SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Pacific Capital Funds
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(I)(1) 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):
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[ ] 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 CAPITAL FUNDS
NEW ASIA GROWTH FUND
INTERNATIONAL STOCK FUND
SMALL CAP FUND
MID-CAP FUND
GROWTH STOCK FUND
GROWTH AND INCOME FUND
VALUE FUND
DIVERSIFIED FIXED INCOME FUND
TAX-FREE SECURITIES FUND
SHORT INTERMEDIATE U.S. GOVERNMENT SECURITIES FUND
TAX-FREE SHORT INTERMEDIATE SECURITIES FUND
ULTRA SHORT GOVERNMENT FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
1-800-258-9232
May [ ], 2004
Dear Shareholder:
The Board of Trustees has called a special meeting of the shareholders of the
funds named above (each a "Fund" and collectively (the "Funds"), each a series
of Pacific Capital Funds (the "Trust"), to take place on Tuesday, June 1, 2004,
at the offices of the Trust's administrator, BISYS Fund Services Ohio, Inc., 100
Summer Street, Suite 1500, Boston, Massachusetts 02110 at 2:00 p.m., Eastern
Time, or as adjourned from time to time.
The purpose of this meeting is to seek shareholder approval for the following
proposals:
1. To approve a new Sub-Advisory Agreement for the International Stock
Fund with Hansberger Global Investors, Inc. (shareholders of the
International Stock Fund only).
2. To approve a proposal that would permit The Asset Management Group of
Bank of Hawaii, the investment adviser to each Fund, and each Fund to
enter into or materially change agreements with sub-advisers on behalf
of the Fund without obtaining shareholder approval (shareholders of all
Funds).
THE TRUSTEES HAVE UNANIMOUSLY APPROVED THE PROPOSALS
AND RECOMMEND THAT YOU VOTE "FOR" EACH PROPOSAL.
Following this letter is a list of commonly asked questions. If you have any
additional questions, please do not hesitate to contact us by calling
1-800-258-9232.
Respectfully,
William Henry
President
Pacific Capital Funds
WE URGE YOU TO VOTE BY COMPLETING AND RETURNING THE ENCLOSED PROXY CARD
OR BY ATTENDING THE MEETING.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE SIZE OF YOUR SHAREHOLDINGS.
Q. WHO CAN VOTE?
A. Any person owning shares of any of the Funds on April 16, 2004.
Q. WHO VOTES ON WHICH PROPOSALS?
The table below summarizes each proposal to be presented at the special meeting
and shows which shareholders may vote for each proposal.
PROPOSAL WHICH SHAREHOLDERS MAY VOTE
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1. To approve a new Sub-Advisory Agreement for the
International Stock Fund with Hansberger Global Shareholders of the International Stock Fund only
Investors, Inc.
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2. To approve a proposal that would permit The Asset
Management Group of Bank of Hawaii, the investment
adviser to each Fund, and each Fund to enter into or Shareholders of ALL Funds
materially change agreements with sub-advisers on
behalf of the Fund without obtaining shareholder approval.
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Q. WHY SHOULD I BOTHER TO VOTE?
A. Your vote is important. If the Trust does not receive enough votes, it will
have to spend money to mail proxies again or solicit voters by telephone so
that this meeting can take place.
Q. HOW CAN I VOTE?
A. - By mail -- Vote, sign and mail the enclosed ballot in the envelope
provided.
- In person at the meeting.
Q. HOW DO THE BOARD MEMBERS OF THE TRUST RECOMMEND THAT I VOTE?
A. After careful consideration, the Board of Trustees unanimously recommends
that you vote "FOR" each applicable proposal on the enclosed proxy card.
Q. WHAT IF I HAVE ADDITIONAL QUESTIONS?
A. Contact us, by calling 1-800-258-9232. Please note that you cannot cast your
vote by calling this number. To cast your vote, please sign and mail the
enclosed ballot in the envelope provided.
1
PACIFIC CAPITAL FUNDS
NEW ASIA GROWTH FUND
INTERNATIONAL STOCK FUND
SMALL CAP FUND
MID-CAP FUND
GROWTH STOCK FUND
GROWTH AND INCOME FUND
VALUE FUND
DIVERSIFIED FIXED INCOME FUND
TAX-FREE SECURITIES FUND
SHORT INTERMEDIATE U.S. GOVERNMENT SECURITIES FUND
TAX-FREE SHORT INTERMEDIATE SECURITIES FUND
ULTRA SHORT GOVERNMENT FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
1-800-258-9232
NOTICE
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 1, 2004
To the shareholders of Pacific Capital Funds:
Notice is hereby given that the Board of Trustees has called a special meeting
of the shareholders of the funds named above (each a "Fund" and collectively the
"Funds"), each a series of Pacific Capital Funds (the "Trust"), to take place on
June 1, 2004, at the offices of the Trust's administrator, BISYS Fund Services
Ohio, Inc., 100 Summer Street, Suite 1500, Boston, Massachusetts 02110 at 2:00
p.m., Eastern Time, or as adjourned from time to time (the "Meeting"), for the
following purposes:
1. To approve a new Sub-Advisory Agreement for the International
Stock Fund with Hansberger Global Investors, Inc.
(shareholders of the International Stock Fund only).
2. To approve a proposal that would permit The Asset Management
Group of Bank of Hawaii, the investment adviser to each Fund,
and each Fund to enter into or materially change agreements
with sub-advisers on behalf of the Fund without obtaining
shareholder approval (shareholders of all Funds).
3. To transact such other business as may properly come before
the Meeting.
After careful consideration, the Board of Trustees unanimously approved the
proposals above and unanimously recommends that shareholders of each Fund vote
"FOR" each applicable proposal.
The matters referred to above are discussed in detail in the proxy statement
attached to this notice. The Board of Trustees has fixed the close of business
on April 16, 2004 as the record date for determining shareholders entitled to
notice of, and to vote at, the Meeting.
Regardless of whether you plan to attend the Meeting, PLEASE COMPLETE, SIGN,
DATE AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED, SO
THAT YOU WILL BE REPRESENTED AT THE MEETING. If you have returned a proxy card
and are present at the Meeting, you may change the vote specified in the proxy
at that time. However, attendance in person at the Meeting, by itself, will not
revoke a previously tendered proxy.
2
By order of the Board of Trustees,
Ryan M. Louvar
Secretary
May [ ], 2004
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE IS NECESSARY IF THE PROXY
CARD IS MAILED IN THE UNITED STATES.
3
PACIFIC CAPITAL FUNDS
NEW ASIA GROWTH FUND
INTERNATIONAL STOCK FUND
SMALL CAP FUND
MID-CAP FUND
GROWTH STOCK FUND
GROWTH AND INCOME FUND
VALUE FUND
DIVERSIFIED FIXED INCOME FUND
TAX-FREE SECURITIES FUND
SHORT INTERMEDIATE U.S. GOVERNMENT SECURITIES FUND
TAX-FREE SHORT INTERMEDIATE SECURITIES FUND
ULTRA SHORT GOVERNMENT FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
1-800-258-9232
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 1, 2004
This proxy statement and the enclosed form of proxy are being furnished in
connection with the solicitation of proxies by the Board of Trustees (the
"Board") of Pacific Capital Funds (the "Trust") for use at a special meeting of
shareholders of each of the funds listed above (each a "Fund" and collectively
the "Funds"), each a series of the Trust, to be held at 2:00 p.m., Eastern Time,
on June 1, 2004, at the offices of BISYS Fund Services Ohio, Inc., 100 Summer
Street, Suite 1500, Boston, Massachusetts 02110, or as adjourned from time to
time (the "Meeting"). The Board is soliciting proxies from shareholders with
respect to the proposals set forth in the accompanying notice.
The Trust anticipates that the mailing of proxies and proxy statements to
shareholders will begin on or about May [ ], 2004.
SHAREHOLDER REPORTS
Shareholders can find important information about each Fund in the Trust's
annual report dated as of July 31, 2003, which previously has been furnished to
shareholders. Shareholders may request another copy of the annual report and the
semi-annual report for the period ended January 31, 2004 by writing to the Trust
at the above address or by calling the telephone number above. The Trust will
provide copies of the reports free of charge.
4
PROPOSAL 1
APPROVAL OF A NEW SUB-ADVISORY AGREEMENT FOR
THE INTERNATIONAL STOCK FUND
(SHAREHOLDERS OF THE INTERNATIONAL STOCK FUND ONLY)
INTRODUCTION
The Board has terminated the services of Nicholas-Applegate Capital Management
LLC ("NACM" or "Current-Sub-Adviser") as sub-adviser to the International Stock
Fund effective as of June 1, 2004, and is proposing that shareholders of the
International Stock Fund approve a new Sub-Advisory Agreement (the "New
Sub-Advisory Agreement") to be entered into among the Trust, on behalf of the
International Stock Fund, The Asset Management Group of Bank of Hawaii ("AMG")
and Hansberger Global Investors, Inc. ("Hansberger"). AMG currently serves as
the International Stock Fund's investment adviser.
BACKGROUND
After discussions with management of the Trust and personnel of AMG, the Board
of Trustees determined in late 2003 that the long-term performance of NACM on
behalf of the International Stock Fund was not satisfactory, and instructed
management to investigate the desirability of retaining another sub-adviser to
manage the Fund's portfolio. After a thorough review of the matter and the
Trust's options, AMG recommended to the Board that the Current Sub-Advisory
Agreement be terminated and that the Trust enter into the New Sub-Advisory
Agreement with Hansberger. On March 30, 2004, the Board approved the New
Sub-Advisory Agreement for the reasons described below, and called a Meeting to
seek shareholder approval of the proposed new sub-advisory arrangement.
INFORMATION ABOUT HANSBERGER
Hansberger conducts a worldwide portfolio management business that provides a
broad range of portfolio management services to customers in the United States
and abroad. Hansberger currently manages over $5 billion in global,
international and emerging markets equity portfolios on behalf of separate
portfolios and institutional mutual funds. Hansberger is a wholly-owned
subsidiary of the Hansberger Group, Inc. ("Hansberger Group")with its principal
offices at 515 East Las Olas Blvd., Fort Lauderdale, Florida, as well as offices
in Hong Kong, Toronto and Moscow. Hansberger was founded in 1994 and has 50
employees, including 17 investment professionals managing global equities.
PORTFOLIO MANAGEMENT TEAM
Management anticipates that the Fund will be managed by a team of investment
professionals at Hansberger, led by Thomas R. H. Tibbles and Lauretta (Retz)
Reeves.
Thomas R. H. Tibbles joined Hansberger in 1999 as a Senior Vice President.
Before joining Hansberger, he was the Head of the Global Equity Team at Indago
Capital Management in Toronto, an affiliate of Canada Life. From 1993 until
joining Indago in [ ], he served as Vice President, International Equities
for Sun Life Investment Management, managing a portfolio of non-North American
equity securities for pension and mutual fund clients. Mr. Tibbles began his
career in the investment industry in 1986. Mr. Tibbles is a Chartered Financial
Analyst.
Lauretta (Retz) Reeves joined the Hansberger in 1996 and serves as its Chief
Investment Officer, Managing Director--Research Technology, a portfolio manager
and a research analyst. From 1987 to 1996, Ms. Reeves was Senior Vice President
at Templeton Worldwide in the research and portfolio management group. While at
Templeton, Ms. Reeves managed several separate accounts and mutual funds with
over $1 billion dollars of assets. Ms. Reeves is a Chartered Financial Analyst.
5
DIRECTORS AND OFFICERS OF HANSBERGER
Thomas L. Hansberger is Chairman, CEO, President, Chief Investment Officer and
Treasurer of Hansberger. The table names the principal executive officer and
each of the Directors of Hansberger and their principal occupations as follows:
Name Principal Occupation
---- --------------------
Thomas L. Hansberger Chairman, CEO, President, Director and Treasurer of Hansberger
Kimberley A. Scott [Acting President], Senior Vice President, Secretary, Chief Compliance
Officer, Chief Administrative Officer and Director of Hansberger
J. Christopher Jackson Senior Vice President, General Counsel, Assistant
Secretary and Director of Hansberger
Wesley E. Freeman Managing Director - Institutional Marketing and Director of Hansberger
The address of Hansberger, Mr. Hansberger and each of the Directors and Officers
of Hansberger is 515 East Las Olas Boulevard, Fort Lauderdale, Florida 33301.
CHANGE IN INVESTMENT APPROACH AND BENCHMARK INDEX
The Current Sub-Adviser follows a growth-oriented investment approach by using
fundamental qualitative and quantitative analysis of issuers (a bottom-up
approach) to seek international stocks whose earnings it believes are expected
to grow or whose share price it believes is undervalued. The construction of the
portfolio generally parallels the country weightings comprising the Morgan
Stanley Capital International ("MSCI") EAFE Index, the International Stock
Fund's current benchmark index.
Hansberger follows a combination of value and growth international equity
disciplines by using fundamental qualitative and quantitative analysis of
issuers (a bottom-up approach). Hansberger incorporates a risk-control framework
to control industry and regional weightings in identifying international stocks
meeting its disciplined value and growth criteria. This investment approach
attempts to be style neutral and does not attempt to add value through altering
allocations between value and growth styles, with rebalancing occurring
semi-annually or when cash flows permit.
If the New Sub-Advisory Agreement is approved, the International Equity Fund
will also change its benchmark index from the MSCI Europe, Australasia, Far East
("EAFE") Index to the MSCI All Country World Free ("ACWI") Ex-US Index, which
management believes is a more appropriate index in light of the anticipated
investment approach of Hansberger and composition of the Fund's portfolio of
securities. The principal difference between these Indexes is [ ]. A
description of each Index and its performance since inception of the Fund is set
forth below:
AVERAGE ANNUAL TOTAL RETURNS
(FOR PERIODS ENDING DECEMBER 31, 3003)
INCEPTION PAST PAST SINCE
OF THE FUND YEAR 5 YEARS INCEPTION
----------- ---- ------- ---------
MSCI EAFE Index*, *** 11/30/98 39.17% 0.26% 1.03%
MSCI ACWI Ex-US Index**, *** 11/30/98 41.41% 1.55% 2.20%
* The MSCI-EAFE Index is an unmanaged index of issuers in the countries Europe,
Australia and the Far East.
** The MSCI-ACWI Ex-U.S. Index is an unmanaged index of issuers located in
countries throughout the world, representing both developed and emerging
markets, excluding the United States.
*** Reflects no deduction for fees, expenses or taxes.
6
NEW SUB-ADVISORY ARRANGEMENT FOR THE INTERNATIONAL STOCK FUND
A copy of the New Sub-Advisory Agreement, as further described below, is set
forth as Appendix A to this Proxy Statement. The following description of the
New Sub-Advisory Agreement is qualified in its entirety by reference to the full
text of the Agreement as set forth in Appendix A.
The New Sub-Advisory Agreement, which the Trust anticipates will take effect
following shareholder approval on June 1, 2004, requires Hansberger to manage
the investment and reinvestment of the assets of the International Stock Fund,
subject to the supervision of AMG. Under the terms of the New Sub-Advisory
Agreement, Hansberger is authorized to effect portfolio transactions for the
International Stock Fund, using its own discretion and without prior
consultation with AMG. Hansberger is required to report periodically to AMG and
the Board. The New Sub-Advisory Agreement is substantially similar to the
Current Sub-Advisory Agreement, except for additional undertakings by Hansberger
with respect to certain matters related to compliance and the fees payable to
Hansberger.
The fee rate payable to Hansberger under the New Sub-Advisory Agreement is lower
than the fee rate payable to NACM under the Current Sub-Advisory Agreement. The
table below sets forth the sub-advisory fee rates payable to NACM under the
Current Sub-Advisory Agreement and the sub-advisory fee rate payable to
Hansberger under the New Sub-Advisory Agreement. As of March 31, 2004, the net
assets of the International Stock Fund were approximately $71 million.
Sub-Advisory Fee Rate Payable to NACM Sub-Advisory Fee Rate Payable to Hansberger
Under the Current Sub-Advisory Agreement Under the New Sub-Advisory Agreement
(as a percentage of the average daily net assets of the Fund) (as a percentage of the average daily net assets of the Fund)
- ------------------------------------------------------------- -------------------------------------------------------------
0.65% of the first $50 million 0.60% of the first $75 million
0.60% of such assets in excess of $50 million 0.35% of such assets in excess of $75 million
Hansberger will bear all expenses (excluding brokerage costs, custodian fees,
auditors fees or other expenses to be borne by the International Stock Fund or
the Trust) in connection with the performance of its services under the New
Sub-Advisory Agreement. The International Stock Fund will bear certain other
expenses to be incurred in its operation, including, but not limited to,
investment advisory fees and administration fees, fees for necessary
professional and brokerage services, costs relating to local administration of
securities, fees for any pricing service; and pro rata costs associated with
maintaining the Fund's legal existence and shareholder relations. All other
expenses not specifically assumed by Hansberger or by AMG are borne by the
International Stock Fund or the Trust.
The New Sub-Advisory Agreement requires Hansberger to ensure the reasonableness
of all valuations of the International Stock Fund's portfolio securities, to
provide AMG and the Trust's officers with supporting certifications in
connection with filings made by the Trust under the Sarbanes-Oxley Act of 2002,
to vote proxies on behalf of the International Stock Fund, and to notify AMG and
the Trust of any actions or proceedings involving the Trust or Hansberger's
compliance with federal and state securities laws.
The New Sub-Advisory Agreement will continue in effect for two years from its
date of execution and thereafter from year to year if its continuance is
approved at least annually (i) by the Board or by vote of the lesser of (a) 67%
of the shares of the Fund represented at a meeting if holders of more than 50%
of the outstanding shares of the Fund are present in person or by proxy, or (b)
more than 50% of the outstanding shares of the Fund and (ii) by vote of a
majority of the Independent Trustees, cast in person at a meeting called for the
purpose of voting on such approval. Any amendment to the New Sub-Advisory
Agreement must be approved by AMG and Hansberger and, if required by law, by
vote of a majority of the outstanding voting securities of the Fund and by a
majority of the Independent Trustees, cast in person at a meeting called for the
purpose of voting on such approval. The New Sub-Advisory Agreement may be
terminated without penalty, upon 60 days' notice, by the Board of Trustees or by
vote of the lesser of (a) 67% of the shares of the Fund represented at a meeting
if holders of more than 50% of the outstanding shares of the Fund are present in
person or by proxy, or (b) more than 50% of the outstanding shares of the Fund,
and will terminate automatically in the event of its "assignment," as defined in
the 1940 Act.
7
The New Sub-Advisory Agreement provides that Hansberger shall not be subject to
any liability in connection with the performance of its services thereunder in
the absence of bad faith, willful misconduct, gross negligence or reckless
disregard of its obligations and duties.
BEST EXECUTION
The New Sub-Advisory Agreement recognizes that, from time to time, Hansberger
may receive brokerage and research services from brokers that execute securities
transactions for the International Stock Fund. The commissions to be paid by the
International Stock Fund to a broker that provides such services to Hansberger
may be greater than the commissions would be if Hansberger used a broker that
did not provide the same level of brokerage and research services. In accordance
with law, to pay any such commission Hansberger must determine in good faith
that such commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or Hansberger's overall responsibilities to the
Fund. Additionally, Hansberger may use such services for clients other than the
International Stock Fund over which Hansberger or any of its affiliates
exercises investment discretion.
Investment advisers, including Hansberger, have a fiduciary duty to achieve best
execution for every trade. In order to determine best execution, the SEC has
stated that "a money manager should consider the full range and quality of a
broker's services in placing brokerage including, among other things, the value
of research provided as well as execution capability, commission rate, financial
responsibility and responsiveness to the money manager." Hansberger has adopted
a best execution guide (the "Guide") that details certain of its procedures
designed to seek to ensure that it is seeking to achieve the most favorable
execution terms reasonably available given the specific circumstances of each
trade. The Guide provides that, when selecting a broker, Hansberger's traders
must consider qualitative as well as quantitative factors, including, but not
limited to, the size of the order, the trading characteristics of the stock, the
competitiveness of commission rates and spreads, the clearance and settlement
capabilities of the broker, the ability of the broker to accommodate
Hansberger's research and soft dollar obligations, the promptness of execution,
the broker's access to markets, the broker's recent activity in the stock and
the broker's integrity. After a trade is executed, its price is recorded and
then reviewed. In addition, Hansberger has established a best execution
committee that meets quarterly to discuss, among other matters, trade execution
quality.
RESTRUCTURING COSTS
The Trust has retained BNY Global Transition Management ("BNY Global"), a
division of BNY Brokerage, a leading institutional brokerage firm and a wholly
owned subsidiary of The Bank of New York, to coordinate portfolio restructuring
in relation to transitioning the sub-advisory arrangements. Restructuring costs
consist primarily of brokerage fees, dealer spreads or markups and market impact
costs related to purchasing and selling securities for the International Stock
Fund. In February 2004, BNY Global, based on the proposed investment strategy of
Hansberger for the International Stock Fund, reviewed the existing portfolio
holdings of the International Stock Fund to determine what holdings it would
expect to purchase and sell in order to conform the International Stock Fund's
portfolio to Hansberger's judgment as to stock selection. Hansberger expects to
sell approximately 75% of the dollar value of the International Stock Fund's
existing portfolio. Based on BNY Global's review, transaction costs were
estimated at $333,000, of which $108,000 represents bid-ask spreads, $108,000
represents commissions, fees and taxes, and $117,000 represents market impact
costs. The foregoing is subject to market conditions at the time of the
transition of the management of the International Stock Fund to Hansberger. The
International Stock Fund will bear all of the costs of any portfolio
transactions that result from the restructuring.
CONSIDERATION OF NEW SUB-ADVISORY AGREEMENT BY THE BOARD
On March 30, 2004, the Board met in person at a meeting called for the purpose
of considering, among other things, the New Sub-Advisory Agreement. At the
meeting, the Board approved the New Sub-Advisory Agreement subject to
shareholder approval. Representatives of AMG and Hansberger met in person or
telephonically with the Board (including all of those Trustees (the "Independent
Trustees") who are not "interested persons" of the Trust as that term is defined
in Section 2(a)(19) of the Investment Company Act of 1940, as amended (the "1940
Act"), and described the general terms of the New Sub-Advisory Agreement, the
anticipated benefits for the International Stock Fund and Hansberger's proposed
fees and services to the International Stock Fund.
8
In deciding to approve the appointment of Hansberger as sub-adviser to the
International Stock Fund under the New Sub-Advisory Agreement, the Trustees
considered a wide range of information of the type they regularly consider when
determining whether to approve a sub-advisory agreement. The Trustees considered
information about, among other things:
- Hansberger's method of operation and investment philosophy;
- Hansberger and its personnel (including particularly those
personnel with the responsibilities for providing services to the
Fund), resources, financial condition and investment process;
- the terms of the New Sub-Advisory Agreement;
- Hansberger's experience and past performance in managing
international equities;
- the total expense ratios of the International Stock Fund and
of similar funds managed by other advisers;
- the financial statements of Hansberger Group and its
affiliates and estimated profitability to Hansberger from managing the
International Stock Fund;
- Hansberger's general compliance procedures and policies,
including its amended code of ethics adopted pursuant to Rule 17j-1
under the 1940 Act;
- Hansberger's practices regarding the selection and
compensation of brokers and dealers that execute portfolio transactions
for the Funds, and the brokers' and dealers' provision of brokerage and
research services to the Adviser; and
- Hansberger's proxy voting policies and procedures.
In evaluating the New Sub-Advisory Agreement, the Board also considered, among
other matters, that the New and Current Sub-Advisory Agreements, including the
terms relating to the services to be provided thereunder, are substantially
identical except for certain terms and conditions as generally described above.
The Board concluded that the lower fee payable to Hansberger for its
sub-advisory services would benefit the International Stock Fund's shareholders.
The Board further determined that the resources and investment expertise of the
Hansberger professionals in managing international equities could benefit the
International Stock Fund's shareholders, and that Hansberger's proposed
investment approach and philosophy could potentially enhance the International
Stock Fund's performance.
After carefully evaluating the foregoing materials and such other factors as
they deemed relevant, the Board, including the Independent Trustees, approved
the submission of the New Sub-Advisory Agreement for approval by the
International Stock Fund's shareholders.
ANTICIPATED EFFECTIVE DATE
If the International Stock Fund's shareholders approve the New Sub-Advisory
Agreement, the Trust expects the Agreement will become effective as of June 1,
2004 (or as soon thereafter as possible), will continue initially for a two-year
period and will continue in effect for successive annual periods thereafter, in
accordance with the terms and conditions described above.
If shareholders fail to approve the New Sub-Advisory Agreement or the Meeting is
otherwise adjourned on June 1, 2004 until a later date, the Board will consider
what alternatives may be most appropriate for the International Stock Fund and
its shareholders, including resubmitting the New Sub-Advisory Agreement for
shareholder approval. For instance, AMG and the Trust, on behalf of the
International Stock Fund, may enter into an interim sub-advisory agreement
("Interim Agreement") with Hansberger or another appropriate sub-adviser,
pursuant to Rule 15a-4 under the 1940 Act, which would take effect on or around
June 1, 2004. This Interim Agreement would be in substantially the form set
forth in Appendix A but also would include certain provisions required by Rule
15a-4 (such as a
9
maximum term of 150 days, a provision that the Board of the Trust or of the
sub-adviser or a majority of the Fund's shareholders may terminate the Interim
Agreement at any time without penalty on not more than 10 days' written notice,
and a provision that the compensation earned by the sub-adviser thereunder will
be held in an interest-bearing escrow account until shareholder approval of a
new sub-advisory agreement is obtained, after which the amount in the escrow
account (together with any interest) will be paid to the sub-adviser). Under
such circumstances, if the International Stock Fund has not received the
requisite shareholder approval for a new sub-advisory agreement within 150 days
after entering into the Interim Agreement, the Board would consider other
appropriate arrangements subject to approval in accordance with the 1940 Act.
THE BOARD OF TRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS
APPROVE THIS PROPOSAL.
10
PROPOSAL 2
APPROVAL TO ENTER INTO AND MATERIALLY AMEND
AGREEMENTS WITH SUB-ADVISERS ON BEHALF OF A FUND
WITHOUT OBTAINING SHAREHOLDER APPROVAL
(SHAREHOLDERS OF ALL FUNDS)
INTRODUCTION
At a meeting of the Board held on March 30, 2004, the Board approved a proposal
to permit the Trust and AMG, in its capacity as each Fund's investment adviser,
to enter into, and materially amend, sub-advisory agreements with each of the
sub-advisers as retained by AMG and the Trust to manage the Funds without
obtaining shareholder approval, if they conclude that such arrangements would be
in the best interests of the Fund's shareholders. This advisory structure is
referred to as a "multi-manager arrangement." Submission of this proposal will
be required under the terms of an order (the "Proposed Order") that the Trust
expects to receive from the SEC in the near future and the terms of a proposed
SEC rule (the "Proposed Rule") on the subject. The Proposed Order or the
Proposed Rule would grant exemptive relief from the provisions of the 1940 Act
and its rules, as discussed below.
The Board recommends that shareholders of each Fund approve this proposal.
Approval by the Board, including a majority of the Independent Trustees, will
continue to be required before entering into a new sub-advisory agreement with
respect to any Fund and amending an existing sub-advisory agreement with respect
to any Fund. However, if shareholders approve this proposal, a shareholder vote
will not be required to approve sub-advisory agreements and material changes to
them, and the shareholders of the Funds will to some extent be giving up their
control of the Funds' operations.
HOW A MULTI-MANAGER ARRANGEMENT WOULD BENEFIT THE FUNDS
The Board believes that it is appropriate and in the best interests of each
Fund's shareholders to provide AMG and the Board with maximum flexibility to
recommend, supervise and evaluate sub-advisers without incurring the unnecessary
delay or expense of obtaining shareholder approval. This process will allow each
Fund to operate more efficiently. Currently, to appoint a sub-adviser or to
materially amend a sub-advisory agreement, the Trust must call and hold a
shareholder meeting of each affected Fund, create and distribute proxy
materials, and solicit proxy votes from the Fund's shareholders. Further, if a
sub-adviser is acquired, the Trust currently must seek approval of a new
sub-advisory agreement from shareholders of the affected Funds, even where there
will be no change in the persons managing the Funds. This process is
time-consuming and costly, and the costs are generally borne entirely by the
respective Fund with a consequent reduction in shareholder investment return.
Without the delay inherent in holding a shareholder meeting, AMG and the Board
would be able to act more quickly and with less expense to appoint a sub-adviser
when the Board and AMG believe that the appointment would benefit a Fund.
In its capacity as investment adviser to each Fund, AMG currently oversees and
monitors the performance of each Fund's sub-adviser. AMG is also responsible for
determining whether to recommend to the Board that a particular sub-advisory
agreement be entered into or terminated. A determination of whether to recommend
the termination of a sub-advisory agreement depends on a number of factors,
including, but not limited to, the sub-adviser's performance record while
managing a Fund.
By investing in a Fund, shareholders in effect hire AMG to manage that Fund's
assets directly or to hire an external sub-adviser under AMG's supervision.
Accordingly, the Board believes that shareholders expect that AMG and the Board
will take responsibility for overseeing each Fund's sub-advisers and for
recommending their hiring, termination and replacement. Thus, in light of the
contractual arrangements under which AMG has been engaged as an investment
adviser, and in light of AMG's experience in recommending and monitoring
sub-advisers, the Board believes that it is appropriate to allow the
recommendation, supervision and evaluation of sub-advisers to be conducted by
AMG. If this proposal is approved, the shareholders will have less control over
the Funds. However, the Board also believes that this approach would be
consistent with shareholder's expectations that AMG will use its expertise to
recommend to the Board qualified candidates to serve as sub-advisers.
11
The Board will continue to oversee the sub-advisory selection and engagement
process. The Board, including a majority of the Independent Trustees, will
continue to evaluate and consider for approval all new or amended sub-advisory
agreements. In addition, under the 1940 Act and the terms of the sub-advisory
agreements, the Board, including a majority of the Independent Trustees, is
required to annually review and consider for renewal each of these agreements
after an initial term. Upon entering into, renewing or amending a sub-advisory
agreement, AMG and the sub-adviser have a legal duty to provide to the Board
information on pertinent factors.
Shareholder approval of this proposal will not result in an increase or decrease
in the total amount of investment advisory fees paid by the Funds to AMG. When
engaging sub-advisers and entering into and amending sub-advisory agreements,
AMG has negotiated and will continue to negotiate fees with these sub-advisers.
The fees paid to AMG and any sub-adviser by the Funds are considered by the
Board in approving and renewing the advisory and sub-advisory agreements. Any
increase in the total fees paid by a Fund to AMG and any sub-advisers to the
Fund in excess of the total previously approved by shareholders would continue
to require shareholder approval. In any event, if shareholders approve this
proposal, AMG, pursuant to each Fund's investment advisory agreement and other
agreements, will continue to provide the same level of management and
administrative services to the Funds as it is currently providing.
THE TERMS OF THE PROPOSED SEC ORDER AND THE PROPOSED RULE
On May 29, 2003, the Trust and AMG filed an application with the SEC requesting
an order for relief from the provisions of Section 15(a) of the 1940 Act and
Rule 18f-2 thereunder. These provisions of the 1940 Act require that
shareholders approve advisory agreements, including the sub-advisory agreements
on behalf of a Fund, and any material amendments to such agreements. While there
can be no assurance, the Trust and AMG expect that the Proposed Order will be
issued by the SEC. On October 23, 2003, the SEC issued the Proposed Rule with
respect to certain sub-advisory contracts that would grant relief similar to the
relief that would be provided by the Proposed Order. If the Proposed Rule is
adopted, the Funds and AMG anticipate relying on its terms and conditions, which
is currently a condition of the Proposed Order. Thus, if shareholders approve
this proposal, AMG and the Trust would be authorized to evaluate, select and
retain new sub-advisers for the Funds, or materially amend an existing
sub-advisory agreement, without obtaining further approval of the affected
Fund's shareholders.
Under the terms of either the Proposed Order or Proposed Rule, the Trust and AMG
will continue to be subject to several conditions imposed by the SEC. For
instance, as requested in this proposal, shareholder approval is required before
AMG and the Trust may implement the arrangement described above permitting them
to enter into and materially amend sub-advisory agreements. Furthermore, within
90 days of a change to a Fund's sub-advisory agreement, the Trust must provide
the affected Fund's shareholders with an information statement that contains
information about the sub-adviser, the sub-advisory agreement, and the
sub-advisory fee. Another condition will require that a majority of the Board
consist of Independent Trustees and that the nomination of new or additional
Independent Trustees be at the discretion of the then existing Independent
Trustees. Any order issued by the Commission or any final rule, however, may
differ from the general terms and conditions described above.
Another condition of the Proposed Order and Proposed Rule is that shareholder
approval will still need to be obtained of a sub-advisory agreement with a
sub-adviser that is an "affiliated person," as defined in Section 2(a)(3) of the
1940 Act, of the Trust or of AMG ("Affiliated Subadviser"). However, the Funds
and AMG may in the future seek SEC exemptive relief (or rely on relief obtained
by an affiliate or on any further SEC rule), which would permit AMG and the
Trust to enter into new, or to materially amend, sub-advisory agreements with
affiliated sub-advisers without obtaining shareholder approval. An affiliate of
AMG, Bankoh Investment Partners LLC ("Bankoh"), currently provides investment
sub-advisory services to the Mid-Cap Fund. By approving this proposal,
shareholders are also approving the application of the multi-manager arrangement
to any affiliated sub-adviser of AMG, subject to necessary regulatory relief.
THE BOARD OF TRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS
APPROVE THIS PROPOSAL.
12
OTHER BUSINESS
The Board does not know of any matters to be presented at the Meeting other than
those set forth in this proxy statement. If other business should properly come
before the Meeting, proxies will be voted in accordance with the judgment of the
persons named in the accompanying proxy.
OTHER INFORMATION
PROXY SOLICITATION
The costs of the Meeting, including the solicitation of proxies (estimated to be
approximately [$ ], will be paid by the Funds, although the Adviser and its
affiliates may bear some of the costs in their discretion. The principal
solicitation will be by mail, but proxies also may be solicited by telephone,
facsimile or personal interview by officers or agents of the Trust. In addition,
the Funds may retain a proxy solicitation firm to assist in the solicitation of
proxies. The Funds will request broker-dealer firms, custodians, nominees and
fiduciaries to forward proxy materials to the beneficial owners of the shares of
the Funds held of record by such persons.
SHAREHOLDER VOTING
Holders of the Funds' Class A, Class B and Class Y shares of beneficial interest
(collectively, the "Shares") of record as of the close of business on April 16,
2004 (the "Record Date") are entitled to vote on all of the business at the
Meeting and any adjournments thereof. Each Share is entitled to one vote, and
fractional votes for fractional Shares held, without regard to Class. As of the
Record Date, the outstanding Shares of each Fund were as follows:
OUTSTANDING OUTSTANDING OUTSTANDING TOTAL OUTSTANDING
FUND CLASS A SHARES CLASS B SHARES CLASS Y SHARES SHARES
- ------------------------------------------------------------------------------------------------------------------------
NEW ASIA GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL STOCK FUND
- ------------------------------------------------------------------------------------------------------------------------
SMALL CAP FUND
- ------------------------------------------------------------------------------------------------------------------------
MID-CAP FUND
- ------------------------------------------------------------------------------------------------------------------------
GROWTH STOCK FUND
- ------------------------------------------------------------------------------------------------------------------------
GROWTH AND INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------
VALUE FUND
- ------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FIXED INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------
TAX-FREE SECURITIES FUND
- ------------------------------------------------------------------------------------------------------------------------
SHORT INTERMEDIATE U.S.
GOVERNMENT SECURITIES FUND
- ------------------------------------------------------------------------------------------------------------------------
TAX-FREE SHORT INTERMEDIATE
SECURITIES FUND
- ------------------------------------------------------------------------------------------------------------------------
ULTRA SHORT GOVERNMENT FUND
- ------------------------------------------------------------------------------------------------------------------------
13
The presence in person or by proxy of more than 50% of the outstanding Shares of
a Fund (without regard to Class) entitled to vote at the Meeting will constitute
a quorum for the particular Fund. If a quorum of a Fund is not present,
sufficient votes are not received by the date of the Meeting, or the holders of
Shares of a Fund present in person or by proxy determine to adjourn the Meeting
of a Fund for any other reason, a person named as proxy may propose one or more
adjournments with respect to the Fund from time to time to permit further
solicitation of proxies. Abstentions and broker non-votes will be counted as
Shares present but not voting. Accordingly, abstentions and broker non-votes
effectively will be a vote against adjournment and the proposal. Broker
non-votes are Shares held in street name for which the broker indicates that
instructions have not been received from the beneficial owners or other persons
entitled to vote and for which the broker does not have discretionary voting
authority. The persons named as proxies will vote in favor of adjournment those
Shares which they represent if adjournment is necessary to obtain a quorum or to
obtain a favorable vote on the proposal.
In addition to voting in person at the Meeting, shareholders also may sign and
mail the proxy card received with this proxy statement. Timely, properly
executed proxies will be voted as instructed by shareholders. If no instructions
are given on the proxy with respect to a proposal (but the proxy is properly
executed), it will be voted FOR the proposal. A shareholder may revoke his or
her proxy at any time prior to its exercise by written notice addressed to the
Secretary of the Trust at the address set forth on the cover of this proxy
statement or by voting in person at the Meeting. However, attendance in person
at the Meeting, by itself, will not revoke a previously tendered proxy.
REQUIRED VOTE
Approval of each proposal with respect to the particular Fund (without regard to
Class) will require the vote of a "majority of the outstanding voting securities
of the Fund" as defined in the 1940 Act. This means the lesser of (1) 67% or
more of the Shares of the Fund present at the Meeting if the owners of more than
50% of the Shares of the Fund then outstanding are present in person or by
proxy, or (2) more than 50% of the outstanding Shares of the Fund entitled to
vote at the Meeting.
INTERESTED PARTIES
The Class A, Class B and Class Y Shares are each Fund's only outstanding classes
of voting securities as of the Record Date. As of the Record Date, Trustees and
officers of the Trust as a group beneficially owned less than 1% of the
outstanding Shares of the Fund. The following table sets forth, as of the Record
Date, the name, address, number and percentage of Shares of persons that owned
beneficially or of record 5% or more of the outstanding Shares of the Fund. Bank
of Hawaii or its affiliates may be deemed to have, or share, investment and/or
voting power with respect to more than 50% of the Class Y Shares, based upon the
Bank of Hawaii's investment discretion for trust and other client accounts, with
respect to which shares the Bank of Hawaii and its affiliates disclaim
beneficial ownership. Such investment and/or voting power will change as the
Bank of Hawaii and its affiliates periodically rebalance such accounts' holdings
among the various Pacific Capital Funds and other investment options. Certain
officers and a Trustee of the Trust are employees of either Bank of Hawaii or
its affiliates.
SHORT
INTERMEDIATE
NAME AND DIVERSIFIED U.S. ULTRA
ADDRESS OF NEW ASIA SMALL GROWTH FIXED TAX-FREE GOVERNMENT SHORT
RECORD GROWTH INTERNATIONAL CAP MID-CAP STOCK GROWTH AND VALUE INCOME SECURITIES SECURITIES GOVERNMENT
HOLDER FUND STOCK FUND FUND FUND FUND INCOME FUND FUND FUND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
(1) The address for [ ] is c/o Bank of Hawaii, P.O. Box 1930, Honolulu, HI
96805.
(2) The Fund does not believe such entity is the beneficial owner of Shares held
of record by it.
14
SHAREHOLDER PROPOSAL
The Trust does not hold regular shareholders' meetings. Shareholders wishing to
submit a proposal for inclusion in a proxy statement for a subsequent
shareholders' meeting should send their written proposal to the Secretary of the
Trust at the address set forth on the cover of this proxy statement.
A proposal must be received within 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, however, does not necessarily
mean that the proposal will be included. Persons named as proxies for any
subsequent shareholders' meeting will vote in their discretion with respect to a
proposal submitted on a timely basis.
OTHER SERVICE PROVIDERS
BISYS Fund Services Ohio, Inc. serves as administrator to the Funds pursuant to
an Administration Agreement and BISYS Fund Services LP serves as the distributor
of shares of the Funds pursuant to a Distribution Agreement. The address of each
is 3435 Stelzer Road, Columbus, Ohio 43219.
THE TRUST REQUESTS YOUR EXECUTION AND RETURN OF THE ENCLOSED PROXY. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
By order of the Board of Trustees,
Ryan M. Louvar
Secretary
May [ ], 2004
15
APPENDIX A
FORM OF SUB-ADVISORY AGREEMENT
FORM OF SUB-ADVISORY AGREEMENT
PACIFIC CAPITAL INTERNATIONAL STOCK FUND
THIS AGREEMENT is made as of June 1, 2004 among Pacific
Capital Funds (the "Trust"), The Asset Management Group of Bank of Hawaii (the
"Adviser"), and Hansberger Global Investors, Inc. (the "Sub-Adviser").
WHEREAS, the Trust is registered as an open-end, diversified
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act");
WHEREAS, the Adviser has been appointed investment adviser to
the Trust's International Stock Fund (the "Fund");
WHEREAS, the Adviser desires to retain the Sub-Adviser to
assist it in the provision of a continuous investment program for the Fund and
the Sub-Adviser is willing to do so; and
WHEREAS, the Sub-Adviser is willing to furnish such services
upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Adviser hereby appoints the Sub-Adviser to
act as the sub-adviser to the Fund as permitted by the Adviser's Advisory
Agreement with the Trust pertaining to the Fund. Intending to be legally bound,
the Sub-Adviser accepts such appointment and agrees to render the services
herein set forth for the compensation herein provided.
2. Sub-Advisory Services. Subject to the supervision of the
Trust's Board of Trustees and the Adviser, the Sub-Adviser will assist the
Adviser in providing a continuous investment program with respect to the Fund's
portfolio, including investment research and management with respect to all
securities and investments and cash equivalents in the Fund. The Sub-Adviser
will provide services under this Agreement in accordance with the Fund's
investment objectives, policies and restrictions as stated in the Fund's
prospectus and resolutions of the Trust's Board of Trustees applicable to the
Fund.
Without limiting the generality of the foregoing, the
Sub-Adviser further agrees that it will, with respect to the Fund:
(a) determine from time to time what securities and other
investments will be purchased, retained or sold for
the Fund;
(b) place orders pursuant to its investment
determinations for the Fund either directly with the
issuer or with any broker or dealer;
(c) not purchase shares of the Fund for itself or for
accounts with respect to which it exercises sole
investment discretion in connection with such
transactions except as permitted by the Trust's Board
of Trustees or by federal, state and local law;
(d) manage the Fund's overall cash position;
(e) attend regular business and investment-related
meetings with the Trust's Board of Trustees and the
Adviser if requested to do so by the Trust and/or the
Adviser;
(f) ensure all Fund security valuations are reasonable
for purposes of determining whether such securities
should be purchased, owned or sold by the Funds;
(g) ensure that, if required, securities are identified
for proper segregation and collateralization;
(h) vote proxies on behalf of the Fund and provide proxy
voting information to the Fund and its agents in
relation to the Fund's annual filing on Form N-PX and
as otherwise reasonably requested by officers of the
Fund; and
(i) maintain books and records with respect to the
securities transactions for the Fund, furnish to the
Adviser and the Trust's Board of Trustees such
periodic and special reports as they may request with
respect to the Fund, and provide in advance to the
Adviser all reports to the Board of Trustees for
examination and review within a reasonable time prior
to the Trust's Board meetings.
3. Covenants by the Sub-Adviser. The Sub-Adviser agrees with
respect to the services provided to the Fund that it will:
(a) conform with all Rules and Regulations of the
Securities and Exchange Commission;
(b) telecopy trade information to the Adviser on the
first business day following the day of the trade and
cause broker confirmations to be sent directly to the
Adviser;
(c) treat confidentially and as proprietary information
of the Trust all records and other information
relative to the Trust and prior, present or potential
shareholders, and 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 Trust, which approval shall not be
unreasonably withheld and may not be withheld and
will be deemed granted 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 the Trust);
2
(d) notify the Adviser and the Trust immediately upon
detection of (i) any material failure to manage the
Fund in accordance with its investment objectives and
policies or any applicable law; or (ii) any material
breach of any of the Fund's or the Sub-Adviser's
policies, guidelines or procedures. The Sub-Adviser
agrees to correct any such failure promptly and to
take any action that the Board may reasonably request
in connection with any such breach;
(e) upon request, provide the Adviser and/or the officers
of the Trust with supporting certifications in
connection with any filings and certifications made
pursuant to the Sarbanes-Oxley Act of 2002; and
(f) promptly notify the Adviser and the Trust in the
event (i) the Sub-Adviser is served or otherwise
receives notice of any action, suit, proceeding,
inquiry or investigation, at law or in equity, before
or by any court, public board, or body, involving the
affairs of the Trust (excluding class action suits in
which the Fund is a member of the plaintiff class by
reason of the Fund's ownership of shares in the
defendant) or the compliance by the Sub-Adviser with
the federal or state securities laws or (ii) an
actual change in control of the Sub-Adviser resulting
in an "assignment" (as defined in the 1940 Act) has
occurred or is otherwise proposed to occur.
4. Services Not Exclusive. Except as provided herein, the
services furnished by the Sub-Adviser hereunder are deemed not to be exclusive,
and nothing in this Agreement shall (i) prevent the Sub-Adviser from acting as
investment adviser or manager for any other person or persons, including other
managementinvestment companies, or (ii) limit or restrict the Sub-Adviser from
buying, selling or trading any securities or other investments (including any
securities or other investments which the Funds are eligible to buy) for its or
their own accounts or for the accounts of others for whom it or they may be
acting; provided, however, that the Sub-Adviser agrees that it will not
undertake any activities which, in its reasonable judgment, will adversely
affect the performance of its obligations to the Fund under this Agreement.
5. Portfolio Transactions. Investment decisions for the Fund
shall be made by the Sub-Adviser independently from those for any other
investment companies and accounts advised or managed by the Sub-Adviser. The
Fund and such investment companies and accounts may, however, invest in the same
securities. When a purchase or sale of the same security is made at
substantially the same time on behalf of the Fund and/or another investment
company or account, the transaction will be averaged as to price, and available
investments allocated as to amount, in a manner which the Sub-Adviser believes
to be equitable to the Fund and such other investment company or account. The
Fund acknowledges that in some instances, this investment procedure may
adversely affect the price paid or received by the Fund or the size of the
position obtained or sold by the Fund. To the extent permitted by law, the
Sub-Adviser may aggregate the securities to be sold or purchased for the Fund
with those to be sold or purchased for other investment companies or accounts in
order to obtain best execution.
The Sub-Adviser shall place orders for the purchase and sale
of portfolio securities and shall solicit broker-dealers to execute transactions
in accordance with the Fund's policies and restrictions regarding brokerage
allocations. The Sub-Adviser shall place orders
3
pursuant to its investment determination for the Fund either directly with the
issuer or with any broker or dealer selected by the Sub-Adviser. In executing
portfolio transactions and selecting brokers or dealers, the Sub-Adviser shall
use its reasonable best efforts to seek the most favorable execution of orders,
after taking into account all factors the Sub-Adviser deems relevant, including
the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker or dealer, and the
reasonableness of the commission, if any, both for the specific transaction and
on a continuing basis.
Consistent with this obligation, the Sub-Adviser may, to the
extent permitted by law, purchase and sell portfolio securities to and from
brokers and dealers who provide brokerage and research services (within the
meaning of Section 28(e) of the Securities Exchange Act of 1934) to or for the
benefit of the Fund and/or other accounts over which the Sub-Adviser or any of
its affiliates exercises investment discretion. The Sub-Adviser is authorized to
pay to a broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the Fund which is in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction if the Sub-Adviser determines in good faith that such
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Sub-Adviser's overall responsibilities to the
Fund. In no instance will portfolio securities be purchased from or sold to the
Sub-Adviser, or the Fund's principal underwriter, or any affiliated person
thereof except as permitted by the 1940 Act or the rules of the Securities and
Exchange Commission thereunder.
6. Books and Records. In compliance with the requirements of Rule
3la-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records which
it maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's request.
The Sub-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.
7. Expenses. During the term of this Agreement, the Sub-Adviser
shall pay all expenses incurred by it in connection with its activities under
this Agreement other than the cost of securities, commodities and other
investments (including brokerage commissions and other transaction charges, if
any) purchased for the Fund.
8. Compensation. For the services provided and the expenses
assumed with respect to the Fund pursuant to this Agreement, the Sub-Adviser
will be entitled to a fee, computed daily and payable quarterly directly from
the Fund, calculated at the annual rate of 0.60% on the first $75 million of the
Fund's average daily net assets and 0.35% on average daily net assets in excess
of $75 million.
9. Standard of Care; Limitation of Liability. The Sub-Adviser
shall exercise due care and diligence and use the same skill and care in
providing its services hereunder as it uses in providing services to other
investment companies and accounts, but shall not be liable for any action taken
or omitted by it in the performance of services rendered hereunder in the
absence of its bad faith, willful misconduct, gross negligence or reckless
disregard of its duties.
4
10. Reference to the Sub-Adviser. Neither the Adviser nor any of
its affiliates or agents shall make reference to or use the name of the
Sub-Adviser or any of its affiliates, or any of their clients, except references
concerning the identity of and services provided by the Sub-Adviser to the Fund,
which references shall not differ in substance from those included in the
current registration statement pertaining to the Fund, this Agreement and the
Advisory Agreement between the Adviser and the Trust with respect to the Fund,
in any advertising or promotional materials without the prior approval of the
Sub-Adviser, which approval shall not be unreasonably withheld or delayed.
11. Duration and Termination. Unless sooner terminated, this
Agreement shall continue for a period of two years from the date first set forth
above, and thereafter shall continue automatically for successive annual
periods, provided such continuance is specifically approved at least annually by
the Trust's Board of Trustees or vote of the lesser of (a) 67 % of the shares of
the Fund represented at a meeting if holders of more than 50% of the outstanding
shares of the Fund are present in person or by proxy, or (b) more than 50% of
the outstanding shares of the Fund, provided that in either event its
continuance also is approved by a majority of the Trust's Trustees who are not
"interested persons "(as defined in the 1940 Act) of any party to this Agreement
(the "Disinterested Trustees"), by vote cast in person at a meeting called for
the purpose of voting on such approval. This Agreement is terminable at any time
without penalty, with respect to the Fund, on 60 days' notice, by the Adviser,
the Sub-Adviser or the Trust's Board of Trustees or by vote of the lesser of (a)
67% of the shares of the Fund represented at a meeting if holders of more than
50% of the outstanding shares of the Fund are present in person or by proxy, or
(b) more than 50% of the outstanding shares of the Fund. This Agreement will
terminate automatically in the event of its assignment (as defined in the 1940
Act).
12. Amendment of this Agreement. No provision of this Agreement
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought. No amendment of this
Agreement shall be effective until approved by the vote of (i) a majority of the
outstanding voting securities of the Fund, if required by the 1940 Act or the
rules of the Securities and Exchange Commission thereunder, and (ii) a majority
of the Disinterested Trustees cast in person at a meeting called for the purpose
of voting on such approval.
13. Notice. Any notice, advice or report to be given pursuant to
this Agreement shall be delivered or mailed:
To The Sub-Adviser at:
Hansberger Global Investors, Inc.
_______________________________
_______________________________
5
To the Adviser at:
The Asset Management Group of
Bank of Hawaii
111 South King Street
Honolulu, Hawaii 96813
To the Trust at:
c/o BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219-3035
14. 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. 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 laws of the
Commonwealth of Massachusetts (without regard to conflict of law principles). 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.
15. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
16. Personal Liability. The names "Pacific Capital Funds"
and "Trustees" refer respectively to the Trust created and to the Trustees, as
trustees but not individually or personally, acting from time to time under an
Agreement and Declaration of Trust dated as of October 30, 1992, as amended, to
which reference is hereby made and a copy of which is on file at the office of
the Secretary of State of The Commonwealth of Massachusetts and elsewhere as
required by law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of "Pacific Capital Funds" entered into in the name or on
behalf hereof by any of the Trustees, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of the
Trustees, shareholders or representatives of the Trust personally, but bind only
the assets of the Trust and all persons dealing with any series of shares of the
Trust must look solely to the assets of the Trust belonging to such series for
the enforcement of any claims against the Trust.
[Signature Page Follows]
6
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.
THE ASSET MANAGEMENT GROUP OF
BANK OF HAWAII
By: ______________________________
Name: ____________________________
Title:____________________________
HANSBERGER GLOBAL INVESTORS, INC.
By: ______________________________
Name: ____________________________
Title:____________________________
PACIFIC CAPITAL FUNDS
By: ______________________________
Name: ____________________________
Title:____________________________
7
PACIFIC CAPITAL FUNDS
NEW ASIA GROWTH FUND
INTERNATIONAL STOCK FUND
SMALL CAP FUND
MID-CAP FUND
GROWTH STOCK FUND
GROWTH AND INCOME FUND
VALUE FUND
DIVERSIFIED FIXED INCOME FUND
TAX-FREE SECURITIES FUND
SHORT INTERMEDIATE U.S. GOVERNMENT SECURITIES FUND
TAX-FREE SHORT INTERMEDIATE SECURITIES FUND
ULTRA SHORT GOVERNMENT FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
1-800-258-9232
SPECIAL MEETING OF SHAREHOLDERS
JUNE 1, 2004
The undersigned hereby appoints Ryan M. Louvar and Alaina Metz, or
either of them (with full power to act in the absence of the other, each with
full power of substitution), his/her attorney and proxy to vote and act with
respect to all shares of each of the funds listed above (each, a "Fund" and
collectively, the "Funds"), each a series of Pacific Capital Funds (the "Trust")
held by the undersigned at the Special Meeting of Shareholders of the Funds to
be held at 2:00 p.m., Eastern Time, on June 1, 2004, at the offices of the
Trust's administrator, BISYS Fund Services Ohio, Inc., 100 Summer Street, Suite
1500, Boston, Massachusetts 02110, and at any adjournment thereof (the
"Meeting"), and instructs them to vote as indicated on the matters referred to
in the Proxy Statement for the Meeting, receipt of which is hereby acknowledged,
with discretionary power to vote upon such other business as may properly come
before the Meeting.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES. THE BOARD OF TRUSTEES
RECOMMENDS THAT YOU VOTE FOR THE FOLLOWING PROPOSAL:
1. APPROVAL OF A NEW SUB-ADVISORY AGREEMENT FOR THE INTERNATIONAL
STOCK FUND WITH HANSBERGER GLOBAL INVESTORS, INC. (SHAREHOLDERS OF THE
INTERNATIONAL STOCK FUND ONLY).
/ / FOR / / AGAINST / / ABSTAIN
2. APPROVAL OF A PROPOSAL THAT WOULD PERMIT THE ASSET MANAGEMENT GROUP
OF BANK OF HAWAII, THE INVESTMENT ADVISER TO EACH FUND, AND EACH FUND TO ENTER
INTO OR MATERIALLY CHANGE AGREEMENTS WITH SUB-ADVISERS ON BEHALF OF THE FUND
WITHOUT OBTAINING SHAREHOLDER APPROVAL (SHAREHOLDERS OF ALL FUNDS).
/ / FOR / / AGAINST / / ABSTAIN
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE,
THIS PROXY WILL BE VOTED FOR THE PROPOSAL.
Receipt of the Notice of Special Meeting and Proxy Statement is hereby
acknowledged.
Dated ______________, 2004
____________________________________________
Name of Shareholder(s) -- Please print or type
____________________________________________
Signature(s) of Shareholder(s)
____________________________________________
Signature(s) of Shareholder(s)
This proxy must be signed by the beneficial owner of Fund shares. If
signing as attorney, executor, guardian or in some representative capacity or as
an officer of a corporation, please add title as such.
PLEASE VOTE, SIGN AND DATE THIS PROXY
AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE.