KINETICS MUTUAL FUNDS, INC. INVESTMENT SUBADVISORY AGREEMENT
KINETICS
MUTUAL FUNDS, INC.
THIS INVESTMENT SUBADVISORY AGREEMENT
(the “Agreement”) is made as of the 24th
day of December, 2009, by and between KINETICS
ASSET MANAGEMENT, INC., a New York Corporation (the “Adviser”) and BROADMARK ASSET MANAGEMENT, LLC, a Delaware limited liability Corporation (the “Subadviser”).
W I T N E S S E T H
:
WHEREAS, the Adviser is
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended (the “Act”), and is engaged in the business of providing investment
advice to investment companies and other clients; and
WHEREAS, the Subadviser is a
registered as an investment
adviser under the Act and is engaged in the business of rendering
investment advisory services; and
WHEREAS, the Adviser desires
to retain the Subadviser to assist in furnishing investment advisory services to
The Kinetics Tactical Paradigm Fund (the “Fund”), a fund within the Kinetics
Mutual Funds, Inc. (the “Company”), a Maryland Corporation, pursuant to the
terms and provisions of this Agreement, and the Subadviser desires to assist the
Adviser in furnishing said services.
NOW, THEREFORE, in
consideration of the covenants and the mutual promises hereinafter set forth,
the parties to this Agreement, intending to be legally bound hereby, mutually
agree as follows:
1. Duties of
the Subadviser. The Adviser hereby engages the services of the
Subadviser as permitted by and in furtherance of its Investment
Advisory Agreement with the Company pertaining to the
Fund. Pursuant to this Agreement and subject to the
oversight and review of the Adviser, the Subadviser will manage the investment
and reinvestment of the assets of the Fund. The Subadviser will
determine in its sole discretion, and subject to the oversight and review of the
Adviser, the securities to be purchased or sold for the Fund that are not
invested in the Paradigm Master Portfolio Company, will make available to the
Adviser records concerning its activities for the Fund which the Subadviser is
required to maintain, and will render regular reports to the Adviser and to
officers of the Company concerning its discharge of the foregoing
responsibilities. The Subadviser shall discharge the foregoing responsibilities
subject to the supervision of the Board of Directors
of the Company and in compliance with such policies as the Board of Directors of
the Company may from time to time establish and which the Adviser shall
communicate in writing to Subadviser, and in compliance with (a) the investment
objectives, policies, and limitations for the Fund set forth in the Company’s
current prospectus(es) and statement(s) of additional information as provided to
Subadviser, and (b) applicable laws and regulations.
The
Subadviser shall have no power, authority, responsibility, or obligation
hereunder to take any action with regard to any claim or potential claim in any
bankruptcy proceedings, class action securities litigation, or other litigation
or proceeding affecting securities held at any time in the Fund, including
without limitation, to file proofs of claim or other documents related to such
proceedings (the “Litigation”), or to investigate, initiate, supervise, or
monitor the Litigation involving Fund assets, and the Adviser acknowledges and
agrees that no such power, authority, responsibility or obligation is delegated
to Subadviser hereunder.
The
Subadviser represents and warrants to the Adviser that it will manage the
Fund in compliance with all applicable federal and state laws
governing its investments. Without limiting the foregoing, the
Subadviser represents and warrants (1) that the Subadviser’s management of the
Fund will be designed to allow the Fund to qualify as a “regulated investment
company” as defined in subchapter M, chapter 1 of the Internal Revenue Code of
1986, as amended (the “Code”), and (2) compliance with (a) provisions of the Act
and rules adopted thereunder that relate to the investment of Fund assets,
including depositing those assets in custody with institutions designated by the
Company to the extent the Subadviser has the authority over such assets; and (b)
federal and state securities laws applicable to Subadviser’s Fund management
responsibilities. Notwithstanding the foregoing, the Adviser shall,
subject to the Subadviser’s compliance with its obligations under this
Agreement, remain responsible for the Fund’s overall compliance with the
Investment Company Act of 1940, as amended (the “1940 Act”), the Code and all
other applicable federal and state laws and regulations. The Adviser
will provide the Subadviser with a copy of those portions of the minutes of the
meetings of the Company’s Board of Directors to the extent they may materially
affect the duties of the Subadviser, and with copies of any financial statements
or reports made by the Company to its shareholders and any further materials or
information which the Subadviser may reasonably request to enable it to perform
its obligations under this Agreement.
The Subadviser further represents and
warrants that to the extent any statement or omissions made in any Registration
Statement for shares of the Company, or any amendment or supplement thereto, are
made in reliance upon and in conformity with material information furnished in writing by the Subadviser expressly for use therein, such
portion of the Registration Statement and any amendments or supplements
thereto will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading. The Adviser agrees to notify the Subadviser in advance of
any such statements it intends to use in the Registration Statement and any
amendments or supplements thereto, and will only include such statements of the
Subadviser upon the consent of the Subadviser. The
Adviser acknowledges and agrees that, provided that the Subadviser has complied
with the second preceding sentence, the Registration Statement, and any
amendment or supplement thereto, will at all times be in compliance with all
disclosure requirements under all applicable federal and state laws and
regulations relating to the Company, including without limitation, the 1940
Act and the
rules and regulations thereunder
and that the Subadviser shall have no liability in connection
therewith.
The Adviser agrees to provide the Subadviser with such
assistance as may be reasonably requested by the Subadviser in connection with
its activities under this Agreement, including without limitation, information
concerning the Fund, its funds available, or to become available, for investment
and generally as to the conditions of the Fund or the Fund’s
affairs.
The
Subadviser accepts such engagement and
agrees, at its own expense, to render the services set forth herein and to
provide the office space, furnishings, equipment and personnel required by it to
perform such services on the terms and for the compensation provided in this
Agreement.
In reliance on the exemption under Rule 17a-10 of the
1940 Act, the Subadviser (and any affiliated person of the Subadviser) hereby
agrees it will not consult with any other subadviser of the Fund, or
any affiliated person of such subadviser, concerning transactions for the Fund
in securities or other assets and each such subadviser shall be limited to
providing investment advice with respect to only the discrete portion of the
Fund, as may be determined from time to time by the Adviser or the Board of
Directors of the Company.
2. Fund
Transactions. The Subadviser shall be responsible for
decisions to buy and sell securities for the Fund, and shall be responsible for
the execution of such buy and sell decisions, as well as the selection of
broker-dealers, and for the negotiation of brokerage commissions rates only with
respect to those securities that are not invested in the Paradigm Master Portfolio
Company.
3. Compensation
of the Subadviser. Except as provided in the last sentence of
this Section 3, the Subadviser shall not be entitled to receive any payment from
the Company and shall look solely and exclusively to the Adviser for payment of
all fees for the services rendered, facilities furnished and expenses paid by it
hereunder. As full compensation for the Subadviser under this
Agreement, the Adviser agrees to pay to the Subadviser a fee at the annual rate
set forth in Schedule A hereto with respect to the Fund. Such fee
shall be accrued daily and paid monthly as soon as practicable after the end of
each month, but not later than thirty (30) days after the end of a particular
month (i.e., the applicable annual fee rate divided by 365 applied to each prior
day’s net assets in order to calculate the daily accrual). If the
Subadviser shall provide its services under this Agreement for less than the
whole of any month, the foregoing compensation shall be prorated. For purposes of this Agreement, the Fund’s
“net assets” shall be determined as provided in the Company’s Registration
Statement.
The Subadviser shall be responsible for its own expenses
in performing its duties hereunder but shall not be responsible for the expenses
of the Adviser, the Company or the Fund. Without limiting the
generality of the foregoing, the Subadviser shall not be responsible for
brokerage commissions; transfer taxes or fees; custody fees of the Fund;
expenses for legal, accounting and auditing services; taxes and governmental
fees; costs of printing and distributing shareholder reports, proxy materials,
prospectuses and stock certificates; payment for Fund pricing services;
registration and filing fees of the Securities and Exchange Commission (“SEC”);
expenses of registering or qualifying securities of the Company or Porfolio for
sale in the various states; and freight and other charges in connection with the
shipment of the Fund’s securities. The Adviser, shall reimburse, or
shall cause the Company to reimburse, the Subadviser for any expenses of the
Company, the Fund or the Adviser as may be reasonably incurred as specifically
provided for in this Agreement or as specifically agreed to in advance by the
Adviser.
4. Reports. The Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs and that of the Company relating to the services provided
herein, as each may reasonably request and which are reasonably available.
5. Status of
the Subadviser. The services of
the Subadviser to the Adviser and the Company are not to be deemed exclusive,
and both the Adviser and Subadviser shall be free to render similar services to
others and to use the same or other information and
investment strategy utilized in the performance of services to the Company for
such other fund,
portfolio, firm, individual or account. Nothing herein shall prevent the Subadviser,
its principals and affiliates from trading in financial
instruments or other investments for their own accounts or for other accounts
the Subadviser or its affiliates manage. The Subadviser shall be
deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Company in
any way or otherwise be deemed an agent of the
Company.
6. Advertising. (a) Neither the Adviser, the
Company nor any of their respective affiliates shall make reference to or use the
name of the Subadviser or any of its affiliates, except as provided herein and
except for references concerning the identity of and services provided by the
Subadviser to the Fund, which references shall not differ in substance from
those included in the prospectuses and this Agreement, in any advertising or
promotional materials without the prior approval of the Subadviser,
which approval shall not be unreasonably withheld or delayed.
(b) Neither
the Subadviser nor any affiliate of it shall make reference to or use the name
of the Company, the Adviser or any of their respective affiliates, except for
references concerning the identity of the Company or the Adviser, and services
provided by the Subadviser to the Fund, which references shall not differ in
substance from those included in the prospectuses and this Agreement, in any
advertising or promotional materials without the prior approval of the Adviser,
which approval shall not be unreasonably withheld or delayed.
(c) The Subadviser shall have no liability
for any advertising materials prepared exclusively by the Adviser and/or
Company, without reliance on any statement or omission to make any statement by
the Subadviser. Likewise, the Adviser shall have no liability for any
advertising materials prepared exclusively by the Subadviser, without reliance on any statement or omission to make any
statement by the
Adviser.
7. Proxy
Voting. The Subadviser shall have no responsibilities in connection with proxy
voting for the Fund unless it is affirmatively requested to make a proxy voting
recommendation, in which case the Subadviser’s sole responsibility shall be to
make such a recommendation.
8. Certain
Records. The Subadviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the 1940 Act, all records relating to its investments
of the Fund, and the Subadviser’s duties and obligations under Section 1 hereof,
that are required to be maintained by the Company pursuant to the requirements
of Rule 31a-1 of the 1940 Act and any other
applicable rules. Copies of any records required to be maintained and
preserved pursuant to the provisions of Rule 31a-1, Rule 31a-2 or other
applicable rules promulgated under the 1940 Act which are prepared or maintained
by the Subadviser on behalf of the Company will be provided promptly to the
Company or the Adviser on request.
The
Subadviser agrees that all accounts, books and other records maintained and
preserved by it as required hereby shall be subject at any time, and from time
to time, to such reasonable periodic, special and other examinations by the SEC,
the Company’s auditors, the Company or any representative of the Company, the
Adviser, or any governmental agency or other instrumentality having regulatory
authority over the Company.
9. Liability
of the Adviser and Subadviser. (a) In the absence of willful misfeasance, bad
faith, negligence or reckless disregard of obligations or duties (“disabling
conduct”) hereunder on the part of the Subadviser (and its officers, directors,
agents, employees, controlling persons, shareholders and any other person or
entity affiliated with the Subadviser), the Subadviser shall not be subject to
liability to the Adviser, the Fund, the Company or any of their respective officers, directors, agents, employees, controlling
persons or shareholders for any act or
omission in the course of, or connected with, rendering services hereunder,
including without limitation, any error of judgment or mistake of law or for any
loss suffered by any of them in connection with the matters to which this
Agreement relates, except to the extent specified in Section 36(b) of the 1940
Act concerning loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services. Except for such disabling
conduct, the Adviser shall indemnify and
hold harmless the Subadviser and
its officers, directors, partners, members,
managers, agents, employees, controlling persons, shareholders and
any other person or entity affiliated with the Subadviser (collectively, the “Indemnified Parties”) from any and
all losses, claims, damages, liabilities or litigation (including reasonable
legal and other expenses) arising from the Subadviser’s providing services under
this Agreement or the sale of securities of the
Company.
(b) The
Subadviser agrees to indemnify and hold harmless the Adviser and its affiliates
and each of its directors and officers and each person, if any, who controls the
Adviser within the meaning of Section 15 of the Securities Act of 1933
(the “1933 Act”) against any and all losses, claims, damages, liabilities or
litigation (including reasonable legal and other expenses), to which the Adviser
or its affiliates or such directors, officers or controlling person may become
subject under the 1933 Act, under other statutes, at common law or otherwise,
which are caused by Subadviser’s disabling conduct with respect to the
performance of its obligations under this Agreement; provided, however, that in
no case does the Subadviser's indemnity in favor of any person apply to protect
such other person against any liability if such person’s actions or omissions
constituted willful misfeasance, bad faith, or gross negligence in the
performance of his, her or its duties or by reason of his, her or its reckless
disregard of obligations and duties under this
Agreement.
10. Confidentiality. The Subadviser will not disclose or use any records or
information obtained pursuant to this Agreement in any manner whatsoever except
as expressly authorized in this Agreement or as reasonably required to
perform its responsibilities under this
Agreement, and will keep confidential any
non-public information obtained directly as a result of this service
relationship, and the Subadviser shall disclose such non-public information only
if the Adviser or the Board of Directors of the Company has authorized such
disclosure by prior written consent, or if such information is or hereafter
otherwise is known by the Subadviser or has been disclosed, directly or
indirectly, by the Adviser or the Company to others, becomes ascertainable from public or published
information or trade sources, or if such disclosure is expressly required or
requested by applicable statutory,
regulatory or governmental authorities or self-regulatory organization or duly authorized subpoena, or to the extent such
disclosure is reasonably required by auditors or attorneys of the Subadviser in
connection with the performance of their professional services or as may
otherwise be contemplated by this Agreement. Notwithstanding the
foregoing, the Subadviser may disclose the total return earned by the Fund and
may include such total return in the calculation of composite performance
information. The Adviser acknowledges that it and the
Company have adopted policies and procedures reasonably designed to protect the
confidentiality of the Company’sportfolio holdings information, and that these
procedures provide for the oversight of compliance by the
Adviser. The Subadviser shall disclose its trading
instructions upon reasonable request by the
Adviser. The Adviser further acknowledges and agrees that
the trading instructions of the Subadviser
are the property of the Subadviser and agree that each of the Adviser and Company will
keep confidential and will not disseminate such instructions or anyinformation, documents,
statements, agreements or workpapers provided to the Adviser or the Company
hereunder, except to the extent such information is expressly required or
requested by applicable federal or state regulatory authorities or a duly
authorized subpoena.
11. Term of
the Agreement. This Agreement shall continue in full force and
effect with respect to the Fund until April 30, 2011, unless sooner terminated
as hereinafter provided and from year to year thereafter so long as
such continuance is specifically approved at least annually (i) by the vote of a
majority of those Directors of the Company who are not parties to this Agreement
or interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval, and (ii) by the Board of
Directors of the Company or by vote of a majority of the outstanding voting
securities of the Fund voting separately from any other series of the
Company.
With respect to the Fund, this Agreement
may be terminated at any time, without payment of a penalty by the Fund or the
Company, by vote of a majority of the Directors of the Company, or by vote of a
majority of the outstanding voting securities of the Fund, voting separately from any other series of
the Company, or by the Adviser, on not less than 30 nor more than 60 days'
written notice to the Subadviser. With respect to the Fund, this
Agreement may be terminated by the Subadviser at any time, without the payment
of any penalty, on not less
than 90 days' written notice to the Adviser and the
Company. This Agreement shall automatically terminate in the event of
its assignment (as defined by the 1940
Act). This Agreement will also terminate in the event that the
Investment Advisory Agreement by and between the Company and the Adviser is
terminated. The terms “majority of the outstanding voting securities”
and “interested persons” shall have the meaning as set forth in the 1940
Act.
12. Severability. This Agreement constitutes
the entire Agreement between the parties hereto. If any provision of
this Agreement shall be held or made invalid by a court decision, statute, rule
or otherwise, the remainder of this Agreement shall not be affected
thereby.
13. Amendments. This
Agreement may be amended by mutual consent in writing, but the consent of the
Company must be obtained in conformity with the requirements of the 1940
Act.
14. Governing
Law. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the 1940
Act. To the extent the applicable laws of the State of New York, or
any of the provisions herein, conflict with the applicable provisions of the
1940 Act, the latter shall control.
15. Notices. All
notices shall be in writing and deemed properly given when delivered or mailed
by United States certified or registered mail, return receipt requested, postage
prepaid, addressed as follows:
Adviser: Kinetics
Asset Management, Inc.
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Subadviser: Broadmark
Asset Management, LLC
100 Drake’s Landing Road, Suite 255
Greenbrae, CA 94904
IN
WITNESS WHEREOF, the parties have caused their respective duly authorized
officers to execute this Agreement as of the date first above
written.
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Subadviser:
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BROADMARK ASSET MANAGEMENT,
LLC
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By: /s/
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Name: ▇▇▇▇▇▇▇▇▇▇▇
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Title: Chief
Executive Officer & Chief Investment Officer
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Adviser:
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KINETICS
ASSET MANAGEMENT, INC.
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By: /s/
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Name: ▇▇▇▇▇▇
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Title: Chief
Financial Officer
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SCHEDULE
A
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Fund
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Fee
Rate (as a percentage of daily net assets of the Fund)
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The
Tactical Paradigm Fund
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65
basis points (0.65%)
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