International Fund

Manager Commentary as of 12/31/10

International markets slowed relative to the U.S. market in the fourth quarter due in large part to concerns about inflation in developing countries. While China is taking steps to cool inflationary tendencies, such as raising the benchmark interest rate and increasing reserve requirements at banks, uncertainty continues to dog the markets and intimidate investors. Brazil, while suffering from the same issues, seems to be taking less aggressive steps to implement fiscal controls.

Debt in Europe continues to be a concern, but the markets have managed, to some extent, to push through the wall of worry. There are still monetary and fiscal issues yet to be addressed in Europe, where the feeling is very similar to that of the U.S., that government is willing to come to the aid of businesses in distress, leaving savers and consumers to bear the financial burden and only vaguely stimulating economic recovery.

For the fourth quarter, the Buffalo International Fund was up 6.42%, slightly underperforming both the MSCI AC World Index ex. USA and the MSCI EAFE Net, which were up 7.20% and 6.61%, respectively. For the year, the Fund handily outperformed both indexes, returning 13.73% compared to 11.15% for the MSCI ACWI and 7.75% for the MSCI EAFE for the same period.

Data represented reflects past performance and is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original value. Current performance may be lower or higher than the performance quoted. Performance current to the most recent quarter end may be obtained by clicking here. Performance current to the most recent month end may be obtained by clicking here.

Performance in the quarter was pulled down mainly due to stock selection in the Industrial and Consumer Discretionary sectors. Although the Fund is underweighted in Financials relative to the benchmarks, stock selection helped performance as financial names enjoyed a bounce in the fourth quarter.

Some top contributors for the quarter include Asian Citrus Holdings, Ltd. in Consumer Staples, and Temenos Group AG and Schroders Plc. in Financials. Detractors included Anta Sports Products Ltd. in Consumer Discretionary, Jardine Matheson in Financials, and Gafisa in Industrials.

We continue to search for companies whose valuation and growth prospects meet our requirements. Currently, we are finding the best values in China as concerns there have pushed stock prices down. Long term, we remain optimistic that opportunities for growth may be found around the globe as disparities in standards of living continue to lessen. We will continue to let bottoms-up stock selection drive portfolio construction and asset allocation decisions and we continue to look for companies that should benefit from secular growth trends that are attractively priced. We do not base our stock selections on benchmark weightings of sectors or countries, but on our perceptions of the risk adjusted return potential of individual companies.

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