI with copies of the Prospectus and
any such other materials and information relating to the Fund in
reasonable quantities upon request.
8. As distributor, the Fund is authorized to pay BCI a distribution
fee equal on an annual basis to 0.25% of the Fund's average daily
net assets. The Fund shall pay the distribution fee to BCI in
connection with its activities or expenses primarily intended to
result in the sale of Shares, including, but not limited to:
a. compensation to registered representatives or other
employees of BCI;
b. compensation to brokerage firms, banks or any other
financial institutions or service providers for the
servicing and administration of shareholder accounts;
c. compensation for providing administrative assistance to the
Fund or its shareholders, including but not limited to: (i)
preparing, printing and distributing promotional and
advertising materials; (ii) preparing, printing and
distributing the Prospectus and reports to other than
current shareholders; (iii) telephone calls and lines; (iv)
interest expenses; and
d. commissions and other fees to broker-dealers or other
persons who have introduced investors to the Fund.
9. If and to the extent the following expenses are considered to be
primarily intended to result in the sale of Shares within the
meaning of Rule 12b-1, they are exempted from the limits set
forth above:
a. costs of the preparation, printing and/or reproducing and
mailing all required reports and notices to shareholders of
the Fund;
b. costs of preparing, printing and/or reproducing and mailing
all proxy statements and proxies, whether or not such proxy
materials include any item relating to or directed toward
the sale of Shares;
c. costs of preparing, printing and/or reproducing and mailing
all Prospectuses;
d. all legal and accounting fees relating to the preparation of
any such report, Prospectusand proxy materials;
e. all fees and expenses relating to the qualification of the
Fund and/or its Shares under the securities or "Blue Sky"
laws of any jurisdiction;
f. all fees under the 1940 Act and the Securities Act of 1933,
including fees in connection with any application for
exemption relating to or directed toward the sale of Shares;
g. all fees and assessments, if any, of the Investment Company
Institute or any successor organization, whether or not its
activities are designed to provide sales assistance;
h. all costs of preparing and mailing confirmations of Shares
sold or redeemed and reports of Share balances; and
i. all costs of responding to telephone or mail inquiries of
shareholders or prospective shareholders.
10. BCI shall report to the Fund in writing, at least quarterly, the
amounts of all expenditures, the identity of the payees and the
purpose for which such expenditures were made for the preceding
fiscal quarter.
11. The procedures relating to all orders and the handling thereof
will be subject to the terms of the Prospectus of the Fund and
the Fund's written instructions to BCI from time to time. No
conditional orders will be accepted. BCI shall transmit or shall
direct the transmission of such orders as are so accepted to the
Fund's transfer and dividend disbursing agent as promptly as
practicable. Purchase orders shall be deemed effective at the
time and in the manner set forth in the Prospectus. BCI agrees
that: (a) BCI shall not effect any transactions (including,
without limitation, any purchases and redemptions) in any Fund
Shares registered in the name of, or beneficially owned by, any
customer unless such customer has granted BCI full right, power
and authority to effect such transactions on his behalf, and (b)
the Fund, the transfer agent and their respective officers,
directors or trustees, agents, employees and affiliates shall not
be liable for, and shall be fully indemnified and held harmless
by BCI from and against, any and all claims, demands, liabilities
and expenses (including, without limitation, reasonable
attorney's fees) which may be incurred by the Fund or any of the
foregoing persons entitled to indemnification from BCI hereunder
arising out of or in connection with the execution of any
transactions in Fund Shares registered in the name of, or
beneficially owned by, any customer in reliance upon any oral or
written instructions believed to be genuine and to have been
given by or on behalf of BCI.
12. The Fund agrees to indemnify, defend and hold BCI, its officers
and directors, and any person who controls BCI within the meaning
of Section 15 of the Securities Act of 1933, as amended, free and
harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which BCI, its officers
and directors, or any such controlling person, may incur under
the Securities Act of 1933, as amended, or under common law or
otherwise, arising out of or based upon (i) any breach of any
representation, warranty or covenant made by the Fund herein,
(ii) any failure by the Fund to perform its obligations as set
forth herein, or (iii) any untrue statement, or alleged untrue
statement, of a material fact contained in any Prospectus, or
arising out of or based upon any omission, or alleged omission,
to state a material fact required to be stated in the Prospectus,
or necessary to make the statements in any Prospectus not
misleading; provided, however, that the Fund's agreement to
indemnify BCI, its officers and directors, and any controlling
person shall not be deemed to cover any claims, demands,
liabilities or expenses arising out of any untrue statement or
alleged untrue statement or omission or alleged omission made in
any Prospectus in reliance upon and in conformity with written
information furnished to the Fund by BCI specifically for use in
the preparation thereof. The Fund's agreement to indemnify BCI,
its officers and directors, and any such controlling person, as
aforesaid, is expressly conditioned upon the Fund's being
notified of any action brought against BCI's officers or
directors, or any such controlling person, such notification to
be given by letter or by telex, telegram or similar means of same
day delivery received by the Fund at its address as specified in
Paragraph 12 of this Agreement within seven (7) days after the
summons or other first legal process shall have been served. The
failure to so notify the Fund of any such action shall not
relieve the Fund from any liability which it may have to the
person against whom such action is brought by reason of any such
breach, failure or untrue, or alleged untrue, statement or
omission, or alleged omission, otherwise than on account of the
Fund's indemnity agreement contained in this Paragraph. The Fund
will be entitled to assume the defense of any suit brought to
enforce any such claim, demand, liability or expense. In the
event that the Fund elects to assume the defense of any such suit
and retain counsel, the defendant or defendants in such suit
shall bear the fees and expenses of any additional counsel
retained by any of them; but in case the Fund does not elect to
assume the defense of any such suit, the Fund will reimburse BCI,
its officers and directors, or controlling persons named as
defendants in such suit, for the fees and expenses of any counsel
retained by BCI or them. The indemnification agreement contained
in this Paragraph shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of
BCI, its officers and directors, or any controlling person, and
shall survive the delivery of any Fund Shares and termination of
this Agreement. This Agreement of indemnity will inure
exclusively to BCI's benefit and to the benefit of any
controlling persons and their successors.
13. BCI agrees to indemnify, defend and hold the Fund and its
officers and directors, and any person who controls the Fund
within the meaning of Section 15 of the Securities Act of 1933,
as amended, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities
and any counsel fees incurred in connection therewith) which the
Fund and its officers and directors, or any such controlling
person, may incur under the Securities Act of 1933, as amended,
or under common law or otherwise, arising out of based upon (i)
any breach of any representation, warranty or covenant made by
BCI herein, (ii) any failure by BCI to perform its obligations as
set forth herein, or (iii) any untrue, or alleged untrue,
statement of a material fact contained in the information
furnished by BCI to the Fund specifically for use in the Fund's
Prospectus, or used in the answers to any of the items of the
Prospectus, or arising out of or based upon any omission, or
alleged omission, to state a material fact in connection with
such information furnished by BCI to the Fund and required to be
stated in such answers or necessary to make such information not
misleading. BCI's agreement to indemnify the Fund and its
officers and directors and any such controlling person, as
aforesaid, is expressly conditioned upon BCI's being notified of
any action brought against any person or entity entitled to
indemnification hereunder, such notification to be given by
letter of by telex , telegram or similar means of same day
delivery received by BCI at its address as specified in Paragraph
12 of the Agreement within seven (7)days after the summons or
other first legal process shall have been served. BCI shall have
the right to control the defense of such action, with counsel of
its own choosing satisfactory to the Fund, if such action is
based solely upon such alleged misstatement or omission on BCI's
part, and in any other event each person or entity entitled to
indemnification hereunder shall have the right to participate in
the defense or preparation of the defense of any such action.
The failure to so notify BCI of any such action shall not relieve
BCI from any liability which it may have to the Fund or its
officers and directors, or to any such controlling person, by
reason or any such breach, failure or untrue, or alleged untrue,
statement or omission, or alleged omission, otherwise than on
account of BCI's indemnity agreement contained in this Paragraph.
The indemnification agreement shall remain operative and in full
force effect regardless of any investigation made by or on behalf
of any person entitled to indemnification pursuant to this
Paragraph and shall survive the delivery of any Fund Shares and
termination of this Agreement. Such agreements of indemnity will
inure exclusively to the benefit of the persons entitled to
indemnification from BCI pursuant to this Agreement and their
respective estates, successors and assigns.
14. All notices required or permitted to be given pursuant to this
Agreement shall be given in writing and delivered by personal
delivery, registered or certified first class mail, or by
telecopy or similar means of same day delivery to Baron Capital,
Inc. at 767 Fifth Avenue, New York, New York 10153 and to the
Fund at 767 Fifth Avenue, New York, New York 10153.
15. This Agreement shall commence on the date first set above. This
Agreement shall continue in effect for a period more than two
years from the date hereof only so long as such continuance is
specifically approved at least annually in conformity with the
requirements of the 1940 Act. This Agreement shall terminate
automatically in the event of its assignment ( as defined by the
1940 Act). In addition, this Agreement may be terminated by
either party at any time, without penalty, on not more than sixty
days' nor less than thirty days' written to the other party.
16. It is understood and expressly stipulated that non of the
Trustees, officers, agents or shareholders of the Fund shall be
personally liable hereunder. The name "Baron Capital Fund" is
the designation of the Trustees for the time being under a
Declaration of Trust 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.
17. This Agreement shall be governed by the laws of the State of New
York.
18. This Agreement constitutes the entire agreement between the
parties hereto and may be assumed only by a writing signed by the
parties hereto. This Agreement may not be assigned by either
party without the prior written consent of the other party.
Dated: New York, New York
1998
Baron Capital Funds Trust
By:
____________________________
Baron Capital, Inc.
By:
___________________________
EXHIBIT 7
CUSTODY AGREEMENT
Agreement made as of this 23rd day of June, 1998, between BARON
CAPITAL FUNDS TRUST, a Delaware business trust organized and existing under
the laws of the State of Delaware, having its principal office and place of
business at 767 Fifth Avenue, New York, New York 10153 (hereinafter called
the "Fund"), and THE BANK OF NEW YORK, a New York corporation authorized to
do a banking business, having its principal office and place of business at
One Wall Street, New York, New York 10286 (hereinafter called the
"Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set
forth, the Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1. "Authorized Persons" shall be deemed to include any person,
whether or not such person is an officer or employee of the Fund, duly
authorized by the Board of Trustees of the Fund to execute any Certificate,
instruction, notice or other instrument on behalf of the Fund and listed in
the Certificate annexed hereto as Appendix A or such other Certificate as
may be received by the Custodian from time to time.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities, its
successor or successors and its nominee or nominees.
3. "Call Option" shall mean an exchange traded option with
respect to Securities other than Stock Index Options, Futures Contracts,
and Futures Contract Options entitling the holder, upon timely exercise and
payment of the exercise price, as specified therein, to purchase from the
writer thereof the specified underlying Securities.
4. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given
to the Custodian which is actually received by the Custodian and signed on
behalf of the Fund by any two Authorized Persons, and the term Certificate
shall also include Instructions.
5. "Clearing Member" shall mean a registered broker-dealer
which is a clearing member under the rules of O.C.C. and a member of a
national securities exchange qualified to act as a custodian for an
investment company, or any broker-dealer reasonably believed by the
Custodian to be such a clearing member.
6. "Collateral Account" shall mean a segregated account so
denominated which is specifically allocated to a Series and pledged to the
Custodian as security for, and in consideration of, the Custodian's
issuance of (a) any Put Option guarantee letter or similar document
described in paragraph 8 of Article V herein, or (b) any receipt described
in Article V or VIII herein.
7. "Composite Currency Unit" shall mean the European Currency
Unit or any other composite unit consisting of the aggregate of specified
amounts of specified Currencies as such unit may be constituted from time
to time.
8. "Covered Call Option" shall mean an exchange traded option
entitling the holder, upon timely exercise and payment of the exercise
price, as specified therein, to purchase from the writer thereof the
specified underlying Securities (excluding Futures Contracts) which are
owned by the writer thereof and subject to appropriate restrictions.
9. "Currency" shall mean money denominated in a lawful currency
of any country or the European Currency Unit.
10. "Depository" shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission, its successor or successors and its nominee or nominees. The
term "Depository" shall further mean and include any other person
authorized to act as a depository under the Investment Company Act of 1940,
its successor or successors and its nominee or nominees, specifically
identified in a certified copy of a resolution of the Fund's Board of
Trustees specifically approving deposits therein by the Custodian.
11. "Financial Futures Contract" shall mean the firm commitment
to buy or sell fixed income securities including, without limitation, U.S.
Treasury Bills, U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank
certificates of deposit, and Eurodollar certificates of deposit, during a
specified month at an agreed upon price.
12. "Futures Contract" shall mean a Financial Futures Contract
and/or Stock Index Futures Contracts.
13. "Futures Contract Option" shall mean an option with respect
to a Futures Contract.
14. "FX Transaction" shall mean any transaction for the purchase
by one party of an agreed amount in one Currency against the sale by it to
the other party of an agreed amount in another Currency.
15. "Instructions" shall mean instructions communications
transmitted by electronic or telecommunications media including S.W.I.F.T.,
computer-to-computer interface, dedicated transmission line, facsimile
transmission signed by an Authorized Person and tested telex.
16. "Margin Account" shall mean a segregated account in the name
of a broker, dealer, futures commission merchant, or a Clearing Member, or
in the name of the Fund for the benefit of a broker, dealer, futures
commission merchant, or Clearing Member, or otherwise, in accordance with
an agreement between the Fund, the Custodian and a broker, dealer, futures
commission merchant or a Clearing Member (a "Margin Account Agreement"),
separate and distinct from the custody account, in which certain Securities
and/or money of the Fund shall be deposited and withdrawn from time to time
in connection with such transactions as the Fund may from time to time
determine. Securities held in the Book-Entry System or the Depository shall
be deemed to have been deposited in, or withdrawn from, a Margin Account
upon the Custodian's effecting an appropriate entry in its books and
records.
17. "Money Market Security" shall be deemed to include, without
limitation, certain Reverse Repurchase Agreements, debt obligations issued
or guaranteed as to interest and principal by the government of the United
States or agencies or instrumentalities thereof, any tax, bond or revenue
anticipation note issued by any state or municipal government or public
authority, commercial paper, certificates of deposit and bankers'
acceptances, repurchase agreements with respect to the same and bank time
deposits, where the purchase and sale of such securities normally requires
settlement in federal funds on the same day as such purchase or sale.
18. "O.C.C." shall mean the Options Clearing Corporation, a
clearing agency registered under Section 17A of the Securities Exchange Act
of 1934, its successor or successors, and its nominee or nominees.
19. "Option" shall mean a Call Option, Covered Call Option,
Stock Index Option and/or a Put Option.
20. "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from an Authorized Person or from a person
reasonably believed by the Custodian to be an Authorized Person.
21. "Put Option" shall mean an exchange traded option with
respect to Securities other than Stock Index Options, Futures Contracts,
and Futures Contract Options entitling the holder, upon timely exercise and
tender of the specified underlying Securities, to sell such Securities to
the writer thereof for the exercise price.
22. "Reverse Repurchase Agreement" shall mean an agreement
pursuant to which the Fund sells Securities and agrees to repurchase such
Securities at a described or specified date and price.
23. "Security" shall be deemed to include, without limitation,
Money Market Securities, Call Options, Put Options, Stock Index Options,
Stock Index Futures Contracts, Stock Index Futures Contract Options,
Financial Futures Contracts, Financial Futures Contract Options, Reverse
Repurchase Agreements, common stocks and other securities having
characteristics similar to common stocks, preferred stocks, debt
obligations issued by state or municipal governments and by public
authorities, (including, without limitation, general obligation bonds,
revenue bonds, industrial bonds and industrial development bonds), bonds,
debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive,
purchase, sell or subscribe for the same, or evidencing or representing any
other rights or interest therein, or any property or assets.
24. "Senior Security Account" shall mean an account maintained
and specifically allocated to a Series under the terms of this Agreement as
a segregated account, by recordation or otherwise, within the custody
account in which certain Securities and/or other assets of the Fund
specifically allocated to such Series shall be deposited and withdrawn from
time to time in accordance with Certificates received by the Custodian in
connection with such transactions as the Fund may from time to time
determine.
25. "Series" shall mean the various portfolios, if any, of the
Fund listed on Appendix B hereto as amended from time to time.
26. "Shares" shall mean the shares of beneficial interest of the
Fund, each of which is, in the case of a Fund having Series, allocated to a
particular Series.
27. "Stock Index Futures Contract" shall mean a bilateral
agreement pursuant to which the parties agree to take or make delivery of
an amount of cash equal to a specified dollar amount times the difference
between the value of a particular stock index at the close of the last
business day of the contract and the price at which the futures contract is
originally struck.
28. "Stock Index Option" shall mean an exchange traded option
entitling the holder, upon timely exercise, to receive an amount of cash
determined by reference to the difference between the exercise price and
the value of the index on the date of exercise.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as
custodian of the Securities and money at any time owned by the Fund during
the period of this Agreement.
2. The Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article
and in Article VIII, the Fund will deliver or cause to be delivered to the
Custodian all Securities and all money owned by it, at any time during the
period of this Agreement, and shall specify with respect to such Securities
and money the Series to which the same are specifically allocated. The
Custodian shall segregate, keep and maintain the assets of the Series
separate and apart. The Custodian will not be responsible for any
Securities and money not actually received by it. The Custodian will be
entitled to reverse any credits made on the Fund's behalf where such
credits have been previously made and money is not finally collected. The
Fund shall deliver to the Custodian a certified resolution of the Board of
Trustees of the Fund, substantially in the form of Exhibit A hereto,
approving, authorizing and instructing the Custodian on a continuous and
on-going basis to deposit in the Book-Entry System all Securities eligible
for deposit therein, regardless of the Series to which the same are
specifically allocated and to utilize the Book-Entry System to the extent
possible in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of
Securities, loans of Securities and deliveries and returns of Securities
collateral. Prior to a deposit of Securities specifically allocated to a
Series in the Depository, the Fund shall deliver to the Custodian a
certified resolution of the Board of Trustees of the Fund, substantially in
the form of Exhibit B hereto, approving, authorizing and instructing the
Custodian on a continuous and ongoing basis until instructed to the
contrary by a Certificate actually received by the Custodian to deposit in
the Depository all Securities specifically allocated to such Series
eligible for deposit therein, and to utilize the Depository to the extent
possible with respect to such Securities in connection with its performance
hereunder, including, without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities, and deliveries and
returns of Securities collateral. Securities and money deposited in either
the Book-Entry System or the Depository will be represented in accounts
which include only assets held by the Custodian for customers, including,
but not limited to, accounts in which the Custodian acts in a fiduciary or
representative capacity and will be specifically allocated on the
Custodian's books to the separate account for the applicable Series. Prior
to the Custodian's accepting, utilizing and acting with respect to Clearing
Member confirmations for Options and transactions in Options for a Series
as provided in this Agreement, the Custodian shall have received a
certified resolution of the Fund's Board of Trustees, substantially in the
form of Exhibit C hereto, approving, authorizing and instructing the
Custodian on a continuous and on-going basis, until instructed to the
contrary by a Certificate actually received by the Custodian, to accept,
utilize and act in accordance with such confirmations as provided in this
Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate
accounts, in the name of each Series, and shall credit to the separate
account for each Series all money received by it for the account of the
Fund with respect to such Series. Money credited to a separate account for
a Series shall be disbursed by the Custodian only:
(a) as hereinafter provided;
(b) pursuant to Certificates setting forth the name and
address of the person to whom the payment is to be made, the Series account
from which payment is to be made and the purpose for which payment is to be
made; or
(c) in payment of the fees and in reimbursement of the
expenses and liabilities of the Custodian attributable to such Series.
3. Promptly after the close of business on each day, the
Custodian shall furnish the Fund with confirmations and a summary, on a per
Series basis, of all transfers to or from the account of the Fund for a
Series, either hereunder or with any co-custodian or sub-custodian
appointed in accordance with this Agreement during said day. Where
Securities are transferred to the account of the Fund for a Series, the
Custodian shall also by book-entry or otherwise identify as belonging to
such Series a quantity of Securities in a fungible bulk of Securities
registered in the name of the Custodian (or its nominee) or shown on the
Custodian's account on the books of the Book-Entry System or the
Depository. At least monthly and from time to time, the Custodian shall
furnish the Fund with a detailed statement, on a per Series basis, of the
Securities and money held by the Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article
and in Article VIII, all Securities held by the Custodian hereunder, which
are issued or issuable only in bearer form, except such Securities as are
held in the Book-Entry System, shall be held by the Custodian in that form;
all other Securities held hereunder may be registered in the name of the
Fund, in the name of any duly appointed registered nominee of the Custodian
as the Custodian may from time to time determine, or in the name of the
Book-Entry System or the Depository or their successor or successors, or
their nominee or nominees. The Fund agrees to furnish to the Custodian
appropriate instruments to enable the Custodian to hold or deliver in
proper form for transfer, or to register in the name of its registered
nominee or in the name of the Book-Entry System or the Depository any
Securities which it may hold hereunder and which may from time to time be
registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held in the
Book-Entry System or in the Depository in a separate account in the name of
such Series physically segregated at all times from those of any other
person or persons.
5. Except as otherwise provided in this Agreement and unless
otherwise instructed to the contrary by a Certificate, the Custodian by
itself, or through the use of the Book-Entry System or the Depository with
respect to Securities held hereunder and therein deposited, shall with
respect to all Securities held for the Fund hereunder in accordance with
preceding paragraph 4:
(a) collect all income, dividends and distributions due or
payable;
(b) give notice to the Fund and present payment and collect
the amount payable upon such Securities which are called, but only if
either (i) the Custodian receives a written notice of such call, or (ii)
notice of such call appears in one or more of the publications listed in
Appendix C annexed hereto, which may be amended at any time by the
Custodian without the prior notification or consent of the Fund;
(c) present for payment and collect the amount payable upon
all Securities which mature;
(d) surrender Securities in temporary form for definitive
Securities;
(e) execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect;
(f) hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the account of
a Series, all rights and similar securities issued with respect to any
Securities held by the Custodian for such Series hereunder; and
(g) deliver to the Fund all notices, proxies, proxy
soliciting materials, consents and other written information (including,
without limitation, notices of tender offers and exchange offers, pendency
of calls, maturities of Securities and expiration of rights) relating to
Securities held pursuant to this Agreement which are actually received by
the Custodian, such proxies and other similar materials to be executed by
the registered owner (if Securities are registered otherwise than in the
name of the Fund), but without indicating the manner in which proxies or
consents are to be voted.
6. Upon receipt of a Certificate and not otherwise, the
Custodian, directly or through the use of the Book-Entry System or the
Depository, shall:
(a) execute and deliver to such persons as may be
designated in such Certificate proxies, consents, authorizations, and any
other instruments whereby the authority of the Fund as owner of any
Securities held by the Custodian hereunder for the Series specified in such
Certificate may be exercised;
(b) deliver any Securities held by the Custodian hereunder
for the Series specified in such Certificate in exchange for other
Securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or recapitalization of
any corporation, or the exercise of any conversion privilege and receive
and hold hereunder specifically allocated to such Series any cash or other
Securities received in exchange;
(c) deliver any Securities held by the Custodian hereunder
for the Series specified in such Certificate to any protective committee,
reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization or
sale of assets of any corporation, and receive and hold hereunder
specifically allocated to such Series such certificates of deposit, interim
receipts or other instruments or documents as may be issued to it to
evidence such delivery;
(d) make such transfers or exchanges of the assets of the
Series specified in such Certificate, and take such other steps as shall be
stated in such Certificate to be for the purpose of effectuating any duly
authorized plan of liquidation, reorganization, merger, consolidation or
recapitalization of the Fund; and
(e) present for payment and collect the amount payable upon
Securities not described in preceding paragraph 5(b) of this Article which
may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein,
the Custodian shall not be required to obtain possession of any instrument
or certificate representing any Futures Contract, any Option, or any
Futures Contract Option until after it shall have determined, or shall have
received a Certificate from the Fund stating, that any such instruments or
certificates are available. The Fund shall deliver to the Custodian such a
Certificate no later than the business day preceding the availability of
any such instrument or certificate. Prior to such availability, the
Custodian shall comply with Section 17(f) of the Investment Company Act of
1940, as amended, in connection with the purchase, sale, settlement,
closing-out or writing of Futures Contracts, Options, or Futures Contract
Options by making payments or deliveries specified in Certificates received
by the Custodian in connection with any such purchase, sale, writing,
settlement or closing-out upon its receipt from a broker, dealer, or
futures commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by brokers,
dealers, or futures commission merchants with respect to such Futures
Contracts, Options, or Futures Contract Options, as the case may be,
confirming that such Security is held by such broker, dealer or futures
commission merchant, in book-entry form or otherwise, in the name of the
Custodian (or any nominee of the Custodian) as custodian for the Fund,
provided, however, that notwithstanding the foregoing, payments to or
deliveries from the Margin Account, and payments with respect to Securities
to which a Margin Account relates, shall be made in accordance with the
terms and conditions of the Margin Account Agreement. Whenever any such
instruments or certificates are available, the Custodian shall,
notwithstanding any provision in this Agreement to the contrary, make
payment for any Futures Contract, Option, or Futures Contract Option for
which such instruments or such certificates are available only against the
delivery to the Custodian of such instrument or such certificate, and
deliver any Futures Contract, Option or Futures Contract Option for which
such instruments or such certificates are available only against receipt by
the Custodian of payment therefor. Any such instrument or certificate
delivered to the Custodian shall be held by the Custodian hereunder in
accordance with, and subject to, the provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund,
other than a purchase of an Option, a Futures Contract, or a Futures
Contract Option, the Fund shall deliver to the Custodian (i) with respect
to each purchase of Securities which are not Money Market Securities, a
Certificate, and (ii) with respect to each purchase of Money Market
Securities, a Certificate or Oral Instructions, specifying with respect to
each such purchase: (a) the Series to which such Securities are to be
specifically allocated; (b) the name of the issuer and the title of the
Securities; (c) the number of shares or the principal amount purchased and
accrued interest, if any; (d) the date of purchase and settlement; (e) the
purchase price per unit; (f) the total amount payable upon such purchase;
(g) the name of the person from whom or the broker through whom the
purchase was made, and the name of the clearing broker, if any; and (h) the
name of the broker to whom payment is to be made. The Custodian shall, upon
receipt of Securities purchased by or for the Fund, pay to the broker
specified in the Certificate out of the money held for the account of such
Series the total amount payable upon such purchase, provided that the same
conforms to the total amount payable as set forth in such Certificate or
Oral Instructions.
2. Promptly after each sale of Securities by the Fund, other
than a sale of any Option, Futures Contract, Futures Contract Option, or
any Reverse Repurchase Agreement, the Fund shall deliver to the Custodian
(i) with respect to each sale of Securities which are not Money Market
Securities, a Certificate, and (ii) with respect to each sale of Money
Market Securities, a Certificate or Oral Instructions, specifying with
respect to each such sale: (a) the Series to which such Securities were
specifically allocated; (b) the name of the issuer and the title of the
Security; (c) the number of shares or principal amount sold, and accrued
interest, if any; (d) the date of sale; (e) the sale price per unit; (f)
the total amount payable to the Fund upon such sale; (g) the name of the
broker through whom or the person to whom the sale was made, and the name
of the clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. The Custodian shall deliver the Securities
specifically allocated to such Series to the broker specified in the
Certificate against payment of the total amount payable to the Fund upon
such sale, provided that the same conforms to the total amount payable as
set forth in such Certificate or Oral Instructions.
ARTICLE V
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the
Fund shall deliver to the Custodian a Certificate specifying with respect
to each Option purchased: (a) the Series to which such Option is
specifically allocated; (b) the type of Option (put or call); (c) the name
of the issuer and the title and number of shares subject to such Option or,
in the case of a Stock Index Option, the stock index to which such Option
relates and the number of Stock Index Options purchased; (d) the expiration
date; (e) the exercise price; (f) the dates of purchase and settlement; (g)
the total amount payable by the Fund in connection with such purchase; (h)
the name of the Clearing Member through whom such Option was purchased; and
(i) the name of the broker to whom payment is to be made. The Custodian
shall pay, upon receipt of a Clearing Member's statement confirming the
purchase of such Option held by such Clearing Member for the account of the
Custodian (or any duly appointed and registered nominee of the Custodian)
as custodian for the Fund, out of money held for the account of the Series
to which such Option is to be specifically allocated, the total amount
payable upon such purchase to the Clearing Member through whom the purchase
was made, provided that the same conforms to the total amount payable as
set forth in such Certificate.
2. Promptly after the sale of any Option purchased by the Fund
pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian a
Certificate specifying with respect to each such sale: (a) the Series to
which such Option was specifically allocated; (b) the type of Option (put
or call); (c) the name of the issuer and the title and number of shares
subject to such Option or, in the case of a Stock Index Option, the stock
index to which such Option relates and the number of Stock Index Options
sold; (d) the date of sale; (e) the sale price; (f) the date of settlement;
(g) the total amount payable to the Fund upon such sale; and (h) the name
of the Clearing Member through whom the sale was made. The Custodian shall
consent to the delivery of the Option sold by the Clearing Member which
previously supplied the confirmation described in preceding paragraph 1 of
this Article with respect to such Option against payment to the Custodian
of the total amount payable to the Fund, provided that the same conforms to
the total amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such Call
Option: (a) the Series to which such Call Option was specifically
allocated; (b) the name of the issuer and the title and number of shares
subject to the Call Option; (c) the expiration date; (d) the date of
exercise and settlement; (e) the exercise price per share; (f) the total
amount to be paid by the Fund upon such exercise; and (g) the name of the
Clearing Member through whom such Call Option was exercised. The Custodian
shall, upon receipt of the Securities underlying the Call Option which was
exercised, pay out of the money held for the account of the Series to which
such Call Option was specifically allocated the total amount payable to the
Clearing Member through whom the Call Option was exercised, provided that
the same conforms to the total amount payable as set forth in such
Certificate.
4. Promptly after the exercise by the Fund of any Put Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such Put
Option: (a) the Series to which such Put Option was specifically allocated;
(b) the name of the issuer and the title and number of shares subject to
the Put Option; (c) the expiration date; (d) the date of exercise and
settlement; (e) the exercise price per share; (f) the total amount to be
paid to the Fund upon such exercise; and (g) the name of the Clearing
Member through whom such Put Option was exercised. The Custodian shall,
upon receipt of the amount payable upon the exercise of the Put Option,
deliver or direct the Depository to deliver the Securities specifically
allocated to such Series, provided the same conforms to the amount payable
to the Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock Index
Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such
Stock Index Option: (a) the Series to which such Stock Index Option was
specifically allocated; (b) the type of Stock Index Option (put or call);
(c) the number of Options being exercised; (d) the stock index to which
such Option relates; (e) the expiration date; (f) the exercise price; (g)
the total amount to be received by the Fund in connection with such
exercise; and (h) the Clearing Member from whom such payment is to be
received.
6. Whenever the Fund writes a Covered Call Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with
respect to such Covered Call Option: (a) the Series for which such Covered
Call Option was written; (b) the name of the issuer and the title and
number of shares for which the Covered Call Option was written and which
underlie the same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; (f) the date such Covered Call Option
was written; and (g) the name of the Clearing Member through whom the
premium is to be received. The Custodian shall deliver or cause to be
delivered, in exchange for receipt of the premium specified in the
Certificate with respect to such Covered Call Option, such receipts as are
required in accordance with the customs prevailing among Clearing Members
dealing in Covered Call Options and shall impose, or direct the Depository
to impose, upon the underlying Securities specified in the Certificate
specifically allocated to such Series such restrictions as may be required
by such receipts. Notwithstanding the foregoing, the Custodian has the
right, upon prior written notification to the Fund, at any time to refuse
to issue any receipts for Securities in the possession of the Custodian and
not deposited with the Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and
described in the preceding paragraph of this Article is exercised, the Fund
shall promptly deliver to the Custodian a Certificate instructing the
Custodian to deliver, or to direct the Depository to deliver, the
Securities subject to such Covered Call Option and specifying: (a) the
Series for which such Covered Call Option was written; (b) the name of the
issuer and the title and number of shares subject to the Covered Call
Option; (c) the Clearing Member to whom the underlying Securities are to be
delivered; and (d) the total amount payable to the Fund upon such delivery.
Upon the return and/or cancellation of any receipts delivered pursuant to
paragraph 6 of this Article, the Custodian shall deliver, or direct the
Depository to deliver, the underlying Securities as specified in the
Certificate against payment of the amount to be received as set forth in
such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to
such Put Option: (a) the Series for which such Put Option was written; (b)
the name of the issuer and the title and number of shares for which the Put
Option is written and which underlie the same; (c) the expiration date; (d)
the exercise price; (e) the premium to be received by the Fund; (f) the
date such Put Option is written; (g) the name of the Clearing Member
through whom the premium is to be received and to whom a Put Option
guarantee letter is to be delivered; (h) the amount of cash, and/or the
amount and kind of Securities, if any, specifically allocated to such
Series to be deposited in the Senior Security Account for such Series; and
(i) the amount of cash and/or the amount and kind of Securities
specifically allocated to such Series to be deposited into the Collateral
Account for such Series. The Custodian shall, after making the deposits
into the Collateral Account specified in the Certificate, issue a Put
Option guarantee letter substantially in the form utilized by the Custodian
on the date hereof, and deliver the same to the Clearing Member specified
in the Certificate against receipt of the premium specified in said
Certificate. Notwithstanding the foregoing, the Custodian shall be under no
obligation to issue any Put Option guarantee letter or similar document if
it is unable to make any of the representations contained therein.
9. Whenever a Put Option written by the Fund and described in
the preceding paragraph is exercised, the Fund shall promptly deliver to
the Custodian a Certificate specifying: (a) the Series to which such Put
Option was written; (b) the name of the issuer and title and number of
shares subject to the Put Option; (c) the Clearing Member from whom the
underlying Securities are to be received; (d) the total amount payable by
the Fund upon such delivery; (e) the amount of cash and/or the amount and
kind of Securities specifically allocated to such Series to be withdrawn
from the Collateral Account for such Series and (f) the amount of cash
and/or the amount and kind of Securities, specifically allocated to such
Series, if any, to be withdrawn from the Senior Security Account. Upon the
return and/or cancellation of any Put Option guarantee letter or similar
document issued by the Custodian in connection with such Put Option, the
Custodian shall pay out of the money held for the account of the Series to
which such Put Option was specifically allocated the total amount payable
to the Clearing Member specified in the Certificate as set forth in such
Certificate against delivery of such Securities, and shall make the
withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with
respect to such Stock Index Option: (a) the Series for which such Stock
Index Option was written; (b) whether such Stock Index Option is a put or a
call; (c) the number of options written; (d) the stock index to which such
Option relates; (e) the expiration date; (f) the exercise price; (g) the
Clearing Member through whom such Option was written; (h) the premium to be
received by the Fund; (i) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be deposited
in the Senior Security Account for such Series; (j) the amount of cash
and/or the amount and kind of Securities, if any, specifically allocated to
such Series to be deposited in the Collateral Account for such Series; and
(k) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in a Margin Account,
and the name in which such account is to be or has been established. The
Custodian shall, upon receipt of the premium specified in the Certificate,
make the deposits, if any, into the Senior Security Account specified in
the Certificate, and either (1) deliver such receipts, if any, which the
Custodian has specifically agreed to issue, which are in accordance with
the customs prevailing among Clearing Members in Stock Index Options and
make the deposits into the Collateral Account specified in the Certificate,
or (2) make the deposits into the Margin Account specified in the
Certificate.
11. Whenever a Stock Index Option written by the Fund and
described in the preceding paragraph of this Article is exercised, the Fund
shall promptly deliver to the Custodian a Certificate specifying with
respect to such Stock Index Option: (a) the Series for which such Stock
Index Option was written; (b) such information as may be necessary to
identify the Stock Index Option being exercised; (c) the Clearing Member
through whom such Stock Index Option is being exercised; (d) the total
amount payable upon such exercise, and whether such amount is to be paid by
or to the Fund; (e) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Margin Account; and (f) the
amount of cash and/or amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account for such Series; and the amount
of cash and/or the amount and kind of Securities, if any, to be withdrawn
from the Collateral Account for such Series. Upon the return and/or
cancellation of the receipt, if any, delivered pursuant to the preceding
paragraph of this Article, the Custodian shall pay out of the money held
for the account of the Series to which such Stock Index Option was
specifically allocated to the Clearing Member specified in the Certificate
the total amount payable, if any, as specified therein.
12. Whenever the Fund purchases any Option identical to a
previously written Option described in paragraphs, 6, 8 or 10 of this
Article in a transaction expressly designated as a "Closing Purchase
Transaction" in order to liquidate its position as a writer of an Option,
the Fund shall promptly deliver to the Custodian a Certificate specifying
with respect to the Option being purchased: (a) that the transaction is a
Closing Purchase Transaction; (b) the Series for which the Option was
written; (c) the name of the issuer and the title and number of shares
subject to the Option, or, in the case of a Stock Index Option, the stock
index to which such Option relates and the number of Options held; (d) the
exercise price; (e) the premium to be paid by the Fund; (f) the expiration
date; (g) the type of Option (put or call); (h) the date of such purchase;
(i) the name of the Clearing Member to whom the premium is to be paid; and
(j) the amount of cash and/or the amount and kind of Securities, if any, to
be withdrawn from the Collateral Account, a specified Margin Account, or
the Senior Security Account for such Series. Upon the Custodian's payment
of the premium and the return and/or cancellation of any receipt issued
pursuant to paragraphs 6, 8 or 10 of this Article with respect to the
Option being liquidated through the Closing Purchase Transaction, the
Custodian shall remove, or direct the Depository to remove, the previously
imposed restrictions on the Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing
Purchase Transaction with respect to any Option purchased or written by the
Fund and described in this Article, the Custodian shall delete such Option
from the statements delivered to the Fund pursuant to paragraph 3 of
Article III herein, and upon the return and/or cancellation of any receipts
issued by the Custodian, shall make such withdrawals from the Collateral
Account, and the Margin Account and/or the Senior Security Account as may
be specified in a Certificate received in connection with such expiration,
exercise, or consummation.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the
Fund shall deliver to the Custodian a Certificate specifying with respect
to such Futures Contract, (or with respect to any number of identical
Futures Contract(s)): (a) the Series for which the Futures Contract is
being entered; (b) the category of Futures Contract (the name of the
underlying stock index or financial instrument); (c) the number of
identical Futures Contracts entered into; (d) the delivery or settlement
date of the Futures Contract(s); (e) the date the Futures Contract(s) was
(were) entered into and the maturity date; (f) whether the Fund is buying
(going long) or selling (going short) on such Futures Contract(s); (g) the
amount of cash and/or the amount and kind of Securities, if any, to be
deposited in the Senior Security Account for such Series; (h) the name of
the broker, dealer, or futures commission merchant through whom the Futures
Contract was entered into; and (i) the amount of fee or commission, if any,
to be paid and the name of the broker, dealer, or futures commission
merchant to whom such amount is to be paid. The Custodian shall make the
deposits, if any, to the Margin Account in accordance with the terms and
conditions of the Margin Account Agreement. The Custodian shall make
payment out of the money specifically allocated to such Series of the fee
or commission, if any, specified in the Certificate and deposit in the
Senior Security Account for such Series the amount of cash and/or the
amount and kind of Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment
required to be made by the Fund to a broker, dealer, or futures commission
merchant with respect to an outstanding Futures Contract, shall be made by
the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
(b) Any variation margin payment or similar payment from a
broker, dealer, or futures commission merchant to the Fund with respect to
an outstanding Futures Contract, shall be received and dealt with by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder
is retained by the Fund until delivery or settlement is made on such
Futures Contract, the Fund shall deliver to the Custodian a Certificate
specifying: (a) the Futures Contract and the Series to which the same
relates; (b) with respect to a Stock Index Futures Contract, the total cash
settlement amount to be paid or received, and with respect to a Financial
Futures Contract, the Securities and/or amount of cash to be delivered or
received; (c) the broker, dealer, or futures commission merchant to or from
whom payment or delivery is to be made or received; and (d) the amount of
cash and/or Securities to be withdrawn from the Senior Security Account for
such Series. The Custodian shall make the payment or delivery specified in
the Certificate, and delete such Futures Contract from the statements
delivered to the Fund pursuant to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to
offset a Futures Contract held by the Custodian hereunder, the Fund shall
deliver to the Custodian a Certificate specifying: (a) the items of
information required in a Certificate described in paragraph 1 of this
Article, and (b) the Futures Contract being offset. The Custodian shall
make payment out of the money specifically allocated to such Series of the
fee or commission, if any, specified in the Certificate and delete the
Futures Contract being offset from the statements delivered to the Fund
pursuant to paragraph 3 of Article III herein, and make such withdrawals
from the Senior Security Account for such Series as may be specified in
such Certificate. The withdrawals, if any, to be made from the Margin
Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
5. Notwithstanding any other provision in this Agreement to the
contrary, the Custodian shall deliver cash and Securities to a futures
commission merchant upon receipt of a Certificate from the Fund specifying:
(a) the name of the futures commission merchant; (b) the specific cash and
Securities to be delivered; (c) the date of such delivery; and (d) the date
of the agreement between the Fund and such futures commission merchant
entered pursuant to Rule 17f-6 under the Investment Company Act 1940, as
amended. Each delivery of such a Certificate by the Fund shall constitute
(x) a representation and warranty by the Fund that the Rule 17f-6 agreement
has been duly authorized, executed and delivered by the Fund and the
futures commission merchant and complies with Rule 17f-6, and (y) an
agreement by the Fund that the Custodian shall not be liable for the acts
or omissions of any such futures commission merchant.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option
by the Fund, the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the Series to
which such Option is specifically allocated; (b) the type of Futures
Contract Option (put or call); (c) the type of Futures Contract and such
other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option purchased; (d) the expiration date;
(e) the exercise price; (f) the dates of purchase and settlement; (g) the
amount of premium to be paid by the Fund upon such purchase; (h) the name
of the broker or futures commission merchant through whom such option was
purchased; and (i) the name of the broker, or futures commission merchant,
to whom payment is to be made. The Custodian shall pay out of the money
specifically allocated to such Series, the total amount to be paid upon
such purchase to the broker or futures commissions merchant through whom
the purchase was made, provided that the same conforms to the amount set
forth in such Certificate.
2. Promptly after the sale of any Futures Contract Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to
each such sale: (a) Series to which such Futures Contract Option was
specifically allocated; (b) the type of Futures Contract Option (put or
call); (c) the type of Futures Contract and such other information as may
be necessary to identify the Futures Contract underlying the Futures
Contract Option; (d) the date of sale; (e) the sale price; (f) the date of
settlement; (g) the total amount payable to the Fund upon such sale; and
(h) the name of the broker or futures commission merchant through whom the
sale was made. The Custodian shall consent to the cancellation of the
Futures Contract Option being closed against payment to the Custodian of
the total amount payable to the Fund, provided the same conforms to the
total amount payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund
pursuant to paragraph 1 is exercised by the Fund, the Fund shall promptly
deliver to the Custodian a Certificate specifying: (a) the Series to which
such Futures Contract Option was specifically allocated; (b) the particular
Futures Contract Option (put or call) being exercised; (c) the type of
Futures Contract underlying the Futures Contract Option; (d) the date of
exercise; (e) the name of the broker or futures commission merchant through
whom the Futures Contract Option is exercised; (f) the net total amount, if
any, payable by the Fund; (g) the amount, if any, to be received by the
Fund; and (h) the amount of cash and/or the amount and kind of Securities
to be deposited in the Senior Security Account for such Series. The
Custodian shall make, out of the money and Securities specifically
allocated to such Series, the payments, if any, and the deposits, if any,
into the Senior Security Account as specified in the Certificate. The
deposits, if any, to be made to the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with
respect to such Futures Contract Option: (a) the Series for which such
Futures Contract Option was written; (b) the type of Futures Contract
Option (put or call); (c) the type of Futures Contract and such other
information as may be necessary to identify the Futures Contract underlying
the Futures Contract Option; (d) the expiration date; (e) the exercise
price; (f) the premium to be received by the Fund; (g) the name of the
broker or futures commission merchant through whom the premium is to be
received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the money and Securities specifically allocated to
such Series the deposits into the Senior Security Account, if any, as
specified in the Certificate. The deposits, if any, to be made to the
Margin Account shall be made by the Custodian in accordance with the terms
and conditions of the Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which
is a call is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Futures Contract
Option was specifically allocated; (b) the particular Futures Contract
Option exercised; (c) the type of Futures Contract underlying the Futures
Contract Option; (d) the name of the broker or futures commission merchant
through whom such Futures Contract Option was exercised; (e) the net total
amount, if any, payable to the Fund upon such exercise; (f) the net total
amount, if any, payable by the Fund upon such exercise; and (g) the amount
of cash and/or the amount and kind of Securities to be deposited in the
Senior Security Account for such Series. The Custodian shall, upon its
receipt of the net total amount payable to the Fund, if any, specified in
such Certificate make the payments, if any, and the deposits, if any, into
the Senior Security Account as specified in the Certificate. The deposits,
if any, to be made to the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written by the
Fund and which is a put is exercised, the Fund shall promptly deliver to
the Custodian a Certificate specifying: (a) the Series to which such Option
was specifically allocated; (b) the particular Futures Contract Option
exercised; (c) the type of Futures Contract underlying such Futures
Contract Option; (d) the name of the broker or futures commission merchant
through whom such Futures Contract Option is exercised; (e) the net total
amount, if any, payable to the Fund upon such exercise; (f) the net total
amount, if any, payable by the Fund upon such exercise; and (g) the amount
and kind of Securities and/or cash to be withdrawn from or deposited in,
the Senior Security Account for such Series, if any. The Custodian shall,
upon its receipt of the net total amount payable to the Fund, if any,
specified in the Certificate, make out of the money and Securities
specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits to and/or withdrawals from the Margin Account, if
any, shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract Option
identical to a previously written Futures Contract Option described in this
Article in order to liquidate its position as a writer of such Futures
Contract Option, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to the Futures Contract Option being
purchased: (a) the Series to which such Option is specifically allocated;
(b) that the transaction is a closing transaction; (c) the type of Futures
Contract and such other information as may be necessary to identify the
Futures Contract underlying the Futures Option Contract; (d) the exercise
price; (e) the premium to be paid by the Fund; (f) the expiration date; (g)
the name of the broker or futures commission merchant to whom the premium
is to be paid; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Senior Security Account for
such Series. The Custodian shall effect the withdrawals from the Senior
Security Account specified in the Certificate. The withdrawals, if any, to
be made from the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or
purchased by the Fund and described in this Article, the Custodian shall
(a) delete such Futures Contract Option from the statements delivered to
the Fund pursuant to paragraph 3 of Article III herein and, (b) make such
withdrawals from and/or in the case of an exercise such deposits into the
Senior Security Account as may be specified in a Certificate. The deposits
to and/or withdrawals from the Margin Account, if any, shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
9. Futures Contracts acquired by the Fund through the exercise
of a Futures Contract Option described in this Article shall be subject to
Article VI hereof.
10. Notwithstanding any other provision in this Agreement to the
contrary, the Custodian shall deliver cash and Securities to a futures
commission merchant upon receipt of a Certificate from the Fund specifying:
(a) the name of the futures commission merchant; (b) the specific cash and
Securities to be delivered; (c) the date of such delivery; and (d) the date
of the agreement between the Fund and such futures commission merchant
entered pursuant to Rule 17f-6 under the Investment Company Act 1940, as
amended. Each delivery of such a Certificate by the Fund shall constitute
(x) a representation and warranty by the Fund that the Rule 17f-6 agreement
has been duly authorized, executed and delivered by the Fund and the
futures commission merchant and complies with Rule 17f-6, and (y) an
agreement by the Fund that the Custodian shall not be liable for the acts
or omissions of any such futures commission merchant.
ARTICLE VIII
SHORT SALES
1. Promptly after any short sales by any Series of the Fund,
the Fund shall promptly deliver to the Custodian a Certificate specifying:
(a) the Series for which such short sale was made; (b) the name of the
issuer and the title of the Security; (c) the number of shares or principal
amount sold, and accrued interest or dividends, if any; (d) the dates of
the sale and settlement; (e) the sale price per unit; (f) the total amount
credited to the Fund upon such sale, if any, (g) the amount of cash and/or
the amount and kind of Securities, if any, which are to be deposited in a
Margin Account and the name in which such Margin Account has been or is to
be established; (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in a Senior Security Account, and (i)
the name of the broker through whom such short sale was made. The Custodian
shall upon its receipt of a statement from such broker confirming such sale
and that the total amount credited to the Fund upon such sale, if any, as
specified in the Certificate is held by such broker for the account of the
Custodian (or any nominee of the Custodian) as custodian of the Fund, issue
a receipt or make the deposits into the Margin Account and the Senior
Security Account specified in the Certificate.
2. In connection with the closing-out of any short sale, the
Fund shall promptly deliver to the Custodian a Certificate specifying with
respect to each such closing-out: (a) the Series for which such transaction
is being made; (b) the name of the issuer and the title of the Security;
(c) the number of shares or the principal amount, and accrued interest or
dividends, if any, required to effect such closing-out to be delivered to
the broker; (d) the dates of closing-out and settlement; (e) the purchase
price per unit; (f) the net total amount payable to the Fund upon such
closing-out; (g) the net total amount payable to the broker upon such
closing-out; (h) the amount of cash and the amount and kind of Securities
to be withdrawn, if any, from the Margin Account; (i) the amount of cash
and/or the amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account; and (j) the name of the broker through whom the
Fund is effecting such closing-out. The Custodian shall, upon receipt of
the net total amount payable to the Fund upon such closing-out, and the
return and/or cancellation of the receipts, if any, issued by the Custodian
with respect to the short sale being closed-out, pay out of the money held
for the account of the Fund to the broker the net total amount payable to
the broker, and make the withdrawals from the Margin Account and the Senior
Security Account, as the same are specified in the Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase
Agreement with respect to Securities and money held by the Custodian
hereunder, the Fund shall deliver to the Custodian a Certificate, or in the
event such Reverse Repurchase Agreement is a Money Market Security, a
Certificate or Oral Instructions specifying: (a) the Series for which the
Reverse Repurchase Agreement is entered; (b) the total amount payable to
the Fund in connection with such Reverse Repurchase Agreement and
specifically allocated to such Series; (c) the broker or dealer through or
with whom the Reverse Repurchase Agreement is entered; (d) the amount and
kind of Securities to be delivered by the Fund to such broker or dealer;
(e) the date of such Reverse Repurchase Agreement; and (f) the amount of
cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in a Senior Security Account for
such Series in connection with such Reverse Repurchase Agreement. The
Custodian shall, upon receipt of the total amount payable to the Fund
specified in the Certificate or Oral Instructions make the delivery to the
broker or dealer, and the deposits, if any, to the Senior Security Account,
specified in such Certificate or Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agreement
described in preceding paragraph 1 of this Article, the Fund shall promptly
deliver a Certificate or, in the event such Reverse Repurchase Agreement is
a Money Market Security, a Certificate or Oral Instructions to the
Custodian specifying: (a) the Reverse Repurchase Agreement being terminated
and the Series for which same was entered; (b) the total amount payable by
the Fund in connection with such termination; (c) the amount and kind of
Securities to be received by the Fund and specifically allocated to such
Series in connection with such termination; (d) the date of termination;
(e) the name of the broker or dealer with or through whom the Reverse
Repurchase Agreement is to be terminated; and (f) the amount of cash and/or
the amount and kind of Securities to be withdrawn from the Senior
Securities Account for such Series. The Custodian shall, upon receipt of
the amount and kind of Securities to be received by the Fund specified in
the Certificate or Oral Instructions, make the payment to the broker or
dealer, and the withdrawals, if any, from the Senior Security Account,
specified in such Certificate or Oral Instructions.
ARTICLE X
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities
specifically allocated to a Series held by the Custodian hereunder, the
Fund shall deliver or cause to be delivered to the Custodian a Certificate
specifying with respect to each such loan: (a) the Series to which the
loaned Securities are specifically allocated; (b) the name of the issuer
and the title of the Securities, (c) the number of shares or the principal
amount loaned, (d) the date of loan and delivery, (e) the total amount to
be delivered to the Custodian against the loan of the Securities, including
the amount of cash collateral and the premium, if any, separately
identified, and (f) the name of the broker, dealer, or financial
institution to which the loan was made. The Custodian shall deliver the
Securities thus designated to the broker, dealer or financial institution
to which the loan was made upon receipt of the total amount designated as
to be delivered against the loan of Securities. The Custodian may accept
payment in connection with a delivery otherwise than through the Book-Entry
System or Depository only in the form of a certified or bank cashier's
check payable to the order of the Fund or the Custodian drawn on New York
Clearing House funds and may deliver Securities in accordance with the
customs prevailing among dealers in securities.
2. Promptly after each termination of the loan of Securities by
the Fund, the Fund shall deliver or cause to be delivered to the Custodian
a Certificate specifying with respect to each such loan termination and
return of Securities: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the title of the
Securities to be returned, (c) the number of shares or the principal amount
to be returned, (d) the date of termination, (e) the total amount to be
delivered by the Custodian (including the cash collateral for such
Securities minus any offsetting credits as described in said Certificate),
and (f) the name of the broker, dealer, or financial institution from which
the Securities will be returned. The Custodian shall receive all Securities
returned from the broker, dealer, or financial institution to which such
Securities were loaned and upon receipt thereof shall pay, out of the money
held for the account of the Fund, the total amount payable upon such return
of Securities as set forth in the Certificate.
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits
to, or withdrawals from, a Senior Security Account as specified in a
Certificate received by the Custodian. Such Certificate shall specify the
Series for which such deposit or withdrawal is to be made and the amount of
cash and/or the amount and kind of Securities specifically allocated to
such Series to be deposited in, or withdrawn from, such Senior Security
Account for such Series. In the event that the Fund fails to specify in a
Certificate the Series, the name of the issuer, the title and the number of
shares or the principal amount of any particular Securities to be deposited
by the Custodian into, or withdrawn from, a Senior Securities Account, the
Custodian shall be under no obligation to make any such deposit or
withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from a
Margin Account to the broker, dealer, futures commission merchant or
Clearing Member in whose name, or for whose benefit, the account was
established as specified in the Margin Account Agreement.
3. Amounts received by the Custodian as payments or
distributions with respect to Securities deposited in any Margin Account
shall be dealt with in accordance with the terms and conditions of the
Margin Account Agreement.
4. The Custodian shall have a continuing lien and security
interest in and to any property at any time held by the Custodian in any
Collateral Account described herein. In accordance with applicable law the
Custodian may enforce its lien and realize on any such property whenever
the Custodian has made payment or delivery pursuant to any Put Option
guarantee letter or similar document or any receipt issued hereunder by the
Custodian. In the event the Custodian should realize on any such property
net proceeds which are less than the Custodian's obligations under any Put
Option guarantee letter or similar document or any receipt, such deficiency
shall be a debt owed the Custodian by the Fund within the scope of Article
XIV herein.
5. On each business day the Custodian shall furnish the Fund
with a statement with respect to each Margin Account in which money or
Securities are held specifying as of the close of business on the previous
business day: (a) the name of the Margin Account; (b) the amount and kind
of Securities held therein; and (c) the amount of money held therein. The
Custodian shall make available upon request to any broker, dealer, or
futures commission merchant specified in the name of a Margin Account a
copy of the statement furnished the Fund with respect to such Margin
Account.
6. Promptly after the close of business on each business day in
which cash and/or Securities are maintained in a Collateral Account for any
Series, the Custodian shall furnish the Fund with a statement with respect
to such Collateral Account specifying the amount of cash and/or the amount
and kind of Securities held therein. No later than the close of business
next succeeding the delivery to the Fund of such statement, the Fund shall
furnish to the Custodian a Certificate specifying the then market value of
the Securities described in such statement. In the event such then market
value is indicated to be less than the Custodian's obligation with respect
to any outstanding Put Option guarantee letter or similar document, the
Fund shall promptly specify in a Certificate the additional cash and/or
Securities to be deposited in such Collateral Account to eliminate such
deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the
resolution of the Board of Trustees of the Fund, certified by the Secretary
or any Assistant Secretary, either (i) setting forth with respect to the
Series specified therein the date of the declaration of a dividend or
distribution, the date of payment thereof, the record date as of which
shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and
the total amount payable to the Dividend Agent and any sub-dividend agent
or co-dividend agent of the Fund on the payment date, or (ii) authorizing
with respect to the Series specified therein the declaration of dividends
and distributions on a daily basis and authorizing the Custodian to rely on
Oral Instructions or a Certificate setting forth the date of the
declaration of such dividend or distribution, the date of payment thereof,
the record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the shareholders
of record as of that date and the total amount payable to the Dividend
Agent on the payment date.
2. Upon the payment date specified in such resolution, Oral
Instructions or Certificate, as the case may be, the Custodian shall pay
out of the money held for the account of each Series the total amount
payable to the Dividend Agent and any sub-dividend agent or co-dividend
agent of the Fund with respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver to
the Custodian a Certificate duly specifying:
(a) the Series, the number of Shares sold, trade date, and
price; and
(b) the amount of money to be received by the Custodian for
the sale of such Shares and specifically allocated to the separate account
in the name of such Series.
2. Upon receipt of such money from the Transfer Agent, the
Custodian shall credit such money to the separate account in the name of
the Series for which such money was received.
3. Upon issuance of any Shares of any Series described in the
foregoing provisions of this Article, the Custodian shall pay, out of the
money held for the account of such Series, all original issue or other
taxes required to be paid by the Fund in connection with such issuance upon
the receipt of a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires
the Custodian to make payment out of the money held by the Custodian
hereunder in connection with a redemption of any Shares, it shall furnish
to the Custodian a Certificate specifying:
(a) the number and Series of Shares redeemed; and
(b) the amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting
forth the Series and number of Shares received by the Transfer Agent for
redemption and that such Shares are in good form for redemption, the
Custodian shall make payment to the Transfer Agent out of the money held in
the separate account in the name of the Series the total amount specified
in the Certificate issued pursuant to the foregoing paragraph 4 of this
Article.
6. Notwithstanding the above provisions regarding the
redemption of any Shares, whenever any Shares are redeemed pursuant to any
check redemption privilege which may from time to time be offered by the
Fund, the Custodian, unless otherwise instructed by a Certificate, shall,
upon receipt of an advice from the Fund or its agent setting forth that the
redemption is in good form for redemption in accordance with the check
redemption procedure, honor the check presented as part of such check
redemption privilege out of the money held in the separate account of the
Series of the Shares being redeemed.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion advance funds
on behalf of any Series which results in an overdraft because the money
held by the Custodian in the separate account for such Series shall be
insufficient to pay the total amount payable upon a purchase of Securities
specifically allocated to such Series, as set forth in a Certificate or
Oral Instructions, or which results in an overdraft in the separate account
of such Series for some other reason, or if the Fund is for any other
reason indebted to the Custodian with respect to a Series, including any
indebtedness to The Bank of New York under the Fund's Cash Management and
Related Services Agreement (except a borrowing for investment or for
temporary or emergency purposes using Securities as collateral pursuant to
a separate agreement and subject to the provisions of paragraph 2 of this
Article), such overdraft or indebtedness shall be deemed to be a loan made
by the Custodian to the Fund for such Series payable on demand and shall
bear interest from the date incurred at a rate per annum (based on a
360-day year for the actual number of days involved) equal to 1/2% over
Custodian's prime commercial lending rate in effect from time to time, such
rate to be adjusted on the effective date of any change in such prime
commercial lending rate but in no event to be less than 6% per annum. In
addition, the Fund hereby agrees that the Custodian shall have a continuing
lien, security interest, and security entitlement in and to any property
including any investment property or any financial asset specifically
allocated to such Series at any time held by it for the benefit of such
Series or in which the Fund may have an interest which is then in the
Custodian's possession or control or in possession or control of any third
party acting in the Custodian's behalf. The Fund authorizes the Custodian,
in its sole discretion, at any time to charge any such overdraft or
indebtedness together with interest due thereon against any balance of
account standing to such Series' credit on the Custodian's books. In
addition, the Fund hereby covenants that on each Business Day on which
either it intends to enter a Reverse Repurchase Agreement and/ or otherwise
borrow from a third party, or which next succeeds a Business Day on which
at the close of business the Fund had outstanding a Reverse Repurchase
Agreement or such a borrowing, it shall prior to 9 a.m., New York City
time, advise the Custodian, in writing, of each such borrowing, shall
specify the Series to which the same relates, and shall not incur any
indebtedness not so specified other than from the Custodian.
2. The Fund will cause to be delivered to the Custodian by any
bank (including, if the borrowing is pursuant to a separate agreement, the
Custodian) from which it borrows money for investment or for temporary or
emergency purposes using Securities held by the Custodian hereunder as
collateral for such borrowings, a notice or undertaking in the form
currently employed by any such bank setting forth the amount which such
bank will loan to the Fund against delivery of a stated amount of
collateral. The Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such borrowing: (a) the Series to which
such borrowing relates; (b) the name of the bank, (c) the amount and terms
of the borrowing, which may be set forth by incorporating by reference an
attached promissory note, duly endorsed by the Fund, or other loan
agreement, (d) the time and date, if known, on which the loan is to be
entered into, (e) the date on which the loan becomes due and payable, (f)
the total amount payable to the Fund on the borrowing date, (g) the market
value of Securities to be delivered as collateral for such loan, including
the name of the issuer, the title and the number of shares or the principal
amount of any particular Securities, and (h) a statement specifying whether
such loan is for investment purposes or for temporary or emergency purposes
and that such loan is in conformance with the Investment Company Act of
1940 and the Fund's prospectus. The Custodian shall deliver on the
borrowing date specified in a Certificate the specified collateral and the
executed promissory note, if any, against delivery by the lending bank of
the total amount of the loan payable, provided that the same conforms to
the total amount payable as set forth in the Certificate. The Custodian
may, at the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights therein
given the lending bank by virtue of any promissory note or loan agreement.
The Custodian shall deliver such Securities as additional collateral as may
be specified in a Certificate to collateralize further any transaction
described in this paragraph. The Fund shall cause all Securities released
from collateral status to be returned directly to the Custodian, and the
Custodian shall receive from time to time such return of collateral as may
be tendered to it. In the event that the Fund fails to specify in a
Certificate the Series, the name of the issuer, the title and number of
shares or the principal amount of any particular Securities to be delivered
as collateral by the Custodian, the Custodian shall not be under any
obligation to deliver any Securities.
ARTICLE XV
INSTRUCTIONS
1. With respect to any software provided by the Custodian to a
Fund in order for the Fund to transmit Instructions to the Custodian (the
"Software"), the Custodian grants to such Fund a personal, nontransferable
and nonexclusive license to use the Software solely for the purpose of
transmitting Instructions to, and receiving communications from, the
Custodian in connection with its account(s). The Fund shall use the
Software solely for its own internal and proper business purposes, and not
in the operation of a service bureau, and agrees not to sell, reproduce,
lease or otherwise provide, directly or indirectly, the Software or any
portion thereof to any third party without the prior written consent of the
Custodian. The Fund acknowledges that the Custodian and its suppliers have
title and exclusive proprietary rights to the Software, including any trade
secrets or other ideas, concepts, know how, methodologies, or information
incorporated therein and the exclusive rights to any copyrights, trademarks
and patents (including registrations and applications for registration of
either) or statutory or legal protections available with respect thereof.
The Fund further acknowledges that all or a part of the Software may be
copyrighted or trademarked (or a registration or claim made therefor) by
the Custodian or its suppliers. The Fund shall not take any action with
respect to the Software inconsistent with the foregoing acknowledgments,
nor shall the Fund attempt to decompile, reverse engineer or modify the
Software. The Fund may not copy, sell, lease or provide, directly or
indirectly, any of the Software or any portion thereof to any other person
or entity without the Custodian's prior written consent. The Fund may not
remove any statutory copyright notice, or other notice including the
software or on any media containing the Software. The Fund shall reproduce
any such notice on any reproduction of the Software and shall add statutory
copyright notice or other notice to the Software or media upon the Bank's
request. Custodian agrees to provide reasonable training, instruction
manuals and access to Custodian's "help desk" in connection with the Fund's
user support necessary to use of the Software. At the Fund's request,
Custodian agrees to permit reasonable testing of the Software by the Fund.
2. The Fund shall obtain and maintain at its own cost and
expense all equipment and services, including but not limited to
communications services, necessary for it to utilize the Software and
transmit Instructions to the Custodian. The Custodian shall not be
responsible for the reliability, compatibility with the Software or
availability of any such equipment or services or the performance or
nonperformance by any nonparty to this Custody Agreement.
3. The Fund acknowledges that the Software, all data bases made
available to the Fund by utilizing the Software (other than data bases
relating solely to the assets of the Fund and transactions with respect
thereto), and any proprietary data, processes, information and
documentation (other than which are or become part of the public domain or
are legally required to be made available to the public) (collectively, the
"Information"), are the exclusive and confidential property of the
Custodian. The Fund shall keep the Information confidential by using the
same care and discretion that the Fund uses with respect to its own
confidential property and trade secrets and shall neither make nor permit
any disclosure without the prior written consent of the Custodian. Upon
termination of this Agreement or the Software license granted hereunder for
any reason, the Fund shall return to the Custodian all copies of the
Information which are in its possession or under its control or which the
Fund distributed to third parties. The provisions of this Article shall not
affect the copyright status of any of the Information which may be
copyrighted and shall apply to all Information whether or not copyrighted.
4. The Custodian reserves the right to modify, at its own
expense, the Software from time to time without prior notice and the Fund
shall install new releases of the Software as the Custodian may direct. The
Fund agrees not to modify or attempt to modify the Software without the
Custodian's prior written consent. The Fund acknowledges that any
modifications to the Software, whether by the Fund or the Custodian and
whether with or without the Custodian's consent, shall become the property
of the Custodian.
5. The Custodian and its manufacturers and suppliers make no
warranties or representations of any kind with regard to the Software or
the method(s) by which the Fund may transmit Instructions to the Custodian,
express or implied, including but not limited to any implied warranties of
merchantability or fitness for a particular purpose.
6. EXPORT RESTRICTIONS. EXPORT OF THE SOFTWARE IS PROHIBITED BY
UNITED STATES LAW. THE FUND AGREES THAT IT WILL NOT UNDER ANY CIRCUMSTANCES
RESELL, DIVERT, TRANSFER, TRANSSHIP OR OTHERWISE DISPOSE OF THE SOFTWARE
(IN ANY FORM) IN OR TO ANY OTHER COUNTRY. IF THE CUSTODIAN DELIVERS THE
SOFTWARE TO THE FUND OUTSIDE THE UNITED STATES, THE SOFTWARE WAS EXPORTED
FROM THE UNITED STATES IN ACCORDANCE WITH EXPORT ADMINISTRATIVE
REGULATIONS. DIVERSION CONTRARY TO U.S. LAWS PROHIBITED. The Fund hereby
authorizes Custodian to report its name and address to government agencies
to which Custodian is required to provide such information by law.
7. Where the method for transmitting Instructions by the Fund
involves an automatic systems acknowledgment by the Custodian of its
receipt of such Instructions, then in the absence of such acknowledgment
the Custodian shall not be liable for any failure to act pursuant to such
Instructions, the Fund may not claim that such Instructions were received
by the Custodian, and the Fund shall deliver a Certificate by some other
means.
8. (a) The Fund agrees that where it delivers to the Custodian
Instructions hereunder, it shall be the Fund's sole responsibility to
ensure that only persons duly authorized by the Fund transmit such
Instructions to the Custodian. The Fund will cause all persons transmitting
Instructions to the Custodian to treat applicable user and authorization
codes, passwords and authentication keys with extreme care, and irrevocably
authorizes the Custodian to act in accordance with and rely upon
Instructions received by it pursuant hereto.
(b) The Fund hereby represents, acknowledges and agrees
that it is fully informed of the protections and risks associated with the
various methods of transmitting Instructions to the Custodian and that
there may be more secure methods of transmitting instructions to the
Custodian than the method(s) selected by the Fund. The Fund hereby agrees
that the security procedures (if any) to be followed in connection with the
Fund's transmission of Instructions provide to it a commercially reasonable
degree of protection in light of its particular needs and circumstances.
9. The Fund hereby represents, warrants and covenants to the
Custodian that this Agreement has been duly approved by a resolution of its
Board of Trustees, and that its transmission of Instructions pursuant
hereto shall at all times comply with the Investment Company Act.
10. The Fund shall notify the Custodian of any errors, omissions
or interruptions in, or delay or unavailability of, its ability to send
Instructions as promptly as practicable, and in any event within 24 hours
after the earliest of (i) discovery thereof, (ii) the Business Day on which
discovery should have occurred through the exercise of reasonable care and
(iii) in the case of any error, the date of actual receipt of the earliest
notice which reflects such error, it being agreed that discovery and
receipt of notice may only occur on a business day. The Custodian shall
promptly advise the Fund whenever the Custodian learns of any errors,
omissions or interruption in, or delay or unavailability of, the Fund's
ability to send Instructions.
11. Custodian will indemnify and hold harmless the Fund with
respect to any liability, damages, loss or claim incurred by or brought
against Fund by reason any claim or infringement against any patent,
copyright, license or other property right arising out or by reason of the
Fund's use of the Software in the form provided under this Section.
Custodian at its own expense will defend such action or claim brought
against Fund to the extent that it is based on a claim that the Software in
the form provided by Custodian infringes any patents, copyrights, license
or other property right, provided that Custodian is provided with
reasonable written notice of such claim, provided that the Fund has not
settled, compromised or confessed any such claim without the Custodian's
written consent, in which event Custodian shall have no liability or
obligation hereunder, and provided Fund cooperates with and assists
Custodian in the defense of such claim. Custodian shall have the right to
control the defense of all such claims, lawsuits and other proceedings. If,
as a result of any claim of infringement against any patent, copyright,
license or other property right, Custodian is enjoined from using the
Software, or if Custodian believes that the System is likely to become the
subject of a claim of infringement, Custodian at its option may in its sole
discretion either (a) at its expenses procure the right for the Fund to
continue to use the Software, or (b), replace or modify the Software so as
to make it non-infringing, or (c) may discontinue the license granted
herein upon written notice to Customer.
ARTICLE XVI
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as
sub-custodian for each Series' Securities for which the primary market is
outside the United States ("Foreign Securities") and other assets, the
foreign banking institutions and foreign securities depositories and
clearing agencies designated on Schedule I hereto ("Foreign Sub-
Custodians"). The Fund may designate any additional foreign sub-custodian
with which the Custodian has an agreement for such entity to act as the
Custodian's agent, as its sub-custodian and any such additional foreign
sub-custodian shall be deemed added to Schedule I. Upon receipt of a
Certificate from the Fund, the Custodian shall cease the employment of any
one or more Foreign Sub-Custodians for maintaining custody of the Fund's
assets and such Foreign Sub-Custodian shall be deemed deleted from Schedule
I.
2. Each delivery of a Certificate to the Custodian in
connection with a transaction involving the use of a Foreign Sub-Custodian
shall constitute a representation and warranty by the Fund that its Board
of Trustees, or its third party foreign custody manager as defined in Rule
17f-5 under the Investment Company Act of 1940, as amended, if any, has
determined that use of such Foreign Sub-Custodian satisfies the
requirements of such Investment Company Act of 1940 and such Rule 17f-5
thereunder.
3. The Custodian shall identify on its books as belonging to
each Series of the Fund the Foreign Securities of such Series held by each
Foreign Sub-Custodian. At the election of the Fund, it shall be entitled to
be subrogated to the rights of the Custodian with respect to any claims by
the Fund or any Series against a Foreign Sub-Custodian as a consequence of
any loss, damage, cost, expense, liability or claim sustained or incurred
by the Fund or any Series if and to the extent that the Fund or such Series
has not been made whole for any such loss, damage, cost, expense, liability
or claim.
4. Upon request of the Fund, the Custodian will, consistent
with the terms of the applicable Foreign Sub- Custodian agreement, use
reasonable efforts to arrange for the independent accountants of the Fund
to be afforded access to the books and records of any Foreign Sub-Custodian
insofar as such books and records relate to the performance of such Foreign
Sub-Custodian under its agreement with the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to time, as
mutually agreed upon, statements in respect of the securities and other
assets of each Series held by Foreign Sub-Custodians, including but not
limited to an identification of entities having possession of each Series'
Foreign Securities and other assets, and advices or notifications of any
transfers of Foreign Securities to or from each custodial account
maintained by a Foreign Sub-Custodian for the Custodian on behalf of the
Series.
6. The Custodian shall transmit promptly to the Fund all
notices, reports or other written information received pertaining to the
Fund's Foreign Securities, including without limitation, notices of
corporate action, proxies and proxy solicitation materials.
7. Notwithstanding any provision of this Agreement to the
contrary, settlement and payment for securities received for the account of
any Series and delivery of securities maintained for the account of such
Series may be effected in accordance with the customary or established
securities trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including, without
limitation, delivery of securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) against a receipt with
the expectation of receiving later payment for such securities from such
purchaser or dealer.
8. Notwithstanding any other provision in this Agreement to the
contrary, with respect to any losses or damages arising out of or relating
to any actions or omissions of any Foreign Sub-Custodian the sole
responsibility and liability of the Custodian shall be to take appropriate
action at the Fund's expense to recover such loss or damage from the
Foreign Sub-Custodian. It is expressly understood and agreed that the
Custodian's sole responsibility and liability shall be limited to amounts
so recovered from the Foreign Sub-Custodian.
ARTICLE XVII
FX TRANSACTIONS
1. Whenever the Fund shall enter into an FX Transaction, the
Fund shall promptly deliver to the Custodian a Certificate or Oral
Instructions specifying with respect to such FX Transaction: (a) the Series
to which such FX Transaction is specifically allocated; (b) the type and
amount of Currency to be purchased by the Fund; (c) the type and amount of
Currency to be sold by the Fund; (d) the date on which the Currency to be
purchased is to be delivered; (e) the date on which the Currency to be sold
is to be delivered; and (f) the name of the person from whom or through
whom such currencies are to be purchased and sold. Unless otherwise
instructed by a Certificate or Oral Instructions, the Custodian shall
deliver, or shall instruct a Foreign Sub-Custodian to deliver, the Currency
to be sold on the date on which such delivery is to be made, as set forth
in the Certificate, and shall receive, or instruct a Foreign Sub-Custodian
to receive, the Currency to be purchased on the date as set forth in the
Certificate.
2. Where the Currency to be sold is to be delivered on the same
day as the Currency to be purchased, as specified in the Certificate or
Oral Instructions, the Custodian or a Foreign Sub-Custodian may arrange for
such deliveries and receipts to be made in accordance with the customs
prevailing from time to time among brokers or dealers in Currencies, and
such receipt and delivery may not be completed simultaneously. The Fund
assumes all responsibility and liability for all credit risks involved in
connection with such receipts and deliveries, which responsibility and
liability shall continue until the Currency to be received by the Fund has
been received in full.
3. Any FX Transaction effected by the Custodian in connection
with this Agreement may be entered with the Custodian, any office, branch
or subsidiary of The Bank of New York Company, Inc., or any Foreign
Sub-Custodian acting as principal or otherwise through customary banking
channels. The Fund may issue a standing Certificate with respect to FX
Transaction but the Custodian may establish rules or limitations concerning
any foreign exchange facility made available to the Fund. The Fund shall
bear all risks of investing in Securities or holding Currency. Without
limiting the foregoing, the Fund shall bear the risks that rules or
procedures imposed by a Foreign Sub-Custodian or foreign depositories,
exchange controls, asset freezes or other laws, rules, regulations or
orders shall prohibit or impose burdens or costs on the transfer to, by or
for the account of the Fund of Securities or any cash held outside the
Fund's jurisdiction or denominated in Currency other than its home
jurisdiction or the conversion of cash from one Currency into another
currency. The Custodian shall not be obligated to substitute another
Currency for a Currency (including a Currency that is a component of a
Composite Currency Unit) whose transferability, convertibility or
availability has been affected by such law, regulation, rule or procedure.
Neither the Custodian nor any Foreign Sub-Custodian shall be liable to the
Fund for any loss resulting from any of the foregoing events.
ARTICLE XVIII
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in Article
XVI, neither the Custodian nor its nominee shall be liable for any loss or
damage, including counsel fees, resulting from its action or omission to
act or otherwise, either hereunder or under any Margin Account Agreement,
except for any such loss or damage arising out of its own negligence or
willful misconduct. In no event shall the Custodian be liable to the Fund
or any third party for special, indirect or consequential damages or lost
profits or loss of business, arising under or in connection with this
Agreement, even if previously informed of the possibility of such damages
and regardless of the form of action. The Custodian may, with respect to
questions of law arising hereunder or under any Margin Account Agreement,
apply for and obtain the advice and opinion of counsel to the Fund, or of
its own counsel, at the expense of the Fund, and shall be fully protected
with respect to anything done or omitted by it in good faith in conformity
with such advice or opinion. The Custodian shall be liable to the Fund for
any loss or damage resulting from the use of the Book-Entry System or any
Depository arising by reason of any negligence or willful misconduct on the
part of the Custodian or any of its employees or agents.
2. Without limiting the generality of the foregoing, the
Custodian shall be under no obligation to inquire into, and shall not be
liable for:
(a) the validity of the issue of any Securities purchased,
sold, or written by or for the Fund, the legality of the purchase, sale or
writing thereof, or the propriety of the amount paid or received therefor;
(b) the legality of the sale or redemption of any Shares,
or the propriety of the amount to be received or paid therefor;
(c) the legality of the declaration or payment of any
dividend by the Fund;
(d) the legality of any borrowing by the Fund using
Securities as collateral;
(e) the legality of any loan of portfolio Securities, nor
shall the Custodian be under any duty or obligation to see to it that any
cash collateral delivered to it by a broker, dealer, or financial
institution or held by it at any time as a result of such loan of portfolio
Securities of the Fund is adequate collateral for the Fund against any loss
it might sustain as a result of such loan. The Custodian specifically, but
not by way of limitation, shall not be under any duty or obligation
periodically to check or notify the Fund that the amount of such cash
collateral held by it for the Fund is sufficient collateral for the Fund,
but such duty or obligation shall be the sole responsibility of the Fund.
In addition, the Custodian shall be under no duty or obligation to see that
any broker, dealer or financial institution to which portfolio Securities
of the Fund are lent pursuant to Article X of this Agreement makes payment
to it of any dividends or interest which are payable to or for the account
of the Fund during the period of such loan or at the termination of such
loan, provided, however, that the Custodian shall promptly notify the Fund
in the event that such dividends or interest are not paid and received when
due; or
(f) the sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or
Collateral Account in connection with transactions by the Fund. In
addition, the Custodian shall be under no duty or obligation to see that
any broker, dealer, futures commission merchant or Clearing Member makes
payment to the Fund of any variation margin payment or similar payment
which the Fund may be entitled to receive from such broker, dealer, futures
commission merchant or Clearing Member, to see that any payment received by
the Custodian from any broker, dealer, futures commission merchant or
Clearing Member is the amount the Fund is entitled to receive, or to notify
the Fund of the Custodian's receipt or non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be
the Custodian of, any money, whether or not represented by any check,
draft, or other instrument for the payment of money, received by it on
behalf of the Fund until the Custodian actually receives and collects such
money directly or by the final crediting of the account representing the
Fund's interest at the Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall not be
liable for ascertaining or acting upon any calls, conversions, exchange
offers, tenders, interest rate changes or similar matters relating to
Securities held in the Depository, unless the Custodian shall have actually
received timely notice from the Depository. In no event shall the Custodian
have any responsibility or liability for the failure of the Depository to
collect, or for the late collection or late crediting by the Depository of
any amount payable upon Securities deposited in the Depository which may
mature or be redeemed, retired, called or otherwise become payable.
However, upon receipt of a Certificate from the Fund of an overdue amount
on Securities held in the Depository the Custodian shall make a claim
against the Depository on behalf of the Fund, except that the Custodian
shall not be under any obligation to appear in, prosecute or defend any
action, suit or proceeding in respect to any Securities held by the
Depository which in its opinion may involve it in expense or liability,
unless indemnity satisfactory to it against all expense and liability be
furnished as often as may be required.
5. The Custodian shall not be under any duty or obligation to
take action to effect collection of any amount due to the Fund from the
Transfer Agent of the Fund nor to take any action to effect payment or
distribution by the Transfer Agent of the Fund of any amount paid by the
Custodian to the Transfer Agent of the Fund in accordance with this
Agreement.
6. The Custodian shall not be under any duty or obligation to
take action to effect collection of any amount if the Securities upon which
such amount is payable are in default, or if payment is refused after due
demand or presentation, unless and until (i) it shall be directed to take
such action by a Certificate and (ii) it shall be assured to its
satisfaction of reimbursement of its costs and expenses in connection with
any such action.
7. The Custodian may in addition to the employment of Foreign
Sub-Custodians pursuant to Article XVI appoint one or more banking
institutions as Depository or Depositories, as Sub-Custodian or
Sub-Custodians, or as Co-Custodian or Co-Custodians including, but not
limited to, banking institutions located in foreign countries, of
Securities and money at any time owned by the Fund, upon such terms and
conditions as may be approved in a Certificate or contained in an agreement
executed by the Custodian, the Fund and the appointed institution.
8. The Custodian shall not be under any duty or obligation (a)
to ascertain whether any Securities at any time delivered to, or held by it
or by any Foreign Sub-Custodian, for the account of the Fund and
specifically allocated to a Series are such as properly may be held by the
Fund or such Series under the provisions of its then current prospectus, or
(b) to ascertain whether any transactions by the Fund, whether or not
involving the Custodian, are such transactions as may properly be engaged
in by the Fund.
9. The Custodian shall be entitled to receive and the Fund
agrees to pay to the Custodian all out-of-pocket expenses and such
compensation as may be agreed upon from time to time between the Custodian
and the Fund. The Custodian may charge such compensation and any expenses
with respect to a Series incurred by the Custodian in the performance of
its duties pursuant to such agreement against any money specifically
allocated to such Series. Unless and until the Fund instructs the Custodian
by a Certificate to apportion any loss, damage, liability or expense among
the Series in a specified manner, the Custodian shall also be entitled to
charge against any money held by it for the account of a Series such
Series' pro rata share (based on such Series, net asset value at the time
of the charge to the aggregate net asset value of all Series at that time)
of the amount of any loss, damage, liability or expense, including counsel
fees, for which it shall be entitled to reimbursement under the provisions
of this Agreement. The expenses for which the Custodian shall be entitled
to reimbursement hereunder shall include, but are not limited to, the
expenses of sub-custodians and foreign branches of the Custodian incurred
in settling outside of New York City transactions involving the purchase
and sale of Securities of the Fund.
10. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing received by the
Custodian and reasonably believed by the Custodian to be a Certificate. The
Custodian shall be entitled to rely upon any Oral Instructions actually
received by the Custodian hereinabove provided for. The Fund agrees to
forward to the Custodian a Certificate or facsimile thereof confirming such
Oral Instructions in such manner so that such Certificate or facsimile
thereof is received by the Custodian, whether by hand delivery, telecopier
or other similar device, or otherwise, by the close of business of the same
day that such Oral Instructions are given to the Custodian. The Fund agrees
that the fact that such confirming instructions are not received, or that
contrary instructions are received, by the Custodian shall in no way affect
the validity of the transactions or enforceability of the transactions
hereby authorized by the Fund. The Fund agrees that the Custodian shall
incur no liability to the Fund in acting upon Oral Instructions given to
the Custodian hereunder concerning such transactions provided such
instructions reasonably appear to have been received from an Authorized
Person.
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by
the Custodian to be given in accordance with the terms and conditions of
any Margin Account Agreement. Without limiting the generality of the
foregoing, the Custodian shall be under no duty to inquire into, and shall
not be liable for, the accuracy of any statements or representations
contained in any such instrument or other notice including, without
limitation, any specification of any amount to be paid to a broker, dealer,
futures commission merchant or Clearing Member.
12. The books and records pertaining to the Fund which are in
the possession of the Custodian shall be the property of the Fund. Such
books and records shall be prepared and maintained as required by the
Investment Company Act of 1940, as amended, and other applicable securities
laws and rules and regulations. The Fund, or the Fund's authorized
representatives, shall have access to such books and records during the
Custodian's normal business hours. Upon the reasonable request of the Fund,
copies of any such books and records shall be provided by the Custodian to
the Fund or the Fund's authorized representative, and the Fund shall
reimburse the Custodian its expenses of providing such copies. Upon
reasonable request of the Fund, the Custodian shall provide in hard copy or
on micro-film, whichever the Custodian elects, any records included in any
such delivery which are maintained by the Custodian on a computer disc, or
are similarly maintained, and the Fund shall reimburse the Custodian for
its expenses of providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report
obtained by the Custodian on the system of internal accounting control of
the Book-Entry System, the Depository or O.C.C., and with such reports on
its own systems of internal accounting control as the Fund may reasonably
request from time to time.
14. The Fund agrees to indemnify the Custodian against and save
the Custodian harmless from all liability, claims, losses and demands
whatsoever, including attorney's fees, howsoever arising or incurred
because of or in connection with this Agreement, including the Custodian's
payment or non-payment of checks pursuant to paragraph 6 of Article XIII as
part of any check redemption privilege program of the Fund, except for any
such liability, claim, loss and demand arising out of the Custodian's own
negligence or willful misconduct.
15. Subject to the foregoing provisions of this Agreement,
including, without limitation, those contained in Article XVI and XVII the
Custodian may deliver and receive Securities, and receipts with respect to
such Securities, and arrange for payments to be made and received by the
Custodian in accordance with the customs prevailing from time to time among
brokers or dealers in such Securities. When the Custodian is instructed to
deliver Securities against payment, delivery of such Securities and receipt
of payment therefor may not be completed simultaneously. The Fund assumes
all responsibility and liability for all credit risks involved in
connection with the Custodian's delivery of Securities pursuant to
instructions of the Fund, which responsibility and liability shall continue
until final payment in full has been received by the Custodian.
16. The Custodian shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set
forth in this Agreement, and no covenant or obligation shall be implied in
this Agreement against the Custodian.
ARTICLE XIX
TERMINATION
1. Either of the parties hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than ninety (90) days after the date
of giving of such notice. In the event such notice is given by the Fund, it
shall be accompanied by a copy of a resolution of the Board of Trustees of
the Fund, certified by the Secretary or any Assistant Secretary, electing
to terminate this Agreement and designating a successor custodian or
custodians, each of which shall be a bank or trust company having not less
than $2,000,000 aggregate capital, surplus and undivided profits. In the
event such notice is given by the Custodian, the Fund shall, on or before
the termination date, deliver to the Custodian a copy of a resolution of
the Board of Trustees of the Fund, certified by the Secretary or any
Assistant Secretary, designating a successor custodian or custodians. In
the absence of such designation by the Fund, the Custodian may designate a
successor custodian which shall be a bank or trust company having not less
than $2,000,000 aggregate capital, surplus and undivided profits. Upon the
date set forth in such notice this Agreement shall terminate, and the
Custodian shall upon receipt of a notice of acceptance by the successor
custodian on that date deliver directly to the successor custodian all
Securities and money then owned by the Fund and held by it as Custodian,
after deducting all fees, expenses and other amounts for the payment or
reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or
the Custodian in accordance with the preceding paragraph, the Fund shall
upon the date specified in the notice of termination of this Agreement and
upon the delivery by the Custodian of all Securities (other than Securities
held in the Book-Entry System which cannot be delivered to the Fund) and
money then owned by the Fund be deemed to be its own custodian and the
Custodian shall thereby be relieved of all duties and responsibilities
pursuant to this Agreement, other than the duty with respect to Securities
held in the Book Entry System which cannot be delivered to the Fund to hold
such Securities hereunder in accordance with this Agreement.
ARTICLE XX
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two
of the present Authorized Persons of the Fund under its seal, setting forth
the names and the signatures of the present Authorized Persons. The Fund
agrees to furnish to the Custodian a new Certificate in similar form in the
event that any such present Authorized Person ceases to be an Authorized
Person or in the event that other or additional Authorized Persons are
elected or appointed. Until such new Certificate shall be received, the
Custodian shall be fully protected in acting under the provisions of this
Agreement upon Oral Instructions or signatures of the Authorized Persons as
set forth in the last delivered Certificate.
2. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall be
sufficiently given if addressed to the Custodian and mailed or delivered to
it at its offices at 90 Washington Street, New York, New York 10286, or at
such other place as the Custodian may from time to time designate in
writing.
3. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Fund shall be sufficiently
given if addressed to the Fund and mailed or delivered to it at its office
at the address for the Fund first above written, or at such other place as
the Fund may from time to time designate in writing.
4. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the same
formality as this Agreement and approved by a resolution of the Board of
Trustees of the Fund.
5. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Fund without
the written consent of the Custodian, or by the Custodian without the
written consent of the Fund, authorized or approved by a resolution of the
Fund's Board of Trustees.
6. This Agreement shall be construed in accordance with the
laws of the State of New York without giving effect to conflict of laws
principles thereof. Each party hereby consents to the jurisdiction of a
state or federal court situated in New York City, New York in connection
with any dispute arising hereunder and hereby waives its right to trial by
jury.
7. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers, thereunto duly authorized and
their respective seals to be hereunto affixed, as of the day and year first
above written.
BARON CAPITAL FUNDS TRUST
[SEAL] By: /s/ Peggy C. Wong
Attest:
/s/ Linda S. Martinson
THE BANK OF NEW YORK
[SEAL] By: /s/ Stephen E. Grunston
Name: Stephen E. Grunston
Title: Vice President
Attest:
/s/ Majorie McLaughlin
APPENDIX A
I, Ronald Baron, President and I, Linda S. Martinson, Secretary
of BARON CAPITAL FUNDS TRUST, a Delaware business trust (the "Fund"), do
hereby certify that:
The following persons have been duly authorized in conformity
with the Fund's Declaration of Trust and By-Laws to execute any
Certificate, instruction, notice or other instrument on behalf of the Fund,
and the signatures set forth opposite their respective names are their true
and correct signatures:
Name Position Signature
Peggy C. Wong CFO /s/ Peggy C. Wong
Linda S. Martinson Secretary, VP /s/ Linda S. Martinson
Morty Schaja COO /s/ Morty Schaja
Ronald Baron President, CEO /s/ Ronald Baron
APPENDIX B
SERIES
BARON CAPITAL FUNDS TRUST
APPENDIX C
I, Marjorie McLaughlin, a Vice President with THE BANK OF NEW
YORK do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
EXHIBIT A
CERTIFICATION
The undersigned, Linda S. Martinson, hereby certifies that he or
she is the duly elected and acting Secretary of BARON CAPITAL FUNDS TRUST,
a Delaware business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on April 28, 1998, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is
in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and the Fund
dated as of June 23, 1998, (the "Custody Agreement") is
authorized and instructed on a continuous and ongoing basis to
deposit in the Book-Entry System, as defined in the Custody
Agreement, all securities eligible for deposit therein,
regardless of the Series to which the same are specifically
allocated, and to utilize the Book-Entry System to the extent
possible in connection with its performance thereunder,
including, without limitation, in connection with settlements of
purchases and sales of securities, loans of securities, and
deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
BARON CAPITAL FUNDS TRUST, as of the 23rd day of June, 1998.
/s/ Linda S. Martinson
[SEAL]
EXHIBIT B
CERTIFICATION
The undersigned, Linda S. Martinson, hereby certifies that he or
she is the duly elected and acting Secretary of BARON CAPITAL FUNDS TRUST,
a Delaware business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on April 28, 1998, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is
in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and the Fund
dated as of June 23, 1998, (the "Custody Agreement") is
authorized and instructed on a continuous and ongoing basis until
such time as it receives a Certificate, as defined in the Custody
Agree- ment, to the contrary to deposit in the Depository, as
defined in the Custody Agreement, all securities eligible for
deposit therein, regardless of the Series to which the same are
specifically allocated, and to utilize the Depository to the
extent possible in connection with its performance thereunder,
including, without limitation, in connection with settlements of
purchases and sales of securities, loans of securities, and
deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
BARON CAPITAL FUNDS TRUST, as of the 23rd day of June, 1998.
/s/ Linda S. Martinson
[SEAL]
EXHIBIT B-1
CERTIFICATION
The undersigned, Linda S. Martinson, hereby certifies that he or
she is the duly elected and acting Secretary of BARON CAPITAL FUNDS TRUST,
a Delaware business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on April 28, 1998, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is
in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and the Fund
dated as of June 23, 1998, (the "Custody Agreement") is
authorized and instructed on a continuous and ongoing basis until
such time as it receives a Certificate, as defined in the Custody
Agree- ment, to the contrary to deposit in the Participants Trust
Company as Depository, as defined in the Custody Agreement, all
securities eligible for deposit therein, regardless of the Series
to which the same are specifically allocated, and to utilize the
Participants Trust Company to the extent possible in connection
with its performance thereunder, including, without limitation,
in connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and returns of
securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
BARON CAPITAL FUNDS TRUST, as of the 23rd day of June, 1998.
/s/ Linda S. Martinson
[SEAL]
EXHIBIT C
CERTIFICATION
The undersigned, Linda S. Martinson, hereby certifies that he or
she is the duly elected and acting Secretary of BARON CAPITAL FUNDS TRUST,
a Delaware business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on April 28, 1998, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is
in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and the Fund
dated as of June 23, 1998 (the "Custody Agreement") is authorized
and instructed on a continuous and ongoing basis until such time
as it receives a Certificate, as defined in the Custody
Agreement, to the contrary, to accept, utilize and act with
respect to Clearing Member confirmations for Options and
transaction in Options, regardless of the Series to which the
same are specifically allocated, as such terms are defined in the
Custody Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
BARON CAPITAL FUNDS TRUST, as of the 23rd day of June, 1998.
/s/ Linda S. Martinson
[SEAL]
EXHIBIT D
The undersigned, Linda S. Martinson, hereby certifies that he or
she is the duly elected and acting Secretary of BARON CAPITAL FUNDS TRUST,
a Delaware business trust (the "Fund"), further certifies that the
following resolutions were adopted by the Board of Trustees of the Fund at
a meeting duly held on April 28, 1998, at which a quorum was at all times
present and that such resolutions have not been modified or rescinded and
are in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to the Custody Agreement between The Bank of New York and the
Fund dated as of June 23, 1998 (the "Custody Agreement") is
authorized and instructed on a continuous and ongoing basis to
act in accordance with, and to rely on Instructions (as defined
in the Custody Agreement).
RESOLVED, that the Fund shall establish access codes and
grant use of such access codes only to Authorized Persons of the
Fund as defined in the Custody Agreement, shall establish
internal safekeeping procedures to safeguard and protect the
confidentiality and availability of user and access codes,
passwords and authentication keys, and shall use Instructions
only in a manner that does not contravene the Investment Company
Act of 1940, as amended, or the rules and regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
BARON CAPITAL FUNDS TRUST, as of the 23rd day of June, 1998.
/s/ Linda S. Martinson
[SEAL]
AGENCY AGREEMENT
THIS AGREEMENT made the 23rd day of June, 1998, by and between BARON
CAPITAL FUNDS TRUST, and all series thereof, a business trust existing
under the laws of the State of Delaware, having its principal place of
business at 767 Fifth Avenue, New York, New York 10153 (the "Fund"), and
DST SYSTEMS, INC., a corporation existing under the laws of the State of
Delaware, having its principal place of business at 333 W. 11th St., 5th
Fl., Kansas City, Missouri 64105 ("DST"):
WITNESSETH:
Whereas, the Fund desires to appoint DST as Transfer Agent and
Dividend Disbursing Agent, and DST desires to accept such appointment;
Now, Therefore, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. Documents to be Filed with Appointment.
In connection with the appointment of DST as Transfer Agent and
Dividend Disbursing Agent for the Fund, there will be filed with DST the
following documents:
A. A certified copy of the resolutions of the Board of Directors of
the Fund appointing DST as Transfer Agent and Dividend Disbursing
Agent, approving the form of this Agreement, and designating
certain persons to sign stock certificates, if any, and give
written instructions and requests on behalf of the Fund;
B. A certified copy of the Articles of Incorporation of the Fund and
all amendments thereto;
C. A certified copy of the Bylaws of the Fund;
D. Copies of Registration Statements and amendments thereto, filed
with the Securities and Exchange Commission.
E. Specimens of all forms of outstanding stock certificates, in the
forms approved by the Board of Directors of the Fund, with a
certificate of the Secretary of the Fund, as to such approval;
F. Specimens of the signatures of the officers of the Fund
authorized to sign stock certificates and individuals authorized
to sign written instructions and requests;
G. An opinion of counsel for the Fund with respect to:
(1) The Fund's organization and existence under the laws of its
state of organization,
(2) The status of all shares of stock of the Fund covered by the
appointment under the Securities Act of 1933, as amended,
and any other applicable federal or state statute, and
(3) That all issued shares are, and all unissued shares will be,
when issued, validly issued, fully paid and nonassessable.
2. Certain Representations and Warranties of DST.
DST represents and warrants to the Fund that:
A. It is a corporation duly organized and existing and in good
standing under the laws of Delaware.
B. It is duly qualified to carry on its business in the State of
Missouri.
C. It is empowered under applicable laws and by its Articles of
Incorporation and Bylaws to enter into and perform the services
contemplated in this Agreement.
D. It is registered as a transfer agent to the extent required under
the Securities Exchange Act of 1934.
E. All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
F. It has and will continue to have and maintain the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
3. Certain Representations and Warranties of the Fund.
The Fund represents and warrants to DST that:
A. It is a business trust duly organized and existing and in good
standing under the laws of the State of Delaware .
B. It is an open-end diversified management investment company
registered under the Investment Company Act of 1940, as amended.
C. A registration statement under the Securities Act of 1933 has
been filed and will be effective with respect to all shares of
the Fund being offered for sale.
D. All requisite steps have been and will continue to be taken to
register the Fund's shares for sale in all applicable states and
such registration will be effective at all times shares are
offered for sale in such state.
E. The Fund is empowered under applicable laws and by its charter
and Bylaws to enter into and perform this Agreement.
4. Scope of Appointment.
A. Subject to the conditions set forth in this Agreement, the Fund
hereby appoints DST as Transfer Agent and Dividend Disbursing
Agent.
B. DST hereby accepts such appointment and agrees that it will act
as the Fund's Transfer Agent and Dividend Disbursing Agent. DST
agrees that it will also act as agent in connection with the
Fund's periodic withdrawal payment accounts and other open
accounts or similar plans for shareholders, if any.
C. The Fund agrees to use its reasonable efforts to deliver to DST
in Kansas City, Missouri, as soon as they are available, all of
its shareholder account records.
D. DST, utilizing TA2000TM, DST's computerized data processing
system for security holder accounting (the "TA2000 System"), will
perform the following services as transfer and dividend
disbursing agent for the Fund, and as agent of the Fund for
shareholder accounts thereof, in a timely manner: (i) issuing
(including countersigning), transferring and canceling share
certificates; (ii) maintaining on the TA2000 System shareholder
accounts; (iii) accepting and effectuating the registration and
maintenance of accounts through Networking and the purchase,
redemption, transfer and exchange of shares in such accounts
through Fund/SERV (Networking and Fund/SERV being programs
operated by the National Securities Clearing Corporation ("NSCC")
on behalf of NSCC's participants, including the Funds), in
accordance with instructions transmitted to and received by DST
by transmission from NSCC on behalf of broker-dealers and banks
which have been established by, or in accordance with the
instructions of, an Authorized Person, as hereinafter defined, on
the Dealer File maintained by DST; (iv) issuing instructions to
the Funds' banks for the settlement of transactions between the
Funds and NSCC (acting on behalf of its broker-dealer and bank
participants); (v) providing account and transaction information
from each affected Fund's records on TA2000 in accordance with
NSCC's Networking and Fund/SERV rules for those broker-dealers;
(vi) maintaining shareholder accounts on TA2000 through
Networking; (vii) providing transaction journals; (viii) once
annually preparing shareholder meeting lists for use in
connection with the annual meeting and certifying a copy of such
list; (ix) mailing shareholder reports and prospectuses; (x)
withholding, as required by federal law, taxes on shareholder
accounts, preparing, filing and mailing U.S. Treasury Department
Forms 1099, 1042, and 1042S and performing and paying backup
withholding as required for all shareholders; (xi) disbursing
income dividends and capital gains distributions to shareholders
and recording reinvestment of dividends and distributions in
shares of the Fund; (xii) preparing and mailing confirmation
forms to shareholders and dealers, as instructed, for all
purchases and liquidations of shares of the Fund and other
confirmable transactions in shareholders' accounts; (xiii)
providing or making available on-line daily and monthly reports
as provided by the TA2000 System and as requested by the Fund or
its management company; (xiv) maintaining those records necessary
to carry out DST's duties hereunder, including all information
reasonably required by the Fund to account for all transactions
in the Fund shares; (xv) calculating the appropriate sales charge
with respect to each purchase of the Fund shares as instructed by
an Authorized Person, as hereinafter defined, determining the
portion of each sales charge payable to the dealer participating
in a sale in accordance with schedules and instructions delivered
to DST by the Fund's principal underwriter or distributor
(hereinafter "principal underwriter") or an Authorized Person
from time to time, disbursing dealer commissions collected to
such dealers, determining the portion of each sales charge
payable to such principal underwriter and disbursing such
commissions to the principal underwriter; (xvi) receiving
correspondence pertaining to any former, existing or new
shareholder account, processing such correspondence for proper
record keeping, and responding promptly to shareholder
correspondence; mailing to dealers confirmations of wire order
trades; mailing copies of shareholder statements to shareholders
and registered representatives of dealers in accordance with the
instructions of an Authorized Person; (xvii) processing,
generally on the date of receipt, purchases or redemptions or
instructions to settle any mail or wire order purchases or
redemptions received in proper order as set forth in the
prospectus, rejecting promptly any requests not received in
proper order (as defined by an Authorized Person or the
Procedures as hereinafter defined), and causing exchanges of
shares to be executed in accordance with the instructions of
Authorized Persons, the applicable prospectus and the general
exchange privilege applicable; (xix) providing to the person
designated by an Authorized Person the daily Blue Sky reports
generated by the Blue Sky module of TA2000 with respect to
purchases of shares of the Funds on TA2000; and (xx) providing to
the Fund escheatment reports as requested by an Authorized Person
with respect to the status of accounts and outstanding checks on
TA2000.
E. At the request of an Authorized Person, DST shall use reasonable
efforts to provide the services set forth in Section 4.D. in
connection with transactions (i) on behalf of retirement plans
and participants in retirement plans and transactions ordered by
brokers as part of a "no transaction fee" program ("NTF"), the
processing of which transactions require DST to use methods and
procedures other than those usually employed by DST to perform
shareholder servicing agent services, (ii) involving the
provision of information to DST after the commencement of the
nightly processing cycle of the TA2000 System or (iii) which
require more manual intervention by DST, either in the entry of
data or in the modification or amendment of reports generated by
the TA2000 System than is usually required by non-retirement
plan, non-NTF and pre-nightly transactions, (the "Exception
Services").
F. DST shall use reasonable efforts to provide, reasonably promptly
under the circumstances, the same services with respect to any
new, additional functions or features or any changes or
improvements to existing functions or features as provided for in
the Fund's instructions, prospectus or application as amended
from time to time, for the Fund provided (i) DST is advised in
advance by the Fund of any changes therein and (ii) the TA2000
System and the mode of operations utilized by DST as then
constituted supports such additional functions and features. If
any addition to, improvement of or change in the features and
functions currently provided by the TA2000 System or the
operations as requested by the Fund requires an enhancement or
modification to the TA2000 System or to operations as presently
conducted by DST, DST shall not be liable therefore until such
modification or enhancement is installed on the TA2000 System or
new mode of operation is instituted. If any new, additional
function or feature or change or improvement to existing
functions or features or new service or mode of operation
measurably increases DST's cost of performing the services
required hereunder at the current level of service, DST shall
advise the Fund of the amount of such increase and if the Fund
elects to utilize such function, feature or service, DST shall be
entitled to increase its fees by the amount of the increase in
costs. In no event shall DST be responsible for or liable to
provide any additional function, feature, improvement or change
in method of operation until it has consented thereto in writing.
G. The Fund shall have the right to add new series to the TA2000
System upon at least thirty (30) days' prior written notice to
DST provided that the requirements of the new series are
generally consistent with services then being provided by DST
under this Agreement. Rates or charges for additional series
shall be as set forth in Exhibit A, as hereinafter defined, for
the remainder of the contract term except as such series use
functions, features or characteristics for which DST has imposed
an additional charge as part of its standard pricing schedule.
In the latter event, rates and charges shall be in accordance
with DST's then-standard pricing schedule.
5. Limit of Authority.
Unless otherwise expressly limited by the resolution of appointment or
by subsequent action by the Fund, the appointment of DST as Transfer
Agent will be construed to cover the full amount of authorized stock
of the class or classes for which DST is appointed as the same will,
from time to time, be constituted, and any subsequent increases in
such authorized amount.
In case of such increase the Fund will file with DST:
A. If the appointment of DST was theretofore expressly limited, a
certified copy of a resolution of the Board of Directors of the
Fund increasing the authority of DST;
B. A certified copy of the amendment to the Articles of
Incorporation of the Fund authorizing the increase of stock;
C. A certified copy of the order or consent of each governmental or
regulatory authority required by law to consent to the issuance
of the increased stock, and an opinion of counsel that the order
or consent of no other governmental or regulatory authority is
required;
D. Opinion of counsel for the Fund stating:
(1) The status of the additional shares of stock of the Fund
under the Securities Act of 1933, as amended, and any other
applicable federal or state statute; and
(2) That the additional shares are, or when issued will be,
validly issued, fully paid and nonassessable.
6. Compensation and Expenses.
A. In consideration for its services hereunder as Transfer Agent and
Dividend Disbursing Agent, the Fund will pay to DST from time to
time a reasonable compensation for all services rendered as
Agent, and also, all its reasonable billable expenses, charges,
counsel fees, and other disbursements ("Compensation and
Expenses") incurred in connection with the agency. Such
compensation is set forth in a separate schedule to be agreed to
by the Fund and DST, a copy of which is attached hereto as
Exhibit A. If the Fund has not paid such Compensation and
Expenses to DST within a reasonable time, DST may charge against
any monies held under this Agreement, the amount of any
Compensation and/or Expenses for which it shall be entitled to
reimbursement under this Agreement.
B. The Fund also agrees promptly to reimburse DST for all reasonable
billable expenses or disbursements incurred by DST in connection
with the performance of services under this Agreement including,
but not limited to, expenses for postage, express delivery
services, freight charges, envelopes, checks, drafts, forms
(continuous or otherwise), specially requested reports and
statements, telephone calls, telegraphs, stationery supplies,
counsel fees, outside printing and mailing firms (including
Output Technology, Inc. and Support Resources, Inc.), magnetic
tapes, reels or cartridges (if sent to the Fund or to a third
party at the Fund's request) and magnetic tape handling charges,
off-site record storage, media for storage of records (e.g.,
microfilm, microfiche, optical platters, computer tapes),
computer equipment installed at the Fund's request at the Fund's
or a third party's premises, telecommunications equipment,
telephone/telecommunication lines between the Fund and its
agents, on one hand, and DST on the other, proxy soliciting,
processing and/or tabulating costs, second-site backup computer
facility, transmission of statement data for remote printing or
processing, and National Securities Clearing Corporation ("NSCC")
transaction fees to the extent any of the foregoing are paid by
DST. The Fund agrees to pay postage expenses at least one day in
advance if so requested. In addition, any other expenses
incurred by DST at the request or with the consent of the Fund
will be promptly reimbursed by the Fund.
C. Amounts due hereunder shall be due and paid on or before the
thirtieth (30th) business day after receipt of the statement
therefor by the Fund (the "Due Date"). The Fund is aware that
its failure to pay all amounts in a timely fashion so that they
will be received by DST on or before the Due Date will give rise
to costs to DST not contemplated by this Agreement, including but
not limited to carrying, processing and accounting charges.
Accordingly, subject to Section 6.D. hereof, in the event that
any amounts due hereunder are not received by DST by the Due
Date, the Fund shall pay a late charge equal to the lesser of the
maximum amount permitted by applicable law or the product of that
rate announced from time to time by State Street Bank and Trust
Company as its "Prime Rate" plus three (3) percentage points
times the amount overdue, times the number of days from the Due
Date up to and including the day on which payment is received by
DST divided by 365. The parties hereby agree that such late
charge represents a fair and reasonable computation of the costs
incurred by reason of late payment or payment of amounts not
properly due. Acceptance of such late charge shall in no event
constitute a waiver of the Fund's or DST's default or prevent the
non-defaulting party from exercising any other rights and
remedies available to it.
D. In the event that any charges are disputed, the Fund shall, on or
before the Due Date, pay all undisputed amounts due hereunder and
notify DST in writing of any disputed charges for billable
expenses which it is disputing in good faith. Payment for such
disputed charges shall be due on or before the close of the fifth
(5th) business day after the day on which DST provides to the
Fund documentation which an objective observer would agree
reasonably supports the disputed charges (the "Revised Due
Date"). Late charges shall not begin to accrue as to charges
disputed in good faith until the first business day after the
Revised Due Date.
E. The fees and charges set forth on Exhibit A shall increase or may
be increased as follows:
(1) On the first day of each new term, in accordance with the
"Fee Increases" provision in Exhibit A;
(2) DST may increase the fees and charges set forth on Exhibit A
upon at least ninety (90) days prior written notice, if
changes in existing laws, rules or regulations: (i) require
substantial system modifications or (ii) materially increase
cost of performance hereunder;
(3) DST may charge for additional features of TA2000 used by the
Fund which features are not consistent with the Fund's
current processing requirements; and
(4) In the event DST, at the Fund's request or direction,
performs Exception Services, DST shall be entitled to
increase the fees and charges for such Exception Services
from those set forth on Exhibit A to the extent such
Exception Services increase DST's cost of performance.
If DST notifies the Fund of an increase in fees or charges
pursuant to subparagraph (2) of this Section 6.E., the parties shall
confer, diligently and in good faith and agree upon a new fee to cover
the amount necessary, but not more than such amount, to reimburse DST
for the Fund's aliquot portion of the cost of developing the new
software to comply with regulatory charges and for the increased cost
of operation.
If DST notifies the Fund of an increase in fees or charges under
subparagraphs (3) or (4) of this Section 6.E., the parties shall
confer, diligently and in good faith, and agree upon a new fee to
cover such new fund feature.
7. Operation of DST System.
In connection with the performance of its services under this
Agreement, DST is responsible for such items as:
A. That entries in DST's records, and in the Fund's records on the
TA2000 System created by DST, reflect the orders, instructions,
and other information received by DST from the Fund, the Fund's
distributor, manager or principal underwriter, the Fund's
investment adviser, the Fund's sponsor, the Fund's custodian, or
the Fund's administrator (each an "Authorized Person"), broker-
dealers or shareholders;
B. That shareholder lists, shareholder account verifications,
confirmations and other shareholder account information to be
produced from its records or data be available and accurately
reflect the data in the Fund's records on the TA2000 System;
C. The accurate and timely issuance of dividend and distribution
checks in accordance with instructions received from the Fund and
the data in the Fund's records on the TA2000 System;
D. That redemption transactions and payments be effected timely,
under normal circumstances on the day of receipt, and accurately
in accordance with redemption instructions received by DST from
Authorized Persons, broker-dealers or shareholders and the data
in the Fund's records on the TA2000 System;
E. The deposit daily in the Fund's appropriate special bank account
of all checks and payments received by DST from NSCC, broker-
dealers or shareholders for investment in shares;
F. Notwithstanding anything herein to the contrary, with respect to
"as of" adjustments, DST will not assume one hundred percent
(100%) responsibility for losses resulting from "as ofs" due to
clerical errors or misinterpretations of shareholder
instructions, but DST will discuss with the Fund DST's accepting
liability for an "as of" on a case-by-case basis and may accept
financial responsibility for a particular situation resulting in
a financial loss to the Fund where DST in its discretion deems
that to be appropriate;
G. The requiring of proper forms of instructions, signatures and
signature guarantees and any necessary documents supporting the
opening of shareholder accounts, transfers, redemptions and other
shareholder account transactions, all in conformance with DST's
present procedures as set forth in its Legal Manual, Third Party
Check Procedures, Check writing Draft Procedures, and Signature
Guarantee Procedures (collectively the "Procedures") with such
changes or deviations therefrom as may be from time to time
required or approved by the Fund, its investment adviser or
principal underwriter, or its or DST's counsel and the rejection
of orders or instructions not in good order in accordance with
the applicable prospectus or the Procedures;
H. The maintenance of customary records in connection with its
agency, and particularly those records required to be maintained
pursuant to subparagraph (2)(iv) of paragraph (b) of Rule 31a-1
under the Investment Company Act of 1940, if any; and
I. The maintenance of a current, duplicate set of the Fund's
essential records at a secure separate location, in a form
available and usable forthwith in the event of any breakdown or
disaster disrupting its main operation.
8. Indemnification.
A. DST shall at all times use reasonable care, due diligence and act
in good faith in performing its duties under this Agreement. DST
shall provide its services as Transfer Agent in accordance with
Section 17A of the Securities Exchange Act of 1934, and the rules
and regulations thereunder. In the absence of bad faith, willful
misconduct, knowing violations of applicable law pertaining to
the manner in which transfer agency services are to be performed
by DST (excluding any violations arising directly or indirectly
out of the actions or omissions to act of third parties
unaffiliated with DST), reckless disregard of the performance of
its duties, or negligence on its part, DST shall not be liable
for any action taken, suffered, or omitted by it or for any error
of judgment made by it in the performance of its duties under
this Agreement. For those activities or actions delineated in
the Procedures, DST shall be presumed to have used reasonable
care, due diligence and acted in good faith if it has acted in
accordance with the Procedures, copies of which have been
provided to the Fund and reviewed and approved by the Fund's
counsel, as amended from time to time with approval of counsel,
or for any deviation therefrom approved by the Fund or DST
counsel.
B. DST shall not be responsible for, and the Fund shall indemnify
and hold DST harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and
liability which may be asserted against DST or for which DST may
be held to be liable, arising out of or attributable to:
(1) All actions of DST required to be taken by DST pursuant to
this Agreement, provided that DST has acted in good faith
and with due diligence and reasonable care;
(2) The Fund's refusal or failure to comply with the terms of
this Agreement, the Fund's negligence or willful misconduct,
or the breach of any representation or warranty of the Fund
hereunder;
(3) The good faith reliance on, or the carrying out of, any
written or oral instructions or requests of persons
designated by the Fund in writing (see Exhibit B) from time
to time as authorized to give instructions on its behalf or
representatives of an Authorized Person or DST's good faith
reliance on, or use of, information, data, records and
documents received from, or which have been prepared and/or
maintained by the Fund, its investment advisor, its sponsor
or its principal underwriter;
(4) Defaults by dealers or shareowner with respect to payment
for share orders previously entered;
(5) The offer or sale of the Fund's shares in violation of any
requirement under federal securities laws or regulations or
the securities laws or regulations of any state or in
violation of any stop order or other determination or ruling
by any federal agency or state with respect to the offer or
sale of such shares in such state (unless such violation
results from DST's failure to comply with written
instructions of the Fund or of any officer of the Fund that
no offers or sales be input into the Fund's security holder
records in or to residents of such state);
(6) The Fund's errors and mistakes in the use of the TA2000
System, the data center, computer and related equipment used
to access the TA2000 System (the "DST Facilities"), and
control procedures relating thereto in the verification of
output and in the remote input of data;
(7) Errors, inaccuracies, and omissions in, or errors,
inaccuracies or omissions of DST arising out of or resulting
from such errors, inaccuracies and omissions in, the Fund's
records, shareholder and other records, delivered to DST
hereunder by the Fund or its prior agent(s);
(8) Actions or omissions to act by the Fund or agents designated
by the Fund with respect to duties assumed thereby as
provided for in Section 21 hereof; and
(9) DST's performance of Exception Services except where DST
acted or omitted to act in bad faith, with reckless
disregard of its obligations or with gross negligence.
C. Except where DST is entitled to indemnification under Section
8.B. hereof and with respect to "as ofs" set forth in Section
7.F., DST shall indemnify and hold the Fund harmless from and
against any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liability arising out of DST's
failure to comply with the terms of this Agreement or arising out
of or attributable to DST's negligence or willful misconduct or
breach of any representation or warranty of DST hereunder.
D. EXCEPT FOR VIOLATIONS OF SECTION 23, IN NO EVENT AND UNDER NO
CIRCUMSTANCES SHALL EITHER PARTY TO THIS AGREEMENT BE LIABLE TO
ANYONE, INCLUDING, WITHOUT LIMITATION TO THE OTHER PARTY, FOR
CONSEQUENTIAL DAMAGES FOR ANY ACT OR FAILURE TO ACT UNDER ANY
PROVISION OF THIS AGREEMENT EVEN IF ADVISED OF THE POSSIBILITY
THEREOF.
E. Promptly after receipt by an indemnified person of notice of the
commencement of any action, such indemnified person will, if a
claim in respect thereto is to be made against an indemnifying
party hereunder, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the
indemnifying party will not relieve an indemnifying party from
any liability that it may have to any indemnified person for
contribution or otherwise under the indemnity agreement contained
herein except to the extent it is prejudiced as a proximate
result of such failure to timely notify. In case any such action
is brought against any indemnified person and such indemnified
person seeks or intends to seek indemnity from an indemnifying
party, the indemnifying party will be entitled to participate in,
and, to the extent that it may wish, assume the defense thereof
(in its own name or in the name and on behalf of any indemnified
party or both with counsel reasonably satisfactory to such
indemnified person); provided, however, if the defendants in any
such action include both the indemnified person and an
indemnifying party and the indemnified person shall have
reasonably concluded that there may be a conflict between the
positions of the indemnified person and an indemnifying party in
conducting the defense of any such action or that there may be
legal defenses available to it and/or other indemnified persons
which are inconsistent with those available to an indemnifying
party, the indemnified person or indemnified persons shall have
the right to select one separate counsel (in addition to local
counsel) to assume such legal defense and to otherwise
participate in the defense of such action on behalf of such
indemnified person or indemnified persons at such indemnified
party's sole expense. Upon receipt of notice from an
indemnifying party to such indemnified person of its election so
to assume the defense of such action and approval by the
indemnified person of counsel, which approval shall not be
unreasonably withheld (and any disapproval shall be accompanied
by a written statement of the reasons therefor), the indemnifying
party will not be liable to such indemnified person hereunder for
any legal or other expenses subsequently incurred by such
indemnified person in connection with the defense thereof. An
indemnifying party will not settle or compromise or consent to
the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether
or not the indemnified persons are actual or potential parties to
such claim, action, suit or proceeding) unless such settlement,
compromise or consent includes an unconditional release of each
indemnified person from all liability arising out of such claim,
action, suit or proceeding. An indemnified party will not,
without the prior written consent of the indemnifying party
settle or compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution
may be sought hereunder. If it does so, it waives its right to
indemnification therefor.
9. Certain Covenants of DST and the Fund.
A. All requisite steps will be taken by the Fund from time to time
when and as necessary to register the Fund's shares for sale in
all states in which the Fund's shares shall at the time be
offered for sale and require registration. If at any time the
Fund will receive notice of any stop order or other proceeding in
any such state affecting such registration or the sale of the
Fund's shares, or of any stop order or other proceeding under the
federal securities laws affecting the sale of the Fund's shares,
the Fund will give prompt notice thereof to DST.
B. DST hereby agrees to perform such transfer agency functions as
are set forth in Section 4.D. above and establish and maintain
facilities and procedures reasonably acceptable to the Fund for
safekeeping of stock certificates, check forms, and facsimile
signature imprinting devices, if any; and for the preparation or
use, and for keeping account of, such certificates, forms and
devices, and to carry such insurance as it considers adequate and
reasonably available.
C. To the extent required by Section 31 of the Investment Company
Act of 1940 as amended and Rules thereunder, DST agrees that all
records maintained by DST relating to the services to be
performed by DST under this Agreement are the property of the
Fund and will be preserved and will be surrendered promptly to
the Fund on request.
D. DST agrees to furnish the Fund annual reports of its financial
condition, consisting of a balance sheet, earnings statement and
any other financial information reasonably requested by the Fund.
The annual financial statements will be certified by DST's
certified public accountants.
E. DST represents and agrees that it will use its reasonable efforts
to keep current on the trends of the investment company industry
relating to shareholder services and will use its reasonable
efforts to continue to modernize and improve.
F. DST will permit the Fund and its authorized representatives to
make periodic inspections of its operations as such would involve
the Fund at reasonable times during business hours.
G. DST agrees to use its reasonable efforts to provide in Kansas
City at the Fund's expense two (2) man weeks of training for the
Fund's personnel in connection with use and operation of the
TA2000 System. All travel and reimbursable expenses incurred by
the Fund's personnel in connection with and during training at
DST's Facility shall be borne by the Fund. At the Fund's option
and expense, DST also agrees to use its reasonable efforts to
provide an additional two (2) man weeks of training at the Fund's
facility for the Fund's personnel in connection with the
conversion to the TA2000 System. Reasonable travel, per diem and
reimbursable expenses incurred by DST personnel in connection
with and during training at the Fund's facility or in connection
with the conversion shall be borne by the Fund.
10. Recapitalization or Readjustment.
In case of any recapitalization, readjustment or other change in the
capital structure of the Fund requiring a change in the form of stock
certificates, DST will issue or register certificates in the new form
in exchange for, or in transfer of, the outstanding certificates in
the old form, upon receiving:
A. Written instructions from an officer of the Fund;
B. Certified copy of the amendment to the Articles of Incorporation
or other document effecting the change;
C. Certified copy of the order or consent of each governmental or
regulatory authority, required by law to the issuance of the
stock in the new form, and an opinion of counsel that the order
or consent of no other government or regulatory authority is
required;
D. Specimens of the new certificates in the form approved by the
Board of Directors of the Fund, with a certificate of the
Secretary of the Fund as to such approval;
E. Opinion of counsel for the Fund stating:
(1) The status of the shares of stock of the Fund in the new
form under the Securities Act of 1933, as amended and any
other applicable federal or state statute; and
(2) That the issued shares in the new form are, and all unissued
shares will be, when issued, validly issued, fully paid and
nonassessable.
11. Stock Certificates.
The Fund will furnish DST with a sufficient supply of blank stock
certificates and from time to time will renew such supply upon the
request of DST. Such certificates will be signed manually or by
facsimile signatures of the officers of the Fund authorized by law and
by bylaws to sign stock certificates, and if required, will bear the
corporate seal or facsimile thereof.
12. Death, Resignation or Removal of Signing Officer.
The Fund will file promptly with DST written notice of any change in
the officers authorized to sign stock certificates, written
instructions or requests, together with two signature cards bearing
the specimen signature of each newly authorized officer. In case any
officer of the Fund who will have signed manually or whose facsimile
signature will have been affixed to blank stock certificates will die,
resign, or be removed prior to the issuance of such certificates, DST
may issue or register such stock certificates as the stock
certificates of the Fund notwithstanding such death, resignation, or
removal, until specifically directed to the contrary by the Fund in
writing. In the absence of such direction, the Fund will file
promptly with DST such approval, adoption, or ratification as may be
required by law.
13. Future Amendments of Charter and Bylaws.
The Fund will promptly file with DST copies of all material amendments
to its Articles of Incorporation or Bylaws made after the date of this
Agreement.
14. Instructions, Opinion of Counsel and Signatures.
At any time DST may apply to any person authorized by the Fund to give
instructions to DST, and may with the approval of a Fund officer
consult with legal counsel for the Fund, or DST's own legal counsel at
the expense of the Fund, with respect to any matter arising in
connection with the agency and it will not be liable for any action
taken or omitted by it in good faith in reliance upon such
instructions or upon the opinion of such counsel. DST will be
protected in acting upon any paper or document reasonably believed by
it to be genuine and to have been signed by the proper person or
persons and will not be held to have notice of any change of authority
of any person, until receipt of written notice thereof from the Fund.
It will also be protected in recognizing stock certificates which it
reasonably believes to bear the proper manual or facsimile signatures
of the officers of the Fund, and the proper countersignature of any
former Transfer Agent or Registrar, or of a co-Transfer Agent or co-
Registrar.
15. Force Majeure and Disaster Recovery Plans.
A. DST shall not be responsible or liable for its failure or delay
in performance of its obligations under this Agreement arising
out of or caused, directly or indirectly, by circumstances beyond
its reasonable control, including, without limitation: any
interruption, loss or malfunction or any utility, transportation,
computer (hardware or software) or communication service;
inability to obtain labor, material, equipment or transportation,
or a delay in mails; governmental or exchange action, statute,
ordinance, rulings, regulations or direction; war, strike, riot,
emergency, civil disturbance, terrorism, vandalism, explosions,
labor disputes, freezes, floods, fires, tornados, acts of God or
public enemy, revolutions, or insurrection; or any other cause,
contingency, circumstance or delay not subject to DST's
reasonable control which prevents or hinders DST's performance
hereunder.
B. DST currently maintains an agreement with a third party whereby
DST is to be permitted to use on a "shared use" basis a "hot
site" (the "Recovery Facility") maintained by such party in event
of a disaster rendering the DST Facilities inoperable. DST has
developed and is continually revising a business contingency plan
(the "Business Contingency Plan") detailing which, how, when, and
by whom data maintained by DST at the DST Facilities will be
installed and operated at the Recovery Facility. Provided the
Fund is paying its pro rata portion of the charge therefor, DST
would, in event of a disaster rendering the DST Facilities
inoperable, use reasonable efforts to convert the TA2000 System
containing the designated the Fund data to the computers at the
Recovery Facility in accordance with the then current Business
Contingency Plan.
C. DST also currently maintains, separate from the area in which the
operations which provides the services to the Fund hereunder are
located, a Crisis Management Center consisting of phones,
computers and the other equipment necessary to operate a full
service transfer agency business in the event one of its
operations areas is rendered inoperable. The transfer of
operations to other operating areas or to the Crisis Management
Center is also covered in DST's Business Contingency Plan.
16. Certification of Documents.
The required copy of the Articles of Incorporation of the Fund and
copies of all amendments thereto will be certified by the Secretary of
State (or other appropriate official) of the State of Incorporation,
and if such Articles of Incorporation and amendments are required by
law to be also filed with a county, city or other officer of official
body, a certificate of such filing will appear on the certified copy
submitted to DST. A copy of the order or consent of each governmental
or regulatory authority required by law to the issuance of the stock
will be certified by the Secretary or Clerk of such governmental or
regulatory authority, under proper seal of such authority. The copy
of the Bylaws and copies of all amendments thereto, and copies of
resolutions of the Board of Directors of the Fund, will be certified
by the Secretary or an Assistant Secretary of the Fund under the
Fund's seal.
17. Records.
DST will maintain customary records in connection with its agency, and
particularly will maintain those records required to be maintained
pursuant to subparagraph (2) (iv) of paragraph (b) of Rule 31a-1 under
the Investment Company Act of 1940, if any.
18. Disposition of Books, Records and Canceled Certificates.
DST may send periodically to the Fund, or to where designated by the
Secretary or an Assistant Secretary of the Fund, all books, documents,
and all records no longer deemed needed for current purposes and stock
certificates which have been canceled in transfer or in exchange, upon
the understanding that such books, documents, records, and stock
certificates will be maintained by the Fund under and in accordance
with the requirements of Section 17Ad-7 adopted under the Securities
Exchange Act of 1934, including by way of example and not limitation
Section 17Ad-7(g) thereof. Such materials will not be destroyed by
the Fund without the consent of DST (which consent will not be
unreasonably withheld), but will be safely stored for possible future
reference.
19. Provisions Relating to DST as Transfer Agent.
A. DST will make original issues of stock certificates upon written
request of an officer of the Fund and upon being furnished with a
certified copy of a resolution of the Board of Directors
authorizing such original issue, an opinion of counsel as
outlined in subparagraphs 1.D. and G. of this Agreement, any
documents required by Sections 5. or 10. of this Agreement, and
necessary funds for the payment of any original issue tax.
B. Before making any original issue of certificates the Fund will
furnish DST with sufficient funds to pay all required taxes on
the original issue of the stock, if any. The Fund will furnish
DST such evidence as may be required by DST to show the actual
value of the stock. If no taxes are payable DST will be
furnished with an opinion of outside counsel to that effect.
C. Shares of stock will be transferred and new certificates issued
in transfer, or shares of stock accepted for redemption and funds
remitted therefor, or book entry transfer be effected, upon
surrender of the old certificates in form or receipt by DST of
instructions deemed by DST properly endorsed for transfer or
redemption accompanied by such documents as DST may deem
necessary to evidence the authority of the person making the
transfer or redemption. DST reserves the right to refuse to
transfer or redeem shares until it is satisfied that the
endorsement or signature on the certificate or any other document
is valid and genuine, and for that purpose it may require a
guaranty of signature in accordance with the Signature Guarantee
Procedures. DST also reserves the right to refuse to transfer or
redeem shares until it is satisfied that the requested transfer
or redemption is legally authorized, and it will incur no
liability for the refusal in good faith to make transfers or
redemptions which, in its judgment, are improper or unauthorized.
DST may, in effecting transfers or redemptions, rely upon the
Procedures, Simplification Acts, Uniform Commercial Code or other
statutes which protect it and the Fund in not requiring complete
fiduciary documentation. In cases in which DST is not directed
or otherwise required to maintain the consolidated records of
shareholder's accounts, DST will not be liable for any loss which
may arise by reason of not having such records.
D. When mail is used for delivery of stock certificates, DST will
forward stock certificates in "nonnegotiable" form by first class
or registered mail and stock certificates in "negotiable" form by
registered mail, all such mail deliveries to be covered while in
transit to the addressee by insurance arranged for by DST.
E. DST will issue and mail subscription warrants, certificates
representing stock dividends, exchanges or split ups, or act as
Conversion Agent upon receiving written instructions from any
officer of the Fund and such other documents as DST deems
necessary.
F. DST will issue, transfer, and split up certificates and will
issue certificates of stock representing full shares upon
surrender of scrip certificates aggregating one full share or
more when presented to DST for that purpose upon receiving
written instructions from an officer of the Fund and such other
documents as DST may deem necessary.
G. DST may issue new certificates in place of certificates
represented to have been lost, destroyed, stolen or otherwise
wrongfully taken upon receiving instructions from the Fund and
indemnity satisfactory to DST and the Fund, and may issue new
certificates in exchange for, and upon surrender of, mutilated
certificates. Such instructions from the Fund will be in such
form as will be approved by the Board of Directors of the Fund
and will be in accordance with the provisions of law and the
bylaws of the Fund governing such matter.
H. DST will supply a shareholder's list to the Fund for its annual
meeting upon receiving a request from an officer of the Fund. It
will also, at the expense of the Fund, supply lists at such other
times as may be requested by an officer of the Fund.
I. Upon receipt of written instructions of an officer of the Fund,
DST will, at the expense of the Fund, address and mail notices to
shareholders.
J. In case of any request or demand for the inspection of the stock
books of the Fund or any other books in the possession of DST,
DST will endeavor to notify the Fund and to secure instructions
as to permitting or refusing such inspection. DST reserves the
right, however, to exhibit the stock books or other books to any
person in case it is advised by its counsel that it may be held
responsible for the failure to exhibit the stock books or other
books to such person.
20. Provisions Relating to Dividend Disbursing Agency.
A. DST will, at the expense of the Fund, provide a special form of
check containing the imprint of any device or other matter
desired by the Fund. Said checks must, however, be of a form and
size convenient for use by DST.
B. If the Fund desires to include additional printed matter,
financial statements, etc., with the dividend checks, the same
will be furnished DST within a reasonable time prior to the date
of mailing of the dividend checks, at the expense of the Fund.
C. If the Fund desires its distributions mailed in any special form
of envelopes, sufficient supply of the same will be furnished to
DST but the size and form of said envelopes will be subject to
the approval of DST. If stamped envelopes are used, they must be
furnished by the Fund; or if postage stamps are to be affixed to
the envelopes, the stamps or the cash necessary for such stamps
must be furnished by the Fund.
D. DST shall establish and maintain on behalf of the Fund one or
more deposit accounts as Agent for the Fund, into which DST shall
deposit the funds DST receives for payment of dividends,
distributions, redemptions or other disbursements provided for
hereunder and to draw checks against such accounts.
E. DST is authorized and directed to stop payment of checks
theretofore issued hereunder, but not presented for payment, when
the payees thereof allege either that they have not received the
checks or that such checks have been mislaid, lost, stolen,
destroyed or through no fault of theirs, are otherwise beyond
their control, and cannot be produced by them for presentation
and collection, and, to issue and deliver duplicate checks in
replacement thereof.
21. Assumption of Duties By the Fund or Agents Designated By the Fund.
A. The Fund or its designated agents other than DST may assume
certain duties and responsibilities of DST or those services of
Transfer Agent and Dividend Disbursing Agent as those terms are
referred to in Section 4.D. of this Agreement including but not
limited to answering and responding to telephone inquiries from
shareholders and brokers, accepting shareholder and broker
instructions (either or both oral and written) and transmitting
orders based on such instructions to DST, preparing and mailing
confirmations, obtaining certified TIN numbers, classifying the
status of shareholders and shareholder accounts under applicable
tax law, establishing shareholder accounts on the TA2000 System
and assigning social codes and Taxpayer Identification Number
codes thereof, and disbursing monies of the Fund, said assumption
to be embodied in writing to be signed by both parties.
B. To the extent the Fund or its agent or affiliate assumes such
duties and responsibilities, DST shall be relieved from all
responsibility and liability therefor and is hereby indemnified
and held harmless against any liability therefrom and in the same
manner and degree as provided for in Section 8 hereof.
C. Initially the Fund or its designees shall be responsible for the
following: [LIST RESPONSIBILITIES OR DELETE AS APPROPRIATE.]
(i) answer and respond to phone calls from shareholders and
broker-dealers, and (ii) scan items into DST's AWDTM System as
such calls or items are received by the Fund, and (iii) enter and
confirm wire order trades.
22. Termination of Agreement.
A. This Agreement shall be in effect for an initial period of one
(1) year and thereafter may be terminated by either party upon
receipt of one (1) year's written notice from the other party,
provided, however, that the effective date of any termination
shall not occur during the period from December 15 through March
30 of any year to avoid adversely impacting year end.
B. Each party, in addition to any other rights and remedies, shall
have the right to terminate this Agreement forthwith upon the
occurrence at any time of any of the following events with
respect to the other party:
(1) The bankruptcy of the other party or its assigns or the
appointment of a receiver for the other party or its
assigns; or
(2) Failure by the other party or its assigns to perform its
duties in accordance with the Agreement, which failure
materially adversely affects the business operations of the
first party and which failure continues for thirty (30) days
after receipt of written notice from the first party.
C. In the event of termination, the Fund will promptly pay DST all
amounts due to DST hereunder. In addition, if this Agreement is
terminated by the Fund for any reason other than those set forth
in Section 22.B. hereof, then the Fund shall pay to DST a
termination fee equal to the lesser of (i) the aggregate of the
fees charged to the Fund during the previous six (6) calendar
months preceding receipt of the notice or (ii) the average
monthly fee over the preceding six (6) months times the number of
months remaining in the then current term after termination. If
the Fund shall not have been billed for six (6) months before
termination, the average monthly fee shall be calculated by
dividing the aggregate fees charged to the Fund during whatever
period it was billed by the number of months in that period and
that average monthly fee shall be multiplied by six (6) in order
to determine the aggregate fees in subparagraph 22.C.(i). In any
event, the effective date of any deconversion as a result of
termination hereof shall not occur during the period from
December 15th through March 30th of any year to avoid adversely
impacting year end.
D. In the event of termination, DST will use its reasonable efforts
to transfer the records of the Fund to the designated successor
transfer agent, to provide reasonable assistance to the Fund and
its designated successor transfer agent, and to provide other
information relating to its services provided hereunder (subject
to the recompense of DST for such assistance at its standard
rates and fees for personnel then in effect at that time);
provided, however, as used herein "reasonable assistance" and
"other information" shall not include assisting any new service
or system provider to modify, alter, enhance, or improve its
system or to improve, enhance, or alter its current system, or to
provide any new, functionality or to require DST to disclose any
DST Confidential Information, as hereinafter defined, or any
information which is otherwise confidential to DST.
23. Confidentiality.
A. DST agrees that, except as provided in the last sentence of
Section 19.J. hereof, or as otherwise required by law, DST will
keep confidential all records of and information in its
possession relating to the Fund or its shareholders or
shareholder accounts and will not disclose the same to any person
except at the request or with the consent of the Fund.
B. The Fund agrees to keep confidential all financial statements and
other financial records received from DST, the terms and
provisions of this Agreement, all accountant's reports relating
to DST, and all manuals, systems and other technical information
and data, not publicly disclosed, relating to DST's operations
and programs furnished to it by DST pursuant to this Agreement
and will not disclose the same to any person except at the
request or with the consent of DST.
C. (1) The Fund acknowledges that DST has proprietary rights in and
to the TA2000 System used to perform services hereunder
including, but not limited to the maintenance of shareholder
accounts and records, processing of related information and
generation of output, including, without limitation any
changes or modifications of the TA2000 System and any other
DST programs, data bases, supporting documentation, or
procedures (collectively "DST Confidential Information")
which the Fund's access to the TA2000 System or computer
hardware or software may permit the Fund or its employees or
agents to become aware of or to access and that the DST
Confidential Information constitutes confidential material
and trade secrets of DST. The Fund agrees to maintain the
confidentiality of the DST Confidential Information.
(2) The Fund acknowledges that any unauthorized use, misuse,
disclosure or taking of DST Confidential Information which
is confidential as provided by law, or which is a trade
secret, residing or existing internal or external to a
computer, computer system, or computer network, or the
knowing and unauthorized accessing or causing to be accessed
of any computer, computer system, or computer network, may
be subject to civil liabilities and criminal penalties under
applicable state law. The Fund will advise all of its
employees and agents who have access to any DST Confidential
Information or to any computer equipment capable of
accessing DST or DST hardware or software of the foregoing.
(3) The Fund acknowledges that disclosure of the DST
Confidential Information may give rise to an irreparable
injury to DST inadequately compensable in damages.
Accordingly, DST may seek (without the posting of any bond
or other security) injunctive relief against the breach of
the foregoing undertaking of confidentiality and
nondisclosure, in addition to any other legal remedies which
may be available, and the Fund consents to the obtaining of
such injunctive relief. All of the undertakings and
obligations relating to confidentiality and nondisclosure,
whether contained in this Section or elsewhere in this
Agreement shall survive the termination or expiration of
this Agreement for a period of ten (10) years.
24. Changes and Modifications.
A. During the term of this Agreement DST will use on behalf of the
Fund without additional cost all modifications, enhancements, or
changes which DST may make to the TA2000 System in the normal
course of its business and which are applicable to functions and
features offered by the Fund, unless substantially all DST
clients are charged separately for such modifications,
enhancements or changes, including, without limitation,
substantial system revisions or modifications necessitated by
changes in existing laws, rules or regulations. The Fund agrees
to pay DST promptly for modifications and improvements which are
charged for separately at the rate provided for in DST's standard
pricing schedule which shall be identical for substantially all
clients, if a standard pricing schedule shall exist. If there is
no standard pricing schedule, the parties shall mutually agree
upon the rates to be charged.
B. DST shall have the right, at any time and from time to time, to
alter and modify any systems, programs, procedures or facilities
used or employed in performing its duties and obligations
hereunder; provided that the Fund will be notified as promptly as
possible prior to implementation of such alterations and
modifications and that no such alteration or modification or
deletion shall materially adversely change or affect the
operations and procedures of the Fund in using or employing the
TA2000 System or DST Facilities hereunder or the reports to be
generated by such system and facilities hereunder, unless the
Fund is given thirty (30) days prior notice to allow the Fund to
change its procedures and DST provides the Fund with revised
operating procedures and controls.
C. All enhancements, improvements, changes, modifications or new
features added to the TA2000 System however developed or paid for
shall be, and shall remain, the confidential and exclusive
property of, and proprietary to, DST.
25. Subcontractors.
Nothing herein shall impose any duty upon DST in connection with or
make DST liable for the actions or omissions to act of unaffiliated
third parties such as, by way of example and not limitation, Airborne
Services, the U.S. mails and telecommunication companies, provided, if
DST selected such company, DST shall have exercised due care in
selecting the same.
26. Limitations on Liability.
A. If the Fund is comprised of more than one Portfolio, each
Portfolio shall be regarded for all purposes hereunder as a
separate party apart from each other Portfolio. Unless the
context otherwise requires, with respect to every transaction
covered by this Agreement, every reference herein to the Fund
shall be deemed to relate solely to the particular Portfolio to
which such transaction relates. Under no circumstances shall the
rights, obligations or remedies with respect to a particular
Portfolio constitute a right, obligation or remedy applicable to
any other Portfolio. The use of this single document to
memorialize the separate agreement of each Portfolio is
understood to be for clerical convenience only and shall not
constitute any basis for joining the Portfolios for any reason.
B. Notice is hereby given that a copy of the Fund's Trust Agreement
and all amendments thereto is on file with the Secretary of State
of the state of its organization; that this Agreement has been
executed on behalf of the Fund by the undersigned duly authorized
representative of the Fund in his/her capacity as such and not
individually; and that the obligations of this Agreement shall
only be binding upon the assets and property of the Fund and
shall not be binding upon any trustee, officer or shareholder of
the Fund individually.
27. Miscellaneous.
A. This Agreement shall be construed according to, and the rights
and liabilities of the parties hereto shall be governed by, the
laws of the State of Missouri, excluding that body of law
applicable to choice of law.
B. All terms and provisions of this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto
and their respective successors and permitted assigns.
C. The representations and warranties, and the indemnification
extended hereunder, if any, are intended to and shall continue
after and survive the expiration, termination or cancellation of
this Agreement.
D. No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and
executed by each party hereto.
E. The captions in this Agreement are included for convenience of
reference only, and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect.
F. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which together
shall constitute one and the same instrument.
G. If any part, term or provision of this Agreement is by the courts
held to be illegal, in conflict with any law or otherwise
invalid, the remaining portion or portions shall be considered
severable and not be affected, and the rights and obligations of
the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be
illegal or invalid.
H. This Agreement may not be assigned by the Fund or DST without the
prior written consent of the other.
I. Neither the execution nor performance of this Agreement shall be
deemed to create a partnership or joint venture by and between
the Fund and DST. It is understood and agreed that all services
performed hereunder by DST shall be as an independent contractor
and not as an employee of the Fund. This Agreement is between
DST and the Fund and neither this Agreement nor the performance
of services under it shall create any rights in any third
parties. There are no third party beneficiaries hereto.
J. Except as specifically provided herein, this Agreement does not
in any way affect any other agreements entered into among the
parties hereto and any actions taken or omitted by any party
hereunder shall not affect any rights or obligations of any other
party hereunder.
K. The failure of either party to insist upon the performance of any
terms or conditions of this Agreement or to enforce any rights
resulting from any breach of any of the terms or conditions of
this Agreement, including the payment of damages, shall not be
construed as a continuing or permanent waiver of any such terms,
conditions, rights or privileges, but the same shall continue and
remain in full force and effect as if no such forbearance or
waiver had occurred.
L. This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement, draft or
agreement or proposal with respect to the subject matter hereof,
whether oral or written, and this Agreement may not be modified
except by written instrument executed by both parties.
M. All notices to be given hereunder shall be deemed properly given
if delivered in person or if sent by U.S. mail, first class,
postage prepaid, or if sent by facsimile and thereafter confirmed
by mail as follows:
If to DST:
DST Systems, Inc.
1055 Broadway, 7th Fl.
Kansas City, Missouri 64105
Attn: Senior Vice President-Full Service
Facsimile No.: 816-435-3455
With a copy of non-operational notices to:
DST Systems, Inc.
333 W. 11th St., 5th Fl.
Kansas City, Missouri 64105
Attn: Legal Department
Facsimile No.: 816-435-8630
If to the Fund:
Baron Capital Funds Trust
767 Fifth Avenue
New York, NY 10153
Attn: General Counsel
Facsimile Number: 212-583-2048
or to such other address as shall have been specified in writing
by the party to whom such notice is to be given.
N. The representations and warranties contained herein shall survive
the execution of this Agreement. The representations and
warranties contained herein and the provisions of Section 8
hereof shall survive the termination of the Agreement and the
performance of services hereunder until any statute of
limitations applicable to the matter at issues shall have
expired.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers, to be effective as
of the day and year first above written.
DST SYSTEMS, INC.
By:________________________________
Title:_____________________________
BARON CAPITAL FUNDS TRUST
By: /s/ Peggy C. Wong
--------------------------------
Peggy C. Wong
Title: Chief Financial Officer
EXHIBIT A
REMOTE SERVICE
FEE SCHEDULE
Fee Increases
The fees and charges set forth in this Exhibit A shall increase annually
upon each anniversary of this Agreement over the fees and charges during
the prior 12 months in an amount equal to the annual percentage of change
in the Consumer Price Index in the Kansas City, Missouri-Kansas Standard
Metropolitan Statistical Area, All Items, Base 1982-1984=100, as last
reported by the U.S. Bureau of Labor Statistics for the 12 calendar months
immediately preceding such anniversary. In the event that this Agreement
was not signed as of the first day of the month, the fees and charges
increase shall be effective as of the first day of the month immediately
following the month during which the anniversary occurred.
Open and Closed Accounts Fees
The monthly fee for an open account shall be charged in the month during
which an account is opened through the month in which such account is
closed. The monthly fee for a closed account shall be charged in the month
following the month during which such account is closed and shall cease to
be charged in the month following the Purge Date, as hereinafter defined.
The "Purge Date" for any year shall be any day after June 1st of that year,
as selected by the Fund, provided that written notification is presented to
DST at least forty-five (45) days prior to the Purge Date.
Reimbursable Expenses
Forms
Postage (to be paid in advance if so requested)
Mailing Services
Computer Hardware and Software - specific to Fund or installed at
remote site at Fund's direction
Telecommunications Equipment and Lines/Long Distance Charges
Magnetic Tapes, Reels or Cartridges
Magnetic Tape Handling Charges
Microfiche/Microfilm
Freight Charges
Printing
Bank Wire and ACH Charges
Proxy Processing - per proxy mailed
not including postage
Includes: Proxy Card
Printing
Outgoing Envelope
Return Envelope
Tabulation and Certification
T.I.N. Certification (W-8 & W-9)
(Postage associated with the return
envelope is included)
N.S.C.C. Communications Charge Currently $1,200.00
(Fund/Serv and Networking) per Fund per Year
Off-site Record Storage
Second Site Disaster Currently $.07
Backup Fee (per account) (guaranteed not to
exceed $.11 through
12/31/97)
Transmission of Statement Data for Currently $.035/per
Remote Processing record
Travel, Per Diem and other Billables
Incurred by DST personnel traveling to,
at and from the Fund at the request
of the Fund
EXHIBIT B
AUTHORIZED PERSONNEL
Pursuant to Section 8.A. of the Agency Agreement between Baron Capital
Funds Trust and all series thereof (the "Fund") and DST (the "Agreement"),
the Fund authorizes the following Fund personnel to provide instructions to
DST, and receive inquiries from DST in connection with the Agreement:
Name Title
---- -----
Ronald Baron President
Morty Schaja Senior Vice President
Peggy Wong Treasurer
Linda Martinson Secretary
This Exhibit may be revised by the Fund by providing DST with a substitute
Exhibit B. Any such substitute Exhibit B shall become effective twenty-
four (24) hours after DST's receipt of the document and shall be
incorporated into the Agreement.
ACKNOWLEDGMENT OF RECEIPT:
DST SYSTEMS, INC. FUND
By:___________________________ By: /s/ Peggy C. Wong
---------------------------
Peggy C. Wong
Title:________________________ Title: Chief Financial Officer
Date:_________________________ Date: June 23, 1998
2. Representations and Warranties
G. It is the lawful user of the computer software and hardware used
in providing services hereunder, such computer software and
hardware have been lawfully acquired by it, and it has the right
to permit Fund access to use of such computer software and
hardware.
8. Indemnification
C. DST will indemnify and hold Fund harmless against, and DST will
at its own expense defend any action brought against Fund to the
extent such action is based upon, any claim that any aspect of
the TA2000 System used within the scope of this Agreement
infringes any U.S. patent, copyright or trade secret; provided,
that DST is immediately notified in writing of any such claim
(but any delay or failure by any User to give notice of such
claim to DST shall relieve DST of its liability hereunder only to
the extent that DST is prejudiced thereby); and provided, further
that DST shall have the exclusive right to control such defense
and settle such claim; provided that in no event may DST settle
any such claim, lawsuit or proceeding in a manner which binds
Fund to liability without Fund's consent. In no event shall Fund
settle any such claim, lawsuit or proceeding without DST's prior
written approval. In the event of any such claim, litigation or
threat thereof, DST may, in its sole and absolute discretion,
either:
(i) Procure for Fund a right to continue to use the
TA2000 System at no additional charge to Fund; or
(ii) Replace or modify the TA2000 System so as to be
non-infringing without eliminating or diminishing the
services provided hereunder at no additional charge to Fund;
or
(iii) Only if (i) or (ii) cannot be accomplished on
commercially reasonable terms, terminate this Agreement
without any further liability to Fund.
EXHIBIT 9
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP LETTERHEAD
DIRECT DIAL
212-735-2135
DIRECT FAX
212-735-3646
July 27, 1998
Baron Capital Asset Fund
767 Fifth Avenue
New York, New York 10153
Re: Baron Capital Asset Fund, a series of
Baron Capital Funds Trust
Registration Statement on Form N-1A
(File Nos. 333-40839 and 811-8505)
Ladies and Gentlemen:
We have acted as counsel to Baron Capital Funds Trust, a Delaware
business trust (the "Trust"), in connection with the Trust's Registration
Statement, as so amended, on Form N-1A filed with the Securities and
Exchange Commission (the "Commission") on November 21, 1997 and Amendment
No. 1 to be filed with the Commission on the date hereof(the "Registration
Statement") relating to the registration of a new series of the Trust,
Baron Capital Asset Fund, and to the issuance by such series of the Trust
of an indefinite number of shares of beneficial interest, par value of
$0.01 per share (the "Shares"), pursuant to Rule 24f-2 under the Investment
Company Act of 1940, as amended (the "Act").
In connection with this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of (i) the
Registration Statement, (ii) the Agreement and Declaration of Trust
executed by the Trustees named therein (the "Declaration of Trust"),
(iii)the By-laws of the Trust, (iii) the Certificate of Trust of the Trust
filed with the Secretary of State on November 20, 1997, (iv) copies of
certain resolutions adopted by the Board of Trustees of the Trust relating
to the authorization, issuance and sale of the Shares, the filing of any
Registration Statement and related matters, (v) the specimen certificates
representing the Shares and (vi) such other documents as we have deemed
necessary or appropriate as a basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified, conformed or
photostatic copies, and the authenticity of the originals of such latter
documents. In making our examination of documents executed or to be
executed by parties other than the Company, we have assumed that such
parties had or will have the power, corporate or other, to enter into and
perform all obligations thereunder and have also assumed the due
authorization by all requisite action, corporate or other, and execution
and delivery by such parties of such documents and the validity and binding
effect thereof. As to any facts material to the opinions expressed herein
which we have not independently established or verified, we have relied
upon statements and representations of officers and other representatives
of the Trust and others.
Members of our firm are admitted to the Bar in the States of New
York and Delaware, and we do not express any opinion as to any laws other
than the Business Trust Act of the State of Delaware.
Based upon and subject to the assumptions, qualifications and
limitations set forth herein, and assuming that all of the Shares will be
issued and sold for cash at a per-share public offering price not less than
par value thereof, on the date of their sale in accordance with resolutions
adopted by the Board of Trustees and the Declaration of Trust, it is our
opinion that, when issued and sold by the Trust, the Shares will be validly
issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion with the
Commission as Exhibit 10 to the Registration Statement. In giving this
consent, we do not hereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933 or the rules
and regulations of the Commission.
Very truly yours,
/S/SKADDEN, ARPS, SLATE, MEAGHER
& FLOM LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form N-1A
(Securities Act File No. 333-40839 and Investment Company Act Files No.
811-8505) of our report dated July 6, 1998, on our audit of the statement
of assets and liabilities of Baron Capital Asset Fund. We also consent
to the reference to our firm under the caption "Other Information".
PricewaterhouseCoopersLLP
New York, New York
July 27, 1998
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT is entered into as of the th day
of June, 1998, between Baron Capital Funds Trust, a trust organized and
existing under the laws of Delaware (the "Trust"), and BAMCO, Inc. (the
"Purchaser").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF THE SECURITIES
1.1 SALE AND ISSUANCE OF UNITS. Subject to the terms and
conditions of this Agreement, the Trust agrees to sell to the Purchaser,
and the Purchaser agrees to purchase from the Trust, Insurance Shares and
Retirement Shares (collectively, the "Securities"), held by investors in
and members of life insurance contracts and retirement plans, respectively.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER.
The Purchaser hereby represents and warrants to, and covenants for the
benefit of, the Trust that:
2.1 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made
by the Trust with the Purchaser in reliance upon the Purchaser's
representation to the Trust, which by the Purchaser's execution of this
Agreement the Purchaser hereby confirms, that the Securities are being
acquired for investment purposes, and Purchaser has no present intention of
redeeming or reselling the securities in violation of any securities
registration requirement under applicable law, but subject nevertheless, to
any requirement of law that the disposition of its property shall at all
times be within its control.
2.2 INVESTMENT EXPERIENCE. The Purchaser acknowledges that it
can bear the economic risk of the investment for an indefinite period of
time and has such knowledge and experience in financial and business
matters (and particularly in the business in which the Trust operates) as
to be capable of evaluating the merits and risks of the investment in the
Securities. The Purchaser represents to the Trust that it is an
"accredited investor" as defined in Rule 501(a) of Regulation D under the
Securities Act of 1933 (the "Act").
2.3 RESTRICTED SECURITIES. The Purchaser understands that the
Securities are characterized as "restricted securities" under the United
States securities laws inasmuch as they are being acquired from the Trust
in a transaction not involving a public offering and that under such laws
and applicable regulations such Securities may be resold without
registration under the Act only in certain circumstances. In this
connection, the Purchaser represents that it understands the resale
limitations imposed by the Act and is generally familiar with the existing
resale limitations imposed by Rule 144.
2.4 FURTHER LIMITATIONS ON DISPOSITION. The Purchaser further
agrees not to make any disposition directly or indirectly of all or any
portion of the Securities unless and until:
(a) There is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) The Purchaser shall have furnished the Trust with an opinion
of counsel, reasonably satisfactory to the Trust, that such disposition
will not require registration of such Securities under the Act.
(c) Notwithstanding the provisions of subsections (a) and (b)
above, no such registration statement or opinion of counsel shall be
necessary for a transfer by the Purchaser to any affiliate of the
Purchaser, if the transferee agrees in writing to be subject to the terms
hereof to the same extent as if it were the original Purchaser hereunder.
2.5 LEGENDS. It is understood that the certificate evidencing
the Securities may bear either or both of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with
respect to the securities under such Act or an opinion of counsel
reasonably satisfactory to the Trustees of Baron Capital Funds Trust that
such registration is not required."
(b) Any legend required by the laws of any other applicable
jurisdiction.
The Purchaser and the Trust agree that the legend contained in
the paragraph (a) above shall be removed at a holder's request when they
are no longer necessary to ensure compliance with federal securities laws.
2.6 TRUST AGREEMENT: The Purchaser consents to (a) the
execution and delivery by the Trust and Purchaser as sponsor of the Trust,
of the Trust Agreement in the form attached hereto.
2.7 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties relating to the subject matter hereof, and
there are no other representations, endorsements, promises, agreements or
understandings, oral, written or inferred, between the parties relating to
the subject matter hereof.
2.8 NO THIRD PARTY BENEFICIARIES. Nothing herein, express or
implied, shall give to any Person, other than the parties hereto, and their
respective successors and assigns, any benefit of any legal or equitable
right, remedy or claim hereunder.
2.9 AMENDMENT; WAIVER. This Agreement shall not be deemed or
construed to be modified, amended, rescinded, cancelled or waived, in whole
or in part, except by a written instrument signed by a duly authorized
representative of the party to be charged. Failure of either party hereto
to exercise any right or remedy hereunder in the event of a breach hereof
by the other party shall not constitute a waiver of any such right or
remedy with respect to any subsequent breach.
2.10 SEVERABILITY. If any clause, provision or section hereof
shall be ruled invalid or unenforceable by any court of competent
jurisdiction, the invalidity or unenforceability of such clause, provision
or section shall not affect any of the remaining clauses, provisions or
sections hereof.
2.11 EXECUTION IN COUNTERPARTS. This Agreement may be executed
in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
2.12 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
giving effect to principles of conflicts of law.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
BARON CAPITAL FUNDS TRUST,
BY ITS TRUSTEES
______________________________
as Trustee
______________________________
as Trustee
______________________________
as Trustee
______________________________
as Trustee
______________________________
as Trustee
______________________________
as Trustee
______________________________
as Trustee
______________________________
BAMCO, INC.
By: __________________________
Name:
Title:
EXHIBIT 13
BARON CAPITAL FUNDS TRUST
Plan of Distribution
Pursuant to Rule 12b-1
This Plan of Distribution of Baron Capital Funds Trust and all series
thereof (the "Fund") is intended to be adopted in accordance with Rule 12b-
1 under the Investment Company Act of 1940, as amended, (the "1940 Act"),
on the following terms and conditions:
1. Distribution Activities.
The amount set forth in paragraph 2 of this Plan shall be paid
for the services of Baron Capital, Inc. ("BCI") as distributor
of the shares of beneficial interest of certain specified classes
of stock of the Fund ("Shares"), in connection with its
activities or expenses primarily intended to result in the sale
of Shares, including, but not limited to, compensation to
registered representatives or other employees of Baron, and to
other broker-dealers, to banks and to other financial
institutions that have entered relevant Agreements with Baron;
compensation to and expenses of employees of Baron who engage in
or support distribution of Shares or who service shareholder
accounts; telephone expenses; interest expenses; overhead; a
carrying charge which approximates lost opportunity costs;
printing of prospectuses and reports for other than existing
shareholders; and preparation, printing and distribution of sales
literature and advertising materials.
2. Compensation.
The Fund shall pay to BCI, as the distributor of the Fund's
Shares, a distribution fee equal on an annual basis to .25% of
the Fund's average daily net assets. Such fee shall be
calculated and accrued daily and paid monthly or at such other
intervals as the Trustees shall determine. If this Plan is not
continued or is terminated, the Fund will owe no payment to BCI
other than any portion of the distribution fee accrued through
the effective date of termination but then unpaid, and BCI will
not have a right to recover expenses in excess of the accrued
distribution fee.
3. Term and Termination.
(a) This Plan shall become effective on the date hereof.
Unless terminated as herein provided, this Plan shall
continue in effect for one year from the date hereof and
shall continue in effect for successive periods of one year
thereafter, but only so long as each such continuance is
specifically approved by votes of a majority of both (i) the
Trustees of the Fund and (ii) the Trustees of the Fund who
are not "interested persons" of the Fund (as defined in the
1940 Act) and who have no direct or indirect financial
interest in the operation of this Plan or in any agreement
relating hereto (the "Rule 12b-1 Trustees"), cast in person
at a meeting called for the purpose of voting on such
approval.
(b) This Plan may be terminated at any time by the vote of a
majority of the Rule 12b-1 Trustees or by the vote of a
majority of the outstanding voting securities (as defined in
the 1940 Act) of the Fund.
4. Amendments
This Plan may not be amended to increase materially the amount of
expenditures provided for in Section 2 hereof unless such
amendment is approved by a vote of majority of the outstanding
voting securities of the Fund (as defined in the 1940 Act), and
no material amendment to this Plan shall be made unless approved
in the manner provided for annual renewal of this Plan in Section
3(a) hereof.
5. Selection and Nomination of Trustees
While this Plan is in effect, the selection and nomination of
Trustees who are not interested persons (as defined in the 1940
Act) of the Fund shall be committed to the discretion of the
Trustees who are not interested persons of the Fund.
6. Quarterly Reports
The Fund shall cause to be provided to the Trustees of the Fund
and the Trustees shall review, at least quarterly, a written
report of the amounts expended pursuant to this Plan and any
related agreement and purposes for which such expenditures were
made.
7. Recordkeeping
The Fund shall preserve copies of this Plan and any related
agreement and all reports made pursuant to Section 6 hereof, for
a period of not less than six years from the date of this Plan,
the agreements or such reports, as the case may be, the first two
years in an easily accessible place.
In Witness Whereof, the Fund and BCI have executed this Plan as
of the ______ day of June, 1998.
Baron Capital Fund
By:
________________________
Baron Capital Inc.
By:
________________________
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001050084
<NAME> BARON CAPITAL FUNDS TRUST
<SERIES>
<NUMBER> 1
<NAME> BARON CAPITAL ASSET FUND
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> NOV-20-1997
<PERIOD-END> JUL-06-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> $100,000
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> $100,000
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> $100,000
<SHARES-COMMON-STOCK> 10,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> $100,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
BARON CAPITAL FUNDS
18f-3 Plan
Baron Capital Funds and all series thereof (collectively, the "Funds")
adopt the following plan pursuant to Rule 18f-3 under the Investment
Company Act of 1940 (the "Plan"). The Plan applies to all series and all
classes of the Funds. A majority of the trustees of the Funds and a
majority of the trustees of the Funds who are not interested persons of the
Funds believe that the Plan, including the expense allocation, is in the
best interest of each class individually and the Funds as a whole.
A. Each class:
1. Shall have a different arrangement for shareholder services
and/or the distribution of securities and shall pay all of the
expenses of that arrangement.
2. Shall pay the same rates for advisory fees, transfer agency fees
and custody fees, except that if the transfer agency fees are
actually incurred in a different amount by the classes or if the
services provided are of a different kind or to a different
degree, then a different share may be paid by a class.
3. Shall have exclusive voting rights on any matter submitted to
shareholders that relates solely to its arrangement.
4. Shall have separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the
interests of any other class.
5. Each class shall have in all other respects the same rights and
obligations as each other class.
B. Expenses may be waived or reimbursed by the adviser, distributor or
any other provider of services to the Funds.
C. Income, realized gains and losses, unrealized appreciation and
depreciation and Fundwide expenses shall be allocated to each class
based on the net assets of that class in relation to the net assets of
the Funds. For purposes of this Plan, Fundwide Expenses means expenses
of the Funds not allocated to a particular class under paragraph A
above.
BARON CAPITAL FUNDS TRUST
POWER OF ATTORNEY
The undersigned in his or her capacity as a Trustee or officer,
or both, as the case may be, of the Baron Capital Funds Trust (the "Trust")
does hereby appoint Linda S. Martinson and Ronald Baron, and each of them,
severally, his or her true and lawful attorney and agent to execute in his
or her name, place and stead (in such capacity) the Registration Statement
of the Trust and any and all amendments thereto and any post-effective
amendments thereto and all instruments necessary or desirable in connection
therewith, to attest the seal of the Trust thereon and to file the same
with the Securities and Exchange Commission; and any and all other
instruments or documents necessary or desirable in connection with the
establishment of a new series of the Trust or any other corporate action
authorized by the Board of Trustees. Each of said attorneys and agents
have power and authority of do and perform in the name and on behalf of
each of the undersigned, in any and all capacities, every act
whatsoever necessary or advisable to be done in the premises as fully and
to all intents and purposes as each of the undersigned might or could do in
person, hereby ratifying and approving the act of said attorneys and agents
and each of them.
Signature Title Date
/s/ Ronald Baron
------------------------- President and Trustee January 27, 1998
Ronald Baron
/s/ Norman S. Edelcup Trustee January 27, 1998
-------------------------
Norman S. Edelcup
/s/ Mark M. Feldman Trustee January 27, 1998
-------------------------
Mark M. Feldman
/s/ Irwin Greenberg Trustee January 27, 1998
-------------------------
Irwin Greenberg
/s/ Linda S. Martinson Secretary, Vice President January 27, 1998
------------------------- and Trustee
Linda S. Martinson
/s/ Charles N. Mathewson Trustee January 27, 1998
------------------------
Charles N. Mathewson
/s/ Harold W. Milner Trustee January 27, 1998
------------------------
Harold W. Milner
/s/ Raymond Noveck Trustee January 27, 1998
------------------------
Raymond Noveck
/s/ Morty Schaja Senior Vice President January 27, 1998
------------------------- and Trustee
Morty Schaja
/s/ David A. Silverman Trustee January 27, 1998
-------------------------
David A. Silverman
