SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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Pacific Capital Funds
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PACIFIC CAPITAL FUNDS
PACIFIC CAPITAL SMALL CAP FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
1-877-333-2303
April 27, 2006
Dear Shareholder:
The Board of Trustees has called a special meeting of the shareholders of the
Pacific Capital Small Cap Fund (the "Fund"), a series of Pacific Capital Funds
(the "Trust"), to take place on June 9, 2006 at the offices of the Trust's
administrator, BISYS Fund Services Ohio, Inc., 100 Summer Street, Suite 1500,
Boston, Massachusetts 02110 at 10:00 a.m. Eastern Time, or as adjourned from
time to time, for the following purposes:
1. To approve a sub-advisory agreement for a portion of the Fund's
investment portfolio with a new sub-adviser, Wellington Management
Company, LLP.
2. To approve a proposal that would permit the Asset Management Group of
Bank of Hawaii, the investment adviser to the Fund, to enter into or
materially change agreements with sub-advisers on behalf of the Fund
without obtaining shareholder approval.
THE TRUSTEES HAVE UNANIMOUSLY APPROVED THE PROPOSALS
AND RECOMMEND THAT YOU VOTE "FOR" THE PROPOSALS.
If you have any questions about the special meeting, please do not hesitate to
contact us by calling 1-877-333-2303. 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. In addition to voting by mail you may also vote
by telephone or via the Internet. Please refer to the enclosed proxy card for
instructions.
To ensure that enough shares are voted by the Meeting, the Fund has engaged the
services of a professional proxy solicitation firm, Management Information
Services. If you have not voted as the meeting date approaches, you may receive
a phone call from them asking you to please vote your shares in favor of the
proposals.
Respectfully,
/s/ William Henry
- -------------------------------------
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 HOLDINGS - WE ASK THAT
YOU VOTE PROMPTLY IN ORDER TO AVOID THE EXPENSE OF ADDITIONAL SOLICITATION.
-2-
Q. WHO CAN VOTE?
A. Any person owning shares of the Pacific Capital Small Cap Fund on April 7,
2006.
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. You can vote your shares by completing and signing the enclosed proxy
card(s) and mailing it in the enclosed postage-paid envelope. In addition
to voting by mail you may also vote by telephone or via the Internet by
following the instructions on the enclosed proxy card. If you need any
assistance, or have any questions regarding the proposals or how to vote
your shares, please call Pacific Capital Funds at 1-877-333-2303.
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 proposal on the enclosed proxy card.
Q. WHAT IF I HAVE ADDITIONAL QUESTIONS?
A. Contact us, by calling 1-877-333-2303. 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.
-3-
PACIFIC CAPITAL FUNDS
PACIFIC CAPITAL SMALL CAP FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
1-877-333-2303
NOTICE OF SPECIAL SHAREHOLDER MEETING
TO BE HELD ON JUNE 9, 2006
To the shareholders of Pacific Capital Small Cap Fund:
Notice is hereby given that the Board of Trustees has called a special meeting
of the shareholders of the Pacific Capital Small Cap Fund (the "Fund"), a series
of Pacific Capital Funds (the "Trust"), to take place on June 9, 2006, at the
offices of the Trust's administrator, BISYS Fund Services Ohio, Inc., 100 Summer
Street, Suite 1500, Boston, Massachusetts 02110 at 10:00 a.m., Eastern Time, or
as adjourned from time to time (the "Meeting"), for the following purposes:
1. To approve a sub-advisory agreement for a portion of the Fund's
investment portfolio with a new sub-adviser, Wellington Management
Company, LLP.
2. To approve a proposal that would permit the Asset Management Group of
Bank of Hawaii, the investment adviser to the Fund, to enter into or
materially change agreements with sub-advisers on behalf of the Fund
without obtaining shareholder approval.
AFTER CAREFUL CONSIDERATION, THE BOARD OF TRUSTEES UNANIMOUSLY APPROVED THE
PROPOSALS AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE FUND VOTE "FOR"
THE PROPOSALS.
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 7, 2006 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. In addition to voting by mail you
may also vote by either telephone or via the Internet. Please refer to the
enclosed proxy card for instructions. 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,
/s/ Patrick Keniston
- -------------------------------------
Patrick Keniston
Secretary
April 27, 2006
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
PACIFIC CAPITAL SMALL CAP FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
1-877-333-2303
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 9, 2006
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 the Pacific Capital Small Cap Fund (the "Fund"), a series of the
Trust, to be held at 10:00 a.m., Eastern Time, on June 9, 2006, 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 April 29, 2006.
Shareholders can find important information about the Fund in the Trust's annual
report for the fiscal year ended July 31, 2005, and its semi-annual report for
the six months ended January 31, 2005, which previously have been furnished to
shareholders. Shareholders may request another copy of the annual and
semi-annual reports 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. Text-only versions of the Fund's annual report and semi-annual report
can be viewed online or downloaded from the Trust's website
(HTTP://WWW.PACIFICCAPITALFUNDS.COM/).
PROPOSAL 1
APPROVAL OF A NEW SUB-ADVISORY AGREEMENT
INTRODUCTION
The Board proposes that the shareholders of the Fund approve a sub-advisory
agreement (the "New Sub-Advisory Agreement") between the Trust, the Asset
Management Group of Bank of Hawaii, as Adviser to the Fund ("AMG" or the
"Adviser"), and Wellington Management Company, LLP ("Wellington Management" or
the "New Sub-Adviser") as a second sub-adviser to the Fund. The terms of the New
Sub-Advisory Agreement will be substantially similar to those of the Fund's
current sub-advisory agreement with Nicholas-Applegate Capital Management
("NACM" or the "Current Sub-Adviser") and will not result in any increase in
fees. If shareholders approve the New Sub-Advisory Agreement, Wellington
Management will act as sub-adviser to a portion of the Fund's investment
portfolio, as designated from time to time by the Adviser, and NACM will
continue to act as sub-adviser to the balance of the Fund's investment
portfolio.
WHY IS THIS CHANGE BEING RECOMMENDED?
Due to rapid growth in assets invested in the Fund and other client accounts,
the Current Sub-Adviser is approaching its capacity to manage further small cap
assets. As a result, the Adviser recommended to the Trustees that a
growth-oriented sub-adviser be added to manage a portion of the Fund's
investment portfolio with a management style complementary to NACM's investment
style, which manages a portion of the Fund's portfolio using a value strategy
and portion of the Fund's portfolio using a core strategy. Based on its review
of potential sub-advisers, the Adviser
further recommended that Wellington Management be appointed as the Fund's second
sub-adviser. After reviewing the matter, for the reasons described further below
the Trustees determined that appointment of Wellington Management as a
sub-adviser to a portion of the Fund's investment portfolio was in the best
interests of the Fund and its shareholders.
HOW WILL THE NEW ARRANGEMENT AFFECT THE MANAGEMENT OF THE FUND?
AMG currently serves as investment adviser to the Fund pursuant to an Investment
Advisory Agreement that permits AMG to delegate portfolio management services to
one or more sub-advisers, subject to supervision by AMG and the Board of
Trustees. Under the Current Sub-Advisory Agreement, NACM manages a portion of
the Fund's portfolio using a "small cap value" strategy and a portion of the
portfolio using a "systematic small cap" strategy. The portion of the Fund's
portfolio managed using each strategy is determined from time to time by the
Adviser in consultation with NACM, subject to capacity constraints. The New
Sub-Advisory Agreement will add an additional sub-adviser for the Fund and will
not replace the Fund's current sub-advisory relationship or agreement with NACM.
The Adviser believes that Wellington Management's portfolio management style in
its "small cap growth" strategy complements NACM's strategies. Wellington
Management employs a portfolio selection method that relies on both fundamental
and quantitative analysis to identify attractive securities in the small cap
growth universe. Fundamental research is provided by 48 global industry
analysts. Each analyst is responsible for a specific industry, applying various
techniques to develop earnings forecasts and investment ratings for each covered
stock in that industry. In addition, quantitative research is provided by a team
of ten quantitative analysts though a proprietary, multi-factor model which
combines value and momentum factors to rank stocks within sectors. Factors used
within the model and the weights of selected factors are developed specifically
by sector. The Adviser believes that the diversification of small cap management
styles applied to various portions of the Fund's investment portfolio will
result in an overall blended "core" Fund portfolio.
The terms of the Current Sub-Advisory Agreement and the New Sub-Advisory
Agreement are described in greater detail below.
CURRENT ADVISORY AND SUB-ADVISORY ARRANGEMENTS
AMG has served as the Fund's investment adviser since the Fund's organization in
December 1998 pursuant to an Investment Advisory Agreement that was approved by
the initial shareholders of the Fund. For its services AMG initially received an
advisory fee at the annual rate of 1.10% of the Fund's average daily net assets
and, until October 2002, was responsible for payment of NACM's sub-advisory
fees. In October 2002 the Investment Advisory Agreement was amended to provide
for payment of sub-advisory fees to NACM directly by the Fund, and AMG's
advisory fees were reduced by a like amount.
NACM has served as the Fund's sub-adviser since the Fund's organization in
December 1998. The Current Sub-Advisory Agreement was entered into on March 8,
2001, upon its approval at a special meeting of Fund shareholders held in view
of NACM's then-pending merger agreement with Allianz of America, Inc. and
certain other parties which would have resulted in an "assignment" and automatic
termination of the Fund's previous sub-advisory agreement with NACM. The Current
Sub-Advisory Agreement was amended in October 2002 to provide for payment of
sub-advisory fees to NACM directly by the Fund rather than by the Adviser (at
which time the Adviser's fee from the Fund was reduced by a like amount), and
was amended further on April 30, 2005 to reflect the use of NACM's "systematic
small cap" strategy to manage a portion of the Fund's portfolio. The Current
Sub-Advisory Agreement was last reviewed by the Board of Trustees of the Trust
at its September 20, 2005 regular meeting, at which the Board approved
continuation of the Current Sub-Advisory Agreement for an additional year. Upon
shareholder approval of the proposed addition of Wellington Management as a
second sub-adviser to the Fund, the Current Sub-Advisory Agreement will be
further amended to reflect the fact that NACM will not be managing the Fund's
entire investment portfolio.
Under the Current Sub-Advisory Agreement, the Trust retains NACM to manage the
Fund's investment portfolios, subject to the direction of the Board of Trustees
and the Adviser. NACM is authorized to determine which securities are to be
bought or sold by the Fund and in what amounts, and reports periodically to the
Adviser and to the Board
of Trustees. As consideration for its services, NACM receives fees from the Fund
at the following annual rates: for assets managed pursuant to its "small cap
value" strategy - 0.60% of the first $50 million of average daily net assets and
0.55% of average daily net assets in excess of $50 million; and for assets
managed pursuant to its "systematic small cap" strategy - 0.70% of average daily
net assets. The aggregate fees paid to NACM for the Fund's last three fiscal
years ended July 31 were $328,971 (2003), $679,751 (2004), and $913,160 (2005).
The Current Sub-Advisory Agreement provides that NACM will not be liable for any
mistake in judgment or in any other event, except for losses resulting from its
willful misfeasance, bad faith or gross negligence in the performance of its
duties or its reckless disregard of such duties. The Current Sub-Advisory
Agreement continues automatically for successive one-year periods, provided such
continuance is approved at least annually by the Board of Trustees or vote of a
majority of the Fund's shareholders as defined in the Investment Company Act of
1940, as amended (the "Investment Company Act"), so long as its continuance is
also approved by a majority of the Trust's Trustees who are not "interested
persons" of the Trust (as defined in the Investment Company Act)(the
"Independent Trustees"). The Current Sub-Advisory Agreement may not be amended
unless approved by vote of a majority of the Fund's shareholders (as defined in
the Investment Company Act) and a majority of the Independent Trustees;
shareholder approval of the proposed New Sub-Advisory Agreement will be also
considered approval of the necessary technical and conforming changes in the
Investment Advisory Agreement and Current Sub-Advisory Agreement to permit the
addition of Wellington Management as a second sub-adviser to the Fund. The
Current Sub-Advisory Agreement is terminable any time without penalty, on 60
days' notice, by AMG, NACM, the Board of Trustees or vote of a majority of the
Fund's shareholders.
THE NEW SUB-ADVISORY AGREEMENT
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 terms and conditions of the New Sub-Advisory Agreement, which the Trust
anticipates will take effect on or about June 9, 2006 following shareholder
approval, are substantially the same as those of the Current Sub-Advisory
Agreement. Under the New Sub-Advisory Agreement, Wellington Management would
among other things: (i) provide a continuous investment program for the portion
of the Fund's assets it manages; (ii) select brokers and dealers through which
securities transactions with respect to those assets are to be executed; and
(iii) maintain certain records required under relevant provisions of the
Investment Company Act. As consideration for its services, Wellington Management
will receive an annual fee based on the portion of the Fund's assets it manages,
at the rate of 0.70% of the first $150 million of average daily net assets and
0.65% of average daily net assets in excess of $150 million, computed daily and
payable quarterly.
Like the Current Sub-Advisory Agreement, the New Sub-Advisory Agreement provides
that Wellington Management will not be liable for any mistake in judgment or in
any other event, except for losses resulting from its willful misfeasance, bad
faith or gross negligence in the performance of its duties or its reckless
disregard of such duties. The New Sub-Advisory Agreement has an initial term of
two years, and thereafter continues automatically for successive one-year
periods provided such continuance is approved at least annually by the Board of
Trustees or vote of a majority of the Fund's shareholders (as defined in the
Investment Company Act), in either event so long as its continuance is also
approved by a majority of the Independent Trustees. The New Sub-Advisory
Agreement may not be amended unless approved by vote of a majority of the
Independent Trustees and, if required by the Investment Company Act, by a
majority of the Fund's shareholders. It is terminable any time without penalty,
on 60 days' notice, by AMG, Wellington Management, the Board of Trustees or vote
of a majority of the Fund's shareholders.
INFORMATION ABOUT WELLINGTON MANAGEMENT
Wellington Management has been an independent, private partnership since 1979.
Its principal offices are located at 75 State Street, Boston, Massachusetts. The
firm is owned by 95 partners, all fully active in the firm. As of March 31,
2006, Wellington Management managed approximately $542 billion of client assets,
including approximately $24 billion of assets invested in dedicated small cap
mandates.
Wellington Management serves as a sub-adviser to the following registered
investment companies with investment objectives similar to those of the Fund:
FUND APPROXIMATE ASSETS MANAGED RELATIONSHIP ANNUAL FEE
- ---- -------------------------- ------------ ----------
(AS OF MARCH 31, 2006)
Hartford MF SmallCap Growth Fund $482,482,371 Sub-Advisor 0.400% of first $50 million
0.300% of $50-$150 million
0.250% of $150-$500 million
0.200% all assets above $500 million
Hartford VA SmallCap Growth Fund $1,078,199,497 Sub-Advisor 0.400% of first $50 million
0.300% of $50-$150 million
0.250% of $150-$500 million
0.200% all assets above $500 million
WELLINGTON MANAGEMENT'S PORTFOLIO MANAGEMENT TEAM
AMG anticipates that the portfolio will be managed by a team of investment
professionals at Wellington Management led by David J. Elliot and Doris T.
Dwyer.
David J. Elliott, Vice President, is an Equity Portfolio Manager in Wellington
Management's Quantitative Investment Group and co-manages the Hartford Small Cap
Growth Portfolio. In addition to his portfolio management responsibilities, Mr.
Elliot focuses on designing and implementing quantitative and computer-based
approaches to improve the portfolio construction and investment decision-making
process. Mr. Elliott joined Wellington Management in 1995 and has been an
investment professional since 1999. He is a Chartered Financial Analyst.
Doris T. Dwyer, Vice President and Equity Portfolio Manager, works in Wellington
Management's Quantitative Investment Group as a member of the Portfolio
Management team for the firm's Quantitative portfolios. She deals with a wide
array of products including various US styles (Small, Mid, Large Capitalization)
and Global Small Cap. Ms. Dwyer joined the firm as an investment professional in
1998 from Grantham, Mayo, Van Otterloo and Company where she was an Equity
Partner and International Portfolio Manager. She has more than eighteen years of
experience in investment management and has significant experience in global
trading and trade cost analysis, as well as in the development of systems to
support global portfolio management.
OFFICERS AND PARTNERS OF WELLINGTON MANAGEMENT
The principal officers and owners of Wellington Management and their principal
occupations are as follows:
Name Principal Occupation
- ---- --------------------
Nicholas C. Adams Partner and Executive Committee Member
Paul Braverman Partner and Chief Financial Officer
Laurie A. Gabriel Partner and Executive Committee Member
Paul J. Hamel Partner and Executive Committee Member
Saul J. Pannell Partner and Executive Committee Member
John R. Ryan Partner and Executive Committee Member
Perry M. Traquina Partner, President, CEO and Executive Committee Member
Cynthia M. Clarke Partner and Chief Legal Officer
Phillip H. Perelmuter Partner and Executive Committee Member
Selwyn J. Notelovitz Chief Compliance Officer
Thomas L. Pappas Partner and Executive Committee Member
James P. Hoffmann Partner and Executive Committee Member
The business address for each of the principal officers listed above is 75 State
Street, Boston, Massachusetts 02109.
CONSIDERATION OF THE NEW SUB-ADVISORY AGREEMENT BY THE BOARD
On March 16, 2006, the Board of Trustees met in person at a meeting called for
the purpose of considering, among other things, the New Sub-Advisory Agreement.
The information, material facts and conclusions that formed the basis for the
Trustee's recommendation to approve the New Sub-Advisory Agreement are described
below. In determining whether to approve the New Sub-Advisory Agreement, the
Trustees received assistance and advice regarding legal and industry standards
from their independent legal counsel. They discussed the agreement with
management representatives and in a private session with independent legal
counsel at which no representatives of management were present. The Trustees did
not identify any single or particular information that, in isolation, was the
controlling factor in deciding to recommend approval of the New Sub-Advisory
Agreement. The following summary describes the most important, but not all, of
the factors considered by the Trustees.
The Trustees evaluated the proposed scope and quality of services to be provided
by Wellington Management. They requested a variety of information from
Wellington Management, and reviewed its responses, with respect to matters such
as the nature of Wellington Management's organization in general; the
qualifications and capabilities of the portfolio managers and other personnel
who would be responsible for providing services to the Fund; the investment
philosophy and decision-making processes of those professionals; the capability
and integrity of Wellington Management's senior management and staff; the
quality of Wellington Management's services with respect to regulatory
compliance and compliance with client investment policies and restrictions; and
the business reputation, financial condition and operational stability of
Wellington Management. The Trustees also considered a report prepared by the
Adviser based on its due diligence examination of Wellington Management
conducted at Wellington Management's principal office. The report provided a
detailed description of the investment processes and personnel, systems, and
regulatory and compliance processes in place at Wellington Management.
The Trustees reviewed information regarding the performance for the past four
calendar years of other accounts managed by Wellington Management in the same
style as it proposed to manage a portion of the Fund's investment portfolio,
compared to the past performance during such periods of the Russell 2000 Growth
index and a peer group of comparable strategies identified by the Adviser. They
noted that Wellington Management's performance in excess of the Russell 2000
Growth index during each of the periods was comparable to or better than most of
the comparison group and, in addition, was considerably less variable
(generating returns in excess of the index during periods when the other
strategies in the comparison group had returns below the index). They considered
the Adviser's conclusion that the diversification of small cap management styles
applied to various portions of the Fund's investment portfolio would result in a
desirable overall blended "core" Fund portfolio. The Trustees also noted that
the terms of the New Sub-Advisory agreement would be substantially the same as
those of the Current Sub-Advisory Agreement, and that under the New Sub-Advisory
Agreement AMG would retain primary responsibility for the Fund's management,
including allocation of the Fund's investment portfolio to Wellington Management
and NACM.
In considering the sub-advisory fees proposed to be paid by the Fund to
Wellington Management, the Trustees reviewed materials provided by Wellington
Management, including information about the sub-advisory fees paid to Wellington
Management by two other mutual funds registered under the Investment Company Act
with investment policies and procedures substantially similar to those of the
Fund. They noted that although the sub-advisory fees paid by the Fund would be
greater that those paid by Wellington Management's other fund sub-advisory
clients, Wellington Management's fees would be slightly less than those the Fund
paid for the assets managed under NACM's systematic small cap strategy. They did
not compare the fees to industry averages, but did note that the total advisory
fees and sub-advisory fees paid by the Fund would not be affected, as the
advisory fees paid by the Fund to AMG would be adjusted to ensure that the total
fees did not exceed those previously approved by the Fund's shareholders. After
reviewing these matters, the Trustees concluded that the proposed sub-advisory
fee was fair and reasonable.
The Trustees noted that, although it was difficult to establish the extent to
which Wellington Management might realize any economies of scale in connection
with its management of a portion of the Fund's portfolio, as there is no precise
way to measure such economies and certain expenses do not necessarily decrease
as assets increase, Wellington Management's fee schedule includes breakpoints
that would appropriately reflect any economies of scale at the Fund's current
level of assets for the benefit of the Fund's shareholders. The Trustees also
evaluated the
projected benefits to Wellington Management of its sub-advisory relationship
with the Fund. As Wellington Management had not yet begun to provide services to
the Fund, it was unable to provide information regarding the projected
profitability of its relationship with the Fund. However, the Trustees noted
that Wellington Management would not receive significant ancillary benefits as a
result of its relationship with the Fund, other than the benefit of research
received from brokers executing transactions on behalf of its clients and the
ability to refer to its sub-advisory relationship with the Fund.
Based on their review, including their consideration of each of the factors
referred to above, the Trustees (including all of the Independent Trustees)
determined, in the exercise of their business judgment, that Wellington
Management was capable of providing high quality investment sub-advisory
services to the Fund that would be beneficial to the Fund's shareholders, that
Wellington Management's proposed sub-advisory fee was fair, and that approval of
the New Sub-Advisory Agreement with Wellington Management is in the best
interest of the Fund and its shareholders. If shareholders fail to approve the
New Sub-Advisory Agreement, NACM will continue to serve as the sub-adviser to
the Fund, and the Board will consider what alternatives may be most appropriate
for future management of the Fund.
THE BOARD OF TRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS APPROVE THE NEW SUB-ADVISORY AGREEMENT.
PROPOSAL 2
APPROVAL TO ENTER INTO AND MATERIALLY AMEND
AGREEMENTS WITH SUB-ADVISERS ON BEHALF OF THE FUND
WITHOUT SHAREHOLDER APPROVAL
INTRODUCTION
The Board proposes that the Trust be authorized to implement a "multi-manager
arrangement" with respect to the Fund, as described below.
Pursuant to Section 15(a) of the Investment Company Act, an investment adviser
to a mutual fund cannot enter into a sub-advisory agreement with respect to the
fund without obtaining approval of the fund's shareholders. Similarly,
shareholders must approve any material amendments to an existing sub-advisory
agreement between an adviser and a sub-adviser. The Trust has applied for and
obtained an exemption from those and other related requirements of the
Investment Company Act from the U.S. Securities and Exchange Commission (the
"SEC"). The exemptive order, among other things, allows the Fund and AMG to
enter into and materially amend sub-advisory agreements with respect to any
series of the Trust, including the Fund, with approval of the Board but without
obtaining shareholder approval, if AMG and the Board conclude that such
arrangements would be in the best interest of that series' shareholders. This
advisory structure is referred to as a "multi-manager arrangement."
Authority to implement a multi-manager arrangement with respect to the Fund is
contingent upon receiving the approval of a majority of the Fund's outstanding
voting securities, as that term is defined in the Investment Company Act. If
shareholders of the Fund approve the proposal, the Fund's sub-advisory
agreements will be amended to reflect that approval by the shareholders of the
Fund will not be required to amend such sub-advisory agreements to the extent
permitted by the SEC exemption. However, approval by the Trustees (including a
majority of Independent Trustees) will continue to be required before the Trust
may enter into a new sub-advisory agreement or amend an existing sub-advisory
agreement with respect to the Fund. The Board believes that the proposed
multi-manager arrangement will allow the Adviser to act more quickly and with
less cost to shareholders to replace sub-advisers to the Fund when the Adviser
and the Board believe it is in the best interest of shareholders, because a
shareholder vote will not be required to approve sub-advisory agreements and
material changes to such agreements. However, as a result the shareholders of
the Fund will to some extent be giving up their control of the Fund's
operations.
The Board of Trustees previously asked shareholders of all series of the Trust,
including the Fund, to approve a multi-manager arrangement at a shareholder
meeting scheduled to be held in May 2004. The request was withdrawn when it
became apparent that it would not be approved by Institutional Shareholder
Services ("ISS"), an independent third-party proxy voting service retained by
the Bank of Hawaii to direct the vote of the series' shares held by trust and
other client accounts for which the Bank and its affiliates had investment
discretion, which constituted a majority of the outstanding shares. ISS
indicated at that time that it did not favor approval of multi-manager
arrangements for fund portfolios that did not in fact have more than one
sub-adviser. As the Trust now proposes that the Fund retain a second
sub-adviser, ISS has indicated that it would generally support such a proposal,
subject to a review of specific terms.
HOW A MULTI-MANAGER ARRANGEMENT WOULD BENEFIT THE FUND
The Trustees believe that the multi-manager arrangement will allow the Fund to
operate more efficiently because it will allow AMG and the Trustees maximum
flexibility to recommend, supervise and evaluate sub-advisers without incurring
the unnecessary delay or expense of obtaining shareholder approval. Currently,
to appoint a sub-adviser or to materially amend a sub-advisory agreement with
respect to the Fund, the Trust must call a meeting of the Fund's shareholders,
create and distribute proxy materials, solicit proxy votes from the Fund's
shareholders and hold a meeting. Further, if a sub-adviser is acquired by
another entity, the Trust currently must seek approval of a new sub-advisory
agreement from shareholders of the Fund, even where there will be no change in
the persons managing the Fund. This process is time-consuming and costly, and
the costs are generally borne entirely by the Fund with a consequent reduction
in shareholder investment return. While AMG expects its relationships with the
sub-advisers to the Fund to be long-term and stable over time, approval of this
proposal will permit the Fund to act quickly in situations where AMG and the
Trustees believe that a change in sub-advisers or to a sub-advisory agreement,
including any fee paid to a sub-adviser, is warranted. This proposal will
eliminate the delay of convening a meeting of shareholders to approve the
retention of sub-advisers or changes to a sub-advisory agreement.
In its capacity as investment adviser to the Fund, AMG currently oversees and
monitors the performance of each sub-adviser. AMG is also responsible for
determining whether to recommend to the Trustees that a particular sub-advisory
agreement be entered into or terminated. By investing in the Fund, shareholders
in effect hire AMG to manage the Fund's assets directly or to hire an external
sub-adviser under AMG's supervision. Accordingly, the Trustees believe that
shareholders expect that AMG and the Trustees will take responsibility for
overseeing the 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 Trustees believe
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 Trustees also
believe that this approach would be consistent with shareholders' expectations
that AMG will use its expertise to recommend to the Trustees qualified
candidates to serve as sub-advisers.
The Trustees will continue to oversee the sub-advisory selection and engagement
process for the Fund. The Trustees, 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 Investment Company Act and the
terms of the sub-advisory agreements, the Trustees, including a majority of the
Independent Trustees, are 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 with respect to the Fund, AMG and the
sub-adviser have a legal duty to provide to the Trustees information on
pertinent factors.
Shareholder approval of this proposal will not increase or decrease the total
amount of investment advisory and sub-advisory fees paid by the Fund. 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 Fund are considered by the
Trustees in approving and renewing advisory and sub-advisory agreements. Any
increase in the total fees paid by the Fund to AMG and any sub-advisers to the
Fund in excess of the total previously approved by shareholders (1.10% of
average daily net assets of the Fund) would continue to require shareholder
approval. If shareholders approve this proposal, AMG, pursuant to the Fund's
investment advisory agreement and other agreements, will continue to provide the
same level of management and administrative services to the Fund as it currently
provides.
THE TERMS OF THE SEC EXEMPTIVE ORDER
On December 7, 2004, the SEC issued an Order exempting the Trust from certain
provisions of the Investment Company Act that require shareholders to approve
sub-advisory agreements on behalf of the various series of the Trust, including
the Fund, and any material amendments to such agreements. Thus, if shareholders
approve this proposal, AMG and the Trust would be authorized to evaluate, select
and retain new sub-advisers for the Fund, or materially amend an existing
sub-advisory agreement, without obtaining further approval of the Fund's
shareholders.
Under the terms of the Order, 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 multi-manager arrangement. Furthermore, within 90 days of a change
to a sub-advisory agreement of the Fund, the Trust must provide the 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 of the Order is that the Trust will still need to obtain shareholder
approval of a sub-advisory agreement for the Fund with a sub-adviser that is an
"affiliated person" of the Trust, as defined in Section 2(a)(3) of the
Investment Company Act.
If shareholders of the Fund do not approve the multi-manager arrangement, the
Trust will continue to seek shareholder approval to enter into sub-advisory
agreements with respect to the Fund or to materially amend such agreements.
OTHER INFORMATION
PROXY SOLICITATION
The costs of the Meeting, estimated to be approximately $42,000, not including
the cost of solicitation, will be paid by the Fund. The principal solicitation
will be by mail, but in order to obtain the necessary quorums at the Meeting,
supplementary solicitation may be made by mail, phone, e-mail or personal
interview by officers of the Company or officers or employees of the Adviser or
its affiliates. The Trust has retained MIS, an ADP company to aid in the
solicitation of proxies at a cost estimated not to exceed $$40,200 plus
out-of-pocket expenses. The Fund will request broker-dealer firms, custodians,
nominees and fiduciaries to forward proxy materials to the beneficial owners of
Fund shares held of record by such persons.
SHAREHOLDER VOTING
Holders of the Fund's Class A, Class B, Class C, and Class Y shares of
beneficial interest (collectively, the "Shares") of record as of the close of
business on April 7, 2006 (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 Shares are entitled to fractional votes, without regard
to Class. As of the Record Date, the outstanding Shares of the Fund were as
follows:
OUTSTANDING OUTSTANDING OUTSTANDING OUTSTANDING TOTAL
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS Y SHARES OUTSTANDING SHARES
- -------------- -------------- -------------- -------------- ------------------
10,803,852.0930 198,194.0390 726,249.220 9,390,269.090 21,111,564.442
The presence in person or by proxy of more than 50% of the outstanding Shares of
the Fund (without regard to Class) entitled to vote at the Meeting will
constitute a quorum for the Meeting. If a quorum is not present, sufficient
votes are not received by the date of the Meeting, or the holders of Shares
present in person or by proxy determine to adjourn the Meeting for any other
reason, a person named as proxy may propose one or more adjournments of the
Meeting 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 will require the affirmative vote of a "majority of
the outstanding voting securities of the Fund" as defined in the Investment
Company 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
To the best of the Trust's knowledge, as of the Record Date, the Directors and
officers of the Trust as a group 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.
As indicated below, Bank of Hawaii or its affiliates may be deemed to have, or
share, investment and/or voting power with respect to approximately 16.15% of
the outstanding shares of the Fund, based upon the Bank's investment discretion
for trust and other client accounts, with respect to which shares Bank of Hawaii
and its affiliates disclaim beneficial ownership. On Proposal 2, 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. Certain officers and a Trustee of the Trust
are employees of either Bank of Hawaii or its affiliates.
Unless otherwise indicated, the address of STROBRO is c/o Bank of Hawaii, P.O.
Box 1930, Honolulu, HI 96805. In addition, unless otherwise indicated, the
address of: (a) First Clearing, LLC ("First Clearing") is 10750 Wheat First
Drive, Glen Allen, VA 23060; (b) National Financial Services LLC ("NFS") is 200
Liberty St., New York, N.Y. 10281; (c) Pershing LLC ("Pershing") is One Pershing
Plaza, 14th Floor - Mutual Funds, Jersey City, NJ 07399; (d) Strafe Co.
("Strafe") is Yamagata Crut PCIAA, PO Box 160, Westerville, OH 43086; (e) Trico
& Co. ("Trico") is PO Box 631, Columbus, MS 39705 (f) Union Bank Tr Nominee
("Union") is PO Box 85484, San Diego, CA 92628; (g) Vanguard Fiduciary Trust
Company ("Vanguard") is P.O. Box 2600 VM 613, Attn: Outside Funds, Valley Forge,
PA 19482.
CLASS A CLASS B CLASS C CLASS Y
------------------------------- ------------------------ ------------------------ ------------------------
PERCENTAGE OF NUMBER OF PERCENTAGE OF NUMBER OF PERCENTAGE OF NUMBER OF PERCENTAGE OF
RECORD HOLDER NUMBER OF SHARES FUND SHARES FUND SHARES FUND SHARES FUND
- -------------- ---------------- ------------- --------- ------------- --------- ------------- --------- -------------
First Clearing 237,647 33.13%
NFS 5,280,935 48.98% 185,099 93.39% 98,317 13.71%
Pershing 1,758,513 16.31% 155,579 21.69%
Strafe 1,726,497 16.01%
STROBRO 3,428,426 36.50%
Trico 513,418 5.47%
Union 786,733 8.38%
Vanguard 1,914,298 20.38%
SHAREHOLDER PROPOSALS
Neither the Trust nor the Fund holds 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
The Asset Management Group of Bank of Hawaii serves as investment adviser to the
Funds; its address is 111 South King Street, Honolulu, Hawaii 96813. BISYS Fund
Services Ohio, Inc. serves as administrator to the Funds pursuant to an
Administration Agreement and BISYS Fund Services Limited Partnership 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. YOU MAY
ALSO VOTE BY TELEPHONE OR VIA THE INTERNET. SEE THE ENCLOSED PROXY CARD FOR
INSTRUCTIONS.
By order of the Board of Trustees,
/s/ Patrick Keniston
- -------------------------------------
Patrick Keniston
Secretary
APPENDIX A
FORM OF SUB-ADVISORY AGREEMENT
PACIFIC CAPITAL SMALL CAP FUND
THIS AGREEMENT is made as of _________, 2006 among Pacific Capital Funds (the
"Trust"), the Asset Management Group of Bank of Hawaii (the "Adviser"), and
Wellington Management Company, LLP (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
Pacific Capital Small Cap Fund (the "Fund");
WHEREAS, the Adviser desires to retain the Sub-Adviser to assist it in the
provision of a continuous investment program for a portion of the assets of 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 portion of the Fund's investment portfolio designated from
time to time by the Adviser by written notice to the Sub-Adviser (the
"Account"), 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. The Adviser hereby acknowledges receipt of a copy
of Part II of the Sub-Adviser's Form ADV, as most recently filed with the
Securities and Exchange Commission.
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 Account, including
investment research and management with respect to all securities and
investments and cash equivalents in the Account. 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 Account:
(a) determine from time to time what securities and other investments
will be purchased, retained or sold for the Account;
(b) place orders pursuant to its investment determinations for the
Account either directly with the issuer or with any broker or
dealer;
(c) not purchase shares of the Account 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 Account's overall cash position;
(e) attend regular business and investment-related meetings with the
Trust's Board of Trustees and the Adviser if reasonably requested
to do so by the Trust and/or the Adviser;
(f) maintain books and records customarily maintained by sub-advisers
on behalf of their clients with respect to the securities
transactions for the Account, furnish to the Adviser and the
Trust's Board of Trustees such periodic and special reports as
they may reasonably request with respect to the Account, 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;
(g) for so long as the Sub-Adviser provides subadvisory services to
the Fund, if the Fund has a claim or potential claim in any
bankruptcy proceeding, class action securities litigation, or
other litigation or proceeding affecting securities held in the
Account, provide the Fund or its custodian with reasonable
assistance in support of the Fund's pursuit of such claim;
provided, however, that notwithstanding anything else to the
contrary in this Agreement, the Sub-Adviser shall not be required
to file claims or take any related actions on behalf of the Fund
in regards to class action settlements related to securities
currently or previously held in the Account nor shall it be
required to assist the Fund's custodian in the evaluation,
pursuit or settlement of such claims, but will provide all
information reasonably requested by the Adviser or the Fund
regarding the securities involved;
(h) furnish a copy of all amendments to Part II of its Form ADV to
the Adviser at least annually;
(i) will make decisions with respect to the voting of securities in
the Account; provided, however, that the Adviser may instruct the
Sub-Adviser to discontinue such voting and the Adviser or its
designee shall take on such responsibility; and
(j) notify the Adviser of any changes in the membership of its
partnership at least annually.
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 the Investment Advisers Act of 1940, as amended
and the provisions of the 1940 Act, as amended which relate to
the subadvisory services it provides to the Fund;
(b) forward a report reflecting trade activity to the Adviser on the
first business day following the day of the trade; and
(c) treat confidentially and as proprietary information of the Trust
all records and other information relative to the Trust 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).
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 prevent the Sub-Adviser from acting as
investment adviser or manager for any other person or persons, including other
management investment companies. The Trust and Adviser acknowledge and agree
that: (i) the Sub-Adviser acts as adviser to other clients and may publish or
give advice and take action with respect to any other client, which may differ
from the timing or nature of any action taken by the Sub-Adviser with respect to
the Account; (ii) the Sub-Adviser will not have any obligation to
purchase or sell, or to recommend for purchase or sale, by the Account any
securities that the Sub-Adviser, its partners, affiliates or employs may
purchase or sell for any other client or themselves if, in their reasonable
opinion, such transaction appears inadvisable for the Account; and (iii)
transactions in a specific security may not be accomplished for all clients at
the same time at the same price.
5. Portfolio Transactions. Investment decisions for the Account 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 Account and
such investment companies and accounts may, however, invest in the same
securities. When securities transactions of the Account and another investment
company or account are aggregated, 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 Account 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
Account or the size of the position obtained or sold by the Account. To the
extent permitted by law, the Sub-Adviser may aggregate the securities to be sold
or purchased for the Account 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 pursuant to its investment
determination for the Account 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, but not limited
to, 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 Account 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 Account 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
Account. 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; provided, however, that the Adviser must
identify its affiliated persons to the Sub-Adviser (excluding affiliated persons
of the Sub-Adviser), and the Sub-Adviser must identify its affiliated persons to
the Fund.
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 costs associated with the execution of securities,
commodities or other investment transactions (including brokerage commissions
and other transaction charges, if any) purchased for the Account.
8. Compensation. For the services provided and the expenses assumed with
respect to the Account pursuant to this Agreement, the Sub-Adviser shall be
entitled to a fee, computed daily and payable quarterly directly from the Fund,
calculated at the annual rate of 0.70% on the first $150 million of the
Account's average daily net assets and 0.65% on average daily net assets in
excess of $150 million. In the event that this Agreement commences
or terminates during any portion of a year, the fee due to the Sub-Adviser shall
be prorated based upon the number of days the Agreement was in effect.
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.
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, in any advertising or
promotional materials without the prior approval of the Sub-Adviser, which
approval shall not be unreasonably withheld or delayed; provided, however, that
no such approval shall be required for references in the Fund's registration
statement, shareholder reports and regulatory filings concerning the identity of
and services provided by the Sub-Adviser to the Fund; and provided further, that
such approval with respect to substantially identical advertising and
promotional materials shall be required only with respect to the first use of
such materials.
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:
Wellington Management Company, LLP
75 State Street
Boston, Massachusetts 02109
Attention: Mutual Fund Group
With a copy to the Legal Services Group at the same address
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
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. 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.
14. 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.
15. 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]
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.
ASSET MANAGEMENT GROUP OF
BANK OF HAWAII
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
WELLINGTON MANAGEMENT COMPANY, LLP
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
PACIFIC CAPITAL FUNDS
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES
PACIFIC CAPITAL SMALL CAP FUND
SPECIAL MEETING OF Shareholders - JUNE 9, 2006
VOTE TODAY BY MAIL,
TOUCH-TONE PHONE OR THE INTERNET
CALL 1-888-221-0697 OR
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The undersigned hereby appoints Patrick Keniston and Heather Slavkin, or
either of them (each with full power to act in the absence of the other and each
with full power of substitution), his/her attorney and proxy to vote and act
with respect to all shares of Pacific Capital Small Cap Fund (the "Fund"), a
series of Pacific Capital Funds (the "Trust") held by the undersigned at the
Special Meeting of Shareholders of the Fund to be held at 10:00 a.m., Eastern
Time, on June 9, 2006, 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 SMALL CAP FUND WITH
WELLINGTON MANAGEMENT COMPANY, LLP
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. APPROVAL OF A MULTI-MANAGER ARRANGEMENT FOR THE SMALL CAP FUND
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS
PROXY WILL BE VOTED FOR THE PROPOSAL.
PLEASE VOTE, SIGN AND DATE AND RETURN IT
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
YOU CAN ALSO VOTE BY CALLING 1-888-221-0697
OR LOGGING ONTO WWW.PROXYWEB.COM
Dated , 2006
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Name of Shareholder(s) -- Please print or type
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Signature(s) of Shareholder(s)
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Signature(s) of Shareholder(s)
NOTE: This proxy must be signed by the beneficial owner of Fund shares. If
signing as attorney, executor, guardian or in some representative capacity as
an officer of a corporation, please add title as such.