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PFM MULTI-MANAGER SERIES TRUST
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PFM MULTI-MANAGER SERIES TRUST
PFM MULTI-MANAGER INTERNATIONAL EQUITY FUND
INFORMATION STATEMENT
INFORMATION STATEMENT
April 23, 2021
| Share Class | | | Ticker Symbol | |
| Advisor* | | | N/A | |
| Institutional | | | N/A | |
| R* | | | N/A | |
The Classes listed above with an asterisk (*) have not yet commenced operations as of the date of this Information Statement.
Before you invest, you may want to review the Fund’s prospectus, which contains more information about the Fund and its risks. You can find the Fund’s prospectus and other information about the Fund online at mmst.pfm.com. You can also get this information at no cost by calling 1.833.PFM.MMST (1.833.736.6678). The Fund’s prospectus and statement of additional information, each dated January 28, 2021 (as each may be amended or supplemented), are incorporated by reference into this Information Statement and may be obtained, free of charge, at the website or phone number noted above.
PFM MULTI-MANAGER SERIES TRUST
PFM Multi-Manager International Equity Fund
PFM Multi-Manager International Equity Fund
213 Market Street
Harrisburg, Pennsylvania 17101-2141
Harrisburg, Pennsylvania 17101-2141
April 23, 2021
Thank you for being a valued PFM Multi-Manager Series Trust (the “Trust”) shareholder.
We are reaching out to provide you with additional information regarding a new sub-adviser for PFM Multi-Manager International Equity Fund (the “Fund”). No action is required on your part. We do, however, ask that you review the enclosed Information Statement, which contains information about the new sub-adviser for the Fund. We encourage you to store this document with your investment information for the Fund.
The Board of Trustees of the Trust (the “Board”) unanimously approved the Fund’s new sub-adviser, Kayne Anderson Rudnick Investment Management, LLC (“KAR”), who began managing an allocated portion of the Fund’s assets on April 20, 2021. Based on the information provided by PFM Asset Management LLC and KAR, the Board believes this change is in the best interests of the Fund and its shareholders.
If you have any questions, please call the following toll free number: 1-833-PFM-MMST (1-833-736-6678).
Thank you, again, for your continued business.
Sincerely,
/s/ John Spagnola
John Spagnola
President of the Trust
John Spagnola
President of the Trust
INFORMATION STATEMENT
PFM MULTI-MANAGER SERIES TRUST
PFM Multi-Manager International Equity Fund
PFM Multi-Manager International Equity Fund
213 Market Street
Harrisburg, Pennsylvania 17101-2141
Harrisburg, Pennsylvania 17101-2141
April 23, 2021
This is for your information only. It is not a proxy statement and you are not being asked to vote. We are not asking you for a proxy and you are requested not to send us a proxy.
This Information Statement is provided in lieu of a proxy statement to the shareholders of PFM Multi-Manager International Equity Fund (the “Fund”), a series of PFM Multi-Manager Series Trust (the “Trust”), pursuant to the terms of an exemptive order (the “Order”) issued by the U.S. Securities and Exchange Commission (the “SEC”). The order permits the Fund to operate in a “manager of managers” structure whereby PFM Asset Management LLC (“PFMAM” or the “Adviser”), as the Fund’s investment adviser, can appoint and replace both wholly owned and unaffiliated sub-advisers, and enter into, amend and terminate subadvisory agreements with such sub-advisers, each subject to Board approval but without obtaining prior shareholder approval.
The Information Statement provides information regarding the new sub-adviser for the Fund and the material terms of the new investment subadvisory agreement. This Information Statement is being made available via the internet beginning on or about April 23, 2021 to all shareholders of record of the Fund as of March 31, 2021 (the “Record Date”).
Appointment of KAR Anderson Rudnick as Sub-Adviser to the Fund
At a meeting held on February 18-19, 2021 (the “Meeting”) in compliance with the conditions for exemptive relief issued by the SEC from the in-person voting requirements due to the Coronavirus Disease 2019 pandemic, the Board, including its members who are not interested persons of the Fund within the meaning of the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Trustees”), approved a new investment subadvisory agreement between the Adviser and Kayne Anderson Rudnick Investment Management, LLC (“KAR” or the “Sub-Adviser”) with respect to the Fund (the “Agreement”). KAR began managing an allocated portion of the Fund’s assets on April 20, 2021. In connection with the addition of the Sub-Adviser, and as reflected in the Fund’s Prospectus, Summary Prospectus and Statement of Additional Information (as amended), Hyung Kim and Craig Thrasher were added as portfolio managers to the Fund.
Information Regarding the Adviser
PFMAM, located at 213 Market Street, Harrisburg, Pennsylvania, 17101-2141, serves as the Fund’s investment adviser pursuant to an investment management agreement (“Management Agreement”) dated December 20, 2017. The Management Agreement was initially approved by the Board, including the Independent Trustees, on November 22, 2017. PFMAM is an indirect, wholly-owned subsidiary of PFM I, LLC, which is owned by the senior employees of PFMAM and its affiliates.
The Trust employs PFMAM to manage the investment and reinvestment of the Fund’s assets and to administer its affairs, subject to the oversight of the Board. Under the Management Agreement, PFMAM has the authority to make determinations with respect to the investment and reinvestment of the Fund’s assets and the purchase and sale of its investment securities. In addition, PFMAM has the authority and discretion to discharge and delegate its investment management responsibilities through the appointment of one or more sub-advisors. In allocating the Fund’s assets, PFMAM has discretion to not allocate any assets to one or more sub-advisors at any time. PFMAM has delegated responsibility for the day-to-day investment management of the Fund to sub-advisers, subject to the oversight and supervision of PFMAM. PFMAM maintains overall responsibility for the management and investment of the assets of the Fund and responsibility for all advisory services furnished by any sub-adviser, and supervises each sub-adviser in its performance of its duties for the Fund.
Under the Management Agreement, the Fund pays PFMAM a fee equal to 0.50% of the Fund’s average net assets.
For the fiscal period ended September 30, 2020, the Fund paid advisory fees, after fees waived, expenses reimbursed and expenses recouped, to the Adviser in the amount of $1,923,078. For the fiscal period ended September 30, 2020, the Adviser waived advisory fees/reimbursed expenses in the amount of $141,724 and recouped $86,014 of previously waived advisory fees/expenses reimbursed. The Adviser is responsible for paying the Fund’s sub-advisers for its services to the Fund. For the fiscal period ended September 30, 2020, the aggregate amount of sub-advisory fees paid by PFMAM for the Fund was $1,581,136 (0.40% of the Fund’s average net assets).
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Information Regarding the Sub-Adviser
KAR is located at 1800 Avenue of the Stars, 2nd Floor, Los Angeles, CA 90067 and is a wholly owned subsidiary of Virtus Partners, Inc., which is a wholly owned subsidiary of Virtus Investment Partners, Inc. KAR had approximately $51.7 billion in total assets under management as of December 31, 2020.
Portfolio Managers. Listed below are the individuals primarily responsible for the day-to-day management of the portion of the Fund’s assets allocated to KAR from time to time (the “Sub-Advised Portion”). The portfolio management team is comprised of Hyung Kim and Craig Thrasher, who have been jointly and primarily responsible for the day-to-day management of the Fund.
Portfolio Management
Craig Thrasher, CFA, is a Portfolio Manager and a Senior Research Analyst with primary research responsibilities for the KAR International Small Cap Portfolio. Before joining KAR in 2008, Mr. Thrasher worked at Kirr, Marbach & Company as an Equity Analyst and at Wedbush Morgan Securities in correspondent credit. He has approximately 16 years of equity research experience. Mr. Thrasher earned a B.S. in Business and Public Administration, concentration in Finance, from the University of Arizona, and an M.B.A. from the University of Chicago, Graduate School of Business. Mr. Thrasher is a Chartered Financial Analyst charterholder.
Hyung Kim is a Portfolio Manager and Senior Research Analyst with primary research responsibilities for the KAR Emerging Markets Small Cap Portfolio. He has approximately 16 years of research experience. Before joining KAR in 2017, Mr. Kim worked as an International Equity Analyst for Advisory Research Inc. for seven years and as a Portfolio Manager on their Global Value strategy. Prior to joining Advisory Research, Mr. Kim worked as a research analyst at Coghill Capital Management and in corporate banking at HSBC and Woori Bank in Seoul, Korea. He also worked as an equity research intern at CLSA in Seoul. He earned a B.A. in German with a minor in Economics from Hankuk University of Foreign Studies in Seoul, Korea, and an M.B.A. in accounting and finance from the University of Chicago Booth School of Business. He is fluent in Korean and German.
Management and Governance.
KAR is a wholly owned subsidiary of Virtus Partners, Inc., which is a wholly owned subsidiary of Virtus Investment Partners, Inc. Listed below are the names, positions and principal occupations of the current directors and principal executive officers of KAR. The principal address of each individual as it relates to his or her duties at KAR is the same as that of KAR.
| | Name | | | | Position with KAR | | |
| | Douglas S. Foreman | | | | Chief Investment Officer | | |
| | Jeannine G. Vanian | | | | Chief Operating Officer | | |
| | Stephen A. Rigali | | | | Executive Managing Director | | |
| | George R. Aylward | | | | President and Chief Executive Officer, Virtus Investment Partners, Inc. | | |
| | Michael A. Angerthal | | | | Executive Vice President and Chief Financial Officer, Virtus Investment Partners, Inc. | | |
| | Wendy J. Hills | | | | Executive Vice President, General Counsel and Secretary, Virtus Investment Partners, Inc. | | |
| | Michael R. Shoemaker | | | | Chief Compliance Officer | | |
Management Activities. KAR acts as a sub-adviser for the KAR International Small Cap Portfolio, a series of Virtus Opportunities Trust, a registered investment company, and KAR International Small Cap Collective Investment Trust, a collective investment trust, with investment objectives similar to the Fund.
Material Terms of the Agreement
The Agreement has an initial term of two years from its effective date of March 15, 2021 (unless sooner terminated in accordance with its terms). Thereafter, continuance of the Agreement shall be subject to the specific approval, at least annually, by vote of a majority of the Independent Trustees, at a meeting called for the purpose of voting on such approval, and by either an affirmative vote of a majority of the Trustees of the Trust, or a vote of the majority of the outstanding voting securities (as that term is defined in the 1940 Act) of the Fund.
Under the terms of the Agreement, subject to the supervision of the Adviser and the Board, KAR formulates and implements a continuous investment program for the Sub-Advised Portion and determines the securities, cash and other financial instruments to be purchased, retained or sold for the Sub-Advised Portion.
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The Agreement provides that it may be terminated at any time, without payment of any penalty, (i) by the Board or by vote of a majority of the outstanding voting securities of the Fund (as defined by the 1940 Act), upon sixty (60) days’ written notice to PFMAM and the Sub-Adviser, (ii) by PFMAM or the Sub-Adviser upon at least sixty (60) days’ written notice to the other party, and (iii) by PFMAM or the Fund upon a material breach by the Sub-Adviser of any of the Sub-Adviser’s obligations or representations under the Agreement if such breach is not corrected within five (5) business days after notice thereof by PFMAM or the Fund. The Agreement will terminate automatically in the event of any assignment thereof, as defined in the 1940 Act, and upon any termination of the Management Agreement between PFMAM and the Trust, on behalf of the Fund.
The Agreement provides that neither the Sub-Adviser nor any of its directors, officers or employees shall be subject to liability to PFMAM or the Fund or to any shareholder of the Fund for any error of judgment or mistake of law or any other act or omission in the course of, or connected with, rendering services under the Agreement, for any losses that may be sustained in the purchase, holding or sale of any security by the Fund, or as a result of any activities of any other sub-adviser appointed by PFMAM to provide investment management services to the Fund, provided that nothing in the Agreement shall be construed to protect KAR or any director, officer or employee of KAR in the event of KAR’s material breach of the Agreement, willful misfeasance, bad faith, gross negligence, or reckless disregard of its obligations or duties under the Agreement. The Agreement provides that KAR will indemnify and hold harmless the Fund, PFMAM and each of its affiliates, officers, directors, trustees, and employees (each a “PFM Indemnified Party”) harmless from, against, for and in respect of all losses, damages, costs and expenses incurred by a PFM Indemnified Party with respect to (i) Sub-Adviser’s material breach of the Agreement, willful misfeasance, bad faith, gross negligence, or reckless disregard of its obligations or duties under the Agreement, together with all legal and other expenses reasonably incurred by any such PFM Indemnified Party in connection with such liability. The Agreement contains similar provisions pursuant to which PFMAM and the Fund are subject to liability and required to indemnify the Sub-Adviser.
As compensation for the subadvisory services performed by KAR, the Adviser pays KAR a subadvisory fee out of the advisory fee the Adviser receives from the Fund.
Because the Adviser pays the Sub-Adviser out of the advisory fee the Adviser receives from the Fund, there is no increase in the advisory fee paid by the Fund in connection with the appointment of KAR as sub-adviser to the Fund.
Evaluation by the Board
At the Meeting, the Board, including a majority of the Independent Trustees, reviewed and approved the Agreement on behalf of the Fund for an initial two-year period. The Independent Trustees received advice from and met separately with Independent Trustee counsel in considering whether to approve the Agreement.
In considering the Agreement, the Board reviewed and considered information provided at the Meeting specifically related to the Agreement, as well as information about the management of the Fund by the Adviser and other sub-advisers provided throughout the year at meetings of the Board and its committees. The Board also reviewed and considered information KAR provided in response to a detailed due diligence request in connection with the approval of the Agreement and in connection with presentations made to the Board by KAR. The Board reviewed and considered all of the factors it deemed relevant in approving the Agreement, including, but not limited to: (i) the nature, extent and quality of the services to be provided by KAR; (ii) the costs of the services to be provided to the Fund; and (iii) the extent to which economies of scale may be realized as the Fund grows.
In approving the Agreement, the Board, including a majority of the Independent Trustees, determined that the terms of the Agreement are fair and reasonable and that the Agreement is in the best interests of the Fund and its shareholders. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board’s determination.
Nature, Extent and Quality of Services: The Board reviewed and considered information regarding the nature, extent and quality of investment sub-advisory services expected to be provided by KAR to the Fund and its shareholders. In doing so, the Board noted that the Fund employs a “manager of managers” structure pursuant to the Order, whereby the Adviser is responsible for selecting sub-advisers (subject to Board and shareholder approval); and subject to oversight of the Board, for allocating the Fund’s assets among such sub-advisers, and overseeing the sub-advisers’ day-to-day management of their respective sleeves of the Fund. The Board further noted the responsibilities that KAR will have with respect to the Sub-Advised Portion, including, among others, security selection for the Sub-Advised Portion consistent with agreed upon investment guidelines. The information reviewed and considered by the Board included, among other things, KAR’s proposed investment strategy, and ability to implement such investment strategy, including, but not limited to, KAR’s trading practices and investment decision processes. The Board also reviewed and considered, among other things, general information on the ownership structure, history,
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management, affiliations, financial condition and viability, and insurance coverage of KAR; KAR’s professional staff, including the experience and responsibilities of the investment team and potential conflicts of interests; information on how portfolio transactions would be effected; KAR’s risk management controls, including how KAR would comply with the Fund’s investment guidelines; and KAR’s compliance program. The Board also considered the Adviser’s rationale for recommending the approval of KAR.
The Board further considered the Trust Chief Compliance Officer’s review of KAR’s compliance program and capabilities as such program and capabilities relate to the operations of the Fund and the monitoring and testing of such program undertaken by the Trust’s Chief Compliance Officer. The Board also considered the selection and due diligence process employed by the Adviser in selecting and deciding to retain KAR as a sub-adviser to the Fund, including the due diligence undertaken with respect to KAR’s compliance and risk management capabilities.
Following consideration of such information, the Board was satisfied with the nature, extent and quality of services to be provided by KAR to the Fund and its shareholders.
Fund Performance: Because KAR has not yet managed any assets of the Fund, the Board concluded that the Fund’s current performance was not a relevant factor in its consideration of the Sub-advisory Agreement. Notwithstanding, the Board did consider the historic performance of the KAR International Small Cap Portfolio (“KAR Portfolio”), which is a portfolio managed by the Sub-Adviser that employs an international small-cap strategy that is comparable to the investment strategy that the Sub-Adviser will employ for the Fund. The Board noted that the KAR Portfolio had outperformed its benchmark, the MSCI ACWI ex U.S. Small Cap Index, for each of the following periods ended December 31, 2020: most recent quarter; one-, three-, five- and seven-year periods; and since inception (January 1, 2012).
Comparative Fees and Expenses: The Board reviewed and considered information regarding the sub-advisory fee to be paid to KAR(the “Sub-Advisory Fee”). The Board received confirmation that the Sub-Advisory Fee will be paid by the Adviser to KAR and is not an additional fee to be borne by the Fund. The Board noted that the Sub-Advisory Fee to be paid by the Adviser to KAR was the product of arms-length negotiations between the Adviser and KAR. The Board concluded that the Sub-Advisory Fee is reasonable based on the information provided.
Profitability and Economies of Scale: The Board noted that it considered information it received at the Meeting regarding the expected impact of retaining KAR on the profitability of the Adviser consistent with the conditions of the Order. The Board determined that its conclusions regarding profitability and economies of scale reached in connection with the September 2020 annual contract renewal of the existing investment management agreement with the Adviser had not changed as a result of the proposal to approve the Sub-advisory Agreement.
Conclusion: Based on its review, consideration and evaluation of all factors it believed relevant, including the above-described factors and conclusions, the Board unanimously approved the Agreement for an initial two-year period.
Additional Information
PFMAM, the Trust’s investment adviser, is located at 213 Market Street, Harrisburg, Pennsylvania, 17101-2141. PFM Fund Distributors, Inc., the Trust’s distributor and wholly-owned subsidiary of PFMAM, is located at 213 Market Street, Harrisburg, Pennsylvania, 17101-2141. State Street Bank and Trust Company, the Trust’s administrator, custodian and transfer agent, is located at One Lincoln Street, Boston, Massachusetts, 02111.
The brokerage commissions paid by the Fund on security transactions placed with entities that are not affiliates of the Fund, Adviser, KAR or other sub-advisers for the fiscal period ended September 30, 2020 was $423,797. The Fund did not pay any commissions to any affiliated brokers during the fiscal period ended September 30, 2020.
A principal shareholder is any person who owns (either of record or beneficially) 5% or more of the outstanding shares of any class of the Fund. A control person is one who beneficially owns, either directly or indirectly, more than 25% of the voting securities of the Fund or acknowledges the existence of such control. A control person can have a significant impact on the outcome of a shareholder vote. As of March 31, 2021, the shareholders indicated below were considered to be either a control person or principal shareholder of any class of the Fund.
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Class | | | Name and Address | | | Shares | | | % Ownership | | | Type of Ownership | | ||||||
Institutional | | | MAC & Co FBO Northampton County, 500 Grant Street, Pittsburgh, PA 15258 | | | | | 10,372,715.94 | | | | | | 22.67% | | | | Record | |
Institutional | | | US Bank NA FBO City of Sunnyvale OPEB Trust, 650 W. Olive Ave, Sunnyvale, CA 94086 | | | | | 2,642,687.90 | | | | | | 5.78% | | | | Record | |
Institutional | | | US Bank NA FBO City of Roseville OPEB Trust, 311 Vernon Street, Roseville, CA 95678 | | | | | 2,455,728.03 | | | | | | 5.37% | | | | Record | |
As of March 31, 2021, the Trustees and officers of the Fund, individually and as a group, do not beneficially own any of the outstanding shares of the Fund.
As of the Record Date, there were 45,753,047.18 Institutional Class shares outstanding of the Fund. As of the Record Date, Advisor Class and Class R shares had not yet commenced operations.
The Trust is a Delaware statutory trust and as such is not required to hold annual meetings of shareholders, although special meetings may be called for the Fund, or for the Trust as a whole, for purposes such as electing or removing Trustees, changing fundamental policies or approving an advisory contract. Shareholder proposals to be presented at any subsequent meeting of shareholders must be received by the Trust at the Trust’s office within a reasonable time before the proxy solicitation is made.
The annual report of the Fund is sent to shareholders of record following the Fund’s fiscal year end. The Fund’s fiscal year end is September 30. The Fund will furnish, without charge, a copy of its annual and semi-annual report to a shareholder upon request. Such requests should be directed to the Fund by calling toll free 1-833-PFM-MMST (1-833-736-6678). Copies of the annual and semi-annual report of the Fund are also available on the EDGAR database on the SEC’s internet site at www.sec.gov.
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PFM MULTI-MANAGER SERIES TRUST
PFM Multi-Manager International Equity Fund
PFM Multi-Manager International Equity Fund
213 Market Street
Harrisburg, Pennsylvania 17101-2141
Telephone Number: (833) 736-6678
Harrisburg, Pennsylvania 17101-2141
Telephone Number: (833) 736-6678
IMPORTANT NOTICE OF INTERNET AVAILABILITY OF INFORMATION STATEMENT
April 23, 2021
This communication presents an overview of the more complete Information Statement that is available to you on the internet relating to PFM Multi-Manager International Equity Fund (the “Fund”), a series of PFM Multi-Manager Series Trust (the “Trust”). We encourage you to access and review all of the important information contained in the Information Statement.
The Information Statement details a recent sub-adviser change relating to the Fund. Specifically, the Board of Trustees of the Trust has approved a new investment subadvisory agreement on behalf of the Fund between PFM Asset Management LLC (“PFMAM”) and Kayne Anderson Rudnick Investment Management, LLC (“KAR”). The new sub-adviser, KAR, began managing an allocated portion of the Fund’s assets on April 20, 2021. PFMAM continues to serve as the Fund’s investment adviser. In connection with the addition of KAR as a new sub-adviser, and as discussed in the Prospectus, Summary Prospectus and Statement of Additional Information, as amended, Hyung Kim and Craig Thrasher were added as portfolio managers to the Fund.
The Trust and PFMAM have received an exemptive order from the U.S. Securities and Exchange Commission that permits the Fund to operate in a “manager of managers” structure whereby PFMAM, as the Fund’s investment adviser, can appoint and replace both wholly owned and unaffiliated sub-advisers, and enter into, amend and terminate subadvisory agreements with such sub-advisers, each subject to Board approval but without obtaining prior shareholder approval. The order requires that an information statement be sent to you. In lieu of physical delivery of the Information Statement, the Trust will make the Information Statement available to you online.
The Information Statement will be available on the Fund’s website at mmst.pfm.com until at least December 1, 2021. You may access and print the full Information Statement by going to the Fund’s website listed above. A paper or email copy of the Information Statement may be obtained, without charge, by calling the following toll free number: 1-833-PFM-MMST (1-833-736-6678). This Notice of Internet Availability of Information Statement is being mailed beginning on or about April 23, 2021, to shareholders of record of the Fund as of March 31, 2021.
Householding is a method of delivery in which a single copy of certain shareholder documents are delivered to investors who share the same address and are members of the same family, even if their accounts are registered under different names. The Fund currently households. If you are no longer interested in householding and would like to have each investor at the same address receive individual copies of this notice, please contact your dealer or call 1-833-PFM-MMST (1-833-736-6678).
If you want to receive a paper or e-mail copy of the Information Statement, you must request one. There is no charge to you for requesting a copy.
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