SUBADVISORY AGREEMENT
THIS
SUBADVISORY AGREEMENT (the “Agreement”) is entered into as of
the 9st day of October, 2006 by and between Xxxxxxxxx
Capital Management, Inc., a Kansas corporation (“Advisor”) and Jayhawk Capital
Management, L.L.C., a Delaware limited liability company
(“Subadvisor”).
W
I T N E S S E T H
WHEREAS,
Buffalo Funds, a Delaware statutory trust (the “Trust”), is registered with the
Securities and Exchange Commission (the “SEC”) as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
“1940 Act”);
WHEREAS,
pursuant to a Management Agreement between the Trust and the Advisor (the
“Advisory Agreement”), the Trust retained Advisor to act as its investment
advisor;
WHEREAS,
the Advisory Agreement permits Advisor to delegate certain of its duties to
a
subadvisor, subject to the requirements of the 1940 Act; and
WHEREAS,
the Trust is creating a new series of mutual fund, to be known as the Buffalo
Jayhawk China Fund (the “Fund”) and Advisor desires to retain Subadvisor as
subadvisor for, the Fund.
NOW,
THEREFORE, Advisor and Subadvisor mutually agree as follows:
AGREEMENT
1.
Appointment as Subadvisor.
Advisor hereby retains Subadvisor to act as subadvisor for the Fund,
subject to the supervision of Advisor and the Board of Trustees of the Trust
and
subject to the terms of this Agreement and all applicable requirements to the
Advisor, and Subadvisor agrees to accept such employment.
2.
Duties of Subadvisor.
2.01
Investments.
Subject to the 1940 Act, the overall direction of Advisor, the oversight
of the Board of Trustees of the Trust and the investment policies and
restrictions of the Fund as set forth in the Trust’s current registration
statement on Form N-1A, as amended from time to time, Subadvisor is authorized
and directed to purchase, hold, sell and monitor on a continuous basis
investments for the account of the Fund (the “Investments”). In providing
these services, Subadvisor will conduct a continual program of investment,
evaluation and, if appropriate, sale and reinvestment of the Investments.
Advisor will provide Subadvisor with reasonable assistance in connection
with Subadvisor’s activities under this Agreement, including without limitation,
providing information concerning the Fund, the daily funds available for
investment and general affairs of the Trust as Subadvisor may reasonably
request.
1
2.02
Agent.
Subject to any other written instructions of Advisor, the Trust or the
Fund, Subadvisor is hereby appointed as Advisor’s, the Trust’s and the Funds’
agent and attorney-in-fact for the limited purpose of executing account
documentation, agreements, contracts and other documents as Subadvisor is
requested by brokers, dealers, counterparties and other persons in connection
with its management of the Investments; provided, however, that any such
documentation that the Subadvisor shall execute shall comply in all material
respects with all laws, rules and regulations applicable to the business of
the
Trust, including but not limited to the 1940 Act and the rules and regulations
thereunder. Subadvisor shall provide the Advisor and the Trust with copies
of any documents executed on behalf of the Trust hereunder as soon as possible
after the execution of any such documents.
2.03
Securities Transactions. Subadvisor
and any of its affiliated persons, as that term is defined under the 1940 Act,
will not purchase securities or other instruments from or sell securities or
other instruments to the Fund; provided, however, Subadvisor may purchase
securities or other instruments from or sell securities or other instruments
to
the Fund if such transaction is permissible under applicable law and the Fund’s
procedures or in accordance with an exemptive order.
2.04
Compliance with Applicable Law and Governing Documents.
With respect to all matters relating to its performance under this
Agreement, Subadvisor and its directors, officers, partners and employees will
act in accordance in all material respects with applicable law and with the
Trust’s governing instruments and regulatory filings, including the Trust’s
Declaration of Trust, amended and restated Bylaws, currently effective
Registration Statement under the 1940 Act and the 1933 Act, the Fund’s
Prospectus, Statement of Additional Information, (collectively, “Governing
Instruments and Regulatory Filings”) and any reasonable instructions or
directions of the Trust, its Board of Trustees or Advisor provided in writing.
Advisor will promptly provide Subadvisor with any material amendments,
supplements or other changes to the Governing Instruments and Regulatory
Filings, and upon receipt, which shall include a detailed description of any
amended, supplemented or changed provision affecting the Subadvisor's services
under this Agreement (“Change Notice”), Subadvisor will act in accordance with
such Change Notice.
2.05
Information Provided by Subadvisor.
As Advisor or the Board of Trustees of the Trust may reasonably request,
Subadvisor will furnish reports on portfolio transactions and reports on
Investments held in the portfolio in such detail as the requesting party may
reasonably request. Subadvisor shall provide information regarding any
such “soft dollar” arrangements that the Subadvisor maintains with respect to
the Fund as may be requested from time to time by the Fund and the Advisor.
Subadvisor will assist Advisor in preparing letters to shareholders to be
included in the Fund’s semi-annual and annual reports. Subadvisor also
will assist Advisor in providing quarterly economic and investment updates
in the same manner as Advisor currently prepares for use by the Board of
Trustees. Upon reasonable advance notice, Subadvisor will periodically
make its officers and employees available to meet with Advisor and the Trust’s
Board of Trustees at the Trust’s principal place of business or another mutually
agreed location to review the Investments of the Fund. Subadvisor will inform
the Trust and Advisor of changes in its investment strategy, tactics,
ownership or key investment personnel that would require disclosure amendments
in the Trust's Governing Instruments and Regulatory Filings.
2
2.06
Allocation of Brokerage.
Subject to the supervision of Advisor and the Board of Trustees of the
Trust, Subadvisor is authorized and directed to establish and maintain accounts
on behalf of the Fund, place orders for the purchase and sale of Investments
with or through such persons, brokers or dealers as Subadvisor may elect, and
negotiate commissions to be paid on such transactions.
2.07
Voting of Proxies.
Subadvisor shall be responsible for voting proxies with respect to
securities held by the Fund in accordance with the policies and procedures
of
the Trust. Subadvisor shall provide the Trust, in a timely manner, the proxy
voting records of the Fund as required by Form N-PX and such other information
regarding proxy voting as may reasonably be requested by the Board of Trustees
or Advisor.
2.08
Master Services Agreement.
Subadvisor acknowledges receipt of a Master Services Agreement for the
Fund and, to the extent within its control, will comply in all material respects
with the provisions of that agreement that relate to the Subadvisor’s duties
hereunder. On each business day, Subadvisor will provide the Advisor with
information relating to all transactions concerning the Fund’s assets as Advisor
or the custodian reasonably requests. The Master Services Agreement is an
agreement between the Advisor and U.S. Bancorp Funds Services, LLC ("USBFS")
for
administrative, fund accounting, transfer agent, prospect services, internet
services, MFx access and paying agent services furnished by USBFS to the Trust
and/or Advisor.
2.09
Trust’s Name; Advisor’s Name.
Subadvisor will have no rights relating to the Trust’s name, the Fund’s
name or the name “Buffalo Funds” as it is used in connection with investment
products, services or otherwise, and Subadvisor will make no use of such names
without the express written consent of the Trust, the Fund or Advisor, as the
case may be; provided that notwithstanding anything in this Agreement,
Subadvisor shall be entitled to use the Fund’s name and the name “Buffalo Funds”
in its Form ADV or any other document required to be filed with any governmental
agency or self-regulatory organization and in marketing materials for the
limited purpose of indicating that Subadvisor is the subadvisor to the Fund.
Subadvisor may use the Fund’s name and “Buffalo Funds” in marketing
materials for other purposes subject to prior review and approval by Advisor
and
Advisor shall not unreasonably withhold its approval to such use.
2.10
Subadvisor.
The Trust, the Fund and the Advisor will have no rights relating to
the Subadvisor or in the name “Jayhawk” as it is used in connection with
investment products, services or otherwise, and the Trust, the Fund and Advisor
will make no use of such name without the express written consent of the
Subadvisor, (which shall not be unreasonably withheld), as the case may be;
provided that notwithstanding anything in this Agreement, the Trust, the
Fund and Advisor shall be entitled to use the Subadvisor’s name in the
Advisor's Form ADV or any other document required to be filed with any
governmental agency or self-regulatory organization and in marketing materials
for the limited purpose of indicating that Subadvisor is the subadvisor to
the
Fund. The Trust, the Fund and Advisor may use the Subadvisor’s name in
marketing materials for other purposes subject to prior review and approval
by
Subadvisor.
3
2.11
Personal Securities Transactions.
Subadvisor shall comply in all material respects with Rule 17j-l under the
1940 Act and the Subadvisor's Code of Ethics. Upon reasonable request
during any business day, Subadvisor will promptly make available to Advisor
or
the Fund any reports concerning the Fund required to be made by Subadvisor
pursuant to Rule 17j-1 under the 1940 Act. On a quarterly basis,
Subadvisor shall either certify that there have been no material violations
of
its Code of Ethics or identify any material violations.
2.12
Fair Valuation.
In accordance with procedures adopted by the Board of Trustees of the
Trust, as amended from time to time, Subadvisor shall provide
assistance with fair valuation of those securities in which it invests the
Fund’s assets for which readily available market quotations are
unavailable. Advisor has provided a copy of its valuation procedures to
Subadvisor and will promptly furnish to Subadvisor any amendments to such
procedures.
2.13
Regulatory Filings.
To the extent Advisor is required to certify compliance with or pursuant
to any Governing Instruments or Regulatory Filings, for which Subadvisor
provides the underlying or related services, Subadvisor will provide a
certification of compliance to Advisor upon which Advisor may rely in making
its
certification in a form mutually acceptable to Subadvisor and Advisor.
2.14
Section 15(c) Request for Information.
Subadvisor shall provide such information concerning Subadvisor as
may reasonably be requested by the Board of Trustees of the Trust, or its
counsel, under Section 15(c) of the 1940 Act in connection with its annual
consideration of this Agreement.
2.15
Material Adverse Change.
Subadvisor shall immediately notify the Advisor if the Subadvisor suffers
a material adverse change in its business or financial condition that would
materially impair its ability to perform its relevant duties under the
Agreement.
3. Services
to Competing Funds.
3.01
Subadvisor. Except as consented to by the Advisor in writing,
which consent shall not be unreasonably withheld, during the term of this
Agreement, Subadvisor and its successors and any person or entity
controlled by Subadvisor (within the meaning of the 0000 Xxx) other than
individual employees, will not act as investment advisor or Subadvisor to
any investment company or portfolio thereof that is substantially identical
to
the Fund (for these purposes, "substantially identical" shall mean a no-load,
open end U.S. registered investment company that invests 80% or more of its
assests in securities the issuers of which are domiciled in China). Mere
solicitation of substantially identical investment companies or portfolios
shall
not require the Advisor's consent or violate the terms of this Section
3.01.
4
3.02
Advisor. Except as consented to by the Subadvisor in
writing, which consent shall not be unreasonably withheld, during the term
of
this agrement, Advisor and its successors and any person or entity controled
by
Advisor (within the meaning of the 0000 Xxx) other than individual employees,
will not act as investment advisor or subadvisor to any investment company
or
portfolio thereof that is substantially identical to the Fund (for these
perposes, "substantialy identical" shall mean a no-load, open end U.S.
registered investment company that invests 80% or more of its assets in
securities the issuers of wihich are domiciled in China). Mere
solicitation of substantially identical investment companies or portfolios
shall
not require the Advisor's consent or violate the terms of this Section
3.02.
4.
Duties of Advisor.
Advisor will continue to be responsible for all services to be provided to
the Fund pursuant to the Advisory Agreement, and shall oversee and review
Subadvisor’s performance under this Agreement.
5. Independent
Contractor.
Subadvisor will be an independent contractor in performing its duties
under this Agreement and unless otherwise expressly provided herein or otherwise
authorized in writing, will have no authority to act for or represent the Trust,
the Fund or Advisor in any way or otherwise be deemed an agent of the Trust,
the
Fund or Advisor.
6. Compensation. For
all of the services rendered with respect to the Fund as herein provided,
Advisor shall pay to the Subadvisor a fee, based on the daily net assets of
the
Fund, as set forth in Schedule A attached hereto and made a part hereof. Such
fee shall be calculated and paid in the same manner and at the same time as
the
advisory fee is paid to the Advisor. In the case of termination of this
Agreement with respect to the Fund during any calendar month, the fee with
respect to such Portfolio accrued to, but excluding, the date of termination
shall be paid promptly following such termination.
7. Expenses.
Subadvisor shall bear its own expenses incurred by it in connection with
its services under this Agreement other than the cost of Investments, including
brokerage commissions and other transaction charges, if any, on such Investments
purchased or sold by the Fund. Subadvisor shall not be responsible for the
Funds’ or the Advisor’s expenses. Specifically, Subadvisor will not be
responsible for expenses of the Fund or the Advisor, including, but not limited
to, the following: (i) charges and expenses for determining the Fund’s net
asset value and the maintenance of the Fund’s books and records and related
overhead; (ii) the charges and expenses of the Funds’ lawyers and auditors;
(iii) the charges and expenses of any custodian, transfer agent, plan agent,
dividend disbursing agent and/or administrator appointed by the Fund; (iv)
brokers’ commissions, and issue and transfer taxes chargeable to the Fund in
connection with securities transactions to which the Fund is a party; (v)
insurance premiums, interest charges, dues and fees for membership in trade
associations and all taxes and corporate fees payable by the Fund to federal,
state or other government agencies; (vi) fees and expenses required to be paid
for registration with the SEC, or any fees and expenses required to be paid
for
the sale of the Fund’s shares in any state; (vii) expenses related to
shareholders’ and directors’ meetings, and the preparation, printing and
distribution of prospectuses, proxy statements, reports to shareholders and
other sales literature of the Fund; (viii) compensation payable to the Funds’
trustees; and (ix) marketing and advertising relating to the Fund.
8. Representations
and Warranties of Subadvisor.
Subadvisor represents and warrants to Advisor, the Trust, and the Fund as
follows:
8.01
Registrations.
Subadvisor is registered as an investment advisor under the Investment Advisers
Act of 1940, as amended (the “Advisers Act”).
8.02
Duly Organized. Subadvisor
is a limited liability company duly organized and validly existing under the
laws of the State of Delaware with the power to carry on its business as it
is
now being conducted.
5
8.03
Authority. The
execution, delivery and performance by Subadvisor of this Agreement are within
its powers and have been duly authorized by all necessary action, and no action
or filing with any governmental body, agency or official is required for the
execution, delivery and performance of this Agreement, and the execution,
delivery and performance by Subadvisor of this Agreement do not contravene
or
constitute a default under any provision of applicable law, rule or regulation,
Subadvisor governing instruments or any agreement, judgment, injunction, order,
decree or other instrument binding upon Subadvisor.
8.04
Valid and Binding. This
Agreement is a valid and binding agreement of Subadvisor.
8.05
Form ADV. Subadvisor
has provided Advisor with its current Form ADV and will promptly provide all
material amendments thereto, and each Form ADV provided to Advisor is and will
be a true and complete copy of Subadvisor’s Form.
8.06
Code of Ethics. Subadvisor
has provided its Code of Ethics to Advisor along with the certification required
by Rule 17j-1(c) (1) (ii) under the 1940 Act. In accordance with Rule
17j-1, the Subadvisor will submit any material changes to such Code of Ethics
to
the Trust’s Board of Trustees for approval no later than six months after its
adoption of the material changes. During the term of this Agreement,
Subadvisor will annually certify to the Trust’s Board of Trustees that it has
adopted procedures reasonably necessary to prevent persons subject to such
Code
from violating the Code of Ethics, and will describe in a written report any
issues arising under the Code regarding material violations of the Code and
sanctions imposed in response thereto.
8.07
Policies and Procedures. Subadvisor
represents, warrants and agrees that it has adopted and implemented, and will
maintain throughout the term of this Agreement, policies and procedures, as
required by Rule 206(4)-7 under the Advisers Act and any other governing
requirements.
9. Representations
and Warranties of Advisor.
Advisor
represents and warrants to Subadvisor, as follows:
9.01
Registrations. Advisor
is registered as an investment advisor under the Advisers Act, and its
investment advisory agents are appropriately registered. It and its agents
have
not been, and are not subject to, any disciplinary action of any kind, whether
disclosable or not.
9.02
Duly Organized.
Advisor
is a corporation duly organized and validly existing under the laws of Kansas
with the power to carry on its business as it is now being
conducted.
9.03
Authority. The
execution, delivery and performance by Advisor of this Agreement are within
its
powers and have been duly authorized by all necessary action of Advisor and
the
Trust, and Advisor or Trust, as the case may be, has caused to be taken all
necessary action under the Advisory Agreement and the 1940 Act to authorize
the
retention of Subadvisor under this Agreement, and no action or filing with
any
governmental body, agency or official is required for the execution, delivery
and performance of this Agreement and the execution, delivery and performance
by
Advisor of this Agreement do not contravene or constitute a default under any
provisions of applicable law, rule or regulation, Advisor’s governing
instruments or any agreement, judgment, injunction, order, decree or other
instrument binding upon Advisor.
6
9.04
Valid and Binding.
This
Agreement is a valid and binding agreement of Advisor.
9.05
Registration Statement. Advisor
has provided to Subadvisor the Trust’s current Registration Statement on Form
N-1A relating to the Fund, and agrees to promptly provide Subadvisor with all
supplements or amendments thereto relating to the Fund and to advise Subadvisor
promptly in writing of any changes in the Fund’s investment policies or
restrictions. Advisor will also provide Subadvisor with its and the Trust’s
Compliance Manuals and Codes of Ethics.
10. Survival
of Representations and Warranties.
All representations and warranties made by the parties pursuant to
Sections 8 and 9 will survive for the duration of this Agreement, and each
party
will immediately notify the other party in writing upon becoming aware that
any
of the foregoing representations and warranties are no longer true.
11. Liability
and Indemnification.
11.01
Liability.
In the absence of willful misfeasance, gross negligence, or reckless
disregard on the part of Subadvisor of its duties or obligations under this
Agreement, Subadvisor shall not be subject to any liability to the Trust, the
Advisor or any of their officers, directors, agents, employees, controlling
person or shareholders, or to the Fund or the Fund's shareholders or any other
third party for any act or omission in the course of, or in connection
with, rendering services hereunder, including without limitation, any error
of
judgment or mistake of law, or for any loss suffered by any of the foregoing
persons, including any losses that may be sustained in the purchase, holding
or
sale of Investments in connection with matters to which this Agreement relates.
In the absence of willful misfeasance, gross negligence, or reckless
disregard on the part of the Advisor of its duties or obligations under this
Agreement, the Advisor shall not be subject to any liability to Subadvisor
for
any act or omission in the course of, or in connection with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding
or
sale of Investments; provided, however, that nothing herein shall relieve the
Advisor or Subadvisor from any of their respective obligations under applicable
law, including without limitation, federal and state laws.
11.02
Indemnification.
Subadvisor shall indemnify the Trust, the Advisor and their directors, agents,
employees, controlling person and shareholders, against any and all losses,
claims, damages, liabilities or litigation and expenses, including reasonable
attorneys’ fees, which may be sustained as a result of the Subadvisor’s willful
misfeasance, gross negligence, or reckless disregard of its duties or
obligations hereunder. The Advisor shall indemnify the Subadvisor and its
directors, agents, employees, controlling persons, managers and members, against
any and all losses, claims, damages, liabilities or litigation and expenses,
including reasonable attorneys’ fees, which may be sustained as a result of the
Advisor’s willful misfeasance, gross negligence, or reckless disregard of its
duties or obligations. “Controlling persons” as used herein shall have that
meaning set forth in Section 2(a) (9) of the 1940 Act.
7
12. Duration
and Termination.
12.01
Duration.
This Agreement shall begin as of the date of execution hereof and shall
continue in effect for two years from the date hereof and thereafter for
successive periods of one year, subject to the provisions for termination and
all of the other terms and conditions hereof, if such continuation shall be
specifically approved at least annually (i) by the vote of a majority of the
Board of Trustees of the Trust, including a majority of the trustees who are
not
parties to this Agreement or “interested persons” of any such party as defined
in the 1940 Act, cast in person at a meeting called for that purpose or (ii)
by
the vote of a majority of the outstanding voting securities, as that phrase
is
defined in Section 2(a)(42) of the 1940 Act, of the Fund. Advisor will use
its good faith efforts to facilitate such annual approval unless it believes
that the continuation of this Agreement is not in the best interest of the
Fund.
12.02
Termination.
Notwithstanding anything to the contrary provided herein, this Agreement
may be terminated at any time, without payment of any penalty: (i) by the
vote of a majority of the Board of Trustees of the Trust or by the vote of
a
majority of the outstanding voting securities of the Fund, in each case upon
not
less than 60 days’ written notice; or (ii) by Subadvisor upon not less than 120
days’ written notice to Advisor, the Trust, and the Fund. This Agreement
shall also terminate automatically in the event of its assignment as defined
in
Section 2(a)(4) of the 1940 Act or upon the termination of the Advisory
Agreement.
13.
Amendment.
This Agreement may be amended by the mutual consent of the parties,
provided that the terms of each such amendment shall be approved by: (i)
affirmative vote of a majority of the Board of Trustees of the Trust cast in
person at a meeting called for that purpose, including a majority of trustees
who are not “interested persons” of the Fund or the Advisor, and (ii) if
necessary, by a vote of a majority of the outstanding voting securities of
the
Fund. If such amendment is proposed in order to comply with the
requirements of the SEC, state regulatory bodies or other governmental
authorities, Advisor will notify Subadvisor of the form of amendment which
it
deems necessary or advisable and the reasons therefor.
14.
Confidentiality.
Subject to the duties of the parties to comply with applicable laws,
including any demand of any regulatory or taxing authority having jurisdiction
or under compulsory process of law, each party shall treat as confidential
all
non-public information pertaining to the Fund and the actions of Subadvisor,
the
Advisor and the Trust in respect thereof.
8
15.
Notice.
Any notice that is required to be given by the parties to each other under
the terms of this Agreement shall be in writing, and deemed given when delivered
or mailed postpaid to the other party, or transmitted by facsimile with
acknowledgment of receipt, to the following addresses and facsimile numbers
designated below (or to such other address or facsimile numbers as a party
may
designate by notice to the other party):
If
to
Advisor:
Xxxxxxxxx
Capital Management Inc.
Attention:
Xxxx X. Xxxxxxxxx
0000
Xxxx
00xx
Xxxxx
Xxxxxxx
Xxxxxxx, Xxxxxx 00000
(000)000-0000
If
to
Subadvisor:
Jayhawk
Capital Management, L.L.C.
Attention:
Xxxx X. XxXxxxxx
0000
Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxx
Xxxxxxx, Xxxxxx 00000
(000)000-0000
16. Counterparts.
This Agreement may be executed in one or more counterparts, all of which
shall together constitute one and the same instrument.
17. Severability.
If any provision of this Agreement is held or made invalid by a court
decision or applicable law, the remainder of the Agreement shall not be affected
adversely and shall remain in full force and effect.
18. Miscellaneous.
Any question of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the
1940 Act, shall be resolved by reference to such term or provision of the 1940
Act and to interpretations thereof, if any, by the United States courts or,
in
the absence of any controlling decision of any such court, by rules, regulations
or orders of the Commission issued pursuant to the 1940 Act. In addition, where
the effect of a requirement of the 1940 Act, reflected in any provision of
this
Agreement, is related by rules, regulation or order of the Commission, such
provision shall be deemed to incorporate the effect of such rule, regulation
or
order.
9
SIGNATURES
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and
year first written above.
XXXXXXXXX
CAPITAL MANAGEMENT INC.
Signature:
/s/ Xxxx X.
Xxxxxxxxx
By: Xxxx
X.
Xxxxxxxxx, President
JAYHAWK
CAPITAL MANAGEMENT, L.L.C.
Signature:
/s/ Xxxx X.
XxXxxxxx
By: Xxxx
X.
XxXxxxxx, President
10
SCHEDULE
A
FEES
Buffalo
Jayhawk China Fund Annual
Fee Rate
..55%
of
average daily net assets of
Buffalo
Jayhawk China Fund
11
