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Mairs & Power proxy vote on murkiness

I received a thick booklet from Mairs & Power asking me, a shareholder in two of their funds, for a proxy vote approving a proposed reorganization from its present Trust status to something else. In 83 pages of print the details of the Something Else are not made explicit. I phoned the supplied number for more info and got someone who seemed to sincerely believe she was giving me useful information by robotically reading sentences from the booklet I had already read. I asked her if she, like me, also did not understand what was being voted upon. Her answer was to recite the names of the three Mairs & Power funds. I thanked her for her time and called the shareholder phone number instead. I got a polite but ignorant person who kept putting me on hold while she asked her supervisor for information, After 15 minutes of brief conversation, separated by 3 minute holds accompanied by music that was not annoying, I was advised to phone the Proxy info number.
Does anyone here understand what is actually being proposed by M&P? I understand that the proposition is to switch to a "multiple series trust platform" and I understand in principal what that is, but no details are given. Part of the murkiness of the proposal is due to what seems to me to be poor English usage, particular the use of the word "series" as a plural without an article ("series" instead of " a series" for instance) and "reorganizations" in place of "reorganization" in a situation where one event of reorganization is proposed. An example: " If the reorganizations (as described below) are completed, the Target Funds would become series of a multiple series trust platform comprised of the Target Funds and other third-party funds". No one I asked on the phone could tell me what that meant or what the third-party funds would be. To add to the confusion, on another page each of the three M&P funds is described as being a "series". What?

Does anyone in this forum know the details of what is being proposed? And if so would you be so kind as to explain them to this simple-minded investor? Thank you in advance.
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Comments

  • Thanks, @Ben. What you quoted is total gibberish and prods the cynical me to wonder what management is trying to hide. One of the strengths and the weaknesses of the English language is its capacity for stringing together nouns that lose meaning for the lack of prepositions, articles, adverbs, etc,, those parts of speech that clarify the meaning of the nouns. Non-native speakers or uninformed native speakers never master the underpinnings of the language, frequently creating gibberish. @DavidMoran might have a view on this because he knows about proper usage for prospecti and similar formal documents.

    You said the music was pleasant. Let’s look on the bright side. BTW, your parents had good taste in names.
  • edited February 23
    I'm more than interested in any informative replies, too. Wish I could help. @Ben and @BenWP. What you describe, BenWP, is succinct and correct in my experience, listening to almost all of my in-laws attempt to speak English. The foreign accent is a dead giveaway, plus the use of the always-wrong preposition just creates a confusing ball of junk. Articles, prepositions, tenses..... who needs all that junk? I cannot speak THEIR language, and have the good sense not to try to do it. But every call center in or near Manila is filled with almost-English-speakers. PRECISION is a fantasy. You'll never get it from them. Sounds like the written stuff referenced by Ben was produced in like manner.
  • edited February 23
    I assume you mean this? https://sec.gov/Archives/edgar/data/61628/000110465911058419/a11-27145_1def14a.htm

    It seems like they want to leave Minnesota--not physically but legally--and reincorporate or reorganize in Delaware. American corporations love Delaware because of its lax pro-business regulations. A tiny state, that has probably the most incorporations in the nation.

    Far more important is the second proposal, that will change the funds' investment restrictions, making them much more lax, giving the funds' more flexibility, which is obviously a double-edged sword. These changes start on page 14, and include shifts in stock concentration, industry concentration limits, the ability to hedge with options or short sales and invest in real estate. It's hard to say how many of these options the funds will avail themselves of, but the new rules in this filing would allow them to do things very differently from what they currently are doing.
  • Thanks everyone. More info is welcome if anyone knows what is happening at M&P.

    @LewisBraham: page 14 of the booklet I was sent lists the managers of the Growth Fund. The linked document is similar to and sometimes apparently identical to what I was sent but with the sections in a different order.
    It seems to me that the previous limits on their funds made the funds stronger. If management wants to make these funds into something else then maybe this is the beginning of the end of Mairs & Power. I hope not.
  • Digging deeper I stumbled upon the "idea" (something between a suggestion and a fact) that M&P wishes to transform itself into a "series" (?!) of Trust For Professional Managers. It's right there on page one of the booklet but the language is so dense I didn't at first catch on that this was the name of something.

    https://docoh.com/company/1141819/trust-for-professional-managers
  • ouch. Thanks, @LewisBraham. They have traditionally deliberately focused on investing in Midwest companies, particularly the upper Midwest. I'll have to look into this...
  • msf
    edited February 23
    Corporations tend to incorporate in Delaware primarily, as Lewis wrote, because of its pro-business regulations. Another rationale given is that Delaware has the most developed corporate law. Though this is somewhat circular - companies incorporate in Delaware because it provides a rich corporate regulatory framework, while that framework develops because so many companies (with so many cases) incorporate in Delaware.

    The relaxing of restrictions is in part simply cleanup. As noted in the proxy, it has been over sixty years since the funds have taken a good look at their fundamental restrictions. Since that time, a lot has changed in fund regulations and the industry has grown more sophisticated. It's not unreasonable to look at bringing the restrictions up to date. Many funds have been gone through this process.

    It's hard to say how many of these options the funds will avail themselves of, but the new rules in this filing would allow them to do things very differently from what they currently are doing.

    That's the key question. To put it another way, how much do you trust the management? I would read the prospectuses of Michael Price's Mutual Series funds and marvel at how wildly he was permitted to run the funds. And yet they were among the least risky around. Regardless of what the restrictions are, management matters.

    FWIW, also in the proxy is this statement: "The Adviser has advised each Board that if the recommended changes are approved, the Adviser does not presently intend to change the manner in which it manages the Funds, or to materially increase the Funds’ risk profiles."
  • Thank you, one and all. All I can add at this point (maybe more tomorrow) is that

    1) "Trust For Professional Managers" of which Mairs & Power proposes to become a series, or to "become series" as the proxy booklet puts it, seems to be *already" incorporated in Delaware.
    and
    2) The question about how much I trust management is well put and on target. At this point I don't know the answer other than to say I have been trusting them a long time and I have not found my trust to be misplaced. But when a fund company that has been sending me reports and statements for 25 years which have been written in clear English sentences with nothing obscure now sends me 83 pages containing difficult-to-penetrate language I naturally wonder why the language is obscure. George Mairs and his successors did not write in scintillating prose. Bob Torray back in the day was certainly more entertaining. But I did know what every sentence in each M&P missive meant without having to read it over and over.
  • edited February 23
    It's odd as this FAQs sheet says very clearly: "There are no changes to the investment objectives, principal investment strategies, principal risks or portfolio of the Target Funds as a result of the Reorganizations. The Adviser and portfolio management team will remain the same." Yet the SEC filing has a proposal on it to change the investment restrictions of the funds.
  • msf
    edited February 23
    (I should have read more carefully.) The link that Lewis provided is for a 2011 proxy. Here's the current proxy:
    https://www.sec.gov/Archives/edgar/data/0001521353/000089418922001123/mairspowertpmproxy.htm

    The 2011 restructuring into a Delaware trust did take place; the current SAI reads:
    The Mairs & Power Growth Fund (Growth Fund), the Mairs & Power Balanced Fund (Balanced Fund) and the Mairs & Power Small Cap Fund (Small Cap Fund) are series of Mairs & Power Funds Trust (the Trust), a Delaware statutory trust established under a Declaration of Trust dated May 9, 2011 (the Declaration of Trust).
    This vote is much more innocuous. It's merely moving the funds from the Mairs and Powers Trust (already incorporated in Delaware) into a larger Delaware Trust under which funds from various families already operate.
  • My bad! Duhhh. It was the most recent one in the filing thread, but sometimes these funds have older threads.
  • Well then, since nothing untoward has happened with M&P since 2011, perhaps I will vote in favor of the propose change. Or not. They expect shareholder expenses to go down.... but not until shareholders pay 1/3 of the expense to make the change.
  • @Ben : "but not until shareholders pay 1/3 of the expense to make the change."
    And who will pay the other 2/3 ?! Shareholders one way or the other to my way of thinking !
    FWIW , Derf
  • msf
    edited February 24
    When you read ERs, do you mentally add back waived fees, figuring that the shareholders pay the full freight one way or another? Or does the management company take the hit by reducing its fees, taking a lower profit?

    The analogy is not perfect because sometimes waived fees can be clawed back, but not always.
    Mairs & Power, Inc. (the “Adviser”) serves as the investment adviser ... The total costs of the Reorganizations are estimated to be $729,000, of which the Adviser is estimated to bear $511,500, Growth Fund (Target Fund and Acquiring Fund collectively), Balanced Fund (Target Fund and Acquiring Fund collectively) and Small Cap Fund (Target Fund and Acquiring Fund collectively) are estimated to bear $173,000, $31,000, and $13,500, respectively.
  • edited February 24
    There is nothing in the proxy statement about changing investment objectives or advisors, at least for the Growth Fund.

    Every fund's and ETF's assets are held in a trust, and that trust is managed by the advisors, just like a personal trust might be held by a bank and managed by you. M&P just wants to replace the current trust company with a bigger trust company, one that also holds assets for other funds. The benefit is some economy of scale in the new trust's operations. They estimate a net reduction in fund fees by 0.01%.

    The cost of the transition, $729,000, is a drop in the bucket compared with the billions in assets held by the funds.
  • msf
    edited February 24
    Every fund's and ETF's assets are held in a trust

    How about the TRP funds that reorganized out of Massachusetts business trusts into Maryland corporations on Oct 30, 2017? Here's the proxy their shareholders were given.
    https://www.sec.gov/Archives/edgar/data/773485/000079808617000024/mbtfiling.htm
    Shareholders of each Fund are being asked to approve the redomiciliation and reorganization of their Fund (each, a “Reorganization”), currently organized as a sub-trust of a Massachusetts business trust, into a series of a newly formed Maryland corporation (each, a “Maryland Corporation,” and collectively, the “Maryland Corporations”) ... as follows ...

    Existing Massachusetts Business Trust                        New Maryland Corporation
    T. Rowe Price California Tax-Free Income Trust   T. Rowe Price State Tax-Free Funds, Inc.
  • wsanders said:

    M&P just wants to replace the current trust company with a bigger trust company, one that also holds assets for other funds.

    It's so simple when put in plain English as you have. Much appreciated. It would have been nice had M&P found someone who could compose sensible sentences.
  • msf
    edited February 25
    I'm afraid I was a bit simplistic in saying that this was merely moving the funds from the Mairs and Powers Trust to a larger trust that already holds funds of various families.

    While funds operate similarly whether organized as trusts or as corporations, it may be better to think in terms of the corporate model because people may be more familiar with that.

    A corporation has shareholders who invest money, and a board of directors (analogous to a board of trustees) who have ultimate responsibility for the company and who answer to the shareholders. In order to run a conventional company, a board hires and oversees corporate officers. In the case of a fund (or series of funds), a board similarly hires investment advisory firms while retaining responsibility for the fund(s).

    See this thread for examples of what can happen when the board fails to carry out its oversight responsibilities:
    https://mutualfundobserver.com/discuss/discussion/58326/infinity-q-capital-management-plans-to-return-500-million-to-mutual-fund-investors

    The current M&P board has five trustees, four of whom are independent including the Chair. The independent trustees are paid between $85K and $100K depending upon responsibilities (e.g. the independent Chair receives $100K). That is to oversee 3 funds run by one advisory firm.

    The new trust (Trust for Professional Managers) currently has three trustees, two of whom are independent; the Chair is not an independent trustee. The two independent trustees are projected to be paid between $94.5K and $97K of which $1800 (for each) will come from the three M&P funds combined. That is to oversee approximately 27 funds from several families run by several advisory firms.

    As noted in the M&P proxy, the new trust will be adding four unnamed trustees. Well, unnamed in the M&P proxy. The new trust has its own proxy where the nominees are named. And shareholders of the three M&P funds being absorbed will not have a say. Only shareholders of funds in the trust as of February 7th get a vote.

    The trustees of the current M&P trust all have at least $100K invested in each of the three M&P funds (except for one trustee who has not invested in one of the three funds). The trustees of the new trust have no investments in any of the 24 funds they oversee.

    Will any of this make a difference? Probably not. Being barred from the vote on trustees who will more than double the size of the board doesn't matter, since retail investors' votes can't influence these elections anyway. (And the nominees are running unopposed.) The timing just doesn't feel right, though.

    New M&P prospectus draft (April [] 2022), including SAI
    Trust for Professional Managers (new trust) proxy to elect four additional trustees

    ----

    Purely by luck, I ran across the fact that a couple of funds (SNOAX, SNWAX) recently left the new trust (Trust For Professional Managers). The management firm (Snow Capital Management) was acquired by Easterly, which you may recognize as James Alpha. Apparently Easterly wanted to move those funds into its own James Alpha Trust. In a sense, the opposite of what M&P is doing. Previously, James Alpha had moved its own funds out of the Saratoga Advantage Trust into its James Alpha Trust.

    Worth noting (see 2nd link below) is that one sees the same rationale (cost savings) given, whether it is moving funds into a conglomerate-like trust (as with M&P) or spinning out a family into its own trust (as with James Alpha). The third link is the actual proxy for the James Alpha spinoff where one can read the rationales in detail. There the projected savings (16-21 basis points) was significant, as compared with one basis point for the M&P move.
    https://www.sec.gov/Archives/edgar/data/1141819/000089418921005185/snowsupplement497e8-2021.htm
    https://www.sec.gov/Archives/edgar/data/924628/000158064221000599/jamesalpha425.htm
    https://www.sec.gov/Archives/edgar/data/1829774/000158064221000287/jaftn14a.htm
  • @msf: *Something* doesn't feel right to me. Could you say a bit more about what you perceive about the timing?
    msf said:

    .

    The timing just doesn't feel right, though.

  • msf
    edited February 25
    The trust is about to acquire three funds. And now it decides to more than double the size of its board. Coincidence or response to taking on more responsibilities? If the latter, shouldn't those creating the need have some say (even if only pro forma) in the process? Even if the timing of the board expansion is just a remarkable coincidence, it is significant enough to be noted in the proxy you received. Again, why the rush?

    For small funds, there certainly is an economy of scale in banding together. Fourteen of the twenty-four funds in the new trust have under $100M in assets. In fact, one of them is the M&P ETF MINN. Only one of the 24 funds is significantly above $1B in size - the $6.7B fund PTIAX. Notably absent from the trust is the $10B JENSX, even though the two other Jensen funds, JGQIX ($36.5M) and JNVIX ($204.9M) are series in the trust.

    Where would the $5.3B MPGFX be best served? That fund alone would increase the amount of assets in the trust by about 50%. And yet its shareholders get no say in the trustees. Because of timing.
  • Food for thought. Thank you.
    msf said:

    The trust is about to acquire three funds. And now it decides to more than double the size of its board. Coincidence or response to taking on more responsibilities? If the latter, shouldn't those creating the need have some say (even if only pro forma) in the process? Even if the timing of the board expansion is just a remarkable coincidence, it is significant enough to be noted in the proxy you received. Again, why the rush?

    For small funds, there certainly is an economy of scale in banding together. Fourteen of the twenty-four funds in the new trust have under $100M in assets. In fact, one of them is the M&P ETF MINN. Only one of the 24 funds is significantly above $1B in size - the $6.7B fund PTIAX. Notably absent from the trust is the $10B JENSX, even though the two other Jensen funds, JGQIX ($36.5M) and JNVIX ($204.9M) are series in the trust.

    Where would the $5.3B MPGFX be best served? That fund alone would increase the amount of assets in the trust by about 50%. And yet its shareholders get no say in the trustees. Because of timing.

  • edited February 25
    "...For small funds, there certainly is an economy of scale in banding together. Fourteen of the twenty-four funds in the new trust have under $100M in assets. In fact, one of them is the M&P ETF MINN. Only one of the 24 funds is significantly above $1B in size - the $6.7B fund PTIAX. Notably absent from the trust is the $10B JENSX, even though the two other Jensen funds, JGQIX ($36.5M) and JNVIX ($204.9M) are series in the trust.

    Hmmmmm. Coincidentally, I own PTIAX. I've not been entirely unhappy with performance. But I take exception to the way they automatically take my very real, green money every month, and pay dividends every month--- but then they play games with words: "total shares" or "vested" shares. After a few extended conversations, including with a "Supervisor," I finally asked point blank: "Is the REAL issue here the fact that you don't have enough people hired to do the job of recording these transactions in a TIMELY manner?"

    There was a LONG silence from the other end, but I knew he was still there. Then I finally broke the tension and offered to say: "Thank you. THAT tells me a great deal."

    What gripes me is that the automatic transfer was set up long ago, and continues, every month. PTIAX is taking it from my bank account. That money should not have to wait around to be recognized by machines as a share purchase. In fact, it's an AUTOMATIC, AUTOMATED process. And with the monthly dividend? That's THEM giving ME money. So, what's the hold-up? It's bullshit, that's what it is. I wonder whether my experience enters into this picture? Could Mairs and Power shareholders begin to experience the same bullshit, after the upcoming switch of Trustee?
    @msf.
  • Could you move PTIAX to Fidelity and dollar-cost average there?
  • msf
    edited February 25
    Interesting question. Don't know the answer. The services in question for the most part sound like tasks the transfer agent performs. Here's a nice 7 page chapter from the ICI on the major moving pieces in a mutual fund, including the transfer agent. Judge for yourself.
    https://www.ici.org/system/files/attachments/pdf/98fb_ch3.pdf

    PTIAX and the three Mairs and Powers funds being moved all use the same transfer agent, US Bancorp Fund Services, LLC, according to their respective prospectuses.
    PTIAX prospectus
    Mairs and Power prospectus

    Things get a little more complicated if one invests through a brokerage, though ultimately it seems it is still the transfer agent responsible for some record keeping.

    (With omnibus accounts, where the brokerage combines all its customer accounts into one jumbo account to present to the fund, the brokerage has to do some of the record keeping, just to sort things out.)
  • THANKS for the responses.:)
  • To the OP and the other posters in this thread: may I ask how you ultimately decided to vote? Thanks
  • @SilverDatsun

    I voted for it. Also, what type of Datsun do/did you have?
  • 1992 Nissan 300ZX. I’ve owned it since 1994. One of my friends accidentally called it a Datsun. Then I insulted his manhood for not knowing the difference between a Nissan and a Datsun. Then he tried to pretend that he knew all along and was simply insulting me. Then, to prove how “not bothered” I was by his lame attempt at an insult, I started calling it the Datsun! We’re still good friends!
  • @SilverDatsun: 1993 ZX convertible in my garage still awaiting Spring. Z owners have to watch out for insulting “wheel police” also.
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