SCHEDULE 14C INFORMATION
Information Statement Pursuant To Section 14(c)
of the Securities Exchange Act 1934
| Check the appropriate box: | ||||
| ¨ | Preliminary Information Statement | |||
| ¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14c-5(d)(2)) | |||
| þ | Definitive Information Statement | |||
Pacific Life Funds
| ||||
| (Name of Registrant as Specified In Its Charter) | ||||
| Payment of Filing Fee (Check the appropriate box): | ||||
| þ | Fee not required. | |||
| ¨ | Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11. | |||
| (1) | Title of each class of securities to which transaction applies:
| |||
| ||||
| (2) | Aggregate number of securities to which transaction applies:
| |||
| ||||
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
| |||
| ||||
| (4) | Proposed maximum aggregate value of transaction:
| |||
| ||||
| (5) | Total fee paid:
| |||
| ||||
| ¨ | Fee paid previously with preliminary materials. | |||
| ¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
| (1) | Amount Previously Paid:
| |||
| ||||
| (2) | Form, Schedule or Registration Statement No.:
| |||
| ||||
| (3) | Filing Party:
| |||
| ||||
| (4) | Date Filed:
| |||
| ||||
PACIFIC LIFE FUNDS
PL FLOATING RATE LOAN AND PL GLOBAL ABSOLUTE RETURN FUNDS
INFORMATION STATEMENT DATED SEPTEMBER 13, 2013
This document (“Information Statement”) provides information concerning a new fund manager and a new fund management agreement for the PL Floating Rate Loan and PL Global Absolute Return Funds and is being sent on or about September 13, 2013 to the shareholders of record as of August 30, 2013.
We are not asking you for a proxy and you are requested not to send us a proxy.
I. Introduction and Background
The Pacific Life Funds (the “Trust”) Board of Trustees (the “Board” or “Trustees”) approved a change in fund manager and a new fund management agreement with respect to the PL Floating Rate Loan and PL Global Absolute Return Funds (the “Funds”), effective August 1, 2013. Information concerning this change in fund manager is included in a supplement to the Trust’s prospectus dated May 1, 2013, as supplemented. Under the Investment Company Act of 1940, as amended (the “1940 Act”), a change in fund manager requires shareholder approval of a new fund management agreement; however, pursuant to an exemptive order issued to Pacific Life Insurance Company (“Pacific Life”) by the Securities and Exchange Commission (“SEC”) on October 13, 1999 and relied upon by the Trust and Pacific Life Fund Advisors LLC (“PLFA” or “Adviser”), in accordance with the terms of the exemptive order, PLFA and the Trust can hire, terminate, and replace, as applicable, fund managers and enter into new fund management agreements (except, as a general matter, fund managers affiliated with PLFA) without shareholder approval. The additional information provided herein concerning the fund manager change is being provided pursuant to the requirements of the exemptive order.
At an in-person board meeting on June 19, 2013, based upon a recommendation from PLFA, the Board, including all of the Independent Trustees, approved, effective August 1, 2013, the transfer of the Fund Management Agreement with Eaton Vance Management (“EVM”) to Boston Management and Research (“BMR”), a wholly-owned subsidiary of EVM with respect to the PL Floating Rate Loan and PL Global Absolute Return Funds (the “BMR Fund Management Agreement”) and appointed BMR as the Fund Manager for these Funds. BMR’s appointment as the new Fund Manager and the Board’s approval of the BMR Fund Management Agreement were made in accordance with the exemptive order issued by the SEC with regard to the Trust and does not require shareholder approval.
II. Board Consideration of the New Fund Management Agreement
In evaluating the BMR Fund Management Agreement, the Board, including the Independent Trustees, considered the factors described below. Additionally, the Trustees considered that BMR is a wholly-owned subsidiary of the Funds’ previous fund manager, EVM, that the terms of the BMR Fund Management Agreement were substantially the same as the fund management agreement with EVM, that BMR shares the same personnel, senior management, operations, compliance program and chief compliance officer with EVM, that BMR would provide the same general sub-advisory services to the Funds as have been provided by EVM, and that PLFA recommended that BMR serve as the new Fund Manager to the Funds.
In evaluating the BMR Fund Management Agreement, the Board, including all the Independent Trustees, considered the following factors, among others:
A. Nature, Extent and Quality of Services to be Provided
The Trustees considered that Eaton Vance, the prior Fund Manager of the Funds, had proposed that BMR, a wholly-owned subsidiary of Eaton Vance, replace Eaton Vance as the Fund Manager of the Funds. The Trustees considered the benefits to shareholders of retaining BMR as the Fund Manager, particularly in light of the nature, extent, and quality of the services to be provided to the PL Global Absolute Return and PL Floating Rate Loan Funds. Under the BMR Fund Management Agreement, BMR would be responsible for providing investment management services, including investment research, advice and supervision, and determining which securities would be purchased or sold by the Funds.
1
The Trustees considered the quality of the management services expected to be provided to each Fund over both the short- and long-term, the organizational depth and resources of BMR, including the background and experience of the Fund Manager’s management, representations from BMR that no significant changes were anticipated in the fund management services currently provided to each Fund, and that the same fund management team would continue to manage each Fund. The Trustees also considered that although BMR is assuming all of the fund management duties, Eaton Vance and its parent company have agreed to guarantee BMR’s obligation to perform all of its duties and obligations under the BMR Fund Management Agreement.
In making these assessments, the Board was aided by the assessments and recommendations of PLFA and the materials provided by BMR, including copies of BMR’s Form ADV; financial information relating to BMR; and other information deemed relevant to the Trustees’ evaluation. The Trustees considered that BMR is a firm with sufficient size, market presence and resources to properly manage each Fund.
In addition, the Board considered that the Trust’s Chief Compliance Officer (“CCO”) had reviewed the written compliance policies and procedures of BMR, including the assessment of its compliance program as required under Rule 38a-1 of the 1940 Act and its code of ethics, prior to the effectiveness of the new BMR Fund Management Agreement.
The Board concluded it was satisfied with the nature, extent and quality of the management services anticipated to be provided to each Fund by BMR under the BMR Fund Management Agreement.
B. Performance
The Trustees considered information about the historical performance of the Funds against similar funds managed by investment management teams that will continue to manage the Funds. With respect to the PL Global Absolute Return Fund, the Trustees considered information about the historical performance of the Fund against a pertinent benchmark and a composite of similarly managed accounts as of March 31, 2013, noting that the Fund had commenced operations on December 10, 2012. The Trustees also considered that they had previously reviewed the historical performance of accounts managed by the PL Global Absolute Return Fund’s investment management team at their meeting on September 11, 2012, in addition to regular quarterly review of investment performance of the Fund. With respect to the PL Floating Rate Loan Fund, the Trustees considered the historical performance of the Fund against a pertinent benchmark and similar funds for the year-to-date, one-, three-, five-, and ten-year periods, as applicable, as of March 31, 2013. The Trustees also considered that they had previously reviewed the historical performance of the PL Floating Rate Loan Fund at their meeting on December 12, 2012, in addition to regular quarterly review of investment performance of the Fund.
C. Fund Management Fee
The Trustees considered that each Fund’s sub-advisory fee schedule would remain the same following the change in Fund Manager. The Trustees noted that they had reviewed the investment advisory fees paid by the PL Global Absolute Return Fund at their meeting on September 11, 2012, and that they had reviewed the investment advisory fees paid by the PL Floating Rate Loan Fund at their meeting on December 12, 2012.
D. Costs, Level of Profits and Economies of Scale
The Trustees reviewed information regarding the costs to BMR of managing each Fund and the profitability of the BMR Fund Management Agreement to BMR to the extent practicable based on the financial information provided by BMR. The Trustees focused their consideration on other information provided in connection with this matter, given the arms’-length nature of the relationship between PLFA and BMR, the fact that each Fund’s sub-advisory fee schedule would remain the same, and the fact that such fees are paid by PLFA. The Board concluded that each Fund’s fee structure reflected in the BMR Fund Management Agreement is fair and reasonable.
2
E. Ancillary Benefits
The Trustees received information from PLFA concerning other benefits that may be received by BMR and its affiliates as a result of their relationship with each Fund, including commissions that may be paid to broker-dealers affiliated with BMR and the anticipated use of soft dollars by BMR. In this regard, the Trustees noted that BMR represented that it does not anticipate utilizing affiliates for brokerage transactions and that although BMR uses soft dollars, it does not anticipate utilizing soft dollar credits for the Funds. The Trustees also considered that BMR may benefit from its relationship with the Funds as a result of the inclusion of assets and performance records in composites used by BMR to demonstrate expertise in each Fund’s strategy, and that such benefit is consistent with those generally derived by fund managers to mutual funds and is not otherwise unusual.
F. Conclusion
Based on their review, including the consideration of each of the factors referred to above, the Board found that: (i) the BMR Fund Management Agreement is in the best interests of each Fund and its shareholders; and (ii) the compensation payable under the BMR Fund Management Agreement is fair and reasonable. No single factor was determinative of the Board’s findings, but rather the Trustees based their determination on the total mix of information available to them.
III. The New Fund Management Agreement
The BMR Fund Management Agreement is substantially similar to the fund management agreement with the prior fund manager, EVM. BMR will, subject to the supervision of the Adviser, provide a continuous investment program for the Funds and determine the composition of the assets of the Funds, including the evaluation, investment, purchases and/or sales and reinvestment of the Funds’ assets in accordance with its investment goal, strategies, policies and restrictions. BMR bears all expenses incurred by it and its staff with respect to all activities in connection with the performance of the Fund Manager’s services provided under the BMR Fund Management Agreement. The Funds are responsible for their own expenses including, but not limited to, investment advisory fees, administration fees, custody fees, brokerage and transaction expenses, fees for pricing services, registration fees and costs of regulatory compliance, and fees for professional services, including legal and auditing services. Except as may otherwise be required by the 1940 Act, other applicable laws, applicable regulations or other provisions of the BMR Fund Management Agreement, BMR is not subject to any liability for, nor subject to any damages, expenses or losses in connection with, any act or omission connected with or arising out of any services rendered under the BMR Fund Management Agreement, except by reason of willful misfeasance, bad faith, or gross negligence in the performance of its duties under the BMR Fund Management Agreement or by reason of BMR’s reckless disregard of its obligations and duties under the BMR Fund Management Agreement or by breach of any provision of the BMR Fund Management Agreement, including breach of any representation, warranty or undertaking. The BMR Fund Management Agreement will continue in effect from year to year, subject to approval annually by the Board or by the shareholders of the Funds and also, in either event, approval of a majority of the Independent Trustees. The BMR Fund Management Agreement may be terminated without penalty at any time by any of the parties upon 60 days’ prior written notice to the other parties.
There was no change to the advisory fee rate paid by the PL Floating Rate Loan and PL Global Absolute Return Funds to the Adviser in connection with the fund manager change. Also, there was no change to the sub-advisory fee rate paid by the Adviser to the new fund manager in connection with the fund manager change. The current sub-advisory fee rates for the Funds are referenced below:
Current Fee Schedules
PL Global Absolute Return Fund | PL Floating Rate Loan Fund | |
0.500% on first $3 billion; and 0.480% in excess of $3 billion | 0.30% of average daily net assets |
The sub-advisory fees paid by the Adviser to the prior fund manager, EVM, were paid through July 31, 2013, pursuant to a fund management agreement dated July 1, 2010, as amended. For the period April 1, 2012 through March 31, 2013, each fund’s sub-advisory management fees paid or owed by the Adviser to the prior fund manager totaled $314,141 for the PL Floating Rate Loan Fund and $254,495 for the PL Global Absolute Return Fund. For the Trust’s fiscal year ended March 31, 2013, the Funds did not pay any brokerage commissions to an affiliated broker of BMR.
3
IV. Information Regarding BMR
BMR, doing business as Eaton Vance Investment Managers, is a registered investment adviser and has been managing assets since 1924. EVM, the Funds’ previous fund manager, is the majority owner of BMR. EVM is a wholly-owned subsidiary of Eaton Vance Corp. Eaton Vance, Inc., a Massachusetts corporation, is the sole trustee of EVM. Eaton Vance, Inc. is 100% owned by Eaton Vance Corp. As of June 30, 2013, BMR’s (including its affiliates) total assets under management were $260.6 billion. BMR, EVM and Eaton Vance Investment Managers’ business address is Two International Place, Boston, Massachusetts 02110.
BMR acts as investment adviser to the following registered investment companies, which have similar objectives to the Funds.
Comparative Funds to the PL Floating Rate Loan Fund (As of June 30, 2013)
Fund Name | Net Assets | Compensation Rate | Waived/ | |||
Eaton Vance Floating-Rate Portfolio | $12 billion | 0.5750% up to $1 billion; 0.5250% on $1 billion but less than $2 billion; 0.5000% on $2 billion but less than $5 billion; 0.4800% on $5 billion but less than $10 billion; 0.4500% on $10 billion but less than $15 billion; 0.4375% on $15 billion but less than $20 billion; 0.4275% on $20 billion but less than $25 billion; and 0.4200% on $25 billion and over | No | |||
Eaton Vance Variable Trust Floating Rate Fund | $508 million | 0.575% up to $1 billion; 0.525% on $1 billion up to $2 billion; 0.500% on $2 billion up to $5 billion; and 0.480% on $5 billion and over | No | |||
Columbia Variable Portfolio—Eaton Vance Floating-Rate Income Fund | $819 million | 0.30% of average daily net assets | No | |||
Met/Eaton Vance Floating Rate Portfolio | $887 million | 0.30% of average daily net assets | No |
Comparative Funds to the PL Global Absolute Return Fund (As of June 30, 2013)
Fund Name | Net Assets | Compensation Rate | Waived/ | |||
Global Macro Absolute Return Advantage Fund | $1.26 billion | 0.97% of average daily net assets | No | |||
Curian/Eaton Vance Global Macro Absolute Return Advantage Fund | $544 million | 0.55% on all assets up to $1 billion; and 0.50% on all assets over $1 billion | No | |||
Columbia Active Portfolio Multi-Manager Alternative Strategies Fund | $149 million | 0.60% of average daily net assets | No | |||
Columbia Variable Portfolio—Eaton Vance Global Macro Advantage Fund | $341 million | 0.60% of average daily net assets | No |
4
As of June 30, 2013, BMR’s principal executive officers are:
Principal Executive Officers1 | Principal Occupation | |
Thomas E. Faust Jr., CFA2 | Chairman, Chief Executive Officer | |
Duncan W. Richardson, CFA2 | Executive Vice President, Chief Equity Investment Officer | |
Jeffrey P. Beale | Chief Administrative Officer | |
Laurie Hylton | Chief Financial Officer | |
Payson Swaffield, CFA | Chief Income Investment Officer | |
Cynthia J. Clemson | Co-Director, Municipal Bonds | |
Michael R. Mach, CFA | Portfolio Manager, Equity Investments | |
Maureen Gemma | Chief Legal Officer, Eaton Vance Funds | |
Frederick Marius | Chief Legal Officer, Eaton Vance Corporation |
| 1 The business address for each individual with respect to the individual’s position at BMR is Two International Place, Boston, Massachusetts 02110. 2 Beneficially owns 10% or more of the outstanding securities of BMR. |
No officer or Trustee of the Trust is an officer, director or shareholder of BMR (including its affiliates).
Additional Information
Additional information about BMR is available in Pacific Life Funds’ Statement of Additional Information, as supplemented, a copy of which may be obtained by calling the appropriate number set forth below.
******
The Trust’s annual report for the fiscal year ended March 31, 2013 and the Trust’s semi-annual report for the fiscal half-year ended September 30, 2012 were previously sent to shareholders. Both reports are available upon request without charge by contacting Pacific Life Funds by:
| Regular mail: | Pacific Life Funds, P.O. Box 9768, Providence, RI 02940-9768 | |||
| Express mail: | Pacific Life Funds, 4400 Computer Drive, Westborough, MA 01581 | |||
| Telephone: | (800) 722-2333 (select Option 2) | |||
| Website: | www.PacificLife.com/pacificlifefunds.htm | |||
To help reduce expenses, environmental waste and the volume of mail you receive, only one copy of this Information Statement may be sent to shareholders who share the same household address (“Householding”). You may elect to not participate in Householding by contacting the Trust through one of the methods provided above. If you are not currently participating in Householding, you may elect to do so by writing to the Trust.
The Trust’s investment adviser is PLFA, and its administrator is Pacific Life. Both are located at 700 Newport Center Drive, Newport Beach, CA 92660.
The Trust’s distributor is Pacific Select Distributors, Inc., 700 Newport Center Drive, P.O. Box 9000, Newport Beach, CA 92660.
PLEASE RETAIN THIS INFORMATION STATEMENT FOR FUTURE REFERENCE
5