UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
Pacific Capital Funds
(Name of Registrant as Specified in Its Charter)
___________________________________________________________________________
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(1) Title of each class of securities to which transaction applies:
______________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
______________________________________________________________________
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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PACIFIC CAPITAL FUNDS
PACIFIC CAPITAL INTERNATIONAL STOCK FUND
PACIFIC CAPITAL MID-CAP FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
1-800-258-9232
March 30, 2007
Dear Shareholder:
A special meeting (the "Meeting") of the shareholders of the Pacific Capital
International Stock Fund (the "International Fund") and the Pacific Capital
Mid-Cap Fund (the "Mid-Cap Fund"), each a series of Pacific Capital Funds (the
"Trust"), will be held at the offices of the Trust's sub-administrator, BISYS
Fund Services Ohio, Inc., 100 Summer Street, Suite 1500, Boston, Massachusetts
02110, on Tuesday, April 24, 2007, at 11:00 a.m. local time.
At the Meeting, shareholders of the International Fund and shareholders of the
Mid-Cap Fund will be asked to consider and vote upon an important matter
relating to their respective Fund.
- PROPOSAL ONE would approve a new sub-advisory agreement for the
International Fund. The shareholders of the International Fund are
being asked to approve a new sub-advisory agreement among the Trust,
Asset Management Group of Bank of Hawaii, and Hansberger Global
Investors, Inc.
- PROPOSAL TWO would approve a new sub-advisory agreement for the
Mid-Cap Fund. The shareholders of the Mid-Cap Fund are being asked to
approve a new sub-advisory agreement among the Trust, Asset Management
Group of Bank of Hawaii, and Chicago Equity Partners, LLC.
To assist you in understanding the matters referred to above, we have prepared a
"Question and Answer" summary. The information provided in the "Question and
Answer" summary, however, is qualified in its entirety by the disclosures
contained in the accompanying proxy statement.
THE TRUSTEES HAVE UNANIMOUSLY APPROVED THE PROPOSALS
AND RECOMMEND THAT YOU VOTE "FOR" THE PROPOSALS.
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.
i
QUESTION AND ANSWER
Q. WHO CAN VOTE?
A. Any person owning shares of the International Fund or the Mid-Cap Fund on
March 2, 2007.
Q. WHO VOTES ON WHICH PROPOSAL?
A. The table below summarizes each proposal to be presented at the Meeting and
shows which shareholders may vote for each proposal.
PROPOSAL NUMBER DESCRIPTION OF PROPOSAL FUND SHAREHOLDERS VOTING
- --------------- --------------------------------------- ------------------------
Proposal One To approve a new sub-advisory agreement International Fund
for the International Fund among the
Trust, Asset Management Group of Bank
of Hawaii, and Hansberger Global
Investors, Inc.
Proposal Two To approve a new sub-advisory agreement Mid-Cap Fund
for the Mid-Cap Fund among the Trust,
Asset Management Group of Bank of
Hawaii, and Chicago Equity Partners,
LLC
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 votes by telephone so
that this Meeting can take place.
Q. HOW CAN I VOTE?
A. You can vote your shares by completing and signing each enclosed proxy card
and mailing it in the enclosed postage-paid envelope. If you need any
assistance, or have any questions regarding the proposals or how to vote
your shares, please call Pacific Capital Funds at 1-800-258-9232.
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" each applicable proposal on the enclosed proxy card.
Q. WHAT IF I HAVE ADDITIONAL QUESTIONS?
A. Contact us by calling 1-800-258-9232. Please note that you cannot cast your
vote by calling this number. To cast your vote, please sign and mail the
enclosed ballot in the envelope provided.
ii
PRELIMINARY COPY
PACIFIC CAPITAL FUNDS
PACIFIC CAPITAL INTERNATIONAL STOCK FUND
PACIFIC CAPITAL MID-CAP FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
1-800-258-9232
----------
NOTICE
----------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 24, 2007
To the shareholders of Pacific Capital International Stock Fund and 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 International Stock Fund (the
"International Fund") and the Pacific Capital Mid-Cap Fund (the "Mid-Cap Fund"),
each a series of Pacific Capital Funds (the "Trust"), to take place at the
offices of the Trust's sub-administrator, BISYS Fund Services Ohio, Inc., 100
Summer Street, Suite 1500, Boston, Massachusetts 02110, on Tuesday, April 24,
2007 at 11:00 a.m. local time, or as adjourned from time to time (the
"Meeting"), for the following purposes:
1. To approve a new sub-advisory agreement for the International Fund among
the Trust, Asset Management Group of Bank of Hawaii, and Hansberger Global
Investors, Inc. (shareholders of the International Fund only).
2. To approve a new sub-advisory agreement for the Mid-Cap Fund among the
Trust, Asset Management Group of Bank of Hawaii, and Chicago Equity
Partners, LLC (shareholders of the Mid-Cap Fund only).
AFTER CAREFUL CONSIDERATION, THE BOARD OF TRUSTEES UNANIMOUSLY APPROVED THE
PROPOSALS AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF EACH FUND VOTE "FOR"
EACH APPLICABLE PROPOSAL.
The matters referred to above are discussed in detail in the proxy statement
attached to this notice. The Board of Trustees has fixed the close of business
on Friday, March 2, 2007 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 EACH 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,
- -------------------------------------
Kinga Kapuscinski
Secretary
March 30, 2007
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
EACH 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 INTERNATIONAL STOCK FUND
PACIFIC CAPITAL MID-CAP FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
1-800-258-9232
----------
PROXY STATEMENT
----------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 24, 2007
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 International Stock Fund (the "International
Fund") and the Pacific Capital Mid-Cap Fund (the "Mid-Cap Fund") (collectively,
the "Funds"), each a series of the Trust, to be held at the offices of the
Trust's sub-administrator, BISYS Fund Services Ohio, Inc., 100 Summer Street,
Suite 1500, Boston, Massachusetts 02110, on Tuesday, April 24, 2007, at 11:00
a.m., local time, 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 following table summarizes the proposal applicable to the International Fund
and the Mid-Cap Fund.
PROPOSAL NUMBER DESCRIPTION OF PROPOSAL APPLICABLE FUND
- --------------- --------------------------------------- ------------------------
Proposal One To approve a new sub-advisory agreement International Fund
for the International Fund among the
Trust, Asset Management Group of Bank
of Hawaii, and Hansberger Global
Investors, Inc.
Proposal Two To approve a new sub-advisory agreement Mid-Cap Fund
for the Mid-Cap Fund among the Trust,
Asset Management Group of Bank of
Hawaii, and Chicago Equity Partners,
LLC
Definitive copies of this proxy statement and the enclosed form of proxy are
intended to be first mailed to shareholders on or about March 30, 2007.
SHAREHOLDERS CAN FIND IMPORTANT INFORMATION ABOUT THE INTERNATIONAL FUND AND THE
MID-CAP FUND IN THE TRUST'S ANNUAL REPORT DATED AS OF JULY 31, 2006 AND
SEMI-ANNUAL REPORT DATED AS OF JANUARY 31, 2007, WHICH PREVIOUSLY HAVE BEEN
FURNISHED TO SHAREHOLDERS. SHAREHOLDERS MAY REQUEST ANOTHER COPY OF THE REPORTS
BY WRITING TO THE TRUST AT THE ADDRESS ABOVE OR BY CALLING THE TELEPHONE NUMBER
ABOVE. THE TRUST WILL PROVIDE COPIES OF THE REPORTS FREE OF CHARGE. TEXT-ONLY
VERSIONS OF THE TRUST'S ANNUAL REPORT AND SEMI-ANNUAL REPORT CAN BE VIEWED
ONLINE OR DOWNLOADED FROM THE TRUST'S WEBSITE
(HTTP://WWW.PACIFICCAPITALFUNDS.COM).
1
PROPOSAL ONE
APPROVAL OF A NEW SUB-ADVISORY AGREEMENT
FOR
THE INTERNATIONAL FUND
(SHAREHOLDERS OF THE INTERNATIONAL FUND ONLY)
INTRODUCTION
On December 13, 2006, the Board approved a new sub-advisory agreement for the
International Fund (the "New International Agreement") among the Trust, Asset
Management Group of Bank of Hawaii ("AMG") and Hansberger Global Investors, Inc.
("Hansberger"). The Board recommends that the shareholders of the International
Fund approve the New International Agreement. The New International Agreement is
currently in effect pending shareholder approval, as described below.
Hansberger currently serves as sub-adviser to the International Fund and has
served in this capacity since June 1, 2004 pursuant to a sub-advisory agreement
among the Trust, AMG and Hansberger dated June 1, 2004 (the "Prior International
Agreement"). The Prior International Agreement was last approved by the Board at
its September 28, 2006 regular meeting and by shareholders of the International
Fund at a special meeting of shareholders held on June 1, 2004. AMG currently
serves as the International Fund's investment adviser.
WHY IS THIS CHANGE BEING RECOMMENDED?
On [________], 2007, IXIS Asset Management US Group, L.P. ("IAMG"), one of the
largest "multi-affiliate" investment management holding companies in the world,
acquired a controlling interest in Hansberger's parent, Hansberger Group, Inc.
("HGI") (the "Hansberger - IAMG Transaction"). Prior to the Hansberger - IAMG
Transaction, IAMG owned approximately 28% of the outstanding common stock and
retained 24.99% of the voting interest of HGI; Thomas L. Hansberger, directly
and through a family limited partnership that he controlled, owned approximately
49% of the outstanding common stock of HGI; and employees of HGI (other than Mr.
Hansberger) and third-party investors held, respectively, approximately 2% and
20% of the outstanding common stock of HGI (before giving effect to the issuance
of shares of common stock in connection with the exercise of stock options or
the vesting of deferred share unit agreements).
Pursuant to a Stock Purchase Agreement dated as of November 15, 2006, IAMG
purchased all of the shares of common stock of HGI owned or controlled by Mr.
Hansberger and non-employee, third-party investors. Upon the closing of the
Hansberger-IAMG Transaction, IAMG held approximately [72%] of the common stock
of HGI on a fully-diluted basis (with the right to vote all of those shares) and
Mr. Hansberger did not hold any shares of common stock of HGI. In addition, in
connection with the acquisition of stock from Mr. Hansberger and third-party
investors, IAMG offered to purchase all shares held by employees of HGI or
Hansberger, including shares obtained through the exercise of deferred stock
units or options. As a result of the tender offer, IAMG's ownership interest in
HGI increased to [__%,], although certain employees own restricted stock units
with respect to HGI shares which, if vested, amount to [__]% of the common stock
of HGI. Mr. Hansberger continues to serve as Chairman of HGI and Ronald W. Holt,
Jr., who has been with Hansberger since 1997 and who previously served as
President and Managing Director of Research, now serves as President and Chief
Executive Officer of HGI.
The Prior International Agreement terminated, as required by the Investment
Company Act of 1940, as amended (the "Investment Company Act"), immediately upon
the closing of the Hansberger - IAMG Transaction on [_________], 2007. To ensure
continuation of the sub-advisory services provided by Hansberger to the
International Fund, the Board approved the New International Agreement. Rule
15a-4 under the Investment Company Act permits a fund to enter into an interim
arrangement prior to shareholder approval, provided that the interim arrangement
is approved by shareholders within 150 days of its effectiveness. Pursuant to
Rule 15a-4, the New International Agreement is currently in effect but will
terminate on [_________], 2007 unless approved by the shareholders of the
International Fund. Accordingly, the Board proposes that shareholders of the
International Fund approve the New International Agreement. If shareholders
approve the New International Agreement, the New International Agreement will
remain in effect until [_________], 2009.
2
HOW WILL THE NEW ARRANGEMENT AFFECT THE MANAGEMENT OF THE INTERNATIONAL FUND?
The proposed change will not affect the investment approach of the International
Fund or the individuals providing portfolio management services to the
International Fund. In addition, the terms of the New International Agreement
are substantially similar to the terms of the Prior International Agreement. For
its services under both the Prior International Agreement and the New
International Agreement, Hansberger receives an annual fee at the rate of 0.60%
of the first $75 million of the International Fund's average daily net assets
and 0.35% of its average daily net assets in excess of $75 million. The
sub-advisory fee the International Fund paid to Hansberger under the Prior
International Agreement for the last fiscal year was $723,787. Had the New
International Agreement been in place for that period, the sub-advisory fee
would have been the same. The terms of the Prior International Agreement and the
New International Agreement are described in greater detail below.
NEW INTERNATIONAL AGREEMENT
A copy of the New International Agreement, as further described below, is set
forth as Appendix A to this proxy statement. The following description of the
New International Agreement is qualified in its entirety by reference to the
full text of the New International Agreement as set forth in Appendix A.
The New International Agreement provides that Hansberger is responsible for,
among other things (i) providing a continuous investment program with respect to
the International Fund's portfolio, including investment research and management
with respect to all securities and investments and cash equivalents held by the
International Fund; (ii) selecting brokers and dealers through which securities
transactions are to be executed; (iii) voting proxies on behalf of the
International Fund and providing proxy voting information to the International
Fund and its agents in connection with the annual report on Form N-PX; and (iv)
maintaining certain records required under the relevant provisions of the
Investment Company Act on behalf of the International Fund. For its services
under the New International Agreement, Hansberger is entitled to a fee from the
International Fund, computed daily and payable quarterly, calculated at the
annual rate of 0.60% of the first $75 million of the International Fund's
average daily net assets and 0.35% of its average daily net assets in excess of
$75 million.
The New International Agreement provides that neither Hansberger nor any of its
directors, officers, agents or employees will be liable or responsible to the
Trust, its shareholders or AMG for any error of judgment or in any other event,
except for liability resulting from Hansberger's bad faith, willful misconduct
or gross negligence in the performance of its duties or reckless disregard of
such duties.
The New International Agreement has an initial term of two years and continues
thereafter automatically for successive annual periods, provided such
continuance is specifically approved at least annually by the Board or by vote
of the lesser of (a) 67% of the shares of the International Fund represented at
a meeting if holders of more than 50% of the outstanding shares of the
International Fund are present in person or by proxy, or (b) more than 50% of
the outstanding shares of the International Fund. In either event its
continuance must also be approved by a majority of the Trustees who are not
"interested persons" (as defined in the Investment Company Act) of any party to
the New International Agreement (the "Independent Trustees"), by vote cast in
person at a meeting called for the purpose of voting on such approval. The New
International Agreement is terminable at any time without penalty, on 60 days'
notice, by AMG, Hansberger or the Board or by vote of the lesser of (a) 67% of
the shares of the International Fund represented at a meeting if holders of more
than 50% of the outstanding shares of the International Fund are present in
person or by proxy, or (b) more than 50% of the outstanding shares of the
International Fund. In addition, the New International Agreement will terminate
automatically in the event of its assignment (as defined in the Investment
Company Act).
COMPARISON OF THE PRIOR AND NEW INTERNATIONAL AGREEMENTS
With the exception of the effective date of the New International Agreement and
the addition of certain provisions required by Rule 15a-4 under the Investment
Company Act, the New International Agreement is substantially the same as the
Prior International Agreement.
Because the New International Agreement is currently in effect pending
shareholder approval, the New International Agreement includes additional
duration and termination provisions required by Rule 15a-4. Specifically, the
New International Agreement will terminate after 150 days ([__________], 2007)
unless it is approved by vote of a majority of the outstanding voting securities
of the International Fund. During the period from ([__________],
3
2007) until the shareholders' approval of the New International Agreement (the
"Interim Period"), the New International Agreement is terminable at any time
without penalty on 10 days' notice (i) by AMG, Hansberger or the Board or (ii)
by vote of a majority of the outstanding voting securities of the International
Fund (as defined in the Investment Company Act).
The advisory fee payable to Hansberger under the New International Agreement is
the same as under the Prior International Agreement. Unlike the Prior
International Agreement, the New International Agreement includes an additional
provision with respect to the compensation payable during the Interim Period as
required by Rule 15a-4. Under the New International Agreement, during the
Interim Period compensation must be placed in an interest bearing account with
the International Fund's custodian bank until the shareholders of the
International Fund approve the New International Agreement. If shareholders
approve the New International Agreement, Hansberger will be paid the amount in
such account on the date of such approval. If shareholders fail to approve the
New International Agreement, Hansberger will be paid out of such account the
lesser of (i) any costs reasonably incurred by Hansberger in performing the
sub-advisory services, plus interest earned on that amount while in the interest
bearing account, and (ii) the total amount in such interest bearing account
(plus interest accrued thereon).
INFORMATION ABOUT HANSBERGER
Hansberger conducts a worldwide portfolio management business. As of December
31, 2006, Hansberger had approximately $10 billion in assets under management,
managing global, international and emerging markets equity portfolios on behalf
of separate portfolios and institutional mutual funds.
Hansberger was founded by Thomas L. Hansberger and is wholly owned by HGI. Both
Hansberger and HGI, located at 401 East Las Olas Boulevard, Suite 1700, Fort
Lauderdale, Florida 33301, are Delaware corporations. [HGI is owned by IAMG,
which holds __% of the voting securities, and employees of HGI and third-party
investors who hold __% and __%, respectively, of the voting securities of HGI].
IAMG is located at [__________.]
PORTFOLIO MANAGEMENT TEAM
The International Fund is managed by Thomas R. H. Tibbles and Lauretta (Retz)
Reeves. Mr. Tibbles, CFA, joined Hansberger in 1999 and serves as its Chief
Investment Officer - Growth Team, a portfolio manager and a research analyst.
Before joining Hansberger, he was the Head of the Global Equity Team at Indago
Capital Management in Toronto, an affiliate of Canada Life. From 1993 until
joining Indago in 1996, he served as Vice President, International Equities for
Sun Life Investment Management, managing a portfolio of non-North American
equity securities for pension and mutual fund clients. Mr. Tibbles began his
career in the investment industry in 1986. Ms. Reeves, CFA, joined Hansberger in
1996 and serves as its Chief Investment Officer - Value Team, Managing Director
- -- Research Technology, a portfolio manager and a research analyst. From 1987 to
1996 Ms. Reeves was Senior Vice President at Templeton Worldwide in the research
and portfolio management group. While at Templeton, Ms. Reeves managed several
separate accounts and mutual funds with combined assets of over $1 billion.
DIRECTORS AND OFFICERS OF HANSBERGER
The following table lists the directors and principal executive officers of
Hansberger.
NAME PRINCIPAL OCCUPATION
---- --------------------------------------------------------
Thomas L. Hansberger Chairman and Treasurer of Hansberger; Director and
Treasurer of HGI; Director of HGI (HK) Ltd.; General
Partner of SLW Family LP
Ronald W. Holt, Jr. President and Chief Executive Officer of Hansberger and
HGI
Wesley E. Freeman Director, Managing Director of Institutional Marketing
and Member of Management Committee of Hansberger
4
The address of each person listed above is 401 East Las Olas Boulevard, Suite
1700, Fort Lauderdale, Florida 33301.
OTHER FUNDS
Hansberger acts as adviser or sub-adviser for other funds with similar
investment objectives as the International Fund. The following table sets forth
relevant information with respect to each fund for which Hansberger acts as an
adviser or a sub-adviser.
NET ASSETS OF CONTRACTUAL ANNUAL RATE OF
THE FUND AS OF COMPENSATION TO HANSBERGER
DECEMBER 31, (BASED ON EACH FUND'S ADVISER OR
NAME OF FUND 2006 AVERAGE DAILY NET ASSETS) SUB-ADVISER
------------ -------------- --------------------------------------- -----------
Hansberger Emerging Markets Fund [$__________] 1.00% of all assets(a) Adviser
Hansberger International Core Fund [$__________] 0.75% of all assets(a) Adviser
Hansberger International Growth Fund [$__________] 0.75% of all assets(a)(b) Adviser
Hansberger International Value Fund [$__________] 0.75% of all assets(a) Adviser
Hansberger International Fund [$__________] 0.45% of the first $200 million Sub-Adviser
0.40% of amounts over $200 million
IXIS Equity Diversified Portfolio [$__________*] 0.45% of the first $250 million Sub-Adviser
0.40% of amounts over $250 million
IXIS Moderate Diversified Portfolio [$__________*] 0.45% of the first $250 million Sub-Adviser
0.40% of amounts over $250 million
ING International Capital Appreciation Fund [$__________] 0.45% of the first $500 million Sub-Adviser
0.40% of the next $500 million
0.35% of assets in excess of $1 billion
Legg Mason Partners - Hansberger Global
Value Fund [$__________] 0.50% of all assets Sub-Adviser
Maryland Bank and Trust - International
Equity Fund [$__________*] 0.60% of all assets Sub-Adviser
Vanguard International Value Fund [$__________*] 0.475% of the first $50 million Adviser
0.15% of the next $450 million
0.12% of the next $500 million
0.11% of assets over $1 billion
The above "basic" fee is adjusted up or
down depending on the cumulative
investment performance of the fund
relative to its benchmark
5
* Hansberger manages only a portion of this fund's assets and other
sub-advisers manage the remaining portions of the fund's assets. This
amount reflects the net assets of the portfolio that are managed by
Hansberger.
(a) Hansberger has provided a letter agreement to the International Value Fund,
Emerging Markets Fund, International Growth Fund and International Core
Fund whereby Hansberger will waive a portion of its management fee (and, to
the extent necessary, bear other expenses) if total expenses, not including
brokerage, interest, taxes, deferred organizational and extraordinary
expenses, exceed 1.00% and 1.15% (1.25% and 1.40% for the Emerging Markets
Fund) for the Institutional and Advisor Class shares of each Fund,
respectively. The letter agreement will continue in effect through April
30, 2008.
(b) Hansberger has voluntarily agreed to provide a breakpoint in the advisory
fee of the International Growth Fund such that Hansberger will reduce its
management fee from 0.75% to 0.70% on the combined assets of the
International Growth Fund and the ING International Capital Appreciation
Fund (a registered fund that is sub-advised by Hansberger). This breakpoint
may be discontinued at any time. Hansberger does not presently intend to
discontinue the breakpoint as a result of the Hansberger-IAMG Transaction.
CONSIDERATION OF THE NEW INTERNATIONAL AGREEMENT BY THE BOARD
On December 13, 2006, the Board, including a majority of the Independent
Trustees, met in person at a meeting called for the purpose of considering,
among other things, the New International Agreement. The Board last approved the
Prior International Agreement in September 2006, in connection with its regular
annual review of the Agreement. Accordingly, the Board considered the New
International Agreement based on its re-review of the information it had
considered in September 2006, its experience with Hansberger since that date,
and its review of information provided by Hansberger with respect to changes
since that date (including information about the Hansberger - IAMG Transaction).
In connection with their deliberations, the Trustees received assistance and
advice from their independent counsel regarding legal standards. They discussed
the renewal of the New International Agreement with management and in a private
session with independent legal counsel at which no representatives of management
were present.
In reviewing the nature, extent and quality of the services to be provided by
Hansberger, the Board considered, among other things, the quality and depth of
the investment professionals currently providing services to the International
Fund; the long-term track record of Hansberger; the investment philosophy and
decision-making processes of those professionals; the capability and integrity
of Hansberger's senior management and staff; the quality of Hansberger's
services with respect to regulatory compliance and compliance with the
investment policies of the International Fund; and the business reputation,
financial condition and operational stability of Hansberger. After reviewing
these and related factors, the Board concluded that Hansberger had provided high
quality services to the International Fund in the past and would continue to do
so in the future.
In connection with its evaluation of the New International Agreement, the Board
noted the strong performance of the International Fund under the Prior
International Agreement; that since Hansberger has been the International Fund's
sub-adviser, the performance of the International Fund has improved relative to
its benchmark, the Morgan Stanley Capital International (MSCI) All Country World
(ACWI) ex US Index, and its peer group of funds; that the returns of the
International Fund had been in the double-digits for the one and three-year
periods ended October 31, 2006; and that Hansberger had satisfied the desire of
the International Fund's shareholders for a relatively conservative investing
style. The Board concluded that the performance of the International Fund had
been satisfactory and that the record of the investment professionals who manage
the International Fund indicated that Hansberger's continued management would
benefit the International Fund and its shareholders.
In reviewing the fees and expenses borne by the International Fund, the Board
noted, among other things, that the New International Agreement would not change
the International Fund's sub-advisory fee or the other terms of Hansberger's
sub-advisory arrangement with the International Fund, that the fee continued to
be reasonable when compared to fees paid by other similarly managed funds, and
that the fee was relatively favorable when compared to the fees paid by
Hansberger's other institutional clients. The Board also noted that Hansberger's
fee schedule included breakpoints and would therefore reflect economies of
scale, if any, realized by Hansberger in managing the International Fund. The
Board also noted that Hansberger would not receive significant ancillary
benefits as a result of its relationship with the International Fund, other than
bundled research of the type normally provided by executing brokers and its
ability to refer to its sub-advisory relationship with the Trust. The Board
concluded that
6
the International Fund's cost structure was reasonable and that Hansberger's
projected profit margin with respect to its relationship with the International
Fund would continue to be within the range of acceptable industry standards.
In considering the impacts of the Hansberger--IAMG Transaction, the Board noted
that IAMG is a multi-manager holding company of a number of investment
management firms that provides considerable autonomy to the management of those
firms; that no changes were planned to the current portfolio management team or
investment approach upon completion of the Hansberger--IAMG Transaction; and
that the rate of compensation under the New International Agreement would be the
same as the rate under the Prior International Agreement. The Board concluded
that the Hansberger--IAMG Transaction would not adversely impact the
International Fund.
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 Hansberger's
proposed sub-advisory fee was fair, and that approval of the New International
Agreement with Hansberger was in the best interest of the International Fund and
its shareholders.
THE BOARD OF TRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS OF THE INTERNATIONAL FUND APPROVE THE NEW
INTERNATIONAL AGREEMENT FOR THE INTERNATIONAL FUND.
PROPOSAL TWO
APPROVAL OF A NEW SUB-ADVISORY AGREEEMNT
FOR
THE MID-CAP FUND
(SHAREHOLDERS OF THE MID-CAP FUND ONLY)
INTRODUCTION
On December 13, 2006, the Board approved a new sub-advisory agreement for the
Mid-Cap Fund (the "New Mid-Cap Agreement") among the Trust, Asset Management
Group of Bank of Hawaii ("AMG") and Chicago Equity Partners, LLC ("CEP"). The
Board recommends that shareholders of the Mid-Cap Fund approve the New Mid-Cap
Agreement. The New Mid-Cap Agreement is currently in effect pending shareholder
approval as described below.
CEP has provided sub-advisory services to the Mid-Cap Fund since October 10,
2006 pursuant to a sub-advisory agreement among the Trust, AMG and CEP dated
October 10, 2006 (the "Prior Mid-Cap Agreement"). The Prior Mid-Cap Agreement
was approved by the Board at its June 21, 2006 regular meeting and by
shareholders of the Mid-Cap Fund at a special meeting of shareholders held on
September 26, 2006. Prior to October 10, 2006, Bankoh Investment Partners, LLC
("BIP"), a joint venture between CEP and Bank of Hawaii ("BOH"), served as
sub-adviser to the Mid-Cap Fund. AMG currently serves as the Mid-Cap Fund's
investment adviser.
WHY IS THIS CHANGE BEING RECOMMENDED?
On December 22, 2006, Affiliated Managers Group, Inc., a publicly traded
corporation ("Affiliated"), acquired a majority equity interest in CEP (the "CEP
- - Affiliated Transaction"). Prior to the CEP - Affiliated Transaction, CEP was
owned by eight partners: David C. Coughenour, James A. DeZellar, Keith
Gustafson, David R. Johnsen, Robert H. Kramer, Patrick C. Lynch, James D.
Miller, and Patrick J. Morris, each an employee of the firm (the "Pervious
Partners"). Following the closing of the CEP - Affiliated Transaction,
Affiliated held an approximate 60% interest in CEP, and nine other partners (the
Previous Partners and one new partner) held the remaining interest.
The Prior Mid-Cap Agreement terminated, as required by the Investment Company
Act, immediately upon the closing of the CEP - Affiliated Transaction on
December 22, 2006. To ensure continuation of the sub-advisory services provided
by CEP to the Mid-Cap Fund, the Board approved the New Mid-Cap Agreement. Rule
15a-4 under the Investment Company Act permits a fund to enter into an interim
arrangement prior to shareholder approval, provided that the interim arrangement
is approved by shareholders within 150 days of its effectiveness. Pursuant to
Rule 15a-4, the New Mid-Cap Agreement is currently in effect but will terminate
on May 21, 2007 unless approved by the shareholders of the Mid-Cap Fund.
Accordingly, the Board proposes that shareholders of the
7
Mid-Cap Fund approve the New Mid-Cap Agreement. If shareholders approve the New
Mid-Cap Agreement, the New Mid-Cap Agreement will remain in effect until
December 22, 2008.
HOW WILL THE NEW ARRANGEMENT AFFECT THE MANAGEMENT OF THE MID-CAP FUND?
The proposed change will not affect the investment approach of the Mid-Cap Fund
or the individuals providing portfolio management services to the Mid-Cap Fund.
In addition, the terms of the New Mid-Cap Agreement are substantially similar to
the terms of the Prior Mid-Cap Agreement. For its services under both the Prior
Mid-Cap Agreement and the New Mid-Cap Agreement, CEP receives an annual fee at
the rate of 0.20% of the average daily value of the net assets of the Mid-Cap
Fund. The sub-advisory fee paid to BIP for the last fiscal year was $162,018.
The terms of the Prior Mid-Cap Agreement and the New Mid-Cap Agreement are
described in greater detail below.
NEW MID-CAP AGREEMENT
A copy of the New Mid-Cap Agreement, as further described below, is set forth in
Appendix B to this proxy statement. The following description of the New Mid-Cap
Agreement is qualified in its entirety by reference to the full text of the New
Mid-Cap Agreement as set forth in Appendix B.
The New Mid-Cap Agreement provides that CEP is responsible for, among other
things (i) providing a continuous investment program with respect to the Mid-Cap
Fund's portfolio, including investment research and management with respect to
all securities and investments and cash equivalents held by the Mid-Cap Fund;
(ii) selecting brokers and dealers through which securities transactions are to
be executed; and (iii) maintaining certain records required under the relevant
provisions of the Investment Company Act. For its services under the New Mid-Cap
Agreement, CEP is entitled to a fee from the Mid-Cap Fund, computed daily and
payable quarterly, calculated at the annual rate of 0.20% of the Mid-Cap Fund's
average daily net assets.
The New Mid-Cap Agreement provides that neither CEP nor any of its directors,
officers, agents or employees will be liable or responsible to the Trust, its
shareholders or AMG for any action taken or omitted, except for liability
resulting from CEP's bad faith, willful misconduct or gross negligence in the
performance of its duties or reckless disregard of such duties.
The New Mid-Cap Agreement has an initial term of two years and continues
thereafter automatically for successive annual periods, provided such
continuance is specifically approved at least annually by the Board or by vote
of the lesser of (a) 67% of the shares of the Mid-Cap Fund represented at a
meeting if holders of more than 50% of the outstanding shares of the Mid-Cap
Fund are present in person or by proxy, or (b) more than 50% of the outstanding
shares of the Mid-Cap Fund. In either event its continuance must also be
approved by a majority of the Independent Trustees by vote cast in person at a
meeting called for the purpose of voting on such approval. The New Mid-Cap
Agreement is terminable at any time without penalty, on 60 days' notice, by AMG,
CEP or the Board or by vote of the lesser of (a) 67% of the shares of the
Mid-Cap Fund represented at a meeting if holders of more than 50% of the
outstanding shares of the Mid-Cap Fund are present in person or by proxy, or (b)
more than 50% of the outstanding shares of the Mid-Cap Fund. In addition, the
New Mid-Cap Agreement will terminate automatically in the event of its
assignment (as defined in the Investment Company Act).
COMPARISON OF THE PRIOR AND NEW MID-CAP AGREEMENTS
With the exception of the effective date of the New Mid-Cap Agreement and the
addition of certain provisions required by Rule 15a-4 under the Investment
Company Act, the New Mid-Cap Agreement is substantially the same as the Prior
Mid-Cap Agreement.
Because the New Mid-Cap Agreement is currently in effect pending shareholder
approval, the New Mid-Cap Agreement includes additional duration and termination
provisions required by Rule 15a-4. Specifically, the New Mid-Cap Agreement will
terminate after 150 days (May 21, 2007) unless it is approved by vote of a
majority of the outstanding voting securities of the Mid-Cap Fund. During the
period from the effective date of the New Mid-Cap Agreement (December 22, 2006)
until the shareholders' approval of the New Mid-Cap Agreement (the "Interim
Period"), the New Mid-Cap Agreement is terminable at any time without penalty on
10 days' notice (i) by AMG, CEP or the Board or (ii) by vote of a majority of
the outstanding voting securities of the Mid-Cap Fund (as defined in the
Investment Company Act).
8
The advisory fee payable to CEP under the New Mid-Cap Agreement is the same as
under the Prior Mid-Cap Agreement. Unlike the Prior Mid-Cap Agreement, the New
Mid-Cap Agreement includes an additional provision with respect to the
compensation payable during the Interim Period as required by Rule 15a-4. Under
the New Mid-Cap Agreement, during the Interim Period compensation must be placed
in an interest bearing account with the Mid-Cap Fund's custodian bank until the
shareholders of the Mid-Cap Fund approve the New Mid-Cap Agreement. If
shareholders approve the New Mid-Cap Agreement, CEP will be paid the amount in
such account on the date of such approval. If shareholders fail to approve the
New Mid-Cap Agreement, CEP will be paid out of such account the lesser of (i)
any costs reasonably incurred by CEP in performing the sub-advisory services,
plus interest earned on that amount while in the interest bearing account, and
(ii) the total amount in such interest bearing account (plus interest accrued
thereon).
INFORMATION ABOUT CEP
CEP is a Delaware limited liability company that has been engaged in the
management of investment portfolios since its inception. Its principal offices
are located at 180 North LaSalle Street, Suite 3800, Chicago, Illinois 60601.
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. CEP is majority owned by Affiliated, which holds
approximately 60% interest in CEP, and by nine other partners. Affiliated is
located at 600 Hale Street, Prides Crossing, Massachusetts 01965.
CEP managed approximately $12 billion in assets as of December 31, 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.
PORTFOLIO MANAGEMENT TEAM
CEP utilizes a team approach to manage the Mid-Cap Fund. Senior team members
include David Coughenour, Robert Kramer and David Johnsen. They are founding
members of CEP who have been with the firm since 1989. Mr. Coughenour, Chief
Investment Officer -- Equity, leads the team. He has sixteen years of industry
experience, and is responsible for overseeing all of CEP's equity products. He
holds the Chartered Financial Analyst designation. Mr. Kramer, Managing
Director, has nineteen years of industry experience and is personally
responsible for following and analyzing the healthcare sector. He also oversees
the quantitative research, trading and technology groups at CEP. Before joining
CEP, Mr. Kramer worked with the Feldman Group and GE Capital. He holds the
Chartered Financial Analyst designation and is a Certified Public Accountant.
Mr. Johnsen, Managing Director, has thirty years of industry experience and is
personally responsible for following and analyzing the technology hardware and
consumer staples sectors. He also oversees CEP's team of fundamental analysts.
Prior to joining CEP, he was a portfolio manager at Continental Bank. He holds
the Chartered Financial Analyst designation.
DIRECTORS AND OFFICERS OF CEP
The following table lists the directors and principal executive officers of CEP,
each of whom is also a partner of CEP. The address of each individual listed
below is 180 N. LaSalle Street, Suite 3800, Chicago, Illinois 60601.
NAME PRINCIPAL OCCUPATION
---- ----------------------------------------------------------------
David C. Coughenour, CFA Managing Director; Chief Investment Officer - Equity
James A. DeZellar, CFA Managing Director - Client Service
Keith Gustafson, CFA Managing Director - Quantitative Analysis
David R. Johnsen, CFA Managing Director - Staples, Technology Hardware
Robert H. Kramer, CFA, CPA Managing Director - Healthcare, Research, Trading and Technology
Patrick C. Lynch, CFA President
James D. Miller, CFA Chairman
Patrick J. Morris, CFA Managing Director - Trading
Dan Xystus Managing Director - Quantitative Analysis
9
OTHER FUNDS
CEP does not currently serve as adviser or sub-adviser to any funds having
similar investment objectives as the Mid-Cap Fund.
CONSIDERATION OF THE NEW MID-CAP AGREEMENT BY THE BOARD
On December 13, 2006, the Board, including a majority of the Independent
Trustees, met in person at a meeting called for the purpose of considering,
among other things, the New Mid-Cap Agreement. The Board last approved the Prior
Mid-Cap Agreement in June 2006, in connection with its appointment of CEP as
sub-adviser to the Mid-Cap Fund upon the impending dissolution of the Mid-Cap
Fund's previous sub-adviser, BIP (a joint venture between CEP and BOH).
Accordingly, the Board considered the New Mid-Cap Agreement based on its
re-review of the information it had considered in June 2006, its experience with
CEP since that date, and its review of information provided by CEP with respect
to changes since that date (including information about the CEP--Affiliated
Transaction). In connection with their deliberations, the Trustees received
assistance and advice regarding legal standards from their independent counsel.
They discussed the renewal of the New Mid-Cap Agreement with management
representatives and in a private session with independent legal counsel at which
no representatives of management were present.
In reviewing the nature, extent and quality of the services to be provided by
CEP, the Board considered, among other things, the quality and depth of the
investment professionals having principal investment responsibility for the
Mid-Cap Fund's investments; the long-term track record and 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 Mid-Cap Fund; and the business reputation, financial
condition and operational stability of CEP. The Board concluded that CEP had
provided high quality services to the Mid-Cap Fund in the past and would
continue to do so in the future. The Board also noted CEP's discipline and
consistency over time in applying its investment style in managing the Mid-Cap
Fund's portfolio, and concluded that the performance of the Mid-Cap Fund has
been satisfactory and that the long-term performance record of the investment
professionals who manage the Mid-Cap Fund indicated that CEP's continued
management would benefit the Mid-Cap Fund and its shareholders.
In reviewing the fees and expenses borne by the Mid-Cap Fund, the Board noted,
among other things, that the New Mid-Cap Agreement would not change the Mid-Cap
Fund's sub-advisory fee or the other terms of CEP's sub-advisory arrangement
with the Mid-Cap Fund (which had been approved by the shareholders of the
Mid-Cap Fund at a shareholders meeting in September 2006), that the fee
continued to be reasonable when compared to fees paid by other similarly managed
funds, and that the fee represented a significant discount from CEP's published
fee schedule and would be advantageous to the Mid-Cap Fund. The Board also noted
that the fees received from the Mid-Cap Fund were below CEP's lowest breakpoint
for other institutional clients and thus reflected the economies of scale of its
overall investment management business, and that CEP would not receive
significant ancillary benefits as a result of its relationship with the Mid-Cap
Fund, other than bundled research of the type normally provided by executing
brokers and its ability to refer to its sub-advisory relationship with the
Trust. The Board concluded that the Mid-Cap Fund's cost structure was reasonable
and that CEP's projected profit margin with respect to its relationship with the
Mid-Cap Fund would continue to be within the range of acceptable industry
standards.
In considering the impacts of the CEP--Affiliated Transaction, the Board noted
that no changes were planned to the current portfolio management team or
investment approach upon completion of the CEP--Affiliated Transaction; that the
rate of compensation under the New Mid-Cap Agreement would be the same as the
rate under the Prior Mid-Cap Agreement; that the CEP--Affiliated Transaction
would provide a stable and permanent source of capital for CEP while allowing
CEP to maintain full investment discretion and day-to-day operational autonomy
regarding most aspects of its current business; and that, as a result of the
CEP--Affiliated Transaction, CEP's partners had made long-term employment
commitments to CEP and Affiliated. Accordingly, the Board concluded that the
effects of the CEP--Affiliated Transaction would be beneficial to the Mid-Cap
Fund.
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 Mid-Cap Agreement with
CEP was in the best interest of the Mid-Cap Fund and its shareholders.
10
THE BOARD OF TRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS OF THE MID-CAP FUND APPROVE THE NEW MID-CAP
AGREEMENT FOR THE MID-CAP FUND.
OTHER INFORMATION
PROXY SOLICITATION
The costs of the Meeting, estimated to be approximately [$______], will be borne
by Hansberger and CEP. The principal solicitation will be by mail, but proxies
also may be solicited by telephone, facsimile or personal interview by officers
or agents of the Trust. In addition, the Funds may retain a proxy solicitation
firm to assist in the solicitation of proxies at the Funds' expense. The Funds
will request broker-dealer firms, custodians, nominees and fiduciaries to
forward proxy materials to the beneficial owners of shares of the Funds held of
record by such persons.
SHAREHOLDER VOTING
Holders of each 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 Friday, March 2, 2007 (the "Record Date") are entitled to notice of,
and to vote at, the Meeting and any adjournments thereof with respect to such
Fund. 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 each Class of each Fund were as follows:
TOTAL
OUTSTANDING OUTSTANDING OUTSTANDING OUTSTANDING OUTSTANDING
FUND CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS Y SHARES SHARES
---- -------------- -------------- -------------- -------------- -----------
International Fund
Mid-Cap Fund
The presence in person or by proxy of more than 50% of the Shares of a Fund
outstanding on the Record Date (without regard to Class) entitled to vote at the
Meeting will constitute a quorum for the particular Fund. If a quorum of a Fund
is not present, sufficient votes are not received by the date of the Meeting, or
the holders of Shares of a Fund present in person or by proxy determine to
adjourn the Meeting of a Fund for any other reason, a person named as proxy may
propose one or more adjournments of the Meeting of a Fund from time to time to
permit further solicitation of proxies. Abstentions and broker non-votes will be
counted as Shares present but not voting. Accordingly, abstentions and broker
non-votes effectively will be a vote against adjournment and the proposal.
Broker non-votes are Shares held in street name for which the broker indicates
that instructions have not been received from the beneficial owners or other
persons entitled to vote and for which the broker does not have discretionary
voting authority. The persons named as proxies will vote in favor of adjournment
those Shares which they represent if adjournment is necessary to obtain a quorum
or to obtain a favorable vote on the proposal.
In addition to voting in person at the Meeting, shareholders also may sign and
mail the proxy card received with this proxy statement. Timely, properly
executed proxies will be voted as instructed by shareholders. If no instructions
are given on the proxy with respect to a proposal, but the proxy is properly
executed, it will be voted FOR the proposal. A shareholder may revoke his or her
proxy at any time prior to its exercise by written notice addressed to the
Secretary of the Trust at the address set forth on the cover of this proxy
statement or by voting in person at the Meeting. However, attendance in person
at the Meeting, by itself, will not revoke a previously tendered proxy.
REQUIRED VOTE
Approval of each proposal with respect to the particular Fund (without regard to
Class) will require the affirmative "vote of a majority of the outstanding
voting securities" of the Fund as defined in the Investment Company Act.
11
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 the required
vote is not obtained for Proposal One or Proposal Two, the Trustees will
consider what other actions to take in the best interests of the affected 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
each Fund. The following tables set forth, to the best of the Trust's knowledge,
the name, address, number and percentage of Shares of persons that owned
beneficially or of record more than 5% of the outstanding Shares of each Fund as
of the Record Date.
Unless otherwise indicated, the address of: (a) [_____________] is
[_____________]; and (b) [_____________] is [_____________].
INTERNATIONAL FUND
CLASS A CLASS B CLASS C CLASS Y
---------------------- ---------------------- ---------------------- ----------------------
RECORD NUMBER OF PERCENTAGE NUMBER PERCENTAGE NUMBER PERCENTAGE NUMBER PERCENTAGE
HOLDER SHARES OF FUND OF SHARES OF FUND OF SHARES OF FUND OF SHARES OF FUND
- ------ --------- ---------- --------- ---------- --------- ---------- --------- ----------
MID-CAP FUND
CLASS A CLASS B CLASS C CLASS Y
---------------------- ---------------------- ---------------------- ----------------------
RECORD NUMBER OF PERCENTAGE NUMBER PERCENTAGE NUMBER PERCENTAGE NUMBER PERCENTAGE
HOLDER SHARES OF FUND OF SHARES OF FUND OF SHARES OF FUND OF SHARES OF FUND
- ------ --------- ---------- --------- ---------- --------- ---------- --------- ----------
SHAREHOLDER PROPOSALS
Neither the Trust nor the Funds hold regular shareholders meetings. Shareholders
wishing to submit a proposal for inclusion in a proxy statement for a subsequent
shareholders meeting should send their written proposal to the Secretary of the
Trust at the address set forth on the cover of this proxy statement.
A proposal must be received within a reasonable time prior to the date of a
meeting of shareholders to be considered for inclusion in the proxy materials
for a meeting. Timely submission of a proposal, however, does not necessarily
mean that the proposal will be included. Persons named as proxies for any
subsequent shareholders meeting will vote in their discretion with respect to a
proposal submitted on a timely basis.
OTHER SERVICE PROVIDERS
Bank of Hawaii, located at 130 Merchant Street, Honolulu, Hawaii 96813, is the
Funds' administrator.
BISYS Fund Services Ohio, Inc., located at 3435 Stelzer Road, Columbus, Ohio
43219, serves as the Funds' sub-administrator. BISYS Fund Services Limited
Partnership, located at 100 Summer Street, Suite 1500, Boston, Massachusetts
02110, is the Funds' distributor.
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,
- -------------------------------------
Kinga Kapuscinski
Secretary
12
APPENDIX A
FORM OF
SUB-ADVISORY AGREEMENT
PACIFIC CAPITAL INTERNATIONAL STOCK FUND
THIS AGREEMENT is made as of [_________] among Pacific Capital Funds
(the "Trust"), Asset Management Group of Bank of Hawaii (the "Adviser"), and
Hansberger Global Investors, Inc. (the "Sub-Adviser").
WHEREAS, the Trust is registered as an open-end, diversified
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act");
WHEREAS, the Sub-Adviser is currently acting as investment sub-adviser
to the Trust's International Stock Fund (the "Fund") pursuant to a Sub-Advisory
Agreement dated as of June 1, 2004 among the parties hereto.
WHEREAS, as a result acquisition of certain equity interests in the
Sub-Adviser by IXIS Asset Management US Group, L.P., an "assignment" of the
Current Sub-Advisory Agreement has occurred, as such term is defined in the 1940
Act;
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;
WHEREAS, in the event that this Agreement has not been approved by a
majority of the outstanding voting securities of the Fund (as defined in the
1940 Act) before the assignment, Rule 15a-4 permits the Sub-Adviser to continue
to provide services to the Fund for a period of 150 days after the effective
date of the assignment, subject to certain conditions; and
WHEREAS, the Board of Trustees of the Trust has approved this
Agreement and the Sub-Adviser is willing to furnish such services upon the terms
and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Adviser hereby appoints the Sub-Adviser to act as the
sub-adviser to the Fund as permitted by the Adviser's Advisory Agreement with
the Trust pertaining to the Fund. Intending to be legally bound, the Sub-Adviser
accepts such appointment and agrees to render the services herein set forth for
the compensation herein provided.
2. Sub-Advisory Services. Subject to the supervision of the Trust's Board
of Trustees and the Adviser, the Sub-Adviser will assist the Adviser in
providing a continuous investment program with respect to the Fund's portfolio,
including investment research and management with respect to all securities and
investments and cash equivalents in the Fund. The Sub-Adviser will provide
services under this Agreement in accordance with the Fund's investment
objectives, policies and restrictions as stated in the Fund's prospectus and
resolutions of the Trust's Board of Trustees applicable to the Fund, and as
amended from time to time.
Without limiting the generality of the foregoing, the Sub-Adviser
further agrees that it will, with respect to the Fund:
(a) determine from time to time what securities and other investments
will be purchased, retained or sold for the Fund;
A-1
(b) place orders pursuant to its investment determinations for the
Fund either directly with the issuer or with any broker or
dealer;
(c) not purchase shares of the Fund for itself or for accounts with
respect to which it exercises sole investment discretion in
connection with such transactions except as permitted by the
Trust's Board of Trustees or by federal, state and local law;
(d) manage the Fund's overall cash position;
(e) attend regular business and investment-related meetings with the
Trust's Board of Trustees and the Adviser if requested to do so
by the Trust and/or the Adviser;
(f) ensure all Fund security valuations are reasonable and for
purposes of determining whether such securities should be
purchased, owned or soled by the Fund;
(g) ensure that, if required, securities are identified for proper
segregation and collateralization;
(h) vote proxies on behalf of the Fund and provide proxy voting
information to the Fund and its agents in relation to the Fund's
annual filing on Form N-PX and as otherwise reasonably requested
by officers of the Fund; and
(i) maintain books and records with respect to the securities
transactions for the Fund, furnish to the Adviser and the Trust's
Board of Trustees such periodic and special reports as they may
request with respect to the Fund, and provide in advance to the
Adviser all reports to the Board of Trustees for examination and
review within a reasonable time prior to the Trust's Board
meetings.
3. Covenants by the Sub-Adviser. The Sub-Adviser agrees with respect to the
services provided to the Fund that it will:
(a) conform with all rules and regulations of the U.S. Securities and
Exchange Commission;
(b) telecopy or provide by electronic means, trade information to the
Adviser on the first business day following the day of the trade
and cause broker confirmations to be sent directly to the
Adviser; 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).
(d) notify the Adviser and the Trust immediately upon detection of
(i) any material failure to manage the Fund in accordance with
its investment objectives and policies or any applicable law; or
(ii) any material breach of any of the Fund's or the
Sub-Adviser's policies, guidelines or procedures. The Sub-Adviser
agrees to correct any such failure promptly and to take any
action that the Board may reasonably request in connection with
any such breach;
(e) upon request, provide the Adviser and or the officers of the
Trust with supporting certifications which pertain to services
being provided by the Sub-Adviser hereunder, in
A-2
connection with any filings and certifications made pursuant to
the Sarbanes-Oxley Act of 2002; and
(f) promptly notify the Adviser and the Trust in the event (i) the
Sub-Adviser is served or otherwise receives notice of any action,
suit, proceeding, inquiry or investigation at law, or in equity,
before or by any court, public board, or body, involving the
affairs of the Trust (excluding class action suits in which the
Fund is a member of the plaintiff class by reason of the Fund's
ownership of shares in the defendant) or the compliance by the
Sub-Adviser with federal or state securities laws or (ii) an
actual change in control of the Sub-Adviser resulting in an
"assignment" (as defined in the 1940 Act") has occurred or is
otherwise proposed to occur.
4. Services Not Exclusive. Except as provided herein, the services
furnished by the Sub-Adviser hereunder are deemed not to be exclusive, and
nothing in this Agreement shall (i) prevent the Sub-Adviser from acting as
investment adviser or manager for any other person or persons, including other
management investment companies, or (ii) limit or restrict the Sub-Adviser from
buying, selling or trading any securities or other investments (including any
securities or other investments which the Fund is eligible to buy) for its or
their own accounts or for the accounts of others for whom it or they may be
acting; provided, however, that the Sub-Adviser agrees that it will not
undertake any activities which, in its reasonable judgment, will adversely
affect the performance of its obligations to the Fund under this Agreement.
5. Portfolio Transactions. Investment decisions for the Fund shall be made
by the Sub-Adviser independently from those for any other investment companies
and accounts advised or managed by the Sub-Adviser. The Fund and such investment
companies and accounts may, however, invest in the same securities. When a
purchase or sale of the same security is made at substantially the same time on
behalf of the Fund and/or another investment company or account, the transaction
will be averaged as to price, and available investments allocated as to amount,
in a manner which the Sub-Adviser believes to be equitable to the Fund and such
other investment company or account. The Fund acknowledges that in some
instances, this investment procedure may adversely affect the price paid or
received by the Fund or the size of the position obtained or sold by the Fund.
To the extent permitted by law, the Sub-Adviser may aggregate the securities to
be sold or purchased for the Fund with those to be sold or purchased for other
investment companies or accounts in order to obtain best execution. The Fund and
Adviser understand that the Sub-Adviser may give advice and take action with
respect to any of its other clients or for its own account which may differ from
the timing or nature of action taken by the Sub-Adviser, with respect to the
Fund.
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
A-3
underwriter, or any affiliated person thereof except as permitted by the 1940
Act or the rules of 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 shall be entitled to maintain a copy of such records for its
files in order to maintain its obligations under the 1940 Act. The Sub-Adviser
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act.
7. Expenses. During the term of this Agreement, the Sub-Adviser shall pay
all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities, commodities and other investments
(including brokerage commissions and other transaction charges, if any)
purchased for the Fund.
8. Compensation.
(a) 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 0.60% of the
first 75 million of the Fund's average daily net assets and 0.35%
on average daily net assets in excess of $75 million; provided
that, until this Agreement has been approved in accordance with
Section 11(a) hereof, such compensation shall be payable to an
interest bearing escrow account with the Fund's custodian bank.
(b) With respect to compensation paid to the escrow account described
in Section 8(a) hereof, if this Agreement is approved in
accordance with Section 11(a) hereof, the amount in such escrow
account with respect to the Fund shall be paid to the Sub-Adviser
on the date of such approval. If this Agreement is not approved
in accordance with Section 11(a) hereof, the Sub-Adviser shall be
paid, out of such escrow account, the lesser of (i) any costs
reasonably incurred by the Sub-Adviser in performing this
Agreement, as approved by the Board of Trustees of the Trust,
plus interest earned on that amount while in escrow, and (ii) the
total amount in such escrow account (plus interest accrued
thereon).
9. Standard of Care; Limitation of Liability. The Sub-Adviser shall
exercise due care and diligence and use the same skill and care in providing its
services hereunder as it uses in providing services to other investment
companies and accounts. Neither the Sub-Adviser, nor any of its directors,
officers, agents or employees shall be liable or responsible to the Trust, its
shareholders or the Adviser for any error of judgment, or any loss arising out
of any investment, or for any other act or omission in the performance by the
Sub-Advisor of its duties under this Agreement, except for liability resulting
from bad faith, willful misconduct, gross negligence or reckless disregard of
its duties under this Agreement.
10. Reference to the Sub-Adviser. Neither the Adviser nor any of its
affiliates or agents shall make any reference to or use the name of the
Sub-Adviser or any of its affiliates, or any of their clients, except reference
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.
A-4
11. Duration and Termination.
(a) Unless this Agreement has been approved by a majority of the
outstanding voting securities of the Fund (as defined in the 1940
Act), this Agreement shall terminate one hundred fifty (150) days
after the date first set forth above. During this period, this
Agreement is terminable (i) at any time without penalty on 10
days' notice by the Adviser, the Sub-Adviser or the Trust's Board
of Trustees or (ii) 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 are present in person or by
proxy, or (B) more than 50% of the outstanding shares of the
Fund.
(b) If this Agreement is approved in accordance with Section 11(a)
hereof, then 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.
(c) Notwithstanding Sections 11(a) and (b) hereof, 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, and (ii) a majority of the Disinterested
Trustees cast in person at a meeting called for the purpose of voting on such
approval.
13. Notice. Any notice, advice or report to be given pursuant to this
Agreement shall be delivered or mailed:
To The Sub-Adviser at:
Hansberger Global Investors, Inc.
515 East Los Olas Boulevard, Suite 1300
Fort Lauderdale, Florida 33301
Attention: President
To the Adviser at:
Asset Management Group of
Bank of Hawaii
111 South King Street
Honolulu, Hawaii 96813
A-5
To the Trust at:
c/o BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219-3035
14. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by the laws of the
Commonwealth of Massachusetts (without regard to conflict of law principles). If
any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16. Personal Liability. The names "Pacific Capital Funds" and "Trustees"
refer respectively to the Trust created and to the Trustees, as trustees but not
individually or personally, acting from time to time under an Agreement and
Declaration of Trust dated as of October 30, 1992, as amended, to which
reference is hereby made and a copy of which is on file at the office of the
Secretary of State of The Commonwealth of Massachusetts and elsewhere as
required by law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of "Pacific Capital Funds" entered into in the name or on
behalf hereof by any of the Trustees, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of the
Trustees, shareholders or representatives of the Trust personally, but bind only
the assets of the Trust and all persons dealing with any series of shares of the
Trust must look solely to the assets of the Trust belonging to such series for
the enforcement of any claims against the Trust.
[Signature Page Follows]
A-6
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the day and
year first above written.
ASSET MANAGEMENT GROUP OF
BANK OF HAWAII
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
HANSBERGER GLOBAL INVESTORS, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
PACIFIC CAPITAL FUNDS
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
A-7
APPENDIX B
SUB-ADVISORY AGREEMENT
PACIFIC CAPITAL MID-CAP FUND
THIS AGREEMENT is made as of December 22, 2006 among Pacific Capital
Funds (the "Trust"), Asset Management Group of Bank of Hawaii (the "Adviser"),
and Chicago Equity Partners, LLC (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 Sub-Adviser is currently acting as investment sub-adviser
to the Trust's Mid-Cap Fund (the "Fund") pursuant to a Sub-Advisory Agreement
dated as of October 10, 2006 among the parties hereto.
WHEREAS, as a result of the acquisition of a majority of the equity
interest in the Sub-Adviser by Affiliated Managers Group, Inc., an "assignment"
of the Current Sub-Advisory Agreement has occurred, as such term is defined in
the 1940 Act;
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;
WHEREAS, in the event that this Agreement has not been approved by a
majority of the outstanding voting securities of the Fund (as defined in the
1940 Act) before the assignment, Rule 15a-4 permits the Sub-Adviser to continue
to provide services to the Fund for a period of 150 days after the effective
date of the assignment, subject to certain conditions; and
WHEREAS, the Board of Trustees of the Trust has approved this
Agreement and 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:
B-1
(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 Fund is eligible to buy) for its or
their own accounts or for the accounts of others for whom it or they may be
acting; provided, however, that the Sub-Adviser agrees that it will not
undertake any activities which, in its reasonable judgment, will adversely
affect the performance of its obligations to the Fund under this Agreement.
5. Portfolio Transactions. Investment decisions for the Fund shall be made
by the Sub-Adviser independently from those for any other investment companies
and accounts advised or managed by the Sub-Adviser. The Fund and such investment
companies and accounts may, however, invest in the same securities. When a
purchase or sale of the same security is made at substantially the same time on
behalf of the Fund and/or another
B-2
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.
(a) 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; provided that, until this
Agreement has been approved in accordance with Section 11(a)
hereof, such compensation shall be payable to an interest bearing
escrow account with the Fund's custodian bank.
(b) With respect to compensation paid to the escrow account described
in Section 8(a) hereof, if this Agreement is approved in
accordance with Section 11(a) hereof, the amount in such escrow
account with respect to the Fund shall be paid to the Sub-Adviser
on the date of such approval. If this Agreement is not approved
in accordance with Section 11(a) hereof, the Sub-Adviser shall be
paid, out of such escrow account, the lesser of (i) any costs
reasonably incurred by the Sub-Adviser in performing this
B-3
Agreement, as approved by the Board of Trustees of the Trust,
plus interest earned on that amount while in escrow, and (ii) the
total amount in such escrow account (plus interest accrued
thereon).
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.
(a) Unless this Agreement has been approved by a majority of the
outstanding voting securities of the Fund (as defined in the 1940
Act), this Agreement shall terminate one hundred fifty (150) days
after the date first set forth above. During this period, this
Agreement is terminable (i) at any time without penalty on 10
days' notice by the Adviser, the Sub-Adviser or the Trust's Board
of Trustees or (ii) 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 are present in person or by
proxy, or (B) more than 50% of the outstanding shares of the
Fund.
(b) If this Agreement is approved in accordance with Section 11(a)
hereof, then 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.
(c) Notwithstanding Sections 11(a) and (b) hereof, 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, and (ii) a majority of the Disinterested Trustees
cast in person at a meeting called for the purpose of voting on such approval.
B-4
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, LLC
180 N. LaSalle St, Suite 3800
Chicago, IL 60601
To the Adviser at:
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]
B-5
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: /s/ Jordan T. Ige
------------------------------------
Name: Jordan T. Ige
Title: Senior Vice President
CHICAGO EQUITY PARTNERS, LLC
By: /s/ Patrick C. Lynch
------------------------------------
Name: Patrick C. Lynch
Title: President
PACIFIC CAPITAL FUNDS
By: /s/ Robert I. Crowell
------------------------------------
Name: Robert I. Crowell
Title: President
B-6
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
SPECIAL MEETING OF SHAREHOLDERS
PACIFIC CAPITAL INTERNATIONAL STOCK FUND
APRIL 24, 2007
The undersigned hereby appoints Kinga Kapuscinski and Salina Fruth or
either of them (with full power to act in the absence of the other, each with
full power of substitution) as his/her attorney and proxy to vote and act with
respect to all shares of the Pacific Capital International Stock Fund (the
"Fund"), a series of Pacific Capital Funds, held by the undersigned at the
special meeting of shareholders of the Fund to be held at 11:00 a.m., local
time, on April 24, 2007, 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 each of
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:
PROPOSAL ONE: TO APPROVE A NEW SUB-ADVISORY AGREEMENT FOR THE INTERNATIONAL
STOCK FUND AMONG PACIFIC CAPITAL FUNDS, ASSET MANAGEMENT GROUP OF
BANK OF HAWAII, AND HANSBERGER GLOBAL INVESTORS, INC.
[ ] 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 the Meeting and proxy statement is hereby
acknowledged.
Dated ______________, 2007
----------------------------------------
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.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
SPECIAL MEETING OF SHAREHOLDERS
PACIFIC CAPITAL MID-CAP FUND
APRIL 24, 2007
The undersigned hereby appoints Kinga Kapuscinski and Salina Fruth or
either of them (with full power to act in the absence of the other, each with
full power of substitution) as his/her attorney and proxy to vote and act with
respect to all shares of the Pacific Capital Mid-Cap Fund (the "Fund"), a series
of Pacific Capital Funds, held by the undersigned at the special meeting of
shareholders of the Fund to be held at 11:00 a.m., local time, on April 24,
2007, 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 each of 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:
PROPOSAL TWO: TO APPROVE A NEW SUB-ADVISORY AGREEMENT FOR THE MID-CAP FUND AMONG
PACIFIC CAPITAL FUNDS, ASSET MANAGEMENT GROUP OF BANK OF HAWAII,
AND 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 the Meeting and proxy statement is hereby
acknowledged.
Dated ______________, 2007
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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)
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.