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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Pacific Capital Funds
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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.
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applies:
(2) Aggregate number of securities to which transaction applies:
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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:
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(4) Date Filed:
[pacific capital funds logo]
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 3, 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?
A. The table below summarizes each proposal to be presented at the special
meeting and shows which shareholders may vote for each proposal.
<Table>
<Caption>
PROPOSAL WHICH SHAREHOLDERS MAY VOTE
- ------------------------------------------------------------------------
1. To approve a new Sub-Advisory Shareholders of the International
Agreement for the International Stock Fund only
Stock Fund with Hansberger
Global Investors, Inc.
- ------------------------------------------------------------------------
2. To approve a proposal that Shareholders of ALL Funds
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
- ------------------------------------------------------------------------
</Table>
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.
[pacific capital funds logo]
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
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NOTICE
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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.
By order of the Board of Trustees,
Ryan M. Louvar
Secretary
May 3, 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.
[PACIFIC CAPITAL FUNDS LOGO]
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 3, 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.
1
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, as of March 31, 2004, had approximately $5.1 billion
under management, managing 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 49 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.
2
Thomas R. H. Tibbles joined Hansberger in 1999 and serves as Managing
Director -- Canada, a portfolio manager and a research analyst. 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 1996, 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 has been granted the designation of
Chartered Financial Analyst.
Lauretta (Retz) Reeves joined 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 has been granted the
designation of Chartered Financial Analyst.
DIRECTORS AND OFFICERS OF HANSBERGER
The table names the principal executive officer and each of the Directors
of Hansberger and their principal occupations as follows:
<Table>
<Caption>
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
</Table>
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 prices it believes are 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 will use a combination of its value and growth international
equity disciplines by using fundamental qualitative and quantitative analysis of
issuers (a
3
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 that
the MSCI ACWI ex-US Index contains issuers located in countries other than the
U.S. representing both developed and emerging markets whereas the MSCI EAFE
Index contains issuers located in developed markets in Europe, Australasia and
the Far East. 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, 2003)
<Table>
<Caption>
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%
</Table>
- ---------------
* The MSCI-EAFE Index is an unmanaged index of issuers in the countries in
Europe, Australasia 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.
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
4
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.
<Table>
<Caption>
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 (AS A PERCENTAGE OF THE AVERAGE DAILY
NET ASSETS OF THE FUND) 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 0.35% of such assets in excess of $75
million million
</Table>
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 for purposes of determining whether such securities should be
purchased, owned or sold by the Fund, 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
5
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 Investment Company Act of 1940, as amended (the "1940 Act").
The New Sub-Advisory Agreement provides that neither Hansberger nor any of
its directors, officers, agents or employees shall be liable or responsible to
the Trust, its shareholders or AMG for any error of judgment, or any loss
arising out of any investment, or for any other act or omission in the
performance by Hansberger of its duties under this Agreement, except for
liability resulting from bad faith, willful misconduct, gross negligence or
reckless disregard of its duties under the New Sub-Advisory Agreement.
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
6
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 February 2004 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 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.
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;
7
- 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 consolidated financial statements of Hansberger Group and its
subsidiaries 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; 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
8
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 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.
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.
9
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 shareholders' expectations that AMG will use its expertise to
recommend to the Board qualified candidates to serve as sub-advisers.
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.
10
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
11
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, 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.
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 (estimated to be approximately $60,000), 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:
<Table>
<Caption>
OUTSTANDING OUTSTANDING OUTSTANDING TOTAL
CLASS A CLASS B CLASS Y OUTSTANDING
FUND SHARES SHARES SHARES SHARES
- ---- ------------- ------------- -------------- --------------
New Asia Growth Fund...... 125,779.96 43,718.21 2,595,681.93 2,765,180.10
International Stock
Fund.................... 137,830.93 85,735.40 8,313,441.05 8,537,007.38
Small Cap Fund............ 263,901.35 193,896.62 7,426,097.91 7,883,395.88
</Table>
12
<Table>
<Caption>
OUTSTANDING OUTSTANDING OUTSTANDING TOTAL
CLASS A CLASS B CLASS Y OUTSTANDING
FUND SHARES SHARES SHARES SHARES
- ---- ------------- ------------- -------------- --------------
Mid-Cap Fund.............. 7,312.39 0.00 2,656,949.45 2,664,261.84
Growth Stock Fund......... 1,444,630.19 1,791,962.14 30,866,748.58 34,103,340.91
Growth And Income Fund.... 499,572.46 708,892.87 11,242,135.51 12,450,600.84
Value Fund................ 318,042.68 169,760.66 22,265,364.90 22,753,167.24
Diversified Fixed Income
Fund.................... 481,244.19 419,033.34 24,207,333.44 25,107,610.97
Tax-Free Securities
Fund.................... 1,042,630.39 423,135.99 33,486,141.64 34,951,908.02
Short Intermediate U.S.
Government Securities
Fund.................... 561,563.55 0.00 9,431,988.60 9,993,552.15
Tax-Free Short
Intermediate Securities
Fund.................... 382,664.17 0.00 6,496,260.59 6,878,924.76
Ultra Short Government
Fund.................... 827,969.21 194,877.83 28,991,275.53 30,014,122.57
</Table>
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.
13
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 each 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 each
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. Bank of Hawaii will vote the shares
for which it has investment discretion in accordance with the recommendation of
Institutional Shareholder Services, an independent third-party proxy voting
service. 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 of
the Trust are employees of either Bank of Hawaii or its affiliates.
<Table>
<Caption>
NEW ASIA GROWTH FUND INTERNATIONAL STOCK FUND SMALL CAP FUND
-------------------------- -------------------------- --------------------------
NAME AND ADDRESS NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE
OF HOLDER(1) SHARES OF FUND SHARES OF FUND SHARES OF FUND
- ---------------- ------------- ---------- ------------- ---------- ------------- ----------
Reinco (2)........... 2,051,036.78 74.17%
Strobro (2).......... 8,057,161.91 94.38% 6,166,530.97 78.22%
Union Bank --
Nominee (3)........ 496,825.41 6.30%
Vanguard Fiduciary
Trust Co. (4)...... 511,100.32 18.48% 508,967.78 6.46%
Fiserv Securities,
Inc. (5) (6)....... 141,469.11 5.12%
</Table>
<Table>
<Caption>
MID-CAP FUND GROWTH STOCK FUND GROWTH AND INCOME FUND
-------------------------- -------------------------- --------------------------
NAME AND ADDRESS NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE
OF HOLDER(1) SHARES OF FUND SHARES OF FUND SHARES OF FUND
- ---------------- ------------- ---------- ------------- ---------- ------------- ----------
Reinco (2)........... 29,147,930.34 85.47% 10,465,448.29 84.10%
Strobro (2).......... 2,656,949.45 99.73%
Vanguard Fiduciary
Trust Co. (4)...... 683,241.65 5.49%
Fiserv Securities,
Inc. (5) (6)....... 2,960,679.37 8.68% 1,145,344.29 9.20%
</Table>
14
<Table>
<Caption>
DIVERSIFIED FIXED INCOME
VALUE FUND FUND TAX-FREE SECURITIES FUND
-------------------------- -------------------------- --------------------------
NAME AND ADDRESS NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE
OF HOLDER(1) SHARES OF FUND SHARES OF FUND SHARES OF FUND
- ---------------- ------------- ---------- ------------- ---------- ------------- ----------
Hawco (2)............ 23,755,073.94 94.61%
Reinco (2)........... 33,220,066.56 95.05%
Strobro (2).......... 22,031,300.60 96.83%
</Table>
<Table>
<Caption>
TAX-FREE SHORT SHORT INTERMEDIATE
INTERMEDIATE U.S. GOVERNMENT ULTRA SHORT
SECURITIES FUND SECURITIES FUND GOVERNMENT FUND
-------------------------- -------------------------- --------------------------
NAME AND ADDRESS NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE
OF HOLDER(1) SHARES OF FUND SHARES OF FUND SHARES OF FUND
- ---------------- ------------- ---------- ------------- ---------- ------------- ----------
Reinco (2)........... 6,494,341.41 94.41% 8,975,524.34 89.81%
Strobro (2).......... 27,941,254.00 93.10%
</Table>
- ---------------
(1) The Fund does not believe any entity is the beneficial owner of Shares held
of record by it.
(2) The address for Hawco, Reinco and Strobro is c/o Bank of Hawaii, P.O. Box
1930, Honolulu, HI 96805. Represents holdings in Class Y Shares, except for
Reinco's holdings in Growth Stock Fund, representing Class B Shares.
(3) P.O. Box 85484, San Diego, CA 92186.
(4) Valley Forge, PA 19482.
(5) 2005 Market Street, Philadelphia, PA 19103.
(6) Represents holdings in Class B Shares.
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.
15
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 3, 2004
16
APPENDIX A
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, and as
amended from time-to-time.
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;
A-1
(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 Fund;
(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 applicable rules and regulations of the U.S.
Securities and Exchange Commission;
(b) telecopy or provide by electronic means, 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);
(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
A-2
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 which pertain to services being provided by
the Sub-Adviser hereunder, 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
management investment 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 Fund is 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 seek to obtain best execution. The
Fund and Adviser understand that the Sub-Adviser may give advice and take action
with respect to any of its other clients or for its own account which may differ
from the timing or nature of action taken by the Sub-Adviser, with respect to
the Fund.
A-3
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 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 from and to 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 shall be entitled to maintain a copy of such records for its
files in order to meet its obligations under the 1940 Act. 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.
A-4
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. Neither the Sub-Adviser, nor any of its directors,
officers, agents or employees shall be liable or responsible to the Trust, its
shareholders or the Adviser for any error of judgment, or any loss arising out
of any investment, or for any other act or omission in the performance by the
Sub-Adviser of its duties under this Agreement, except for liability resulting
from bad faith, willful misconduct, gross negligence or reckless disregard of
its duties under this Agreement.
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.
A-5
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.
515 East Las Olas Boulevard, Suite 1300
Fort Lauderdale, Florida 33301
Attention : President
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]
A-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:
---------------------------------------------
A-7
PROXY TABULATOR
P.O. BOX 9132
HINGHAM, MA 02043
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES
PACIFIC CAPITAL INTERNATIONAL STOCK FUND SPECIAL MEETING OF SHAREHOLERS - 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.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE FOR THE FOLLOWING PROPOSALS:
1. APPROVAL OF A NEW SUB-ADVISORY AGREEMENT FOR THE INTERNATIONAL STOCK
FUND WITH HANSBERGER GLOBAL INVESTORS, INC.
/ / FOR / / AGAINST / / ABSTAIN
2. APPROVAL OF A PROPOSAL THAT WOULD PERMIT THE ASSET MANAGEMENT GROUP OF
BANK OF HAWAII, THE INVESTMENT ADVISER TO THE FUND, AND THE TRUST TO ENTER INTO
OR MATERIALLY CHANGE AGREEMENTS WITH SUB-ADVISERS ON BEHALF OF THE FUND WITHOUT
OBTAINING SHAREHOLDER APPROVAL.
/ / 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.
PROXY TABULATOR
P.O. BOX 9132
HINGHAM, MA 02043
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES
[NAME OF FUND] SPECIAL MEETING OF SHAREHOLERS - 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.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE FOR THE FOLLOWING PROPOSAL:
1. APPROVAL OF A PROPOSAL THAT WOULD PERMIT THE ASSET MANAGEMENT GROUP OF
BANK OF HAWAII, THE INVESTMENT ADVISER TO THE FUND, AND THE TRUST TO ENTER INTO
OR MATERIALLY CHANGE AGREEMENTS WITH SUB-ADVISERS ON BEHALF OF THE FUND WITHOUT
OBTAINING SHAREHOLDER APPROVAL.
/ / 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.