The Advisors’ Inner Circle Fund III
Prospectus | January 28, 2024
Mesirow Enhanced Core Plus Fund
(Institutional
Shares: MFBIX)
(Investor Shares: MFBVX)
Mesirow High Yield Fund
(Institutional
Shares: MFHIX)
(Investor Shares: MFHVX)
Mesirow Small Company Fund
(Institutional
Shares: MSVIX)
(Investor Shares: MSVVX)
Investment Advisers:
MESIROW
FINANCIAL INVESTMENT MANAGEMENT, INC.
MESIROW INSTITUTIONAL INVESTMENT
MANAGEMENT, INC.
The U.S. Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy or accuracy of this prospectus.
Any representation to the contrary is a criminal offense.
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About This Prospectus |
This prospectus has been arranged into different sections so that you can easily review this important information. For detailed information about each Fund, please see:
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More Information about the Funds’ Investment Objectives and Strategies |
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Related Performance Data of Mesirow Financial Investment Management, Inc. |
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Institutional Shares
Investor Shares
Bloomberg U.S. Aggregate Index (reflects no deduction for fees, expenses or taxes)
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Mesirow Enhanced Core Plus Fund |
The Mesirow Enhanced Core Plus Fund (the “Enhanced Core Plus Fund” or the “Fund”) seeks to maximize total return through capital appreciation and current income consistent with preservation of capital.
This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
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Institutional and Investor Shares |
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Redemption Fee (as a percentage of amount redeemed, if shares redeemed have been held for less than 90 days) |
1.00% |
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| Redemption Fee (As a percentage of Amount Redeemed)* |
| * |
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Institutional
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Investor
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Management Fees |
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Distribution and/or Service (12b-1) Fees |
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Other Expenses |
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Shareholder Servicing Fees |
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Other Operating Expenses |
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Total Annual Fund Operating Expenses |
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Less Fee Reductions and/or Expense Reimbursements1 |
( |
( |
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Total Annual Fund Operating Expenses After Fee Reductions and/or Expense Reimbursements |
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1 |
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1
This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses (including one year of capped expenses in each period) remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
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1 Year |
3 Years |
5 Years |
10 Years |
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Institutional Shares |
$ |
$ |
$ |
$ |
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Investor Shares |
$ |
$ |
$ |
$ |
The
Fund pays transaction costs, such as commissions or mark-ups, when it buys and
sells securities or other assets (or “turns over” its portfolio). A higher
portfolio turnover rate may indicate higher transaction costs and may result in
higher taxes when Fund shares are held in a taxable account. These costs, which
are not reflected in total annual fund operating expenses or in the example,
affect the Fund’s performance. During its most recent fiscal year, the Fund’s
portfolio turnover rate was
2
Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in fixed income securities and other financial instruments with economic characteristics similar to such securities. The Fund primarily invests in investment-grade fixed income securities with an adjusted portfolio duration that normally varies within two years (plus or minus) of the adjusted duration of the securities comprising the Bloomberg U.S. Aggregate Index. As of September 30, 2023, the average portfolio duration of securities comprising the Bloomberg U.S. Aggregate Index was approximately 6.08 years. Duration is a measure of the expected life of a fixed income security that is used to determine the sensitivity of a security’s price to changes in interest rates.
For purposes of the Fund’s 80% investment policy, fixed income securities include securities issued or guaranteed by the U.S. Government and its agencies or instrumentalities, municipal bonds, corporate bonds, residential and commercial mortgage-backed securities, asset-backed securities, convertible securities, trust preferred securities, loan participations and assignments, and U.S. dollar-denominated foreign debt securities. The Fund typically will also invest in exchange-traded funds that invest in such instruments, preferred stocks and hybrid preferred securities. Additionally, the Fund will invest up to 15% of its net assets in foreign exchange spot transactions (including with respect to emerging market currencies) and derivative instruments, such as options, futures contracts, forward contracts or swap agreements (including non-deliverable forwards and credit default swaps), for bona fide hedging purposes, to gain exposure to certain markets or segments of markets, and for speculative purposes. The Fund may also purchase or sell securities or other assets on a when-issued or delayed delivery basis.
While the Fund primarily invests in fixed income securities rated investment grade by Moody’s Investors Service, Inc. (“Moody’s”), or equivalently rated by S&P Global Ratings (“S&P”) or Fitch, Inc. (“Fitch”), it may invest to a lesser extent in high yield instruments (also known as “junk bonds”). The Fund may borrow money for, among other reasons, cash management purposes, to obtain leverage and to meet redemptions.
MFIM’s investment philosophy and process for selecting investments for the Fund generally includes a neutral duration policy, meaning that MFIM does not shorten or lengthen the Fund’s duration based on interest rate forecasts, but MFIM expects that the Fund’s duration
3
may vary within two years (plus or minus) of the duration of the benchmark. MFIM strives to diversify at the sector, industry and issuer level when constructing the Fund’s portfolio. At the sector level, MFIM starts with the benchmark index weightings, modifies the index weightings to achieve what it believes will produce the most favorable risk-adjusted returns based on current market conditions and outlook, and then tactically adjusts sector weightings as market opportunities present themselves. MFIM believes the majority of available excess returns can be captured through sector allocation and specific security selection. This approach is designed to capture the bulk of the excess returns available in the fixed income market while minimizing the variability of those returns relative to the Fund’s benchmark. MFIM believes the key to this investment process is the responsiveness, focus and analysis provided by its in-house sector specialists, credit analysts and trading professionals.
MFIM will target spot transactions and derivative instruments on behalf of the Fund that it believes will generate consistent alpha (i.e., outperformance) in all market conditions. MFIM will allocate capital between fundamental and technical currency strategies, and will aim to profit from short- and medium-term moves in various markets’ currency pairs. When investing in high yield bonds on behalf of the Fund, MFIM will target instruments that have individual yield premiums which MFIM believes are favorable and which are viewed by MFIM as having a comparable or lower probability of default and/or the risk of loss compared to their peer group.
The Fund may invest in cash or money market instruments for the purpose of meeting redemption requests or making other anticipated cash payments.
As
with all mutual funds, there is no guarantee that the Fund will achieve its
investment objective.
Fixed Income Market Risk — The prices of the Fund’s fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments and their agencies. Generally, the value of the Fund’s fixed income securities will vary
4
inversely with the direction of prevailing interest rates. Declines in dealer market-making capacity as a result of structural or regulatory changes could decrease liquidity and/or increase volatility in the fixed income markets. In the case of foreign securities, price fluctuations will reflect international economic and political events, as well as changes in currency valuations relative to the U.S. dollar. In response to these events, the Fund’s value may fluctuate and/or the Fund may experience increased redemptions from shareholders, which may impact the Fund’s liquidity or force the Fund to sell securities into a declining or illiquid market.
Interest Rate Risk — The risk that a change in interest rates will cause a fall in the value of fixed income securities, including U.S. Government securities, in which the Fund invests. Generally, the value of the Fund’s fixed income securities will vary inversely with the direction of prevailing interest rates. Changing interest rates may have unpredictable effects on the markets and may affect the value and liquidity of instruments held by the Fund. Although U.S. Government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates.
Market Risk — The risk that the market value of a security or other Fund holding may move up and down, sometimes rapidly and unpredictably. Market risk may affect a single issuer, an industry, a sector or the bond market as a whole. In addition, the impact of any epidemic, pandemic or natural disaster, or widespread fear that such events may occur, could negatively affect the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the markets in general in significant and unforeseen ways. Any such impact could adversely affect the prices and liquidity of the securities and other instruments in which the Fund invests, which in turn could negatively impact the Fund’s performance and cause losses on your investment in the Fund.
Liquidity Risk — The risk that certain securities or other Fund holdings may be difficult or impossible to sell at the time and the price that the seller would like. The seller may have to lower the price, sell other securities instead or forego an investment opportunity, any of which could have a negative effect on Fund management or performance.
5
Credit Risk — The risk that the issuer of a security or the counterparty to a contract will default or otherwise become unable to honor a financial obligation.
Corporate Fixed Income Securities Risk — Corporate fixed income securities respond to economic developments, especially changes in interest rates, as well as perceptions of the creditworthiness and business prospects of individual issuers.
Below Investment Grade Securities (Junk Bonds) Risk — Fixed income securities rated below investment grade (junk bonds) involve greater risks of default or downgrade and are generally more volatile than investment grade securities because the prospect for repayment of principal and interest of many of these securities is speculative. Because these securities typically offer a higher rate of return to compensate investors for these risks, they are sometimes referred to as “high yield bonds,” but there is no guarantee that an investment in these securities will result in a high rate of return.
Leverage Risk — The Fund’s use of borrowing, derivatives and when-issued, delayed delivery or forward commitment transactions may result in the Fund’s total investment exposure substantially exceeding the value of its portfolio securities and, in certain cases, the Fund’s investment returns substantially depending on the performance of securities that the Fund may not directly own. The use of leverage can amplify the effects of market volatility on the Fund’s share price and may also cause the Fund to liquidate portfolio positions when it would not be advantageous to do so in order to satisfy its obligations. In the case of borrowings, the Fund may experience losses if its borrowing costs exceed the investment returns on the securities purchased with the borrowed money. The Fund’s use of leverage may result in a heightened risk of investment loss.
Duration Risk — The longer-term securities in which the Fund may invest tend to be more volatile than shorter-term securities. A portfolio with a longer average portfolio duration is more sensitive to changes in interest rates than a portfolio with a shorter average portfolio duration.
Derivatives Risk — The Fund’s use of futures, forwards, options and swaps is subject to market risk, leverage risk, correlation risk and liquidity risk. Leverage risk, liquidity risk and market risk are described elsewhere in this section. Many over-the-counter (OTC) derivative instruments will not have liquidity beyond the counterparty to the instrument. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly
6
with the underlying asset, rate or index. The Fund’s use of OTC forward contracts, options and swaps is also subject to credit risk and valuation risk. Valuation risk is described below. Credit risk is described above. Each of these risks could cause the Fund to lose more than the principal amount invested in a derivative instrument. Some derivatives have the potential for unlimited loss, regardless of the size of the Fund’s initial investment. The other parties to certain derivative contracts present the same types of credit risk as issuers of fixed income securities. The Fund’s use of derivatives may also increase the amount of taxes payable by shareholders. Both U.S. and non-U.S. regulators have adopted and implemented regulations governing derivatives markets, the ultimate impact of which remains unclear. Additionally, some derivatives, such as non-deliverable forwards, require funds to be posted by the Fund when positions are opened. This creates a risk that the funds may not be returned to the Fund even if the position is closed.
Bank Loans Risk — Investments in bank loans (through both assignments and participations) are generally subject to the same risks as investments in other types of debt instruments, including, in many cases, investments in junk bonds. There may be limited public information available regarding bank loans and bank loans may be difficult to value. If the Fund holds a bank loan through another financial institution, or relies on a financial institution to administer the loan, its receipt of principal and interest on the loan may be subject to the credit risk of that financial institution. It is possible that any collateral securing a loan may be insufficient or unavailable to the Fund, and that the Fund’s rights to collateral may be limited by bankruptcy or insolvency laws. In addition, the secondary market for bank loans may be subject to irregular trading activity, wide bid/ask spreads, and extended trade settlement periods, which may cause the Fund to be unable to realize the full value of its investment in a bank loan.
Bank loans may not be considered “securities,” and purchasers, such as the Fund, therefore may not be entitled to rely on the anti-fraud protections of the federal securities laws.
Hybrid Preferred Securities Risk — Hybrid preferred securities may be issued by corporations, generally in the form of interest-bearing instruments with preferred securities characteristics, or by an affiliated trust or partnership of the corporation, generally in the form of preferred interests in subordinated business trusts or similarly structured securities. Although hybrid preferred security holders generally have claims to assets in a corporate liquidation that are
7
senior to those of traditional preferred securities, the claims of such holders are generally still subordinate to those of senior debt holders.
Trust Preferred Securities Risk — Trust preferred securities are preferred stocks issued by a special purpose trust subsidiary backed by subordinated debt of the corporate parent. MFIM considers trust preferred securities to be debt securities. Trust preferred securities are subject to increased credit risk and market value volatility, as well as the risk that the Fund may have to liquidate other investments in order to satisfy the distribution requirements applicable to regulated investment companies (“RICs”) within the meaning of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”) if the trust preferred security or the subordinated debt is treated as an original issue discount obligation, and thereby causes the Fund to accrue interest income without receiving corresponding cash payments. There is also the risk that the underlying obligations, and thus the trust preferred securities, may be prepaid after a stated call date or as a result of certain tax or regulatory events, resulting in a lower yield to maturity.
Foreign Currency Risk — Foreign currency risk is the risk that foreign currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency hedged. Due to the Fund’s active positions in currencies, it will be subject to the risk that currency exchange rates may fluctuate in response to, among other things, changes in interest rates, intervention (or failure to intervene) by U.S. or foreign governments, central banks or supranational entities, or by the imposition of currency controls or other political developments in the United States or abroad.
Investment Style Risk — The risk that fixed income securities may underperform other segments of the fixed income markets or the fixed income markets as a whole.
Convertible Securities and Preferred Stocks Risk — Convertible and preferred securities have many of the same characteristics as stocks, including many of the same risks. In addition, convertible bonds may be more sensitive to changes in interest rates than stocks. Convertible bonds may also have credit ratings below investment grade, meaning that they carry a higher risk of failure by the issuer to pay principal and/or interest when due.
Mortgage-Backed Securities Risk — Mortgage-backed securities are affected significantly by the rate of prepayments and modifications of the mortgage loans backing those securities, as
8
well as by other factors such as borrower defaults, delinquencies, realized or liquidation losses and other shortfalls. Mortgage-backed securities are particularly sensitive to prepayment risk, which is described below, given that the term to maturity for mortgage loans is generally substantially longer than the expected lives of those securities; however, the timing and amount of prepayments cannot be accurately predicted. The timing of changes in the rate of prepayments of the mortgage loans may significantly affect the Fund’s actual yield to maturity on any mortgage-backed securities, even if the average rate of principal payments is consistent with the Fund’s expectation. Along with prepayment risk, mortgage-backed securities are significantly affected by interest rate risk, which is described above. In a low interest rate environment, mortgage loan prepayments would generally be expected to increase due to factors such as refinancings and loan modifications at lower interest rates. In contrast, if prevailing interest rates rise, prepayments of mortgage loans would generally be expected to decline and therefore extend the weighted average lives of mortgage-backed securities held or acquired by the Fund.
Prepayment Risk — The risk that, in a declining interest rate environment, fixed income securities with stated interest rates may have the principal paid earlier than expected, requiring the Fund to invest the proceeds at generally lower interest rates.
Extension Risk — The risk that rising interest rates may extend the duration of a fixed income security, typically reducing the security’s value.
When-Issued and Delayed Delivery Securities Risk — When-issued and delayed delivery securities involve the risk that the security the Fund buys will lose value prior to its delivery.
Municipal Securities Risk — Municipal securities, like other fixed income securities, rise and fall in value in response to economic and market factors, primarily changes in interest rates, and actual or perceived credit quality. Rising interest rates will generally cause municipal securities to decline in value. Longer-term securities respond more sharply to interest rate changes than do shorter-term securities. A municipal security will also lose value if, due to rating downgrades or other factors, there are concerns about the issuer’s current or future ability to make principal or interest payments. State and local governments rely on taxes and, to some extent, revenues from private projects financed by municipal securities, to pay interest and principal on municipal debt. Poor statewide or local economic
9
results or changing political sentiments may reduce tax revenues and increase the expenses of municipal issuers, making it more difficult for them to meet their obligations. Actual or perceived erosion of the creditworthiness of municipal issuers may reduce the value of the Fund’s holdings. As a result, the Fund will be more susceptible to factors that adversely affect issuers of municipal obligations than a mutual fund that does not have as great a concentration in municipal obligations.
Asset-Backed Securities Risk — Payment of principal and interest on asset-backed securities is dependent largely on the cash flows generated by the assets backing the securities. Securitization trusts generally do not have any assets or sources of funds other than receivables and related property they own, and asset-backed securities are generally not insured or guaranteed by the related sponsor or any other entity. Asset-backed securities may be more illiquid than more conventional types of fixed income securities that the Fund may acquire.
Foreign Investment/Emerging Markets Risk — The risk that non-U.S. securities may be subject to additional risks due to, among other things, political, social and economic developments abroad, currency movements, and different legal, regulatory and tax environments. In addition, periodic U.S. Government restrictions on investments in issuers from certain foreign countries may require the Fund to sell such investments at inopportune times, which could result in losses to the Fund. In addition, periodic U.S. Government restrictions on investments in issuers from certain foreign countries may require the Fund to sell such investments at inopportune times, which could result in losses to the Fund. These additional risks may be heightened with respect to emerging market countries because political turmoil and rapid changes in economic conditions are more likely to occur in these countries.
Exchange-Traded Funds (ETFs) Risk — The risks of owning shares of an ETF generally reflect the risks of owning the underlying securities in which the ETF invests, although lack of liquidity in an ETF could result in its value being more volatile than the underlying portfolio securities. When the Fund invests in an ETF, in addition to directly bearing the expenses associated with its own operations, it will bear a pro rata portion of the ETF’s expenses.
Money Market Instruments Risk — The value of money market instruments may be affected by changing interest rates and by changes in the credit ratings of the investments. An investment in
10
a money market fund is not a bank deposit and is not insured or guaranteed by any bank, the FDIC or any other government agency. A money market fund’s sponsor has no legal obligation to provide financial support to the fund, and there should be no expectation that the sponsor will provide financial support to the fund at any time. Certain money market funds float their net asset value while others seek to preserve the value of investments at a stable net asset value (typically, $1.00 per share). An investment in a money market fund, even an investment in a fund seeking to maintain a stable net asset value per share, is not guaranteed and it is possible for the Fund to lose money by investing in these and other types of money market funds. Under certain circumstances where a money market fund experiences heightened redemptions, it may be required to impose a mandatory liquidity fee on amounts the Fund redeems from the money market fund (i.e., impose a liquidity fee). In addition, a money market fund may impose a liquidity fee of up to 2% on amounts the Fund redeems from the money market fund during circumstances where the money market fund’s board of directors determines such fee would be in the money market fund’s best interests. These measures may result in an investment loss. Money market funds and the securities they invest in are subject to comprehensive regulations. The regulations governing money market funds were recently amended in July, 2023, and their implementation and interpretation, as well as enforcement, may affect the manner of operation, performance and/or yield of money market funds.
Valuation Risk — The risk that a security may be difficult to value. The Fund may value certain securities at a price higher than the price at which they can be sold.
U.S. Government Securities Risk — Although U.S. Government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. Government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency’s own resources.
11
Updated
performance information is available by calling
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Year |
Return |
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2020 |
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2021 |
( |
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2022 |
( |
| 2023 |
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() |
() |
This table compares the Fund’s average annual total returns for the periods ended December 31, 2023 to those of an appropriate broad-based index.
12
|
Mesirow Enhanced Core Plus Fund |
1 Year |
Since Inception () |
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Fund Returns Before Taxes |
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Institutional Shares |
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Investor Shares |
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Fund Returns After Taxes |
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Institutional Shares |
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( |
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Fund Returns After Taxes on Distributions and Sale of Fund Shares |
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Institutional Shares |
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( |
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Bloomberg U.S. Aggregate Index (reflects no deduction for fees, expenses or taxes) |
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( |
Investment Adviser
Mesirow Financial Investment Management, Inc.
Portfolio Managers
Peter W. Hegel, Senior Managing Director, has managed the Fund since its inception in 2019.
Joseph P. Hoffman, CFA, Senior Managing Director, has managed the Fund since 2019.
James Lisko, Managing Director and Portfolio Manager, has managed the Fund since 2022.
David Nirtaut, Senior Managing Director and Senior Portfolio Manager, has managed the Fund since 2023.
For important information about the purchase and sale of Fund shares, taxes and financial intermediary compensation, please turn to “Summary Information about the Purchase and Sale of Fund Shares, Taxes and Financial Intermediary Compensation” on page 36 of the prospectus.
13
Institutional Shares
Investor Shares
Bloomberg U.S. Corporate High Yield Index (reflects no deduction for fees, expenses or taxes)
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Mesirow High Yield Fund |
The Mesirow High Yield Fund (the “High Yield Fund” or the “Fund”) seeks to provide a high level of current income consistent with the preservation of principal.
This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
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Institutional and Investor Shares |
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Redemption Fee (as a percentage of amount redeemed, if shares redeemed have been held for less than 90 days) |
1.00% |
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| Redemption Fee (As a percentage of Amount Redeemed)* |
| * |
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Institutional
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Investor
| |
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Management Fees |
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Distribution and/or Service (12b-1) Fees |
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Other Expenses |
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Shareholder Servicing Fees |
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Other Operating Expenses |
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Total Annual Fund Operating Expenses |
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Less Fee Reductions and/or Expense Reimbursements1 |
( |
( |
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Total Annual Fund Operating Expenses After Fee Reductions and/or Expense Reimbursements |
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1 |
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14
This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses (including one year of capped expenses in each period) remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
|
|
1 Year |
3 Years |
5 Years |
10 Years |
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Institutional Shares |
$ |
$ |
$ |
$ |
|
Investor Shares |
$ |
$ |
$ |
$ |
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
total annual fund operating expenses or in the example, affect the Fund’s
performance. During its most recent fiscal year, the Fund’s portfolio turnover
rate was
Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in
15
high yield instruments (also known as “junk bonds”) and other financial instruments with economic characteristics similar to such instruments, such as derivatives and exchange-traded funds (“ETFs”). This investment policy may be changed by the Fund upon 60 days’ prior written notice to shareholders.
High yield instruments in which the Fund may invest include domestic and foreign bonds (including corporate bonds), convertible securities, forward commitments, loan participations and assignments, preferred stocks and privately issued securities (e.g., Rule 144A securities) that are rated below investment grade by Moody’s Investors Service, Inc. (“Moody’s”), or equivalently rated by S&P Global Ratings (“S&P”) or Fitch, Inc. (“Fitch”), or, if unrated, determined by MFIM to be of comparable quality.
The Fund may invest the remainder of its assets in investment grade instruments including securities issued or guaranteed by the U.S. Government and its agencies or instrumentalities, municipal bonds, corporate bonds, residential and commercial mortgage-backed securities, asset-backed securities, loan participations and assignments, U.S. dollar-denominated foreign debt securities and ETFs that invest in such instruments. The Fund may also invest up to 5% of its net assets in foreign currency-denominated securities. The Fund may also invest up to 10% of its net assets in securities and instruments that are economically tied to emerging market countries, which MFIM defines as those countries that are: (i) characterized as developing or emerging by any of the World Bank, the United Nations, the International Finance Corporation, or the European Bank for Reconstruction and Development; (ii) included in an emerging markets index by a recognized index provider; or (iii) countries with similar developing or emerging characteristics as countries classified as emerging market countries pursuant to sub-paragraph (i) and (ii) above, in each case determined at the time of purchase. The Fund may also invest in equity securities, which are ownership interests in a public or private company or partnership and consist of common stocks, warrants and rights to acquire common stock, and investments in master limited partnerships (“MLPs”). The Fund may invest in securities of companies with any market capitalization.
The Fund also may invest up to 5% of its net assets in derivative instruments, such as options, futures contracts or swap agreements, for bona fide hedging purposes, to gain exposure to certain markets or segments of markets, and for speculative purposes. From time to time, the Fund may experience significant inflows; if this occurs,
16
the Fund may, on a temporary or interim basis, invest these new assets (potentially in an amount which may approach up to 50% of the Fund’s total net assets if new flows were extremely large relative to the Fund’s current assets) in a combination of derivative instruments and other investment companies, including ETFs, until such time as MFIM can identify and invest in appropriate high yield instruments in accordance with the Fund’s principal strategy. The Fund may purchase or sell securities or other assets on a when-issued, delayed delivery or forward commitment basis. The Fund may borrow money for, among other reasons, cash management purposes, to obtain leverage and to meet redemptions.
The average portfolio duration of the Fund normally varies within two years (plus or minus) of the portfolio duration of the securities comprising the Bloomberg U.S. Corporate High-Yield Index, which as of September 30, 2023 was 3.47 years. Duration is a measure of the expected life of a fixed income security that is used to determine the sensitivity of a security’s price to changes in interest rates.
In selecting investments for the Fund, MFIM will consider the risks and opportunities presented by the industries within the high yield universe. MFIM evaluates the bond issuers within the selected industries and identifies those investments which MFIM believes have favorable risk reward characteristics and match MFIM’s investing philosophy. MFIM evaluates various criteria such as historical and future expected financial performance, management tenure and experience, capital structure, free cash flow generation, barriers to entry, security protections, yield and relative value, and ownership structure. MFIM targets investments that have individual yield premiums which appear to be favorable and are viewed by MFIM as having a comparable or lower probability of default and/or loss risk.
The Fund may invest in cash or money market instruments for the purpose of meeting redemption requests or making other anticipated cash payments.
As
with all mutual funds, there is no guarantee that the Fund will achieve its
investment objective.
17
Below Investment Grade Securities (Junk Bonds) Risk — Fixed income securities rated below investment grade (junk bonds) involve greater risks of default or downgrade and are generally more volatile than investment grade securities because the prospect for repayment of principal and interest of many of these securities is speculative. Because these securities typically offer a higher rate of return to compensate investors for these risks, they are sometimes referred to as “high yield bonds,” but there is no guarantee that an investment in these securities will result in a high rate of return.
Market Risk — The risk that the market value of a security may move up and down, sometimes rapidly and unpredictably. Market risk may affect a single issuer, an industry, a sector or the bond market as a whole. In addition, the impact of any epidemic, pandemic or natural disaster, or widespread fear that such events may occur, could negatively affect the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the markets in general in significant and unforeseen ways. Any such impact could adversely affect the prices and liquidity of the securities and other instruments in which the Fund invests, which in turn could negatively impact the Fund’s performance and cause losses on your investment in the Fund.
Credit Risk — The risk that the issuer of a security or the counterparty to a contract will default or otherwise become unable to honor a financial obligation.
Fixed Income Market Risk — The prices of the Fund’s fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments and their agencies. Generally, the value of the Fund’s fixed income securities will vary inversely with the direction of prevailing interest rates. Declines in dealer market-making capacity as a result of structural or regulatory changes could decrease liquidity and/or increase volatility in the fixed income markets. In the case of foreign securities, price fluctuations will reflect international economic and political events, as well as changes in currency valuations relative to the U.S. dollar. In response to these events, the Fund’s value may fluctuate and/or the Fund may experience increased redemptions from shareholders, which may impact the Fund’s liquidity or force the Fund to sell securities into a declining or illiquid market.
18
Corporate Fixed Income Securities Risk — Corporate fixed income securities respond to economic developments, especially changes in interest rates, as well as perceptions of the creditworthiness and business prospects of individual issuers.
Bank Loans Risk — Investments in bank loans (through both assignments and participations) are generally subject to the same risks as investments in other types of debt instruments, including, in many cases, investments in junk bonds. There may be limited public information available regarding bank loans and bank loans may be difficult to value. If the Fund holds a bank loan through another financial institution, or relies on a financial institution to administer the loan, its receipt of principal and interest on the loan may be subject to the credit risk of that financial institution. It is possible that any collateral securing a loan may be insufficient or unavailable to the Fund, and that the Fund’s rights to collateral may be limited by bankruptcy or insolvency laws. In addition, the secondary market for bank loans may be subject to irregular trading activity, wide bid/ask spreads, and extended trade settlement periods, which may cause the Fund to be unable to realize the full value of its investment in a bank loan.
Bank loans may not be considered “securities,” and purchasers, such as the Fund, therefore may not be entitled to rely on the anti-fraud protections of the federal securities laws.
Prepayment Risk — The risk that, in a declining interest rate environment, fixed income securities with stated interest rates may have the principal paid earlier than expected, requiring the Fund to invest the proceeds at generally lower interest rates.
Extension Risk — The risk that rising interest rates may extend the duration of a fixed income security, typically reducing the security’s value.
Investment Style Risk — The risk that high yield fixed income securities may underperform other segments of the fixed income markets or the fixed income markets as a whole.
Interest Rate Risk — The risk that a change in interest rates will cause a fall in the value of fixed income securities, including U.S. Government securities, in which the Fund invests. Generally, the value of the Fund’s fixed income securities will vary inversely with the direction of prevailing interest rates. Changing interest rates may have unpredictable effects on the markets and may affect the value and liquidity of instruments held by the Fund. Although
19
U.S. Government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates.
Duration Risk — The longer-term securities in which the Fund may invest tend to be more volatile than shorter-term securities. A portfolio with a longer average portfolio duration is more sensitive to changes in interest rates than a portfolio with a shorter average portfolio duration.
Liquidity Risk — The risk that certain securities may be difficult or impossible to sell at the time and the price that the seller would like. The seller may have to lower the price, sell other securities instead or forego an investment opportunity, any of which could have a negative effect on Fund management or performance.
Valuation Risk — The risk that a security may be difficult to value. The Fund may value certain securities at a price higher than the price at which they can be sold.
Exchange-Traded Funds (ETFs) Risk — The risks of owning shares of an ETF generally reflect the risks of owning the underlying securities in which the ETF invests, although lack of liquidity in an ETF could result in its value being more volatile than the underlying portfolio securities. When the Fund invests in an ETF, in addition to directly bearing the expenses associated with its own operations, it will bear a pro rata portion of the ETF’s expenses.
Money Market Instruments Risk — The value of money market instruments may be affected by changing interest rates and by changes in the credit ratings of the investments. An investment in a money market fund is not a bank deposit and is not insured or guaranteed by any bank, the FDIC or any other government agency. A money market fund’s sponsor has no legal obligation to provide financial support to the fund, and there should be no expectation that the sponsor will provide financial support to the fund at any time. Certain money market funds float their net asset value while others seek to preserve the value of investments at a stable net asset value (typically, $1.00 per share). An investment in a money market fund, even an investment in a fund seeking to maintain a stable net asset value per share, is not guaranteed and it is possible for the Fund to lose money by investing in these and other types of money market funds. Under certain circumstances where a money market fund experiences heightened redemptions, it may be required to impose a mandatory liquidity fee on amounts the Fund redeems from the money market fund (i.e., impose a liquidity fee). In addition, a money
20
market fund may impose a liquidity fee of up to 2% on amounts the Fund redeems from the money market fund during circumstances where the money market fund’s board of directors determines such fee would be in the money market fund’s best interests. These measures may result in an investment loss. Money market funds and the securities they invest in are subject to comprehensive regulations. The regulations governing money market funds were recently amended in July, 2023, and their implementation and interpretation, as well as enforcement, may affect the manner of operation, performance and/or yield of money market funds.
Leverage Risk — The Fund’s use of borrowing, derivatives and when-issued, delayed delivery or forward commitment transactions may result in the Fund’s total investment exposure substantially exceeding the value of its portfolio securities and, in certain cases, the Fund’s investment returns depending substantially on the performance of securities that the Fund may not directly own. The use of leverage can amplify the effects of market volatility on the Fund’s share price and may also cause the Fund to liquidate portfolio positions when it would not be advantageous to do so in order to satisfy its obligations. In the case of borrowings, the Fund may experience losses if its borrowing costs exceed the investment returns on the securities purchased with the borrowed money. The Fund’s use of leverage may result in a heightened risk of investment loss.
Foreign Currency Risk — As a result of the Fund’s investments in securities denominated in, and/or receiving revenues in, foreign currencies, the Fund will be subject to currency risk. Currency risk is the risk that foreign currencies will decline in value relative to the U.S. dollar, in which case the dollar value of an investment in the Fund would be adversely affected.
Asset-Backed Securities Risk — Payment of principal and interest on asset-backed securities is dependent largely on the cash flows generated by the assets backing the securities. Securitization trusts generally do not have any assets or sources of funds other than receivables and related property they own, and asset-backed securities are generally not insured or guaranteed by the related sponsor or any other entity. Asset-backed securities may be more illiquid than more conventional types of fixed income securities that the Fund may acquire.
Convertible Securities and Preferred Stocks Risk — Convertible and preferred securities have many of the same characteristics as
21
stocks, including many of the same risks. In addition, convertible securities may be more sensitive to changes in interest rates than stocks. Convertible securities may also have credit ratings below investment grade, meaning that they carry a higher risk of failure by the issuer to pay principal and/or interest when due.
Derivatives Risk — The Fund’s use of futures, options and swaps is subject to market risk, leverage risk, correlation risk and liquidity risk. Leverage risk, liquidity risk and market risk are described elsewhere in this section. Many over-the-counter (OTC) derivative instruments will not have liquidity beyond the counterparty to the instrument. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. The Fund’s use of OTC options and swaps is also subject to credit risk and valuation risk. Valuation risk and credit risk are described above. Each of these risks could cause the Fund to lose more than the principal amount invested in a derivative instrument. Some derivatives have the potential for unlimited loss, regardless of the size of the Fund’s initial investment. The other parties to certain derivative contracts present the same types of credit risk as issuers of fixed income securities. The Fund’s use of derivatives may also increase the amount of taxes payable by shareholders. Both U.S. and non-U.S. regulators have adopted and implemented regulations governing derivatives markets, the ultimate impact of which remains unclear.
Foreign Investment/Emerging Markets Risk — The risk that non-U.S. securities may be subject to additional risks due to, among other things, political, social and economic developments abroad, currency movements, and different legal, regulatory and tax environments. In addition, periodic U.S. Government restrictions on investments in issuers from certain foreign countries may require the Fund to sell such investments at inopportune times, which could result in losses to the Fund. In addition, periodic U.S. Government restrictions on investments in issuers from certain foreign countries may require the Fund to sell such investments at inopportune times, which could result in losses to the Fund. These additional risks may be heightened with respect to emerging market countries because political turmoil and rapid changes in economic conditions are more likely to occur in these countries.
Mortgage-Backed Securities Risk — Mortgage-backed securities are affected significantly by the rate of prepayments and modifications of the mortgage loans backing those securities, as well as by other factors such as borrower defaults, delinquencies,
22
realized or liquidation losses and other shortfalls. Mortgage-backed securities are particularly sensitive to prepayment risk, which is described below, given that the term to maturity for mortgage loans is generally substantially longer than the expected lives of those securities; however, the timing and amount of prepayments cannot be accurately predicted. The timing of changes in the rate of prepayments of the mortgage loans may significantly affect the Fund’s actual yield to maturity on any mortgage-backed securities, even if the average rate of principal payments is consistent with the Fund’s expectation. Along with prepayment risk, mortgage-backed securities are significantly affected by interest rate risk, which is described above. In a low interest rate environment, mortgage loan prepayments would generally be expected to increase due to factors such as refinancings and loan modifications at lower interest rates. In contrast, if prevailing interest rates rise, prepayments of mortgage loans would generally be expected to decline and therefore extend the weighted average lives of mortgage-backed securities held or acquired by the Fund.
Municipal Securities Risk — Municipal securities, like other fixed income securities, rise and fall in value in response to economic and market factors, primarily changes in interest rates, and actual or perceived credit quality. Rising interest rates will generally cause municipal securities to decline in value. Longer-term securities respond more sharply to interest rate changes than do shorter-term securities. A municipal security will also lose value if, due to rating downgrades or other factors, there are concerns about the issuer’s current or future ability to make principal or interest payments. State and local governments rely on taxes and, to some extent, revenues from private projects financed by municipal securities, to pay interest and principal on municipal debt. Poor statewide or local economic results or changing political sentiments may reduce tax revenues and increase the expenses of municipal issuers, making it more difficult for them to meet their obligations. Actual or perceived erosion of the creditworthiness of municipal issuers may reduce the value of the Fund’s holdings. As a result, the Fund will be more susceptible to factors that adversely affect issuers of municipal obligations than a mutual fund that does not have as great a concentration in municipal obligations.
U.S. Government Securities Risk — Although U.S. Government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. Government
23
agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency’s own resources.
When-Issued and Delayed Delivery Securities and Forward Commitments Risk — When-issued and delayed delivery securities and forward commitments involve the risk that the security the Fund buys will lose value prior to its delivery.
Equity Market Risk — The risk that stock prices will fall over short or extended periods of time.
Small- and Mid-Capitalization Companies Risk — Small- and mid-capitalization companies in which the Fund may invest may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, small- and mid-capitalization companies may have limited product lines, markets and financial resources and may depend upon a relatively small management group. Therefore, small- and mid-capitalization stocks may be more volatile than those of larger companies. Small- and mid-capitalization stocks may be traded over-the-counter or listed on an exchange.
Large Capitalization Risk — The risk that larger, more established companies may be unable to respond quickly to new competitive challenges such as changes in technology and consumer tastes. Larger companies also may not be able to attain the high growth rates of successful smaller companies.
Master Limited Partnerships (MLPs) Risk — MLPs are limited partnerships in which the ownership units are publicly traded. MLPs often own several properties or businesses (or own interests) that are related to oil and gas industries or other natural resources, but they also may finance other projects. To the extent that an MLP’s interests are all in a particular industry, the MLP will be negatively impacted by economic events adversely impacting that industry. Additional risks of investing in a MLP also include those involved in investing in a partnership as opposed to a corporation, such as limited control of management, limited voting rights and tax risks. MLPs may be subject to state taxation in certain jurisdictions, which will have the effect of reducing the amount of income paid by the MLP to its investors.
Privately Issued Securities Risk — Investment in privately placed securities may be less liquid than in publicly traded securities. Although these securities may be resold in privately negotiated transactions, the prices realized from these sales could be less
24
than those originally paid by the Fund or less than what may be considered the fair value of such securities. Further, companies whose securities are not publicly traded may not be subject to the disclosure and other investor protection requirements that might be applicable if their securities were publicly traded.
Warrants and Rights Risk — Warrants and rights may be more speculative than other types of investments. The price of a warrant or right may be more volatile than the price of its underlying security, and a warrant or right may offer greater potential for capital appreciation as well as capital loss. A warrant or right ceases to have value if it is not exercised prior to its expiration date.
Updated
performance information is available by calling
|
Year |
Return |
|
2019 |
|
|
2020 |
|
|
2021 |
|
|
2022 |
( |
| 2023 |
|
|
|
|
|
|
|
() |
() |
25
This table compares the Fund’s average annual total returns for the periods ended December 31, 2023 to those of an appropriate broad-based index.
|
Mesirow High Yield Fund |
1 Year |
5 Years |
Since Inception () |
|
Fund Returns Before Taxes |
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|
|
Institutional Shares |
|
|
|
|
Investor Shares |
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|
Fund Returns After Taxes |
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|
|
Institutional Shares |
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|
|
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Fund Returns After Taxes on Distributions and Sale of Fund Shares |
|
|
|
|
Institutional Shares |
|
|
|
|
Bloomberg U.S. Corporate High Yield Index (reflects no deduction for fees, expenses or taxes) |
|
|
|
Investment Adviser
Mesirow Financial Investment Management, Inc.
26
Portfolio Managers
Robert Sydow, Senior Managing Director, Chief Investment Officer and Portfolio Manager, has managed the Fund since its inception in 2018.
Kevin Buckle, CFA, Senior Managing Director and Portfolio Manager, has managed the Fund since its inception in 2018.
James Lisko, Managing Director and Portfolio Manager, has managed the Fund since its inception in 2018.
For important information about the purchase and sale of Fund shares, taxes and financial intermediary compensation, please turn to “Summary Information about the Purchase and Sale of Fund Shares, Taxes and Financial Intermediary Compensation” on page 36 of the prospectus.
27
Institutional Shares
Investor Shares
Russell 2000 Index (reflects no deduction for fees, expenses or taxes)
|
Mesirow Small Company Fund |
The Mesirow Small Company Fund (the “Small Company Fund” or the “Fund”) seeks to provide long-term capital appreciation with less volatility than the U.S. small company market.
This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
|
Institutional and Investor Shares |
||
|
Redemption Fee (as a percentage of amount redeemed, if shares redeemed have been held for less than 90 days) |
1.00% |
|
| Redemption Fee (As a percentage of Amount Redeemed)* |
| * |
|
Institutional
|
Investor
| |
|
Management Fees |
|
|
|
Distribution and/or Service (12b-1) Fees |
|
|
|
Other Expenses |
|
|
| Shareholder Servicing Fees | 1 | |
|
Other Operating Expenses |
|
|
|
Total Annual Fund Operating Expenses |
|
|
|
Less Fee Reductions and/or Expense Reimbursements2 |
( |
( |
|
Total Annual Fund Operating Expenses After Fee Reductions and/or Expense Reimbursements |
|
|
Shareholder Servicing Fees
|
1 |
|
|
2 |
|
28
This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses (including one year of capped expenses in each period) remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
|
|
1 Year |
3 Years |
5 Years |
10 Years |
|
Institutional Shares |
$ |
$ |
$ |
$ |
|
Investor Shares |
$ |
$ |
$ |
$ |
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
total annual fund operating expenses or in the example, affect the Fund’s
performance. During its most recent fiscal year, the Fund’s portfolio turnover
rate was
29
Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in securities of small companies. This investment policy may be changed by the Fund upon 60 days’ prior written notice to shareholders.
The Fund considers small companies to be those with market capitalizations within the range of the market capitalizations of companies in the Russell 2500 Index at the time of purchase, and exchange-traded funds (“ETFs”) that aim to replicate or produce returns that generally correspond to small company indexes. The market capitalization range of the Russell 2500 Index was approximately $27 million to $19.8 billion as of September 30, 2023, and may change over time. At any given time, the Fund may own a diversified group of stocks in several industries. The Fund invests mainly in common stocks, but it may also invest in ETFs.
MIIM employs a relative value philosophy to identify companies that MIIM believes have attractive valuations and a high probability for accelerated earnings and cash flow growth compared to their peers. MIIM evaluates broad themes and market developments that it believes can be exploited through portfolio construction and rigorous fundamental research to identify investments that are best positioned to take advantage of catalysts and trends that may positively change the earnings potential and cash flow growth of a target company. MIIM believes that earnings and cash flow growth are the principal drivers of investment performance, particularly when accompanied by visible, quantifiable catalysts that have not been fully recognized by the investment community.
Further, MIIM considers various operational and structural factors within its fundamental assessment of macro, sector and company specific trends. Factors taken into consideration may include (but are not limited to): business model risks that may arise from general economic activity, interest rates, business input costs and changes to industry structure; governance factors such as board composition, share class structure and shareholder voting rights; environmental factors such as resource usage and carbon intensity; social factors such as workplace policies, child labor and human rights; and other qualitative factors that may impede a company’s ability to reach stated goals and objectives. MIIM believes companies that reduce exposure to broad risk factors have the potential to reduce the cost of capital, materially lower operating costs or increase the profitability
30
of a company, which may, in turn, lead to higher investment returns for the Fund.
MIIM continuously monitors and evaluates investments held by the Fund to discern changes in trends, modify investment outlooks, and adjust valuations accordingly. MIIM attempts to mitigate excess risk through ownership of what it considers a well-diversified portfolio with broad representation across market industries and sectors. MIIM seeks to actively encourage management of the Fund’s portfolio companies to make incremental positive changes to their business models and risk infrastructure with the goal of producing better investment results. From time to time, the Fund may focus its investments in a particular sector or sectors of the economy. MIIM will liquidate an investment based on several factors, including asset valuation, changes in prospective attributes, and purchases of alternative investments with potentially higher returns. MIIM generally will not immediately sell a stock merely due to market appreciation outside the Fund’s target capitalization range if it believes the company has growth potential.
Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and more capital gains tax liabilities than a fund with a buy and hold strategy.
The Fund may invest in cash or money market instruments for the purpose of meeting redemption requests or making other anticipated cash payments.
As
with all mutual funds, there is no guarantee that the Fund will achieve its
investment objective.
Equity Market Risk — The risk that stock prices will fall over short or extended periods of time. In addition, the impact of any epidemic, pandemic or natural disaster, or widespread fear that such events may occur, could negatively affect the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the markets in general in significant and unforeseen ways. Any such impact could adversely affect the prices and liquidity of the securities and other instruments in which the Fund
31
invests, which in turn could negatively impact the Fund’s performance and cause losses on your investment in the Fund.
Small Companies Risk — Small companies in which the Fund invests may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, small companies may have limited product lines, markets and financial resources and may depend upon a relatively small management group. Therefore, stocks of small companies may be more volatile than those of larger companies. Stocks of small companies may be traded over-the-counter or listed on an exchange.
Sector Emphasis Risk — The securities of companies in the same business sector, if comprising a significant portion of the Fund’s portfolio, may in some circumstances react negatively to market conditions, interest rates and economic, regulatory or financial developments and adversely affect the value of the portfolio to a greater extent than if such securities comprised a lesser portion of the Fund’s portfolio or the Fund’s portfolio was diversified across a greater number of industry sectors.
Style Risk — Relative value investing focuses on companies with stocks that appear undervalued in light of factors such as the company’s earnings, book value, revenues or cash flow. If MIIM’s assessment of market conditions, or a company’s value or prospects for exceeding earnings expectations, is wrong, the Fund could suffer losses or produce poor performance relative to other funds.
Investment Strategy Risk — The risk that the Fund’s investment strategy may underperform other segments of the equity markets or the equity markets as a whole.
Liquidity Risk — The risk that certain securities may be difficult or impossible to sell at the time and the price that the seller would like. The seller may have to lower the price, sell other securities instead or forego an investment opportunity, any of which could have a negative effect on Fund management or performance.
Valuation Risk — The risk that a security may be difficult to value. The Fund may value certain securities at a price higher than the price at which they can be sold.
Portfolio Turnover Risk — The Fund is subject to portfolio turnover risk because it may buy and sell investments frequently. Such a strategy often involves higher expenses, including brokerage commissions, and may increase the amount of capital gains (in
32
particular, short-term gains) realized by the Fund. Shareholders may pay tax on such capital gains.
Exchange-Traded Funds (ETFs) Risk — The risks of owning shares of an ETF generally reflect the risks of owning the underlying securities in which the ETF invests, although lack of liquidity in an ETF could result in its value being more volatile than the underlying portfolio securities. When the Fund invests in an ETF, in addition to directly bearing the expenses associated with its own operations, it will bear a pro rata portion of the ETF’s expenses.
Money Market Instruments Risk — The value of money market instruments may be affected by changing interest rates and by changes in the credit ratings of the investments. An investment in a money market fund is not a bank deposit and is not insured or guaranteed by any bank, the FDIC or any other government agency. A money market fund’s sponsor has no legal obligation to provide financial support to the fund, and there should be no expectation that the sponsor will provide financial support to the fund at any time. Certain money market funds float their net asset value while others seek to preserve the value of investments at a stable net asset value (typically, $1.00 per share). An investment in a money market fund, even an investment in a fund seeking to maintain a stable net asset value per share, is not guaranteed and it is possible for the Fund to lose money by investing in these and other types of money market funds. Under certain circumstances where a money market fund experiences heightened redemptions, it may be required to impose a mandatory liquidity fee on amounts the Fund redeems from the money market fund (i.e., impose a liquidity fee). In addition, a money market fund may impose a liquidity fee of up to 2% on amounts the Fund redeems from the money market fund during circumstances where the money market fund’s board of directors determines such fee would be in the money market fund’s best interests. These measures may result in an investment loss. Money market funds and the securities they invest in are subject to comprehensive regulations. The regulations governing money market funds were recently amended in July, 2023, and their implementation and interpretation, as well as enforcement, may affect the manner of operation, performance and/or yield of money market funds.
33
Updated
performance information is available by calling
|
Year |
Return |
|
2019 |
|
|
2020 |
|
|
2021 |
|
|
2022 |
( |
| 2023 |
|
|
|
|
|
|
|
() |
() |
This table compares the Fund’s average annual total returns for the periods ended December 31, 2023 to those of an appropriate broad-based index.
34
|
Mesirow Small Company Fund |
1 Year |
5 Years |
Since Inception () |
|
Fund Returns Before Taxes |
|
|
|
|
Institutional Shares |
|
|
|
|
Investor Shares |
|
|
|
|
Fund Returns After Taxes |
|
|
|
|
Institutional Shares |
|
|
|
|
Fund Returns After Taxes on Distributions and Sale of Fund Shares |
|
|
|
|
Institutional Shares |
|
|
|
|
Russell 2000 Index (reflects no deduction for fees, expenses or taxes) |
|
|
|
Investment Adviser
Mesirow Institutional Investment Management, Inc.
Portfolio Managers
Kathryn A. Vorisek, Senior Managing Director and Portfolio Manager, has managed the Fund since its inception in 2018.
Leo Harmon, CFA, CAIA, Senior Managing Director, Chief Investment Officer and Portfolio Manager, has managed the Fund since its inception in 2018.
John Nelson, CFA, Managing Director and Portfolio Manager, has managed the Fund since 2023.
Eric Jacobsohn, CFA, Managing Director and Portfolio Manager, has managed the Fund since 2023.
Andrew Hadland, CFA, Managing Director and Portfolio Manager, has managed the Fund since 2023.
For important information about the purchase and sale of Fund shares, taxes and financial intermediary compensation, please turn to “Summary Information about the Purchase and Sale of Fund Shares, Taxes and Financial Intermediary Compensation” on page 36 of the prospectus.
35
Summary Information about the Purchase
and Sale of
Fund Shares, Taxes and
Financial Intermediary Compensation
You may generally purchase or redeem shares on any day that the New York Stock Exchange (“NYSE”) is open for business.
To purchase Institutional Shares of the High Yield Fund for the first time, you must invest at least $1,000,000. To purchase Institutional Shares of the Enhanced Core Plus Fund or Small Company Fund for the first time, you must invest at least $100,000. To purchase Investor Shares of each Fund for the first time, you must invest at least $5,000. There is no minimum for subsequent investments.
The Funds may accept investments of smaller amounts in its sole discretion.
If you own your shares directly, you may redeem your shares by contacting the Funds directly by mail at: Mesirow Funds P.O. Box 219009, Kansas City, MO 64121-9009 (Express Mail Address: Mesirow Funds, c/o SS&C Global Investor & Distribution Solutions, Inc., 430 West 7th Street, Kansas City, MO 64105) or telephone at 833-MESIROW (833-637-4769).
If you own your shares through an account with a broker or other financial intermediary, contact that broker or financial intermediary to redeem your shares. Your broker or financial intermediary may charge a fee for its services in addition to the fees charged by the Funds.
Tax Information
Each Fund intends to make distributions that may be taxed as qualified dividend income, ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or individual retirement accounts (“IRAs”), in which case your distribution will be taxed when withdrawn from the tax-deferred account.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of a Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend a Fund over another investment. Ask your salesperson or visit your financial intermediary’s web site for more information.
36
More Information about the Funds’ Investment Objectives and Strategies
The investment objective of the Enhanced Core Plus Fund is to seek to maximize total return through capital appreciation and current income consistent with preservation of capital.
The investment objective of the High Yield Fund is to seek to provide a high level of current income consistent with the preservation of principal.
The investment objective of the Small Company Fund is to seek to provide long-term capital appreciation with less volatility than the U.S. small company market.
The investment objective of each Fund is not a fundamental policy and may be changed by the Board without shareholder approval.
The investments and strategies described in this prospectus are those that the Funds use under normal conditions. During unusual economic or market conditions, or for temporary defensive or liquidity purposes, each Fund may, but is not obligated to, invest up to 100% of its assets in money market instruments and other cash equivalents that would not ordinarily be consistent with its investment objective. If a Fund invests in this manner, it may cause the Fund to forgo greater investment returns for the safety of principal and the Fund may therefore not achieve its investment objective. A Fund will only do so if Mesirow Financial Investment Management, Inc. or Mesirow Institutional Investment Management, Inc. (each, an “Adviser” and together, the “Advisers”), as applicable, believes that the risk of loss outweighs the opportunity for capital appreciation or current income for that Fund.
This prospectus describes the Funds’ principal investment strategies, and the Funds will normally invest in the types of securities and other investments described in this prospectus. In addition to the securities and other investments and strategies described in this prospectus, each Fund also may invest to a lesser extent in other securities, use other strategies and engage in other investment practices that are not part of its principal investment strategies. These investments and strategies, as well as those described in this prospectus, are described in detail in the Funds’ Statement of Additional Information (“SAI”) (for information on how to obtain a copy of the SAI see the back cover of this prospectus). Of course, there is no guarantee that a Fund will achieve its investment goals.
37
More Information about Risk
Investing in each Fund involves risk and there is no guarantee that a Fund will achieve its goals. The Advisers’ judgments about the markets, the economy, or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good of a job the Advisers do, you could lose money on your investment in a Fund, just as you could with similar investments.
The value of your investment in a Fund is based on the value of the securities the Fund holds. These prices change daily due to economic and other events that affect particular companies and other issuers. These price movements, sometimes called volatility, may be greater or lesser depending on the types of securities the Fund owns and the markets in which they trade. The effect on a Fund of a change in the value of a single security will depend on how widely the Fund diversifies its holdings.
Asset-Backed Securities Risk (Enhanced Core Plus Fund and High Yield Fund only) — Asset-backed securities are securities that are backed primarily by the cash flows of a discrete pool of fixed or revolving receivables or other financial assets that by their terms convert into cash within a finite time period. Asset-backed securities include mortgage-backed securities, but the term is more commonly used to refer to securities supported by non-mortgage assets such as auto loans, motor vehicle leases, student loans, credit card receivables, floorplan receivables, equipment leases and peer-to-peer loans. The assets are removed from any potential bankruptcy estate of an operating company through the true sale of the assets to an issuer that is a special purpose entity, and the issuer obtains a perfected security interest in the assets. Payments of principal of and interest on asset-backed securities rely entirely on the performance of the underlying assets. Asset-backed securities are generally not insured or guaranteed by the related sponsor or any other entity and therefore, if the assets or sources of funds available to the issuer are insufficient to pay those securities, a Fund will incur losses. In addition, asset-backed securities entail prepayment risk that may vary depending on the type of asset, but is generally less than the prepayment risk associated with mortgage-backed securities.
Bank Loans Risk (Enhanced Core Plus Fund and High Yield Fund only) — Bank loans are arranged through private negotiations between a company and one or more financial institutions (lenders).
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Investments in bank loans are generally subject to the same risks as investments in other types of debt instruments, including, in many cases, investments in junk bonds. This means bank loans are subject to greater credit risks than other investments, including a greater possibility that the borrower will be adversely affected by changes in market or economic conditions and may default or enter bankruptcy. Bank loans made in connection with highly leveraged transactions, including operating loans, leveraged buyout loans, leveraged capitalization loans and other types of acquisition financing, are subject to greater credit risks than other types of bank loans. In addition, it may be difficult to obtain reliable information about and value any bank loan.
A Fund may invest in bank loans in the form of participations in the loans (participations) and assignments of all or a portion of the loans from third parties (assignments). In connection with purchasing participations, a Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement relating to the loan, nor any rights of set-off against the borrower, and the Fund may not benefit directly from any collateral supporting the loan in which it has purchased the participation. As a result, the Fund will assume the credit risk of both the borrower and the lender that is selling the participation. When a Fund purchases assignments from lenders, the Fund will acquire direct rights against the borrower on the loan. A Fund may have difficulty disposing of bank loans because, in certain cases, the market for such instruments is not highly liquid. The lack of a highly liquid secondary market may have an adverse impact on the value of such instruments and on a Fund’s ability to dispose of the bank loan in response to a specific economic event, such as deterioration in the creditworthiness of the borrower. Furthermore, transactions in many loans settle on a delayed basis, and the Fund may not receive the proceeds from the sale of a loan for a substantial period of time after the sale. As a result, those proceeds will not be available to make additional investments or to meet a Fund’s redemption obligations.
Bank loans may not be considered “securities,” and purchasers, such as a Fund, therefore may not be entitled to rely on the anti-fraud protections of the federal securities laws.
Below Investment Grade Fixed Income Securities (Junk Bonds) Risk (Enhanced Core Plus Fund and High Yield Fund only) — Below investment grade fixed income securities (junk bonds) involve greater risk of default or downgrade and are generally more volatile than investment grade securities. Junk bonds also involve greater
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risk of price declines than investment grade securities due to actual or perceived changes in an issuer’s creditworthiness. In addition, issuers of junk bonds may be more susceptible than other issuers to economic downturns. Junk bonds are subject to the risk that the issuer may be unable to pay interest or dividends and ultimately may be unable to repay principal upon maturity. Discontinuation of these payments could substantially adversely affect the market value of the security. The volatility of junk bonds, particularly those issued by foreign governments, is even greater because the prospect for repayment of principal and interest of many of these securities is speculative. Some may even be in default. As an incentive to invest, these risky securities tend to offer higher returns, but there is no guarantee that an investment in these securities will result in a high rate of return.
Convertible Securities and Preferred Stocks Risk (Enhanced Core Plus Fund and High Yield Fund only) — Convertible securities are bonds, debentures, notes, preferred stock or other securities that may be converted into or exercised for a prescribed amount of common stock at a specified time and price. Convertible securities provide an opportunity for equity participation, with the potential for a higher dividend or interest yield and lower price volatility compared to common stock. Convertible securities typically pay a lower interest rate than nonconvertible bonds of the same quality and maturity because of the conversion feature. The value of a convertible security is influenced by changes in interest rates, with investment value typically declining as interest rates increase and increasing as interest rates decline, and the credit standing of the issuer. The price of a convertible security will also normally vary in some proportion to changes in the price of the underlying common stock because of the conversion or exercise feature. Convertible securities may also be rated below investment grade (junk bonds) or not rated and are subject to credit risk and prepayment risk, which are discussed below.
Preferred stocks are nonvoting equity securities that pay a stated fixed or variable rate dividend. Due to their fixed income features, preferred stocks provide higher income potential than issuers’ common stocks, but are typically more sensitive to interest rate changes than an underlying common stock. Preferred stocks are also subject to equity market risk, which is the risk that stock prices will fluctuate and can decline and reduce the value of a Fund’s investment. The rights of preferred stocks on the distribution of a corporation’s assets in the event of a liquidation are generally
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subordinate to the rights associated with a corporation’s debt securities. Preferred stock may also be subject to prepayment risk, which is discussed below.
Corporate Fixed Income Securities Risk (Enhanced Core Plus Fund and High Yield Fund only) — Corporate fixed income securities are fixed income securities issued by public and private businesses. Corporate fixed income securities respond to economic developments, especially changes in interest rates, as well as perceptions of the creditworthiness and business prospects of individual issuers. Corporate fixed income securities are subject to the risk that the issuer may not be able to pay interest or, ultimately, to repay principal upon maturity. Interruptions or delays of these payments could adversely affect the market value of the security. In addition, due to lack of uniformly available information about issuers or differences in the issuers’ sensitivity to changing economic conditions, it may be difficult to measure the credit risk of corporate securities.
Credit Risk (Enhanced Core Plus Fund and High Yield Fund only) — Credit risk is the risk that a Fund could lose money if the issuer or guarantor of a portfolio security or a counterparty to a contract fails to make timely payment or otherwise honor its obligations. An actual or perceived decline in the credit quality of a security or other investment, an issuer of a security, or a provider of credit support or a maturity-shortening structure for a security can cause the price of such security or other investment to decrease. A Fund can lose money as a result.
Derivatives Risk (Enhanced Core Plus Fund and High Yield Fund only) — Derivatives are instruments that derive their value from an underlying security, financial asset or an index. Examples of derivative instruments include futures contracts, forward contracts, options and swaps. The primary risk of derivative instruments is that changes in the market value of securities held by a Fund and of the derivative instruments relating to those securities may not be proportionate. There may not be a liquid market for a Fund to sell a derivative instrument, which could result in difficulty in closing the position. Moreover, certain derivative instruments can magnify the extent of losses incurred due to changes in the market value of the securities to which they relate. Some derivative instruments are subject to counterparty risk. A default by the counterparty on its payments to a Fund will cause the value of your investment in the Fund to decrease. A Fund’s use of derivatives is also subject to credit risk, leverage risk, lack of availability risk, valuation risk,
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correlation risk and tax risk. Credit risk is described above. Leverage risk is described below. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause a Fund to realize higher amounts of short-term capital gains, thereby increasing the amount of taxes payable by shareholders. These risks could cause a Fund to lose more than the principal amount invested. Some derivatives have the potential for unlimited loss, regardless of the size of a Fund’s initial investment. A Fund’s counterparties to its derivative contracts present the same types of credit risk as issuers of fixed income securities.
Derivatives are also subject to a number of other risks described elsewhere in this prospectus. Derivatives transactions entered into on non-U.S. exchanges may not be conducted in the same manner as those entered into on U.S. exchanges, and may be subject to different margin, exercise, settlement or expiration procedures. Derivatives transactions entered into on non-U.S. exchanges also are subject to the risks affecting foreign securities, currencies and other instruments, in addition to other risks.
Both U.S. and non-U.S. regulators have adopted and implemented regulations governing derivatives markets, including mandatory clearing of certain derivatives, margin and reporting requirements. Regulation relating to a Fund’s use of derivatives and related instruments, including Rule 18f-4 under the Investment Company Act of 1940, as amended (the “1940 Act”), could potentially limit or impact a Fund’s ability to invest in derivatives, limit a Fund’s ability to employ certain strategies that use derivatives and/or adversely affect the value of derivatives and a Fund’s performance.
Forward Contracts – A forward contract, also called a “forward”, involves a negotiated obligation to purchase or sell a specific security or currency at a future date (with or without delivery required), which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. Forward contracts are not traded on exchanges; rather, a bank or dealer will act as agent or as principal in order to make or take deferred delivery at a later date of a specified lot of a particular security or currency for a Fund’s account. Risks associated with forwards may include:
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(i) an imperfect correlation between the movement in prices of forward contracts and the securities or currencies underlying them; (ii) an illiquid market for forwards; (iii) difficulty in obtaining an accurate value for the forwards; and (iv) the risk that the counterparty to the forward contract will default or otherwise fail to honor its obligation. Because forwards require only a small initial investment in the form of a deposit or margin, they involve a high degree of leverage. Forwards are also subject to credit risk, liquidity risk and leverage risk, each of which is further described elsewhere in this section.
Non-deliverable forwards do not require physical delivery of the currency on the settlement date. Rather, the Fund and the counterparty agree to net the settlement by making a payment in U.S. dollars or another fully convertible currency that represents any differential between the foreign exchange rate agreed upon at the inception of the non-deliverable forward agreement and the actual exchange rate on the agreed upon future date. Non-deliverable forwards are subject to many of the risks associated with derivatives in general and other forward contracts including risks associated with fluctuation in foreign currency and the risk that the counterparty will fail to fulfill its obligations. The use of non-deliverable forwards for hedging or to increase income or gain may not be successful, resulting in losses to the Fund, and the cost of such strategies may reduce the Fund’s returns.
Futures Contracts – Futures contracts, or “futures”, provide for the future sale by one party and purchase by another party of a specified amount of a specific security or asset at a specified future time and at a specified price (with or without delivery required). The risks of futures include: (i) leverage risk; (ii) correlation or tracking risk and (iii) liquidity risk. Because futures require only a small initial investment in the form of a deposit or margin, they involve a high degree of leverage. Accordingly, the fluctuation of the value of futures in relation to the underlying assets upon which they are based is magnified. Thus, a Fund may experience losses that exceed losses experienced by funds that do not use futures contracts and which may be unlimited, depending on the structure of the contract. There may be imperfect correlation, or even no correlation, between price movements of a futures contract and price movements of investments for which futures are used as a substitute, or which futures are intended to hedge.
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Lack of correlation (or tracking) may be due to factors unrelated to the value of the investments being substituted or hedged, such as speculative or other pressures on the markets in which these instruments are traded. Consequently, the effectiveness of futures as a security substitute or as a hedging vehicle will depend, in part, on the degree of correlation between price movements in the futures and price movements in underlying securities or assets. While futures contracts are generally liquid instruments, under certain market conditions they may become illiquid. Futures exchanges may impose daily or intra-day price change limits and/or limit the volume of trading.
Additionally, government regulation may further reduce liquidity through similar trading restrictions. As a result, a Fund may be unable to close out its futures contracts at a time that is advantageous. If movements in the markets for security futures contracts or the underlying security decrease the value of a Fund’s positions in security futures contracts, the Fund may be required to have or make additional funds available to its carrying firm as margin. If a Fund’s account is under the minimum margin requirements set by the exchange or the brokerage firm, its position may be liquidated at a loss, and the Fund will be liable for the deficit, if any, in its account. A Fund may also experience losses due to systems failures or inadequate system back-up or procedures at the brokerage firm(s) carrying the Fund’s positions. The successful use of futures depends upon a variety of factors, particularly the ability of MFIM to predict movements of the underlying securities markets, which requires different skills than predicting changes in the prices of individual securities. There can be no assurance that any particular futures strategy adopted will succeed.
Options – An option is a contract between two parties for the purchase and sale of an underlying asset such as a security, futures contract (in the case of options on futures contracts), currency or other financial instrument or asset, for a specified price at any time during the option period. In the case of options on futures contracts, unlike a futures contract, an option grants the purchaser, in exchange for a premium payment, a right (not an obligation) to buy or sell a futures contract. An option on a futures contract gives the purchaser the right, in exchange for a premium, to assume a position in a futures contract at a specified exercise price during the term of the option. The seller of an uncovered call (buy) option assumes the risk of a theoretically unlimited increase in the market price of the underlying asset above the exercise
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price of the option. The underlying asset necessary to satisfy the exercise of the call option may be unavailable for purchase except at much higher prices. Purchasing the underlying asset to satisfy the exercise of the call option can itself cause the price of the underlying asset to rise further, sometimes by a significant amount, thereby exacerbating the loss. The buyer of a call option assumes the risk of losing an entire premium invested in the call option without ever getting the opportunity to exercise the option. The seller (writer) of a put (sell) option that is covered (e.g., the writer has a short position in the underlying asset) assumes the risk of an increase in the market price of the underlying asset above the sales price (in establishing the short position) of the underlying asset plus the premium received and gives up the opportunity for gain on the underlying security below the exercise price of the option. The seller of an uncovered put option assumes the risk of a decline in the market price of the underlying asset below the exercise price of the option. The buyer of a put option assumes the risk of losing an entire premium invested in the put option without ever getting the opportunity to exercise the option. An option’s time value (i.e., the component of the option’s value that exceeds the in-the-money amount) tends to diminish over time. Even though an option may be in-the-money to the buyer at various times prior to its expiration date, the buyer’s ability to realize the value of an option depends on when and how the option may be exercised. For example, the terms of a transaction may provide for the option to be exercised automatically if it is in-the-money on the expiration date. Conversely, the terms may require timely delivery of a notice of exercise, and exercise may be subject to other conditions (such as the occurrence or non-occurrence of certain events, such as knock-in, knock-out or other barrier events) and timing requirements, including the “style” of the option.
Swap Agreements – Swaps are agreements whereby two parties agree to exchange payment streams calculated by reference to an underlying asset, such as a rate, index, instrument or securities. Swaps typically involve credit risk, market risk, liquidity risk, funding risk, operational risk, legal and documentation risk, regulatory risk and/or tax risk. Interest rate swaps involve one party, in return for a premium, agreeing to make payments to another party to the extent that interest rates exceed or fall below a specified rate (a “cap” or “floor,” respectively). Swap agreements involve the risk that the party with whom the Fund has entered into the swap will default on its
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obligation to pay a Fund and the risk that the Fund will not be able to meet its obligations to the other party to the agreement.
A credit default swap enables a Fund to buy or sell protection against a defined credit event of an issuer or a basket of securities. The buyer of a credit default swap is generally obligated to pay the seller a periodic stream of payments over the term of the contract in return for a contingent payment upon the occurrence of a credit event with respect to an underlying reference obligation. If a Fund is a seller of protection and a credit event occurs (as defined under the terms of that particular swap agreement), the Fund will generally either: (i) pay to the buyer an amount equal to the notional amount of the swap and take delivery of the referenced obligation, other deliverable obligations, or underlying securities comprising a referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising a referenced index. If a Fund is a buyer of protection and a credit event occurs (as defined under the terms of that particular swap agreement), the Fund will either: (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation, other deliverable obligations or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. Recovery values are calculated by market makers considering either industry standard recovery rates or entity specific factors and other considerations until a credit event occurs. If a credit event has occurred, the recovery value is generally determined by a facilitated auction whereby a minimum number of allowable broker bids, together with a specified valuation method, are used to calculate the settlement value.
Credit default swaps involve special risks in addition to those mentioned above because they are difficult to value, are highly susceptible to liquidity and credit risk, and generally pay a return to the party that has paid the premium only in the event of an actual default by the issuer of the underlying obligation (as opposed to a credit downgrade or other indication of financial difficulty). Like a long or short position in a physical security, credit default swaps are subject to the same factors that cause changes in the market value of the underlying asset.
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The Dodd-Frank Act, which was signed into law on July 21, 2010, created a new statutory framework that comprehensively regulated the over-the-counter (OTC) derivatives markets for the first time. Key Dodd-Frank Act provisions relating to OTC derivatives require rulemaking by the U.S. Securities and Exchange Commission (the “SEC”) and the U.S. Commodity Futures Trading Commission (the “CFTC”), not all of which has been proposed or finalized as of the date of this prospectus. Prior to the Dodd-Frank Act, the OTC derivatives markets were traditionally traded on a bilateral basis (so-called “bilateral OTC transactions”). Under the Dodd-Frank Act, certain OTC derivatives transactions are now required to be centrally cleared and traded on exchanges or electronic trading platforms called swap execution facilities. Bilateral OTC transactions differ from exchange-traded or cleared derivatives transactions in several respects. Bilateral OTC transactions are transacted directly with dealers and not with a clearing corporation. As bilateral OTC transactions are entered into directly with a dealer, there is a risk of nonperformance by the dealer as a result of its insolvency or otherwise. Under regulations adopted by the CFTC and federal banking regulators (commonly referred to as “Margin Rules”), a Fund is required to post collateral (known as variation margin) to cover the mark-to-market exposure in respect of its uncleared swaps. These rules also mandate that collateral in the form of initial margin be posted to cover potential future exposure attributable to uncleared swap transactions for certain entities, which may include the Funds.
Duration Risk (Enhanced Core Plus Fund and High Yield Fund only) — Duration is a measure of the expected life of a fixed income security that is used to determine the sensitivity of a security’s price to changes in interest rates. For example, if a fixed income security has a five-year duration, it will decrease in value by approximately 5% if interest rates rise 1% and increase in value by approximately 5% if interest rates fall 1%. Fixed income instruments with higher duration typically have higher risk and higher volatility. Longer-term fixed income securities in which a Fund may invest tend to be more volatile than shorter-term fixed income securities. A portfolio with a longer average portfolio duration is typically more sensitive to changes in interest rates than a portfolio with a shorter average portfolio duration.
Emerging Markets Risk (Enhanced Core Plus Fund and High Yield Fund only) — Emerging market countries are those countries that are: (i) characterized as developing or emerging
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by any of the World Bank, the United Nations, the International Finance Corporation, or the European Bank for Reconstruction and Development; (ii) included in an emerging markets index by a recognized index provider; or (iii) countries with similar developing or emerging characteristics as countries classified as emerging market countries pursuant to sub-paragraph (i) and (ii) above, in each case determined at the time of purchase. Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting and reporting requirements and unreliable securities valuation. It is sometimes difficult to obtain and enforce court judgments in such countries and there is often a greater potential for nationalization and/or expropriation of assets by the government of an emerging market country. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in other countries. As a result, there will tend to be an increased risk of price volatility associated with the Fund’s investments in emerging market and countries, which may be magnified by currency fluctuations relative to the U.S. dollar. Additionally, periodic U.S. Government restrictions on investments in issuers from certain foreign countries may result in a Fund having to sell such prohibited securities at inopportune times. Such prohibited securities may have less liquidity as a result of such U.S. Government designation and the market price of such prohibited securities may decline, which may cause the Fund to incur losses.
Equity Market Risk (High Yield Fund and Small Company Fund only) — A Fund that invests in equity securities is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of a Fund’s securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. In the case of foreign stocks, these fluctuations will reflect international economic and political events, as well as changes in currency valuations relative to the U.S. dollar. These factors contribute to price volatility.
Exchange-Traded Funds (ETFs) Risk (All Funds) — The risks of owning interests of an ETF generally reflect the same risks as owning the underlying securities or other instruments in which the ETF invests. The shares of certain ETFs may trade at a premium or
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discount to their intrinsic value (i.e., the market value may differ from the net asset value (NAV) of an ETF’s shares). For example, supply and demand for shares of an ETF or market disruptions may cause the market price of the ETF to deviate from the value of the ETF’s investments, which may be emphasized in less liquid markets. By investing in an ETF, a Fund indirectly bears the proportionate share of any fees and expenses of the ETF in addition to the fees and expenses that the Fund and its shareholders directly bear in connection with the Fund’s operations.
Extension Risk (Enhanced Core Plus Fund and High Yield Fund only) — Investments in fixed income securities are subject to extension risk. Generally, rising interest rates tend to extend the duration of fixed income securities, making them more sensitive to changes in interest rates. As a result, in a period of rising interest rates, the Funds may exhibit additional volatility.
Fixed Income Market Risk (Enhanced Core Plus Fund and High Yield Fund only) — The prices of a Fund’s fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments and their agencies. Generally, the value of a Fund’s fixed income securities will vary inversely with the direction of prevailing interest rates. Fixed income securities may have fixed-, variable- or floating-rates. There is a risk that the current interest rate on floating and variable rate instruments may not accurately reflect existing market interest rates. Also, longer-term securities are generally more sensitive to changes in the level of interest rates, so the average maturity or duration of these securities affects risk. Changes in government policy, including the Federal Reserve’s decisions with respect to raising interest rates or terminating certain programs such as quantitative easing, could increase the risk that interest rates will continue to rise. Rising interest rates may also increase volatility and reduce liquidity in the fixed income markets, and result in a decline in the value of the fixed income investments held by a Fund. In addition, reductions in dealer market-making capacity as a result of structural or regulatory changes could further decrease liquidity and/or increase volatility in the fixed income markets. In the case of foreign securities, price fluctuations will reflect international economic and political events, as well as changes in currency valuations relative to the U.S. dollar. As a result of these market conditions, a Fund’s value may fluctuate and/or a Fund may experience increased redemptions
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from shareholders, which may impact the Fund’s liquidity or force the Fund to sell securities into a declining or illiquid market.
Foreign Currency Risk (Enhanced Core Plus Fund and High Yield Fund only) — Because non-U.S. securities and other assets are usually denominated in currencies other than the dollar, the value of the Fund’s portfolio may be influenced by currency exchange rates and exchange control regulations. The currencies of emerging market countries may experience significant declines against the U.S. dollar, and devaluation may occur subsequent to investments in these currencies by the Fund. Inflation and rapid fluctuations in inflation rates have had, and may continue to have, negative effects on the economies and securities markets of certain emerging market countries.
Additionally, taking active positions in currencies involves different techniques and risk analyses than the purchase of securities or other investments. Currency exchange rates may fluctuate in response to factors extrinsic to that country’s economy, which makes the forecasting of currency market movements extremely difficult. Fluctuations in currency rates of foreign countries can result in losses to the Fund if they are unable to deliver or receive currency or funds in settlement of obligations and could also cause hedges it has entered into to be rendered useless, resulting in full currency exposure, as well as incurring transaction costs. Passive investment in currencies may, to a lesser extent, also subject the Fund to these same risks.
MFIM’s currency analysis depends on publicly-available sources of data relating to foreign exchange and transactions, providing accurate and unbiased data. While MFIM is alert to indications that data may be incorrect, there is always a risk that MFIM’s analysis may be compromised by limited, inaccurate or misleading information, which could cause the Fund to experience investment losses.
Foreign Investment Risk (Enhanced Core Plus Fund and High Yield Fund only) — Investing in issuers located in foreign countries poses distinct risks because political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. More specifically, investing in foreign issuers includes risks of adverse changes in foreign economic, political, regulatory and other conditions, changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges), differing accounting,
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auditing, financial reporting and legal standards and practices, differing securities market structures, and higher transaction costs. In certain countries, legal remedies available to investors may be more limited than those available with respect to investments in the U.S. In addition, the securities of some foreign companies may be less liquid and, at times, more volatile than securities of comparable U.S. companies. A Fund may also experience more rapid or extreme changes in value as compared to a fund that invests solely in securities of U.S. companies because the securities markets of many foreign countries are relatively small and consist of a limited number of companies representing a small number of industries. Investing in foreign issuers also poses the risk that the cost of buying, selling and holding foreign securities, including brokerage, tax and custody costs, may be higher than the costs involved in domestic transactions. In addition, investments in foreign countries are generally denominated in a foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of a Fund’s investments. These currency movements may happen separately from, and in response to, events that do not otherwise affect the value of the security in the issuer’s home country. Additionally, periodic U.S. Government restrictions on investments in issuers from certain foreign countries may result in a Fund having to sell such prohibited securities at inopportune times. Such prohibited securities may have less liquidity as a result of such U.S. Government designation and the market price of such prohibited securities may decline, which may cause the Fund to incur losses.
Hybrid Preferred Securities Risk (Enhanced Core Plus Fund only) — Hybrid preferred securities are debt instruments that have characteristics similar to those of traditional preferred securities (characteristics of both subordinated debt and preferred stock). Hybrid preferred securities may be issued by corporations, generally in the form of interest-bearing instruments with preferred securities characteristics, or by an affiliated trust or partnership of the corporation, generally in the form of preferred interests in subordinated business trusts or similarly structured securities. The hybrid-preferred securities market consists of both fixed and adjustable coupon rate securities that are either perpetual in nature or have stated maturity dates. Hybrid preferred holders generally have claims to assets in a corporate liquidation that are senior to those of traditional preferred securities but subordinate to those of senior debt holders.
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Interest Rate Risk (Enhanced Core Plus Fund and High Yield Fund only) — Interest rate risk is the risk that a change in interest rates will cause a fall in the value of fixed income securities, including U.S. Government securities, in which a Fund invests. In a low interest rate environment, the risk of a decline in value of a Fund’s portfolio securities associated with rising rates is heightened because there may be a greater likelihood of rates increasing, potentially rapidly. In a declining interest rate environment, a Fund generally will be required to invest cash in instruments with lower interest rates than those of the current portfolio securities. Although U.S. Government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. Government agencies are backed by the U.S. Treasury, whereas others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency’s own resources.
Investment Style Risk (All Funds) — Investment style risk is the risk that a Fund’s investment in certain securities in a particular market segment pursuant to its particular investment strategy may underperform other market segments or the market as a whole.
Large Capitalization Risk (High Yield Fund only) — If valuations of large capitalization companies appear to be greatly out of proportion to the valuations of small or medium capitalization companies, investors may migrate to the stocks of small and medium-sized companies. Additionally, larger, more established companies may be unable to respond quickly to new competitive challenges such as changes in technology and consumer tastes. Larger companies also may not be able to attain the high growth rates of successful smaller companies.
Leverage Risk (Enhanced Core Plus Fund and High Yield Fund only) — Certain Fund transactions, such as borrowing, derivatives and when-issued, delayed delivery or forward commitment transactions, may give rise to a form of leverage. These transactions may expose a Fund to greater risk and increase its costs. As open-end investment companies registered with the SEC, the Funds are subject to the federal securities laws, including the 1940 Act and the rules thereunder. Rule 18f-4 under the 1940 Act requires, among other things, that the Funds either use derivatives in a limited manner or comply with an outer limit on fund leverage risk based on value-at-risk. The use of leverage can amplify the effects of market volatility on a Fund’s share price and make the Fund’s returns more volatile. This is because leverage tends to exaggerate the
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effect of any increase or decrease in the value of a Fund’s portfolio securities. The use of leverage may also cause a Fund to liquidate portfolio positions when it would not be advantageous to do so in order to satisfy its obligations. A Fund’s use of leverage may result in a heightened risk of investment loss.
Liquidity Risk (All Funds) — Liquidity risk exists when particular investments are difficult to purchase or sell. The market for certain investments may become illiquid due to specific adverse changes in the condition of a particular issuer or under adverse market or economic conditions independent of the issuer. A Fund’s investments in illiquid securities may reduce the returns of the Fund because it may be unable to sell the illiquid securities at an advantageous time or price. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities.
Market Risk (Enhanced Core Plus Fund and High Yield Fund only) — Market risk is the risk that the market value of a security may move up and down, sometimes rapidly and unpredictably. Market risk may affect a single issuer, an industry, a sector or the market as a whole. Markets for securities in which a Fund invests may decline significantly in response to adverse issuer, political, regulatory, market, economic or other developments that may cause broad changes in market value, public perceptions concerning these developments, and adverse investor sentiment or publicity. Similarly, the impact of any epidemic, pandemic or natural disaster, or widespread fear that such events may occur, could negatively affect the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the markets in general in significant and unforeseen ways. Any such impact could adversely affect the prices and liquidity of the securities and other instruments in which a Fund invests, which in turn could negatively impact the Fund’s performance and cause losses on your investment in the Fund. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken worldwide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff.
Master Limited Partnerships (MLPs) Risk (High Yield Fund only) — MLPs are limited partnerships in which the ownership units are publicly traded. MLPs often own several properties or businesses (or own interests) that are related to oil and gas industries or other
53
natural resources, but they also may finance other projects. To the extent that an MLP’s interests are all in a particular industry, the MLP will be negatively impacted by economic events adversely impacting that industry. Additional risks of investing in an MLP also include those involved in investing in a partnership as opposed to a corporation. For example, state law governing partnerships is often less restrictive than state law governing corporations. Accordingly, there may be fewer protections afforded to investors in a MLP than investors in a corporation. For example, investors in MLPs may have limited voting rights or be liable under certain circumstances for amounts greater than the amount of their investment. In addition, MLPs may be subject to state taxation in certain jurisdictions which will have the effect of reducing the amount of income paid by the MLP to its investors.
Mid-Capitalization Companies Risk (High Yield Fund only) — The risk that mid-capitalization companies in which the Fund may invest may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, mid-capitalization companies may have limited product lines, markets and financial resources and may depend upon a relatively small management group. Therefore, mid-capitalization stocks may be more volatile than those of larger companies. Mid-capitalization stocks may be traded over-the-counter or listed on an exchange.
Money Market Instruments Risk (All Funds) — The value of money market instruments may be affected by changing interest rates and by changes in the credit ratings of the investments. An investment in a money market fund is not a bank deposit and is not insured or guaranteed by any bank, the FDIC or any other government agency. A money market fund’s sponsor has no legal obligation to provide financial support to the fund, and there should be no expectation that the sponsor will provide financial support to the fund at any time. Certain money market funds float their net asset value while others seek to preserve the value of investments at a stable net asset value (typically, $1.00 per share). An investment in a money market fund, even an investment in a fund seeking to maintain a stable net asset value per share, is not guaranteed and it is possible for a Fund to lose money by investing in these and other types of money market funds. Under certain circumstances where a money market fund experiences heightened redemptions, it may be required to impose a mandatory liquidity fee on amounts the Fund redeems from the money market fund (i.e., impose a liquidity fee). In addition, a money market fund may impose a liquidity fee
54
of up to 2% on amounts a Fund redeems from the money market fund during circumstances where the money market fund’s board of directors determines such fee would be in the money market fund’s best interests. These measures may result in an investment loss. Money market funds and the securities they invest in are subject to comprehensive regulations. The regulations governing money market funds were recently amended in July, 2023, and their implementation and interpretation, as well as enforcement, may affect the manner of operation, performance and/or yield of money market funds.
Mortgage-Backed Securities Risk (Enhanced Core Plus Fund and High Yield Fund only) — Mortgage-backed securities are a class of asset-backed securities representing an interest in a pool or pools of whole mortgage loans (which may be residential mortgage loans or commercial mortgage loans). Mortgage-backed securities held or acquired by a Fund could include (i) obligations guaranteed by federal agencies of the U.S. Government, such as the Government National Mortgage Association (Ginnie Mae), which are backed by the “full faith and credit” of the United States, (ii) securities issued by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), which are not backed by the “full faith and credit” of the United States but are guaranteed by the U.S. Government as to timely payment of principal and interest, (iii) securities (commonly referred to as “private-label RMBS”) issued by private issuers that represent an interest in or are collateralized by whole residential mortgage loans without a government guarantee and (iv) commercial mortgage-backed securities (CMBS), which are multi-class or pass-through securities backed by a mortgage loan or a pool of mortgage loans secured by commercial property such as industrial and warehouse properties, office buildings, retail space and shopping malls, multifamily properties and cooperative apartments. Because private-label RMBS and CMBS are not issued or guaranteed by the U.S. Government, those securities generally are structured with one or more types of credit enhancement. There can be no assurance, however, that credit enhancements will support full payment to a Fund of the principal and interest on such obligations. In addition, changes in the credit quality of the entity that provides credit enhancement could cause losses to a Fund and affect its share price.
A Fund may invest in mortgage-backed securities in the form of debt or in the form of “pass-through” certificates. Pass-through
55
certificates, which represent beneficial ownership interests in the related mortgage loans, differ from debt securities, which generally provide for periodic fixed payments of interest on and principal of the related notes. Mortgage pass-through securities provide for monthly payments that are a “pass-through” of the monthly interest and principal payments (including any prepayments) made by the individual borrowers on the pooled mortgage loans, net of any fees and expenses owed to the servicers of the mortgage loans and other transaction parties that receive payment from collections on the mortgage loans.
The performance of mortgage loans and, in turn, the mortgage-backed securities acquired by a Fund, is influenced by a wide variety of economic, geographic, social and other factors, including general economic conditions, the level of prevailing interest rates, the unemployment rate, the availability of alternative financing and homeowner behavior.
The rate and aggregate amount of distributions on mortgage-backed securities, and therefore the average lives of those securities and the yields realized by a Fund, will be sensitive to the rate of prepayments (including liquidations) and modifications of the related mortgage loans, any losses and shortfalls on the related mortgage loans allocable to the tranches held by the Fund and the manner in which principal payments on the related mortgage loans are allocated among the various tranches in the particular securitization transaction. Furthermore, mortgage-backed securities are sensitive to changes in interest rates, but may respond to those changes differently from other fixed income securities due to the possibility of prepayment of the mortgage loans. Among other factors, a significant amount of defaults, rapid prepayments or prepayment interest shortfalls may erode amounts available for distributions to a Fund. The timing of changes in the rate of prepayments of the mortgage loans may significantly affect a Fund’s actual yield to maturity, even if the average rate of principal payments is consistent with the Fund’s expectations. If prepayments of mortgage loans occur at a rate faster than that anticipated by a Fund, payments of interest on the mortgage-backed securities could be significantly less than anticipated. Similarly, if the number of mortgage loans that are modified is larger than that anticipated by a Fund, payments of principal and interest on the mortgage-backed securities could be significantly less than anticipated.
Municipal Securities Risk (Enhanced Core Plus Fund and High Yield Fund only) — Municipal securities are fixed income securities
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issued by state or local governments or their agencies (such as housing or hospital authorities) to finance capital expenditures and operations. The obligation to pay principal and interest on municipal securities may be a general obligation of the state or local government or may be supported only by an agency or a particular source of revenues. Therefore, municipal securities vary in credit quality. Municipal securities, like other fixed income securities, rise and fall in value in response to economic and market factors, primarily changes in interest rates, and actual or perceived credit quality. Rising interest rates will generally cause municipal securities to decline in value.
Longer-term securities generally respond more sharply to interest rate changes than do shorter-term securities. A municipal security will also lose value if, due to rating downgrades or other factors, there are concerns about the issuer’s current or future ability to make principal or interest payments. State and local governments rely on taxes and, to some extent, revenues from private projects financed by municipal securities, to pay interest and principal on municipal debt. Poor statewide or local economic results or changing political sentiments may reduce tax revenues and increase the expenses of municipal issuers, making it more difficult for them to meet their obligations. Actual or perceived erosion of the creditworthiness of municipal issuers may reduce the value of a Fund’s holdings. As a result, a Fund will be more susceptible to factors that adversely affect issuers of municipal obligations than a mutual fund that does not have as great of a concentration in municipal obligations. Any changes in the financial condition of municipal issuers also may adversely affect the value of a Fund’s securities.
Portfolio Turnover Risk (Small Company Fund only) — Due to its investment strategy, the Fund may buy and sell securities and other instruments frequently. This may result in higher transaction costs and additional capital gains tax liabilities, which may affect the Fund’s performance.
Prepayment Risk (Enhanced Core Plus Fund and High Yield Fund only) — Investments in fixed income securities are subject to prepayment risk. In a declining interest rate environment, fixed income securities with stated interest rates may have their principal paid earlier than expected. This may result in a Fund having to reinvest that money at lower prevailing interest rates, which can reduce the returns of the Fund.
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Privately Issued Securities Risk (High Yield Fund only) — Investment in privately placed securities may be less liquid than in publicly traded securities. Although these securities may be resold in privately negotiated transactions, the prices realized from these sales could be less than those originally paid by the Fund or less than what may be considered the fair value of such securities. In certain cases, privately placed securities may need to be priced at fair value as determined in good faith pursuant to procedures approved by the Board. Despite such good faith efforts, the Fund’s privately placed securities are subject to the risk that the securities’ fair value prices may differ from the actual prices that the Fund may ultimately realize upon their sale or disposition. Further, companies whose securities are not publicly traded may not be subject to the disclosure and other investor protection requirements that might be applicable if their securities were publicly traded.
Sector Emphasis Risk (Small Company Fund only) — The securities of companies in the same business sector, if comprising a significant portion of the Fund’s portfolio, may in some circumstances react negatively to market conditions, interest rates and economic, regulatory or financial developments and adversely affect the value of the portfolio to a greater extent than if such securities comprised a lesser portion of the Fund’s portfolio or the Fund’s portfolio was diversified across a greater number of industry sectors. Some industry sectors have particular risks that may not affect other sectors.
Small Company Risk (Small Company Fund and High Yield Fund only) — The risk that small companies in which a Fund may invest may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, small companies may have limited product lines, markets and financial resources and may depend upon a relatively small management group. Therefore, stocks of small companies may be more volatile than those of larger companies. Stocks of small companies may be traded over-the-counter or listed on an exchange.
Style Risk (Small Company Fund only) — Relative value investing focuses on companies with stocks that appear undervalued in light of factors such as the company’s earnings, book value, revenues or cash flow. If MIIM’s assessment of market conditions, or a company’s value or prospects for exceeding earnings expectations, is wrong, the Fund could suffer losses or produce poor performance relative to other funds. In addition, “value stocks” can continue to be undervalued by the market for long periods of time.
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Trust Preferred Securities Risk (Enhanced Core Plus Fund only) — Trust preferred securities are preferred stocks issued by a special purpose trust subsidiary backed by subordinated debt of the corporate parent. MFIM considers trust preferred securities to be debt securities. These securities typically bear a market rate coupon comparable to interest rates available on debt of a similarly rated company. The securities are generally senior in claim to standard preferred stock but junior to other bondholders. Trust preferred securities are subject to unique risks, due to the fact that dividend payments will only be paid if interest payments on the underlying obligations are made, which interest payments are dependent on the financial condition of the parent corporation and may be deferred for up to 20 consecutive quarters. Such risks include increased credit risk and market value volatility, as well as the risk that the Fund may have to liquidate other investments in order to satisfy the distribution requirements applicable to RICs if the trust preferred security or the subordinated debt is treated as an original issue discount obligation, and thereby causes the Fund to accrue interest income without receiving corresponding cash payments. There is also the risk that the underlying obligations, and thus the trust preferred securities, may be prepaid after a stated call date or as a result of certain tax or regulatory events, resulting in a lower yield to maturity.
U.S. Government Securities Risk (Enhanced Core Plus Fund and High Yield Fund only) — Although U.S. Government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. Government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency’s own resources. Therefore, such obligations are not backed by the full faith and credit of the U.S. Government.
Valuation Risk (All Funds) — The risk that a security may be difficult to value. The Funds may value certain securities at a price higher than the price at which they can be sold. This risk may be especially pronounced for investments that are illiquid or may become illiquid.
Warrants and Rights Risk (High Yield Fund only) — Warrants are instruments that entitle the holder to buy an equity security at a specific price for a specific period of time. Rights are similar to warrants but typically have a shorter duration and are issued by a company to existing stockholders to provide those holders the right to purchase additional shares of stock at a later date. Warrants and rights may be more speculative than other types of investments. The
59
price of a warrant or right may be more volatile than the price of its underlying security, and a warrant or right may offer greater potential for capital appreciation as well as capital loss. A warrant or right ceases to have value if it is not exercised prior to its expiration date.
When-Issued and Delayed Delivery Securities and Forward Commitments Risk (Enhanced Core Plus Fund and High Yield Fund only) — When-issued and delayed delivery securities and forward commitments involve the risk that the security a Fund buys will lose value prior to its delivery. There also is the risk that the security will not be issued or that the other party to the transaction will not meet its obligation. If this occurs, the Fund may lose both the investment opportunity for the assets it set aside to pay for the security and any gain in the security’s price.
Information about Portfolio Holdings
A description of the Funds’ policies and procedures with respect to the circumstances under which the Funds disclose their portfolio holdings is available in the SAI. Each Fund will post its top ten holdings within ten calendar days after the end of each calendar quarter, and its complete portfolio holdings within thirty calendar days after the end of each calendar quarter on the internet at www.mesirow.com. The Advisers may exclude any portion of a Fund’s portfolio holdings from such publication when deemed in the best interest of the Fund. The portfolio holdings information placed on the Funds’ website generally will remain there until such information is included in a filing with the SEC.
Investment Advisers
Mesirow Financial Investment Management, Inc. (“MFIM”), an Illinois corporation founded in 1986, serves as the investment adviser to the Enhanced Core Plus Fund and High Yield Fund. MFIM’s principal place of business is located at 353 N. Clark Street, Chicago, Illinois 60654. MFIM is a wholly-owned subsidiary of Mesirow Financial Services, Inc., which is a wholly-owned subsidiary of Mesirow Financial Holdings, Inc. Approximately 96% of Mesirow Financial Holdings, Inc. common stock was owned by employees, including a majority of the Investment Management Divisions’ senior professionals (who own 19.7% of the stock as of September 30, 2023). Approximately 4% is owned by 4 non-employee stockholders (who are individuals with a prior or current business relationship with Mesirow Financial Holdings, Inc.). As of September 30, 2023, MFIM had approximately $56.0 billion
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in discretionary and non-discretionary assets under management, and an additional $148.1 billion in currency risk management assets.
Mesirow Institutional Investment Management, Inc. (“MIIM” and, together with MFIM, the “Advisers”), a Delaware corporation founded in 2022, serves as the investment adviser to the Small Company Fund. MIIM’s principal place of business is located at 353 N. Clark Street, Chicago, Illinois 60654. MIIM is a wholly-owned subsidiary of Mesirow Financial Services, Inc., which is a wholly-owned subsidiary of Mesirow Financial Holdings, Inc. As of September 30, 2023, MIIM had approximately $1.0 billion in assets under management.
Each Adviser makes investment decisions for, and continuously reviews, supervises and administers the investment program of each Fund to which it serves as investment adviser. The Board oversees the Advisers and establishes policies that the Advisers must follow in their management activities with respect to the Funds.
For their services to the Funds, the Advisers are entitled to a fee, which is calculated daily and paid monthly, at the following annual rates based on the average daily net assets of the Funds:
|
Fund |
Advisory Fee |
|
Mesirow Financial Investment Management, Inc. |
|
|
Enhanced Core Plus Fund |
0.37% |
|
High Yield Fund |
0.55% |
|
Mesirow Institutional Investment Management, Inc. |
|
|
Small Company Fund |
0.75% |
For each Fund to which it serves as investment adviser, each Adviser has contractually agreed to waive its fees and/or reimburse expenses to the extent necessary to keep total annual fund operating expenses (excluding interest, taxes, brokerage commissions, class specific expenses (e.g., distribution and/or service (12b-1) fees) other than shareholder servicing fees incurred by the Fund under the Amended and Restated Shareholder Services Plan adopted by the Trust, research expenses relating to the securities that are purchased and sold by the Fund, dividend and interest expenses on securities sold short, acquired fund fees and expenses, other expenditures which are capitalized in accordance with generally accepted accounting principles, and non-routine expenses (collectively, “excluded expenses”)) for Institutional Shares and Investor Shares from exceeding certain levels as set forth below until January 31, 2025 (each, a “contractual expense limit”). Each
61
agreement may be terminated by: (i) the Board, for any reason at any time; or (ii) the applicable Adviser, upon ninety (90) days’ prior written notice to the Trust, effective as of the close of business on January 31, 2025.
|
Fund |
Contractual
|
|
Mesirow Financial Investment Management, Inc. |
|
|
Enhanced Core Plus Fund |
0.54% |
|
High Yield Fund |
0.75% |
|
Mesirow Institutional Investment Management, Inc. |
|
Small Company Fund |
0.98% |
In addition, MFIM may receive from the Enhanced Core Plus Fund and High Yield Fund the difference between the total annual fund operating expenses (not including excluded expenses) and the respective Fund’s contractual expense limit to recoup all or a portion of its prior fee waivers or expense reimbursements made during the rolling three-year period preceding the date of the recoupment if at any point total annual fund operating expenses (not including excluded expenses) are below the contractual expense limit (i) at the time of the fee waiver and/or expense reimbursement and (ii) at the time of the recoupment.
Further, MIIM may receive from the Small Company Fund the difference between the total annual fund operating expenses (not including excluded expenses) and the Fund’s contractual expense limit to recoup all or a portion of its or MFIM’s prior fee waivers or expense reimbursements made during the rolling three-year period preceding the date of the recoupment if at any point total annual fund operating expenses (not including excluded expenses) are below the contractual expense limit (i) at the time of the fee waiver and/or expense reimbursement and (ii) at the time of the recoupment.
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For the fiscal year ended September 30, 2023, the Advisers received advisory fees (after fee reductions) as a percentage of the average daily net assets of each Fund as follows:
|
Fund |
Advisory Fees Paid |
|
Mesirow Financial Investment Management, Inc. |
|
|
Enhanced Core Plus Fund |
0.00% |
|
High Yield Fund |
0.00% |
|
Mesirow Financial Investment Management, Inc./Mesirow Institutional Investment Management, Inc. |
|
|
Small Company Fund |
0.00% |
A discussion regarding the basis for the Board’s approval of MFIM’s investment advisory agreement with respect to the Enhanced Core Plus Fund and High Yield Fund is available in the Funds’ Annual Report to Shareholders dated September 30, 2023, which covers the period from October 1, 2022 through September 30, 2023. A discussion regarding the basis for the Board’s approval of MIIM’s investment advisory agreement with respect to the Small Company Fund is available in the Fund’s Annual Report to Shareholders dated September 30, 2023, which covers the period from October 1, 2022 through September 30, 2023.
Portfolio Managers
The Funds are each managed by a team of investment professionals that are jointly and primarily responsible for the day to day management of the Funds.
Peter W. Hegel, Senior Managing Director, serves as a portfolio manager for the Enhanced Core Plus Fund. Prior to joining MFIM in 2005, Mr. Hegel was a senior vice president and portfolio manager at Columbia Management. Before that, he was a founding member of Van Kampen Funds, where he served as chief fixed income investment officer. During that time, he also served as chief investment officer for Xerox Life. He is a board member of the Barnabas Foundation and the Timothy Christian School Foundation. Mr. Hegel earned a B.S. from Purdue University, graduating cum laude, and an M.B.A. from the University of Chicago. Mr. Hegel has 44 years of industry experience.
Joseph P. Hoffman, CFA, Senior Managing Director, serves a portfolio manager for the Enhanced Core Plus Fund. Prior to joining MFIM in 2017, Mr. Hoffman worked at Russell Investments, where
63
he spent the last 20 years focused on currency and derivatives. He co-founded Russell Investments’ currency implementation business in 2003 and, most recently, was the global head of currency. Mr. Hoffman earned a BS from Central Washington University and an MS in finance from Seattle University. He is a CFA charterholder and also holds FINRA series 3, 7, 24, 30, 63 and 65 licenses. Mr. Hoffman has 28 years of investment management experience.
David Nirtaut, Senior Managing Director and Senior Portfolio Manager, serves as a portfolio manager for the Enhanced Core Plus Fund. Prior to joining MFIM in 2022, Mr. Nirtaut was the Chief Investment Officer at Curve Asset Management, LLC (“Curve”). Before joining Curve, he was the Head of Fixed Income and Solutions at Legal & General Investment Management America, where he served in leadership capacities in the fixed income, insurance, pension, LDI and global trading businesses since 2007. Mr. Nirtaut earned his B.S. in Finance, with honors, from Indiana University and his M.B.A., Magna Cum Laude, from The University of Notre Dame. He is also an active volunteer with Misericordia and Catholic Charities. Mr. Nirtaut has 26 years of industry experience.
Robert Sydow, Senior Managing Director, Chief Investment Officer and Portfolio Manager, serves as a portfolio manager for the High Yield Fund. Mr. Sydow joined MFIM in 2017. Prior to joining MFIM, Mr. Sydow was a senior vice president at Pacific Income Advisers from 2010 to 2017. Previously, he founded Grandview Capital and served in multiple positions at SunAmerica Investments’ High Yield Bond Department. Mr. Sydow also held multiple positions at First Interstate Bancorp and Atlantic Richfield Company. He earned joint undergraduate degrees in Economics and History, graduating summa cum laude, and an M.B.A. and J.D. from UCLA. Mr. Sydow has 36 years of industry experience.
Kevin Buckle, CFA, Senior Managing Director and Portfolio Manager, serves as a portfolio manager for the High Yield Fund. Mr. Buckle joined MFIM in 2017. Prior to joining MFIM, Mr. Buckle was a senior vice president at Pacific Income Advisers from 2010 to 2017. Previously, he was a portfolio manager at Grandview Capital and a managing director at Willow Brook Capital, a private equity boutique. He also held multiple positions at SunAmerica Investments, where he co-managed high yield bond, leveraged loan, and structured product portfolios. Mr. Buckle earned a B.S. in Finance and Accounting and an M.B.A. with honors from the University of Southern California. He is a CFA charterholder. Mr. Buckle has 34 years of industry experience.
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James Lisko, Managing Director and Portfolio Manager, serves as a portfolio manager for the High Yield Fund and Enhanced Core Plus Fund. Mr. Lisko joined MFIM in 2017. Prior to joining MFIM in 2017, Mr. Lisko was a senior vice president at Pacific Income Advisers from 2010 to 2017. Previously, he was a portfolio manager at Grandview Capital, portfolio manager at JPBT Advisors, senior analyst at Western Asset Management and SunAmerica Investments, and a director of research at Papillon Partners. Mr. Lisko earned an undergraduate degree in Finance from the Ohio State University and an M.B.A. from the University of Miami. Mr. Lisko has 31 years of industry experience.
Kathryn A. Vorisek, Senior Managing Director and Portfolio Manager, serves as a portfolio manager for the Small Company Fund. Ms. Vorisek joined MFIM when the firm acquired Fiduciary Management Associates (“FMA”) in 2016 and joined MIIM in 2022. Prior to joining FMA in 1996, Ms. Vorisek worked for Duff & Phelps Investment Research in Chicago. She is a member of the Advisers’ Board of Directors, the CFA Institute, Economics Club of Chicago, Women Investment Professionals, and a former board member of the CFA Society of Chicago. Ms. Vorisek earned a B.S. in Finance from Marquette University and an M.B.A. with a dual concentration in Finance and International Business from the Kellogg Graduate School of Management at Northwestern University. Ms. Vorisek has over 39 years of industry experience.
Leo Harmon, CFA, CAIA, Senior Managing Director, Chief Investment Officer and Portfolio Manager, serves as a portfolio manager for the Small Company Fund. Mr. Harmon is also a current member and past Chairman of Mesirow’s DE&I Council. Mr. Harmon joined MFIM when the firm acquired FMA in 2016 and joined MIIM in 2022. Prior to joining FMA in 2003, Mr. Harmon was a portfolio manager at Allstate Insurance, Allstate Investments LLC. Mr. Harmon is a CFA charterholder and a member of the CFA Institute, the National Association of Securities Professionals, and the Economics Club of Chicago. He is also a member of the CFA Society of Chicago where he was appointed to the board of directors and served as Chairman. Mr. Harmon also serves as a member of the Board of Trustees for Bradley University. He has served as Chairman on the External Investment Committee for the Office of the Illinois State Treasurer. Mr. Harmon earned a B.S. in Finance from Bradley University and an M.B.A. with a concentration in Finance from the Fuqua School of Business at Duke University. Mr. Harmon has over 29 years of industry experience.
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John Nelson, CFA, Managing Director and Portfolio Manager, serves as a portfolio manager for the Small Company Fund. Mr. Nelson joined MFIM when the firm acquired FMA in 2016 and joined MIIM in 2022. Prior to joining FMA in 2014, Mr. Nelson served as an equity Research Analyst and Portfolio Manager at Gofen and Glossberg as well as an equity Research Analyst at William Blair & Company. Mr. Nelson is a CFA® charterholder, member of the CFA Society of Colorado and the CFA Institute, and earned the FSA Credential from the Sustainability Accounting Standards Board. Mr. Nelson earned a B.A. in political science and international affairs from the University of Nebraska and an M.B.A. with dual concentration in Finance and Accounting from the Kelley School of Business at Indiana University. Mr. Nelson has over 20 years of industry experience.
Eric Jacobsohn, CFA, Managing Director and Portfolio Manager, serves as a portfolio manager for the Small Company Fund. Mr. Jacobsohn joined MFIM in 2017 and joined MIIM in 2022. Prior to joining Mesirow, Mr. Jacobsohn was at Calamos Investments where he was responsible for leading the research effort for U.S. cyclicals. Mr. Jacobsohn has also served as a buy-side senior equity Research Analyst at Columbia Wanger Investment Management and held an analyst role at Robert W. Baird & Company. Mr. Jacobsohn is a CFA® charterholder, a member of the CFA Society of Chicago and the CFA Institute and earned the FSA Credential from the Sustainability Accounting Standards Board. Mr. Jacobsohn earned a B.B.A. in Finance and Real Estate from the University of Wisconsin - Madison, and an M.B.A. from the University of Chicago Booth School of Business. Mr. Jacobsohn has over 19 years of industry experience.
Andrew Hadland, CFA, Managing Director and Portfolio Manager, serves as a portfolio manager for the Small Company Fund. Mr. Hadland joined MFIM when the firm acquired FMA in 2016 and joined MIIM in 2022. Prior to joining FMA, Mr. Hadland served as a Senior Equity Analyst at The Northern Trust Company and a Senior Analyst and Co-Portfolio Manager at Conseco Capital Management. Mr. Hadland earned a B.S. in Finance from Miami of Ohio University and an M.B.A. with dual concentration in Finance and Equity Valuation from the Kelley School of Business at Indiana University. Mr. Hadland is a CFA charterholder and member of the CFA Society of Chicago and CFA Institute. Mr. Hadland has over 26 years of industry experience.
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The SAI provides additional information about the portfolio managers’ compensation, other accounts managed, and ownership of Fund shares.
Related Performance Data of
Mesirow Financial
Investment Management, Inc.
High Yield Composite
The following tables give the related performance of actual accounts (each, an “Account”), referred to as “a Composite,” managed by MFIM on a discretionary basis that have investment objectives, policies and strategies substantially similar to those of the Mesirow High Yield Fund. The data illustrates the past performance of MFIM in managing substantially similar accounts. The data does not represent the performance of the Mesirow High Yield Fund. Performance is historical and does not represent the future performance of the Mesirow High Yield Fund or of MFIM.
Robert Sydow, Kevin Buckle, CFA, and James Lisko (the “Portfolio Managers”) are primarily responsible for the day-to-day management of the Mesirow High Yield Fund and the Composite. For periods prior to October 23, 2017, the Composite includes the performance of accounts managed by the Portfolio Managers while employed by firms unaffiliated with MFIM (the “Prior Adviser Comparable Accounts”). The Portfolio Managers exercised final decision-making authority over all material aspects concerning the investment objective, policies, strategies, and security selection decisions of the Prior Adviser Comparable Accounts, and exercise the same level of authority and discretion in managing the Mesirow High Yield Fund and the Composite. No individual other than the Portfolio Managers played a significant part in the performance results of the Prior Adviser Comparable Accounts. While at the prior firms, the Portfolio Managers managed no other accounts with investment objectives, policies and strategies substantially similar to those of the Mesirow High Yield Fund and the Composite.
The manner in which the performance was calculated for the Composite differs from that of registered mutual funds such as the Mesirow High Yield Fund. If the performance was calculated in accordance with SEC standardized performance methodology, the performance results may have been different. MFIM has prepared and presented the Composite performance in compliance with the Global Investment Performance Standards (GIPS®). MFIM’s
67
policies on calculating performance and preparing GIPS® compliant performance presentations are available upon request.
All returns presented were calculated on a total return basis and include all dividends and interest, accrued income, and realized and unrealized gains and losses. Investment transactions are accounted for on a trade date basis. “Net of fees” returns reflect the deduction of investment management fees, as well as the deduction of any brokerage commissions, execution costs, withholding taxes, sales loads and account fees paid by the Accounts included in the Composite, without taking into account federal or state income taxes, while “gross of fees” returns do not reflect the deduction of investment management fees. As of October 1, 2013, “net of fees” returns reflect the actual investment management fees paid by the Accounts included in the Composite. Prior to October 1, 2013, “net of fees” returns were calculated using the highest applicable investment management fee, which was higher than the investment management fee charged to certain Accounts. All fees and expenses, except custodial fees, if any, were included in the calculations.
Because of variation in fee levels, the “net of fees” Composite returns may not be reflective of performance in any one particular Account. Therefore, the performance information shown below is not necessarily representative of the performance information that typically would be shown for a registered mutual fund.
The Mesirow High Yield Fund’s fees and expenses are generally expected to be higher than those of the composite. If the Mesirow High Yield Fund’s fees and expenses had been imposed on the Composite, the performance shown below would have been lower. The Accounts that are included in the Composite are also not subject to the diversification requirements, specific tax restrictions, and investment limitations imposed on the Mesirow High Yield Fund by the federal securities and tax laws. Consequently, the performance results for the Composite could have been adversely affected if the Accounts in the Composite were subject to the same federal securities and tax laws as the Mesirow High Yield Fund.
The investment results for the Composite presented below are not intended to predict or suggest the future returns of the Mesirow High Yield Fund. The performance data shown below should not be considered a substitute for the Mesirow High Yield Fund’s own performance information. Investors should be aware that the use of a methodology different than that used below to calculate performance could result in different performance data.
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THE FOLLOWING DATA DOES NOT REPRESENT THE PERFORMANCE OF THE MESIROW HIGH YIELD FUND.
Performance Information for MFIM’s High Yield Composite1
|
Calendar Year Total Pre-Tax Returns | |||||
|
Year |
Total
Pre- |
Total
Pre- |
Bloomberg
|
Number
of |
Total
Assets |
|
2022 |
(10.76)% |
(10.38)% |
(11.19)% |
3 |
$717 |
|
2021 |
11.67% |
12.12% |
5.28% |
4 |
$1,301 |
|
2020 |
8.55% |
9.00% |
7.11% |
4 |
$1,388 |
|
2019 |
12.58% |
13.02% |
14.32% |
3 |
$1,124 |
|
2018 |
(1.34)% |
(0.99)% |
(2.08)% |
2 |
$859 |
|
2017 |
8.45% |
8.90% |
7.50% |
1 |
$512 |
|
2016 |
14.67% |
15.18% |
17.13% |
7 |
$742 |
|
2015 |
(1.45)% |
(1.02)% |
(4.47)% |
8 |
$617 |
|
2014 |
2.68% |
3.14% |
2.45% |
8 |
$593 |
|
2013 |
8.90% |
9.41% |
7.44% |
7 |
$520 |
|
2012 |
14.00% |
14.63% |
15.81% |
1 |
$40 |
|
2011 |
4.06% |
4.44% |
4.98% |
2 |
$27 |
|
2010 |
16.36% |
16.94% |
15.12% |
1 |
$11 |
|
2009 |
43.63% |
44.33% |
58.21% |
1 |
$10 |
|
2008 |
(18.12)% |
(17.70)% |
(26.16)% |
1 |
$8 |
|
2007 |
7.06% |
7.59% |
1.87% |
1 |
$11 |
|
2006 |
18.03% |
18.61% |
11.85% |
1 |
$14 |
|
2005 |
6.28% |
6.81% |
2.74% |
2 |
$1,536 |
|
2004 |
15.43% |
16.00% |
11.13% |
3 |
$1,522 |
|
2003 |
23.03% |
23.64% |
28.97% |
2 |
$1,265 |
|
2002 |
11.08% |
11.63% |
(1.41)% |
2 |
$888 |
|
2001 |
6.60% |
7.14% |
5.28% |
2 |
$648 |
|
2000 |
(8.88)% |
(8.42)% |
(5.86)% |
2 |
$465 |
|
1999 |
4.38% |
4.81% |
1.49% |
2 |
$507 |
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|
Average Annual Total Pre-Tax Returns (as of 12/31/22) | |||
|
MFIM’s Composite Returns |
|||
|
Time Period |
Net of Fees |
Gross of Fees |
Bloomberg
U.S. |
|
1 Year |
(10.76)% |
(10.38)% |
(11.19)% |
|
5 Years |
3.74% |
4.15% |
2.31% |
|
10 Years |
5.11% |
5.55% |
4.03% |
|
Since Inception3 |
7.60% |
8.10% |
6.03% |
|
1 |
The Composite performance information is calculated in and expressed in United States dollars. Results are based on fully discretionary accounts under management, including any such accounts no longer with the Firm. |
|
Effective May 1, 2010, the Composite has adopted a significant cash flow policy whereby an Account will be temporarily removed from the Composite if it experiences a significant cash flow of 20% or more of the Account’s assets under management. |
|
For periods prior to January 1, 2010, carve-outs reflect the capping of cash to 8% of net asset value on an account which represents the personal holdings of one of the portfolio managers in order to align such cash amount to the level typical of an institutional account. |
|
2 |
The Bloomberg U.S. Corporate High Yield Index is a market-weighted index that measures US dollar-denominated, high-yield and fixed-rate corporate bonds. Securities are classified as high yield if the middle rating of Moody’s, Fitch and S&P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country of risk, based on Bloomberg Barclays’ emerging markets country definition, are excluded. |
|
3 |
Inception date of the Composite is March 1, 1999. |
Purchasing, Selling and Exchanging Fund Shares
This section tells you how to purchase, sell (sometimes called “redeem”) and exchange shares of the Funds.
For information regarding the federal income tax consequences of transactions in shares of the Funds, including information about cost basis reporting, see “Taxes.”
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How to Choose a Share Class
Each Fund offers two classes of shares, Institutional Shares and Investor Shares, to both individual and institutional investors. Each share class has its own investment minimums and cost structure, as summarized below. Contact your financial intermediary or the Funds for more information about each Fund’s share classes and how to choose between them.
|
Fund Name |
Class Name |
Investment
|
Fees |
Enhanced Core Plus Fund |
Institutional Shares |
Initial – $100,000 Subsequent - None |
No Rule 12b-1 Fee
Shareholder Servicing Fee of up to 0.15% |
|
Investor Shares |
Initial – $5,000 Subsequent - None |
0.25% Rule 12b-1 Fee
Shareholder Servicing Fee of up to 0.15% | |
High Yield Fund |
Institutional Shares |
Initial - $1,000,000 Subsequent - None |
No Rule 12b-1 Fee
Shareholder Servicing Fee of up to 0.15% |
|
Investor Shares |
Initial - $5,000 Subsequent - None |
0.25% Rule 12b-1 Fee
Shareholder Servicing Fee of up to 0.15% | |
Small Company Fund |
Institutional Shares |
Initial - $100,000 Subsequent - None |
No Rule 12b-1 Fee
Shareholder Servicing Fee of up to 0.15% |
|
Investor Shares |
Initial - $5,000 Subsequent - None |
0.25% Rule 12b-1 Fee
Shareholder Servicing Fee of up to 0.15% |
Institutional Shares and Investor Shares are offered to investors who purchase shares directly from the Funds or through certain financial intermediaries such as financial planners, investment advisors, broker-dealers or other financial institutions. An investor may be eligible to purchase more than one share class. However, if you purchase shares through a financial intermediary, you may only purchase that class of shares which your financial intermediary sells or services. Your financial intermediary can tell you which class of shares is available through the intermediary.
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The Funds reserve the right to accept investments of smaller amounts in their sole discretion.
How to Purchase Fund Shares
To purchase shares directly from the Funds through their transfer agent, complete and send in the application. If you need an application or have questions, please call 833-MESIROW (833-637-4769).
All investments must be made by check, Automated Clearing House (“ACH”), or wire. All checks must be made payable in U.S. dollars and drawn on U.S. financial institutions. The Funds do not accept purchases made by third-party checks, credit cards, credit card checks, cash, traveler’s checks, money orders or cashier’s checks.
The Funds reserve the right to reject any specific purchase order, including exchange purchases, for any reason. The Funds are not intended for short-term trading by shareholders in response to short-term market fluctuations. For more information about the Funds’ policy on short-term trading, see “Excessive Trading Policies and Procedures.”
The Funds do not generally accept investments by non-U.S. persons. Non-U.S. persons may be permitted to invest in the Funds subject to the satisfaction of enhanced due diligence. Please contact the Funds for more information.
By Mail
You can open an account with the Funds by sending a check and your account application to the address below. You can add to an existing account by sending the Funds a check and, if possible, the “Invest by Mail” stub that accompanies your confirmation statement. Be sure your check identifies clearly your name, your account number, the Fund name and the share class.
Regular Mail Address
Mesirow
Funds
P.O. Box 219009
Kansas City, MO 64121-9009
Express Mail Address
Mesirow
Funds
c/o SS&C Global Investor & Distribution Solutions, Inc.
430
West 7th Street
Kansas City, MO 64105
72
The Funds do not consider the U.S. Postal Service or other independent delivery services to be their agents. Therefore, deposit in the mail or with such services of purchase orders does not constitute receipt by the Funds’ transfer agent. The share price used to fill the purchase order is the next price calculated by a Fund after the Funds’ transfer agent receives and accepts the order in good order at the P.O. Box provided for regular mail delivery or the office address provided for express mail delivery.
By Wire
To open an account by wire, call 833-MESIROW (833-637-4769) for details. To add to an existing account by wire, wire your money using the wiring instructions set forth below (be sure to include the Fund name, the share class and your account number). The share price used to fill the purchase order is the next price calculated by a Fund after the Funds’ transfer agent receives and accepts the wire in good order.
Wiring Instructions
UMB
Bank, N.A.
ABA # 101000695
Mesirow Funds
DDA # 9872013085
Ref: Fund
name/share class/account number/account name
Purchases In-Kind
Subject to the approval of the Funds, an investor may purchase shares of a Fund with liquid securities and other assets that are eligible for purchase by the Fund (consistent with the Fund’s investment policies and restrictions) and that have a value that is readily ascertainable in accordance with the valuation procedures used by the Funds. These transactions will be effected only if a Fund’s Adviser deems the security to be an appropriate investment for the Fund. Assets purchased by a Fund in such transactions will be valued in accordance with the valuation procedures used by the Funds. The Funds reserve the right to amend or terminate this practice at any time.
Minimum Purchases
To purchase Institutional Shares of the High Yield Fund for the first time, you must invest at least $1,000,000. To purchase Institutional Shares of the Enhanced Core Plus Fund or Small Company Fund
73
for the first time, you must invest at least $100,000. To purchase Investor Shares of each Fund for the first time, you must invest at least $5,000. There is no minimum for subsequent investments. The Funds may accept investments of smaller amounts in their sole discretion.
By Systematic Investment Plan (via ACH)
You may not open an account via ACH. However, once you have established a direct account with the Funds, you can set up an automatic investment plan via ACH by mailing a completed application to the Funds. These purchases can be made monthly, quarterly, semi-annually or annually in amounts of at least $1,000 for Institutional Shares and Investor Shares. To cancel or change a plan, contact the Fund by mail at: Mesirow Funds, P.O. Box 219009, Kansas City, MO 64121-9009 (Express Mail Address: Mesirow Funds, c/o SS&C Global Investor & Distribution Solutions, Inc., 430 West 7th Street, Kansas City, MO 64105). Please allow up to 15 days to create the plan and 3 days to cancel or change it.
Fund Codes
The Funds’ reference information, which is listed below, will be helpful to you when you contact the Fund to purchase or exchange shares, check daily NAV, or obtain additional information.
|
Fund Name |
Share Class |
Ticker
|
CUSIP |
Fund
|
Enhanced Core Plus Fund |
Institutional Shares |
MFBIX |
00774Q 817 |
2674 |
|
Investor Shares |
MFBVX |
00774Q 791 |
2675 | |
High Yield Fund |
Institutional Shares |
MFHIX |
00774Q 783 |
2676 |
|
Investor Shares |
MFHVX |
00774Q 775 |
2677 | |
Small Company Fund |
Institutional Shares |
MSVIX |
00774Q 767 |
2672 |
|
Investor Shares |
MSVVX |
00774Q 759 |
2673 |
General Information
You may generally purchase shares on any day that the NYSE is open for business (a “Business Day”). Shares cannot be purchased by Federal Reserve wire on days that either the NYSE or the Federal Reserve is closed.
A Fund’s price per share will be the next determined NAV per share after the Fund or an authorized institution (as defined below) receives
74
and accepts your purchase order in good order. “Good order” means that the Fund was provided with a complete and signed account application, including the investor’s social security number or tax identification number, and other identification required by law or regulation, as well as sufficient purchase proceeds. Purchase orders that are not in good order cannot be accepted and processed even if money to purchase shares has been submitted by wire, check or ACH.
Each Fund calculates its NAV once each Business Day as of the close of normal trading on the NYSE (normally, 4:00 p.m., Eastern Time). To receive the current Business Day’s NAV, a Fund or an authorized institution must receive and accept your purchase order in good order before the close of normal trading on the NYSE. If your purchase order is not received and accepted in good order before the close of normal trading on the NYSE, you will receive the NAV calculated on the subsequent Business Day on which your order is received and accepted in good order. If the NYSE closes early, as in the case of scheduled half-day trading or unscheduled suspensions of trading, the Funds reserve the right to calculate NAV as of the earlier closing time. The Funds will not accept orders that request a particular day or price for the transaction or any other special conditions. Shares will only be priced on Business Days. Since securities that are traded on foreign exchanges may trade on days that are not Business Days, the value of a Fund’s assets may change on days when you are unable to purchase or redeem shares.
Buying or Selling Shares through a Financial Intermediary
In addition to being able to buy and sell Fund shares directly from the Funds through their transfer agent, you may also buy or sell shares of a Fund through accounts with financial intermediaries, such as brokers and other institutions that are authorized to place trades in Fund shares for their customers. When you purchase or sell Fund shares through a financial intermediary (rather than directly from a Fund), you may have to transmit your purchase and sale requests to the financial intermediary at an earlier time for your transaction to become effective that day. This allows the financial intermediary time to process your requests and transmit them to the Fund prior to the time the Fund calculates its NAV that day. Your financial intermediary is responsible for transmitting all purchase and redemption requests, investment information, documentation and money to a Fund on time. If your financial intermediary fails to do so, it may be responsible for any resulting fees or losses. Unless your
75
financial intermediary is an authorized institution, orders transmitted by the financial intermediary and received by a Fund after the time NAV is calculated for a particular day will receive the following day’s NAV.
Certain financial intermediaries, including certain broker-dealers and shareholder organizations, are authorized to act as agent on behalf of the Funds with respect to the receipt of purchase and redemption orders for Fund shares (“authorized institutions”). Authorized institutions are also authorized to designate other intermediaries to receive purchase and redemption orders on a Fund’s behalf. A Fund will be deemed to have received a purchase or redemption order when an authorized institution or, if applicable, an authorized institution’s designee, receives the order. Orders will be priced at a Fund’s next computed NAV after they are received by an authorized institution or an authorized institution’s designee. To determine whether your financial intermediary is an authorized institution or an authorized institution’s designee such that it may act as agent on behalf of a Fund with respect to purchase and redemption orders for Fund shares, you should contact your financial intermediary directly.
If you deal directly with a financial intermediary, you will have to follow its procedures for transacting with a Fund. Your financial intermediary may charge a fee for your purchase and/or redemption transactions. For more information about how to purchase or sell Fund shares through a financial intermediary, you should contact your financial intermediary directly.
How the Funds Calculate NAV
The NAV of a class of a Fund’s shares is determined by dividing the total value of the Fund’s portfolio investments and other assets attributable to the class, less any liabilities attributable to the class, by the total number of shares outstanding of the class.
In calculating NAV, each Fund generally values its investment portfolio at market price. If market prices are not readily available or they are unreliable, such as in the case of a security value that has been materially affected by events occurring after the relevant market closes, securities are valued at fair value. The Board has designated each Fund’s Adviser as the valuation designee to make all fair value determinations with respect to the Fund’s portfolio investments, subject to the Board’s oversight. The Advisers have adopted and implemented policies and procedures to be followed when making fair value determinations for their respective Funds,
76
and each has established a Valuation Committee through which fair value determinations are made. An Adviser’s determination of a security’s fair value price often involves the consideration of a number of subjective factors, and is therefore subject to the unavoidable risk that the value that is assigned to a security may be higher or lower than the security’s value would be if a reliable market quotation for the security was readily available.
With respect to non-U.S. securities held by a Fund, the Advisers may take factors influencing specific markets or issuers into consideration in determining the fair value of a non-U.S. security. International securities markets may be open on days when the U.S. markets are closed. In such cases, the value of any international securities owned by a Fund may be significantly affected on days when investors cannot buy or sell shares. In addition, due to the difference in times between the close of the international markets and the time as of which the Fund prices its shares, the value an Adviser assigns to securities may not be the same as the quoted or published prices of those securities on their primary markets or exchanges. In determining fair value prices, the Advisers may consider the performance of securities on their primary exchanges, foreign currency appreciation/depreciation, securities market movements in the United States, or other relevant information related to the securities.
There may be limited circumstances in which the Advisers would price securities at fair value for stocks of U.S. companies that are traded on U.S. exchanges – for example, if the exchange on which a portfolio security is principally traded closed early or if trading in a particular security was halted during the day and did not resume prior to the time a Fund calculated its NAV.
When valuing fixed income securities with remaining maturities of more than 60 days, a Fund uses the value of the security provided by pricing services. The values provided by a pricing service may be based upon market quotations for the same security, securities expected to trade in a similar manner or a pricing matrix. When valuing fixed income securities with remaining maturities of 60 days or less, the Fund may use the security’s amortized cost. Amortized cost and the use of a pricing matrix in valuing fixed income securities are forms of fair value pricing.
Other assets held by the Funds for which market quotations are not readily available will be valued at their fair value as determined in good faith by the Funds’ respective Advisers, subject to Board oversight.
77
How to Sell Your Fund Shares
If you own your shares directly, you may sell your shares on any Business Day by contacting the Funds directly by mail or telephone at 833-MESIROW (833-637-4769).
If you own your shares through an account with a broker or other institution, contact that broker or institution to sell your shares. Your broker or institution may charge a fee for its services in addition to the fees charged by the Funds.
If you would like to have your redemption proceeds, including proceeds generated as a result of closing your account, sent to a third party or an address other than your own, please notify the Funds in writing.
Certain redemption requests will require a signature guarantee by an eligible guarantor institution. Eligible guarantors include commercial banks, savings and loans, savings banks, trust companies, credit unions, member firms of a national stock exchange, or any other member or participant of an approved signature guarantor program. For example, signature guarantees may be required if your address of record has changed in the last 30 days, if you want the proceeds sent to a bank other than the bank of record on your account, or if you ask that the proceeds be sent to a different person or address. Please note that a notary public is not an acceptable provider of a signature guarantee and that a Fund must be provided with the original guarantee. Signature guarantees are for the protection of Fund shareholders. Before granting a redemption request, the Fund may require a shareholder to furnish additional legal documents to ensure proper authorization.
Accounts held by a corporation, trust, fiduciary or partnership, may require additional documentation along with a signature guaranteed letter of instruction. The Funds participate in the Paperless Legal Program (the “Program”), which eliminates the need for accompanying paper documentation on legal securities transfers. Requests received with a Medallion Signature Guarantee will be reviewed for the proper criteria to meet the guidelines of the Program and may not require additional documentation. Please contact Shareholder Services at 833-MESIROW (833-637-4769) for more information.
The sale price of each share will be the next determined NAV after a Fund (or an authorized institution) receives and accepts your request in good order.
78
By Mail
To redeem shares by mail, please send a letter to the Funds signed by all registered parties on the account specifying:
|
● |
The Fund name; |
|
● |
The share class; |
|
● |
The account number; |
|
● |
The dollar amount or number of shares you wish to redeem; |
|
● |
The account name(s); and |
|
● |
The address to which redemption (sale) proceeds should be sent. |
All registered shareholders must sign the letter in the exact name(s) and must designate any special capacity in which they are registered.
Regular Mail Address
Mesirow
Funds
P.O. Box 219009
Kansas City, MO 64121-9009
Express Mail Address
Mesirow
Funds
c/o SS&C Global Investor & Distribution Solutions, Inc.
430
West 7th Street
Kansas City, MO 64105
The Funds do not consider the U.S. Postal Service or other independent delivery services to be their agents. Therefore, deposit in the mail or with such services of sell orders does not constitute receipt by the Funds’ transfer agent. The share price used to fill the sell order is the next price calculated by a Fund after the Funds’ transfer agent receives and accepts the order in good order at the P.O. Box provided for regular mail delivery or the office address provided for express mail delivery.
By Telephone
To redeem shares by telephone, you must first establish the telephone redemption privilege (and, if desired, the wire and/or ACH redemption privilege) by completing the appropriate sections of the account application. Call 833-MESIROW (833-637-4769) to redeem your shares. Based on your instructions, the Funds will mail your proceeds to you, or send them to your bank via wire or ACH.
79
By Systematic Withdrawal Plan (via ACH)
If you have a direct account with the Funds, you may transfer as little as $1,000 per month for Institutional Shares and Investor Shares from your account to another financial institution through a Systematic Withdrawal Plan (via ACH). The minimum balance requirements may be modified by a Fund in its sole discretion. To participate in this service, you must complete the appropriate sections of the account application and mail it to the Funds.
Receiving Your Money
Normally, a Fund will send your sale proceeds within one Business Day after it receives your redemption request. A Fund, however, may take up to seven days to pay redemption proceeds. Your proceeds can be wired to your bank account (may be subject to a $10 fee), sent to you by check or sent via ACH to your bank account if you have established banking instructions with a Fund. If you are selling shares that were recently purchased by check or through ACH, redemption proceeds may not be available until your check has cleared or the ACH transaction has been completed (which may take up to 15 days from your date of purchase).
A Fund typically expects to sell portfolio assets and/or hold cash or cash equivalents to meet redemption requests. On a less regular basis, a Fund may also meet redemption requests by using short-term borrowings from its custodian and/or redeeming shares in-kind (as described below). These methods may be used during both normal and stressed market conditions.
Redemptions In-Kind
The Funds generally pay sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise and for the protection of the Funds’ remaining shareholders, the Funds might pay all or part of your redemption proceeds in securities with a market value equal to the redemption price (redemption in-kind). It is highly unlikely that your shares would ever be redeemed in-kind, but if they were, you would have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. In addition, you would continue to be subject to the risks of any market fluctuation in the value of the securities you receive in-kind until they are sold.
80
Involuntary Redemptions of Your Shares
If your account balance drops below $100,000 for Institutional Shares or $2,500 for Investor Shares of a Fund, you may be required to sell your shares. The Funds generally will provide you at least 30 days’ written notice to give you time to add to your account and avoid the involuntary redemption of your shares. Each Fund reserves the right to waive the minimum account value requirement in its sole discretion. If your shares are redeemed for this reason within 90 days of their purchase, the redemption fee will not be applied.
Suspension of Your Right to Sell Your Shares
The Funds may suspend your right to sell your shares or delay payment of redemption proceeds for more than seven days during times when the NYSE is closed, other than during customary weekends or holidays, or as otherwise permitted by the U.S. Securities and Exchange Commission (the “SEC”). More information about this is in the SAI.
How to Exchange Your Fund Shares
At no charge, you may exchange Institutional Shares or Investor Shares of any Fund for Institutional Shares or Investor Shares, respectively, of another Fund by writing to or calling the Funds. Exchanges are subject to the minimum investment requirements and the fees and expenses of the Fund you exchange into. (The Funds may accept investments of smaller amounts in their sole discretion). You may only exchange shares between accounts with identical registrations (i.e., the same names and addresses).
The exchange privilege is not intended as a vehicle for short-term or excessive trading. A Fund may suspend or terminate your exchange privilege if you engage in a pattern of exchanges that is excessive, as determined in the sole discretion of the Fund. For more information about the Funds’ policy on excessive trading, see “Excessive Trading Policies and Procedures.”
Telephone Transactions
Purchasing, selling and exchanging Fund shares over the telephone is extremely convenient, but not without risk. Although the Funds have certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Funds are not responsible for any losses or costs incurred by following telephone instructions they reasonably believe to be genuine. If you or your financial institution transact with the Funds over the telephone, you will generally bear the risk of any loss.
81
Payments to Financial Intermediaries
The Funds and/or the Advisers may compensate financial intermediaries for providing a variety of services to the Funds and/or their shareholders. Financial intermediaries include affiliated or unaffiliated brokers, dealers, banks (including bank trust departments), trust companies, registered investment advisers, financial planners, retirement plan administrators, insurance companies, and any other institution having a service, administration, or any similar arrangement with the Funds, their service providers or their respective affiliates. This section briefly describes how financial intermediaries may be paid for providing these services. For more information please see “Payments to Financial Intermediaries” in the SAI.
Distribution Plan
The Funds have adopted a distribution plan under Rule 12b-1 of the Investment Company Act of 1940, as amended, for Investor Shares that allows the Funds to pay distribution and/or service fees for the sale and distribution of Fund shares, and for services provided to shareholders. Because these fees are paid out of a Fund’s assets on an on-going basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. The maximum annual Rule 12b-1 fee for Investor Shares of a Fund is 0.25%.
Shareholder Servicing Plan
The Funds have adopted a shareholder servicing plan that provides that the Funds may pay financial intermediaries for shareholder services in an annual amount not to exceed 0.15% based on the average daily net assets of the Funds’ Institutional Shares and Investor Shares. The services for which financial intermediaries are compensated may include record-keeping, transaction processing for shareholders’ accounts and other shareholder services.
Payments by the Advisers
From time to time, the Advisers and/or their affiliates, in their discretion, may make payments to certain affiliated or unaffiliated financial intermediaries to compensate them for the costs associated with distribution, marketing, administration and shareholder servicing support for the Funds. These payments are sometimes characterized as “revenue sharing” payments and are made out of the Advisers’ and/or its affiliates’ own legitimate profits or other resources, and
82
may be in addition to any payments made to financial intermediaries by the Funds. A financial intermediary may provide these services with respect to Fund shares sold or held through programs such as retirement plans, qualified tuition programs, fund supermarkets, fee-based advisory or wrap fee programs, bank trust programs, and insurance (e.g., individual or group annuity) programs. In addition, financial intermediaries may receive payments for making shares of the Funds available to their customers or registered representatives, including providing the Funds with “shelf space,” placing them on a preferred or recommended fund list, or promoting the Funds in certain sales programs that are sponsored by financial intermediaries. To the extent permitted by SEC and Financial Industry Regulatory Authority (“FINRA”) rules and other applicable laws and regulations, the Advisers and/or their affiliates may pay or allow other promotional incentives or payments to financial intermediaries.
The level of payments made by the Advisers and/or their affiliates to individual financial intermediaries varies in any given year and may be negotiated on the basis of sales of Fund shares, the amount of Fund assets serviced by the financial intermediary or the quality of the financial intermediary’s relationship with the Advisers and/or their affiliates. These payments may be more or less than the payments received by the financial intermediaries from other mutual funds and may influence a financial intermediary to favor the sales of certain funds or share classes over others. In certain instances, the payments could be significant and may cause a conflict of interest for your financial intermediary. Any such payments will not change the NAV or price of a Fund’s shares. Please contact your financial intermediary for information about any payments it may receive in connection with the sale of Fund shares or the provision of services to Fund shareholders.
In addition to these payments, your financial intermediary may charge you account fees, commissions or transaction fees for buying or redeeming shares of the Funds, or other fees for servicing your account. Your financial intermediary should provide a schedule of its fees and services to you upon request.
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Other Policies
Excessive Trading Policies and Procedures
The Funds are intended for long-term investment purposes only and discourage shareholders from engaging in “market timing” or other types of excessive short-term trading. This frequent trading into and out of a Fund may present risks to the Fund’s long-term shareholders and could adversely affect shareholder returns. The risks posed by frequent trading include interfering with the efficient implementation of a Fund’s investment strategies, triggering the recognition of taxable gains and losses on the sale of Fund investments, requiring the Fund to maintain higher cash balances to meet redemption requests, and experiencing increased transaction costs.
In addition, because certain of the Funds may invest in foreign securities traded primarily on markets that close prior to the time a Fund determines its NAV, the risks posed by frequent trading may have a greater potential to dilute the value of Fund shares held by long-term shareholders than funds investing exclusively in U.S. securities. In instances where a significant event that affects the value of one or more foreign securities held by a Fund takes place after the close of the primary foreign market, but before the time that the Fund determines its NAV, certain investors may seek to take advantage of the fact that there will be a delay in the adjustment of the market price for a security caused by this event until the foreign market reopens (sometimes referred to as “price” or “time zone” arbitrage). Shareholders who attempt this type of arbitrage may dilute the value of a Fund’s shares if the prices of the Fund’s foreign securities do not reflect their fair value. Although the Advisers have procedures designed to determine the fair value of foreign securities for purposes of calculating the applicable Funds’ NAV when such an event has occurred, fair value pricing, because it involves judgments which are inherently subjective, may not always eliminate the risk of price arbitrage.
In addition, because certain of the Funds may invest in small-cap securities, which often trade in lower volumes and may be less liquid, the Funds may be more susceptible to the risks posed by frequent trading because frequent transactions in the Funds’ shares may have a greater impact on the market prices of these types of securities.
The Funds’ service providers will take steps reasonably designed to detect and deter frequent trading by shareholders pursuant to the
84
Funds’ policies and procedures described in this prospectus and approved by the Board. For purposes of applying these policies, the Funds’ service providers may consider the trading history of accounts under common ownership or control. The Funds’ policies and procedures include:
|
● |
Shareholders are restricted from making more than 4 “round trips,” including exchanges, into or out of a Fund over any rolling 12 month period. If a shareholder exceeds this amount, the Fund and/or its service providers may, at their discretion, reject any additional purchase or exchange orders. The Funds define a “round trip” as a purchase or exchange into a Fund by a shareholder, followed by a subsequent redemption out of the Fund, of an amount the Advisers reasonably believe would be harmful or disruptive to the Fund(s) they manage. |
|
● |
A redemption fee of 1.00% of the value of shares sold will be imposed on Fund shares redeemed within 90 days or less after their date of purchase (subject to certain exceptions as discussed below in “Redemption Fee”). |
|
● |
Each Fund reserves the right to reject any purchase or exchange request by any investor or group of investors for any reason without prior notice, including, in particular, if the Fund or the Advisers reasonably believe that the trading activity would be harmful or disruptive to the Fund(s) they manage. |
The Funds and/or their service providers seek to apply these policies to the best of their abilities uniformly and in a manner they believe is consistent with the interests of the Funds’ long-term shareholders. The Funds do not knowingly accommodate frequent purchases and redemptions by Fund shareholders. Although these policies are designed to deter frequent trading, none of these measures alone nor all of them taken together eliminate the possibility that frequent trading in a Fund will occur. Systematic purchases and redemptions are exempt from these policies.
Financial intermediaries (such as investment advisers and broker-dealers) often establish omnibus accounts in the Funds for their customers through which transactions are placed. The Funds have entered into “information sharing agreements” with these financial intermediaries, which permit the Funds to obtain, upon request, information about the trading activity of the intermediary’s customers that invest in the Funds. If the Funds or their service providers identify omnibus account level trading patterns that have the potential to be detrimental to the Funds, the Funds or their
85
service providers may, in their sole discretion, request from the financial intermediary information concerning the trading activity of its customers. Based upon a review of that information, if the Funds or their service providers determine that the trading activity of any customer may be detrimental to the Funds, they may, in their sole discretion, request the financial intermediary to restrict or limit further trading in the Funds by that customer. If the Funds are not satisfied that the intermediary has taken appropriate action, the Funds may terminate the intermediary’s ability to transact in Fund shares. When information regarding transactions in the Funds’ shares is requested by the Funds and such information is in the possession of a person that is itself a financial intermediary to a financial intermediary (an “indirect intermediary”), any financial intermediary with whom the Funds have an information sharing agreement is obligated to obtain transaction information from the indirect intermediary or, if directed by the Funds, to restrict or prohibit the indirect intermediary from purchasing shares of the Funds on behalf of other persons.
The Funds and their service providers will use reasonable efforts to work with financial intermediaries to identify excessive short-term trading in omnibus accounts that may be detrimental to the Funds. However, there can be no assurance that the monitoring of omnibus account level trading will enable the Funds to identify or prevent all such trading by a financial intermediary’s customers. Please contact your financial intermediary for more information.
Redemption Fee
In an effort to discourage short-term trading and defray costs incurred by shareholders as a result of short-term trading, each Fund charges a 1.00% redemption fee on redemptions (including exchanges) of shares that have been held for less than 90 days. The redemption fee is deducted from a Fund’s sale proceeds and cannot be paid separately, and any proceeds of the fee are credited to the assets of the Fund from which the redemption was made. The fee does not apply to shares purchased with reinvested dividends or distributions. In determining how long shares of a Fund have been held, the Fund assumes that shares held by the investor the longest period of time will be sold first.
The redemption fee is applicable to Fund shares purchased either directly from a Fund or through a financial intermediary, such as a broker-dealer. Transactions through financial intermediaries typically are placed with the Fund on an omnibus basis and include both purchase and sale transactions placed on behalf of multiple
86
investors. The Funds request that financial intermediaries assess the redemption fee on customer accounts and collect and remit the proceeds to the Funds. However, the Funds recognize that due to operational and systems limitations, intermediaries’ methods for tracking and calculating the fee may be inadequate or differ in some respects from the Funds’. Therefore, to the extent that financial intermediaries are unable to collect the redemption fee, a Fund may not be able to defray the expenses associated with those short-term trades made by that financial intermediary’s customers.
Each Fund reserves the right to waive its redemption fee at its discretion when it believes such waiver is in the best interests of the Fund, including with respect to certain categories of redemptions that the Fund reasonably believes may not raise frequent trading or market timing concerns. These categories currently include, but are not limited to, the following: (i) participants in certain group retirement plans whose processing systems are incapable of properly applying the redemption fee to underlying shareholders; (ii) redemptions resulting from certain transfers upon the death of a shareholder; (iii) redemptions by certain pension plans as required by law or by regulatory authorities; (iv) systematic withdrawals; and (v) retirement loans and withdrawals.
Customer Identification and Verification
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.
What this means to you: When you open an account, a Fund will ask your name, address, date of birth, and other information that will allow the Fund to identify you. This information is subject to verification to ensure the identity of all persons opening a mutual fund account.
The Funds are required by law to reject your new account application if the required identifying information is not provided.
In certain instances, the Funds are required to collect documents to fulfill their legal obligation. Documents provided in connection with your application will be used solely to establish and verify your identity.
Attempts to collect the missing information required on the application will be performed by either contacting you or, if applicable, your
87
broker or financial intermediary. If this information cannot be obtained within a reasonable timeframe established in the sole discretion of the Funds, your application will be rejected.
Subject to each Fund’s right to reject purchases as described in this prospectus, upon receipt of your application in good order (or upon receipt of all identifying information required on the application), your investment will be accepted and your order will be processed at the next-determined NAV per share.
The Funds reserve the right to close or liquidate your account at the next-determined NAV and remit proceeds to you via check if they are unable to verify your identity. Attempts to verify your identity will be performed within a reasonable timeframe established in the sole discretion of the Funds. Further, the Funds reserve the right to hold your proceeds until your original check clears the bank, which may take up to 15 days from the date of purchase. In such an instance, you may be subject to a gain or loss on Fund shares and will be subject to corresponding tax implications.
Anti-Money Laundering Program
Customer identification and verification is part of the Funds’ overall obligation to deter money laundering under federal law. The Funds have adopted an anti-money laundering compliance program designed to prevent the Funds from being used for money laundering or the financing of illegal activities. In this regard, the Funds reserve the right to: (i) refuse, cancel or rescind any purchase or exchange order; (ii) freeze any account and/or suspend account services; or (iii) involuntarily close your account in cases of threatening conduct or suspected fraudulent or illegal activity. These actions will be taken when, in the sole discretion of Fund management, they are deemed to be in the best interest of a Fund or in cases when a Fund is requested or compelled to do so by governmental or law enforcement authority. If your account is closed at the request of governmental or law enforcement authority, you may not receive proceeds of the redemption if the Fund is required to withhold such proceeds.
Unclaimed Property
Each state has unclaimed property rules that generally provide for escheatment (or transfer) to the state of unclaimed property under various circumstances. Such circumstances include inactivity (e.g., no owner-initiated contact for a certain period), returned mail (e.g., when mail sent to a shareholder is returned by the post office, or
88
“RPO,” as undeliverable), or a combination of both inactivity and returned mail. Once it flags property as unclaimed, the applicable Fund will attempt to contact the shareholder, but if that attempt is unsuccessful, the account may be considered abandoned and escheated to the state.
Shareholders that reside in the state of Texas may designate a representative to receive escheatment notifications by completing and submitting a designation form that can be found on the website of the Texas Comptroller. While the designated representative does not have any rights to claim or access the shareholder’s account or assets, the escheatment period will cease if the representative communicates knowledge of the shareholder’s location and confirms that the shareholder has not abandoned his or her property. A completed designation form may be mailed to the Funds (if shares are held directly with the Funds) or to the shareholder’s financial intermediary (if shares are not held directly with the Funds).
More information on unclaimed property and how to maintain an active account is available through your state or by calling 833-MESIROW (833-637-4769).
Dividends and Distributions
The Enhanced Core Plus Fund distributes its net investment income quarterly and makes distributions of its net realized capital gains, if any, at least annually. The High Yield Fund distributes its net investment income monthly and makes distributions of its net realized capital gains, if any, at least annually. The Small Company Fund distributes its net investment income, and makes distributions of its net realized capital gains, if any, at least annually. If you own Fund shares on a Fund’s record date, you will be entitled to receive the distribution.
You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify a Fund in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Fund receives your written notice. To cancel your election, simply send the Fund written notice.
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Taxes
Please consult your tax advisor regarding your specific questions about U.S. federal, state and local income taxes. Below is a summary of certain important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. This summary does not apply to shares held in an IRA or other tax-qualified plans, which are generally not subject to current tax. Transactions relating to shares held in such accounts may, however, be taxable at some time in the future.
Each Fund has elected and intends to qualify each year for treatment as a RIC under the Code. If it meets certain minimum distribution requirements, a RIC is not subject to tax at the fund level on income and gains from investments that are timely distributed to shareholders. However, a Fund’s failure to qualify as a RIC or to meet minimum distribution requirements would result (if certain relief provisions were not available) in fund-level taxation and, consequently, a reduction in income available for distribution to shareholders.
Each Fund intends to distribute substantially all of its net investment income and net realized capital gains, if any. The dividends and distributions you receive may be subject to federal, state, and local taxation, depending upon your tax situation. Distributions you receive from each Fund may be taxable whether or not you reinvest them. Income distributions, other than distributions of qualified dividend income, and distributions of short-term capital gains are generally taxable at ordinary income tax rates. Distributions reported by the Funds as long-term capital gains and as qualified dividend income are generally taxable at the rates applicable to long-term capital gains currently set at a maximum tax rate for individuals at 20% (lower rates apply to individuals in lower tax brackets). A Fund’s investment strategies may limit its ability to make distributions eligible for treatment as qualified dividend income. Once a year the Funds (or their administrative agent) will send you a statement showing the types and total amount of distributions you received during the previous year.
A RIC that receives business interest income may pass through its net business interest income for purposes of the tax rules applicable to the interest expense limitations under Section 163(j) of the Code. A RIC’s total “Section 163(j) Interest Dividend” for a tax year is limited to the excess of the RIC’s business interest income over the sum of its business interest expense and its other deductions
90
properly allocable to its business interest income. A RIC may, in its discretion, designate all or a portion of ordinary dividends as Section 163(j) Interest Dividends, which would allow the recipient shareholder to treat the designated portion of such dividends as interest income for purposes of determining such shareholder’s interest expense deduction limitation under Section 163(j). This can potentially increase the amount of a shareholder’s interest expense deductible under Section 163(j). In general, to be eligible to treat a Section 163(j) Interest Dividend as interest income, you must have held your shares in a Fund for more than 180 days during the 361-day period beginning on the date that is 180 days before the date on which the share becomes ex-dividend with respect to such dividend. Section 163(j) Interest Dividends, if so designated by a Fund, will be reported to your financial intermediary or otherwise in accordance with the requirements specified by the Internal Revenue Service (“IRS”).
You should note that if you purchase shares just before a distribution, the purchase price would reflect the amount of the upcoming distribution. In this case, you would be taxed on the entire amount of the distribution received, even though, as an economic matter, the distribution simply constitutes a return of your investment. This is known as “buying a dividend” and generally should be avoided by taxable investors.
Each sale of Fund shares may be a taxable event. For tax purposes, an exchange of your Fund shares for shares of a different fund is the same as a sale. Assuming a shareholder holds Fund shares as a capital asset, the gain or loss on the sale of Fund shares generally will be treated as a short-term capital gain or loss if you held the shares for 12 months or less or as long-term capital gain or loss if you held the shares for longer. Any loss realized upon a taxable disposition of Fund shares held for six months or less will be treated as long-term, rather than short-term, to the extent of any long-term capital gain distributions received (or deemed received) by you with respect to Fund shares. All or a portion of any loss realized upon a taxable disposition of Fund shares will be disallowed if you purchase other substantially identical shares within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss.
U.S. individuals with income exceeding $200,000 ($250,000 if married and filing jointly) are subject to a 3.8% tax on their “net investment income,” including interest, dividends, and capital gains
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(including capital gains realized on the sale or exchange of shares of a Fund).
The Funds (or their administrative agent) must report to the IRS and furnish to Fund shareholders cost basis information for Fund shares. In addition to reporting the gross proceeds from the sale of Fund shares, the Funds (or their administrative agent) are also required to report the cost basis information for such shares and indicate whether these shares had a short-term or long-term holding period. For each sale of Fund shares, the Funds will permit shareholders to elect from among several IRS-accepted cost basis methods, including the average cost basis method. In the absence of an election, the Funds will use a default cost basis method. The cost basis method elected by the Fund shareholder (or the cost basis method applied by default) for each sale of Fund shares may not be changed after the settlement date of each such sale of Fund shares. Fund shareholders should consult their tax advisors to determine the best IRS-accepted cost basis method for their tax situation and to obtain more information about how cost basis reporting applies to them. Shareholders also should carefully review the cost basis information provided to them and make any additional basis, holding period or other adjustments that are required when reporting these amounts on their federal income tax returns.
To the extent a Fund invests in foreign securities, it may be subject to foreign withholding taxes with respect to dividends or interest the Fund receives from sources in foreign countries. If more than 50% of the total assets of a Fund consists of foreign securities, such Fund will be eligible to elect to treat some of those taxes as a distribution to shareholders, which would allow shareholders to offset some of their U.S. federal income tax. A Fund (or its administrative agent) will notify you if it makes such an election and provide you with the information necessary to reflect foreign taxes paid on your income tax return.
Because each shareholder’s tax situation is different, you should consult your tax advisor about the tax implications of an investment in the Funds.
More information about taxes is in the SAI.
Additional Information
The Trust enters into contractual arrangements with various parties, including, among others, the Funds’ investment advisers, custodian,
92
transfer agent, accountants, administrator and distributor, who provide services to the Funds. Shareholders are not parties to, or intended (or “third-party”) beneficiaries of, any of those contractual arrangements, and those contractual arrangements are not intended to create in any individual shareholder or group of shareholders any right to enforce the terms of the contractual arrangements against the service providers or to seek any remedy under the contractual arrangements against the service providers, either directly or on behalf of the Trust.
This prospectus and the SAI provide information concerning the Trust and the Funds that you should consider in determining whether to purchase shares of the Funds. The Funds may make changes to this information from time to time. Neither this prospectus, the SAI or any document filed as an exhibit to the Trust’s registration statement, is intended to, nor does it, give rise to an agreement or contract between the Trust or the Funds and any shareholder, or give rise to any contract or other rights in any individual shareholder, group of shareholders or other person other than any rights conferred explicitly by federal or state securities laws that may not be waived.
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Financial Highlights
The tables that follow present performance information about Institutional Shares and Investor Shares of the Funds. This information is intended to help you understand the Funds’ financial performance for the period of the Funds’ operations. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in a Fund (assuming reinvestment of dividends and distributions). The information provided below has been audited by PricewaterhouseCoopers LLP, independent registered public accounting firm of the Funds. The financial statements and the unqualified opinion of PricewaterhouseCoopers LLP are included in the 2023 annual report of the Funds, which is available upon request by calling the Funds at 833-MESIROW (833-637-4769).
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Mesirow Enhanced Core Plus Fund
|
Selected
Per Share Data & Ratios | ||||||||||||||||
|
Institutional Shares |
Year
Ended |
Year
Ended |
Year
Ended |
Year
Ended |
||||||||||||
|
Net Asset Value, Beginning of Year |
$ | 8.49 | $ | 10.33 | $ | 10.30 | $ | 10.00 | ||||||||
|
Income (Loss) from Operations: |
||||||||||||||||
|
Net Investment Income(1) |
0.35 | 0.25 | 0.24 | 0.25 | ||||||||||||
|
Net Realized and Unrealized Gain (Loss) |
(0.03 | ) | (1.78 | ) | 0.01 | 0.28 | ||||||||||
|
Total from Operations |
0.32 | (1.53 | ) | 0.25 | 0.53 | |||||||||||
|
Dividends and Distributions: |
||||||||||||||||
|
Net Investment Income |
(0.35 | ) | (0.25 | ) | (0.22 | ) | (0.23 | ) | ||||||||
|
Net Realized Gain |
— | (0.06 | ) | — | — | ^ | ||||||||||
|
Total Dividends and Distributions |
(0.35 | ) | (0.31 | ) | (0.22 | ) | (0.23 | ) | ||||||||
|
Net Asset Value, End of Year |
$ | 8.46 | $ | 8.49 | $ | 10.33 | $ | 10.30 | ||||||||
|
Total Return† |
3.75 | % | (15.03 | )% | 2.41 | % | 5.38 | % | ||||||||
|
Ratios and Supplemental Data |
||||||||||||||||
|
Net Assets, End of Year (Thousands) |
$ | 16,337 | $ | 15,485 | $ | 22,917 | $ | 16,219 | ||||||||
|
Ratio of Expenses to Average Net Assets |
0.54 | % | 0.54 | % | 0.54 | % | 0.54 | % | ||||||||
|
Ratio of Expenses to Average Net Assets (Excluding Waivers, Reimbursements and Fees Paid Indirectly) |
2.34 | % | 1.83 | % | 1.88 | % | 2.87 | % | ||||||||
|
Ratio of Net Investment Income to Average Net Assets |
4.02 | % | 2.61 | % | 2.28 | % | 2.53 | % | ||||||||
|
Portfolio Turnover Rate |
161 | % | 71 | % | 72 | % | 116 | % | ||||||||
|
* |
Commenced operations on October 1, 2019. |
|
^ |
Amount represents less than $0.005 per share. |
|
† |
Return is for the period indicated and has not been annualized. Total return would have been lower had certain expenses not been waived and assumed by the Adviser during the period. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. |
|
(1) |
Per share calculations were performed using average shares for the period. |
Amounts designated as “—” are $0 or have been rounded to $0.
95
Mesirow Enhanced Core Plus Fund
|
Selected
Per Share Data & Ratios | ||||||||||||||||
|
Investor Shares |
Year
Ended |
Year
Ended |
Year
Ended |
Year
Ended |
||||||||||||
|
Net Asset Value, Beginning of Year |
$ | 8.49 | $ | 10.33 | $ | 10.29 | $ | 10.00 | ||||||||
|
Income (Loss) from Operations: |
||||||||||||||||
|
Net Investment Income(1) |
0.34 | 0.23 | 0.21 | 0.22 | ||||||||||||
|
Net Realized and Unrealized Gain (Loss) |
(0.05 | ) | (1.79 | ) | 0.02 | 0.28 | ||||||||||
|
Total from Operations |
0.29 | (1.56 | ) | 0.23 | 0.50 | |||||||||||
|
Dividends and Distributions: |
||||||||||||||||
|
Net Investment Income |
(0.33 | ) | (0.22 | ) | (0.19 | ) | (0.21 | ) | ||||||||
|
Net Realized Gain |
— | (0.06 | ) | — | — | ^ | ||||||||||
|
Total Dividends and Distributions |
(0.33 | ) | (0.28 | ) | (0.19 | ) | (0.21 | ) | ||||||||
|
Net Asset Value, End of Year |
$ | 8.45 | $ | 8.49 | $ | 10.33 | $ | 10.29 | ||||||||
|
Total Return† |
3.41 | % | (15.25 | )% | 2.28 | % | 5.08 | % | ||||||||
|
Ratios and Supplemental Data |
||||||||||||||||
|
Net Assets, End of Year (Thousands) |
$ | 668 | $ | 189 | $ | 218 | $ | 67 | ||||||||
|
Ratio of Expenses to Average Net Assets |
0.79 | % | 0.79 | % | 0.79 | % | 0.79 | % | ||||||||
|
Ratio of Expenses to Average Net Assets (Excluding Waivers, Reimbursements and Fees Paid Indirectly) |
2.66 | % | 2.10 | % | 2.12 | % | 3.19 | % | ||||||||
|
Ratio of Net Investment Income to Average Net Assets |
3.89 | % | 2.38 | % | 2.05 | % | 2.20 | % | ||||||||
|
Portfolio Turnover Rate |
161 | % | 71 | % | 72 | % | 116 | % | ||||||||
|
* |
Commenced operations on October 1, 2019. |
|
^ |
Amount represents less than $0.005 per share. |
|
† |
Return is for the period indicated and has not been annualized. Total return would have been lower had certain expenses not been waived and assumed by the Adviser during the period. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. |
|
(1) |
Per share calculations were performed using average shares for the period. |
Amounts designated as “—” are $0 or have been rounded to $0.
96
Mesirow High Yield Fund
|
Selected
Per Share Data & Ratios | ||||||||||||||||||||
|
Institutional Shares |
Year
Ended |
Year
Ended |
Year
Ended |
Year
Ended |
Period
|
|||||||||||||||
|
Net Asset Value, Beginning of Year/Period |
$ | 8.32 | $ | 10.33 | $ | 9.32 | $ | 10.18 | $ | 10.00 | ||||||||||
|
Income (Loss) from Operations: |
||||||||||||||||||||
|
Net Investment Income(1) |
0.77 | 0.76 | 0.74 | 0.66 | 0.57 | |||||||||||||||
|
Net Realized and Unrealized Gain (Loss) |
0.04 | (1.86 | ) | 1.00 | (0.64 | ) | 0.17 | |||||||||||||
|
Total from Operations |
0.81 | (1.10 | ) | 1.74 | 0.02 | 0.74 | ||||||||||||||
|
Redemption Fees |
— | ^ | 0.01 | — | — | — | ||||||||||||||
|
Dividends and Distributions: |
||||||||||||||||||||
|
Net Investment Income |
(0.81 | ) | (0.72 | ) | (0.70 | ) | (0.70 | ) | (0.56 | ) | ||||||||||
|
Net Realized Gain |
— | (0.20 | ) | (0.03 | ) | (0.18 | ) | — | ||||||||||||
|
Total Dividends and Distributions |
(0.81 | ) | (0.92 | ) | (0.73 | ) | (0.88 | ) | (0.56 | ) | ||||||||||
|
Return of Capital |
— | — | ^ | — | — | — | ||||||||||||||
|
Net Asset Value, End of Year/Period |
$ | 8.32 | $ | 8.32 | $ | 10.33 | $ | 9.32 | $ | 10.18 | ||||||||||
|
Total Return† |
10.17 | % | (11.33 | )% | 19.19 | % | 0.55 | % | 7.53 | % | ||||||||||
|
Ratios and Supplemental Data |
||||||||||||||||||||
|
Net Assets, End of Year/Period (Thousands) |
$ | 64,498 | $ | 45,077 | $ | 66,855 | $ | 46,918 | $ | 27,030 | ||||||||||
|
Ratio of Expenses to Average Net Assets |
0.75 | % | 0.75 | % | 0.75 | % | 0.75 | % | 0.75 | %** | ||||||||||
|
Ratio of Expenses to Average Net Assets (Excluding Waivers, Reimbursements and Fees Paid Indirectly) |
1.40 | % | 1.21 | % | 1.20 | % | 1.59 | % | 2.08 | %** | ||||||||||
|
Ratio of Net Investment Income to Average Net Assets |
9.19 | % | 7.91 | % | 7.29 | % | 7.04 | % | 6.77 | %** | ||||||||||
|
Portfolio Turnover Rate |
62 | % | 74 | % | 71 | % | 90 | % | 58 | %*** | ||||||||||
|
* |
Commenced operations on December 3, 2018. |
|
** |
Annualized. |
|
*** |
Not Annualized. |
|
† |
Return is for the period indicated and has not been annualized. Total return would have been lower had certain expenses not been waived and assumed by the Adviser during |
97
the period. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
|
^ |
Amount represents less than $0.005 per share. |
|
(1) |
Per share calculations were performed using average shares for the period. |
Amounts designated as “—” are $0 or have been rounded to $0.
98
Mesirow High Yield Fund
|
Selected
Per Share Data & Ratios | ||||||||||||||||||||
|
Investor Shares |
Year
Ended |
Year
Ended |
Year
Ended |
Year
Ended |
Period
|
|||||||||||||||
|
Net Asset Value, Beginning of Year/Period |
$ | 8.31 | $ | 10.32 | $ | 9.31 | $ | 10.19 | $ | 10.00 | ||||||||||
|
Income (Loss) from Operations: |
||||||||||||||||||||
|
Net Investment Income(1) |
0.75 | 0.74 | 0.70 | 0.63 | 0.59 | |||||||||||||||
|
Net Realized and Unrealized Gain (Loss) |
0.04 | (1.86 | ) | 1.02 | (0.65 | ) | 0.14 | |||||||||||||
|
Total from Operations |
0.79 | (1.12 | ) | 1.72 | (0.02 | ) | 0.73 | |||||||||||||
|
Redemption Fees |
— | ^ | 0.01 | — | — | — | ||||||||||||||
|
Dividends and Distributions: |
||||||||||||||||||||
|
Net Investment Income |
(0.79 | ) | (0.70 | ) | (0.68 | ) | (0.68 | ) | (0.54 | ) | ||||||||||
|
Net Realized Gain |
— | (0.20 | ) | (0.03 | ) | (0.18 | ) | — | ||||||||||||
|
Total Dividends and Distributions |
(0.79 | ) | (0.90 | ) | (0.71 | ) | (0.86 | ) | (0.54 | ) | ||||||||||
|
Return of Capital |
— | — | ^ | — | — | — | ||||||||||||||
|
Net Asset Value, End of Year/Period |
$ | 8.31 | $ | 8.31 | $ | 10.32 | $ | 9.31 | $ | 10.19 | ||||||||||
|
Total Return† |
9.92 | % | (11.56 | )% | 18.94 | % | 0.11 | % | 7.51 | % | ||||||||||
|
Ratios and Supplemental Data |
||||||||||||||||||||
|
Net Assets, End of Year/Period (Thousands) |
$ | 12,443 | $ | 7,198 | $ | 5,740 | $ | 713 | $ | 41 | ||||||||||
|
Ratio of Expenses to Average Net Assets |
1.00 | % | 1.00 | % | 1.00 | % | 0.99 | % | 1.00 | %** | ||||||||||
|
Ratio of Expenses to Average Net Assets (Excluding Waivers, Reimbursements and Fees Paid Indirectly) |
1.66 | % | 1.50 | % | 1.43 | % | 1.77 | % | 2.38 | %** | ||||||||||
|
Ratio of Net Investment Income to Average Net Assets |
9.00 | % | 7.89 | % | 6.86 | % | 6.99 | % | 6.94 | %** | ||||||||||
|
Portfolio Turnover Rate |
62 | % | 74 | % | 71 | % | 90 | % | 58 | %*** | ||||||||||
|
* |
Commenced operations on December 3, 2018. |
|
** |
Annualized. |
|
*** |
Not Annualized. |
99
|
† |
Return is for the period indicated and has not been annualized. Total return would have been lower had certain expenses not been waived and assumed by the Adviser during the period. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. |
|
^ |
Amount represents less than $0.005 per share. |
|
(1) |
Per share calculations were performed using average shares for the period. |
Amounts designated as “—” are $0 or have been rounded to $0.
100
Mesirow Small Company Fund
|
Selected
Per Share Data & Ratios | ||||||||||||||||||||
|
Institutional Shares |
Year
Ended |
Year
Ended |
Year
Ended |
Year
Ended |
Period
|
|||||||||||||||
|
Net Asset Value, Beginning of Year/Period |
$ | 10.39 | $ | 14.04 | $ | 9.03 | $ | 11.14 | $ | 10.00 | ||||||||||
|
Income (Loss) from Operations: |
||||||||||||||||||||
|
Net Investment Income(1) |
0.08 | 0.02 | 0.04 | 0.05 | 0.04 | |||||||||||||||
|
Net Realized and Unrealized Gain (Loss) |
1.32 | (0.81 | ) | 5.02 | (1.28 | ) | 1.10 | |||||||||||||
|
Total from Operations |
1.40 | (0.79 | ) | 5.06 | (1.23 | ) | 1.14 | |||||||||||||
|
Redemption Fees |
— | ^ | — | ^ | — | — | — | |||||||||||||
|
Dividends and Distributions: |
||||||||||||||||||||
|
Net Investment Income |
(0.02 | ) | (0.03 | ) | (0.05 | ) | (0.07 | ) | — | ^ | ||||||||||
|
Net Realized Gain |
(0.31 | ) | (2.83 | ) | — | (0.81 | ) | — | ||||||||||||
|
Total Dividends and Distributions |
(0.33 | ) | (2.86 | ) | (0.05 | ) | (0.88 | ) | — | |||||||||||
|
Net Asset Value, End of Year/Period |
$ | 11.46 | $ | 10.39 | $ | 14.04 | $ | 9.03 | $ | 11.14 | ||||||||||
|
Total Return† |
13.56 | % | (7.41 | )% | 56.17 | % | (12.51 | )% | 11.45 | % | ||||||||||
|
Ratios and Supplemental Data |
||||||||||||||||||||
|
Net Assets, End of Year/Period (Thousands) |
$ | 24,529 | $ | 15,346 | $ | 12,320 | $ | 8,094 | $ | 9,978 | ||||||||||
|
Ratio of Expenses to Average Net Assets |
0.98 | % | 0.98 | % | 0.98 | % | 0.98 | % | 0.98 | %** | ||||||||||
|
Ratio of Expenses to Average Net Assets (Excluding Waivers, Reimbursements and Fees Paid Indirectly) |
2.06 | % | 2.82 | % | 2.92 | % | 3.85 | % | 4.07 | %** | ||||||||||
|
Ratio of Net Investment Income to Average Net Assets |
0.66 | % | 0.18 | % | 0.30 | % | 0.52 | % | 0.62 | %** | ||||||||||
|
Portfolio Turnover Rate |
102 | % | 109 | % | 108 | % | 136 | % | 131 | %*** | ||||||||||
|
* |
Commenced operations on December 19, 2018. |
|
** |
Annualized. |
|
*** |
Not Annualized. |
|
^ |
Amount represents less than $0.005 per share. |
101
|
† |
Return is for the period indicated and has not been annualized. Total return would have been lower had certain expenses not been waived and assumed by the Adviser during the period. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. |
| (1) | Per share calculations were performed using average shares for the period. |
Amounts designated as “—” are $0 or have been rounded to $0.
102
Mesirow Small Company Fund
|
Selected
Per Share Data & Ratios | ||||||||||||||||||||
|
Investor Shares |
Year
Ended |
Year
Ended |
Year
Ended |
Year
Ended |
Period
|
|||||||||||||||
|
Net Asset Value, Beginning of Year/Period |
$ | 10.41 | $ | 14.07 | $ | 9.05 | $ | 11.14 | $ | 10.00 | ||||||||||
|
Income (Loss) from Operations: |
||||||||||||||||||||
|
Net Investment Income (Loss)(1) |
0.06 | (0.02 | ) | 0.01 | 0.14 | 0.13 | ||||||||||||||
|
Net Realized and Unrealized Gain (Loss) |
1.31 | (0.80 | ) | 5.06 | (1.35 | ) | 1.01 | |||||||||||||
|
Total from Operations |
1.37 | (0.82 | ) | 5.07 | (1.21 | ) | 1.14 | |||||||||||||
|
Redemption Fees |
0.01 | — | ^ | — | — | — | ||||||||||||||
|
Dividends and Distributions: |
||||||||||||||||||||
|
Net Investment Income |
(0.01 | ) | (0.01 | ) | (0.05 | ) | (0.07 | ) | — | ^ | ||||||||||
|
Net Realized Gain |
(0.31 | ) | (2.83 | ) | — | (0.81 | ) | — | ||||||||||||
|
Total Dividends and Distributions |
(0.32 | ) | (2.84 | ) | (0.05 | ) | (0.88 | ) | — | |||||||||||
|
Net Asset Value, End of Year/Period |
$ | 11.47 | $ | 10.41 | $ | 14.07 | $ | 9.05 | $ | 11.14 | ||||||||||
|
Total Return† |
13.37 | % | (7.64 | )% | 56.16 | % | (12.32 | )% | 11.45 | % | ||||||||||
|
Ratios and Supplemental Data |
||||||||||||||||||||
|
Net Assets, End of Year/Period (Thousands) |
$ | 2,010 | $ | 237 | $ | 23 | $ | — | $ | — | ||||||||||
|
Ratio of Expenses to Average Net Assets |
1.23 | % | 1.23 | % | 1.23 | % | 0.00 | %‡ | 0.00 | %**‡ | ||||||||||
|
Ratio of Expenses to Average Net Assets (Excluding Waivers, Reimbursements and Fees Paid Indirectly) |
2.34 | % | 3.21 | % | 3.06 | % | 3.57 | % | 3.52 | %** | ||||||||||
|
Ratio of Net Investment Income (Loss) to Average Net Assets |
0.52 | % | (0.21 | )% | 0.08 | % | 1.50 | % | 1.48 | %** | ||||||||||
|
Portfolio Turnover Rate |
102 | % | 109 | % | 108 | % | 136 | % | 131 | %*** | ||||||||||
|
* |
Commenced operations on December 19, 2018. |
|
** |
Annualized. |
|
*** |
Not Annualized. |
|
^ |
Amount represents less than $0.005 per share. |
|
‡ |
The ratio rounds to 0.00% due to the relative net asset value of Investor Shares. Prospectively, it is expected the ratio of net expenses to average net assets would |
103
approximate 1.23% (4.32% excluding waivers) and 1.23% (4.10% excluding waivers, reimbursements and fees paid indirectly), for the period ended September 30, 2019 and year ended September 30, 2020, respectively.
|
(1) |
Per share calculations were performed using average shares for the period. |
|
† |
Return is for the period indicated and has not been annualized. Total return would have been lower had certain expenses not been waived and assumed by the Adviser during the period. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. |
Amounts designated as “—” are $0 or have been rounded to $0.
104
THE ADVISORS’ INNER CIRCLE FUND III
MESIROW FUNDS
Investment Advisers
Mesirow
Financial Investment Management, Inc.
353 N. Clark Street
Chicago,
Illinois 60654
Mesirow
Institutional Investment Management, Inc.
353 N. Clark Street
Chicago,
Illinois 60654
Distributor
SEI
Investments Distribution Co.
One Freedom Valley Drive
Oaks, Pennsylvania
19456
Legal Counsel
Morgan,
Lewis & Bockius LLP
2222 Market Street
Philadelphia, Pennsylvania
19103
More information about the Funds is available, without charge, through the following:
Statement of Additional Information (“SAI”): The SAI, dated January 28, 2024, as it may be amended from time to time, includes detailed information about the Funds and The Advisors’ Inner Circle Fund III. The SAI is on file with the U.S. Securities and Exchange Commission (the “SEC”) and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus.
Annual and Semi-Annual Reports: These reports list the Funds’ holdings and contain information from the Advisers about investment strategies, and recent market conditions and trends and their impact on Fund performance. The reports also contain detailed financial information about the Funds.
To Obtain an SAI, Annual or Semi-Annual Report, or More Information:
|
By Telephone: |
833-MESIROW (833-637-4769) |
|
By Mail: |
Mesirow
Funds |
|
By Internet: |
www.mesirow.com |
From the SEC: You can also obtain the SAI or the Annual and Semi-Annual Reports, as well as other information about The Advisors’ Inner Circle Fund III, from the EDGAR Database on the SEC’s website at: http://www.sec.gov. You may also obtain this information, upon payment of a duplicating fee, by e-mailing the SEC at the following address: [email protected].
The Trust’s Investment Company Act registration number is 811-22920.
MES-PS-001-0700