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Wintergreen Fund, Inc. to liquidate

497 1 wintergreen_497e.htm SUPPLEMENTARY MATERIALS

(the “Fund”)

April 17, 2019

Supplement to Prospectus and Summary Prospectus each dated April 30, 2018, as amended.

At a meeting held on April 15, 2019, the Board of Directors (the “Board”) of Wintergreen Fund, Inc. (the “Fund”) approved the liquidation and dissolution of the Fund. Effective immediately at market close on April 17, 2019, the Fund has suspended most sales of its shares pending the completion of the liquidation and the payment of liquidating distributions to its shareholders. The Fund expects to make the liquidating distributions and cease operations on or shortly after June 3, 2019 (the “Liquidation Date”).

In limited circumstances, such as sales to certain retirement plans and sales made through retail omnibus platforms, the Fund will continue to offer its shares for a limited time, but no offer or sale of Fund shares will be made after April 30, 2019.

Shareholders should be aware that the Fund will convert its assets to cash and/or cash equivalents before the liquidating distributions are made to shareholders. After the Fund converts its assets to cash, the Fund will no longer pursue its stated investment objective or engage in any business activities except for the purposes of winding up its business and affairs, preserving the value of its assets, paying its liabilities, and distributing its remaining assets to shareholders.

In connection with the liquidation, the Board approved the immediate suspension of the Fund’s distribution and/or service (Rule 12b-1) fees. The Board also approved a waiver of the redemption fee of 2.00% imposed on shares redeemed within 60 days of purchase for redemptions of Fund shares that occur after the date of this supplement.

If a shareholder has not redeemed his or her shares prior to May 30, 2019, then the shareholder’s account will be automatically redeemed and proceeds will be sent to the shareholder’s address of record.

The liquidation of the Fund, like any redemption of Fund shares, will constitute an event upon which a gain or loss may be recognized for state and federal income tax purposes, depending on the type of account and the adjusted cost basis of the investor’s shares. The tax year for the Fund will end on the Liquidation Date.

The Fund expects to make one or more distributions of income and/or net capital gains prior to the Liquidation Date in order to eliminate Fund-level taxes. The Fund must declare and distribute to shareholders realized capital gains, if any, and all net investment income no later than the final liquidation distribution. The Fund currently expects to pay a capital gains distribution prior to the liquidation of the Fund. As with any other distribution, such pre-liquidation distribution by the Fund will be taxable unless you hold shares in a tax-advantaged account, such as an IRA or a retirement plan.

Please contact your tax advisor to discuss the tax consequences to you of the liquidation.

Important Action Required for Direct Shareholders with IRA Accounts

As an IRA account shareholder holding an account directly with the Fund, you should contact a shareholder service representative at 1-888-468-6473 to arrange a transfer of your Fund assets to another IRA custodian.

Please respond by May 30, 2019. If we do not receive a response by May 30, 2019, your investment in the Fund will be liquidated as an age-based distribution with 10% federal withholding on the Liquidation Date. Please also note that state withholding may also apply. Checks will be mailed to your address of record. You may have a limited time, typically 60 days, to reinvest proceeds to avoid tax consequences.

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  • An expensive lousy performing fund. Bye!
  • @MFO Members: Who would have thought that David Winters, who honed his skills under Max Heine and Michael Price at Mutual Series, and once considered a rising star in the fund world, would come to an end after fourteen years at the helm of Wintergreen Fund. But the numbers tell the story of his downfall, the fund was in the 100% percentile during it's life.
  • Another nail in the coffin of active "management." Yet, just today, I heard another spokesperson say, "There has never been a time when we needed active management more than today." Yada yada yada.... I can't count the times this guy was a special guest on Wealthtrack (PBS) while Wintergreen was sometimes listed as a contributor.
  • @MFO Members: Speaking of the devil !
  • edited April 2019
    It is perhaps a nail in a certain kind of active management. As much as I admire the boutique money manager--something championed by this site in particular--there are definitely some risks when a manager strikes out on his/her own as Winters did. There is often this impression investors have that the manager is solely responsible for his previous charge's performance when the truth is much more complicated--see Bill Gross at Janus. In other words, big shops sometimes have significant advantages over lone gunslinger types of boutique managers, a depth of talent and technological resources that manager loses when he jumps ship to start his own firm. It is also an indicator of what's been going on in value investing today--a trend eerily reminscent of the late 1990s when a lot of top value guys retired or were fired. Finally, the concentration risk of perhaps "too much active share" can also be damaging. We always highlight the benefits of active share, but done wrong, the drawbacks are immense.
  • Agree with @Lewis. I thought it odd that Winter set up shop in Maine to run an active, global fund.
  • @BenWP & MFO Members: Official state herb of Maine, the wintergreen.
  • edited April 2019
    Accustomed to pointless useless movie clips from one member here, I nearly didn’t click on the one above. But I must commend @Ted for that one and highly recommend it if you have time on this somewhat busy news day. (I sampled it but haven’t watched the full 30-minutes.)

    It’s a half hour Consuelo Mack production. Begins with Buffett’s apparent affinity for index investing and than goes into a lengthy interview with Winters. I disagree with Buffet. And recall long discussions here years back when he revealed his investment strategy for his wife’s inheritance after his passing. (No desire to wade through that muck again.)

    The interview is typical optimistic charming David Winters. He was an apprentice under renowned activist deep value investor Michael Price decades back, who managed the Mutual Series (later acquired by Franklin Templeton). Price had a style for pushing management to make changes which often resulted in quick appreciation of their stock price - possibly at the expense of longer term value. Winters’ approach to Wintergreen likely reflected that deep value approach. I was tempted to send money when he opened Wintergreen but resisted. The high fees were a turn-off. Charm and pedigree can only get you so far. So Winters’ act turned out to be not a “Michael Price II” - but a failure instead.

    To me this has as much to do with the fickleness of investment trends as anything else. We have very short memories and tend to think things will always remain as they are. It’s possible Winters had it right, but was out of step with the current indexing / momentum driven investment climate. Who knows? I don’t pretend to. But don't dismiss Winters as an investing lightweight. The picture is a bit more complex than it might appear on surface.
  • I never considered investing in this fund. The high fee alone would have kept me away. And I personally never found him charming. When he stated on Wealth Track that very few people were left doing the work of analyzing individual stocks, I thought it was the most patently false claim I had ever heard in an investment interview.
  • msf
    edited May 2019
    hank said:

    To me this has as much to do with the fickleness of investment trends as anything else. We have very short memories and tend to think things will always remain as they are. It’s possible Winters had it right, but was out of step with the current indexing / momentum driven investment climate. Who knows? I don’t pretend to. But don't dismiss Winters as an investing lightweight. The picture is a bit more complex than it might appear on surface.

    OTOH, the Mutual Series funds have continued to do moderately well with their old familiar deep value/vulture style. So perhaps it just required a bit of evolution over time, and Winters went off track.

    MUTHX, M* writes: "Cheap stocks and merger-arbitrage plays typically constitute 80% to 90% of assets, while the remainder is in distressed debt and cash."

    MQIFX, M* writes: "Its strategy is similar to that of other Franklin Mutual Series offerings, but it holds far more debt than its siblings. Cheap stocks and merger-arbitrage plays typically comprise 55%-75% of the fund's assets, while the remainder of the portfolio is invested in distressed debt and cash."

    These sound very much like Michael Price's Mutual Series funds. Their style box shows what you'd expect, offset well into the value column. In contrast, Wintergreen's shows this narrow slice solidly across the growth column. He's been investing in growth stocks since at least 2014 (that's as far back as M* shows style boxes on a fund's portfolio page).
  • edited May 2019
    “In contrast, Wintergreen's shows this narrow slice solidly across the growth column. He's been investing in growth stocks since at least 2014”

    Thanks @msf - Sounds like you nailed it. And I hate it when managers deviate from their (stated / normal / assumed ) approach in pursuit of better gains. I guess I’m confused as to whether Winters conveyed his emphasis on growth to his investors?

    Hope Winters can find work somewhere else. (I still think he sounds like a nice guy.)
  • I would definitely not call Wintergreen a growth fund regardless of what the stylebox says. To understand it, you really need to understand one stock which makes up 45% of its portfolio: Consolidated Tomoka Land
    That company may have high valuations landing it in the growth stock corner of the style box, but it definitely isn't a rapidly growing stock. It is a real estate company which doesn't have much in the way of earnings--hence the high apparent valuation--yet all of its value is ostensibly in the land it owns which it can sell. Its an asset value play and an activism play as Winters got involved with the company's board. This kind of activism play has some affinity to Michael Price but not at this level of concentration and not without tradional arb plays to reduce risk you find in Mutual Series. The fund made a big bet on undervalued real estate much like Fairholme's Berkowitz did with St. Joe and failed. Still, the style is different enough from Mutual Series, more aggressive value with less arb. It is one of the reasons I also question the other Price student fund Evermore, which seems far more agressive and volatile than the Mutual Series funds.
  • Certainly that describes the fund's portfolio now. Looking at its performance graph (e.g. in the latest [Dec 2018] annual report), one can see it diverge sharply from the S&P 500 starting around 2012-2013. It also significantly underperformed its category starting around 2012, with the exception of 2016.

    The fund has been investing in Consolidated Tomoka since 2006. Going along with your comment about Berkowitz, Wintergreen held a significant portion of Consolidated Tomoka (over 5%) since day one. But it didn't represent an excessively large portion of the fund until the last 2-3 years. So while this stock holding does help explain more recent problems (thanks!), there's more to the story than one stock and a manager's obsession with it.

    At the end of 2013 CTO represented about 2.6% of Wintergreen. The fund's top holdings were Jardines (7%), Swatch (7%), and Berkshire Hathaway, with a good amount of tobacco thrown in (BAT and Reynolds, over 10% combined).

    At the end of 2014, tobacco moved up, with Reynolds in top spot (7.3%) but also BAT (6.8%) and Altria (4.7%). Consolidated Tomoka appears in the top ten at 4.7%, primarily through appreciation (50%+) but also because of some AUM shrinkage (15%). The fund continued to hold the same number of shares as it had since 2012; they represented 21% of CTO. (The 2014 annual report has a discussion of this holding.)

    By the end of 2015, Consolidated Tomoka had grown enough to have become the fund's second largest holding (9.3%). Again, with no additional stock purchases, and with tobacco still the dominant holding - Reynolds (12.4%), BAT (8.5%), Altria (6.3%). CTO's performance (down around 6%) was in line with the fund's 2015 performance (down7%). The rise to 2nd largest holding was thus due to the fact that people were pulling money out of the fund and Winters didn't sell off CTO pro-rata. AUM dropped over 50%.

    So arguably it wasn't until 2016 that CTO began to dominate the fund. But Winters also continued favoring tobacco during this period. By the end of 2016, CTO constituted 13.9% of the fund, while tobacco kept pace, with Reynolds now at 19.5%, BAT at 9.4%, and Altria at 7%. Tobacco stocks now accounted for three of the four largest holdings. CTO was essentially flat on the year, while the fund itself performed well relative to its peers, gaining 6.67%.

    Once again, the increased fraction of the fund that CTO represented was a result of people pulling money out of the fund (AUM down nearly 1/3) and Winters hanging on to CTO, and onto the tobacco stocks. Note also that real estate didn't grow much as a fraction of the fund in 2016 (just to 13.9% up from 13.5%), because Winters gave up on his other real estate holding, Sun Hung Kai.

    By the end of 2017, CTO was the fund's largest holding, at 20.4%. BAT (now owning Reynolds) was 16.1%, and Altria 5.7%. That was a result of CTO appreciating 20% and AUM shrinking 20%. Again, no change in the number of shares owned by the fund.

    Finally, by the end of 2018, CTO represents 42.6% of the company (despite underperforming in 2018), BAT is still the second largest holding, but that's just 5.9% of the fund. Tobacco and every other stock have become nearly immaterial.

  • edited May 2019

    Here are its return and risk numbers through April:

  • Say Charles, it looks like the fund is being compared to Global Multi-Cap Growth Funds:-)

    Do you happen to know how it fared against its reputed peers, Global Multi-Cap Value Funds?
  • edited May 2019
    And yet one would be hard pressed to call tobacco stocks growth stocks either. More to the point, tobacco stocks were mainstay investments at Franklin Mutual Series where Winters was previously:
    In fact, he was involved with some of these companies prior to creating Wintergreen:
    These are lumpy value stocks with litigation surrounding them and difficult mergers, the kind Price always focused on. What I do think is different is the concentration of positions in such stocks and the failure to invest more in safer conventional arb plays to provide balance in the portfolio. Also, lest I forget, ridiculously high fees. Finally, I would add that value stock investing isn't quite so easy to represent as the style box would have us believe. Consider that after the 2008 crash, many stocks had depressed earnings or no earnings even though their share prices had been crushed. Just looking at the p-e ratios for such companies would lead one to believe they were growth stocks because the "e" part of the equation was so depressed. This is often the case with asset value plays as opposed to earnings value plays even in non-crisis environments. They have little in the way of earnings so their p-e's are elevated and sometimes even their book value is also artificially depressed because in the case of a real estate company the company may not want to increase the estimated value of their properties for tax reasons. It's the same logic a home owner uses who tries to keep the assessed value of their properties low.
  • While there's little here that I disagree with, I do wonder how relevant it is to the past five years - the ones M* characterized as growth leaning. Yes, traditional value metrics like P/E were skewed following GFC. But was that still true from 2013 onward?

    Yes, tobacco stocks have traditionally been regarded as value stocks, and troubled in the 90s due to the anticipated 1998 settlement. But these days? I'm having a hard time finding value funds with tobacco stocks in their top 25 holdings. I spot checked DODGX, LLPFX, VEIRX, TAVFX, PRFDX (MO is #23 at 1.37%), MDISX (BATS is #21 at 1.50%), YAFFX (KT&G is #25 at 0.68%), TBGVX. Maybe I'm just not looking at the right funds, but it looks like value funds aren't finding much "value" in tobacco.

    We can each define value investing however we want. Just look at Bill Miller. I think your observation about concentration and protection goes a long way toward explaining the failure of this fund, value or not.
  • Thanks @lewis and @msf for confirming my correct decision some years ago to stay clear of Wintergreen. The smell of the tobacco was enough to deter me, but you have pointed out other good reasons.
  • edited May 2019
    @msf - At one time I considered OAKBX a value fund. Not sure what to call it now as I’ve exited it and moved on. Lipper lists Phillip Morris as its #10 top holding at over 2%.

    Added: Whatever they’re “smoking” over there, I wanted no part of it after a dismal 4th quarter - lagging the S&P and most peers.
  • msf
    edited May 2019
    Thanks @hank. I was pretty sure the stocks hadn't gone completely up in smoke, but I wasn't seeing lots of them anywhere valuish. Interesting that OAKMX leans a bit more toward growth than OAKBX (which is technically a hybrid fund, but value on the equity side).
  • I appreciate the thoughtful analysis from the above posts. Sadly, I invested in this fund the day it opened. I was a Mutual Series investor from the 80s. Wintergreen Fund looked like an opportunity to get Michael Price like talent at the beginning of his run. It had a great first year and it went downhill from there. (I never understood why he thought he could push Coke around). I gave up and sold the fund two years ago. A great investor will make money in any type of market, no matter his style. Peter Lynch did. Michael Price did. David Winters didn’t.
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