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 MID-CAP FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
1-800-258-9232
August 23, 2006
Dear Shareholder:
The Board of Trustees has called a special meeting of the shareholders of the
Pacific Capital Mid-Cap Fund (the "Fund"), a series of Pacific Capital Funds
(the "Trust"), to take place on September 26, 2006 at the offices of the Trust's
sub-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 sole purpose of this meeting is to seek shareholder approval of a
Sub-Advisory Agreement for the Fund with a new sub-adviser, Chicago Equity
Partners, LLC ("CEP"). The Fund's current sub-adviser, Bankoh Investment
Partners, LLC ("BIP"), is a joint venture between the Bank of Hawaii ("BOH") and
CEP. BOH and CEP have decided to dissolve BIP, and the Board of Trustees of the
Trust recommends that CEP continue to provide services to the Fund directly
rather than through BIP. The terms of the Fund's proposed New Sub-Advisory
Agreement will be substantially similar to those of the Fund's Current
Sub-Advisory Agreement and will not result in any change in fees or management
of the Fund.
THE TRUSTEES HAVE UNANIMOUSLY APPROVED THE PROPOSAL
AND RECOMMEND THAT YOU VOTE "FOR" THE PROPOSAL.
If you have any additional questions, please do not hesitate to 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.
Respectfully,
- -------------------------------------
Robert Crowell
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.
Q. WHO CAN VOTE?
A. Any person owning shares of the Pacific Capital Mid-Cap Fund on August 11,
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(them) in the enclosed postage-paid envelope. If you
need any assistance, or have any questions regarding the proposal or how to
vote your shares, please call Pacific Capital Funds at 1-800-258-9232.
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" the 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
PACIFIC CAPITAL MID-CAP FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
1-800-258-9232
NOTICE
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 26, 2006
To the shareholders of Pacific Capital Mid-Cap Fund:
Notice is hereby given that the Board of Trustees has called a special meeting
of the shareholders of the Pacific Capital Mid-Cap Fund (the "Fund"), a series
of Pacific Capital Funds (the "Trust"), to take place on September 26, 2006, at
the offices of the Trust's sub-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 sole
purpose of approving a New Sub-Advisory Agreement for the Fund with Chicago
Equity Partners, LLC.
AFTER CAREFUL CONSIDERATION, THE BOARD OF TRUSTEES UNANIMOUSLY APPROVED THE
PROPOSAL AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE FUND VOTE "FOR" THE
PROPOSAL.
The matter referred to above is discussed in detail in the proxy statement
attached to this notice. The Board of Trustees has fixed the close of business
on August 11, 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. 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,
- -------------------------------------
Patrick Keniston
Secretary
August 23, 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 MID-CAP FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
1-800-258-9232
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 26, 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 Mid-Cap Fund (the "Fund"), a series of the
Trust, to be held at 10:00 a.m., Eastern Time, on September 26, 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 proposal
set forth in the accompanying notice.
The Trust anticipates that the mailing of proxies and proxy statements to
shareholders will begin on or about August 25, 2006.
Shareholders can find important information about the Fund in the Trust's annual
report dated as of July 31, 2005, 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, 2006 by writing to the Trust
at the above address or by calling the telephone number above. The Trust will
provide copies of the report(s) 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/).
INTRODUCTION
The Fund's portfolio investments are currently managed by Bankoh Investment
Partners, LLC ("BIP" or "the Current-Sub-Adviser") as sub-adviser to the Fund
pursuant to a sub-advisory agreement among the Trust, BIP and the Asset
Management Group of Bank of Hawaii ("AMG" or "the Adviser") as adviser to the
Fund (the "Current Sub-Advisory Agreement"). The Board proposes that the Trust
terminate the Current Sub-Advisory Agreement on or about September 18, 2006, and
that at the same time the Trust enter into a new sub-advisory agreement on
behalf of the Fund (the "New Sub-Advisory Agreement") with AMG and Chicago
Equity Partners, LLC ("CEP" or "the New Sub-Adviser") as sub-adviser to the
Fund.
WHY IS THIS CHANGE BEING RECOMMENDED?
BIP has provided sub-advisory services to the Fund since the Fund commenced
operation in December 2003. BIP is a joint venture between Bank of Hawaii
("BOH") and CEP, and is principally engaged in the business of investment
management for institutions. BOH and CEP have informed the Board that it is no
longer efficient to continue their joint venture and that they intend to
dissolve BIP. After reviewing the matter, for the reasons described further
below, the Trustees have determined that appointment of CEP as sub-adviser to
directly manage the Fund's investment portfolio is in the best interests of the
Fund and its shareholders.
HOW WILL THE NEW ARRANGEMENT AFFECT THE MANAGEMENT OF THE FUND?
The proposed change will not affect the persons providing portfolio management
services to the Fund. In addition, the terms of the New Sub-Advisory Agreement
are substantially similar to the terms of the Current Sub-Advisory Agreement.
For its services, the New Sub-Adviser will receive the same fee that the Current
Sub-Adviser receives, 0.20% of the average daily value of the net assets of the
Fund. The terms of the Current Sub-Advisory Agreement and the New Sub-Advisory
Agreement are described in greater detail below.
THE CURRENT SUB-ADVISORY AGREEMENT
BIP serves as sub-adviser to the Fund pursuant to the Current Sub-Advisory
Agreement, which was entered into on December 29, 2003. The Current Sub-Advisory
Agreement was approved by the initial shareholders of the Fund upon its
formation, and was last approved by the Board of Trustees of the Trust at its
September 20, 2005 regular meeting.
Under the Current Sub-Advisory Agreement, BIP effects portfolio transactions for
the Fund, using its own discretion and without prior consultation with AMG, and
reports periodically to AMG and to the Board of Trustees. For its services BIP
receives an annual fee at the rate of 0.20% of the Fund's average net assets,
computed daily and payable quarterly. The aggregate fees paid to BIP for the
Fund's last two fiscal years ended July 31 were as follows: 2006 -- $162,018;
and 2005 -- $127,645.
The Current Sub-Advisory Agreement provides that BIP 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"), in either event so long as its
continuance is also approved by a majority of the Trust's Trustees who are not
"interested persons" (as defined in the Investment Company Act) of any party to
the Agreement (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. It is terminable any time without penalty, on 60 days'
notice, by AMG, BIP, 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 September 28, 2006 following
shareholder approval, are substantially the same as those of the Current
Sub-Advisory Agreement. Under the New Sub-Advisory Agreement, CEP would among
other things: (i) provide a continuous investment program for the Fund's assets;
(ii) select brokers and dealers through which securities transactions are to be
executed; and (iii) maintain certain records required under relevant provisions
of the Investment Company Act. As consideration for its services, CEP would
receive the same annual fee as the Current Sub-Adviser -- at the rate of 0.20%
of the Fund's average net assets, computed daily and payable quarterly.
Like the Current Sub-Advisory Agreement, the New Sub-Advisory Agreement provides
that CEP 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 (as defined
in the Investment Company Act). It is terminable any time without
penalty, on 60 days' notice, by AMG, CEP, the Board of Trustees or vote of a
majority of the Fund's shareholders.
INFORMATION ABOUT CHICAGO EQUITY PARTNERS
CEP is a Delaware limited liability company which has been engaged in the
management of investment portfolios since its organization in May 2000. Its
principal offices are at 180 North LaSalle Street, Suite 3800, Chicago,
Illinois. The firm is registered as an investment adviser with the U.S.
Securities and Exchange Commission, the Ontario Securities Commission, and the
New Brunswick Securities Commission.
The New Sub-Adviser managed approximately $11.0 billion in assets as of June 30,
2006. The firm manages equity and fixed income portfolios for institutional
clients such as pension funds, mutual funds and charitable foundations. The
minimum account size is generally set at $10 million.
CEP does not currently serve as adviser or sub-adviser to any funds having
similar investment objectives as the Fund.
PORTFOLIO MANAGEMENT TEAM
CEP uses a team approach to manage the Fund. The team consists of David
Coughenour, Robert Kramer and David Johnsen. Mr. Coughenour, Chief Investment
Officer-Equity, is one of the founding members and leads the team. He joined CEP
in 1989 and has sixteen years of industry experience. Mr. Kramer, Managing
Director, is also one of the founding members of CEP and has been with the firm
since 1989. He has eighteen years of industry experience, and is responsible for
following and analyzing the healthcare sector. Mr. Johnsen, Managing Director,
is also one of the founding members of CEP and has been with the firm since
1989. He has twenty-nine years of investment experience, and is responsible for
following and analyzing the technology hardware and consumer staples sectors.
Each member of the team is a Chartered Financial Analyst, and Mr. Kramer is also
a Certified Public Accountant.
DIRECTORS AND OFFICERS OF CEP
CEP is owned by its eight principals, all of whom are employees of the firm:
James D. Miller, CFA Chairman
Patrick C. Lynch, CFA President
David C. Coughenour, CFA Chief Investment Officer - Equity
James A. DeZellar, CFA Managing Director - Client Service
Keith Gustafson, CFA Managing Director - Quantitative Analysis
Robert H. Kramer, CFA, CPA Managing Director - Research, Trading and Technology
David R. Johnsen, CFA Managing Director - Fundamental Research
Patrick J. Morris, CFA Managing Director - Trading
CONSIDERATION OF THE NEW SUB-ADVISORY AGREEMENT BY THE BOARD
On June 21, 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
Trustees' recommendation to approve the New Sub-Advisory Agreement are described
below. In previous years the Trustees received a wide variety of material
relating to the services provided by the Current Sub-Adviser, including its
portfolio management services which were provided principally by CEP personnel
acting on behalf of the Current Sub-Adviser. They also evaluated information
provided by CEP at the meeting in accordance with section 15(c) of the
Investment Company Act. In determining whether to approve the New Sub-Advisory
Agreement, the Trustees received assistance and advice regarding legal and
industry standards from their independent counsel. They discussed the renewals
with management representatives and in a private session with independent legal
counsel at which no representatives of management were present. In deciding to
recommend approval of the New Sub-Advisory Agreement, the Trustees did not
identify any single or particular information
that, in isolation, was the controlling factor. The following summary describes
the most important, but not all, of the factors considered by the Board.
As part of their review, the Board examined the ability of CEP to provide high
quality investment management services to the Fund. The Board considered the
quality and depth of CEP's organization in general and of the investment
professionals currently providing services on behalf of BIP to the Fund who
would continue to provide such services on behalf of CEP; the investment
philosophy and decision-making processes of those professionals; the capability
and integrity of CEP's senior management and staff; the quality of CEP's
services with respect to regulatory compliance and compliance with the
investment policies of the Fund; and the business reputation, financial
condition and operational stability of CEP. The Board concluded that CEP would
likely provide the same high quality service that BIP had provided.
In reviewing the various factors referred to above, the Board noted that the
Fund has outperformed its benchmark (the S&P Mid-Cap 400 Index) and Lipper peer
group since the Fund's inception, but had underperformed in the past year
despite trending in the same direction. The Board concluded that the performance
record of the investment professionals who would manage the Fund on behalf of
CEP indicated that their continued management would benefit the Fund and its
shareholders.
In reviewing the fees and expenses borne by the Fund, the Board noted among
other things that there would be no change in the Fund's sub-advisory fee as a
result of the change in sub-advisers. The Board also noted that that particular
fee had been compared to fees paid by other similarly managed funds at a prior
meeting. The Board reviewed a sample CEP fee schedule which reflected the
standard fee other institutional accounts with similar objectives and policies
would expect to pay for a portfolio invested in CEP's mid cap core strategy, and
noted that the fees paid by the Fund to CEP represented a significant discount
from CEP's published fee schedule and would be advantageous to the Fund.
The Board also evaluated the projected benefits of the Fund's sub-advisory
relationship to CEP, including the projected profitability of its relationship
with the Fund. The Board noted that although CEP's sub-advisory fee did not have
break points and thus would not reflect economies of scale, if any, the fees it
received from the Fund would be below its lowest breakpoint for other
institutional clients and would thus reflect the economies of scale of its
overall investment management business. The Board considered that CEP does not
generally compute profitability on an account or fund basis and that CEP does
not engage in soft dollar transactions on behalf of its clients and would not
receive significant ancillary benefits as a result of its relationship with the
Fund, other than bundled research of the type advisers normally received from
the brokers executing transactions on behalf of their clients and the ability to
refer to its sub-advisory relationship with the Trust. The Independent Trustees
concluded that the Fund's cost structure was reasonable and CEP's projected
profit margin with respect to its relationship with the Fund would be within the
range of acceptable industry standards.
Based on their review, including their consideration of each of the factors
referred to above, the Board (including all of the Independent Trustees)
determined, in the exercise of their business judgment, that CEP's proposed
sub-advisory fee was fair, and that approval of the New Sub-Advisory Agreement
with CEP was in the best interest of the Fund and its shareholders.
THE BOARD OF TRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS APPROVE THE NEW SUB-ADVISORY AGREEMENT.
OTHER INFORMATION
PROXY SOLICITATION
The costs of the Meeting, estimated to be approximately $18,200 will be paid by
the Fund. 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 Fund may retain a proxy solicitation firm to assist
in the solicitation
of proxies at the Fund's expense. The Fund will request broker-dealer firms,
custodians, nominees and fiduciaries to forward proxy materials to the
beneficial owners of the Fund shares held of record by such persons.
SHAREHOLDER VOTING
Holders of the Fund's Class A, Class C, and Class Y shares of beneficial
interest (collectively, the "Shares") of record as of the close of business on
August 11, 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 TOTAL OUTSTANDING
CLASS A SHARES CLASS C SHARES CLASS Y SHARES SHARES
- -------------- -------------- -------------- -----------------
56,985 37,124 5,338,895 5,433,004
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 the New Sub-Advisory Agreement 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. If
shareholders fail to approve the New Sub-Advisory Agreement, BIP will continue
to serve as the sub-adviser to the Fund until it dissolves, and the Board will
consider what alternatives may be most appropriate for future management of the
Fund.
INTERESTED PARTIES
To the best of the Trust's knowledge, as of the Record Date the Trustees and
officers of the Trust as a group owned less than 1% of the outstanding shares of
the Fund. The following table sets forth, to the best of the Trust's knowledge
and 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 class of the Fund.
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) Howard Mark Hodel ("Hodel") is 3258 Oahu Ave., Honolulu, HI
96822; (b) MG Trust Custodian or Trustee - Traffic Management Inc 401 K PS Plan
("MG") is Suite 300, Denver, CO 80202
CLASS A CLASS C CLASS Y
---------------------- ---------------------- ------------------------
RECORD NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE
HOLDER SHARES OF CLASS SHARES OF CLASS SHARES OF CLASS
- ------ --------- ---------- --------- ---------- ----------- ----------
Hodel 4810.438 6.81%
MG 26112.376 57.33%
STROBRO 5329172.379 99.27%
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
Bank of Hawaii serves as administrator to the Trust pursuant to an
Administration Agreement; its address is 130 Merchant Street, Honolulu, Hawaii
96813. BISYS Fund Services Ohio, Inc. serves as sub-administrator to the Funds
pursuant to an Sub-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,
- -------------------------------------
Patrick Keniston
Secretary
APPENDIX A
FORM OF SUB-ADVISORY AGREEMENT
FORM OF SUB-ADVISORY AGREEMENT
PACIFIC CAPITAL MID-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
Chicago Equity Partners (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 Mid-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 the Fund and the Sub-Adviser is
willing to do so; and
WHEREAS, the Sub-Adviser is willing to furnish such services upon the terms and
conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Adviser hereby appoints the Sub-Adviser to act as the
sub-adviser to the Fund as permitted by the Adviser's Advisory Agreement with
the Trust pertaining to the Fund. Intending to be legally bound, the Sub-Adviser
accepts such appointment and agrees to render the services herein set forth for
the compensation herein provided.
2. Sub-Advisory Services. Subject to the supervision of the Trust's Board
of Trustees and the Adviser, the Sub-Adviser will assist the Adviser in
providing a continuous investment program with respect to the Fund's portfolio,
including investment research and management with respect to all securities and
investments and cash equivalents in the Fund. The Sub-Adviser will provide
services under this Agreement in accordance with the Fund's investment
objectives, policies and restrictions as stated in the Fund's prospectus and
resolutions of the Trust's Board of Trustees applicable to the Fund.
Without limiting the generality of the foregoing, the Sub-Adviser further agrees
that it will, with respect to the Fund:
(a) determine from time to time what securities and other investments
will be purchased, retained or sold for the Fund;
(b) place orders pursuant to its investment determinations for the
Fund either directly with the issuer or with any broker or
dealer;
(c) not purchase shares of the Fund for itself or for accounts with
respect to which it exercises sole investment discretion in
connection with such transactions except as permitted by the
Trust's Board of Trustees or by federal, state and local law;
(d) manage the Fund's overall cash position;
(e) attend regular business and investment-related meetings with the
Trust's Board of Trustees and the Adviser if requested to do so
by the Trust and/or the Adviser; and
(f) maintain books and records with respect to the securities
transactions for the Fund, furnish to the Adviser and the Trust's
Board of Trustees such periodic and special reports as they may
request with respect to the Fund, and provide in advance to the
Adviser all reports to the Board of Trustees for examination and
review within a reasonable time prior to the Trust's Board
meetings.
3. Covenants by the Sub-Adviser. The Sub-Adviser agrees with respect to the
services provided to the Fund that it will:
(a) conform with all Rules and Regulations of the Securities and
Exchange Commission;
(b) telecopy trade information to the Adviser on the first business
day following the day of the trade and cause broker confirmations
to be sent directly to the Adviser; and
(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).
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 Funds are eligible to buy) for its or
their own accounts or for the accounts of others for whom it or they may be
acting; provided, however, that the Sub-Adviser agrees that it will not
undertake any activities which, in its reasonable judgment, will adversely
affect the performance of its obligations to the Fund under this Agreement.
5. Portfolio Transactions. Investment decisions for the Fund shall be made
by the Sub-Adviser independently from those for any other investment companies
and accounts advised or managed by the Sub-Adviser. The Fund and such investment
companies and accounts may, however, invest in the same securities. When a
purchase or sale of the same security is made at substantially the same time on
behalf of the Fund and/or another investment company or account, the transaction
will be averaged as to price, and available investments allocated as to amount,
in a manner which the Sub-Adviser believes to be equitable to the Fund and such
other investment company or account. The Fund acknowledges that in some
instances, this investment procedure may adversely affect the price paid or
received by the Fund or the size of the position obtained or sold by the Fund.
To the extent permitted by law, the Sub-Adviser may aggregate the securities to
be sold or purchased for the Fund with those to be sold or purchased for other
investment companies or accounts in order to obtain best execution.
The Sub-Adviser shall place orders for the purchase and sale of portfolio
securities and shall solicit broker-dealers to execute transactions in
accordance with the Fund's policies and restrictions regarding brokerage
allocations. The Sub-Adviser shall place orders 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 oil a continuing
basis.
Consistent with this obligation, the Sub-Adviser may, to the extent permitted by
law, purchase and sell portfolio securities to and from brokers and dealers who
provide brokerage and research services (within the meaning of
Section 28(e) of the Securities Exchange Act of 1934) to or for the benefit of
the Fund and/or other accounts over which the Sub-Adviser or any of its
affiliates exercises investment discretion. The Sub-Adviser is authorized to pay
to a broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the Fund which is in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction if the Sub-Adviser determines in good faith that such
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Sub-Adviser's overall responsibilities to the
Fund. In no instance will portfolio securities be purchased from or sold to the
Sub-Adviser, or the Fund's principal underwriter, or any affiliated person
thereof except as permitted by the Securities and Exchange Commission.
6. Books and Records. In compliance with the requirements of Rule 3la-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records which it
maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's request.
The Sub-Adviser further agrees to preserve for the periods prescribed by Rule
31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1
under the 1940 Act.
7. Expenses. During the term of this Agreement, the Sub-Adviser shall pay
all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities, commodities and other investments
(including brokerage commissions and other transaction charges, if any)
purchased for the Fund.
8. Compensation. For the services provided and the expenses assumed with
respect to the Fund pursuant to this Agreement, the Sub-Adviser shall be
entitled to a fee, computed daily and payable quarterly directly from the Fund,
calculated at the annual rate of 0.20% on the Fund's average daily net assets.
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 affiliate or
agent of it 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 both (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:
Chicago Equity Partners
180 N. LaSalle St, Suite 3800
Chicago, IL 60601
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]
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:
------------------------------
CHICAGO EQUITY PARTNERS
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
PACIFIC CAPITAL FUNDS
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES
SPECIAL MEETING OF SHAREHOLDERS
PACIFIC CAPITAL MID-CAP FUND
SEPTEMBER 26, 2006
The undersigned hereby appoints Patrick Keniston and Kinga Kapuscinski, 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 the fund listed above (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 September
26, 2006, at the offices of the Trust's sub-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 NEW SUB-ADVISORY AGREEMENT FOR THE FUND WITH CHICAGO EQUITY
PARTNERS, LLC
[ ] 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 , 2006
--------------
----------------------------------------
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.