-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ETD5Jobkq0xBKIN57iK3Yi3LZXA6vEWH3AMX7jqasLM2+PHLN23JnrC4p2mAVIxM dJQ63De58WJMG36jesNjyQ== 0000950123-09-022877.txt : 20090717 0000950123-09-022877.hdr.sgml : 20090717 20090716183527 ACCESSION NUMBER: 0000950123-09-022877 CONFORMED SUBMISSION TYPE: DEF 14C PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20090716 FILED AS OF DATE: 20090717 DATE AS OF CHANGE: 20090716 EFFECTIVENESS DATE: 20090717 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PACIFIC LIFE FUNDS CENTRAL INDEX KEY: 0001137761 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: DEF 14C SEC ACT: 1934 Act SEC FILE NUMBER: 811-10385 FILM NUMBER: 09948974 BUSINESS ADDRESS: STREET 1: 700 NEWPORT CENTER DRIVE STREET 2: POST OFFFICE BOX 7500 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 BUSINESS PHONE: 9492193233 MAIL ADDRESS: STREET 1: 700 NEWPORT CENTER DRIVE CITY: NEWPORT BEACH STATE: CA ZIP: 92660 FORMER COMPANY: FORMER CONFORMED NAME: PACIFIC FUNDS DATE OF NAME CHANGE: 20010405 0001137761 S000001904 PL LARGE-CAP GROWTH FUND C000005012 CLASS A PFBAX DEF 14C 1 a53068def14c.htm INFORMATION STATEMENT - PL LARGE CAP GROWTH def14c

SCHEDULE 14C INFORMATION

Information Statement Pursuant To Section 14(c)
of the Securities Exchange Act 1934

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Pacific Life Funds

(Name of Registrant as Specified In Its Charter)

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PACIFIC LIFE FUNDS
PL LARGE-CAP GROWTH FUND

INFORMATION STATEMENT DATED JULY 16, 2009
 
This statement provides information concerning a new fund manager and a new fund management agreement for the PL Large-Cap Growth Fund.
 
We are not asking you for a proxy, and you are requested not to send us a proxy.
 
We previously advised you, via a supplement dated March 31, 2009 to the Pacific Life Funds (the “Trust”) prospectus, dated July 1, 2008, that the Trust’s Board of Trustees (the “Board” or “Trustees”) approved a change in manager and a new Fund Management Agreement (the “PL Large-Cap Growth Fund Agreement”) with respect to the PL Large-Cap Growth Fund (the “Fund”) effective July 1, 2009. Under the Investment Company Act of 1940, as amended (the “1940 Act”), a change in fund manager requires shareholder approval of a new fund management agreement; however, pursuant to an exemptive order issued to Pacific Life Insurance Company (“Pacific Life”) by the Securities and Exchange Commission (“SEC”) on October 13, 1999 and relied upon by the Trust and Pacific Life Fund Advisors LLC (“PLFA” or “Adviser”), in accordance with the terms of the exemptive order, PLFA and the Trust can hire, terminate, and replace, as applicable, fund managers and enter into new fund management agreements (except, as a general matter, fund managers affiliated with PLFA) without shareholder approval. The additional information provided herein concerning the fund manager change is being provided pursuant to the requirements of the exemptive order.
 
I.   Background
 
At an in-person meeting on March 18, 2009, the Board, including all of the Trustees who are not “interested persons,” as that term is defined in the 1940 Act (“Independent Trustees”), approved, effective no later than July 1, 2009, the PL Large-Cap Growth Fund Agreement with UBS Global Asset Management (Americas) Inc. (“UBS Global AM”) with respect to the PL Large-Cap Growth Fund and appointed UBS Global AM as the new fund manager (“Fund Manager”). In connection with this matter, also at the March 18, 2009 meeting, the Board terminated the fund management agreement for the Fund with the prior fund manager upon the effectiveness of the PL Large-Cap Growth Fund Agreement. UBS Global AM’s appointment as Fund Manager was made in accordance with the SEC exemptive order noted above and does not require shareholder approval.
 
II.   Board Consideration of the New Fund Management Agreement
 
In evaluating the PL Large-Cap Growth Fund Agreement, the Board, including all of the Independent Trustees, considered the factors described below. Additionally, the Board considered the various screening processes that PLFA utilizes in identifying a proposed new fund manager, including screening for qualified firms through the use of quantitative data and information gathered from independent third-party databases, as well as the due diligence conducted by PLFA on the investment resources and personnel of a fund manager and an assessment of the investment strategies used by a fund manager. In addition, the Board reviewed the specific criteria and information evaluated by PLFA during the selection process of UBS Global AM, including information about other firms considered by PLFA and reviewed PLFA’s analysis in reaching its conclusion to recommend UBS Global AM as Fund Manager.
 
In evaluating the PL Large-Cap Growth Fund Agreement, the Board, including the Independent Trustees, considered the following factors, among others:
 
     A.   Nature, Extent and Quality of Services to be Provided
 
The Trustees considered the benefits to shareholders of retaining UBS Global AM as the Fund Manager, particularly in light of the nature, extent, and quality of the services expected to be provided by UBS Global AM. In this regard, the Trustees considered various materials relating to the proposed Fund Manager, including copies of the proposed PL Large-Cap Growth Fund Agreement; copies of the Form ADV for the Fund Manager; financial information relating to the Fund Manager; and other information deemed relevant to the Trustees’ evaluation of the Fund Manager, including qualitative assessments from senior management of PLFA.
 
The Trustees considered that under the PL Large-Cap Growth Fund Agreement, UBS Global AM would be responsible for providing the investment management services for the Fund’s assets, including investment research, advice and supervision and

 

determining which securities would be purchased or sold by the Fund. The Trustees considered the quality of the management services expected to be provided to the PL Large-Cap Growth Fund over both the short- and long-term, the organizational depth and resources of UBS Global AM, including the background and experience of UBS Global AM’s management and the expertise of the fund management team, as well as the investment strategies, processes and philosophy to be used with respect to the investment strategy.
 
In addition, the Trustees considered that the Trust’s Chief Compliance Officer had reviewed the written compliance policies and procedures of UBS Global AM, including the assessment of its compliance programs as required under Rule 38a-1 of the 1940 Act and its code of ethics, prior to the effectiveness of the new PL Large-Cap Growth Fund Agreement.
 
In making these assessments, the Trustees took note of the extensive due diligence PLFA conducted with respect to UBS Global AM and was aided by the assessments and recommendations of PLFA and the in-person presentation and materials provided by UBS Global AM at a prior Board Meeting. The Trustees considered PLFA’s efforts and process to search for and screen advisory firms that are qualified to manage a large-cap growth fund and the identification by PLFA of UBS Global AM to serve as Fund Manager with regard to the day-to-day investment activities of the PL Large-Cap Growth Fund. In this regard the Trustees considered that the search criteria employed by PLFA included identification of a firm with sufficient size, market presence and resources to properly manage the Fund, a dedicated, experienced management team, a large-cap growth investment style, competitive peer ranking and competitive advisory fees. The Trustees also considered that PLFA has historically exercised diligence in monitoring the performance of the fund managers and has recommended and taken measures to attempt to remedy relative underperformance by a fund when PLFA and the Board believed appropriate.
 
The Board concluded it was satisfied with the nature, extent and quality of the investment management services anticipated to be provided to the PL Large-Cap Growth Fund by UBS Global AM under the PL Large-Cap Growth Fund Agreement.
 
     B.  Performance
 
The Trustees considered information about the historical performance of investment companies advised or sub-advised by the same UBS Global AM portfolio management team that would manage the PL Large-Cap Growth Fund using similar investment strategies as those proposed for the PL Large-Cap Growth Fund (the “Comparable Performance”). The Trustees considered the Comparable Performance against a pertinent benchmark and against its peer group category for the year-to-date, one-, three- and five-year periods as of December 31, 2008 and found that UBS Global AM had performed in the top quartile of its applicable Morningstar category for the one-, three- and five-year periods. Additionally, the Trustees considered performance information presented by PLFA for another potential fund manager. The Trustees also considered the performance of that firm’s account during recent periods with challenging market conditions. The Trustees noted UBS Global AM’s nimbleness in responding to various market conditions and considered that UBS Global AM offered the potential to achieve comparable upside performance and better downside protection than the current fund manager.
 
The Board determined that UBS Global AM’s performance record was acceptable.
 
     C.  Fund Management Fees
 
The Trustees considered information regarding the comparative fees paid to UBS Global AM by accounts with a similar investment strategy. The Trustees noted that there were differences in the fee structure proposed to the PL Large-Cap Growth Fund by UBS Global AM and the fee charged by UBS Global AM on other accounts. They noted that in certain cases the amounts were lower and in other cases they were higher, and that in some instances, the differences were due to the different nature of the accounts. The Trustees noted that the fee rates were the result of arms’-length negotiations between PLFA and UBS Global AM, and that the PL Large-Cap Growth Fund’s sub-advisory management fees are paid by PLFA and are not paid directly by the PL Large-Cap Growth Fund. The Trustees also considered that the sub-advisory management fees payable to UBS Global AM under the PL Large-Cap Growth Fund Agreement contain breakpoints and that the fee schedule remained unchanged from the current fee schedule for the Fund. The Board concluded that the compensation payable under the PL Large-Cap Growth Fund Agreement is fair and reasonable.
 
     D.  Costs, Level of Profits
 
The Trustees reviewed information regarding the costs to UBS Global AM of managing the PL Large-Cap Growth Fund and the projected profitability of the PL Large-Cap Growth Fund Agreement to UBS Global AM to the extent practicable based on the


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financial information provided by UBS Global AM. This information is only estimated because there is no actual operating history for UBS Global AM within the PL Large-Cap Growth Fund. The Trustees gave less weight to projected profitability considerations and did not view this information as being as important as other information provided in connection with this matter, given the arms’-length nature of the relationship between PLFA and UBS Global AM with respect to the negotiation of sub-advisory fees, the fact that such fees are paid by PLFA and the fact that they are projections. The Board concluded that the PL Large-Cap Growth Fund’s fee structure reflected in the PL Large-Cap Growth Fund Agreement is fair and reasonable.
 
     E.  Ancillary Benefits
 
The Trustees received from PLFA information concerning other benefits that may be received by UBS Global AM and its affiliates as a result of their relationship with the PL Large-Cap Growth Fund, including commissions that may be paid to broker-dealers affiliated with the Fund Manager and the anticipated use of soft dollars by the Fund Manager. In this regard, the Trustees noted that UBS Global AM represented that they anticipate utilizing an affiliated broker-dealer for trades or utilizing soft dollar credits generated by fund commissions to pay for research services. The potential benefits that may be derived by PLFA from its relationship with the PL Large-Cap Growth Fund could include larger assets under management and reputational benefits, which are consistent with those generally derived by investment advisers to mutual funds. The Trustees considered potential benefits to be derived by UBS Global AM from its relationship with the PL Large-Cap Growth Fund and that such benefits were consistent with those generally derived by sub-advisers to mutual funds or were otherwise not unusual.
 
     F.  Conclusion
 
Based on their review, including the consideration of each of the factors referred to above, the Board found that: (i) the compensation payable under the PL Large-Cap Growth Fund Agreement is fair and reasonable; and (ii) the PL Large-Cap Growth Fund Agreement is in the best interests of the PL Large-Cap Growth Fund and its shareholders. No single fact was determinative of the Board’s findings, but rather the Trustees based their determination on the total mix of information available to them.
 
III.  The New Fund Management Agreement
 
The PL Large-Cap Growth Fund Agreement is substantially similar to the prior fund management agreement with respect to the Fund. UBS Global AM will, subject to the supervision of the Adviser, provide a continuous investment program for the Fund and determine the composition of the assets of the Fund, including the evaluation, investment, sales and reinvestment of the Fund’s assets in accordance with the Fund’s investment objectives, policies and restrictions. UBS Global AM bears its expenses and the expenses of its own staff with respect to its activities in connection with the services provided under the PL Large-Cap Growth Fund Agreement. The Fund is responsible for its own expenses including, but not limited to, investment advisory fees, administration fees, custody fees, brokerage and transaction expenses, fees for pricing services, registration fees and costs of regulatory compliance, and fees for professional services, including legal and auditing services. Except as may otherwise be required by the 1940 Act, UBS Global AM is not subject to any liability for, nor subject to any damages, expenses or losses in connection with, any act or omission connected with or arising out of any services rendered under the PL Large-Cap Growth Fund Agreement, except by reason of willful misfeasance, bad faith, or gross negligence in the performance of its duties under the PL Large-Cap Growth Fund Agreement or by reason of UBS Global AM’s reckless disregard of its obligations and duties under the PL Large-Cap Growth Fund Agreement. The PL Large-Cap Growth Fund Agreement will continue in effect for a period of two years from the effective date, and will continue from year to year thereafter, subject to approval annually by the Board or by the shareholders of the Fund and also, in either event, approval of a majority of the Independent Trustees. The PL Large-Cap Growth Fund Agreement may be terminated without penalty at any time by any of the parties upon 60 days’ prior written notice to the other parties.


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There was no change to the advisory fee paid by the Fund to the Adviser in connection with the fund manager change. Additionally, there was no change to the fund management fee paid by the Adviser to the fund manager in connection with the fund manager change. The current fund management fee schedule is set forth in the table below:
 
 
     
Fund Management Fee
Fee
 
 Break Point (Assets)
 
0.45%
  On first $25 million
0.40%
  On next $225 million
0.30%
  On next $1.75 billion
0.25%
  Over $2 billion
 
The fund management fee paid by the Adviser through June 30, 2009 to the previous fund manager of the Fund was paid pursuant to a fund management agreement dated January 1, 2006, as amended. For the period April 1, 2008 through March 31, 2009, the fund management fees paid or owed by the Adviser for the Fund totaled $71,927. When determining the breakpoint rates, the combined average daily net assets of the Fund were aggregated with the corresponding portfolio of the Pacific Select Fund with the same portfolio manager. For the fiscal year ended March 31, 2009, the Fund did not pay brokerage commissions to an affiliated broker of the prior fund manager.
 
IV.   Information Regarding UBS Global AM
 
The address for UBS Global AM is One North Wacker Drive, Chicago, Illinois 60606. UBS Global AM is the primary manager for the PL Large-Cap Growth Fund and is an indirect, wholly-owned subsidiary of UBS AG and a member of the UBS Global Asset Management Division. UBS AG, with headquarters in Zürich, Switzerland, is an internationally diversified organization with operations in many areas of the financial services industry. The address for UBS AG is Schaffhauserstrasse 339, 8050 Zürich, Switzerland. As of March 31, 2009, UBS Global Asset Management Division’s total assets under management were approximately $507 billion, and UBS Global AM’s total assets under management were approximately $142 billion.
 
UBS Global AM acts as investment adviser to the following registered investment companies, which have a similar objective to the Fund:
 
                         
    Net Assets(1)
 		             
Fund Name
  (000s omitted)     Compensation Rate(1)     Waived/Reduced  
 
UBS U.S. Large Cap Growth Fund
  $ 80,900       0.70 %     N/A  
UBS U.S. Large Cap Growth Equity Relationship Fund
  $ 73,000       None (2)     N/A  
 
(1) As of March 31, 2009
 
(2) UBS Global AM receives no fees from the UBS U.S. Large Cap Growth Equity Relationship Fund for providing investment advisory services; however, only “accredited investors” may invest in this fund. Accredited investors include common or commingled trust funds, investment companies, registered broker-dealers, investment banks, commercial banks, corporations, group trusts and similar organizations.
 
As of March 31, 2009, UBS Global AM’s directors and principal executive officers are: Kai Sotorp, Board Director, President & Chief Executive Officer; John Moore, Board Director, Treasurer & Chief Financial Officer; Mark F. Kemper, Secretary & Chief Legal Officer; Joseph McGill, Chief Compliance Officer; and Barry M. Mandinach, Board Director & Vice President.*
 
The business address for each above individual is c/o UBS Global Asset Management (Americas) Inc. One North Wacker Drive, Chicago, Illinois 60606.
 
No officer or Trustee of the Trust is an officer, director or shareholder of UBS Global AM.
 
* None of the principal executive officers and directors of UBS Global AM listed above has other principal employment other than their respective positions with UBS Global AM and its affiliates.
 
Additional Information
 
Additional information about UBS Global AM, including, but not limited to, investment policies, fund manager compensation, proxy voting policies, recent legal proceedings, if any, and information on other accounts managed by the UBS Global AM fund managers, can be found in the Trust’s Statement of Additional Information, a copy of which may be obtained by calling the appropriate number set forth below.


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The annual report for the Trust for the fiscal year ended March 31, 2009 has previously been sent to shareholders. That report is available upon request without charge by contacting the Trust by:
 
     
Regular mail:
  Pacific Life Funds, P.O. Box 9768, Providence, RI 02940-9768
Express mail:
  Pacific Life Funds, 101 Sabin Street Pawtucket, RI 02860
Phone:
  1-800-722-2333 (Select Option 2)
Internet:
  www.PacificLife.com
 
The Trust’s investment adviser is Pacific Life Fund Advisors LLC, and its administrator is Pacific Life Insurance Company, both located at 700 Newport Center Drive, Newport Beach, CA 92660.
 
The Trust’s distributor is Pacific Select Distributors, Inc., also located at 700 Newport Center Drive, P.O. Box 9000, Newport Beach, CA 92660.
 
PLEASE RETAIN THIS INFORMATION STATEMENT FOR FUTURE REFERENCE

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