Februrary 11, 2011
Dear Shareholder:
We are pleased to enclose a Notice and Proxy Statement for the special meeting of the shareholders of First Focusthe Tributary International Equity Fund, (the “Fund”), a series portfolio of Tributary Funds, Inc. (“First Focus”(the "Company''). The special meeting is scheduled to be held on May 3, 2010March 7, 2011 at 10:0010 a.m. Central Time (the “Meeting”) at the offices of First Focus,the Company, located at 1620 Dodge Street, 16th Floor, Omaha, Nebraska 68197. Please take the time to read the proxy statement and cast your vote.
The purpose of the Meeting is to seek your approval on the election and re-election of the Board of Directors, to seek your approval on the filling of an existing vacancy on the Board of Directors, and to seek your approval on matters related to the approval of a new investment advisorysub-advisory agreement for First Focus,the Company, on behalf of each series of First Focus (each, a "Fund" and together, the "Funds"Fund, between Tributary Capital Management, LLC, the investment adviser to the Fund (“Tributary”), and new sub-advisory agreements for certainKleinwort Benson Investors International Ltd., currently the sub-adviser to Tributary on behalf of the Funds, including a potential name change for the Funds.Fund on an interim basis (“KBI”).
The Board of Directors has concluded that all the proposalsproposal included in thethis proxy statement areis in the best interests of First Focusthe Fund and its shareholders (the “Shareholders”) and recommend that Shareholders vote in favor of each proposal for which they are eligible to vote. For your added convenience, there is a summary at the beginning of the proxy statement that briefly describes eachsuch proposal.
We appreciate your participation and prompt response in this matter and thank you for your continued support.
Sincerely,
Michael SummersStephen R. Frantz
President and Chairman
FIRST FOCUSTRIBUTARY FUNDS, INC.
ONE FIRST NATIONAL CENTER
1620 DODGE STREET
OMAHA, NEBRASKA 68197
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the shareholders of First Focusthe Tributary International Equity Fund (the “Fund”), a series portfolio of Tributary Funds, Inc. (the “Company”):
A special meeting of the shareholders (the “Shareholders”) of the First Focus Funds, Inc. ("First Focus'')Fund will be held on May 3, 2010March 7, 2011 at 10:0010 a.m. Central Time (the "Meeting'') at the offices of First Focus,the Company, located at 1620 Dodge Street, 16th Floor, Omaha, Nebraska 68197, for the following purposes:purpose:
(1) | To elect and re-elect four nominees to First Focus’ Board of Directors, including the filling of an existing vacancy on the Board of Directors. This proposal applies to all Shareholders. |
(2) | To approve a new investment advisory agreement between First Focus, on behalf of each series of First Focus (each, a "Fund" and together, the "Funds"), and Tributary Capital Management, LLC (“Tributary”). This proposal applies to all Shareholders.
|
(3) ■ | To approve a new sub-advisory agreement between Tributary Capital Management, LLC and First National Fund Advisers, a newly-formed division of First National Bank in Fort Collins, Colorado,Kleinwort Benson Investors International Ltd. with respect to the First Focus Balanced Fund. This proposal applies to Shareholders of the First Focus Balanced Fund only. |
(4) | To approve a new sub-advisory agreement between Tributary and KBC Asset Management Limited with respect to the First Focus International Equity Fund. This proposal applies to Shareholders of the First Focus International Equity Fund only. |
(5) | To approve a new sub-advisory agreement between Tributary and Riverbridge Partners, LLC with respect to the First Focus Large Cap Growth Fund. This proposal applies to Shareholders of the First Focus Large Cap Growth Fund only. |
(6) | To approve the Board’s ability to change the name of First Focus and the Funds as follows at its discretion following the approval of Proposals (2) through (5): |
Existing Name | New Name |
First Focus Funds, Inc. | Tributary Funds, Inc. |
First Focus Short-Intermediate Bond Fund | Tributary Short-Intermediate Bond Fund |
First Focus Income Fund | Tributary Income Fund |
First Focus Balanced Fund | Tributary Balanced Fund |
First Focus Core Equity Fund | Tributary Core Equity Fund |
First Focus Large Cap Growth Fund | Tributary Large Cap Growth Fund |
First Focus Growth Opportunities Fund | Tributary Growth Opportunities Fund |
First Focus Small Company Fund | Tributary Small Company Fund |
First Focus International Equity Fund | Tributary International Equity Fund |
The proposal to change the nameBoard of First Focus applies to all Shareholders. The proposal to change the name of a Fund applies to ShareholdersDirectors of the respective Fund.
The BoardCompany has fixed the close of business on April 1, 2010January 21, 2011 as the record date for determining Shareholders who are entitled to notice of, and to vote at, the Meeting and any adjournment thereof.
You are cordially invited to attend the Meeting. Shareholders who do not expect to attend the Meeting are requested to complete, sign, and return the enclosed proxy promptly.
The enclosed proxy is being solicited by the Board of Directors of First Focus.the Company.
Your vote is important. Whether or not you plan to attend the meeting, please vote.
By Order of the Board of Directors
Toni BugniEvan Williams
Secretary
April 22, 2010February 11, 2011
| IMPORTANT—We urge you to sign and date the enclosed proxy card and return it in the enclosed addressed envelope, which requires no postage and is intended for your convenience. You may also vote through the internet by visiting the website address on your proxy card or by telephone by using the toll-free number on your proxy card. If you can attend the Meeting and wish to vote your shares in person at that time, you will be able to do so. |
PROXY STATEMENT
FIRST FOCUS
TRIBUTARY FUNDS, INC.
ONE FIRST NATIONAL CENTER
1620 DODGE STREET
OMAHA, NEBRASKA 68197
SPECIAL MEETING OF SHAREHOLDERS OF
FIRST FOCUSTRIBUTARY INTERNATIONAL EQUITY FUND,
A SERIES PORTFOLIO OF
TRIBUTARY FUNDS, INC.
May 3, 2010March 7, 2011
SOLICITATION OF PROXIES ON BEHALF OF THE
FIRST FOCUS FUNDS, INC. BOARD OF DIRECTORS OF
TRIBUTARY FUNDS, INC.
This proxy statement (“Proxy Statement”) is furnished in connection with the solicitation of proxies on behalf of the Board of Directors (the “Board”) of First FocusTributary Funds, Inc. (“First Focus”(the “Company”) for use at a special meeting of shareholders of each series the of First Focus funds (the “Shareholders”) of the Tributary International Equity Fund (the “Fund”), a series portfolio of the Company, for the purposespurpose set forth in the accompanying Notice of Special Meeting of Shareholders (“Notice”) to be held at 10:00 a.m. Central Time on May 3, 2010March 7, 2011 (the “Meeting”), at the offices of First Focus,the Company, located at 1620 Dodge Street, 16th Floor, Omaha, Nebraska 68197, and at any adjournment of the meeting. The approximate mailing date of this Proxy Statement is April 22, 2010.February 18, 2011.
Important Notice Regarding the Internet Availability of Proxy and Other Materials for the Meeting:
This Proxy Statement and the accompanying Notice of Special Meeting of Shareholders and form of proxy card also are available on First Focus’the Company’s website at:
www.firstfocusfunds.comwww.tributaryfunds.com/FinancialReports/financialReports.htm
Broadridge Financial Solutions, Inc., located at 51 Mercedes Way, Edgewood, New York 11717 has been engaged to assist in the solicitation of proxies for First Focus,the Company, at an estimated cost of approximately $12,000$2,000 plus expenses. In addition, First Focusthe Company may request personnel of the Co-Administrators (as defined herein) to assist in the solicitation of proxies for no separate compensation. It is anticipated that First Focusthe Company will request brokers, custodians, nominees, and fiduciaries who are record owners of stock to forward proxy materials to their principals and obtain authorization for the execution of proxies. Upon request, First Focusthe Company will reimburse the brokers, custodians, nominees, and fiduciaries for their reasonable expenses in forwarding proxy materials to their principals. FNB Fund AdvisersKleinwort Benson Investors International Ltd. (“KBI”) will bear the c ostcost of soliciting proxies.
The Board has fixed the close of business on April 1, 2010,January 21, 2011, as the record date (the “Record Date”) for the determination of Shareholders entitled to notice of and to vote at the Meeting and at any adjournment or postponement thereof. Shareholders on the Record Date will be entitled to one vote for each share of a particular series of First Focus (each, a "Fund" and together, the "Funds")Fund held in his or her name, with proportional voting rights for fractional shares. Based upon the records of First Focusthe Company and the Funds’Company’s transfer agent, persons who beneficially or of record own more than five percent of athe Fund’s outstanding shares as of the Record Date are listed in Appendix E.B. Prior to completing the attached proxy cards, Shareholders should review all voting information presented below unde runder “Additional Information About First Focus.”
SUMMARY OF PROPOSALS
While you should read the full text of this Proxy Statement, here is a brief summary of each of the proposals and how it will affect the Funds.
The following proposals will be considered and acted upon at the Meeting:
(1) | election and re-election of the current Directors as well as a new Director nominee to fill an existing vacancy on the Board; |
(2) | approval of a new investment advisory agreement (the “New Investment Advisory Agreement”) between First Focus, on behalf of each Fund, and Tributary Capital Management, LLC (“Tributary”); |
(3) | approval of a new sub-advisory agreement (the “New First National Sub-Advisory Agreement”) between Tributary and First National Fund Advisers (“FNFA”), a newly-formed division of First National Bank in Fort Collins, Colorado (“FNBFC”), with respect to the First Focus Balanced Fund; |
(4) | approval of a new sub-advisory agreement (the “New KBC Sub-Advisory Agreement”) between Tributary and KBC Asset Management International Limited (“KBC”), with respect to the First Focus International Equity Fund; and |
(5) | approval of a new sub-advisory agreement (the “New Riverbridge Sub-Advisory Agreement”) between Tributary and Riverbridge Partners, LLC (“Riverbridge”), with respect to the First Focus Large Cap Growth Fund. |
(6) | upon approval of Proposals (2) through (5), approve the Board’s ability to change the name of First Focus and the Funds at its discretion as follows: |
Existing Name | New Name |
First Focus Funds, Inc. | Tributary Funds, Inc. |
First Focus Short-Intermediate Bond Fund | Tributary Short-Intermediate Bond Fund |
First Focus Income Fund | Tributary Income Fund |
First Focus Balanced Fund | Tributary Balanced Fund |
First Focus Core Equity Fund | Tributary Core Equity Fund |
First Focus Large Cap Growth Fund | Tributary Large Cap Growth Fund |
First Focus Growth Opportunities Fund | Tributary Growth Opportunities Fund |
First Focus Small Company Fund | Tributary Small Company Fund |
First Focus International Equity Fund | Tributary International Equity Fund |
Shareholders of each Fund will vote separately for the New Investment Advisory Agreement, the applicable sub-advisory agreements, and the name change of the respective Fund. The following table lists the Shareholders of which Funds vote on these proposals.
Proposal
| Shareholders Entitled to Vote |
Election of Directors: Elect and re-elect current directors as well as a new director nominee to the Board
| Shareholders of all Funds, voting together |
Advisory Agreement: Approve the New Investment Advisory Agreement between First Focus and Tributary, to become effective upon consummation of the Tributary Transactions, as described below
| Shareholders of each Fund, voting separately by Fund |
First National Fund Advisers Sub-Advisory Agreement: Approve the New First National Sub-Advisory Agreement between Tributary and First National Fund Advisers, to become effective upon the consummation of the Tributary Transactions, as described below
| Shareholders of the First Focus Balanced Fund |
KBC Sub-Advisory Agreement: Approve the New KBC Sub-Advisory Agreement between Tributary and KBC, to become effective upon the consummation of the Tributary Transactions, as described below
| Shareholders of the First Focus International Equity Fund |
Riverbridge Sub-Advisory Agreement: Approve the New Riverbridge Sub-Advisory Agreement between Tributary and Riverbridge, to become effective upon the consummation of the Tributary Transactions, as described below
| Shareholders of the First Focus Large Cap Growth Fund |
Name Change: Change the name of First Focus and each Fund to be effected at the discretion of the Board.
| First Focus: Shareholders of all Funds, voting together
Each Fund: Shareholders of the respective Fund
|
PROPOSAL NO. 1 (ALL SHAREHOLDERS) – ELECTION OF NOMINEES TO THE BOARD
Under this proposal, the Board recommends that Shareholders of the Funds elect and re-elect each of the current directors to the Board: Michael Summers, Robert A. Reed, and Gary D. Parker, and elect a new director nominee, John J. McCartney, to fill an existing vacancy on the Board. First Focus will be managed by the directors in accordance with the laws of Nebraska governing corporations. The Board oversees all of the Funds. Directors serve until their respective successors have been elected and qualified or until their earlier death, resignation or removal. The directors appoint the officers of First Focus to actively supervise its day-to-day operations.
PROPOSAL NO. 2 (ALL SHAREHOLDERS) – TO APPROVE THE NEW INVESTMENT ADVISORY AGREEMENT
Under this proposal, the Board recommends that Shareholders of the Funds approve the New Investment Advisory Agreement between Tributary and First Focus, on behalf of all the Funds. FNB Fund Advisers (“FNB Advisers”), a division of First National Bank of Omaha, N.A. (“FNBO”), presently serves as the investment adviser to six of the eight Funds (the First Focus Short-Intermediate Bond Fund, the First Focus Income Fund, the First Focus Core Equity Fund, the First Focus Large Cap Growth Fund, the First Focus Small Company Fund, and the First Focus International Equity Fund (collectively, the “FNB Advised Funds”)), pursuant to an Investment Advisory Agreement, dated December 20, 1994, as amended December 5, 1995, June 4, 1996, February 14, 2005, and July 1, 2007 (the “Current FNB Advisory Agr eement”). Tributary presently serves as the investment adviser to the First Focus Balanced Fund and to the First Focus Growth Opportunities Fund (together, the “Tributary Advised Funds”), pursuant to an Investment Advisory Agreement, dated February 14, 2005 (the “Current Tributary Advisory Agreement,Company.” and together with the Current FNB Advisory Agreement, the “Current Master Advisory Agreements”).
FNB Advisers and Tributary are both owned, directly or indirectly, by First National of Nebraska, Inc., a Nebraska corporation (“FNNI”). By adopting this proposal, Tributary will be directly responsible for, and accountable to the Shareholders for, the investment performance of all eight Funds. The advisory fees to be paid to Tributary, its duties to each of the Funds, and its investment management operations and investment professionals will be substantially identical to those fees, duties, investment management operations, and investment professionals existing under (i) the Current FNB Advisory Agreement with respect to the FNB Advised Funds, and (ii) the Current Tributary Advisory Agreement with respect to the Tributary Advised Funds.
PROPOSAL NO. 3 (FIRST FOCUS BALANCED FUND SHAREHOLDERS ONLY) – TO APPROVE THE NEW FIRST NATIONAL SUB-ADVISORY AGREEMENT
Under this proposal, the Board recommends that Shareholders of the First Focus Balanced Fund approve the New First National Sub-Advisory Agreement between Tributary and FNFA with respect to the First Focus Balanced Fund. Tributary presently serves as the investment adviser to the First Focus Balanced Fund. FNFA is a separately-identifiable division of FNBFC, 205 West Oak Street, Fort Collins, Colorado 80521. By adopting this proposal, FNFA will offer certain sub-advisory services to aid Tributary in its responsibility and accountability for the investment performance of the First Focus Balanced Fund. The sub-advisory fees to be received by FNFA from Tributary are equal to an annual rate of 0.375% of the average daily net assets of the First Focus Balanced Fund, paid at the same time and in the same man ner as Tributary would be paid its advisory fee under the New Investment Advisory Agreement.
PROPOSAL NO. 4 (FIRST FOCUS INTERNATIONAL EQUITY FUND SHAREHOLDERS ONLY) – TO APPROVE THE NEW KBC SUB-ADVISORY AGREEMENT
Under this proposal, the Board recommends that Shareholders of the First Focus International Equity Fund approve the New KBC Sub-Advisory Agreement between KBC and Tributary with respect to the First Focus International Equity Fund. KBC presently serves as the sub-adviser to the First Focus International Equity Fund, pursuant to an Investment Sub-Advisory Agreement dated April 15, 2002 (the “KBC Sub-Advisory Agreement”). Pursuant to this proposal, KBC will continue to provide sub-advisory services and aid Tributary in its responsibility and accountability for the investment performance of the First Focus International Equity Fund. The sub-advisory fees to be received by KBC from Tributary are equal to an annual rate of 0.50% of the average daily net assets of the First Focus International Equity Fund, paid at the same time and in the same manner as Tributary would be paid its advisory fee under the New Investment Advisory Agreement.
PROPOSAL NO. 5 (FIRST FOCUS LARGE CAP GROWTH FUND SHAREHOLDERS ONLY) – TO APPROVE THE NEW RIVERBRIDGE SUB-ADVISORY AGREEMENT
Under this proposal, the Board recommends that Shareholders of the First Focus Large Cap Growth Fund approve the New Riverbridge Sub-Advisory Agreement between Riverbridge and Tributary with respect to the First Focus Large Cap Growth Fund. Riverbridge presently serves as the sub-adviser to the First Focus Large Cap Growth Fund, pursuant to an Investment Sub-Advisory Agreement effective July 1, 2007 (the “Riverbridge Sub-Advisory Agreement,” and collectively with the KBC Sub-Advisory Agreement and the Current Master Advisory Agreements, the “Current Advisory Agreements”). Pursuant to this proposal, Riverbridge will continue to provide sub-advisory services and aid Tributary in its responsibility and accountability for the investment performance of the First Focus Large Cap Growth Fund. The sub-advisory fees to be received by Riverbridge from Tributary are equal to an annual rate of 0.45% of the average daily net assets of the First Focus Large Cap Growth Fund, paid at the same time and in the same manner as Tributary would be paid its advisory fee under the New Investment Advisory Agreement.
PROPOSAL NO. 6 (ALL SHAREHOLDERS) – TO APPROVE THE POTENTIAL NAME CHANGE OF FIRST FOCUS AND EACH OF THE FUNDS
Under this proposal, the Board recommends that Shareholders of each of the Funds approve the Board’s ability to effectuate a name change for First Focus and each of the Funds at the Board’s discretion. Pursuant to this proposal, upon approval by Shareholders of Proposals (2) through (5), the Board may change the name of First Focus to Tributary Funds, Inc., and may change the name of each Fund as follows: Tributary Short-Intermediate Bond Fund; Tributary Income Fund; Tributary Balanced Fund; Tributary Core Equity Fund; Tributary Large Cap Growth Fund; Tributary Growth Opportunities Fund; Tributary Small Company Fund; and Tributary International Equity Fund. The purpose of this proposal is to conform the Funds’ names to the name of the new investment adviser to the Funds, Tributary.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH PROPOSAL FOR WHICH YOU ARE ELIGIBLE TO VOTE.
SHAREHOLDER REPORTS
Unaudited financial statements of First Focus in the form of the Semi-Annual Report, dated September 30, 2009, and audited financial statements of First Focus in the form of the Annual Report, dated March 31, 2009, have been mailed to Shareholders before this proxy mailing. First Focus will furnish, without charge, a copy of the Annual Report or the Semi-Annual Report to any Shareholder who requests the report. Shareholders may obtain such reports by visiting www.firstfocusfunds.com; calling 1-800-662-4203; or by writing First Focus at 1620 Dodge Street, Mail Stop 1075, Omaha, Nebraska 68197.
BACKGROUND
DESCRIPTION OF THE TRANSACTION
Purchases of Membership Interests in Tributary
Subject to Shareholder approval, FNNI will engage in an internal reorganization of its subsidiaries, including FNB Advisers and Tributary. As part of this reorganization, FNBO has entered into an Interest Purchase Agreement (the “Purchase Agreement”) under which FNBO will purchase all of the outstanding interests in Tributary from FNBFC. Under the terms of the Purchase Agreement, all existing FNB Adviser personnel will become employees of Tributary, and such personnel, as applicable, will continue to service the Funds as they have previously (with such transactions collectively referred to as the “Tributary Transactions”).
The New Investment Advisory Agreement and the Tributary Transactions will enable the current managers and portfolio management teams of FNB Advisers to continue to advise the FNB Advised Funds. Shareholder approval of the New Investment Advisory Agreement is a condition to the closing of the Purchase Agreement.
The Purchase Agreement, if consummated, may be deemed to constitute an “assignment,” (as defined in the 1940 Act), of the Current Master Advisory Agreements. Accordingly, pursuant to the 1940 Act, the Current Master Advisory Agreements would terminate upon the consummation of the Purchase Agreement and the effectiveness of the New Investment Advisory Agreement. The consummation of the Purchase Agreement may also confer a benefit upon Tributary (within the meaning of Section 15(f) of the 1940 Act) because FNBO will purchase its interests. Section 15(f) of the 1940 Act permits Tributary to receive such benefit if (i) at least 75% of the Funds’ directors are not “interested
persons” (as defined in the 1940 Act) of either FNBO or Tributary for a period of three years from the consummation of the Purchase Agreement, and (ii) no unfair burden is imposed on the Funds as a result of the Tributary Transactions. Tributary believes that such requirements will be met if the Board’s independent director nominees are elected and re-elected, as applicable, under Proposal 1, and because none of the new advisory agreements to be approved by the Shareholders under Proposals 2 – 5 will result in any burden on any of the Funds, as described below under such Proposals.
Subject to Shareholder approval, the Tributary Transactions are expected to close on or about May 3, 2010. If any Shareholders do not approve their Fund’s New Investment Advisory Agreement, the appropriate parties will have no obligation to close the Purchase Agreement. Upon completion of the Tributary Transactions, Tributary will assume all operations, employees, rights, and obligations of FNB Advisers and FNB Advisers will terminate its current registration as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act’).
Subsequent Transfer of Interests in Tributary
After the completion of the Tributary Transactions, the integration of FNB Advisers’ personnel into Tributary, and the commencement of the New Investment Advisory Agreement between Tributary and the Funds, FNBO intends to transfer all of its interests in Tributary to either FNIB or FNNI (the “Follow On Transfer”). Due to the application of various regulatory provisions to FNNI and its subsidiaries in connection with the Follow On Transfer, the purchaser of Tributary has not been determined as of the date of this Proxy Statement. However, regardless of whether FNIB or FNNI purchase the interests in Tributary from FNBO, none of Tributary’s personnel or management will change in connection with the Follow On Transfer. Accordingly, the Follow On Transfer will not constitute an “assignmen t” of the New Investment Advisory Agreement by Tributary under the 1940 Act, and therefore neither the Funds nor the New Investment Advisory Agreement will be affected by the Follow On Transfer.
The consummation of the Follow On Transfer may also confer a benefit upon FNBO (within the meaning of Section 15(f) of the 1940 Act) because FNBO will sell its interests to an affiliate. Section 15(f) of the 1940 Act permits FNBO to receive such benefit if (i) at least 75% of the Funds’ directors are not “interested persons” (as defined in the 1940 Act) of either FNBO or Tributary for a period of three years from the consummation of the Follow On Transfer, and (ii) no unfair burden is imposed on the Funds as a result of the Follow On Transfer. FNBO believes that such requirements will be met if the Board’s independent director nominees are elected and re-elected, as applicable, under Proposal 1, and because none of the new advisory agreements to be approved by the Shareholders under Proposals 2 ̵ 1; 5 will result in any burden on any of the Funds, as described below under such Proposals.
Appointment of First National Fund Advisers as Sub-Adviser to First Focus Balanced Fund
In anticipation of the Tributary Transactions, FNFA, a new division of FNBFC, has been established. Pursuant to the New First National Sub-Advisory Agreement with Tributary, FNFA will offer certain sub-advisory services to aid Tributary in its responsibility and accountability for the investment performance of the First Focus Balanced Fund. The sub-advisory fees to be received by FNFA from Tributary are equal to an annual rate of 0.375% (37.5 bps) of the average daily net assets of the First Focus Balanced Fund, paid at the same time and in the same manner as Tributary would be paid its advisory fee pursuant to the New Investment Advisory Agreement.
Appointment of KBC as Sub-Adviser to First Focus International Equity Fund
Upon the consummation of the Rights Purchase Agreement, the existing KBC Sub-Advisory Agreement will terminate automatically. To enable KBC to continue serving as sub-adviser and aid Tributary in its responsibility and accountability for the investment performance of the First Focus International Equity Fund, Tributary and KBC will need to enter into the New KBC Sub-Advisory Agreement. With the exception of replacing FNBO with Tributary as the “Adviser” and a new effective date, the KBC Sub-Advisory Agreement and the New KBC Sub-Advisory Agreement are substantially identical.
Appointment of Riverbridge as Sub-Adviser to First Focus Large Cap Growth Fund
Upon the consummation of the Rights Purchase Agreement, the existing Riverbridge Sub-Advisory Agreement will terminate automatically. To enable Riverbridge to continue serving as sub-adviser and aid Tributary in its responsibility and accountability for the investment performance of the First Focus Large Cap Growth Fund, Tributary and Riverbridge will need to enter into the New Riverbridge Sub-Advisory Agreement. With the exception of replacing FNBO with Tributary as the “Adviser,” a new effective date, and shortening the notice requirement from sixty (60) days to thirty (30) days, the Riverbridge Sub-Advisory Agreement and the New Riverbridge Sub-Advisory Agreement are substantially identical.
CURRENT INVESTMENT ADVISERS
FNB Advisers, a division of FNBO, 1620 Dodge Street, Stop 1075, Omaha, Nebraska 68197 presently serves as the investment adviser to the FNB Advised Funds. FNB Advisers is a registered investment adviser under the Advisers Act. FNBO is a subsidiary of FNNI, a Nebraska corporation with total assets of about $19 billion as of December 31, 2009. FNBO offers clients a full range of financial services and has seventy years of experience in banking, trust, and financial investment management. As of December 31, 2009, First Investment Group, the investment division of FNBO which includes FNB Advisers, had $4.6 billion in assets under management. FNB Advisers acts through its Chief Financial Officer, and its employees. Steve Frantz, whose business address is 1620 Dodge Street, Stop 175, Om aha, Nebraska 68197, has been with FNB Advisers for ten years. Appendix A lists the current executive officers and directors of FNB Advisers.
Tributary, located at 215 West Oak Street, Fort Collins, Colorado 80521, is the investment adviser to the Tributary Advised Funds. Tributary is a wholly-owned subsidiary of FNBFC, which is a wholly-owned subsidiary of First National of Colorado, Inc., a locally-owned community bank holding company (“FNCI”), 205 West Oak Street, Fort Collins, Colorado 80521, which in turn is a wholly-owned subsidiary of FNNI. As of December 31, 2009, Tributary had approximately $233.9 million in assets under management. Tributary acts through its Managing Director, Kurt Spieler; its Senior Portfolio Manager, David Jordan; and its employees. Mr. Spieler, whose business address is 215 West Oak Street, Fort Collins, Colorado 80522, has been with Tributary for three years. Mr. Jordan, whose business a ddress is 215 West Oak Street, Fort Collins, Colorado 80522, has been with Tributary, and its predecessor, FNB Advisers, for more than fourteen years. Appendix A lists the current executive officers and directors of Tributary.
KBC is a subsidiary of KBC Asset Management Limited, located at Joshua Dawson House, Dawson Street, Dublin 2, Ireland, serves as the investment sub-adviser to the First Focus International Equity Fund. KBC, a registered investment adviser under the Advisers Act, provides investment advisory services to individuals, investment companies, and other institutions. As of December 31, 2009, KBC had $5.6 billion in assets under management. KBC is part of the KBC Bank and Insurance Group NV. KBC Group is a financial services group with headquarters in Brussels, Belgium. KBC acts through its Chief Executive Officer, Sean Hawkshaw, and its employees. Mr. Hawkshaw, whose business address is Joshua Dawson House, Dawson Street, Dublin 2, Ireland, has been with KBC for seventeen years. 60;Appendix A lists the current executive officers and directors of KBC.
Riverbridge, located at Midwest Plaza West, 801 Nicollet Mall, Suite 600, Minneapolis, Minnesota 55402, serves as the investment sub-adviser to the First Focus Large Cap Growth Fund. Riverbridge, a registered investment adviser under the Advisers Act, provides investment advisory services to individuals, investment companies, and other institutions. As of December 31, 2009, Riverbridge had $1.731 billion in assets under management. Riverbridge has been a registered investment adviser since 1987. Riverbridge’s business address is Midwest Plaza West, 801 Nicollet Mall, Suite 600, Minneapolis, Minnesota 55402.
CURRENT ADVISORY AGREEMENTS
FNB Advisers and Tributary (together, the “Current Advisers”) supervise and administer the Funds’ respective investment programs. Supervised by the Board and following each Fund’s investment objectives and restrictions, each Adviser (or, as to the First Focus International Equity Fund and First Focus Large Cap Growth Fund, the sub-adviser): (i) manages a Fund’s investments, (ii) makes buy/sell decisions and places the related orders, and (iii) keeps records of purchases and sales. Investment decisions for the Funds are made by teams of adviser or sub-adviser personnel. In general, investment decisions are made by consensus, and no one person is primarily responsible for making investment recommendations. Each Fund’s respective portfolio management team is primarily r esponsible for day-to-day management of the Fund.
FNB Advisers provides investment advisory services to the FNB Advised Funds pursuant to the Current FNB Advisory Agreement. The Current FNB Advisory Agreement was most recently approved by the Board on May 18, 2009.
Tributary provides investment advisory services to the Tributary Advised Funds pursuant to the Current Tributary Advisory Agreement. The Current Tributary Advisory Agreement was most recently approved by the Board on May 18, 2009.
KBC provides investment sub-advisory services to FNB Advisers for the First Focus International Equity Fund pursuant to the KBC Sub-Advisory Agreement. The KBC Sub-Advisory Agreement was most recently approved by the Board on May 18, 2009.
Riverbridge provides investment sub-advisory services to FNB Advisers for the First Focus Large Cap Growth Fund pursuant to the Riverbridge Sub-Advisory Agreement. The Riverbridge Sub-Advisory Agreement was most recently approved by the Board on May 18, 2009.
The Current Advisory Agreements have existed since each Fund’s inception. As a result, the Current Advisory Agreements were approved by each Fund’s initial Shareholders and have not been otherwise submitted to a vote of the Funds’ Shareholders.
Unless otherwise terminated, after their initial terms, the Current Advisory Agreements remain in effect from year to year for successive annual periods ending on June 30 if, as to each Fund, such continuance is approved at least annually by (a) the vote of a majority of First Focus’ Board of Directors who are not “interested persons” (as defined in the 1940 Act), cast in person at a meeting called for the purpose of voting on such approval, and (b) the vote of a majority of First Focus’ Board of Directors or by the vote of a majority of all votes attributable to the outstanding shares of such Fund.
First Focus pays FNB Advisers and Tributary, for their services to the Funds, a fee based on an annual percentage of the average daily net assets of each Fund. The following table sets forth the advisory fees paid on behalf of each Fund for the fiscal year ended March 31, 2010, and identifies the respective adviser.
Fund | Advisory Fee |
First Focus Short-Intermediate Bond Fund | 0.50% (to FNB Advisers) |
First Focus Income Fund | 0.60% (to FNB Advisers) |
First Focus Balanced Fund | 0.75% (to Tributary) |
First Focus Core Equity Fund | 0.75% (to FNB Advisers) |
First Focus Large Cap Growth Fund | 0.90% (to FNB Advisers) |
First Focus Growth Opportunities Fund | 0.75% (to Tributary) |
First Focus Small Company Fund | 0.85% (to FNB Advisers) |
First Focus International Equity Fund | 1.00% (to FNB Advisers) |
For sub-advisory services provided by KBC to FNB Advisers with respect to the First Focus International Equity Fund, FNB Advisers pays KBC a sub-advisory fee at an annual rate of 0.50% of the average daily net assets of the First Focus International Equity Fund. For sub-advisory services provided by Riverbridge to FNB Advisers with respect to the First Focus Large Cap Growth Fund, FNB Advisers pays Riverbridge a sub-advisory fee at an annual rate of 0.45% of the average daily net assets of the First Focus Large Cap Growth Fund.
FNB Advisers and Tributary may choose to waive all or some of their advisory fees, as applicable, which will cause a Fund’s yield and total return to be higher than it would be without the waiver. Additionally, KBC and Riverbridge may choose to waive a portion of their sub-advisory fees. Currently FNB Advisers, Tributary, and Riverbridge have contractually agreed to fee waivers in the following amounts for the period August 1, 2009 through July 31, 2010:
Fund | Fee Waiver |
First Focus Short-Intermediate Bond Fund | 0.29% (from FNB Advisers) |
First Focus Income Fund | 0.47% (from FNB Advisers) |
First Focus Balanced Fund | 0.15% (from Tributary) |
First Focus Core Equity Fund | 0.15% (from FNB Advisers) |
First Focus Large Cap Growth Fund | 0.20% (from FNB Advisers) (0.10% from Riverbridge as sub-adviser) |
First Focus Growth Opportunities Fund | 0.15% (from Tributary) |
First Focus Small Company Fund | 0.15% (from FNB Advisers) |
First Focus International Equity Fund | 0.15% (from FNB Advisers) |
The following table sets forth the advisory fees, net of fee waivers, earned by FNB Advisers and Tributary for the fiscal year ended March 31, 2010:
Fiscal Year Ended March 31, 2010
| Fund | Fee Waivers | Advisory Fees Net of Fee Waivers |
| First Focus Short-Intermediate Fund | $ 178,337 | $ 129,141 |
| First Focus Income Fund | $ 279,558 | $ 65,587 |
| First Focus Balanced Fund | $ 38,451 | $ 153,802 |
| First Focus Core Equity Fund | $ 142,234 | $ 568,933 |
| First Focus Large Cap Growth Fund | $ 194,299 | $ 399,273 |
| First Focus Growth Opportunities Fund | $ 84,198 | $ 336,791 |
| First Focus Small Company Fund | $ 77,208 | $ 360,304 |
| First Focus International Equity Fund | $ 196,591 | $ 722,644 |
For the fiscal year ended March 31, 2010, the Funds paid no commissions on securities transactions to any broker affiliated with FNB, Tributary, or First Focus.
During the last fiscal year, contractual fee waivers on the First Focus Income Fund, the First Focus Large Cap Growth Fund, and the First Focus International Equity Fund were decreased. Effective August 1, 2009, (i) the First Focus Income Fund decreased its waiver from 52 bps to 47 bps, (ii) the First Focus International Fund decreased its waiver from 25 bps to 15 bps, and (iii) the First Focus Large Cap Growth Fund decreased its waiver from 45 bps to 20 bps.
There has been no material interest, direct or indirect, of any Director of the Funds in (i) any material transactions or (ii) any material proposed transactions since the beginning of the most recently completed fiscal year, to which the investment adviser of the Funds, any parent or subsidiary of the investment adviser (other than a Fund) or any subsidiary or parent of such entities was or is to be a party.
The Current Master Advisory Agreements, as required by the 1940 Act, each contain a provision requiring the agreement to terminate in the event of an “assignment.” Under the 1940 Act, a change of control of an investment adviser results in an assignment and termination of the adviser’s investment advisory contracts. As described above, Tributary and FNB Advisers are involved in the Tributary Transactions. Tributary may be deemed to undergo a change of control (as that term is used under the 1940 Act) upon consummation of the Tributary Transactions. Such a change of control may be deemed to result in the assignment of, and therefore the termination of, the Current Tributary Advisory Agreement. Additionally, pursuant to the Tributary Transactions, the Current FNB Advisory Agr eement will be assigned to Tributary. Therefore, upon the consummation of the Tributary Transactions, and subject to Shareholder approval, Tributary will become the sole investment adviser to all Funds.
As discussed below and taking into account that the investment professionals of FNB Advisers will be transferred to Tributary, neither the level nor the quality of the advisory services provided to each Fund nor the compensation paid for those services will change under the New Investment Advisory Agreement. With the exception of inserting Tributary as the investment adviser to the Funds, and different dates of effectiveness, the Current Master Advisory Agreements and the New Investment Advisory Agreement are substantially identical. With the exception of replacing FNBO with Tributary as the “Adviser” and a new effective date, the KBC Sub-Advisory Agreement and the New KBC Sub-Advisory Agreement are substantially identical. With the exception of replacing FNBO with Tributary as the “Adviser̶ 1;, a new effective date, and shortening the termination notice requirement from sixty (60) days to thirty (30) days, the Riverbridge Sub-Advisory Agreement and the New Riverbridge Sub-Advisory Agreement are substantially identical.
PROPOSAL 1
ELECTION OF NOMINEES TO THE BOARD
(ALL SHAREHOLDERS)
The Board recommends that the Shareholders of the Funds elect the current directorapprove a new sub-advisory agreement (the “New KBI Sub-Advisory Agreement”) between Tributary Capital Management, LLC (“Tributary”) and KBI, with respect to the Board: Michael Summers. The Board also recommends that Shareholders ofFund (the “Proposal”). KBI presently serves as sub-adviser to Tributary, the Funds re-elect the current directorsinvestment adviser to the Board: Robert A. Reed, and Gary D. Parker. The Board further recommends that Shareholders elect the new director nominee to fill an existing vacancy on the Board: John J. McCartney. Each nominee must be elected by a plurality of the shares of First Focus voted at the Meeting. Shares of each Fund will be counted together in determining the results of the voting for Proposal 1.
If any director standing for election shall by reason of death or for any other reason become unavailable as a candidate at the Meeting, votes pursuant to the enclosed proxy will be cast for a substitute candidate by the proxies named on the proxy card, present and acting at the Meeting. Any such substitute candidate for election as a director shall be made by a majority of the directors of the Funds who are not “interested persons” (as defined in the 1940 Act) (“Independent Directors”) of the Funds. The Board has no reason to believe that any current director will become unavailable for election as a director.
NOMINEES’ INFORMATION
Background
First Focus will be managed by the directors in accordance with the laws of Nebraska governing corporations. The Board oversees all of the Funds. Directors serve until their respective successors have been elected and qualified or until their earlier death, resignation or removal. The directors appoint the officers of First Focus to actively supervise its day-to-day operations.
Please see Appendix D to this Proxy Statement for the business addresses, ages, principal occupations during the last five years, other current directorships, ownership of shares in the Funds, compensation of the directors as well as the specific experience, qualifications, attributes, and skills that led to the conclusion that each person should serve as a director for the Funds.
Board Structure
Throughout its existence, the relative size of First Focus has been modest, as compared to many fund families. This is primarily because traditionally First Focus has been almost exclusively marketed to customers of First National Bank, and the Funds have not sought widespread distribution. Because of First Focus’ smaller size, for a number of years the structure of its Board has been smaller than is typical for larger scale fund families. Presently, the Board has three directors, two of whom are not “interested persons” (as defined in the 1940 Act) of either the Funds, the Funds’ respective investment advisers or the Funds’ various service providers. Upon the election of Mr. McCartney, the Board will be comprised of 75% Independent Directors.
Because of the Funds’ affiliation with the First National organization, First Focus has always had at least one director who is affiliated with First National, an arrangement which is quite common in the fund industry. Presently, the Funds’ one interested director meets the definition of “interested” under the 1940 Act because of his affiliation with First National, and serves as the Board’s Chairman. Given the relatively modest size of First Focus, we believe the Board’s structure comprised of 75% Independent Directors (upon the election of the additional Independent Director under Proposal 1) is appropriate, because the ratio of three Independent Directors to one interested director provides the Independent Directors with a distinct ability to influence the Board’s agenda and actions. A 75% majority of Independent Directors will provide an appropriate level of oversight of conflicts of interest among the Funds’ investment adviser, subadvisers and the Funds when considering the terms of any advisory contracts, as well as nominating directors to serve on the Board in the future.
Given the relatively modest size of First Focus, we do not believe that more than four directors are required at this time because the Board’s composition of four directors is sufficiently capable of performing its duties to the Funds. Should the size of the Funds materially increase or the Funds’ distribution strategies expand, the Board will re-evaluate the appropriateness of its size. Furthermore, in light of the Funds’ size and the limited size of its Board, the Board does not
presently consider diversity in its nominees for directors, but rather the Board focuses on each director’s ability to contribute to the Board’s oversight of the Funds. Accordingly, the Board has not adopted any policy requiring it or the Nominations Committee to specifically consider diversity when identifying director nominees.
Moreover, because the Board will have only three Independent Directors, First Focus does not believe that appointing a lead Independent Director would be particularly useful. Instead, all decisions with affiliated persons, and as described below, and all committee matters which should be decided by Independent Directors are determined by the three Independent Directors functioning as a committee, or as the only Independent Directors, as applicable.
The Board has formed two committees, the Audit Committee and the Nominations Committee, which are generally charged with determining First Focus’ most important corporate governance matters, such as reviewing the Funds’ reported financial information and nominating new directors for shareholder election. Both of those committees are now comprised solely of the two Independent Directors, and upon the election of a new Independent Director under Proposal 1, will be comprised of all three Independent Directors. Please see the description below regarding the specific responsibilities of those committees.
The Board’s role in overseeing the risks of First Focus begins with its duties imposed by it under both the 1940 Act and state corporate law—as the body which is charged with supervision of First Focus’ overall operations. In addition to reviewing periodic reports provided to the Board from the Funds’ various service providers, the Board meets, usually in person, at least quarterly to discuss the Funds’ operations, performance, and other matters such as review of any compliance concerns, if any. The Board has caused the Funds to engage with certain service providers which assist it in overseeing the Funds’ operations. For example, the Funds’ co-administrators are primarily responsible for assuring the Funds’ accounting is appropriately managed and the Funds’ internal operati ons are appropriately carried out, the Funds’ investment advisers are primarily responsible for implementing the Funds’ respective investment programs, and the Funds’ independent auditors are primarily responsible for conducting the annual audit of the Funds’ financial statements. The Board oversees the activities of all of these service providers.
In addition, the Board’s committee structure further enables it to oversee First Focus’ risks. The primary committee in this regard is the Audit Committee, which is comprised entirely of Independent Directors. The Funds’ independent auditors must report their findings and conclusions respecting their annual audit of the Funds’ financial statements. Furthermore, the Funds’ internal policies require service providers and other persons to report compliance and similar risk matters to the attention of the Audit Committee.
The Board has determined that its leadership structure is appropriate based on the size of First Focus, the Board’s current responsibilities, each of the director’s ability to participate in the oversight of First Focus, and committee transparency. As noted above, 75% of the Board will be (upon approval of Proposal 1) comprised of Independent Directors, and these Independent Directors serve on committees designed to facilitate the governance of First Focus and provide risk oversight. Additionally, the Board believes that its existing directors, as well as the director nominee, provide exceptional leadership and management experience to First Focus.
Beneficial Ownership
The table below sets forth the amount of Shares beneficially owned by each director and each nominee for election as director in each Fund stated as one of the following dollar ranges: None; $1-$10,000; $10,001-$50,000; $50,001-$100,000; or over $100,000. The information below is provided as of December 31, 2009.
| Independent Directors | Interested Director | Independent
Director Nominee
|
| Mr. Parker | Mr. Reed | Mr. Summers | Mr. McCartney |
First Focus Short-Intermediate Fund | None | None | None | None |
First Focus Income Fund | None | None | None | None |
First Focus Balanced Fund | None | None | None | None |
First Focus Core Equity Fund | None | None | None | None |
First Focus Growth Fund | None | None | None | None |
First Focus Small Company, Fund | None | None | None | None |
First Focus International Fund | None | None | $1-$10,000 | None |
First Focus Large Cap Fund | None | None | None | None |
All Funds in the Aggregate | None | None | $1-$10,000 | None |
Compensation
The following table sets forth certain information concerning compensation paid by First Focus to its directors in the fiscal year ended March 31, 2010.
Name and Position | Aggregate Compensation From First Focus | Pension or
Retirement
Benefits
Accrued as Part
of First Focus
Expenses | Estimated
Annual
Retirement
Benefits | Total Compensation From First Focus |
Independent Directors | | | |
Gary D. Parker Director | $9,000 | 0 | 0 | $9,000 |
Robert A. Reed Director | $9,000 | 0 | 0 | $9,000 |
| Interested Director | | | |
Michael Summers President and Director | 0 | 0 | 0 | 0 |
The officers of First Focus receive no compensation directly from First Focus for performing the duties of their offices. The officers of First Focus, may, from time to time, serve as officers of other investment companies. Jackson Fund Services (“JFS”), a division of Jackson National Asset Management, LLC, as the Funds’ Co-Administrator, receives fees from each of the Funds for acting as Co-Administrator. Mr. Koors, Ms. Bugni, and Ms. Hernandez are employees of, and are compensated by, JFS. Beacon Hill Fund Services, Inc. (“Beacon Hill”), provides the Funds with certain compliance services. Mr. Ruehle is an employee of Beacon Hill, and as such, is compensated by Beacon Hill.
Board Meeting Attendance
During the fiscal year ended March 31, 2010, the Board held five meetings. Each of the Directors attended at least 75% of the aggregate of the total number of meetings of the Board, and the total number of meetings held by all committees of the Board on which he served. First Focus encourages all of its directors to attend its Shareholders’ meetings, though First Focus did not hold a Shareholders’ meeting last year.
Committees
The Board has established the following committees:
Audit Committee. The Board’s Audit Committee is responsible for, among other things, reviewing and recommending to the Board the selection of the Funds’ independent registered public accounting firm, reviewing the scope of the proposed audits of the Funds, reviewing the results of the annual audits of the Fund’s financial statements with the independent registered public accounting firm and interacting with the Fund’s independent auditors on behalf of the full Board. The Audit Committee currently consists of each of the Independent Directors. The Audit Committee held three meetings during the fiscal year ended March 31, 2010.
Nominations Committee. The Nominations Committee is responsible for screeningFund, pursuant to an interim sub-advisory agreement between Tributary and nominating candidates for election toKBI effective October 11, 2010 (the “Interim KBI Sub-Advisory Agreement”) that was approved by the Board as Independent Directors of the Funds. The Nominations Committee is comprised of the Independent Directors. The Nominations Committee held oneat an in-person meeting during the fiscal year ended March 31,on October 8, 2010. The Nominations Committee has adoptedInterim KBI Sub-Advisory Agreement is set to expire on March 10, 2011 or the date a Charter effective November 15, 2004. The Committee has established a policy that it will receive and consider recommendations for nomination of Independent Director candidates from other persons, includingdefinitive sub-advisory contract is approved by the Shareholders of the Funds. Recommendations can be submitted to: First Focus Funds, Inc., 1620 Dodge Street, Mail Stop 1071, Omaha, NE 68102, Attention: Chairman, Nominations Committee.
In considering candidatesFund. Please see Appendix C for selection or nomination to the Board, the Nominations Committee will consider various factors, including a candidate’s education, professional experience (including experience in the insurance and mutual fund industries), the results of in-person meetings with the candidate, the views of managementcopy of the Advisers with respect to the candidate, the candidate’s other business and professional activities, and other factors that may be deemed relevant by the Nominations Committee.proposed New KBI Sub-Advisory Agreement.
Fair Value Committee. The Board has a standing Fair Value Committee that is composed of various representatives of First Focus’ service providers, as appointed by the Board. The Fair Value Committee operates under procedures approved by the Board. The principal responsibilities of the Fair Value Committee are to determine the fair value of securities for which current market quotations are not readily available. The Fair Value Committee meets periodically, as necessary, and met four times during the fiscal year ended March 31, 2010.
PROPOSAL 2
APPROVAL OF
NEW INVESTMENT ADVISORY AGREEMENT BY AND BETWEEN TRIBUTARY AND FIRST FOCUS,
ON BEHALF OF EACH OF THE FUNDS
(ALL SHAREHOLDERS MUST APPROVE)
REQUIRED VOTERequired Vote
Approval of the New Investment Advisory Agreement appointing Tributary as investment adviser to all of the Funds requires the affirmative vote of a majority of the outstanding voting securities of each Fund. Under the 1940 Act, a majority of each Fund’s outstanding voting securities is defined as the lesser of (i) 67% of the outstanding shares represented at a meeting at which more than 50% of each Fund’s outstanding shares are present in person or represented by proxy, or (ii) more than 50% of each Fund’s outstanding voting securities. If the New Investment Advisory Agreement is not so approved by each Fund’s Shareholders, Tributary will continue to serve as investment adviser to the Tributary Advised Funds at the current fee level under the Current Tributary Advisory Agreement, and FNB Advisers wil l continue to serve as investment adviser to the FNB Advised Funds at the current fee level under the terms of the Current FNB Advisory Agreement.
CURRENT AND NEW ADVISORY AGREEMENTS
Except for differences in the effective and renewal dates, the Current Master Advisory Agreements and the New Investment Advisory Agreement are substantially similar. A form of the New Investment Advisory Agreement is attached to this Proxy Statement as Appendix B. Under the New Investment Advisory Agreement, Tributary would perform the same services it currently performs with respect to the Tributary Advised Funds and would perform the same services currently performed by FNB Advisers with respect to the FNB Advised Funds. With the sole exception of Kurt Spieler, who will join FNBFC, the portfolio managers, portfolio management team, and investment programs are expected to continue substantially unchanged as a result of the Tributary Transactions. Additionally, no further changes to Tributary’s personnel or management will occur in connection with the Follow On Transfer.
Pursuant to both the Current Master Advisory Agreements and the New Investment Advisory Agreement, the investment adviser to the Funds is responsible for providing a continuous investment program for the Funds, including the provision of investment research and management with respect to all securities and investments and cash equivalents purchased, sold, or held in the Funds, and the selection of brokers and dealers through which securities transactions for the Funds are executed. The investment adviser performs its responsibilities subject to the supervision of, and policies established by, the Board.
Although Tributary intends to devote such time and effort to the business of the Funds as is reasonably necessary to perform its duties to First Focus, both the Current Master Advisory Agreements and the New Investment Advisory Agreement acknowledge that the services of Tributary are not exclusive, and Tributary may provide similar services to other investment companies and other clients and may engage in other activities (though Tributary does not currently provide similar services to other investment companies).
Under both the Current Master Advisory Agreements and the New Investment Advisory Agreement, the investment adviser bears all expenses incurred by it in performing its duties as investment adviser, including but not limited to, expenses related to all office space, facilities, equipment, and clerical personnel necessary for the investment adviser to carry out its duties and obligations under the respective agreement, but excluding the cost of securities, commissions, and transfer taxes, if any, purchased for the Funds. Each of the Funds bears the following expenses relating to its operations: organizational expenses, taxes, interest, any brokerage fees and commissions, fees of the directors of First Focus, Securities and Exchange Commission (“SEC”) fees, state securities registration fees and expenses, costs of preparing and printing prospectuses for regulatory purposes and for distribution to a Fund’s current and prospective Shareholders, outside auditing and legal expenses, advisory and administration fees, fees and out-of-pocket expenses of the custodian and transfer agent, costs of Fund accounting services, certain insurance premiums, costs of maintenance of First Focus’ existence, costs of Shareholders’ and directors’ reports and meetings, distribution expenses, Shareholder servicing expenses incurred pursuant to First Focus’ Administrative Services Plan and other similar arrangements, any extraordinary expenses incurred in the Fund’s operation, and other operating expenses not assumed by First Focus’ service providers.
The New Investment Advisory Agreement provides for the furnishing of the same advisory services for the same advisory fees as the Current Master Advisory Agreements. Additionally, both the Current Master Advisory Agreements and the New Investment Advisory Agreement provide, among other things, that in any fiscal year the aggregate expenses of any of the Funds (as defined under the securities regulations of any state having jurisdiction over First Focus) exceeds the expense limitations of any such state, the investment adviser will reimburse the Fund for such excess expenses; provided, that the obligation of the investment adviser to reimburse the Funds is limited to the amount of its fee for such fiscal year. Notwithstanding the foregoing, both agreements also provide that the investment adviser must reimburse the Funds for such excess expenses regardless of the amount of fees paid to it during such fiscal year to the extent required by securities regulations of any state having jurisdiction over First Focus.
The Current Master Advisory Agreements and the New Investment Advisory Agreement provide that the investment adviser is entitled to receive a fee, payable monthly, at an annual rate based of the average daily net assets of each Fund. The fees for each Fund under the New Investment Advisory Agreement are the same as under the Current Master Advisory Agreements, as set forth above in the discussion under the heading “Current Advisory Agreements.” Additionally, the current fee waivers agreed to by each Current Adviser, on behalf of the Funds and as set forth above in the discussion under the heading “Current Advisory Agreements,” remain unchanged under the New Investment Advisory Agreement.
The Current Master Advisory Agreements and the New Investment Advisory Agreement provide that the investment adviser shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Funds in connection with the performance of the respective investment advisory agreement, except a loss resulting from a breach of a
fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith, or gross negligence on the part of the investment adviser in the performance of its duties or from reckless disregard by it of its obligations and duties under the investment advisory agreement.
The Current Master Advisory Agreements and the New Investment Advisory Agreement are renewable annually, with respect to a Fund by (i) the vote of a majority of those members of the Board who are not parties to the agreement or “interested persons” of any such party (as defined in the 1940 Act), cast in person at a meeting called for the purpose of voting on such approval; and (ii) the vote of a majority of all of the members of the Board or by vote of the holders of “a majority of the outstanding voting securities” of a Fund (as defined in the 1940 Act).
The Current Master Advisory Agreements and the New Investment Advisory Agreement terminate automatically if assigned (as defined in the 1940 Act) and may be terminated by either party thereto at any time, without penalty, on sixty (60) days’ written notice.
BASIS FOR THE BOARD RECOMMENDATION
At an in-person meeting of the Board held on February 24, 2010, the Board, including the directors who are neither (i) parties to the advisory contract nor (ii) “interested persons” (as defined in the 1940 Act) of either the Funds or any of the investment advisers, unanimously concluded that the New Investment Advisory Agreement is in the best interests of the Funds and their Shareholders, and approved, and voted to recommend to the Shareholders of each Fund that they approve, the New Investment Advisory Agreement. At a second meeting of the Board on March 29, 2010, the Board reviewed the terms of the Follow On Transfer and determined that no changes would occur to either the personnel or the management of Tributary in connection with the Follow On Transfer.
In approving the New Investment Advisory Agreement, the Board took into account that the provisions of the Current Master Advisory Agreements and the New Investment Advisory Agreement are substantially identical. The Board also noted that neither the Funds nor their Shareholders will pay any of the costs and expenses incurred by the Funds associated with the Tributary Transactions, including the consummation of the Purchase Agreement, as well as the Funds’ expenses incurred to obtain Shareholder approvals and associated regulatory requirements.
In considering the New Investment Advisory Agreement, the Board requested and received information from Tributary and FNB Advisers regarding the Tributary Transactions. Those materials included information regarding Tributary, FNB, and their affiliates, and their personnel, operations, and financial condition. Additionally, senior officers of Tributary and FNB Advisers were present to answer questions from the Board. The Board also met and conferred with representatives of Tributary, FNB Advisers, FNBO, and FNNI. In approving the proposed New Investment Advisory Agreement, the Board considered a number of factors, including those discussed below.
Nature, Extent, and Quality of Services to be Provided by the Investment Adviser. The Board received and considered a variety of information pertaining to the nature, extent, and quality of services to be provided by Tributary, as reorganized following the Tributary Transactions (“New Tributary”). The Board recognized that New Tributary would remain the investment adviser to the Tributary Advised Funds, and that KBC and Riverbridge would to continue to sub-advise the First Focus International Equity Fund and First Focus Large Cap Growth Fund, respectively. Accordingly, the Board paid particular attention to the impact that the Tributary Transactions would have on the management of the First Focus Short-Intermediate Bond Fund, the First Focus Inc ome Fund, the First Focus Core Equity Fund, the First Focus Large Cap Growth Fund, the First Focus Small Company Fund, and the First Focus International Equity Fund (the Funds not previously advised by Tributary). Representatives of Tributary and FNB Advisers discussed with the Board the philosophy of management, performance expectations, and methods of operation of FNB Advisers insofar as they related to First Focus and indicated their belief that, as a consequence of the Tributary Transactions, the operations and service capabilities of Tributary would be enhanced by the resources of New Tributary. In its review of the nature, extent, and quality of services to be provided by New Tributary to the Funds, the Board also considered the following:
· | The professional qualifications and experience of the portfolio management teams for each of the Funds are expected to remain in place following the closing of the Tributary Transactions. |
· | The overall high quality of the personnel, operations, financial condition, investment management capabilities, methodologies, and performance of New Tributary should benefit the Funds following the closing of the Tributary Transactions. |
· | New Tributary’s organization, resources, and research capabilities will be substantially identical with those of FNB Advisers. |
· | There is an apparent absence of potential conflicts of interest in having New Tributary serve as the sole investment adviser to the Funds. |
· | New Tributary will not be bound by any capital limitations of FNBO and FNBFC, which the Board believes could allow New Tributary to offer additional advisory services to benefit First Focus and the Funds. |
· | The Board found no material compliance, regulatory, or litigation concerns, and the Board reviewed New Tributary’s compliance strategies and found them in line with those of FNB Advisers and Tributary. The Board confirmed that New Tributary has adopted and maintained written procedures, which are in accordance with the Advisers Act and consistent with the standards set forth in the 1940 Act. |
· | New Tributary’s portfolio transaction execution and soft dollar policies and practices are consistent with those currently followed by FNB Advisers and Tributary. |
· | New Tributary’s operations and facilities would include the current operations and facilities of FNB Advisers. |
· | New Tributary’s policies and procedures for allocating transactions among accounts would remain consistent with those currently followed by FNB Advisers and Tributary. |
· | The range of New Tributary’s service offerings, including investment analysis, investment management, trading of portfolio securities, proxy voting, valuation of portfolio securities, administering the Funds’ business affairs, and providing accounting, legal, compliance, record-keeping, and related services, would remain consistent with those currently provided by FNB Advisers and Tributary. |
After reviewing this information and discussing it with representatives of Tributary and FNB Advisers, the Board concluded that it was satisfied with the nature, extent, and quality of the services to be provided by New Tributary. In particular, the Board determined that the FNB Advised Funds would benefit from having New Tributary serve as their investment adviser as a result of the greater depth of the portfolio management team and greater distribution opportunities.
Investment Performance. The Board received information regarding the performance of Funds currently managed by Tributary and FNB Advisers. Because of the combination of personnel and resources at the closing of the Tributary Transactions, the Board determined that the investment experience of New Tributary would be sufficient to sustain, and even improve, the investment performance of the Funds currently managed by FNB Advisers and Tributary separately. The Board noted that the investment objective and principal investment strategies of each Fund are expected to continue substantially unchanged. The Board also noted that the investment performance of each Fund for the three months and year ended December 31, 2009, has been comparable to, and in s ome cases exceeded, fund indices for the same periods.
Cost of Services Provided and Profitability. The Board considered the projected assets under management of New Tributary and determined that, based on the limited size of assets under management, fee breakpoints were not justified. The Directors reviewed and considered the advisory fee that would be payable by each Fund to New Tributary in light of the nature, extent, and quality of the management services expected to be provided by New Tributary, including any fee waivers and/or expense reimbursement arrangements currently in place and expected to continue following the closing of the Tributary Transactions. As noted above, all current advisory fees, which the Board has previously determined to be fair and reasonable, are expected to continue at their exis ting rates listed above in the discussion of the “Current Advisory Agreements.” All current fee waivers also are expected to continue following the closing of the Tributary Transactions. Additionally, the Directors received and considered information comparing each Fund’s advisory fees and overall expenses with those of comparable funds. The Board considered that other investment advisers managing certain other mutual funds with similar investment objectives or principal investment strategies as the Funds may charge lower management fees than those proposed by New Tributary. The Board also considered New Tributary’s projected and historical revenues, costs, assets, liabilities, and profitability in relation to the fees payable to New Tributary following the closing of the Tributary Transactions. The Board noted that New Tributary, not the Funds or First Focus, will pay the sub-advisory fees to KBC, Riverbridge and FNFA.
The Board also evaluated New Tributary’s proposed method for determining compensation for each portfolio manager. Following the reorganization, Tributary will pay portfolio managers a fixed salary based upon experience and market
value norms. Participation in the parent organization’s defined contribution 401(k) plan is voluntary and each portfolio manager is eligible to receive a bonus, which is paid annually and calculated as a percentage of base salary and is dependent upon Fund pre-tax performance versus Fund benchmarks.
Based on the foregoing information, the Board concluded that the proposed advisory fees and total expenses to be borne by the Funds under the New Investment Advisory Agreement are reasonable in relation to the services to be provided, and that the investment adviser’s level of profitability from its proposed New Investment Advisory Agreement with the Funds also was reasonable. Additionally, given the nature and quality of New Tributary’s expected services, the benefits expected to be received by the Funds, and the nature and extent of expected non-advisory services offered by New Tributary, the Board found New Tributary’s proposed fee acceptable.
Economies of Scale. The Board considered a variety of other benefits to be realized by New Tributary as a result of New Tributary’s relationship with the Funds, including fees for administrative services provided for the benefit of certain Funds. The Board has reviewed New Tributary’s portfolio trading practices and evaluated them in light of the current practices of the Current Advisers. The Board took these ancillary benefits into account in evaluating the reasonableness of the advisory fees paid to New Tributary. The Board also noted that New Tributary may realize modest economies of scale based on the Tributary Transactions and synergies of operations, but that because the Funds’ sizes are not expected to materially increase , utilizing a break point system in the Funds’ fee structure to accounts for economies of scale may not be appropriate at this time.
Adviser Financial Information. The Board reviewed information regarding New Tributary’s projected costs of providing services to the Funds, including personnel, systems, and the resources of investment, compliance, trading, accounting, and other administrative operations. It considered New Tributary’s projected costs and willingness to invest in technology, infrastructure, and staff to maintain and expand services and capabilities, respond to industry and regulatory developments, and attract and retain qualified personnel. It noted information received regarding the compensation structure for New Tributary’s investment professionals. The Board noted the competitiveness and cyclicality of both the mutual fund industry and the capital market s, and the importance to the Funds in that environment of New Tributary’s long-term profitability for maintaining its independence, company culture, and management continuity. The Board concluded that the Funds’ advisory fee structures under the New Investment Advisory Agreement reflected a reasonable sharing of benefits between New Tributary and the Funds’ Shareholders. The Board also considered the financial capabilities and balance sheet of the FNIB and FNNI, New Tributary's respective direct and indirect owners. Based on that information and the historical financial stability of FNNI as it relates to the previous operations of FNB Advisers and Tributary, the Board concluded that New Tributary would be sufficiently capitalized to satisfy its obligations to the Funds.
Employment Arrangements. The Board also considered the consistency of the portfolio managers following the Tributary Transactions. As a result of the Tributary Transactions, personnel of FNB Advisers who currently manage FNB Advised Funds are expected to continue managing these Funds as personnel of Tributary. Further, the Board considered that Tributary does not intend to make any material changes to Tributary’s or FNB Advisers’ human or other resources that would adversely impact Tributary’s ability to provide the same quality of advisory services that it has provided in the past. Finally, the Board considered its familiarity and relationships with the existing portfolio managers of the Funds and its satisfaction with the expe rience and qualifications of such portfolio managers.
Legal Considerations. Based on information provided by Tributary and its independent counsel, the Board believes applicable federal and state legal requirements will continue to be satisfied after the Tributary Transactions and the Follow On Transfer. The Board conducted a review of New Tributary and its affiliates’ history of regulatory compliance and found the results to be satisfactory. The Board also considered Tributary’s prior ability to satisfy compliance obligations. Additionally, the Board reviewed Tributary’s current Code of Ethics and found no material discrepancies between it and FNB’s existing Code of Ethics. The Board is not aware of any pending or anticipated legal proceedings or investigations in volving Tributary or its affiliates.
Other Considerations. Because the Board noted the Current Advisory Agreements and the New Investment Advisory Agreement are substantially identical, the Board also considered the information that had been received, the factors that had been identified, and the conclusions that had been reached by the Board in connection with its most recent approval or continuance of each Fund’s current investment advisory agreement. The Board also identified and considered the benefits that are anticipated to accrue to Tributary because of its relationship with the Funds. Such benefits include greater assets under management, resulting in recruiting high quality staff, supporting research services, more favorable commission rates, and enhanced marketing. T he Board also has determined that no changes will occur to New Tributary in connection with the Follow On Transfer, other than the immediate FNNI affiliate which will hold the interests in New Tributary.
In light of all of the foregoing, the Board, including all of the members who are not “interested persons” (as defined in the 1940 Act) of either the Funds or the investment advisers, or parties to the New Investment Advisory Agreement, approved the New Investment Advisory Agreement. No single factor reviewed by the Board was identified as the principal factor in determining whether to approve the New Investment Advisory Agreement, and each director attributed different weight to the various factors. Accordingly, the Board, including all Independent Directors, unanimously approved the New Investment Advisory Agreement and voted to recommend its approval to the respective Fund’s Shareholders.
PROPOSAL 3
APPROVAL OF
NEW FIRST NATIONAL SUB-ADVISORY AGREEMENT BETWEEN FNFA
AND TRIBUTARY, WITH RESPECT TO THE FIRST FOCUS BALANCED FUND
(FIRST FOCUS BALANCED FUND SHAREHOLDERS ONLY)
REQUIRED VOTE
Approval of the New First NationalKBI Sub-Advisory Agreement with FNFA requires the affirmative vote of holders of a majority of the outstanding securities of the First Focus Balanced Fund. Under the 1940 Act, a majority of the First Focus Balanced Fund’s outstanding voting securities is defined as the lesser of (i) 67% of the outstanding shares represented at a meeting at which more than 50% of the Fund’s outstanding shares are present in person or represented by proxy, or (i) more than 50% of the First Focus Balanced Fund’s outstanding voting securities. If the New First National Sub-Advisory Agreement is not so approved, Tributary will continue to serve as investment adviser to the First Focus Balanced Fund at the current fee level under the Current Tributary Advisory Agreement.
THE NEW FIRST NATIONAL SUB-ADVISORY AGREEMENT
The Board believes that First Focus Balanced Fund Shareholders can benefit from management of the Fund’s assets by FNFA, which has demonstrated its ability to encourage superior equity performance and provide portfolio manager stability. No material changes to the Fund’s current principal investment strategies would occur if the New First National Sub-Advisory Agreement, in the form attached hereto as Appendix C, is approved.
Consistent with the Current Advisory Agreements, FNFA would be responsible for providing a continuous investment program for the First Focus Balanced Fund, including investment research and management with respect to all securities and investments and cash equivalents purchased, sold, or held in the First Focus Balanced Fund, and the selection of brokers and dealers through which securities transactions for the First Focus Balanced Fund are executed. FNFA would perform its responsibilities subject to the supervision of, and policies established by, the Board.
Although FNFA intends to devote such time and effort to the business of the First Focus Balanced Fund as is reasonably necessary to perform its duties to First Focus, the New First National Sub-Advisory Agreement acknowledges that the services of FNFA are not exclusive, and FNFA may provide similar services to other investment companies and other clients and may engage in other activities (though FNFA does not currently provide similar services to other investment companies).
Under the New First National Sub-Advisory Agreement, FNFA will pay all expenses incurred by it in connection with its activities under the New First National Sub-Advisory Agreement, excluding the cost of securities, commissions, and transfer taxes, if any, purchased for or on behalf of the First Focus Balanced Fund.
The New First National Sub-Advisory Agreement provides that the sub-advisory fees to be received by FNFA from New Tributary are equal to an annual rate of 0.375% of the average daily net assets of the First Focus Balanced Fund, paid at the same time and in the same manner as New Tributary would be paid its advisory fee under the New Investment Advisory Agreement.
Pursuant to the New First National Sub-Advisory Agreement, FNFA will not be liable for any error of judgment or mistake of law or for any loss suffered by the Funds in connection with its performance of the New First National Sub-Advisory Agreement, except a loss resulting from a breach of a fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith, or gross negligence on the part of FNFA in the performance of its duties or from reckless disregard by it of its obligations and duties under the New First National Sub-Advisory Agreement.
The New First National Sub-Advisory Agreement may be terminated at any time, without the payment of any penalty, on thirty (30) days’ written notice by Tributary, the First Focus Balanced Fund or by FNFA. The New First National Sub-Advisory Agreement will immediately terminate in the event of its assignment (as defined in the 1940 Act).
BASIS FOR THE BOARD’S RECOMMENDATION
At an in-person meeting of the Board held on February 24, 2010, the Board, including the directors who are neither (i) parties to the New First National Sub-Advisory Agreement nor (ii) “interested persons” (as defined in the 1940 Act) of either the Funds, FNFA or New Tributary, unanimously concluded that the proposed New First National Sub-Advisory Agreement is in the best interests of the First Focus Balanced Fund and its Shareholders, and approved, and voted to recommend to the Shareholders of the First Focus Balanced Fund that they approve, the proposed New First National Sub-Advisory Agreement.
In approving the New First National Sub-Advisory Agreement, the Board requested and received information from FNFA and Tributary regarding the Tributary Transactions and FNFA. Those materials included information regarding New Tributary, FNFA, and their affiliates, and their personnel, operations, and financial condition. Additionally, senior officers of Tributary and FNFA were present to answer questions from the Board. The Board met and conferred with representatives of New Tributary, FNFA, FNBFC, and FNNI. In considering the New First National Sub-Advisory Agreement, the Board considered a number of factors, including those discussed below.
Nature, Extent, and Quality of Services to be Provided by FNFA. The Board received and considered a variety of information pertaining to the nature, extent, and quality of services to be provided by FNFA under the New First National Sub-Advisory Agreement. The Board reviewed biographical information for each portfolio manager to be employed by FNFA following the closing of the Tributary Transactions who would be providing services under the New First National Sub-Advisory Agreement and noted the breadth and depth of experience presented. The Board evaluated the nature, quality, and extent of FNFA’s services, including its expertise, and resources in domestic financial markets. The Board noted the apparent absence of potential conflicts of interest. 60; The Board also evaluated FNFA’s organization, resources, and research capabilities, which the Board noted were consistent with those of Tributary. Because FNFA is a newly-formed entity, the Board requested and evaluated FNFA’s organizational documents, including its proposed registration with the SEC, which it found acceptable. The Board also reviewed FNFA’s portfolio transaction execution and soft dollar policies and practices, which the Board found consistent with those followed by Tributary. The Board found FNFA’s policies and procedures for allocating transactions among accounts to be consistent with those currently followed by Tributary.
Investment Performance. The Board noted that all of FNFA’s investment strategies will be team managed and noted FNFA’s focus on using data, technology, and sophisticated analytical methods to evaluate and project expected returns. The Board recognized that the investment objective and principal investment strategies of the First Focus Balanced Fund are expected to continue substantially unchanged under the New First National Sub-Advisory Agreement. The Board believes clarifying the responsibility for the First Focus Balanced Fund’s investment performance will produce greater accountability to the First Focus Balanced Fund’s Shareholders. The Board also reviewed the Lipper “peer group” identified by FNFA as an a ppropriate benchmark for evaluating the performance to be achieved by FNFA for the First Focus Balanced Fund. The Board concluded that the First Focus Balanced Fund ranked highly in its peer group for the one-year, three-year, five-year and ten-year periods, ranking first in the group for the ten-year period ended December 31, 2009.
Cost of Services Provided and Profitability. The Board reviewed the rate of FNFA’s sub-advisory fee in relation to the nature, extent, and quality of services to be provided by FNFA, based on the financial projections provided by FNFA. The Board noted the consistency of the proposed sub-advisory fees with current sub-advisory fees charged by similar sub-advisers for comparable funds with comparable objectives. New Tributary, not the First Focus Balanced Fund or First Focus, will pay the sub-advisory fee to FNFA.
The Board also considered FNFA’s method for determining the compensation of each portfolio manager. The compensation program is a combination of base salary and a performance bonus. The percentage of each piece of the compensation program varies by investment professional. In terms of the base salary and performance bonus, approximately 70% percent of the compensation is salary with the remaining 30% percent based on relative investment performance. The investment performance portion is based on a rolling one-year (50%) and three-year (50%) relative performance versus the respective peer group. For the First Focus Balanced Fund, the peer group is the Morningstar Moderate Allocation Category. The performance bonus payout is based on a sliding scale with 0% for average perform ance and a maximum payout at top twentieth percentile performance. The compensation program is not based
on the value of assets in the Fund. The Board found this method to be consistent with methodologies used by current investment advisers to the Funds.
Economies of Scale. The Board noted that FNFA is not projected to achieve economies of scale in connection with, or immediately following, the Tributary Transactions. Accordingly, utilizing a break point system in the Funds’ fee structure to account for economies of scale would not be appropriate at this time.
Employment Arrangements. The Board considered FNFA’s current personnel, as well as its plans for attracting and retaining high quality investment professionals. Kurt Spieler and John Harris are the portfolio managers that will be responsible for the day-to-day management of the Fund.
While the Fund will be co-managed, Kurt Spieler will have final decision-making authority. Kurt has been the Managing Director of Investments for FNFA’s predecessor (Tributary) since 2005. Previously, he was Head of International Equities for the Principal Financial Group as well as president of his own asset management firm. Kurt has over 22 years of experience in managing fixed income and international and U.S. equities. Kurt earned his Bachelor of Business Administration degree from Iowa State University and a Masters of Business Administration from Drake University. He is a CFA charterholder.
Legal Consideration. The Board reviewed FNFA’s compliance program, including the procedures to be adopted and maintained by FNFA. The Board noted that these procedures were in accordance with the Advisers Act and that the compliance program was generally consistent with the standard set forth under the 1940 Act. The Board also reviewed FNFA’s Code of Ethics, which the Board found consistent with the Code of Ethics of other investment advisers, including that of New Tributary. The Board also considered the internal controls that FNFA intends to establish, which include compliance policies and procedures, on-going training, and an on-site Chief Compliance Officer, Celeste Blackburn, CFA. The Board is not aware of any pending or anticipated legal proceedings or investigations involving FNFA.
Other Considerations. The Board noted that there are no other tangible benefits to FNFA in providing investment advisory services to the First Focus Balanced Fund, other than the fee to be earned under the New First National Sub-Advisory Agreement. There may be certain intangible benefits gained to the extent that serving the Fund could enhance FNFA’s reputation in the marketplace, and, therefore, would enable it to attract additional client relationships.
In light of the foregoing, the Board, including all of the members who are not “interested persons” (as defined in the 1940 Act) of either the Funds or FNFA or parties to the New First National Sub-Advisory Agreement, approved the New First National Sub-Advisory Agreement. No single factor reviewed by the Board was identified as the principal factor in determining whether to approve the New First National Sub-Advisory Agreement, and each director attributed different weight to the various factors. Accordingly, the Board, including all of the Independent Directors, unanimously approved the New First National Sub-Advisory Agreement and voted to recommend its approval to the First Focus Balanced Fund’s Shareholders.
MORE INFORMATION ABOUT FIRST NATIONAL FUND ADVISERS
FNFA is a division of FNBFC. FNFA’s primary place of business is 205 West Oak Street, Fort Collins, Colorado 80521. FNFA is a separately identifiable department of FNBFC, which is a wholly owned subsidiary of First National Colorado, Inc., a wholly owned subsidiary of FNNI. FNFA’s primary place of business is 205 West Oak Street, Fort Collins, Colorado 80521. See Appendix A for a list of FNFA’s executive officers.
PROPOSAL 4
APPROVAL OF
NEW KBC SUB-ADVISORY AGREEMENT BETWEEN KBC AND TRIBUTARY,
WITH RESPECT TO THE FIRST FOCUS INTERNATIONAL EQUITY FUND
(FIRST FOCUS INTERNATIONAL EQUITY FUND SHAREHOLDERS ONLY)
REQUIRED VOTE
Approval of the New KBC Sub-Advisory Agreement with KBC, Joshua Dawson House, Dawson Street, Dublin 2, Ireland,KBI requires the affirmative vote of a majority of the outstanding securities of the First Focus International Equity Fund. Under the Investment Company Act of 1940, Act,as amended, (the “1940 Act”), a majority of the First Focus International Equity Fund’s outstanding voting securities is defined as the lesser of (i) 67% of the outstanding shares represented at a meeting at which more than 50% of the Fund’s outstanding shares are present in person or represented by proxy, or (ii) more than 50% of the First Focus International Equity Fund’s outstanding voting securities. If
Background
From the NewFund’s inception through May 3, 2010, FNB Fund Advisers (“FNB Advisers”), a division of First National Bank of Omaha, N.A. (“FNBO”) served as investment adviser to the Fund pursuant to an investment advisory agreement between FNB Advisers and the Company, and KBC Asset Management International Limited (“KBC”) served as sub-adviser to FNB Advisers, on behalf of the Fund, pursuant to a sub-advisory agreement between FNB Advisers and KBC. On May 3, 2010, shareholders of each series of the Company, including shareholders of the Fund, approved a reorganization (the “Reorganization”) of the ultimate parent organization for FNB Advisers and Tributary, First National of Nebraska, Inc., a Nebraska corporation (“FNNI”), as of such date. The Reorganization resulted in a change in control of FNB Advisers resulting in the termination of FNB Advisers as adviser to the Fund and its sub-advisory agreement with KBC on behalf of the Fund. As part of the Reorganization, Fund shareholders appointed Tributary to replace FNB Advisers as adviser to the Fund. Accordingly, on May 3, 2010, Fund shareholders approved an investment advisory agreement between the Company and Tributary on behalf of the Fund (the “Tributary Advisory Agreement”) and a sub-advisory agreement between Tributary and KBC on behalf of the Fund (the “Previous KBC Sub-Advisory Agreement”).
Effective October 11, 2010, KBC and its parent company were purchased by Kleinwort Benson Group Ltd., a part of RHJ International S.A. (“RHJ”), a large European financial services group. Following the purchase, KBC was rebranded as KBI. As a result of the change in control of KBC, the Previous KBC Sub-Advisory Agreement terminated on October 11, 2010 as required by the 1940 Act. In order to continue with the existing portfolio management team without interruption, the Board approved the Interim KBI Sub-Advisory Agreement without seeking Shareholder approval in accordance with the requirements of Rule 15a-4(b)(2) under the 1940 Act. Generally, Section 15(a) of the 1940 Act requires that all advisory agreements be approved by shareholders. However, Rule 15a-4(b)(2) allows fund boards to approve interim agreements without shareholder approval under limited circumstances when the previous advisory agreement terminates as a result of a change in control in which the adviser receives a benefit. As required by Rule 15a-4(b)(2), prior to termination of the Previous KBC Sub-Advisory Agreement, the Board, including a majority of the directors who are not “interested persons” of the Fund or KBI (as such term is defined by the 1940 Act), approved the Interim KBI Sub-Advisory Agreement, following a determination that the scope and quality of services to be provided to the Fund under the Interim KBI Sub-Advisory Agreement would be at least equivalent to the scope and quality of services provided under the Previous KBC Sub-Advisory Agreement. As further required by Rule 15a-4(b)(2), the Interim KBI Sub-Advisory Agreement (i) provides for compensation to KBI that is no greater than the compensation that would have been payable to KBC under the Previous KBC Sub-Advisory Agreement, (ii) is only effective for a 150-day term, (iii) may be terminated by the Board or a majority of the Fund’s shareholders at any time, without penalty, on not more than 10 calendar days’ written notice to KBI, (iv) compensation earned by KBI under the Interim KBI Sub-Advisory Agreement has been held in an interest-bearing escrow account, and (v) except as noted with respect to (i) through (iv) contains the same terms and conditions as the Previous KBC Sub-Advisory Agreement. Additionally, as required by Rule 15a-4(b)(2), if the Proposal is approved, the amount in the escrow account (including interest earned) will be paid to KBI. If the Proposal is not so approved, KBCKBI will continuebe paid, out of the escrow account, the lesser of (i) any costs incurred in performing the Interim KBI Sub-Advisory Agreement (plus interest earned on that amount while in escrow); or (ii) the total amount in the escrow account (plus interest earned). When the Board approved the Interim KBI Sub-Advisory Agreement, however, the Board agreed that the Company would seek shareholder approval of a definitive agreement within 150 days to serve as the sub-adviserenable KBI to the First Focus International Equity Fund at the current fee levelreceive all advisory fees earned under the KBCInterim KBI Sub-Advisory Agreement. At an in-person meeting on January 17, 2011, the Board approved the Proposal and is now seeking Shareholder approval of
the Proposal in order to continue KBI’s service as sub-adviser on behalf of the Fund beyond the limited term of the Interim KBI Sub-Advisory Agreement and so that KBI can be paid all compensation earned under the Interim KBI Sub-Advisory Agreement.
CURRENT AND NEW SUB-ADVISORY AGREEMENTSTributary, headquartered at 1620 Dodge Street, Stop 1075, Omaha, NE 68197, with an additional location at 215 West Oak Street, Fort Collins, Colorado 80521, is a registered investment adviser under the Investment Advisers Act of 1940, as amended (“Advisers Act”). Tributary is a wholly-owned subsidiary of First National Bank, which is a wholly-owned subsidiary of FNNI, the largest privately owned banking company in the United States with over $17 billion in managed assets and 5,000 employee associates. As of December 31, 2010, Tributary had approximately $1.5 billion in assets under management. Tributary acts through its President, Stephen Frantz; its Managing Directors, Randall Greer, Ronald Horner and David Jordan; and its employees. Mr. Frantz, whose business address is 1620 Dodge Street, Stop 1075, Omaha, Nebraska 68197, has been with Tributary since the Reorganization and with its predecessor, FNB Advisers, since May 1999. Mr. Frantz also serves as the President of the Company and Chairman of the Board. Mr. Greer, whose business address is 1620 Dodge Street, Omaha, Nebraska 68197, has been with Tributary and its predecessor, FNB Advisers, for more than four years. Mr. Horner, whose business address is 1620 Dodge Street, Omaha, Nebraska 68197, has been with Tributary and its predecessor, FNB Advisers, for nearly five years. Mr. Jordan, whose business address is 215 West Oak Street, Fort Collins, Colorado 80522, has been with Tributary for nearly fifteen years. Appendix A lists the current executive officers and directors of Tributary.
Tributary supervises and administers the Fund’s investment program. Tributary provides investment advisory services to the Fund pursuant to the Tributary Advisory Agreement. The Tributary Advisory Agreement was most recently approved by the Board on February 24, 2010 and by the shareholders of each series of the Company, including shareholders of the Fund, on May 3, 2010. Unless otherwise terminated, after its two-year initial term, the Tributary Advisory Agreement will remain in effect from year to year for successive annual periods ending on June 30 if, as to each Fund, such continuance is approved at least annually by (a) the vote of a majority of directors, who are not parties to the Tributary Advisory Agreement or “interested persons” of any such party (as such term is defined under the 1940 Act), cast in person at a meeting called for the purpose of voting on such approval, and the vote of a majority of the Board or (b) by the vote of a majority of all votes attributable to the outstanding shares of such Fund.
KBI is a 100% owned subsidiary of Kleinwort Benson Investors Dublin Ltd (“KBID”) and is headquartered at Joshua Dawson House, Dawson Street, Dublin 2, Ireland. KBID’s parent is the Kleinwort Benson Group Ltd., which is located at 7th Floor 55, Baker Street, London W1U 8EW and is in turn 100% owned by the Brussels based RHJ. KBI is a registered investment adviser under the Advisers Act, providing investment advisory services to individuals, investment companies, and other institutions. KBI does not manage any other mutual fund with an investment strategy similar to the Fund. As of December 31, 2010, KBI had $5.0 billion in assets under management. A part of RHJ, KBI acts through its Chief Executive Officer, Sean Hawkshaw, and its employees. Mr. Hawkshaw, whose business address is Joshua Dawson House, Dawson Street, Dublin 2, Ireland, has been with KBI and its predecessor, KBC, for eighteen years. Appendix A lists the current executive officers and directors of KBI. The sale of KBI conferred a benefit upon KBI (within the meaning of Section 15(f) of the 1940 Act) because ownership of KBI was indirectly transferred to RHJ in exchange for compensation. Section 15(f) of the 1940 Act permits KBI to receive such benefit if (i) at least 75% of the Funds’ directors are not “interested persons” of either KBI or KBC or their affiliates (as that term is defined in the 1940 Act) for a period of three years from the consummation of the sale of KBI, and (ii) no unfair burden is imposed on the Fund as a result of the sale of KBI. KBI believes that such requirements were and will be met since none of the Board’s Directors are or will be “interested persons” (as that term is defined in the 1940 Act) of either KBI or KBC or their affiliates, and because the sale of KBI did not and does not result in any burden on the Fund since the Interim KBI Sub-Advisory Agreement and the New KBI Sub-Advisory Agreement are substantially similar to the Previous KBC Sub-Advisory Agreement, day-to-day management of the Fund has continued uninterrupted and KBI has agreed to bear all costs to the Fund resulting from the transition, including expenses relating to the Meeting and preparation of this Proxy. See “Expenses of the Meeting” below.
Supervised by the Board and Tributary, and following the Fund’s investment objectives and restrictions, pursuant to the Interim KBI Sub-Advisory Agreement, KBI (i) manages the Fund’s investments, (ii) makes buy/sell decisions and places the related orders, and (iii) keeps records of purchases and sales. Investment decisions for the Fund are made by teams of KBI personnel. In general, investment decisions are made by consensus, and no one person is primarily responsible for making investment recommendations. The Fund’s portfolio management team at KBI is primarily responsible for day-to-day management of the Fund. Upon Shareholder approval of the Proposal, KBI would continue such services. The Interim KBI Sub-Advisory Agreement was approved by the Board on October 8, 2010; the Interim KBI Sub-Advisory Agreement has not been approved by Shareholders.
The Company pays Tributary for its services to the Fund an advisory fee at an annual rate of 1.00% of the average daily net assets of the Fund. For sub-advisory services provided by KBI to Tributary with respect to the Fund, Tributary escrows KBI a sub-advisory fee at an annual rate of 0.50% of the average daily net assets of the Fund.
Tributary may choose to waive all or some of its advisory fees, which will cause the Fund’s yield and total return to be higher than it would be without the waiver. Additionally, KBI may choose to waive a portion of its sub-advisory fees. Currently Tributary has contractually agreed to fee waivers at the annual rate of 0.15% for the period August 1, 2010 through July 31, 2011. Effective August 1, 2009, Tributary decreased its waiver from 0.25% to 0.15%. Currently KBI has contractually agreed to fee waivers at the annual rate of 0.15% for the period August 1, 2010 through July 31, 2011.
The following table sets forth the advisory fees, net of fee waivers, earned by Tributary, FNB Advisers, KBC, and KBI for the fiscal year ended March 31, 2010:
Fiscal Year Ended March 31, 2010
| Adviser/Sub-Adviser | Fee Waivers | Advisory Fees Net of Fee Waivers |
| FNB Advisers | $150,629 | $308,988 |
| KBC (from FNB Advisers) | $45,962 | $413,656 |
| Tributary | $0 | $0 |
| KBI | $0 | $0 |
For the fiscal year ended March 31, 2010, the Fund paid no commissions on securities transactions to any broker affiliated with Tributary, FNB Advisers, KBC, KBI or the Company.
There has been no material interest, direct or indirect, of any director of the Company in (i) any material transactions or (ii) any material proposed transactions, including the Proposal, since the beginning of the most recently completed fiscal year, to which any investment adviser or sub-adviser of the Fund, any parent or subsidiary of the investment adviser or sub-adviser (other than the Fund) or any subsidiary or parent of such entities was or is to be a party.
New Sub-Advisory Agreement
With the exception of replacing FNB Fund AdvisersKBC with TributaryKBI as the lead investment adviser to the First Focus International Equity Fund“sub-adviser” and a new effective date, the Previous KBC Sub-Advisory Agreement and the New KBCKBI Sub-Advisory Agreement are substantially identical. A formAdditionally, with the exception of removing provisions relating to escrowing fees earned by KBI and the effective and termination dates, the Interim KBI Sub-Advisory Agreement and the New KBI Sub-Advisory Agreement are substantially identical. Neither the level nor the quality of the advisory services provided to the Fund nor the compensation paid for those services will change under the New KBCKBI Sub-Advisory Agreement. The sub-advisory fees (an annual rate of 0.50% of the average daily net assets of the Fund computed daily and paid monthly) to be received by KBI from Tributary under the New KBI Sub-Advisory Agreement is attached to this Proxy Statement as Exhibit F. Under the New KBC Sub-Advisory Agreement, KBC would perform the same services it currently performs with respectare identical to the First Focus International Equity Fund.
Pursuant to bothsub-advisory fees received by KBC and KBI from Tributary under the Previous KBC Sub-Advisory Agreement and the Interim KBI Sub-Advisory Agreement, respectively. Additionally, the current fee waiver agreed to by KBC, on behalf of the Fund, remains unchanged under the New KBI Sub-Advisory Agreement.
To enable the KBI portfolio management team to continue serving as sub-adviser without interruption past the term of the Interim KBI Sub-Advisory Agreement, and aid Tributary in its responsibility and accountability for the investment performance of the Fund, Tributary and KBI will need to enter into the New KBI Sub-Advisory Agreement. The personnel responsible for the day-to-day investment management decisions for the Fund will continue to remain the same as they were under the Previous KBC Sub-Advisory Agreement KBC isand the Interim KBI Sub-Advisory Agreement, respectively. Similar to the Interim KBI Sub-Advisory Agreement, the New KBI Sub-Advisory Agreement requires KBI to be responsible for providing a continuous investment program for the First Focus International Equity Fund, including the provision of investment research and management with respect to all securities and equivalents and cash equivalents purchased, sold, or held in the First Focus International Equity Fund, and the selection of brokers and dealers through which securities transactions for the First Focus International Equity Fund are executed. KBC performsUnder the New KBI Sub-Advisory Agreement, KBI will continue to perform its responsibilities subject to the supervision of, and policies established by, the Board.
Although KBC intends to devote such time and effort to the business of the First Focus International Equity Fund as is reasonably necessary to perform its duties to the First Focus International Equity Fund, the New KBC Sub-Advisory Agreement acknowledges that the services of KBC are not exclusive, and KBC may provide similar services to other investment companies and other clients and may engage in other activities (though KBC does not currently provide similar services to other investment companies).
Under both the KBCInterim KBI Sub-Advisory Agreement and the New KBCKBI Sub-Advisory Agreement, KBCKBI bears all expenses incurred by it in connection with its sub-advisory activities, but excluding the cost of securities, commissions, and transfer taxes, if any, purchased for or on behalf of the First Focus International Equity Fund.
Following its initial term, the KBCNew KBI Sub-Advisory Agreement is renewable annually, with respect to the Fund, by (i) the vote of a majority of directors, who are not parties to the New KBI Sub-Advisory Agreement or “interested persons” of any such party (as such term is defined under the 1940 Act), cast in person at a meeting called for the purpose of voting on such approval, and the vote of a majority of the Board or (ii) by vote of the holders of “a majority of the outstanding voting securities” of the Fund (as defined in the 1940 Act). The New KBCKBI Sub-Advisory Agreement will terminate automatically if assigned (as defined in the 1940 Act) and may be terminated with respect to the Fund at any time, without penalty, by KBI, the investment adviser will pay KBC a sub-advisory fee equalor the Fund on not more than sixty (60) days’ and not less than thirty (30) days’ written notice.
Although KBI intends to an annual rate of 0.50%devote such time and effort to the business of the average daily net assets ofFund as is reasonably necessary to perform its duties to the First Focus International Equity Fund. This fee will be computed daily and paid to KBC monthly. Additionally, the current fee waiver agreed to by KBC, on behalf of the First Focus International Equity Fund, remains unchanged under the New KBCKBI Sub-Advisory Agreement.Agreement acknowledges that the services of KBI are not exclusive, and KBI may provide similar services to other investment companies and other clients and may engage in other activities (though KBI does not currently provide similar services to other investment companies).
Pursuant to both the KBCNew KBI Sub-Advisory Agreement, and the New KBC Sub-Advisory Agreement, KBCKBI will not be liable for any error of judgment or mistake of law or for any act or omission in connection with the performance of the New KBI Sub-Advisory Agreement, except a loss resulting from willful misfeasance, bad faith, or negligence in the performance of its duties, or by reason of its reckless disregard of its obligations and duties thereunder.
The KBCPrior to May 3, 2010, investment advisory services were provided to the Fund by FNB Advisers, at the time, a division of FNBO, pursuant to an investment advisory agreement dated December 20, 1994 as amended December 5, 1995, June 4, 1996, February 14, 2005 and July 1, 2007 (the “FNB Advisory Agreement”). FNBO is a wholly-owned subsidiary of FNNI.
Basis for the Board Recommendation
At an in-person meeting of the Board held on January 17, 2011 called for the purpose of voting on approval of the New KBI Sub-Advisory Agreement, and the New KBC Sub-Advisory Agreement are renewable annually, with respect to the First Focus International Equity Fund, by (i) the vote ofBoard, including a majority of those members of the Boarddirectors who are not parties to the New KBI Sub-Advisory Agreement or “interested persons” of any such party (as such term is defined inunder the 1940 Act), cast in person at a meeting called forunanimously approved, and voted to recommend to the purpose of voting on such approval, and (ii) the vote of a majority of all the membersShareholders of the Board or by vote ofFund that they approve, the holders of “a majority ofproposed New KBI Sub-Advisory Agreement. In reaching its conclusion to approve the outstanding voting securities” of the First Focus International Equity Fund (as defined in the 1940 Act).
The KBCNew KBI Sub-Advisory Agreement, andthe Board noted that it reserves the right to continue to evaluate KBI as sub-adviser to the Fund, noting specifically that the Fund may terminate the New KBCKBI Sub-Advisory Agreement terminate automatically if assigned (as defined in the 1940 Act) and may be terminated with respect to the First Focus International Equity Fund at any time, without penalty, by KBC, the investment adviser or the First Focus International Equity Fund on not more than sixty (60) days’ and not less than thirty (30) days’ written notice.
BASIS FOR THE BOARD RECOMMENDATION
At an in-person meeting of the Board held on February 24, 2010, the Board, including the directors who are neither (i) parties to the New KBC Sub-Advisory Agreement nor (ii) “interested persons” of the Funds (as defined in the 1940 Act) of either the Funds, KBC or New Tributary, unanimously concluded that the proposed New KBC Sub-Advisory Agreement is in the best interests of the First Focus International Equity Fund and its Shareholders, and approved, and voted to recommend to the Shareholders of the First Focus International Equity Fund that they approve, the proposed New KBC Sub-Advisory Agreement.
In approving the New KBCKBI Sub-Advisory Agreement, the Board requested and received information from KBC and Tributary regarding the Tributary Transactions and KBC.KBI. Those materials included information regarding New Tributary, KBC,KBI and theirits affiliates, and their personnel, operations, and financial condition. Additionally, senior officers of New Tributary and KBCKBI were available to answer questions from the Board. The Board also conferred with representatives of New Tributary, KBC, and FNNI.Tributary. In proposing the New KBCKBI Sub-Advisory Agreement, the Board considered a number of factors, including those discussed below.
Nature, Extent, and Quality of Services to be Provided by KBC.KBI. The Board received and considered a variety of information pertaining to the nature, extent, and quality of services to be provided by KBCKBI under the New KBCKBI Sub-Advisory Agreement. The Board reviewed biographical information for each portfolio manager employed by KBCKBI who would be providing services under the New KBCKBI Sub-Advisory Agreement and noted the breadth and depth of experience presented.Agreement. The Board evaluated the nature, quality, and extent of KBC’sKBI’s services, including its reputation, expertise, and resources in international financial markets. The Board noted the apparent absence of potential conflicts of interest. The Board also evaluated KBC’sKBI’s organization, resourc es,resources, and research capabilities, which the Board noted would not adversely change under the New KBCKBI Sub-Advisory Agreement. The Board also reviewed KBC'sKBI's portfolio transaction execution and soft dollar policies and practices, which the Board found consistent with those currently followed by KBI and previously by KBC. The Board found KBC’sKBI’s policies and procedures for allocating transactions among accounts to be consistent with those currently followed by KBI and previously by KBC. The Board noted that the recent change in control of KBI and previous portfolio management team turnover suggest that the Board should continue to actively monitor KBI’s quality of services in the future.
Investment Performance. The Board was provided with a comparison of the First Focus International Equity Fund’s performance with that of a Lipper peer group identified by KBC of substantially similar mutual funds, and concluded that the Fund’s performance was in line with its peer group for the one-year, five-year and ten-year periods. In addition, the Board determined that the Fund performed in line with its stated benchmark, the MSCI EAFE index.index, and noted that the Fund’s performance was generally in line with the benchmark but had slightly lagged the benchmark for the one-year and five-year periods. In evaluating the Fund’s past performance, the Board noted that the KBI portfolio team is comprised of the former KBC portfolio management team.
Cost of Services Provided and Profitability. The Board reviewed the rate of KBC’sKBI’s sub-advisory fee in relation to the nature, extent, and quality of services to be provided by KBC,KBI, based on the financial information provided by KBC.KBI. The Board compared the First Focus International Equity Fund’s advisory fees and total expense ratios to those of a Lipper peer group of substantially similar mutual funds. The Board noted that KBCalthough KBI does not manage any mutual funds similar to the Fund, KBI
represented that the fees paid by the Fund are on the lower end of advisory fees paid on similar accounts managed by KBI. The Board further noted that KBI did not employ breakpoints in theirits fee arrangements whichthat would benefit Shareholders as the First Focus International Equity Fund grew. However, KBCthe Board noted that KBI had voluntarily waived a portion of its fee in order to keep total expenses down, and the Board expects this fee waiver to continue, followingwhich would benefit the closingShareholders of the T ributary Transactions.Fund in the event that any of the fees waived by KBI under its fee waiver were passed through by Tributary. Based on the information provided to the Board, the Board determined that the sub-advisory fee payable to KBCKBI, in light of all the facts and circumstances, is fair and reasonable in light of the services to be provided, the profitability of KBC’sKBI’s relationship with the First Focus International Equity Fund, and the comparability of the proposed fee to fees paid by similar mutual funds.funds, and that it reflects charges that are within a range of what could have been negotiated at arm’s length. The Board also noted that KBC’sKBI’s sub-advisory fee under the New KBCKBI Sub-Advisory Agreement did not increase current sub-advisory fees or impact overall operating expenses of the First Focus International Equity Fund over historical fee and expense levels.
Economies of Scale. The Board noted that KBC’sKBI’s total assets under management and current economies of scale will not change as a result of the Tributary Transactions and the New KBCKBI Sub-Advisory Agreement. Accordingly, the Board determined that utilizing a break pointbreakpoint system in the Fund’s fee structure to account for economies of scale would not be appropriate at this time.
Employment Arrangements. The Board considered KBC’sKBI’s current personnel, as well as its plans for attracting and retaining high quality investment professionals and concluded that KBC was successful in recruiting high-qualityKBI has adequately recruited investment professionals given their location, culture and compensation structure.
Legal Consideration. The Board reviewed KBC’sKBI’s compliance program, including the procedures adopted and maintained by KBC.KBI. The Board noted that these procedures were in accordance with the Advisers Act, and that the compliance program was generally consistent with the standard set forth under the 1940 Act. The Board also reviewed KBC’sKBI’s Code of Ethics, which the Board found generally in line with the Code of Ethics of other investment advisers, including that of New Tributary.
Other Considerations. The Board noted that there are no other tangible benefits to KBCKBI in providing investment sub-advisory services to the First Focus International Equity Fund, other than the fee to be earned under the New KBCKBI Sub-Advisory Agreement. There may be certain intangible benefits gained to the extent that serving the Fund could enhance KBC’sKBI’s reputation in the marketplace, and, therefore, would enable it to attract additional client relationships. The Board also considered that the termination of the Previous KBC Sub-Advisory Agreement resulted from the change of ownership of KBC and that it approved the Interim KBI Sub-Advisory Agreement primarily to ensure continuity of management during the 150-day interim period of the Interim KBI Sub-Advisory Agreement. The Board noted that it has previously agreed that the Company would seek shareholder approval of a definitive agreement within the 150-day period to enable KBI to receive all sub-advisory fees earned under the Interim KBI Sub-Advisory Agreement. The Board noted that although it is now seeking shareholder approval of the New KBI Sub-Advisory Agreement, in part, to enable KBI to receive its sub-advisory fees earned under the Interim KBI Sub-Advisory Agreement, the Board would continue to monitor the Fund’s future relationship with KBI, especially in light of recent Fund performance, the change in control of KBI, and portfolio management team turnover. To this end, the Board noted that the Fund, as required by the 1940 Act, may terminate the New KBI Sub-Advisory Agreement on not more than sixty (60) days’ and not less than thirty (30) days’ written notice.
In light of the foregoing, the Board, including alla majority of the membersdirectors, who are not “interested persons” (as defined in the 1940 Act) of either the Funds, KBC or New Tributary, or parties to the New KBCKBI Sub-Advisory Agreement or “interested persons” of any such party (as such term is defined under the 1940 Act), approved the New KBCKBI Sub-Advisory Agreement. No single factor reviewed by the Board was identified as the principal factor in determining whether to approve the New KBCKBI Sub-Advisory Agreement, and each director attributed different weight to the various factors. Accordingly, the Board including all of the Independent Directors, unanimously approved the New KBCKBI Sub-Advisory Agreement and voted to recommend its approval to the First Focus International Equity Fund’s Shareholders.
PROPOSAL 5THE BOARD HEREBY RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL.
APPROVAL OF
NEW RIVERBRIDGE SUB-ADVISORY AGREEMENT BETWEEN RIVERBRIDGE AND TRIBUTARY,
WITH RESPECT TO THE FIRST FOCUS LARGE CAP GROWTH FUND
(FIRST FOCUS LARGE CAP GROWTH FUND SHAREHOLDERS ONLY)
REQUIRED VOTE
Approval of the New Riverbridge Sub-Advisory Agreement with Riverbridge, Midwest Plaza West, 801 Nicollett Mall, Suite 600, Minneapolis, Minnesota 55402, requires the affirmative vote of a majority of the outstanding securities of the First Focus Large Cap Growth Fund. Under the 1940 Act, a majority of the First Focus Large Cap Growth Fund’s outstanding voting securities is defined as the lesser of (i) 67% of the outstanding shares represented at a meeting at which more than 50% of the Fund’s outstanding shares are present in person or represented by proxy, or (ii) more than 50% of the First Focus Large Cap Growth Fund’s outstanding voting securities. If the New Riverbridge Sub-Advisory Agreement is not approved, Riverbridge will continue to serve as the sub-adviser to the First Focus Large Cap Growth Fund at the current fee level under the Riverbridge Sub-Advisory Agreement.
CURRENT AND NEW SUB-ADVISORY AGREEMENTS
With the exception of replacing FNB Fund Advisers with Tributary as the lead investment adviser, a new effective date, and shortening the termination notice requirement from sixty (60) days to thirty (30) days, the Riverbridge Sub-Advisory Agreement and the New Riverbridge Sub-Advisory Agreement are substantially identical. A form of the New Riverbridge Sub-Advisory Agreement is attached to this Proxy Statement as Exhibit G.
Pursuant to both the Riverbridge Sub-Advisory Agreement and the New Riverbridge Sub-Advisory Agreement, Riverbridge is responsible for providing a continuous investment program for the First Focus Large Cap Growth Fund, including the provision of investment research and management with respect to all securities and equivalents and cash equivalents purchased, sold, or held in the First Focus Large Cap Growth Fund, and the selection of brokers and dealers through which securities transactions for the First Focus Large Cap Growth Fund are executed. Riverbridge performs its responsibilities subject to the supervision of, and policies established by, the Board.
Although Riverbridge intends to devote such time and effort to the business of the First Focus Large Cap Growth Fund as is reasonably necessary to perform its duties to the First Focus Large Cap Growth Fund, the New Riverbridge Sub-Advisory Agreement acknowledges that the services of Riverbridge are not exclusive, and Riverbridge may provide similar services to other investment companies and other clients and may engage in other activities (though Riverbridge does not currently provide similar services to other investment companies).
Under both the Riverbridge Sub-Advisory Agreement and the New Riverbridge Sub-Advisory Agreement, Riverbridge bears all expenses incurred by it in connection with its sub-advisory activities, but excluding the cost of securities, commissions, and transfer taxes, if any, purchased for or on behalf of the First Focus Large Cap Growth Fund.
Under both the Riverbridge Sub-Advisory Agreement and the New Riverbridge Sub-Advisory Agreement, the investment adviser will pay Riverbridge a sub-advisory fee equal to an annual rate of 0.45% of the average daily net assets of the First Focus Large Cap Growth Fund. This fee will be computed daily and paid to Riverbridge monthly. Additionally, the current fee waiver agreed to by Riverbridge, on behalf of the First Focus Large Cap Growth Fund, remains unchanged under the New Riverbridge Sub-Advisory Agreement.
Pursuant to both the Riverbridge Sub-Advisory Agreement and the New Riverbridge Sub-Advisory Agreement, Riverbridge will not be liable for any error of judgment or mistake of law or for any act or omission in connection with the performance of the Sub-Advisory Agreement, except a loss resulting from willful misfeasance, bad faith, or negligence in the performance of its duties, or by reason of its reckless disregard of its obligations and duties hereunder.
The Riverbridge Sub-Advisory Agreement and the New Riverbridge Sub-Advisory Agreement are renewable annually, with respect to the First Focus Large Cap Growth Fund, by (i) the vote of a majority of those members of the Board who are not “interested persons” of any such party (as defined in the 1940 Act), cast in person at a meeting called for the purpose of voting on such approval, and (ii) the vote of a majority of all the members of the Board or by vote of the holders of “a majority of the outstanding voting securities” of the First Focus Large Cap Growth Fund (as defined in the 1940 Act).
The Riverbridge Sub-Advisory Agreement and the New Riverbridge Sub-Advisory Agreement terminate automatically if assigned (as defined in the 1940 Act). The existing Riverbridge Sub-Advisory Agreement may be terminated with respect to the First Focus Large Cap Growth Fund at any time by either Riverbridge, the First Focus Large Cap Growth Fund or New Tributary, without penalty, on thirty (30) days’ written notice.
BASIS FOR THE BOARD RECOMMENDATION
At an in-person meeting of the Board held on February 24, 2010, the Board, including the directors who are neither (i) parties to the advisory contract nor (ii) “interested persons” (as defined in the 1940 Act) of either the First Focus Large Cap Growth Fund, Riverbridge or New Tributary, unanimously concluded that the proposed New Riverbridge Sub-Advisory Agreement is in the best interests of the First Focus Large Cap Growth Fund and its Shareholders, and approved, and voted to recommend to the Shareholders of the First Focus Large Cap Growth Fund that they approve, the proposed New Riverbridge Sub-Advisory Agreement.
In approving the New Riverbridge Sub-Advisory Agreement, the Board requested and received information from Riverbridge and Tributary regarding the Tributary Transactions and Riverbridge. Additionally, senior officers of Tributary and Riverbridge were available to answer questions from the Board. The Board met and conferred with representatives of the Tributary, Riverbridge, and FNNI. In considering the New Riverbridge Sub-Advisory Agreement, the Board considered a number of factors, including those discussed below.
Nature, Extent, and Quality of Services to be Provided by Riverbridge. The Board received and considered a variety of information pertaining to the nature, extent, and quality of services to be provided by Riverbridge under the New Riverbridge Sub-Advisory Agreement. The Board reviewed biographical information for each portfolio manager employed by Riverbridge who would be providing services under the New Riverbridge Sub-Advisory Agreement and noted the breadth and depth of experience presented. The Board evaluated the nature, quality, and extent of Riverbridge’s services, including its reputation, expertise, and resources in domestic financial markets. The Board noted the apparent absence of potential conflicts of interest. The Board also evaluated Riverbridge’s organization, resources, and research capabilities, which the Board noted would not change with the adoption of the New Riverbridge Sub-Advisory Agreement. The Board also reviewed Riverbridge’s portfolio transaction execution and soft dollar policies and practices, which the Board found would not change. The Board found Riverbridge’s policies and procedures for allocating transactions among accounts to be consistent with those currently followed by Riverbridge.
Investment Performance. The Board was provided with a comparison of the First Focus Large Cap Growth Fund’s performance with that of a Lipper peer group of substantially similar investment companies identified by Riverbridge, and concluded that the Fund performed in the top quartile of its peer group for the one-year period. The Fund has not reached the three-year anniversary, so the Board could not evaluate that performance timeframe.
Cost of Services Provided and Profitability. The Board reviewed the rate of Riverbridge’s sub-advisory fee in relation to the nature, extent, and quality of services to be provided by Riverbridge, based on the financial information provided by Riverbridge. The Board evaluated the First Focus Large Cap Growth Fund’s advisory fees and total expense ratios to those of a peer group of substantially similar investment companies. The Board noted that Riverbridge had voluntarily
waived a portion of its fee, which brought it below the Lipper peer group average. Riverbridge’s fee waiver is expected to continue following the closing of the Tributary Transactions. Based on the information provided to the Board, the Board determined that the sub-advisory fee payable to Riverbridge is fair and reasonable in light of the services to be provided, the profitability of Riverbridge’s relationship with the First Focus Large Cap Growth Fund, and the comparability of the proposed fee to fees paid by similar investment companies. The Board also noted that Riverbridge’s sub-advisory fee under the New Riverbridge Sub-Advisory Agreement did not increase current sub-advisory fees or overall operating expenses of the First Focus Large Cap Growth Fund over historical fee and expense levels.
Economies of Scale. The Board noted that Riverbridge’s total assets under management, and current economies of scale, will not change as a result of the Tributary Transactions and the New Riverbridge Sub-Advisory Agreement. Accordingly, the Board determined that utilizing a break point system in the Fund’s fee structure to account for economies of scale would not be appropriate at this time.
Employment Arrangements. The Board considered Riverbridge’s current personnel, as well as its plans for attracting and retaining high quality investment professionals, and concluded since all members of the investment team are owners of the company, that Riverbridge therefore has a firm commitment to the longevity of the organization.
Legal Consideration. The Board reviewed Riverbridge’s compliance program, including the procedures adopted and maintained by Riverbridge. The Board noted that these procedures were in accordance with the Advisers Act, and that the compliance program was generally consistent with the standard set forth under the 1940 Act. The Board also reviewed Riverbridge’s Code of Ethics, which the Board found generally in line with the Code of Ethics of other investment advisers to the Funds, including that of New Tributary.
Other Considerations. The Board noted that there are no other tangible benefits to Riverbridge in providing investment sub-advisory services to the First Focus Large Cap Growth Fund, other than the fee to be earned under the New Riverbridge Sub-Advisory Agreement. There may be certain intangible benefits gained to the extent that serving the Fund could enhance Riverbridge’s reputation in the marketplace, and, therefore, would enable it to attract additional client relationships.
In light of the foregoing, the Board, including all of the members who are not “interested persons” (as defined in the 1940 Act) of either the First Focus Large Cap Growth Fund, Riverbridge or New Tributary, or parties to the New Riverbridge Sub-Advisory Agreement, approved the New Riverbridge Sub-Advisory Agreement. No single factor reviewed by the Board was identified as the principal factor in determining whether to approve the New Riverbridge Sub-Advisory Agreement, and each director attributed different weight to the various factors. Accordingly, the Board, including all of the Independent Directors, unanimously approved the New Riverbridge Sub-Advisory Agreement and voted to recommend its approval to the First Focus Large Cap Growth Fund’s Shareholders.
PROPOSAL 6
APPROVAL TO CHANGE THE NAME OF FIRST FOCUS AND OF EACH FUND
(ALL SHAREHOLDERS WITH RESPECT TO FIRST FOCUS, EACH FUND’S SHAREHOLDERS ONLY WITH RESPECT TO SUCH FUND’S NAME CHANGE)
REQUIRED VOTE
Approval of a name change for First Focus requires the affirmative vote of a majority of the shares held by Shareholders of the Funds present at the Meeting. Approval of a name change for each Fund individually requires the affirmative vote of a majority of the Shareholders of each respective Fund present at the Meeting. If the proposed name change for First Focus or any of the Funds is not approved, the Board will not change the name of First Focus or any of the Funds.
DESCRIPTION OF PROPOSAL
Upon approval of Proposals (2) through (5), the Funds will have a new investment adviser and one new sub-adviser (FNFA). Specifically, upon approval of Proposal (2), Tributary will become the investment adviser to each of the Funds. The Board believes that, subject to such approvals, it may be in the best interest of the Funds individually and collectively to be re-branded with Tributary’s name. Therefore, the Board desires the ability to effectuate such name changes in the future.
Under this proposal, the Board seeks Shareholder approval to authorize the Board to change the names of First Focus and each of the Funds, at the Board’s discretion, as follows:
Existing Name | New Name |
First Focus Funds, Inc. | Tributary Funds, Inc. |
First Focus Short-Intermediate Bond Fund | Tributary Short-Intermediate Bond Fund |
First Focus Income Fund | Tributary Income Fund |
First Focus Balanced Fund | Tributary Balanced Fund |
First Focus Core Equity Fund | Tributary Core Equity Fund |
First Focus Large Cap Growth Fund | Tributary Large Cap Growth Fund |
First Focus Growth Opportunities Fund | Tributary Growth Opportunities Fund |
First Focus Small Company Fund | Tributary Small Company Fund |
First Focus International Equity Fund | Tributary International Equity Fund |
OTHER BUSINESS
The Board knows of no other business to be brought before the Meeting. If other business should properly come before the Meeting, the proxy holder will vote thereon in their discretion.
ADDITIONAL INFORMATION ABOUT FIRST FOCUSTHE COMPANY AND THE FUND
DIRECTORS AND OFFICERSDirectors and Officers
Appendix D provides a list of each individual who has served as a director or executive officer of First Focus since the beginning of the last fiscal year and any positions held with any Current Advisers, KBC, and Riverbridge. As of the Record Date, the officers and directors of First Focusthe Company as a group beneficially owned less than 1% of the outstanding shares of anythe Fund.
PRINCIPAL SHAREHOLDERSPrincipal Shareholders
As of the Record Date, the persons shown on Appendix EB were the only persons known to First Focusthe Company to be the record or beneficial owners of 5% or more of anythe Fund. First FocusThe Company believes that most of the shares referred to in Appendix EB were held by such holders in accounts for their fiduciary, agency, or custodial accounts.
BENEFICIAL OWNERSHIPBeneficial Ownership
Since the beginning of the last fiscal year, no director or nominee for election as a director has made purchases or sales of securities of either of the Current AdvisersTributary, KBI or their respective parents or subsidiaries.
CO-ADMINISTRATORSCo-Administrators
JFS,Jackson Fund Services, a division of Jackson National Asset Management, LLC, 225 West Wacker Drive, Suite 1200, Chicago, Illinois 60606, is a co-administrator (“Co-Administrator”) for each Fund,the Company, providing clerical, certain compliance, regulatory, accounting, and other services.
New Tributary will also serveserves as Co-Administrator for each Fund,the Company, providing clerical, compliance, regulatory, accounting, and other services. As compensation for its administrative services, the co-administration agreement between New Tributary and First Focusthe Company provides that New Tributary will receivereceives a fee for its services, calculated daily and paid monthly based on the Funds’Fund’s average daily net assets. New Tributary receives an annual rate of 0.07% of the Funds’Company’s average daily net assets. New Tributary intends to assumeassets for the existing Co-Administration contract between First FocusInstitutional Class assets and FNB Advisers and the related responsibilities upon closing0.035% of the Tributary Transactions.Company’s average daily net assets for the Institutional Plus Class assets. These services will continue to be provided after the Proposal is approved.
MATERIAL BUSINESS RELATIONSHIPSMaterial Business Relationships
Neither Tributary, KBI, nor the Current Advisers nor KBC, FNFA, Riverbridge nor First Focus isCompany are aware of any affiliation or material business relationship between any principal of suchany adviser, and the Funds,Company, its distributor, or any other organization that provides investment advisory services to the Funds.Company.
DISTRIBUTORDistributor
Northern Lights Distributors, LLC, 4020 South 147th Street, Omaha, Nebraska 68137, is the distributor for the Funds.Company.
VOTING INFORMATIONVoting Information
The vote required to approve a proposalthe Proposal is set forth at the beginning of the description of that proposal.above. As of the close of business on the Record Date, the FundsFund had the following10,250,158 outstanding shares:
Fund | Shares Outstanding |
First Focus Short-Intermediate Bond Fund | 7,491,760 |
First Focus Income Fund | 6,137,497 |
First Focus Balanced Fund | 2,403,464 |
First Focus Core Equity Fund | 14,109,415 |
First Focus Large Cap Growth Fund | 9,297,511 |
First Focus Growth Opportunities Fund | 5,947,664 |
First Focus Small Company Fund | 3,907,736 |
First Focus International Equity Fund | 10,198,379 |
shares.
Each share outstanding as of the Record Date is entitled to one vote per share in his or her name, with proportional voting for fractional shares.
The persons named in the enclosed proxy will vote shares of the FundsFund in accordance with instructions received from Shareholders. Shares held by Shareholders present in person or represented by proxy at the Meeting will be counted both for the purpose of determining the presence of a quorum and for calculating the votes cast on any proposalthe Proposal before the Meeting for which they are entitled to vote. Shares represented by timely and properly executed proxies will be voted as specified. Executed proxies that are unmarked will be voted in favor of the proposals set forth in the Notice for which the Shareholder is entitled to vote.Proposal.
A proxy may be revoked at any time prior to its exercise by written notice, by execution of a subsequent proxy, or by attending the Meeting and voting in person. However, attendance at the Meeting, by itself, will not serve to revoke a proxy. An abstention or broker non-vote on any proposalthe Proposal by a Shareholder will be counted for purposes of establishing a quorum. With respect to Proposals 1quorum and 6, abstentions and broker non-votes do not constitute a vote "for" or "against" a matter and will be disregarded in determining "votes cast" on an issue. ��With respect to Proposals 2, 3, 4 and 5, abstentions and broker non-votes will be considered votes “against” such proposals.the Proposal. Broker non-votes are proxies from brokers or nominees indicating that such persons have not received instructions f romfrom the beneficial owner or other person entitled to vote
shares on a particular matter with respect to which the brokers or nominees do not have discretionary voting power will be treated the same as abstentions.
In the event that a sufficient number of votes to approve a proposalthe Proposal is not received, the FundsFund may propose one or more adjournments of the Meeting to permit further solicitation of voting instructions, or for any other purpose. A vote may be taken on any proposalthe Proposal prior to an adjournment if sufficient votes have been received for approval. Any adjournment will require the affirmative vote of a majority of those shares represented at the meeting in person or by proxy. Unless otherwise instructed, proxies will be voted in favor of any adjournment. At any subsequent reconvening of the Meeting, proxies will (unless previously revoked) be voted in the same manner as they would have been voted at the Meeting.
SHAREHOLDER COMMUNICATION WITH THE BOARD OF DIRECTORSShareholder Communication with the Board
Shareholders may address correspondence that relates to the Funds,Company, to the Board as a whole, or to individual directors and send such correspondence to First Focus’the Company’s Director of Fund Services at First Focus’the Company’s principal executive office: First FocusTributary Funds, Inc., 1620 Dodge Street, Stop 1075, Omaha, Nebraska 68197. Upon receipt, all such shareholder correspondence will be directed to the attention of the addressee.
EXPENSES OF THE MEETINGExpenses of the Meeting
Tributary and FNBO, on behalf of FNB Advisers,KBI will pay or reimburse First Focusthe Company for the costs of the Meeting, and any adjournment thereof, the preparation, printing, and mailing of the enclosed proxy, Notice, and this Proxy Statement, and all other costs incurred in connection with the solicitation of proxies, and the related Board and Shareholder meetings.
PROPOSALS FOR FUTURE SHAREHOLDER MEETINGSProposals for Future Shareholder Meetings
First FocusThe Company does not intend to hold shareholder meetings each year, but the Board may call meetings from time to time. Proposals of Shareholders that are intended to be presented at a future shareholder meeting must be received by First Focusthe Company in writing at a reasonable time prior to the date of a meeting of shareholders to be considered for inclusion in the proxy materials for a meeting. Timely submission of a proposal does not, however, necessarily mean that the proposal will be included. A Shareholder who wishes to make a proposal at the next meeting of Shareholders, without including the proposal in First Focus’the Company’s proxy statement, must notify the Secretary of First Focusthe Company in writing of such proposal within a reasonable time prior to the date proxy materials are provided for the meeting. If a Shar eholderShareholder fails to give timely notice, then the persons named as proxies in the proxies solicited by the Board for the next meeting of Shareholders may exercise discretionary voting power with respect to any such proposal.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which any director, nominee, or affiliated person of such director, or nominee is a party adverse to the Funds or any of their affiliated persons or has a material interest adverse to the Funds or any of their affiliated persons.Shareholder Reports
Unaudited financial statements of the Company in the form of the Semi-Annual Report, dated September 30, 2010, and audited financial statements of the Company in the form of the Annual Report, dated March 31, 2010, have previously been mailed to Shareholders. The Company will furnish, without charge, a copy of the Annual Report or the Semi-Annual Report to any Shareholder who requests the report. Shareholders may obtain such reports by visiting www.tributaryfunds.com; calling the Company at 1-800-662-4203; or by writing the Company at 1620 Dodge Street, Mail Stop 1075, Omaha, Nebraska 68197.
APPENDIX A
FNB Fund AdvisersTributary Capital Management, LLC
SteveStephen Frantz, Chief Investment OfficerPresident
Randall Greer, Managing Director Equities
Ron Horner, Managing Director Equities
David Jordan, Managing Director
Travis Nordstrom, Principal
Mark Wynegar, Principal
KBC Asset Management
Kleinwort Benson Investors International LimitedLtd.
Sean Hawkshaw, Director
Ger Solan, Director
Noel O’Halloran, Director
Geoff Blake, Director
Wim Allergaert,Heinrich Linz, Director
Anna Magdalena Kamenetzky-Wetzel, Director
Derval Murray, Company Secretary
Riverbridge Partners
Mark A. Thompson, Chairman
Rick D. Moulton, Secretary
Andrew W. Turner, Treasurer
First National Fund Advisors
Jack Wolfe, Sole Member
Kurt Spieler, Managing Director
David Jordan, Senior Portfolio Manager
APPENDIX B
INVESTMENT ADVISORY AGREEMENT
This INVESTMENT ADVISORY AGREEMENT (this "Agreement") is entered into as of __________, 2010, and is effective with respect to each Fund (as defined below) as set forth on Schedule A hereto, between FIRST FOCUS FUNDS, INC., a registered open-end management investment company organized as a Nebraska corporation having its principal place of business at 1620 Dodge Street, Omaha, NE 68197 (herein called the "Company"), and TRIBUTARY CAPITAL MANAGEMENT, LLC, a Colorado limited liability company (herein called the "Investment Adviser").
RECITALS
WHEREAS, the Company is registered as an open-end, diversified, management investment company under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Company desires to retain the Investment Adviser to furnish investment advisory and administrative services to certain investment portfolios of the Company, and may retain the Investment Adviser to serve in such capacity to certain additional investment portfolios of the Company, all as now or hereafter may be identified in Schedule A hereto (such initial investment portfolios and any such additional investment portfolios each comprising a series of the Company, as contemplated in the 1940 Act, together called the "Funds"), and the Investment Adviser represents that it is willing and possesses legal authority to so furnish such services without violation of applicable laws and regulations.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is agreed between the parties hereto as follows:
AGREEMENT
1. Appointment. The Company hereby appoints the Investment Adviser to act as investment adviser to the Funds for the period and on the terms set forth in this Agreement. The Investment Adviser accepts such appointment and agrees to furnish the services herein set forth for the compensation herein provided. Additional Funds may from time to time be added to those covered by this Agreement, consistent with the 1940 Act, by the parties executing a new Schedule A which shall become effective upon its execution and shall supersede any Schedule A having an earlier date.
2. Delivery of Documents. The Company has furnished or will furnish the Investment Adviser from time to time with copies of all amendments of or supplements to the following:
a. the Company's Articles of Incorporation, executed as of October 12, 1994, and as filed with the Secretary of State of Nebraska on October 12, 1994, and any and all amendments thereto or restatements thereof (such document as presently in effect and as it shall from time to time be amended or restated, is herein called the "Articles");
b. the Company's By-laws and any amendments thereto (such document as presently in effect and as it shall, from time to time be amended and restated, is herein called the "By-laws");
c. resolutions of the Company's Board of Directors (the "Board") authorizing the appointment of the Investment Adviser and approving this Agreement;
d. the Company's Notification of Registration on Form N-8A under the 1940 Act as filed with the Securities and Exchange Commission ("SEC") on November 1, 1994, and all amendments thereto;
e. the Company's registration statement on Form N-lA under the Securities Act of 1933, as amended, (File No. 33-85982), and under the 1940 Act as filed with the SEC and all amendments thereto (the "Registration Statement"); and
f. the most recent Prospectus and Statement of Additional Information of each of the Funds filed in connection with the Registration Statement (such Prospectus and Statement of Additional Information, as presently in effect, and all amendments and supplements thereto, are herein collectively called the "Prospectus").
3. Management. Subject to the supervision of the Board, the Investment Adviser will provide a continuous investment program for the Funds, including investment research and management with respect to all securities and investments and cash equivalents held by or to be purchased by the Funds. The Investment Adviser will determine from time to time what securities and other investments will be purchased, retained, or sold by each Fund. The Investment Adviser will provide the services under this Agreement in accordance with each of the Fund's investment objectives, policies, and restrictions as stated in the Prospectus and resolutions of the Board. With the approval of the Boa rd, and subject to applicable provisions of the 1940 Act, the Investment Adviser may appoint sub-advisers to assist it in the performance of its duties hereunder. The Investment Adviser further agrees that it:
a. will use the same skill and care in providing such services as it uses in providing services to fiduciary accounts for which it has investment responsibilities;
b. will conduct its activities under this Agreement in accordance with any applicable regulations of any governmental authority pertaining to the investment advisory activities of the Investment Adviser, including (i) the 1940 Act and the rules adopted by the SEC thereunder, (ii) the Investment Advisers Act of 1940 (the "Advisers Act") and the rules adopted by the SEC thereunder, (iii) the Prospectus, (iv) the Articles and By-laws, and (v) the policies and procedures adopted by the Board;
c. will not make loans to any person to purchase or carry shares of the Company or make loans to the Company;
d. will place orders pursuant to its investment determinations for the Funds either directly with the issuer or with any broker or dealer. In placing orders with brokers and dealers, the Investment Adviser will attempt to obtain prompt execution of orders in an effective manner at the most favorable price. Consistent with this obligation and any policies adopted by the Board, and to the extent permitted by the 1940 Act, the Advisers Act, and Section 28(e) of the Securities Exchange Act of 1934, the Investment Adviser may, in its discretion, purchase and sell portfolio securities to and from brokers and dealers who provide the Investment Adviser with research advice and other services. The Investment Adviser may authorize the Funds to pay a commiss ion in excess of the commission another broker-dealer would have charged if the Investment Adviser determines in good faith that such commission is reasonable in relation to the value of the brokerage and research services provided by such broker-dealer, viewed either in terms of that particular transaction or the Investment Adviser's overall responsibilities to the accounts it manages. In no instance will portfolio securities be purchased from or sold to the Company's administrator (the "Administrator"), the Investment Adviser, or any affiliated person of the Company, the Administrator, or the Investment Adviser acting as principal; in no instance will portfolio securities be sold or purchased through the Administrator, the Investment Adviser, or any affiliated person of the Company except in strict compliance with Rule 17e-1 under the 1940 Act; in no instance will the Company purchase securities of which the Investment Adviser or any affiliated person of the Company is an underwriter except in strict compliance with Rule 10f-3 under the 1940 Act; in no instance will any Fund purchase securities from, or sell securities to another Fund in a principal transaction except in strict compliance with Rule 17a-7 under the 1940 Act; and in no instance will any Fund engage in any joint or joint and several participation in any transaction with any other Fund in violation of Section 17(d) of the 1940 Act.
e. will maintain all books and records with respect to the securities transactions of the Funds as required by the 1940 Act and the Advisers Act, and will furnish the Board such periodic and special reports as the Board may request;
f. will treat confidentially and as proprietary information of the Company all records and other information relative to the Company and the Funds and prior, present, or potential shareholders, will not use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Company, which approval shall not be unreasonably withheld and may not be withheld where the Investment Adviser may be exposed to civil or criminal contempt proceedings for failure to comply, when requested to divulge such information by duly constituted authorities, or when so requested by the Company; and
g. will maintain its policy and practice of conducting its fiduciary functions independently. In making investment recommendations for the Funds, the Investment Adviser's personnel will not inquire or take into consideration whether the issuers of securities proposed for purchase or sale for the Funds' account are customers of the Investment Adviser or of its parent or its subsidiaries or affiliates. In dealing with such customers, the Investment Adviser and its parent, subsidiaries, and affiliates will not inquire or take into consideration whether securities of those customers are held by any Fund.
4. Services Not Exclusive. The investment management services furnished by the Investment Adviser hereunder are not to be deemed exclusive, and the Investment Adviser shall be free to furnish similar services to others so long as its services under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Investment Adviser hereby agrees that all records which it maintains for the Funds are the property of the Company and further agrees to surrender promptly to the Company any of such records upon the Company's request. The Investment Adviser further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act.
6. Expenses. During the term of this Agreement, the Investment Adviser will pay all expenses incurred by it in connection with its activities under this Agreement, including but not limited to, expenses related to all office space, facilities, equipment, and clerical personnel necessary for the Investment Adviser to carry out its duties and obligations under this Agreement, but excluding the cost of securities (including brokerage commission, issue and transfer taxes, if any) purchased by the Funds. Each of the Funds shall bear the following expenses relating to its operations: organizational expenses, taxes, interest, any brokerage fees and commissions, fees of the directors of the Company, SEC fees, state securities registration fees and expenses, costs of preparing and printing prospectuses for regulatory purposes and for distribution to a Fund's current or prospective shareholders, outside auditing and legal expenses, advisory and administration fees, fees and out-of-pocket expenses of the custodian and transfer agent, costs of Fund accounting services, certain insurance premiums, costs of maintenance of the Company's existence, costs of shareholders' and directors' reports and meetings, distribution expenses, shareholder servicing expenses incurred pursuant to the Company's Administrative Service Plan and other similar arrangements, any extraordinary expenses incurred in the Funds' operation, and other operating expenses not assumed by the Company's service providers.
7. Compensation. For the services provided and the expenses assumed pursuant to this Agreement, each of the Funds will pay the Investment Adviser and the Investment Adviser will accept as full compensation therefor a fee, computed daily and paid monthly in arrears, equal to the lesser of (a) the fee set forth on Schedule A hereto or (b) such other fee as may from time to time be agreed upon in writing by the Company and the Investment Adviser. The obligations of the Funds to pay the above-described fee to the Investment Adviser will begin as first set forth above.
If in any fiscal year the aggregate expenses of any of the Funds (as defined under the securities regulations of any state having jurisdiction over the Company) exceed the expense limitations of any such state, the Investment Adviser will reimburse the Fund for such excess expenses, provided that the obligation of the Investment Adviser to reimburse the Funds hereunder is limited in any fiscal year to the amount of its fee hereunder for such fiscal year; provided further, however, that notwithstanding the foregoing, the Investment Adviser shall reimburse the Funds for such excess expenses regardless of the amount of fees paid to it during such fiscal year to the extent that the securities regulations of any state having jurisdiction over the Company so require. Such expense reimbursement, if any, will be estimated daily and reconcile d and paid on a monthly basis.
8. Notices of Meetings. The Company agrees that notice of each regular meeting of the Board will be sent or otherwise given to the Investment Adviser. To the extent that the directors of the Company invite any person or persons employed by the Investment Adviser to attend any such meeting, the Company agrees that it will make the appropriate arrangements, at the expense of the Investment Adviser, for the attendance by such person or persons or by such other person or persons as the Investment Adviser may designate.
9. Limitation of Liability. The Investment Adviser shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Funds in connection with the performance of this Agreement, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith, or gross negligence on the part of the Investment Adviser in the performance of its duties or from reckless disregard by it of its obligations and duties under this Agreement.
10. Duration and Termination. (a)This Agreement will become effective as of the date first written above (or, if a particular Fund is not in existence on that date, on the date the Registration Statement relating to that Fund becomes effective with the SEC), provided that it is approved by vote of a majority of the outstanding voting securities of such Fund, in accordance with the requirements under the 1940 Act, and, unless sooner terminated as provided herein, shall continue in effect until June 30, 2011. This Agreement, which shall become effective upon its execution, shall supersede any agreement respecting investment advisory services between the parties (or affiliates of the Investment Adviser) having an earlier date.
Thereafter, if not terminated, this Agreement will continue in effect for successive periods of twelve (12) months, each ending on the day preceding the anniversary of the Agreement’s effective date of each year, provided that such continuation is specifically approved at least annually by (x) the vote of a majority of those members of the Board who are not interested persons (as set forth in the 1940 Act) of the Company or the Investment Adviser, cast in person at a meeting called for the purpose of voting on such approval, and (y) the vote of a majority of the Board or by the vote of a majority of all votes attributable to the outstanding shares of such Fund.
(b) Notwithstanding the foregoing, this Agreement may be terminated as to a particular Fund at any time on sixty days’ written notice, without the payment of any penalty, by the Company (by vote of the Board or by vote of a majority of the outstanding voting securities of such Fund) or by the Investment Adviser. This Agreement will immediately terminate in the event of its assignment (as set forth in the 1940 Act).
11. Investment Adviser's Representations. The Investment Adviser hereby represents and warrants to the Company that:
a. it is willing and possesses all requisite legal authority to provide the services contemplated by this Agreement without violation of applicable laws and regulations, including but not limited to the Glass-Steagall Act, and the regulations promulgated thereunder;
b. is has adopted and implemented written policies and procedures reasonably designed to prevent violation of the federal securities laws (as that term is used in Rule 38a-1 adopted under the 1940 Act) by the Investment Adviser and its supervised persons, and shall provide the Company, at such times as the Company shall reasonably request, a copy of such policies and procedures and a report of such policies and procedures; such report shall be of sufficient scope and in sufficient detail as may reasonably be required to comply with Rule 38a-1 under the 1940 Act; and
c. it is and shall remain during the term of this Agreement, registered as an investment adviser under the Advisers Act.
12. Amendment of this Agreement. No provision of this Agreement may be changed, waived, discharged, or terminated except by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge, or termination is sought.
13. Miscellaneous. 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. 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. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and shall be governed by the law of the State of Nebraska. The provisions of the 1940 Act and rules and regulations promulgated thereunder shall supersede the terms and provi sions hereof and any ambiguity or matter of interpretation hereunder shall be resolved in a manner which effectuates the 1940 Act and such rules and regulations. This Agreement may be signed in any number of counterparts, and any single counterpart or a set of counterparts signed in either case by the parties hereto shall constitute a full and original Agreement for all purposes.
Signature Page Follows
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written.
FIRST FOCUS FUNDS, INC.
By: _____________________________________
Name: __________________________________
Title: ____________________________________
TRIBUTARY CAPITAL MANAGEMENT, LLC
By: _____________________________________
Name: __________________________________
Title: ____________________________________
Schedule A
to the
Investment Advisory Agreement
Between
First Focus Funds, Inc. and Tributary Capital Management, LLC
This Schedule A is dated _________________
Name of Fund | Compensation*
| Effective Date |
First Focus Short/Intermediate Bond Fund
| Annual rate of fifty one-hundredths of one percent (.50%) of the Fund's average daily net assets
| |
| | |
First Focus Income Fund | Annual rate of sixty one-hundredths of one percent (.60%) of the Fund's average daily net assets | |
| | |
First Focus Balanced Fund | Annual rate of seventy-five one-hundredths of one percent (.75%) of the Fund's average daily net assets | |
| | |
First Focus Core Equity Fund | Annual rate of seventy-five one-hundredths of one percent (.75%) of the Fund's average daily net assets | |
| | |
First Focus Large Cap Growth Fund | Annual rate of ninety one-hundredths of one percent (.90%) of the Fund's average daily net assets | |
| | |
First Focus Growth Opportunities Fund | Annual rate of seventy-five one-hundredths of one percent (.75%) of the Fund's average daily net assets | |
| | |
First Focus International Equity Fund | Annual rate of one percent (1.00%) of the Fund's average daily net assets | |
| | |
First Focus Small Company Fund | Annual rate of eighty-five one-hundredths of one percent (.85%) of the Fund's average daily net assets | |
__________________
*All fees are computed daily and paid monthly
FIRST FOCUS FUNDS, INC. | TRIBUTARY CAPITAL MANAGEMENT, LLC |
By: _________________________
| By: _________________________
|
Name: _______________________ | Name: _______________________ |
Title: ________________________ | Title: ________________________ |
APPENDIX CA-1
INVESTMENT SUB-ADVISORY AGREEMENT
This AGREEMENT is made and entered this ______ day of _________, 2010, by and between Tributary Capital Management, LLC, a Colorado limited liability company (the "Adviser") and First National Bank (Fort Collins), a national banking association having its principal place of business in Fort Collins, Colorado and doing business as First National Fund Advisers ("Sub-Adviser").
RECITALS
WHEREAS, Adviser is the investment adviser for First Focus Funds, Inc. ("First Focus"), an open-end management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), pursuant to an Investment Advisory Agreement dated _________, by and between the Adviser and First Focus (the "Advisory Agreement"); and
WHEREAS, Adviser desires to retain the Sub-Adviser as its agent to furnish investment advisory services to the First Focus Balanced Fund, a diversified investment portfolio of First Focus (the "Fund").
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows:
AGREEMENT
1. Appointment. Adviser hereby appoints the Sub-Adviser to provide certain sub-investment advisory services to the Fund in furtherance of the Advisory Agreement for the period and on the terms set forth in this Agreement. The Sub-Adviser accepts such appointment and agrees to furnish the services herein set forth for the compensation herein provided.
2. Management. Subject always to the supervision of First Focus' Board of Directors (the "Board") and the Adviser, in addition to the terms of the Advisory Agreement, the Sub-Adviser will furnish an investment program including investment research, advice, and supervision in respect of, and make investment decisions for, all assets of the Fund on behalf of the Adviser and place all orders for the purchase and sale of securities, for Adviser on behalf of the Fund. In the performance of its duties, the Sub-Adviser will satisfy its fiduciary duties to the Fund (as set forth in Section 8, below) and will monitor the Fund's investments. The Sub-Adviser and Adviser will each make its respec tive officers and employees available to the other from time to time at reasonable times to review investment policies of the Fund and to consult with each other regarding the investment affairs of the Fund. The Sub-Adviser shall also make itself reasonably available to the Board at such times as the Board shall request.
The Sub-Adviser agrees that it will:
(a) Use the same skill and care in providing such services as it uses in providing services to fiduciary accounts for which it has investment responsibilities;
(b) Place orders pursuant to its investment determinations for the Fund either directly with the issuer or with any broker or dealer. In placing orders with brokers or dealers, the Sub-Adviser will attempt to obtain the best combination of prompt execution of orders in an effective manner and at the most favorable price. Consistent with this obligation and any policies adopted by the Board, and to the extent permitted by the 1940 Act, the Investment Advisers Act of 1940 (the "Advisers Act") and Section 28(e) of the Securities Exchange Act of 1934, when the execution and price offered by two or more brokers or dealers are comparable, the Sub-Adviser may, in its discretion, purchase and sell portfolio securities to and from brokers and dealers who provide the S ub-Adviser with research advice and other services. The Sub-Adviser may pay a commission in excess of the commission another broker-dealer would have charged if the Sub-Adviser determines in good faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed either in terms of that particular transaction or the Sub-Adviser's overall responsibilities to the accounts it manages.
(c) Report regularly to the Adviser and will make appropriate persons available for the purpose of reviewing at reasonable times with representatives of the Adviser and the Board, the management of the Fund, including, without limitation, review of the general investment strategies of the Fund, the performance of the Fund in relation to standard industry indices, interest rate considerations, and general conditions affecting the marketplace and will provide various other reports from time to time as reasonably requested by the Adviser;
(d) Maintain books and records with respect to First Focus' securities transactions and will furnish the Adviser and the Board such periodic and special reports as the Board or the Adviser may request, including economic, operational, and investment data and reports, including, without limitation, all information and materials reasonably requested by or requested to be delivered to the Board pursuant to Section 15(c) of the 1940 Act;
(e) Act upon instructions from the Adviser not inconsistent with the fiduciary duties hereunder;
(f) Submit such reports relating to the valuation of the Fund's assets and otherwise assist in the calculation of the net asset value of shares of the Fund as may reasonably be requested;
(g) Provide to Adviser for regulatory filings and other appropriate uses information relating to Sub-Adviser as may be reasonably requested by Adviser from time-to-time;
(h) Treat confidentially and as proprietary information of First Focus all such records and other information relative to First Focus maintained by the Sub-Adviser, and will not use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by First Focus, which approval shall not be unreasonably withheld and may not be withheld where the Sub-Adviser may be exposed to civil or criminal contempt proceedings for failure to comply, when requested to divulge such information by duly constituted authorities, or when so requested by First Focus; and
(i) Conduct its activities under this Agreement in accordance with any applicable regulations of any governmental authority pertaining to the investment advisory activities of the Sub-Adviser, including (i) the 1940 Act and the rules adopted by the SEC thereunder, (ii) the Investment Advisers Act of 1940 (the "Advisers Act") and the rules adopted by the Securities and Exchange Commission ("SEC") thereunder, (iii) the most recent Prospectus and Statement of Additional Information of the Fund filed in connection with the Fund's Registration Statement on Form N-lA filed under the Securities Act of 1933, as amended, (File No. 33-85982), and under the 1940 Act (such Prospectus and Statement of Additional Information, as presently in effect, and all amendments and supplements there to, collectively the "Prospectus"), (iv) the Fund's articles of incorporation and by-laws, and (v) the policies and procedures adopted by the Board.
3. Fund Securities. The Sub-Adviser shall have the right to execute and deliver, or cause its nominee to execute and deliver, all proxies and notices of meetings and other notices affecting or relating to the securities of the Fund. The Sub-Adviser shall provide the Adviser with such assistance and advice as Adviser may reasonably request as to the manner in which to exercise, on behalf of the Fund, such voting rights, subscription rights, rights to consent to corporate action, and any other rights pertaining to the Fund's assets that may be exercised, in accordance with any policy pertaining to the same that may be adopted or agreed to by the Fund, so that Adviser may exercise such rights, or, in the event that the Fund retains the right to exercise such rights, to furnish the Fund with advice as may reasonably be requested as to the manner in which such rights should be exercised.
4. Books and Records. In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records which it maintains for the Fund, on behalf of First Focus, are the property of First Focus and further agrees to surrender promptly to First Focus any of such records upon First Focus' request. The Sub-Adviser further agrees to preserve for the periods prescribed by the 1940 Act, the records required to be maintained under the 1940 Act.
5. Expenses. During the term of this Agreement, the Sub-Adviser will pay all expenses incurred by it in connection with its activities under this Agreement, but excluding the cost of securities (including commission, issue and transfer taxes, if any) purchased for or on behalf of the Fund.
6. Compensation. For the services to be provided by the Sub-Adviser pursuant to this Agreement, the Adviser will pay the Sub-Adviser, and the Sub-Adviser agrees to accept as full compensation thereof, a sub-advisory fee at an annual rate of 0.375% of the average daily net assets of the Fund, paid at the same time and in the same manner as the Fund pays the Adviser its advisory fee pursuant to the Advisory Agreement. This fee will be computed daily and paid to the Sub-Adviser monthly. The Sub-Adviser may agree to waive a portion of its fee. Any fee waiver for the Sub-Adviser is voluntary and will be mutually agreed upon with the Adviser. For any month during which this Agreement becomes effective and the month during which it terminates, however, there shall be an appropriate proration of the fee payable for such month based on the number of calendar days of such month during which this Agreement is effective.
7. Services to Others. Adviser understands that the Sub-Adviser now acts, and may in the future act, as an investment adviser to fiduciary and other managed accounts, and as investment adviser, sub-investment adviser, and/or administrator to other investment companies. Adviser has no objection to the Sub-Adviser's acting in such capacities, provided that whenever the Fund and one or more other investment companies advised by the Sub-Adviser have available funds for investment, investments suitable and appropriate for each will be allocated in accordance with a formula believed by the Sub-Adviser to be equitable to each company. In addition, Adviser understands that the persons employe d by the Sub-Adviser to assist in the Sub-Adviser's duties under this Agreement will not devote their full time to such service, and nothing contained in this Agreement will be deemed to limit or restrict the right of the Sub-Adviser or any of its affiliates to engage in and devote time and attention to other businesses or to render services of whatever kind or nature.
8. Standard of Care. The Sub-Adviser shall discharge its duties under this Agreement with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. The federal securities laws impose liabilities under certain circumstances on persons who act in good faith, and therefore nothing herein shall in any way constitute a waiver or limitation of any rights which the Adviser may have against Sub-Adviser under any federal securities laws based on negligence and which cannot be modified in advance by contract.
9. Limitation of Liability. The Sub-Adviser shall not be liable for any error of judgment or mistake of law or for any act or omission in carrying out its duties hereunder, except a loss resulting from willful misfeasance, bad faith, or negligence in the performance of its duties, or by reason of its reckless disregard of its obligations and duties hereunder. Each of the Adviser and Sub-Adviser agrees to indemnify each other and hold each other harmless from and against any and all actions, suits, and claims, whether groundless or otherwise, and from and against any and all losses, damages, costs, charges, reasonable counsel fees and disbursements, payments, expenses, and liabilities (including reasonable investigation expenses) (collectively, "Damages") arising directly or indirectly out of the indemnifying party's willful misfeasance, bad faith, or negligence in the performance of its duties, or by reason of its reckless disregard of its obligations and duties hereunder.
10. Duration and Termination.
(a) This Agreement will become effective as of the date hereof, provided that it is approved by vote of a majority of the outstanding voting securities of the Fund in accordance with the requirements under the 1940 Act, and, unless sooner terminated as provided herein, will continue in effect until June 30, 2011. This Agreement, which shall become effective upon its execution, shall supersede any agreement between the parties having an earlier date.
Thereafter if not terminated, this Agreement will continue in effect for successive periods of twelve (12) months, each ending on the day preceding the anniversary of the Agreement's effective date of each year, provided that such continuation is specifically approved at least annually (x) by the vote of a majority of those members of the Board who are not interested persons (as set forth in the 1940 Act) of First Focus, the Sub-Adviser, or the Adviser, cast in person at a meeting called for the purpose of voting on such approval, and (y) by the vote of a majority of the Board or by the vote of a majority of all votes attributable to the outstanding shares of the Fund (as set forth in the 1940 Act).
(b) Notwithstanding the foregoing, this Agreement may be terminated as to the Fund at any time, without the payment of any penalty, on not more than sixty (60) days' and not less than thirty (30) days' written notice by the Board or the shareholders of the Fund (acting by a vote of at least a majority of the outstanding voting securities (as set forth in the 1940 Act)), the Adviser, or by the Sub-Adviser. This Agreement will immediately terminate in the event of its assignment (as set forth in the 1940 Act).
(c) Notwithstanding the foregoing, this Agreement may also be terminated by Adviser or the Fund: (i) upon a material breach by Sub-Adviser of any of the representations and warranties set forth in Section 15, if such breach shall not have been cured within a twenty (20) day period after notice of such breach, or (ii) if Sub-Adviser becomes unable to discharge its duties and obligations under this Agreement.
(d) Notwithstanding the foregoing, this Agreement may also be terminated by Sub-Adviser upon a material breach by Adviser or its assigns, if such breach shall not have been cured within a twenty (20) day period after notice of such breach.
(e) Notwithstanding the foregoing, this Agreement will terminate automatically if the Advisory Agreement is terminated.
11. Amendment of this Agreement. This Agreement may be amended by the parties only in a written instrument signed by the parties to the Agreement and only if such amendment is specifically approved (a) by a majority of the Board, including a majority of its directors who are not interested persons of the Fund or the Adviser, Sub-Adviser, or any of their respective affiliates (as set forth in the 1940 Act), and (b) if required by applicable law, by the affirmative vote of a majority of the outstanding voting securities of the Fund.
12. Multiple Originals. This Agreement may be executed in two or more counterparts, each of which when so executed shall be deemed to be an original, but such counterparts shall together constitute but one and the same document.
13. Custody. All securities and other assets of the Fund shall be maintained with a custodian designated by the Adviser. Sub-Adviser shall have no responsibility or liability with respect to any custodial function.
14. Adviser Representations and Warranties. The Adviser represents and warrants to Sub-Adviser that (a) the Adviser's entry into this Agreement on behalf of the Fund and the performance of it and the Fund of their respective obligations hereunder has been duly authorized by the Adviser, and to the best of the Adviser's knowledge, by the Fund and First Focus and will not cause the Adviser, to the best of the Adviser's knowledge, the Fund or First Focus to be in violation of the 1940 Act or any other applicable law or regulation, (b) the Adviser is registered as an investment adviser with the SEC under the Advisers Act and is in compliance with all applicable rules and regulations of the SEC pertaining to it s investment advisory activities, (c) to the best of the Adviser's knowledge, First Focus is the legal owner of all of its assets, and (d) the Adviser is empowered to enter into this Agreement without the consent or authority of any other party or, alternatively, has at the date hereof obtained such consents as may be necessary to permit the making of this Agreement.
15. Sub-Adviser Representations and Warranties. The Sub-Adviser represents and warrants to Adviser that it (a) is registered as an investment adviser under the Advisers Act and will continue to be so registered for so long as this Agreement remains in effect, (b) is not prohibited by either the 1940 Act or the Advisers Act from performing the services contemplated by this Agreement, (c) has met, and will continue to meet for so long as this Agreement remains effective, any other applicable federal or state requirements, or the applicable requirements of any regulatory or industry self-regulatory organization necessary to be met in order to perform the services contemplated by this Agreement, including its adoption and implementation of written policies and procedures reasonably designed to prevent violation of the federal securities laws (as that term is used in Rule 38a-1 adopted under the 1940 Act) by the Sub-Adviser and its supervised persons, (d) is empowered to enter into this Agreement without the consent or authority of any other party or, alternatively, has at the date hereof obtained such consents as may be necessary to permit the making of this Agreement, and (e) will immediately notify Adviser of the occurrence of any event that would disqualify it from serving as an investment adviser to an investment company pursuant to Section 9(a) of the 1940 Act or otherwise, and of the
institution of any administrative, regulatory, or judicial proceeding against it that could have a material advise effect upon its ability to fulfill its obligations under this Agreement.
16. Reliance on Proper Instructions. The Sub-Adviser shall be fully protected in acting upon any proper instructions reasonably believed by it in good faith to be genuine and signed or communicated by or on behalf of the Adviser or the Fund, and the Sub-Adviser shall be under no duty to make any investigation or inquiry regarding any proper instructions of the Adviser or the Fund, as the case may be.
17. No Conflict. Unless the Sub-Adviser is otherwise informed in writing, it shall be entitled to assume that any action taken by it under the terms of this Agreement, upon instructions of the Fund or the Adviser consistent with Section 16, is not in conflict or contrary to any provision of any document referred to in Section 2 hereof and may assume that such action is not in conflict with any existing investment limit imposed on the Fund by law, by any such document, or by contract or otherwise.
18.Receipt of Part II of Form ADV. The Adviser acknowledges and agrees on behalf of the Fund that either (i) the Fund has received Part II of the Sub-Adviser's Form ADV at least forty-eight (48) hours prior to execution of this Agreement or (ii) the Fund has received Part II of the Sub-Adviser's Form ADV together with this Agreement and shall have the right to cancel this Agreement, without penalty, within five (5) business days of the execution of this Agreement.
19.Notices. Any notice or other communication required to be given pursuant to this Agreement shall be deemed duly given if delivered personally or by overnight delivery service or mailed by certified or registered mail, return receipt requested and postage prepaid, or sent by facsimile addressed to the parties at their respective addresses set forth below, or at such other address as shall be designated by any party in a written notice to the other party.
Tributary Capital Management, LLC
Attention: Managing Director
1620 Dodge Street
Omaha, NE 68197
First National Bank (Fort Collins)
Attention: First National Fund Advisers
First National Bank Tower
215 West Oak Street, 4th Floor
Fort Collins, CO 80521
20. Miscellaneous. 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. If any provision of this Agreement is held or made invalid by a court decision, statute, rule, or otherwise, the remainder of this Agreement will not be affected thereby. This Agreement will be binding upon and shall inure to the benefit of the parties hereto and will be governed by the laws of the state of Colorado without giving effect to such state's conflicts of laws provisions, and the 1940 Act. To the extent that the applicable laws of the state of Colorado confli ct with the applicable provisions of the 1940 Act, the latter shall control. Sub-Adviser shall notify Adviser of any changes in its members or managers within a reasonable time.
Signature Page Follows
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written.
FIRST NATIONAL BANK (FORT COLLINS)
By: _______________________________
Name: ____________________________
Title: ______________________________
TRIBUTARY CAPITAL MANAGEMENT, LLC
By: _______________________________
Name: ____________________________
Title: ______________________________
APPENDIX DB
Directors
Name, Age and
Address
| Position(s)
held with
Funds | Length of
Time
Served | Principal Occupation(s)
During Past 5 Years
| Number
of
Portfolios
in Fund
Complex
Overseen
by
Director | Other
Directorships
Held by
Director |
Independent Directors |
Robert A. Reed
1620 Dodge Street
Omaha, NE 68102
Age 70
| Director | Since
1994
| President and Chief Executive Officer, Physicians Mutual Insurance Company and Physicians Life Insurance Company (1974 - present). | 8 | None. |
Gary D. Parker
1620 Dodge Street
Omaha, NE 68102
Age 65
| Director | Since
2004
| Retired. | 8 | None. |
John J. McCartney
1620 Dodge Street
Omaha, NE 68102
Age 66
| Director
Nominee
| N/A | Retired. Executive Vice President and Chief Financial Officer, Zurich Insurance Group North America (August 2002 - June 2007); President and Chief Executive Officer, Empire Fire and Marine Insurance Companies (October 1993 - August 2002). | 8 | None. |
Interested Director* |
Michael Summers
1620 Dodge Street
Omaha, NE 68102
Age 45
| Director/
President
| Since
2007
| Chief Financial Officer of First National Nebraska, Inc. (November 2006 - present); Chief Financial Officer, Transgenomic, Inc. (August 2004 - November 2006); General Manager of C&A Industries (February 2003 - August 2004). | 8 | None. |
The following are the experiences, qualifications and skills of each of our Directors which led to the conclusion that they should serve as such.
Gary D. Parker. Until his retirement in 2000, Mr. Parker served for a number of years as Chairman, President and CEO of Lindsay Manufacturing Co., a leading manufacturer of center pivot and lateral move irrigation systems, which is listed on the New York Stock Exchange. In his capacity as Chairman and CEO of a public company, Mr. Parker supervised business and financial matters of that company as a board member and executive responsible to public investors. Mr. Parker’s breadth of managerial and executive leadership in public company corporate governance and public financial reporting are experiences directly applicable to Mr. Parker’s service as an independent director on our Board.
Robert A. Reed. Mr. Reed has served as President and Chief Executive Officer of Physicians Mutual Insurance Company and Physicians Life Insurance Company since 1974. These regulated companies have combined assets of approximately $2.7 billion. In his capacity as CEO, Mr. Reed supervises the investment and financial functions of the two insurance companies. Mr. Reed’s extensive management experience, particularly his oversight responsibility with respect to regulatory matters, in these areas qualifies him to oversee the Funds’ investment advisers and sub-advisers, qualify him to serve as a member of First Focus’ Audit Committee and as an independent director on our Board.
|
John J. McCartney. Mr. McCartney was Executive Vice President and Chief Financial Officer of Zurich Insurance Group North America, a part of Zurich Financial Services, a global insurance-based financial services provider. During Mr. McCartney's time in this position, this Zurich unit grew from $9 billion to $16 billion in total assets. Mr. McCartney's responsibilities included significant emphasis on financial control, financial reporting, auditing, Sarbanes-Oxley compliance and implementation of a new governance process. With more than 30 years of broad management experience of financial services companies, including oversight of investment portfolios, and his responsibilities for financial controls and Sarbanes-Oxley compliance, demonstrate rele vant experience applicable to his duties in overseeing First Focus’ operations.
Michael Summers. Since 2006, Mr. Summers has been Chief Financial Officer of First National Nebraska, Inc. FNNI has more than $20 billion in managed assets, and more than 6,000 employees in 35 states. Prior to his service with FNNI, Mr. Summers served as Chief Financial Officer of Transgenomic, Inc., a public biotechnology company, from 2004 to November 2006. Mr. Summers’ other career experience includes both operating management and financial managements positions. Mr. Summers is a Certified Public Accountant who began his career as a public accountant. As FNNI is the direct or indirect parent of the Funds’ investment advi ser and one of its proposed sub-advisers, Mr. Summers is an “interested” director, within the meaning of the 1940 Act. Mr. Summers’ management experience at a large regulated financial services institution and at a public company, along with his financial experience and intimate understanding of FNNI, the indirect parent company to the Funds’ adviser, qualify him to serve on the Board and as its Chairman.
|
Officers
Name, Age and
Address
| Position(s)
held with
Funds | Length of
Time
Served | Principal Occupation(s)
During Past 5 Years
| Number
of
Portfolios
in Fund
Complex
Overseen
by
Director | Other
Directorships
Held by
Director |
Current Officers |
Daniel W. Koors
225 West Wacker Drive
Suite 1200
Chicago, Illinois 60606
Age: 39
| Treasurer | Since
December 2009
| Senior Vice President of Jackson National Asset Management (“JNAM”) and Jackson Fund Services (“JFS”), a division of JNAM, (2009 – present); Chief Financial Officer of JNAM and JFS (2007 – present); Vice President, Treasurer and Chief Financial Officer of investment companies advised by JNAM (2006 – present). Formerly, Assistant Vice President – Fund Administration of Jackson National Life Insurance Company (“Jackson”) (2006 – 2009); Vice President of JNAM and JFS (2007 – 2008); Assistant Treasurer of investment companies advised by JNAM (2006); Partner of Deloitte & Touche LLP (2003 – 2006). | N/A | N/A |
Rodney L. Ruehle
4041 North High Street
Suite 402
Columbus, Ohio 43214
Age: 41
| Chief Compliance Officer and Anti-Money Laundering Officer | Since
December 2009
| Director, Beacon Hill Fund Services, Inc. (2008 – present). Formerly, Vice President, CCO Services, Citi Fund Services, Inc. (2004 – 2008); Director, Fund Administration, Citi Fund Services, Inc. (1995 – 2004). | N/A | N/A |
Name, Age and
Address
| Position(s)
held with
Funds | Length of
Time
Served | Principal Occupation(s)
During Past 5 Years
| Number
of
Portfolios
in Fund
Complex
Overseen
by
Director | Other
Directorships
Held by
Director |
Toni M. Bugni
225 West Wacker Drive
Suite 1200
Chicago, Illinois 60606
Age: 36
| Secretary | Since
December 2009
| Director of Compliance of JNAM and JFS (2008 – present). Formerly, Compliance Manager of JNAM and JFS (2006 – 2008); Legal Assistant, MetLife Advisers, LLC (2004 – 2006); Regulatory Administration Senior Specialist, PFPC Inc. (2003 – 2004). | N/A | N/A |
Danielle A. Hernandez
225 West Wacker Drive
Suite 1200
Chicago, Illinois 60606
Age: 29
| Assistant
Secretary
| Since
December 2009
| Senior Compliance Analyst of JNAM and JFS (2009 – present); Anti-Money Laundering Officer of investment companies advised by JNAM (2007 – present). Formerly, Compliance Analyst of JNAM and JFS (2006 – 2009); Administrative Assistant of JNAM and JFS (2005 – 2006); Executive Assistant at the U.S. House of Representatives (2002 – 2005). | N/A | N/A |
Previous Officers | | | | | |
Christopher Sabato
3435 Stelzer Road
Columbus, OH 43219
Age: 40
| Treasurer | November 2008-December 2009 | Senior Vice President, Fund Administration, Citi Fund Services Ohio, Inc. since 2007 and has been employed by Citi Fund Services Ohio, Inc. in various other roles since 1997. | N/A | N/A |
Eric Phipps
3435 Stelzer Road
Columbus, OH 43219
Age: 38
| Chief
Compliance
and AML
Officer
| March 2008-December 2009 | Vice President of Citi Fund Services Ohio, Inc. since 2004 and has been employed by Citi Fund Services Ohio, Inc. in various other roles since 1995. | N/A | N/A |
William Cady
3435 Stelzer Road
Columbus, OH 43219
Age: 34
| Secretary | May 2009-December 2009 | Assistant Vice President of Citi Fund Services Ohio, Inc. (Since 2005); Product Specialist, Deutsche Investment Management Americas, Inc. (February 2004 – August 2005).
| N/A | N/A |
* As defined in the 1940 Act, Mr. Summers is an “interested” director because he is an officer of FNNI, which is the parent company of the current and proposed investment adviser for the Funds.
APPENDIX E
List of 5% Owners in the Fund as of the Record Date
| Portfolio | Record Owner | Number of Shares | Percent of
Outstanding Portfolio
Shares |
| Growth Opportunities Fund | Firnbank Company P.O. Box 3128 Omaha, NE 68103 Penfirn Company P.O. Box 3128 Omaha, NE 68103 | 702,031 4,750,768 | 11.80% 79.88% |
| Core Equity Fund | Firnbank Company P.O. Box 3128 Omaha, NE 68103 Penfirn Company P.O. Box 3128 Omaha, NE 68103 | 4,236,816 8,658,922 | 30.03% 61.37% |
| Short/Intermediate Bond Fund | Firnbank Company P.O. Box 3128 Omaha, NE 68103 Penfirn Company P.O. Box 3128 Omaha, NE 68103 | 2,233,678 5,165,352 | 29.68% 68.95% |
| Small Company Fund | Firnbank Company P.O. Box 3128 Omaha, NE 68103 Penfirn Company P.O. Box 3128 Omaha, NE 68103 | 1,427,687 2,393,669 | 36.53% 61.25% |
| Balanced Fund | Penfirn Company P.O. Box 3128 Omaha, NE 68103 | 2,234,922 | 92.99% |
| Income Fund | Firnbank Company P.O. Box 3128 Omaha, NE 68103 Penfirn Company P.O. Box 3128 Omaha, NE 68103 | 2,153,965 3,872,083 | 35.10% 63.08% |
| International Equity Fund | Penfirn Company P.O. Box 3128 Omaha, NE 68103 | 10,198,379 | 99.72% |
| Large Cap Growth Fund | Penfirn Company P.O. Box 3128 Omaha, NE 68103 | 10,198,379 | 99.88% |
| Portfolio | Record Owner | Number of Shares | Percent of Outstanding Shares |
| Tributary International Equity Fund | Penfirn Company PO Box 3128 Omaha, NE 68103-0128 | 7,679,515 | 74.92% |
| Tributary International Equity Fund | Frontier Trust Co FBO First National of Nebraska Inc. FI 480135 PO Box 10758 Fargo, ND 58106-0758 | 2,093,744 | 20.43% |
APPENDIX FC
INVESTMENT SUB-ADVISORY AGREEMENT
This INVESTMENT SUB-ADVISORY AGREEMENT (this "Agreement") is made and entered this ______ day of _________, 2010,2011, by and between Tributary Capital Management, LLC, a Colorado limited liability company (the "Adviser"), and KBC Asset ManagementKleinwort Benson Investors International Limited,Ltd., an Irish registered company (the "Sub-Adviser").
RECITALS
WHEREAS, the adviser is the investment adviser for the First FocusTributary International Equity Fund, a diversified investment portfolio (the "Fund") of First FocusTributary Funds, Inc. ("First Focus"(the "Company"), an open-end management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, Adviser desires to retain the Sub-Adviser as its agent to furnish certain investment advisory services for the Fund as provided hereunder.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows:
AGREEMENT
1. Appointment. Adviser hereby appoints the Sub-Adviser to provide certain sub-investment advisory services to the Fund in furtherance of the Advisory Agreement for the period and on the terms set forth in this Agreement. The Sub-Adviser accepts such appointment and agrees to furnish the services herein set forth for the compensation herein provided.
2. Delivery of Documents. Adviser has furnished the Sub-Adviser with copies properly certified or authenticated of each of the following:
(a) First Focus'sThe Company's Articles of Incorporation, as filed with the Secretary of State of Nebraska on October 12, 1994, and all amendments thereto or restatements thereof (the "Articles");
(b) First Focus'sThe Company's By-Laws and amendments thereto (the "By-laws");
(c) Resolutions of First Focus'sthe Company's Board of Directors (the "Board") authorizing the appointment of Sub-Adviser and approving this Agreement;
(d) First Focus'sThe Company's Notification of Registration on Form N-8A under the 1940 Act as filed with the Securities and Exchange Commission (the "SEC") and all amendments thereto;
(e) First Focus'sThe Company's Registration Statement on Form N-1A filed with the SEC under the Securities Act of 1933, as amended, and under the 1940 Act and all amendments thereto insofar as such Registration Statement and such amendments relate to the Fund (the "Registration Statement"); and
(f) First Focus'sThe Company's most recent prospectus and Statement of Additional Information for the Fund filed in connection with the Registration Statement (such prospectus and Statement of Additional Information, as presently in effect, and all amendments and supplements thereto are herein collectively called the "Prospectus").
The Adviser will promptly furnish the Sub-Adviser from time to time with copies of all amendments of or supplements to the foregoing.
The Sub-Adviser's authority and discretion hereunder shall include, without limitation, the power to lend any securities held by the Fund to such persons, for such purposes and upon such terms and conditions as the Sub-Adviser may deem advisable, provided that any such lending shall be in conformity with the Fund's current investment objective and policies, as stated in its current Prospectus and any guidelines adopted from time to time by the Board.
The Sub-Adviser represents and warrants that it is registered as an investment adviser with the SEC and is in compliance with all applicable rules and regulations of the SEC pertaining to its investment advisory activities, and agrees that it will:
(a) Use the same skill and care in providing such services as it uses in providing services to fiduciary accounts for which it has investment responsibilities;
(b) Place orders pursuant to its investment determinations for the Fund either directly with the issuer or with any broker or dealer. In placing orders with brokers or dealers, the Sub-Adviser will attempt to obtain the best combination of prompt execution of orders in an effective manner and at the most favorable price. Consistent with this obligation and any policies adopted by the Board, and to the extent permitted by the 1940 Act, the Investment Advisers Act of 1940 (the "Advisers Act") and Section 28(e) of the Securities Exchange Act of 1934, when the execution and price offered by two or more brokers or dealers are comparable, the Sub-Adviser may, in its discretion, purchase and sell portfolio securities to and from brokers and dealers who provide the Sub-Adviser with research advice and other services. The Sub-Adviser may pay a commission in excess of the commission another broker-dealer would have charged if the Sub-Adviser determines in good faith that such commission is reasonable in relation to the value of the brokerage and research services provided by such broker-dealer, viewed either in terms of that particular transaction or the Sub-Adviser's overall responsibilities to the accounts it manages. In no instance will portfolio securities be purchased from or sold to Adviser, the Sub-Adviser, Jackson Fund Services or any affiliated person of either First Focus,the Company, Adviser, Jackson Fund Services, or the Sub-Adviser, except as may be permitted under the 1940 Act;
(c) Report regularly to the Adviser and will make appropriate persons available for the purpose of reviewing at reasonable times with representatives of the Adviser and the Board, the management of the Fund, including, without limitation, review of the general investment strategies of the Fund, the performance of the Fund in relation to standard industry indices, interest rate considerations, and general conditions affecting the marketplace and will provide various other reports from time to time as reasonably requested by the Adviser;
(e) Act upon instructions from the Adviser not inconsistent with the fiduciary duties hereunder;
(g) Conduct its activities under this Agreement in accordance with any applicable regulations of any governmental authority pertaining to the investment advisory activities of the Sub-Adviser, including (i) the 1940 Act and the rules adopted by the SEC thereunder, (ii) the Advisers Act and the rules adopted by the SEC thereunder, (iii) the most recent Prospectus, (iv) the Articles and the By-laws, and (v) the policies and procedures adopted by the Board.
The Sub-Adviser shall have the right to execute and deliver, or cause its nominee to execute and deliver, all proxies and notices of meetings and other notices affecting or relating to the securities of the Fund.
pursuant to the Advisory Agreement. This fee will be computed daily and paid to the Sub-Adviser monthly.
(a) This Agreement will become effective as of the date hereof, provided that it is approved by vote of a majority of the outstanding voting securities of the Fund in accordance with the requirements under the 1940 Act, and, unless sooner terminated as provided herein, will continue in effect until June 30, 2011.2012.
(b) Notwithstanding the foregoing, this Agreement may be terminated as to the Fund at any time, without the payment of any penalty, on not more than sixty (60) days' and not less than thirty (30) days' written notice by the Board or the shareholders of the Fund (acting by a vote of at least a majority
of the outstanding voting securities), the Adviser, or by the Sub-Adviser. This Agreement will immediately terminate in the event of its assignment (as set forth in the 1940 Act).
(c) Notwithstanding the foregoing, this Agreement will terminate automatically if the Advisory Agreement is terminated.
(d) Notwithstanding the foregoing, this Agreement also may be terminated by Adviser or the Fund: (i) upon a material breach by Sub-Adviser of any of the representations and warranties set forth in Section 15, if such breach shall not have been cured within a twenty (20) day period after notice of such breach, or (ii) if Sub-Adviser becomes unable to discharge its duties and obligations under this Agreement.
(e) Notwithstanding the foregoing, this Agreement may also be terminated by Sub-Adviser upon a material breach by Adviser or its assigns, if such breach shall not have been cured within a twenty (20) day period after notice of such breach.
investment adviser to an investment company pursuant to Section 9(a) of the 1940 Act or otherwise, and of the institution of any administrative, regulatory, or judicial proceeding against it that could have a material advise effect upon its ability to fulfill its obligations under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written.
