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Tue Jun 20, 2017, 12:30 PM

Redomiciliation of T. Rowe Price Virginia Municipal Bond Fund

Does anyone have any thoughts on this?

They want to move the address of registration of the fund from Massachusetts to Maryland. It doesn't seem harmful, but I've never run into anything like this before. The vote isn't until July 26. I have a feeling it will happen regardless of my thoughts.

Maryland's regulations might be just a tad more lenient than those of Massachusetts, but I don't think the regulations of either locale would encourage risky behavior, at least not in a municipal bond fund.

Thanks

http://www.proxy-direct.com/MeetingDocuments/28475/Final%20-%20Redomiciliation%20Proxy.pdf

https://materials.proxyvote.com/Approved/MC0070/20170228/AR_320468.PDF

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Reply Redomiciliation of T. Rowe Price Virginia Municipal Bond Fund (Original post)
mahatmakanejeeves Jun 2017 OP
Else You Are Mad Jun 2017 #1
mahatmakanejeeves Jun 2017 #2
Else You Are Mad Jun 2017 #3
mahatmakanejeeves Jun 2017 #4
A HERETIC I AM Jun 2017 #5
mahatmakanejeeves Jun 2017 #6
A HERETIC I AM Jun 2017 #7
mahatmakanejeeves Jun 2017 #8
A HERETIC I AM Jun 2017 #9
mahatmakanejeeves Jun 2017 #10
mahatmakanejeeves Jun 2017 #11

Response to mahatmakanejeeves (Original post)

Tue Jun 20, 2017, 12:47 PM

1. I have heard some things...

That indicate that municipal bonds are likely to have 2007 style crash within the next year or so, maybe that has something to do with it? Maybe they see the writing on the wall and Maryland offers greater legal protections in regard to such should a crash occur?

Or, it could just be that someone's relative or friend works out of Maryland and this is just some good old fashioned nepotism?

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Response to Else You Are Mad (Reply #1)

Tue Jun 20, 2017, 12:53 PM

2. Not nepotism.

T. Rowe Price is headquartered in Baltimore, Maryland. The mutual fund was established years ago, when Massachusetts regulations were a de facto standard. That situation seems no longer to be the case, and that Maryland regulations will work too. The proxy statement elaborates.

Thanks.

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Response to mahatmakanejeeves (Reply #2)

Tue Jun 20, 2017, 12:55 PM

3. Ahh, should have read that before commenting. Nt.

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Response to Else You Are Mad (Reply #3)

Tue Jun 20, 2017, 12:57 PM

4. No problem. It's a lot of "party of the first part, notwithstanding Provision 14(a)" stuff.

I suspect the plan is on the up-and-up. As I said, Maryland cuts the fund manager a little more slack in how many shares are needed for a quorum.

It's not exactly in the headlines.

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Response to mahatmakanejeeves (Original post)

Tue Jun 20, 2017, 03:10 PM

5. I don't see it as any problem, and the reasons for the move.....

are spelled out on pages 9 through 11 of the Proxy document you linked. (Pages 11, 12 &13 of the .pdf doc), to wit;

More Efficient Proxy Process
.
Maryland and Massachusetts have
different proxy requirements, which create significant redundancies
and inefficiencies during a proxy campaign involving multiple funds
domiciled in the two different jurisdictions. For example, each
Trust’s trust agreement, the current organizational document for the
Trust, requires a record date of not more than 60 days prior to a
shareholder meeting, whereas Maryland corporate law requires a
record date of not more than 90 days, nor less than 10 days, prior to
a shareholder meeting. The longer solicitation period available in
Maryland would provide shareholders with more time to consider
and vote on proposals, and it could also result in fewer adjournments
and lower proxy solicitation expenses. In addition, the current trust
agreements of the Trusts require more shareholder votes than would
be required under Maryland law to constitute a quorum (the trust
agreements require a majority of votes entitled to be cast at the
meeting compared to Maryland’s minimum requirement of one-third
of the shares entitled to vote). Because of these differences, it has
been difficult for the T. Rowe Price Funds organized as Maryland
corporations to share the same proxy statement with the T. Rowe
Price Funds organized as Massachusetts business trusts and be part of
the same proxy campaign even though all of the funds are holding a
shareholder meeting at the same location on the same date.
Generally, all of the Maryland Corporations have been included in a
single proxy statement and all of the Massachusetts business trusts
have been included in a separate proxy statement, which mails
approximately 30 days after the proxy statement for the Maryland
Corporations. This has fostered confusion for shareholders who own
shares of T. Rowe Price Funds organized under both Massachusetts
and Maryland law and led to questions regarding the inability to vote
all of their shares at the same time. Each Reorganization will benefit
shareholders by making future complex-wide proxy campaigns for
proposals impacting all of the T. Rowe Price Funds, such as the
election of directors, less confusing to shareholders and more
efficient and less costly to administer.
o
Operational Streamlining
.
The Reorganizations will serve to
standardize and conform the corporate governance of the Funds with
the other funds in the T. Rowe Price family of funds. This
standardization is expected to streamline the administration of the
Funds, which may potentially result in cost savings to T. Rowe Price
and the Funds and their shareholders, and more effective
administration by eliminating differences in governing documents
and controlling law. T. Rowe Price is headquartered in Maryland, the
majority of its staff is located in Maryland, and the overwhelming
majority of the T. Rowe Price Funds are already domiciled in
Maryland. Because T. Rowe Price staff is in Maryland and not
Massachusetts, all organizational documents may be hand delivered
to the appropriate state regulatory agencies (which allows T. Rowe
Price to determine immediately whether the state had any issues
accepting the documents) rather than mailing documents to
Massachusetts regulatory agencies or relying upon outside vendors to
do so, which takes far more time and expense. Over the longer term,
T. Rowe Price believes that the Reorganizations will also result in
potential cost savings for T. Rowe Price, the T. Rowe Price Funds,
and their shareholders. For example, issues arising under state law
could be vetted with one outside law firm specializing in Maryland
law rather than two separate outside experts currently needed to vet
issues under both Maryland and Massachusetts law. Since there are a
smaller number of T. Rowe Price Funds domiciled in Massachusetts
splitting those costs, the Funds could potentially bear a larger cost
than if they were domiciled in Maryland and splitting those costs
with the rest of the T. Rowe Price Funds. In addition, if the
Reorganizations are approved, it would no longer be necessary to pay
fees to an outside vendor to file documents with state regulators on
behalf of the Funds.
o
More Legal Certainty
. The comprehensive body of law in Maryland
may reduce legal uncertainty and risk and provide the Funds’
directors and management with greater certainty and predictability in
managing fund affairs. For example, Maryland law provides
comparatively greater certainty with regard to limiting the liability of
shareholders for obligations of a fund or its directors.
o
Opportunity to Modernize Governing Instruments
.
The Trusts’
organizational documents were all written more than 30 years ago
and, as a result, their governing instruments do not reflect the
current governing framework available to mutual funds registered
under the Investment Company Act of 1940, as amended (the “1940
PAGE 11
Act”). The Reorganizations will have the benefit of eliminating any
outdated provisions, and adding more modern provisions that could
benefit Fund shareholders by increasing flexibility of operations and
governance. For example: (1) the form of Maryland charters that
would apply if the Reorganizations are approved (attached hereto in
Appendix C) provide more flexibility in how a shareholder vote may
be obtained because they permit multiple funds organized under one
corporation to vote together in certain instances, whereas the current
trust agreements of the Trusts only allow the Funds to vote together
if required by law; (2) the Trusts’ organizational documents have
more stringent shareholder voting requirements for reorganizations
and mergers than the current governing framework available to
mutual funds; (3) the form of Maryland charters contain more
modern provisions relating to the requirements for closing a fund
that is a series of a corporation; and (4) Maryland law provides more
flexibility to funds in litigation, as a Maryland corporation can be a
named litigant; in Massachusetts, on the other hand, a lawsuit must
be brought by the trustees, as a business trust cannot bring a lawsuit
directly.



I trust you are a resident of Virginia?
If so and if you are a shareholder of this fund, is it held in a tax qualified account?

Here's the Morningstar report on this fund;

http://www.morningstar.com/funds/XNAS/PRVAX/quote.html

Not bad - Currently yielding 3.15% and averaged 4.41% total return over the last 15 years. Over 80% of the bonds held by the fund are rated "A" or better, 44% rated "AA". Heavily weighted in transportation bonds (23%) with 81% of the portfolio having coupons between 4 and 6%

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Response to A HERETIC I AM (Reply #5)

Tue Jun 20, 2017, 03:19 PM

6. "I trust you are a resident of Virginia?"

Yes. I inherited it. I'm not exactly Bruce Wayne, of stately Wayne Manor, so the tax advantages aren't that overwhelming. Still, 3+% beats a lot that's out there.

I don't think the redomiciliation is going to be a big problem.

It makes a lot of sense, especially with T. Rowe Price being in Baltimore.

Thanks for writing.

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Response to mahatmakanejeeves (Reply #6)

Tue Jun 20, 2017, 04:19 PM

7. The reason I ask, and you may aware of this already...

is that state specific Muni bond funds do no good to residents of other states, except those states with no income tax, as the interest income, while tax free in Virginia, is taxable in New York, for example.

That's also why I asked if it was held in a qualified account, but since it was inherited, I'll assume it isn't.

And yeah, 3% is just fine. Beats what you can get from a CD anyway, plus you aren't paying any income taxes on the interest income.

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Response to A HERETIC I AM (Reply #7)

Tue Jun 20, 2017, 04:38 PM

8. "qualified account" I'm drawing a blank right now.

Three of us inherited the fund. One brother lives in North Carolina, so the triple-tax free advantage I have is of less use to him. He can subtract the interest on his Federal taxes, but not on his NC taxes.

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Response to mahatmakanejeeves (Reply #8)

Tue Jun 20, 2017, 04:56 PM

9. Tax Qualified, as in an IRA, 401(k), 403(b), etc.

Unfortunately, your brother is stuck....sort of!

PRVAX has no redemption fee, so he would be able to move it at no cost to another fund in the T. Rowe Price family. He could also redeem his shares and invest it any way he sees fit, including buying individual North Carolina Muni bonds, if he so desired. Of course, there would be transaction fees/commissions buying into a new security, but he could search Vanguard or Fidelity or other no-load families for a NC specific bond fund.


Good luck!

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Response to A HERETIC I AM (Reply #9)

Wed Jun 21, 2017, 12:50 PM

10. Oh, of course. No, it's in

a regular brokerage account, not a retirement thing.

I'm looking at my tax statement from Vanguard right now. The income from that appears in box 10 of the 1099-DIV as an "exempt-interest dividend." The instructions say to "Include this amount on line 8b of Form 1040 or 1040A as tax-exempt interest." As if you didn't know that.

I have a Roth IRA, but it has stocks and mutual funds.

I don't know what my brother in NC did. He might have kept it, or he might have swapped it for an NC muni bond fund.

I don't smell any shenanigans with the proposal. T. Rowe Price seems scandal-free. Maybe one of the owners' kids got a penalty for not wearing a mouth guard at a lacrosse game, but beyond that hypothetical thought of mine, they don't show up in the business section for shady dealing.

Thanks for writing.

ETA: I just voted in favor. Thanks again.

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Response to A HERETIC I AM (Reply #5)

Thu Jun 22, 2017, 12:43 PM

11. Being a Maryland corporation, as opposed to being a Massachusetts Business Trust,

seems not unusual.

See Appendix A, starting on page 35, of this document:

https://www.proxy-direct.com/MeetingDocuments/28830/2017_CEF_Non_Classified_Proxy_FINAL.pdf

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