SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
CHECK THE APPROPRIATE BOX:
__ PRELIMINARY INFORMATION STATEMENT
__ CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14C-
5(D)(2))
_X DEFINITIVE INFORMATION STATEMENT
MTB Group of Funds
(Retail/Institutional Funds)
(Name of Registrant as Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
_x No fee required
__ Fee computed on table below per Exchange Act Rules 14c-5(g) and O-11
(1) Title of each class of securities to which transaction applies:
_____________________________________
(2) Aggregate number of securities to which transaction applies:
_____________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to
Exchange Act Rule O-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
_____________________________________
(4) Proposed maximum aggregate value of transaction:
_____________________________________
(5) Total fee paid:
_____________________________________
__ Fee paid previously with preliminary materials.
__ Check box if any part of the fee is offset as provided by Exchange Act Rule
O-11(a)(2) and
identify the filing for which the offsetting fee was paid previously.
Identify the previous filing
by registration statement number, or the Form or Schedule and the date of
its filing.
(1) Amount Previously Paid:
____________________________________
(2) Form Schedule or Registration Statement No.:
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(3) Filing Party:
_____________________________________
(4) Date Filed:
_____________________________________
MTB GROUP OF FUNDS
MTB BALANCED FUND
MTB SMALL CAP STOCK FUND
5800 CORPORATE DRIVE
PITTSBURGH, PA 15237-7010
December 31, 2006
Dear Shareholder,
This letter is being provided to the shareholders of MTB Balanced
Fund (Balanced Fund) and MTB Small Cap Stock Fund (Small Cap Stock Fund)
(together, Funds), portfolios of MTB Group of Funds (Trust), to notify
shareholders of portfolio management changes for the Funds.
The Trust and MTB Investment Advisors, Inc. (MTBIA) received an
exemptive order from the U.S. Securities and Exchange Commission that permits
MTBIA, as the Funds' investment advisor, to hire new sub-advisors or make
changes to the existing sub-advisory agreements with the approval of the Trust's
Board of Trustees, but without obtaining approval of the shareholders of the
affected Fund. As a condition of this exemptive order, MTBIA and the Trust are
required to furnish shareholders with information about the new sub-advisors or
sub-advisory agreements.
The enclosed "Information Statement" provides information relating
to the changes in portfolio management for the Funds. The changes described in
the "Information Statement" do not require shareholder approval. You have
previously been provided with supplements to the Funds' prospectuses reflecting
the changes to the prospectuses required in connection with the changes in sub-
advisors.
Please take a few minutes to review the attached materials and thank
you for your investment in MTB Group of Funds.
Sincerely,
Carl W. Jordan
President
MTB Group of Funds
INFORMATION STATEMENT
MTB GROUP OF FUNDS
MTB BALANCED FUND
MTB SMALL CAP STOCK FUND
5800 CORPORATE DRIVE
PITTSBURGH, PA 15237-7010
This Information Statement is being provided to shareholders of MTB
Balanced Fund (Balanced Fund) and MTB Small Cap Stock Fund (Small Cap Stock
Fund) (together, Funds), portfolios of MTB Group of Funds (Trust), to provide
information regarding the sub-advisory agreements recently entered into with
DePrince, Race & Zollo, Inc. (DRZ) and Copper Rock Capital Partners (Copper
Rock). (DRZ and Copper Rock are collectively referred to as New Sub-Advisors.)
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
DETAILS OF SUB-ADVISORY RELATIONSHIPS
On September 13, 2006, the Board of Trustees of the Trust (Board)
unanimously approved the recommendation of the Trust's investment manager, MTB
Investment Advisors, Inc. (MTBIA), 100 East Pratt Street, 17th floor, Baltimore,
MD 21202, to hire DRZ as a sub-advisor for the equity value component of the
Balanced Fund; and to hire Copper Rock as a sub-advisor for the growth component
of the Small Cap Stock Fund, replacing Mazama Capital Management, Inc. (Mazama).
MTBIA and its predecessors or affiliates have been the investment advisor
to the Funds since their inception. MTBIA continues to serve as such under an
Investment Advisory Contract (Advisory Contract) that was last approved by
shareholders on November 8, 2000 (in the case of Small Cap Stock Fund) and
August 18, 2003 (in the case of Balanced Fund), and its renewal was last
approved by the Board on September 13, 2006 (for both Funds). Under the
Advisory Contract, MTBIA has the overall responsibility, subject to the
oversight of the Board, for providing investment advisory services to the Trust.
Also under the Advisory Contract, MTBIA is permitted to hire sub-advisors to
assist it in investing the Trust's assets. MTBIA monitors and evaluates the
performance of any sub-advisors and makes recommendations to the Board regarding
their hiring, termination and replacement.
Mazama previously served as sub-advisor to the growth component of the
Small Cap Stock Fund pursuant to a contract approved by shareholders of the
Small Cap Stock Fund on June 28, 2001. This contract expired on October 31, 2006
and based on recommendation by MTBIA, the Board decided to not renew the
contract in favor of hiring a new subadvisor.
On November 1, 2006, MTBIA and the Trust entered into new sub-advisory
agreements (New Sub-Advisory Agreements) with each New Sub-Advisor. Each New
Sub-Advisor began serving as a sub-advisor to the Fund on that date. The
subadvisory fees for each New Sub-Advisor are being paid by MTBIA out of the
investment advisory fee it receives from the Fund.
The New Sub-Advisory Agreements do not require shareholder approval
because the Trust has received permission from the U.S. Securities and Exchange
Commission (SEC) to enter into new sub-advisory agreements without the delay and
expense of a shareholder vote. This special permission was made subject to
several conditions. One of the conditions, which has been satisfied, is that the
shareholders of the Fund must approve a policy to permit the Trust's board and
investment advisor to appoint and replace sub-advisors for the Fund and to enter
into and amend its sub-advisory contracts without seeking shareholder approval.
Another condition requires shareholders to be notified of the details of any new
sub-advisory agreements entered into by the Trust by sending the shareholders an
Information Statement within 90 days of the hiring of the new subadvisor.
Therefore, you are receiving this disclosure document.
REASONS AND PROCESS FOR APPOINTING NEW SUB-ADVISORS
The decision to not renew the previous subadvisory relationship, and the
recommendation to enter into the new sub-advisory relationships, were made by
MTBIA in the ordinary course of its ongoing evaluation of fund performance and
investment strategy. In particular, MTBIA determined that the use of multiple
managers, each with specific expertise in managing a separate style component of
the Fund, was preferable to the single manager approach previously in effect.
The selection of each New Subadvisor for recommendation to the Board was made
after extensive research of numerous candidate firms and qualitative and
quantitative analysis of each candidate's organizational structure, investment
process, style and long-term performance record.
In evaluating each New Sub-Advisor, the Trustees received written and oral
information from MTBIA and each New Sub-Advisor about the portfolio managers or
management team, their investment philosophies, strategies and processes, and
other factors. In approving each New Sub-Advisor as sub-advisor to a Fund, the
Trustees held meetings in September 2006, and carefully evaluated: (1) the
search process that led to MTBIA's recommendation; (2) the nature, extent and
quality of the services expected to be rendered to the Fund; (3) the distinct
investment objective and policies of the Fund; (4) the history, organizational
structure, financial condition and reputation of each New Sub-Advisor, and the
qualification and background of each New Sub-Advisor's personnel; (5) the
practices and policies of each New Sub-Advisor with respect to selecting brokers
and executing trades; (6) certification by the New Sub-Advisors of the existence
and adequacy of an advisor compliance program under the Investment Advisers Act
of 1940; (7) any regulatory, compliance or litigation matters; (8) business
continuity programs; (9) the investment performance records of each New Sub-
Advisor; (10) the reasonableness of the fees to be paid to and the profits to be
realized by each New Sub-Advisor (including any benefits to be received by each
New Sub-Advisor or its affiliates in connection with soft dollar arrangements);
(11) whether the fees to be paid to the Sub-Advisors were competitive with the
fees they charge other clients that are similarly managed; (12) how competitive
forces in the market impacted the ability to secure the services of sub-advisors
and negotiate fees; (13) the extent to which economies of scale would be
realized as the Fund grows, and whether fee levels reflect these economies of
scale; (14) the reasonableness of the fees that would be retained by MTBIA,
before and after any voluntary waivers, and that there would be no changes to
the advisory fee charged to the Fund; and (15) other factors deemed relevant.
The Board relied upon MTBIA's report to the Board that the nature of the
services to be provided by, and the fees to be paid to, the New Sub-Advisors are
no less favorable to the Fund than are available from other prospective sub-
advisors, noting in that regard that all fees to New Sub-Advisors will be paid
directly by MTBIA, out of the fees MTBIA receives from the Fund.
The Board's decision to approve each New Sub-Advisory Agreement reflects
the exercise of its business judgment on whether the proposed new sub-advisory
arrangements would be in the best interest of the Fund. During the course of its
review of these agreements, the Board considered and relied upon many factors,
among the most material of which are those set forth above. The Board was
assisted in its deliberations by the advice of independent legal counsel.
In particular, the Board relied upon the fact that MTBIA remains the party
primarily responsible for the performance of the Fund, through its selection and
retention (subject to approval of the Board) and continued supervision of each
New Sub-Advisor, and that MTBIA recommended to the Board the engagement of each
New Sub-Advisor after extensive research of numerous candidate firms. The Board
also relied upon the fact that MTBIA negotiated fee arrangements with the New
Sub-Advisors on an arms-length basis and the new sub-advisory arrangements will
not result in any increase in the total advisory fees and total expenses payable
by the Fund.
Finally, the Board also based its decision on the favorable results of an
independent review and consideration of extensive background material provided
to it by each New Sub-Advisor regarding the New Sub-Advisor's organizational
structure, compliance program, investment process, style and long-term
performance record as well as the factors discussed above, no single one of
which was considered to be determinative. Instead, all of the foregoing factors
were considered together in reaching the conclusion to approve each new Sub-
Advisory Agreement.
NEW SUB-ADVISORY AGREEMENTS
MTBIA manages each Fund by allocating a portion of assets to each Sub-
Advisor. In the case of the Balanced Fund, MTBIA adjusts allocations based upon
the size of each portion and the relative attractiveness of growth versus value
equity securities. MTBIA also allocates a portion of the Balanced Fund's assets
to fixed income (normally at least 25%). This allocation is based upon the size
of each portion and the relative attractiveness of fixed income versus equity
investments. MTBIA manages the growth equity and fixed income portions of the
Fund. Their services will not be affected by the actions described in this
Information Statement.
With respect to the Small Cap Stock Fund, allocations are also made on the
basis of the size of the portion allocated and the relative attractiveness of
the growth versus value equity securities. LSV Asset Management manages the
value portion of the Small Cap Stock Fund. Their services will not be affected
by the actions described in this Information Statement.
Each New Sub-Advisor serves as sub-advisor under sub-advisory agreements
among MTBIA, the Trust and the respective New Sub-Advisor. Under their
respective New Sub-Advisory Agreements, each New Sub-Advisor makes investment
decisions for the assets of the Fund component allocated to it by MTBIA, and
continuously reviews, supervises and administers such Fund component's
investment programs with respect to these assets. Each New Sub-Advisor is
independent of MTBIA and discharges its responsibilities subject to the
supervision of MTBIA and the Trustees, and in a manner consistent with the
Fund's investment objectives, policies and limitations.
The New Sub-Advisory Agreements are substantially similar to those in
existence among the Trust, MTBIA and the Trust's other sub-advisors.
Specifically, the duties to be performed, standard of care and termination
provisions of the New Sub-Advisory Agreements are similar to the other
agreements. Each New Sub-Advisory Agreement will remain in effect for 2 years
(unless earlier terminated), and will have to be approved annually thereafter by
a majority of the Trustees, including a majority of the Trustees who are not
parties to the New Sub-Advisory Agreements or "interested persons," as that term
is defined in the Investment Company Act of 1940, of any party to a New Sub-
Advisory Agreement.
COMPENSATION
Pursuant to the terms of the New Sub-Advisory arrangements, DRZ receives a
sub-advisory fee from MTBIA on the equity value portion of the average daily net
assets (ADNA) of the Balanced Fund at the following annual rate: 0.40% on the
assets it manages; and Copper Rock receives a sub-advisory fee from MTBIA on the
growth portion of the ADNA of the Small Cap Stock Fund it manages at the
following annual rate: 0.72% on the first $50 million of ADNA and 0.66% on ADNA
over $50 million. (By comparison, Mazama received a sub-advisory fee from MTBIA
on the growth portion of the ADNA of the Small Cap Stock Fund at the following
annual rate: 0.70% of the Fund's ADNA.) The new sub-advisory arrangements will
not affect the advisory fees or total expenses payable by the Funds. All sub-
advisory fees will be paid by MTBIA out of the investment advisory fee it
receives from the Funds. Each New Sub-Advisor may voluntarily waive all or a
portion of its sub-advisory fee in its sole discretion.
For its services under the Advisory Contract, MTBIA receives an annual
Advisory Fee from the Balanced Fund equal to 0.65% of the Fund's ADNA. For the
fiscal year ended April 30, 2006, the Balanced Fund paid MTBIA $403,095 for
investment advisory services.
For its services under the Advisory Contract, MTBIA receives an annual
Advisory Fee from the Small Cap Stock Fund equal to 0.85% of the Fund's ADNA.
For the fiscal year ended April 30, 2006, the Small Cap Stock Fund paid MTBIA
$1,511,801 for investment advisory services.
Mazama, the Small Cap Stock Fund's previous sub-advisor, was paid by MTBIA
as follows: 0.70% of the Small Cap Stock Fund's ADNA. For the fiscal year ended
April 30, 2006, MTBIA paid Mazama $480,617 for sub-advisory services.
ADDITIONAL INFORMATION ON THE SUB-ADVISORS
DRZ
DRZ is a registered investment advisor formed as a Florida corporation in
April 1995. DRZ is substantially owned by three principals, Gregory M.
DePrince, John D. Race and Victor A. Zollo, Jr. Each of these principals owns
roughly 30% of the business. In 2001, equity was distributed to the following
other key investment professionals: Kelly Carbone, Director of Marketing; Jill
Lynch, Director of Large-Cap Research; and Greg Ramsby, Director of Small-Cap
Research. DRZ's principal business address is 250 Park Avenue South, Suite 250,
Winter Park, Florida 32789. As of October 31, 2006, DRZ managed approximately
$5.334 billion in assets.
Following is a list of the directors and principal executive officers of
DRZ and their principal occupations. Unless otherwise noted, the address of
each person listed is 250 Park Avenue South, Suite 250, Winter Park, Florida
32789.
NAME PRINCIPAL OCCUPATION
Gregory M. DePrince Director, President and Portfolio Manager
John D. Race Director, Executive Vice President, Treasurer and Portfolio Manager
Victor A. Zollo, Jr. Director, Executive Vice President, Secretary and Portfolio Manager
DRZ currently serves as subadvisor to several other mutual funds with an
equity value investment management style. The following chart contains a
description of these funds and the compensation paid to DRZ for its sub-advisory
services:
NAME OF FUND APPROXIMATE TOTAL FUND ASSETS AS ADVISORY FEE (ANNUALLY, AS % OF AVERAGE DAILY WAIVER OF
OF OCTOBER 31, 2006 NET ASSETS) ADVISORY FEE
RTC US Value $150 million 0.36% N/A
Fund
Russell $44 million 0.36% N/A
Investments
LTD
RIC Select $65 million 0.36% N/A
Value Fund
RIC RIF $46 million 0.36% N/A
MTB Equity $57 million 0.40% N/A
Income Fund
Copper Rock
Copper Rock is a registered investment advisor and a 60% indirect
subsidiary of Old Mutual plc, a financial services company whose principal
business address is Old Mutual Place, 5th Floor, 2 Lambeth Hill, London, EC4V
4GG, United Kingdom. Copper Rock was founded in 2005 and its principal business
address is 200 Clarendon Street, 52nd floor, Boston, MA 02116. As of October
31, 2006, Copper Rock managed approximately $1.2 billion in assets.
Following is a list of the directors and principal executive officers of
Copper Rock and their principal occupations. Unless otherwise noted, the
address of each person listed is 200 Clarendon Street, Boston, MA 02116.
- ----------------------------------------------------------------------------
|NAME |PRINCIPAL OCCUPATION |
- ----------------------------------------------------------------------------
|Tucker Walsh |Chief Executive Officer, Head of Portfolio Management |
- ----------------------------------------------------------------------------
|Mike Malouf |President, Portfolio Manager |
- ----------------------------------------------------------------------------
|Mike Sakala |Principal, Chief Financial Officer/Chief Compliance Officer|
- ----------------------------------------------------------------------------
|Dave Cavanaugh|Principal, Senior Analyst |
- ----------------------------------------------------------------------------
|Greg Poulos |Principal, Senior Analyst |
- ----------------------------------------------------------------------------
|Mike Callahan |Principal, Head of Trading |
- ----------------------------------------------------------------------------
|Peter Hadelman|Principal, Head of Relationship Management |
- ----------------------------------------------------------------------------
|Lidney Motch |Senior Vice President, Director of Client Service |
- ----------------------------------------------------------------------------
Copper Rock currently serves as subadvisor to eight mutual funds with an
objective similar to the equity growth approach of the assets of the Small Cap
Stock Fund that Copper Rock manages. The following chart contains the name of
these funds and the compensation paid to Copper Rock for its sub-advisory
services:
NAME OF FUND APPROXIMATE TOTAL FUND ASSETS AS OF OCTOBER 31, 2006 ADVISORY FEE (ANNUALLY, AS % OF WAIVER OF
AVERAGE DAILY NET ASSETS) ADVISORY
FEE
Old Mutual Copper Rock Emerging $85,328,910 0.60% Not
Growth Fund publicly
disclosed,
if any
Old Mutual Emerging Growth Fund $159,562,905 0.30% to 0.60% depending on assets Not
under management publicly
disclosed,
if any
Old Mutual Asset Allocation $2,557,315 0.55% Not
Balanced Portfolio publicly
disclosed,
if any
Old Mutual Asset Allocation $3,592,668 0.55% Not
Growth Portfolio publicly
disclosed,
if any
Old Mutual Asset Allocation $4,295,078 0.55% Not
Moderate Growth Portfolio publicly
disclosed,
if any
Old Mutual Strategic Small $20,460,218 0.30% to 0.60% depending on assets Not
Company Fund under management publicly
disclosed,
if any
Callan Alpha Diversified Group $22,781,777 Not publicly disclosed Not
Trust publicly
disclosed,
if any
Wilshire Variable Annuity Trust $32,776,889 Not publicly disclosed Not
publicly
disclosed,
if any
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ADDITIONAL INFORMATION ON THE FUNDS
The Trust mailed to shareholders the annual report for the Funds, which
includes audited financial statements for their fiscal year ended April 30,
2006. The Trust's semi-annual report, which contains unaudited financial
statements for the Funds for the period ended October 31, 2006, is being mailed
concurrently with this Information Statement. The Trust will promptly provide,
without charge and upon request, a copy of the Funds' annual report and/or semi-
annual report. Requests for the annual report or semi-annual report for the
Funds may be made by writing to the Trust's principal executive offices located
at 5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-7010 or by calling the
Trust toll-free at 1-800-836-2211.
The Trust's distributor is Edgewood Services, Inc., 5800 Corporate Drive,
Pittsburgh, Pennsylvania 15237-5829.
The co-administrators for the Trust are M&T Securities, Inc., One M&T
Plaza, Buffalo, NY 14203; and Federated Services Company, Federated Investors
Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
December 31, 2006
IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY
In an effort to reduce costs and avoid duplicate mailings, the Trust intends to
deliver a single copy of certain documents to each household in which more than
one shareholder of the Trust resides (so-called "householding"), as permitted by
applicable rules. The Trust's "householding" program covers its Prospectuses and
Statements of Additional Information, and supplements to each, as well as Semi-
Annual and Annual Shareholder Reports and any Proxies or information statements.
Shareholders must give their written consent to participate in the
"householding" program. The Trust is also permitted to treat a shareholder as
having given consent ("implied consent") if (i) shareholders with the same last
name, or believed to be members of the same family, reside at the same street
address or receive mail at the same post office box, (ii) the Trust gives notice
of its intent to "household" at least sixty (60) days before they begin
"householding" and (iii) none of the shareholders in the household have notified
the Trust or its agent of the desire to "opt out" of "householding."
Shareholders who have granted written consent, or have been deemed to have
granted implied consent, can revoke that consent and opt out of "householding"
at any time: shareholders who purchased shares through an intermediary should
contact their representative; other shareholders may call the Trust at 1-800-
836-2211.
Edgewood Services, Inc., Distributor
Cusip 55376T106
Cusip 55376T205
Cusip 55376T304
Cusip 55376T130
Cusip 55376T122
Cusip 55376T114
35906 (12/06)
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