ck0000811030-20231031
CONGRESS SMid GROWTH
ETF
(CSMD)
CONGRESS LARGE CAP GROWTH
ETF
(CAML)
Listed
on NYSE Arca, Inc.
PROSPECTUS
August
21, 2023
The
Securities and Exchange Commission has not approved or disapproved the Funds’
shares or determined whether this Prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Investment
Objective
The
Congress SMid Growth ETF (the “SMid Fund” or “Fund”) seeks long‑term capital
appreciation.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy, hold and sell
shares of the SMid Fund (“Shares”). You may pay other fees, such as brokerage
commissions and other fees to financial intermediaries, which are not reflected
in the table and example below.
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(Expenses
that you pay each year as a percentage of the value of your
investment) |
|
| Management
Fees |
0.68 |
% |
| Distribution
and Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses(1)(2) |
0.00 |
% |
|
Acquired
Fund Fees and Expenses(1)(3) |
0.01 |
% |
| Total
Annual Fund Operating Expenses |
0.69 |
% |
(1)
Estimated for the current fiscal
year.
(2)
Under the
Investment Advisory Agreement, Congress Asset Management Company, LLP has agreed
to pay all expenses of the Funds except for the fee paid to the Adviser pursuant
to the Investment Advisory Agreement, interest charges on any borrowings, taxes,
brokerage commissions and other expenses incurred in placing orders for the
purchase and sale of securities and other investment instruments, acquired fund
fees and expenses, accrued deferred tax liability, extraordinary expenses, and
distribution fees and expenses paid by the Fund under any distribution plan
adopted pursuant to Rule 12b-1 under the 1940
Act.
(3) Acquired Fund Fees and
Expenses are expenses indirectly incurred by the Fund as a result of its
investments in one or more underlying funds, including exchange-traded funds and
money market funds.
Example
The Example below is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. This
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% annual return each year and
that the Fund’s operating expenses remain the same. The Example does not take
into account brokerage commissions that you may pay on your purchases and sales
of Shares. Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
Portfolio
Turnover
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
annual fund operating expenses or in the Example, affect the Fund’s performance.
As the Fund has not yet commenced operations, there is no portfolio turnover
information to provide at this time.
Principal Investment
Strategies
The Fund is an actively-managed exchange-traded fund
(“ETF”). The Fund seeks to achieve its investment objective by investing at
least 80% of its net assets (plus any borrowings for investment purposes) in
equity securities of small and mid-capitalization companies
(“SMid-capitalization companies”). The Fund invests primarily in publicly traded
stocks of U.S. companies which Congress
Asset Management Company, LLP (the “Adviser”)
considers to have a small to mid-size market capitalization. The Fund defines
SMid-capitalization companies as those whose market capitalization, at the time
of purchase, are consistent with the market capitalizations of companies in the
Russell 2500™ Growth Index. As of the last reconstitution date, June 23, 2023,
the market capitalization of companies in the Russell 2500™ Growth Index ranged
from $300 million to $18.8 billion. The Fund may invest any portion of the
remaining 20% of its net assets in equity securities of small-capitalization
mid-capitalization and large-capitalization companies. The Fund may invest up to
20% of its total assets in U.S. dollar denominated foreign equity securities,
including through American Depositary Receipts (“ADRs”) and Global Depositary
Receipts (“GDRs”) issued by U.S. depository banks, which are traded on U.S.
exchanges. The Fund invests in companies that the Adviser believes are
experiencing or will experience earnings growth. The Adviser employs a
“bottom-up” approach to research and stock selection, which means that the
Adviser bases its investments on a company’s future prospects and not on any
significant economic or market cycle. The Adviser also uses a growth-style
approach to selecting securities with a focus on high quality companies. The
Adviser’s fundamental approach emphasizes earnings growth and free cash flow.
The Fund may, from time to time, have significant exposure to one or more
sectors of the market. The Fund may also invest in other registered investment
companies, including ETFs.
The Adviser may sell a security for a number of reasons including, but
not limited to, if a determination is made that the security no longer meets its
investment criteria or if a new security is judged more attractive than a
current holding.
Principal Risks of Investing in
the SMid Fund
There is a risk that you could
lose all or a portion of your investment in the SMid Fund. The
following risks are considered principal to the SMid Fund and could affect the
value of your investment in the Fund:
•Mid-Capitalization
Investing Risk.
The securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-capitalization companies
generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large capitalization stocks or the stock market
as a whole.
•Small-Capitalization
Investing Risk.
The securities of small-capitalization companies may be more vulnerable to
adverse issuer, market, political, or economic developments than securities of
large- or mid-capitalization companies. The securities of small-capitalization
companies generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large- or mid-capitalization stocks or the
stock market as a whole. There is typically less publicly available information
concerning smaller-capitalization companies than for larger, more established
companies.
•Growth
Style Investment Risk:
Growth stocks may lose value or fall out of favor with investors. Growth stocks
may be more sensitive to changes in current or expected earnings than the prices
of other stocks.
•Equity
Securities Risk: The
price of equity securities may rise or fall because of economic or political
changes or changes in a company’s financial condition, sometimes rapidly or
unpredictably. These price movements may result from factors affecting
individual companies, sectors or industries selected for the Fund’s portfolio or
the securities market as a whole, such as changes in economic or political
conditions.
•Foreign
Investment Risk:
Foreign securities involve increased risks due to political, social and economic
developments abroad, as well as due to differences between U.S. and foreign
regulatory practices. When the Fund invests in ADRs as a substitute for an
investment directly in the underlying foreign shares, the Fund is exposed to the
risk that the ADRs may not provide a return that corresponds precisely with that
of the underlying foreign shares. GDRs generally are subject to the same risks
as the foreign securities that they evidence or into which they may be
converted.
•Sector-Focus
Risk:
Investing
a significant portion of the Fund’s assets in one sector of the market exposes
the Fund to greater market risk and potential monetary losses than if those
assets were spread among various sectors.
The
remaining principal risks are presented in alphabetical order. Each risk
summarized below is considered a “principal risk” of investing in the SMid Fund,
regardless of the order in which it appears.
•ETF
Risks:
The Fund is an ETF, and, as a result of an ETF’s structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants (“APs”). In addition, there may be a limited number of
market makers and/or liquidity providers in the marketplace. To the extent
either of the following events occur, Shares may trade at a material discount to
NAV and possibly face delisting: (i) APs exit the business or otherwise become
unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares:
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid-ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV:
As with all ETFs, Shares may be bought and sold in the secondary market at
market prices. Although it is expected that the market price of Shares will
approximate the Fund’s NAV, there may be times when the market price of Shares
is more than the NAV intra-day (premium) or less than the NAV intra-day
(discount) due to supply and demand of Shares or during periods of market
volatility. This risk is heightened in times of market volatility, periods of
steep market declines, and periods when there is limited trading activity for
Shares in the secondary market, in which case such premiums or discounts may be
significant.
◦Trading:
Although Shares are listed for trading on NYSE
Arca, Inc.
(the “Exchange”) and may be traded on U.S. exchanges other than the Exchange,
there can be no assurance that Shares will trade with any volume, or at all, on
any stock exchange. In stressed market conditions, the liquidity of Shares may
begin to mirror the liquidity of the Fund’s underlying portfolio holdings, which
can be significantly less liquid than Shares, and this could lead to differences
between the market price of the Shares and the underlying value of those Shares.
•General
Market Risk: Economies
and financial markets throughout the world are becoming increasingly
interconnected, which increases the likelihood that events or conditions in one
country or region will adversely impact markets or issuers in other countries or
regions. Securities in the Fund’s portfolio may underperform in comparison to
securities in the general
financial
markets, a particular financial market, or other asset classes due to a number
of factors, including: inflation (or expectations for inflation); interest
rates; global demand for particular products or resources; natural disasters or
events; pandemic diseases; terrorism; regulatory events; and government
controls. U.S. and international markets have experienced significant periods of
volatility in recent years and months due to a number of economic, political and
global macro factors which has resulted in a public health crisis, disruptions
to business operations and supply chains, stress on the global health care
system, growth concerns in the U.S. and overseas, staffing shortages and the
inability to meet consumer demand, and widespread concern and uncertainty. The
global recovery from COVID-19 is proceeding at slower than expected rates due to
the emergence of variant strains and may last for an extended period of time.
Continuing uncertainties regarding interest rates, rising inflation, political
events, rising government debt in the U.S., and trade tensions also contribute
to market volatility. As a result of continuing political tensions and armed
conflicts, including the war between Ukraine and Russia, the U.S. and the
European Union imposed sanctions on certain Russian individuals and companies,
including certain financial institutions, and have limited certain exports and
imports to and from Russia. The war has contributed to market volatility and may
continue to do so.
•Large
Companies Risk:
Larger, more established companies may be unable to respond quickly to new
competitive challenges like changes in consumer tastes or innovative smaller
competitors. Also, large‑cap companies are sometimes unable to attain the high
growth rates of successful, smaller companies, especially during extended
periods of economic expansion.
•Investments
in Other Investment Companies: To
the extent the Fund invests in shares of other investment companies, you will
indirectly bear fees and expenses charged by those investment companies and will
be subject to the risks that those investment companies are subject to.
•Management
Risk:
The Fund is actively-managed and may not meet its investment objective based on
the Adviser’s success or failure to implement investment strategies for the
Fund.
•New
Fund Risk: The Fund is a recently organized investment company with no
operating history. As a result, prospective investors have no track record or
history on which to base their investment decision.
Performance
Information
Performance information for the Fund is not
included because the Fund did not commence operations prior to the date of this
Prospectus. In the future, performance information for the Fund
will be presented in this section. Updated performance will be available on the
Fund’s website at www.etfs.congressasset.com.
Investment
Adviser
Congress
Asset Management Company, LLP.
Portfolio
Managers
Nancy
T. Huynh, Senior
Vice President, Adviser; Portfolio Manager for the Fund since its inception in
August 2023, and Chair of the SMid Growth Investment Policy
Committee.
Daniel
A. Lagan,
CFA, CEO/CIO, Adviser; Portfolio Manager for the Fund since its inception in
August 2023, and co-Chair of the SMid Growth Investment Policy Committee.
Purchase
and Sale of Fund Shares
Shares
are listed on the Exchange, and individual Shares may only be bought and sold in
the secondary market through brokers at market prices, rather than NAV. Because
Shares trade at market prices rather than NAV, Shares may trade at a price
greater than NAV (premium) or less than NAV (discount).
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities and/or a designated amount of U.S. cash.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its NAV, market price, premiums and discounts, and bid-ask spreads is
available on the Fund’s website at www.etfs.congressasset.com.
Tax
Information
The
Fund’s distributions will be taxed as ordinary income or capital gains, unless
you are investing through a tax‑deferred arrangement, such as a 401(k) plan or
an individual retirement account. Distributions on investments made through
tax-deferred arrangements may be taxed later upon withdrawal of assets from
those accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
Investment
Objective
The
Congress Large Cap Growth ETF (the “Large Cap Fund” or “Fund”) seeks long‑term
capital growth.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy, hold and sell
shares of the Large Cap Fund (“Shares”). You may pay other fees, such as
brokerage commissions and other fees to financial intermediaries, which are not
reflected in the table and example below.
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(Expenses
that you pay each year as a percentage of the value of your
investment) |
|
| Management
Fees |
0.65 |
% |
| Distribution
and Service (12b-1) Fees |
0.00 |
% |
|
Other
Expenses(1)(2) |
0.00 |
% |
|
Acquired
Fund Fees and Expenses(1)(3) |
0.01 |
% |
| Total
Annual Fund Operating Expenses |
0.66 |
% |
(1)
Estimated for the current fiscal
year.
(2)
Under the
Investment Advisory Agreement, Congress Asset Management Company, LLP has agreed
to pay all expenses of the Funds except for the fee paid to the Adviser pursuant
to the Investment Advisory Agreement, interest charges on any borrowings, taxes,
brokerage commissions and other expenses incurred in placing orders for the
purchase and sale of securities and other investment instruments, acquired fund
fees and expenses, accrued deferred tax liability, extraordinary expenses, and
distribution fees and expenses paid by the Fund under any distribution plan
adopted pursuant to Rule 12b-1 under the 1940 Act.
(3)
Acquired
Fund Fees and Expenses are expenses indirectly incurred by the Fund as a result
of its investments in one or more underlying funds, including exchange-traded
funds and money market funds.
Example
The Example below is intended to help you compare the cost of
investing in the Large Cap Fund with the cost of investing in other mutual
funds. The Example assumes that you invest $10,000 in the Large Cap 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 remain the same. The Example does not
take into account brokerage commissions that you may pay on your purchases and
sales of Shares. Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
Portfolio
Turnover
The
Large Cap 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 annual fund operating expenses or in the Example, affect the Fund’s
performance. As the Fund has not yet commenced operations, there is no portfolio
turnover information to provide at this time.
Principal Investment
Strategies
The Fund is an actively-managed exchange-traded fund
(“ETF”). The Fund attempts to achieve its investment objective by investing at
least 80% of its net assets (plus any borrowings for investment
purposes)
in equity securities of large-capitalization companies. The Fund defines
large-capitalization companies as those whose market capitalization, at the time
of purchase, are consistent with the market capitalizations of companies in the
Russell 1000®
Growth Index.
As
of June 30, 2023, the market capitalization of companies in the Russell
1000®
Growth Index ranged from approximately $1.345 billion to $2.982
trillion.
The
Fund may invest any portion of the remaining 20% of its net assets from time to
time in equity securities of small-capitalization and mid-capitalization
companies. Equity securities in which the Fund may invest include common stock
and preferred stock.
The
Fund may also invest up to 20% of its total assets in U.S.
dollar-denominated
foreign equity securities, including through American Depositary Receipts
(“ADRs”) and Global Depositary Receipts (“GDRs”) issued by U.S. depository
banks, which are traded on U.S. exchanges. Congress Asset Management Company,
LLP (the“Adviser”) employs a “bottom-up” approach to stock selection which means
that the Adviser chooses the ETF’s investments based on a company’s future
prospects and not on any significant economic or market cycle. The Adviser also
uses a growth style approach to select securities with a focus on high quality
companies. The Adviser’s fundamental approach emphasizes growth of earnings and
free cash flow.
The
Fund may, from time to time, have significant exposure to one or more sectors of
the market. The Fund may also invest in other registered investment companies,
including ETFs.
The Adviser may sell a security for a number of reasons including, but
not limited to, if it determines that the security no longer meets its
investment criteria or if a new security is judged more attractive than a
current holding.
Principal Risks of Investing in
the Large Cap Fund
There is the risk that you
could lose all or a portion of your investment in the Large Cap
Fund. The following risks are considered principal to the Large
Cap Fund and could affect the value of your investment in the Fund:
•Large
Companies Risk:
The securities of large-capitalization companies may be relatively mature
compared to smaller companies and therefore subject to slower growth during
times of economic expansion. Large-capitalization companies may also be unable
to respond quickly to new competitive challenges, such as changes in technology
and consumer tastes.
•Growth
Style Investment Risk:
Growth stocks may lose value or fall out of favor with investors. Growth stocks
may be more sensitive to changes in current or expected earnings than the prices
of other stocks.
•Equity
Securities Risk:
Common stocks are susceptible to general stock market fluctuations and to
volatile increases and decreases in value. These fluctuations may cause a
security to be worth less than its cost when originally purchased or less than
it was worth at an earlier time.
•Foreign
Investment Risk:
Foreign securities involve increased risks due to political, social and economic
developments abroad, as well as due to differences between U.S. and foreign
regulatory practices. When the Fund invests in ADRs as a substitute for an
investment directly in the underlying foreign shares, the Fund is exposed to the
risk that the ADRs may not provide a return that corresponds precisely with that
of the underlying foreign shares. GDRs generally are subject to the same risks
as the foreign securities that they evidence or into which they may be
converted.
•Sector-Focus
Risk:
Investing a significant portion of the Fund’s assets in one sector of the market
exposes the Fund to greater market risk and potential monetary losses than if
those assets were spread among various sectors.
The
remaining principal risks are presented in alphabetical order. Each risk
summarized below is considered a “principal risk” of investing in the Large Cap
Fund, regardless of the order in which it appears.
•ETF
Risks:
The Fund is an ETF, and, as a result of an ETF’s structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants (“APs”). In addition, there may be a limited number of
market makers and/or liquidity providers in the marketplace. To the extent
either of the following events occur, Shares may trade at a material discount to
NAV and possibly face delisting: (i) APs exit the business or otherwise become
unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares:
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid-ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV:
As with all ETFs, Shares may be bought and sold in the secondary market at
market prices. Although it is expected that the market price of Shares will
approximate the Fund’s NAV, there may be times when the market price of Shares
is more than the NAV intra-day (premium) or less than the NAV intra-day
(discount) due to supply and demand of Shares or during periods of market
volatility. This risk is heightened in times of market volatility, periods of
steep market declines, and periods when there is limited trading activity for
Shares in the secondary market, in which case such premiums or discounts may be
significant.
◦Trading:
Although Shares are listed for trading on NYSE
Arca, Inc.
(the “Exchange”) and may be traded on U.S. exchanges other than the Exchange,
there can be no assurance that Shares will trade with any volume, or at all, on
any stock exchange. In stressed market conditions, the liquidity of Shares may
begin to mirror the liquidity of the Fund’s underlying portfolio holdings, which
can be significantly less liquid than Shares, and this could lead to differences
between the market price of the Shares and the underlying value of those Shares.
•General
Market Risk:
Economies
and financial markets throughout the world are becoming increasingly
interconnected, which increases the likelihood that events or conditions in one
country or region will adversely impact markets or issuers in other countries or
regions. Securities in the Fund’s portfolio may underperform in comparison to
securities in the general financial markets, a particular financial market, or
other asset classes due to a number of factors, including: inflation (or
expectations for inflation); interest rates; global demand for particular
products or resources; natural disasters or events; pandemic diseases;
terrorism; regulatory events; and government controls. U.S. and international
markets have experienced significant periods of volatility in recent years and
months due to a number of economic, political and global macro factors which has
resulted in a public health crisis, disruptions to business operations and
supply chains, stress on the global health care system, growth concerns in the
U.S. and overseas, staffing shortages and the inability to meet consumer demand,
and widespread concern and uncertainty. The global recovery from COVID-19 is
proceeding at slower than expected rates due to the emergence of variant strains
and may last for an extended period of time. Continuing
uncertainties
regarding interest rates, rising inflation, political events, rising government
debt in the U.S., and trade tensions also contribute to market volatility. As a
result of continuing political tensions and armed conflicts, including the war
between Ukraine and Russia, the U.S. and the European Union imposed sanctions on
certain Russian individuals and companies, including certain financial
institutions, and have limited certain exports and imports to and from Russia.
The war has contributed to market volatility and may continue to do so.
•Investments
in Other Investment Companies: To
the extent the Fund invests in shares of other investment companies, you will
indirectly bear fees and expenses charged by those investment companies and will
be subject to the risks that those investment companies are subject to.
•Management
Risk:
The Fund is actively-managed and may not meet its investment objective based on
the Adviser’s success or failure to implement investment strategies for the
Fund.
•New
Fund Risk:
The Fund is a recently organized investment company with no operating history.
As a result, prospective investors have no track record or history on which to
base their investment decision.
•Small
and Medium Companies Risk: Securities of small and medium cap companies may possess
comparatively greater price volatility and less liquidity than the securities of
companies that have larger market capitalizations and/or that are traded on
major stock exchanges.
Performance
Information
Performance information for the Fund is not
included because the Fund did not commence operations prior to the date of this
Prospectus. In the future, performance information for the Fund
will be presented in this section. Updated performance will be available on the
Fund’s website at www.etfs.congressasset.com.
Investment
Adviser
Congress
Asset Management Company, LLP.
Portfolio
Managers
Matthew
Lagan, CFA,
Vice
President,
Adviser; Portfolio Manager for the Fund since its inception in August 2023, and
Chair of the Large Cap Growth Investment Policy Committee.
Daniel
A. Lagan,
CFA, CEO/CIO, Adviser; Portfolio Manager for the Fund since its inception in
August 2023, and co-Chair of the Large Cap Growth Investment Policy Committee.
Purchase
and Sale of Fund Shares
Shares
are listed on the Exchange, and individual Shares may only be bought and sold in
the secondary market through brokers at market prices, rather than NAV. Because
Shares trade at market prices rather than NAV, Shares may trade at a price
greater than NAV (premium) or less than NAV (discount).
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities and/or a designated amount of U.S. cash.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its NAV, market price, premiums and discounts, and bid-ask spreads is
available on the Fund’s website at www.etfs.congressasset.com.
Tax
Information
The
Large Cap Fund’s distributions are taxed as ordinary income or capital gains,
unless you are investing through a tax‑deferred arrangement, such as a 401(k)
plan or an individual retirement account. Distributions on investments made
through tax‑deferred arrangements may be taxed later upon withdrawal of assets
from those accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
This
Prospectus offers shares of the Congress SMid Growth ETF and Congress Large Cap
Growth ETF.
The
Congress SMid Growth ETF seeks long‑term capital appreciation. The Congress
Large Cap Growth ETF seeks long‑term capital growth. The investment objective of
each Fund is non‑fundamental; that is, it can be changed by a vote of the Board
of Trustees alone and without a shareholder vote upon at least 60 days’ prior
written notice to shareholders. The objective and strategies description for
each Fund tells you:
•what
the Fund is trying to achieve;
•how
the Adviser intends to invest your money; and
•what
makes each Fund different from the other Fund offered in this
Prospectus.
The
Funds will provide at least 60 days’ prior written notice to shareholders of a
change in a Fund’s policy of investing at least 80% of its net assets (plus any
borrowings for investment purposes) in the type of investments suggested by each
Fund’s name.
Temporary
Defensive Position.
Generally, the Adviser does not attempt to “time” the market, such as by
shifting all or a significant portion of the portfolio in or out of the market
in anticipation of or in response to adverse market or other conditions or
atypical circumstances such as unusually large cash inflows or redemptions.
However, in order to respond to adverse market, economic, political or other
conditions, each Fund may assume a temporary defensive position by reducing
investments in equities and/or increasing investments in short‑term fixed income
securities. Each Fund may also invest without limit in cash and high quality
cash equivalents such as investment grade commercial paper and other money
market instruments. During such times, a Fund may not achieve its investment
objective to the extent it makes temporary and/or cash investments. A defensive
position, taken at the wrong time, may have an adverse impact on a Fund’s
performance.
Before
investing in the Funds, you should carefully consider your own investment goals,
the amount of time you are willing to leave your money invested and the amount
of risk you are willing to take. Remember that in addition to possibly not
achieving your investment goals, you could lose money by investing in a Fund.
The value of your investment in a Fund will fluctuate with the prices of the
securities in which the Funds invest. The principal risks of investing in the
Funds are discussed in more detail below in order of relevance to the
Funds:
Small
and Medium Companies Risk.
Because investing in smaller‑sized companies may have more risk than investing
in larger, more established companies, such an investment by a Fund may have the
following additional risks:
•The
earnings and prospects of small‑ or medium‑sized companies are more volatile
than those of larger‑sized companies;
•Small‑
and medium‑sized companies may experience higher failure rates than larger‑sized
companies;
•Analysts
and other investors typically follow these companies less actively and
information about these companies is not always readily available;
•The
trading volume of securities of small‑ and medium‑sized companies is normally
lower and such securities may be less liquid than those of larger‑sized
companies, which may disproportionately affect their stock prices, and may cause
their stock prices to fall more in response to selling pressure than is the case
with larger‑sized companies; and
•Small‑
and medium‑sized companies may have limited markets, product lines, or financial
resources and may lack management experience, making these companies more
susceptible to economic and market setbacks.
For
these and other reasons, the security prices of small‑ and medium‑capitalization
companies may fluctuate more significantly than the security prices of
large‑capitalization companies. The smaller the company, the greater effect
these risks may have on that company’s operations and performance. As a result,
such an investment by a Fund may exhibit a higher degree of volatility than the
general domestic securities market.
Large
Companies Risk.
Large company stock risk is the risk that stocks of larger companies may
underperform relative to those of small and mid‑sized companies. Larger, more
established companies may be unable to respond quickly to new competitive
challenges, such as changes in technology and consumer tastes. Many larger
companies may not be able to attain the high growth rate of successful smaller
companies, especially during extended periods of economic
expansion.
Growth
Style Investment Risk.
Growth stocks can perform differently from the market as a whole and from other
types of stocks. Thus, a growth style investment strategy attempts to identify
companies whose earnings may grow or are growing at a faster rate than inflation
and the economy. While growth stocks may react differently to issuer, political,
market and economic developments than the market as a whole and other types of
stocks by rising in price in certain environments, growth stocks also tend to be
sensitive to changes in the earnings of their underlying companies and more
volatile than other types of stocks, particularly over the short term. During
periods of adverse economic and market conditions, the stock prices of growth
stocks may fall despite favorable earnings trends.
Equity
Securities Risk.
The price of equity securities may rise or fall because of changes in the broad
market or changes in a company’s financial condition, sometimes rapidly or
unpredictably. These price movements may result from factors affecting
individual companies, sectors or industries selected for a Fund’s portfolio or
the securities market as a whole, such as changes in economic or political
conditions. Equity securities are subject to “stock market risk” meaning that
stock prices in general (or in particular, the prices of the types of securities
in which a Fund invests) may decline over short or extended periods
of
time. When the value of a Fund’s securities goes down, your investment in each
Fund decreases in value. If you hold common stocks of any given issuer, you
would generally be exposed to greater risk than if you hold preferred stocks or
debt obligations of the issuer because common stockholders generally have
inferior rights to receive payments from issuers in comparison with the rights
of preferred stockholders, bondholders and other creditors of such
issuers.
Foreign
Investment Risk.
Foreign securities may experience more rapid and extreme changes in value than
securities of U.S. companies because a limited number of companies represent a
small number of industries. Foreign issuers are not subject to the same degree
of regulation as U.S. issuers. Also, nationalization, expropriation or
confiscatory taxation or political changes could adversely affect a Fund’s
investments in a foreign company. ADRs do not eliminate all of the risks
associated with direct investment in the securities of foreign issuers.
Sponsored ADRs are issued with the support of the issuer of the foreign stock
underlying the ADRs and carry all of the rights of common shares, including
voting rights. The underlying securities of the ADRs in a Fund’s portfolio are
usually denominated or quoted in currencies other than the U.S. Dollar. As a
result, changes in foreign currency exchange rates may affect the value of a
Fund’s portfolio. In addition, because the underlying securities of ADRs trade
on foreign exchanges at times when the U.S. markets are not open for trading,
the value of the securities underlying the ADRs may change materially at times
when the U.S. markets are not open for trading, regardless of whether there is
an active U.S. market for the shares. A Fund’s investments in foreign securities
may be in the form of depositary receipts, such as GDRs, which are issued by
U.S. depository banks and evidence ownership of the underlying securities. GDRs
generally are subject to the same risks as the foreign securities that they
evidence or into which they may be converted. GDRs may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted. Investments in GDRs, involve risks similar to those
accompanying direct investments in foreign securities.
Sector-Focus
Risk.
Investing a significant portion of a Fund’s assets in one sector of the market
exposes each Fund to greater market risk and potential monetary losses than if
those assets were spread among various sectors. If a Fund’s portfolio is
overweighted in a certain sector, any negative development affecting that sector
will have a greater impact on each Fund than a fund that is not overweighted in
that sector.
The
remaining risks are considered “principal risks” of investing in the Funds,
regardless of the order in which they appear.
Management
Risk.
Management risk describes each Fund’s ability to meet their investment objective
based on the Adviser’s success or failure to implement investment strategies for
a Fund. The value of your investment in each Fund is subject to the
effectiveness of the Adviser and the Adviser’s research, analysis and asset
allocation among portfolio securities. If the Adviser’s investment strategies do
not produce the expected results, your investment could be diminished or even
lost.
General
Market Risk.
Economies and financial markets throughout the world are becoming increasingly
interconnected, which increases the likelihood that events or conditions in one
country or region will adversely impact markets or issuers in other countries or
regions. Securities in each Fund’s portfolio may underperform in comparison to
securities in the general financial markets, a particular financial market, or
other asset classes due to a number of factors, including: inflation (or
expectations for inflation); interest rates; global demand for particular
products or resources; natural disasters or events; pandemic diseases;
terrorism; regulatory events; and government controls. U.S. and international
markets have experienced significant periods of volatility in recent years and
months due to a number of economic, political and global macro factors including
the impact of COVID-19 as a global pandemic, which has resulted in a public
health crisis, disruptions to business operations and supply chains, stress on
the global healthcare system, growth concerns in the U.S. and overseas, staffing
shortages and the inability to meet consumer demand, and widespread concern and
uncertainty. The global recovery from COVID-19 is proceeding at slower than
expected rates due to the emergence of variant strains and may last for an
extended period of
time.
Continuing uncertainties regarding interest rates, rising inflation, political
events, rising government debt in the U.S. and trade tensions also contribute to
market volatility. As a result of continuing political tensions and armed
conflicts, including the war between Ukraine and Russia, the U.S. and the
European Union imposed sanctions on certain Russian individuals and companies,
including certain financial institutions, and have limited certain exports and
imports to and from Russia. The war has contributed to recent market volatility
and may continue to do so.
New
Fund Risk.
Each Fund is a recently organized investment company with no operating history.
As a result, prospective investors have no track record or history on which to
base their investment decision.
Investments
in Other Investment Companies.
Investments in other investment companies, including ETFs (which may, in turn,
invest in stocks, bonds, and other financial vehicles), involve substantially
the same risks as investing directly in the instruments held by these entities.
However, the investment may involve duplication of certain fees and expenses. By
investing in an investment company or ETF, a Fund becomes a shareholder of that
fund. As a result, Funds’ shareholders indirectly bear their proportionate share
of the investment company’s or ETF’s fees and expenses which are paid by the
Funds’ as a shareholder of the fund. These fees and expenses are in addition to
the fees and expenses that Funds’ shareholders directly bear in connection with
the Fund’s own operations. If the investment company or ETF fails to achieve its
investment objective, the Fund’s investment in that fund may adversely affect
the Funds’ performance.
ETF
Risks.
Each Fund is an ETF, and, as a result of an ETF’s structure, they are exposed to
the following risks:
APs,
Market Makers, and Liquidity Providers Concentration Risk.
Each Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, Shares may trade at a material discount to NAV and possibly face
delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Costs
of Buying or Selling Shares.
Investors buying or selling Shares in the secondary market will pay brokerage
commissions or other charges imposed by brokers, as determined by that broker.
Brokerage commissions are often a fixed amount and may be a significant
proportional cost for investors seeking to buy or sell relatively small amounts
of Shares. In addition, secondary market investors will also incur the cost of
the difference between the price at which an investor is willing to buy Shares
(the “bid” price) and the price at which an investor is willing to sell Shares
(the “ask” price). This difference in bid and ask prices is often referred to as
the “spread” or “bid-ask spread.” The bid-ask spread varies over time for Shares
based on trading volume and market liquidity, and the spread is generally lower
if Shares have more trading volume and market liquidity and higher if Shares
have little trading volume and market liquidity. Further, a relatively small
investor base in a Fund, asset swings in a Fund, and/or increased market
volatility may cause increased bid-ask spreads. Due to the costs of buying or
selling Shares, including bid-ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small
investments.
Shares
May Trade at Prices Other Than NAV.
As with all ETFs, Shares may be bought and sold in the secondary market at
market prices. Although it is expected that the market price of Shares will
approximate each Fund’s NAV, there may be times when the market price of Shares
is more than the NAV intra-day (premium) or less than the NAV intra-day
(discount) due to supply and demand of Shares or during periods of market
volatility. This risk is heightened in times of
market
volatility or periods of steep market declines. The market price of Fund shares
during the trading day, like the price of any exchange-traded security, includes
a “bid-ask” spread charged by the exchange specialist, market makers or other
participants that trade the Fund shares. In times of severe market disruption,
the bid-ask spread can increase significantly. At those times, Fund shares are
most likely to be traded at a discount to NAV, and the discount is likely to be
greatest when the price of Fund shares is falling fastest, which may be the time
that you most want to sell your Fund shares. The Adviser believes that, under
normal market conditions, large market price discounts or premiums to NAV will
not be sustained because of arbitrage opportunities.
Trading.
Although Shares are listed for trading on the Exchange and may be listed or
traded on U.S. and non-U.S. stock exchanges other than the Exchange, there can
be no assurance that an active trading market for such Shares will develop or be
maintained. Trading in Shares may be halted due to market conditions or for
reasons that, in the view of the Exchange, make trading in Shares inadvisable.
In addition, trading in Shares on the Exchange is subject to trading halts
caused by extraordinary market volatility pursuant to Exchange “circuit breaker”
rules, which temporarily halt trading on the Exchange when a decline in the
S&P 500® Index during a single day reaches certain thresholds (e.g., 7%,
13%, and 20%). Additional rules applicable to the Exchange may halt trading in
Shares when extraordinary volatility causes sudden, significant swings in the
market price of Shares. There can be no assurance that Shares will trade with
any volume, or at all, on any stock exchange. In stressed market conditions, the
liquidity of Shares may begin to mirror the liquidity of each Fund’s underlying
portfolio holdings, which can be significantly less liquid than Shares, and this
could lead to differences between the market price of the Shares and the
underlying value of those Shares.
Information
about each Fund’s daily portfolio holdings will be available at
www.etfs.congressasset.com. A complete description of each Fund’s policies and
procedures with respect to the disclosure of the Funds’ portfolio holdings is
available in the Funds’ Statement of Additional Information (“SAI”).
Investment
Adviser
Congress
Asset Management Company, LLP, serves as the investment adviser and has overall
responsibility for the general management and administration of the Funds. The
Adviser is a registered investment adviser with offices located at 2 Seaport
Lane, Boston, Massachusetts 02210. The Adviser was founded in 1985, and serves
as investment adviser to high net worth individuals and institutions. As of June
30, 2023, the Adviser managed approximately $19.2 billion in assets under
advisement. Subject to the general supervision of the Board, the Adviser is
responsible for managing each Fund in accordance with its investment objective
and policies, and making decisions with respect to, and placing orders for, all
purchases and sales of portfolio securities. The Adviser also maintains related
records for the Funds.
The
Adviser provides the Funds advice on buying and selling securities. The Adviser
also furnishes the Funds with office space and certain administrative services
and provides most of the personnel needed by the Funds. For the services it
provides to the Congress SMid Growth ETF, the Fund pays the Adviser a unitary
management fee, which is calculated daily and paid monthly, at an annual rate of
0.68% based on the Fund’s average daily net assets. For the services it provides
to the Congress Large Cap Growth ETF, the Fund pays the Adviser a unitary
management fee, which is calculated daily and paid monthly, at an annual rate of
0.65% based on the Fund’s average daily net assets.
Under
the Investment Advisory Agreement, the Adviser has agreed to pay all expenses of
the Funds except for the fee paid to the Adviser pursuant to the Investment
Advisory Agreement, interest charges on any borrowings, taxes, brokerage
commissions and other expenses incurred in placing orders for the purchase and
sale of securities and other investment instruments, acquired fund fees and
expenses, accrued deferred tax liability, extraordinary expenses, and
distribution fees and expenses paid by the Fund under any distribution plan
adopted pursuant to Rule 12b-1 under the 1940 Act.
The
basis for the Board’s approval of the Funds’ Investment Advisory Agreement
between the Adviser and the Trust with respect to the Funds will be available in
the Funds’ first Annual Report to Shareholders in January 2024.
Portfolio
Managers
|
|
|
|
|
| |
| Portfolio
Managers/Funds |
Bio |
|
Daniel A.
Lagan, MBA, CFA
Congress
Large Cap Growth ETF
Congress
SMid ETF
Since
Inception August 2023 |
Mr. Daniel
Lagan is a Chartered Financial Analyst charter holder. Since
July 1999, Mr. Lagan has served as CEO/CIO of, and as a
Portfolio Manager for, the Advisor and is jointly and primarily
responsible for day‑to‑day management of the Large Cap Growth ETF and the
SMid ETF. Mr. Lagan is the co-Chair of both the Large Cap Growth and the
SMid Growth Investment Policy Committee. From August 1989 to
June 1999, Mr. Lagan served as Executive Vice President and
Portfolio Manager for the Advisor. Prior to joining the Advisor in 1989,
Mr. Lagan served as an auditor for PricewaterhouseCoopers.
Mr. Lagan holds a Bachelor of Arts degree in Accounting from
St. Michael’s College and a Masters of Business Administration degree
in Finance from Boston College.
|
|
Nancy
T. Huynh
Congress
SMid ETF
Since
Inception August 2023 |
Ms.
Nancy T. Huynh is a Portfolio Manager at CAM. Ms. Huynh is Chair of the
SMid Growth Investment Policy Committee. She is a member of the Large Cap
Growth and Multi-Cap Growth Investment Policy Committees. Ms. Huynh holds
a Bachelor of Arts degree in International Relations from Colby College
and a Masters degree in Management with a concentration in Finance from
Harvard University.
|
|
Matthew
Lagan, MBA, CFA
Congress
Large Cap Growth ETF
Since
Inception August 2023 |
Mr.
Matthew Lagan has been with Congress Asset Management since 2003. He
chairs the firm’s Large Cap Growth Investment Committee. He is also a
member of the SMid Growth Investment Committee and the Impact Investing
Investment Committee. Since 2013, he has been a member of the Management
Committee, which formulates the firm’s overall strategic direction. Matt
is a CFA charterholder, and a member of the CFA Society Boston and CFA
Institute. Mr. Lagan holds a Bacheler of Science from Bridgewater
State College and a Masters of Business Administration from University
College Dublin.
|
The
Funds’ combined SAI provides additional information about each of the Portfolio
Manager’s compensation, other accounts managed by the Portfolio Managers, and
each of the Portfolio Manager’s ownership of securities in the
Funds.
HOW
TO BUY AND SELL SHARES
Each
Fund issues and redeems Shares at NAV only in Creation Units. Only APs may
acquire Shares directly from a Fund, and only APs may tender their Shares for
redemption directly to a Fund, at NAV. APs must be a member or participant of a
clearing agency registered with the SEC and must execute a Participant Agreement
that has been agreed to by the Distributor (defined below), and that has been
accepted by the Funds’ transfer agent, with respect to purchases and redemptions
of Creation Units. Once created, Shares trade in the secondary market in
quantities less than a Creation Unit.
Most
investors buy and sell Shares in secondary market transactions through brokers.
Shares are listed for trading on the secondary market on the Exchange and can be
bought and sold throughout the trading day like other publicly traded
securities.
When
buying or selling Shares through a broker, you will incur customary brokerage
commissions and charges, and you may pay some or all of the spread between the
bid and the offer price in the secondary market on each leg of a round trip
(purchase and sale) transaction. In addition, because secondary market
transactions occur at market prices, you may pay more than NAV when you buy
Shares and receive less than NAV when you sell those Shares.
Book
Entry
Shares
are held in book-entry form, which means that no stock certificates are issued.
The Depository Trust Company (“DTC”) or its nominee is the record owner of all
outstanding Shares.
Investors
owning Shares are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for all Shares. DTC’s
participants include securities brokers and dealers, banks, trust companies,
clearing corporations and other institutions that directly or indirectly
maintain a custodial relationship with DTC. As a beneficial owner of Shares, you
are not entitled to receive physical delivery of stock certificates or to have
Shares registered in your name, and you are not considered a registered owner of
Shares. Therefore, to exercise any right as an owner of Shares, you must rely
upon the procedures of DTC and its participants. These procedures are the same
as those that apply to any other securities that you hold in book entry or
“street name” through your brokerage account.
Frequent
Purchases and Redemptions of Shares
The
Funds impose no restrictions on the frequency of purchases and redemptions of
Shares. In determining not to approve a written, established policy, the Board
evaluated the risks of market timing activities by Fund shareholders. Purchases
and redemptions by APs, who are the only parties that may purchase or redeem
Shares directly with a Fund, are an essential part of the ETF process and help
keep Share trading prices in line with NAV. As such, the Funds accommodate
frequent purchases and redemptions by APs. However, the Board has also
determined that frequent purchases and redemptions for cash may increase
tracking error and portfolio transaction costs and may lead to the realization
of capital gains. To minimize these potential consequences of frequent purchases
and redemptions, the Funds employ fair value pricing and may impose transaction
fees on purchases and redemptions of Creation Units to cover the custodial and
other costs incurred by a Fund in effecting trades. In addition, the Funds and
the Adviser reserve the right to reject any purchase order at any
time.
Determination
of Net Asset Value
The
NAV of each Fund’s Shares is calculated each day the New York Stock Exchange
(the “NYSE”) is open for trading as of the close of regular trading on the NYSE,
generally 4:00 p.m. Eastern Time (the “NAV Calculation Time”). If the NYSE
closes before 4:00 p.m. Eastern Time, as it occasionally does, the NAV
Calculation Time will be the time the NYSE closes. Each Fund’s NAV per share is
calculated by dividing each Fund’s net assets by the number of Fund Shares
outstanding.
In
calculating its NAV, each Fund generally values its assets on the basis of
market quotations, last sale prices, or estimates of value furnished by a
pricing service or brokers who make markets in such instruments. If such
information is not available for a security held by a Fund or is determined to
be unreliable, the security will be valued by the Adviser at fair value pursuant
to procedures established by the Adviser and approved by the Board (as described
below).
Fair
Value Pricing
The
Board designated the Adviser as the “valuation designee” for the Funds under
Rule 2a-5 of the 1940 Act subject to its oversight. The Adviser and the Trust
have adopted procedures and methodologies to fair value Fund securities whose
market prices are not “readily available” or are deemed to be unreliable. For
example, such circumstances may arise when: (i) a security has been de-listed or
has had its trading halted or suspended; (ii) a security’s primary pricing
source is unable or unwilling to provide a price; (iii) a security’s primary
trading market is closed during regular market hours; or (iv) a security’s value
is materially affected by events occurring after the close of the security’s
primary trading market. Generally, when fair valuing a security, the valuation
designee will take into account all reasonably available information that may be
relevant to a particular valuation including, but not limited to, fundamental
analytical data regarding the issuer, information relating to the issuer’s
business, recent trades or offers of the security, general and/or specific
market conditions and the specific facts giving rise to the need to fair value
the security. Fair value determinations are made in good faith and in accordance
with the fair value methodologies included in the Adviser-approved valuation
procedures. Due to the subjective and variable nature of fair value pricing,
there can be no assurance that the Adviser will be able to obtain the fair value
assigned to the security upon the sale of such security.
Dividends
and Distributions
Each
Fund intends to pay out dividends, if any, and distribute any net realized
capital gains to its shareholders at least annually. Each Fund will declare and
pay capital gain distributions, if any, in cash. Distributions in cash may be
reinvested automatically in additional whole Shares only if the broker through
whom you purchased Shares makes such option available. Your broker is
responsible for distributing the income and capital gain distributions to
you.
Delivery
of Shareholder Documents – Householding
Householding
is an option available to certain investors of each Fund. Householding is a
method of delivery, based on the preference of the individual investor, in which
a single copy of certain shareholder documents can be delivered to investors who
share the same address, even if their accounts are registered under different
names. Householding for each Fund is available through certain broker-dealers.
If you are interested in enrolling in householding and receiving a single copy
of prospectuses and other shareholder documents, please contact your
broker-dealer. If you are currently enrolled in householding and wish to change
your householding status, please contact your broker-dealer.
Investments
by Registered Investment Companies
Section 12
of the 1940 Act restricts investments by registered investment companies in the
securities of other investment companies, including shares of each Fund.
However, registered investment companies are permitted to invest in each Fund
beyond the limits set forth in section 12 when they comply with rules adopted by
the SEC and comply with the necessary conditions.
Taxes
The
following discussion is a summary of some important U.S. federal income tax
considerations generally applicable to investments in the Funds. Your investment
in a Fund may have other tax implications. Please consult your tax advisor about
the tax consequences of an investment in Shares, including the possible
application of foreign, state, and local tax laws. 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. This summary is based on
current tax laws, which may change.
Each
Fund will elect and intends to continue to qualify each year for treatment as a
RIC. If a Fund 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.
Unless
your investment in Shares is made through a tax-exempt entity or tax-advantaged
account, such as an IRA plan, you need to be aware of the possible tax
consequences when a Fund makes distributions, when you sell your Shares listed
on the Exchange; and when you purchase or redeem Creation Units (APs
only).
Taxes
on Distributions
Each
Fund intends to distribute, at least annually, substantially all of its net
investment income and net capital gains. For federal income tax purposes,
distributions of investment income are generally taxable as ordinary income or
qualified dividend income. Taxes on distributions of capital gains (if any) are
determined by how long a Fund owned the investments that generated them, rather
than how long a shareholder has owned his or her Shares. Sales of assets held by
a Fund for more than one year generally result in long-term capital gains and
losses, and sales of assets held by a Fund for one year or less generally result
in short-term capital gains and losses. Distributions of a Fund’s net capital
gain (the excess of net long-term capital gains over net short-term capital
losses) that are reported by such Fund as capital gain dividends (“Capital Gain
Dividends”) will be taxable as long-term capital gains, which for non-corporate
shareholders are subject to tax at reduced rates of up to 20% (lower rates apply
to individuals in lower tax brackets). Distributions of short-term capital gain
will generally be taxable as ordinary income. Dividends and distributions are
generally taxable to you whether you receive them in cash or reinvest them in
additional Shares.
Distributions
reported by the Funds as “qualified dividend income” are generally taxed to
non-corporate shareholders at rates applicable to long-term capital gains,
provided holding period and other requirements are met. “Qualified dividend
income” generally is income derived from dividends paid by U.S. corporations or
certain foreign corporations that are either incorporated in a U.S. possession
or eligible for tax benefits under certain U.S. income tax treaties. In
addition, dividends that the Funds received in respect of stock of certain
foreign corporations may be qualified dividend income if that stock is readily
tradable on an established U.S. securities market. Corporate shareholders may be
entitled to a dividends received deduction for the portion of dividends they
receive from a Fund that are attributable to dividends received by the Funds
from U.S. corporations, subject to certain limitations. A Fund’s investment
strategy may limit the amount of distributions eligible for treatment as
qualified dividend
income
in the hands of non-corporate shareholders or eligible for the dividends
received deduction for corporate shareholders.
Shortly
after the close of each calendar year, you will be informed of the amount and
character of any distributions received from a Fund.
U.S.
individuals with income exceeding specified thresholds are subject to a 3.8% tax
on all or a portion of their “net investment income,” which includes interest,
dividends, and certain capital gains (generally including capital gains
distributions and capital gains realized on the sale of Shares). This 3.8% tax
also applies to all or a portion of the undistributed net investment income of
certain shareholders that are estates and trusts.
In
general, your distributions are subject to federal income tax for the year in
which they are paid. Certain distributions paid in January, however, may be
treated as paid on December 31 of the prior year. Distributions are generally
taxable even if they are paid from income or gains earned by a Fund before your
investment (and thus were included in the Shares’ NAV when you purchased your
Shares).
You
may wish to avoid investing in a Fund shortly before a dividend or other
distribution, because such a distribution will generally be taxable even though
it may economically represent a return of a portion of your investment.
If
you are neither a resident nor a citizen of the United States or if you are a
foreign entity, distributions (other than Capital Gain Dividends) paid to you by
a Fund will generally be subject to a U.S. withholding tax at the rate of 30%,
unless a lower treaty rate applies. Gains from the sale or other disposition of
your Shares generally are not subject to U.S. taxation, unless you are a
nonresident alien individual who is physically present in the U.S. for 183 days
or more per year. A Fund may, under certain circumstances, report all or a
portion of a dividend as an “interest-related dividend” or a “short-term capital
gain dividend,” which would generally be exempt from this 30% U.S. withholding
tax, provided certain other requirements are met. Different tax consequences may
result if you are a foreign shareholder engaged in a trade or business within
the United States or if a tax treaty applies.
Under
legislation generally known as “FATCA” (the Foreign Account Tax Compliance Act),
a Fund is required to withhold 30% of certain ordinary dividends it pays to
shareholders that are foreign entities and that fail to meet prescribed
information reporting or certification requirements.
Each
Fund (or a financial intermediary, such as a broker, through which a shareholder
owns Shares) generally is required to withhold and remit to the U.S. Treasury a
percentage (currently 24%) of the taxable distributions and sale proceeds paid
to any shareholder who fails to properly furnish a correct taxpayer
identification number, who has underreported dividend or interest income, or who
fails to certify that the shareholder is not subject to such withholding.
Taxes
When Shares Are Sold on the Exchange
Provided
that a shareholder holds Shares as capital assets, any capital gain or loss
realized upon a sale of Shares generally is treated as a long-term capital gain
or loss if Shares have been held for more than one year and as a short-term
capital gain or loss if Shares have been held for one year or less. However, any
capital loss on a sale of Shares held for six months or less is treated as
long-term capital loss to the extent of Capital Gain Dividends paid with respect
to such Shares. Any loss realized on a sale will be disallowed to the extent
Shares of a Fund are acquired, including through reinvestment of dividends,
within a 61-day period beginning 30 days before and ending 30 days after the
disposition of Shares. The ability to deduct capital losses may be
limited.
The
cost basis of Shares of a Fund acquired by purchase will generally be based on
the amount paid for the Shares and then may be subsequently adjusted for other
applicable transactions as required by the Code. The difference between the
selling price and the cost basis of Shares generally determines the amount of
the capital gain or loss realized on the sale or exchange of Shares. Contact the
broker through whom you purchased your Shares to obtain information with respect
to the available cost basis reporting methods and elections for your
account.
Taxes
on Purchases and Redemptions of Creation Units
An
AP having the U.S. dollar as its functional currency for U.S. federal income tax
purposes who exchanges securities for Creation Units generally recognizes a gain
or a loss. The gain or loss will be equal to the difference between the value of
the Creation Units at the time of the exchange and the exchanging AP’s aggregate
basis in the securities delivered, plus the amount of any cash paid for the
Creation Units. An AP who exchanges Creation Units for securities will generally
recognize a gain or loss equal to the difference between the exchanging AP’s
basis in the Creation Units and the aggregate U.S. dollar market value of the
securities received, plus any cash received for such Creation Units. The
Internal Revenue Service may assert, however, that a loss that is realized upon
an exchange of securities for Creation Units may not be currently deducted under
the rules governing “wash sales” (for an AP who does not mark-to-market its
holdings), or on the basis that there has been no significant change in economic
position. APs exchanging securities should consult their own tax advisor with
respect to whether the wash sales rule applies and when a loss might be
deductible.
Each
Fund may include a payment of cash in addition to, or in place of, the delivery
of a basket of securities upon the redemption of Creation Units. Such Fund may
sell portfolio securities to obtain the cash needed to distribute redemption
proceeds. This may cause such Fund to recognize investment income and/or capital
gains or losses that it might not have recognized if it had completely satisfied
the redemption in-kind. As a result, such Fund may be less tax efficient if it
includes such a cash payment in the proceeds paid upon the redemption of
Creation Units.
Foreign
Investments by the Funds
Interest
and other income received by the Funds with respect to foreign securities may
give rise to withholding and other taxes imposed by foreign countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. If as of the close of a taxable year more than 50% of the
value of a Fund’s assets consists of certain foreign stock or securities, each
such Fund will be eligible to elect to “pass through” to investors the amount of
foreign income and similar taxes (including withholding taxes) paid by such Fund
during that taxable year. This means that investors would be considered to have
received as additional income their respective Shares of such foreign taxes, but
may be entitled to either a corresponding tax deduction in calculating taxable
income, or, subject to certain limitations, a credit in calculating federal
income tax. If a Fund does not so elect, each such Fund will be entitled to
claim a deduction for certain foreign taxes incurred by such Fund. A Fund (or
your broker) 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.
Net
Investment Income Tax
U.S.
individuals with income exceeding specified thresholds are subject to a 3.8% tax
on all or a portion of their “net investment income,” which includes interest,
dividends, and certain capital gains (generally including capital gains
distributions and capital gains realized on the sale of Shares). This 3.8% tax
also applies to all or a portion of the undistributed net investment income of
certain shareholders that are estates and trusts.
The
foregoing discussion summarizes some of the possible consequences under current
federal tax law of an investment in each Fund. It is not a substitute for
personal tax advice. You also may be subject to state and local tax on Fund
distributions and sales of Fund Shares. Consult your personal tax advisor about
the potential tax consequences of an investment in Fund Shares
under
all applicable tax laws. For more information, please see the section entitled
“Federal Income Taxes” in the SAI.
The
Distributor, Quasar Distributors, LLC, a wholly owned subsidiary of Foreside
Financial Group, LLC (d/b/a ACA Group), is a broker-dealer registered with the
SEC. The Distributor distributes Creation Units for the Funds on an agency basis
and does not maintain a secondary market in Shares. The Distributor has no role
in determining the policies of the Funds or the securities that are purchased or
sold by the Funds. The Distributor’s principal address is 111 East Kilbourn
Avenue, Suite 2200, Milwaukee, Wisconsin 53202.
The
Board has adopted a Distribution and Service Plan (the “Plan”) pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Plan, each Fund is authorized
to pay an amount up to 0.25% of its average daily net assets each year for
certain distribution-related activities and shareholder services.
No
Rule 12b-1 fees are currently paid by the Funds, and there are no plans to
impose these fees. However, in the event Rule 12b-1 fees are charged in the
future, because the fees are paid out of each Fund’s assets, over time these
fees will increase the cost of your investment and may cost you more than
certain other types of sales charges.
The
Adviser, out of its own resources and legitimate profits and without additional
cost to a Fund or its shareholders, may provide cash payments to certain
intermediaries, sometimes referred to as revenue sharing. These payments are in
addition to or in lieu of any amounts payable to financial intermediaries under
the Rule 12b-1 Plan. The Adviser may make revenue sharing payments to
intermediaries for shareholder services or distribution-related services, such
as: marketing support services; access to third party platforms; access to sales
meetings, sales representatives and management representatives of the
intermediary; and inclusion of a Fund on a sales list, including a preferred or
select sales list, and in other sales programs. The Adviser may also pay cash
compensation in the form of finder’s fees that vary depending on the dollar
amount of the Shares sold. From time to time, and in accordance with applicable
rules and regulations, the Adviser may also provide non-cash compensation to
representatives of various intermediaries who sell Shares or provide services to
a Fund’s shareholders. In addition, the Adviser has engaged and pays variable
compensation to an SEC-registered broker-dealer and investment adviser for
consulting services on marketing strategies and for due diligence, education,
training, and support services. The Adviser pays these consulting and support
service fees from its own resources and not from the assets of a
Fund.
The
Funds are new and therefore do not have any information regarding how often
Shares traded on the Exchange at a price above (i.e., at a premium) or below
(i.e., at a discount) the NAV of each Fund.
Shares
are not sponsored, endorsed, or promoted by the Exchange. The Exchange is not
responsible for, nor has it participated in, the determination of the timing of,
prices of, or quantities of the Shares to be issued, nor in the determination or
calculation of the equation by which the Shares are redeemable. The Exchange has
no obligation or liability to owners of the Shares in connection with the
administration, marketing, or trading of the Shares.
Without
limiting any of the foregoing, in no event shall the Exchange have any liability
for any lost profits or indirect, punitive, special, or consequential damages
even if notified of the possibility thereof.
The
Adviser, the Exchange, and each Fund make no representation or warranty, express
or implied, to the owners of Shares or any member of the public regarding the
advisability of investing in securities generally or in the Funds
particularly.
Shareholder
Derivative Actions
The
governing instruments of the Funds state that shareholders have power to the
same extent as the stockholders of a Massachusetts business corporation as to
whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or the shareholders.
The
Trust’s Declaration of Trust provides that the Business Litigation Section of
the Superior Court of the Commonwealth of Massachusetts sitting in Suffolk
County, Massachusetts shall be the exclusive forum in which certain types of
litigation may be brought. Any person purchasing or otherwise acquiring or
holding any interest in shares of beneficial interest of the Trust shall be (i)
deemed to have notice of and consented to the provisions of this provision, and
(ii) deemed to have waived any argument relating to the inconvenience of the
judicial forum referenced above in connection with any action or proceeding
described in provision. This provision does not apply to federal security law
claims.
Financial
highlights are not shown for any Fund as the Funds have not commenced operations
as of the date of this Prospectus.
