ck0000811030-20221031
STATEMENT
OF ADDITIONAL INFORMATION
February
28, 2023
CONGRESS
MID CAP GROWTH FUND
Retail
Class – Ticker:
CMIDX
Institutional
Class – Ticker:
IMIDX
CONGRESS
LARGE CAP GROWTH FUND
Retail
Class – Ticker:
CAMLX
Institutional
Class – Ticker:
CMLIX
CONGRESS
SMALL CAP GROWTH FUND
Retail
Class – Ticker: CSMVX
Institutional
Class – Ticker: CSMCX
2
Seaport Lane
Boston,
Massachusetts 02210
1-888-688-1299
This
Statement of Additional Information (“SAI”) is not a prospectus, and it should
be read in conjunction with the Prospectus dated February 28,
2023,
as may be revised, of the Congress Mid Cap Growth Fund (the “Mid Cap Fund”), the
Congress Large Cap Growth Fund (the “Large Cap Fund”), and the Congress Small
Cap Growth Fund (the “Small Cap Fund,”) together with the “Mid Cap Fund,” and
the “Large Cap Fund,” (the “Funds”), advised by Congress Asset Management
Company, LLP (the “Advisor”), each a series of Professionally Managed Portfolios
(the “Trust”). A copy of the Funds’ Prospectus is available by calling the
number listed above.
Some
of the financial information in this SAI relating to the Congress Large Cap
Growth Fund is that of the Century Shares Trust, a series of Century Capital
Management Trust (the “Accounting Survivor”), which was acquired by the Congress
Large Cap Growth Fund in a reorganization that was effective on
September 15, 2017 (the “Reorganization”). Upon completion of the
Reorganization, the Congress Large Cap Growth Fund assumed the performance,
financial and other historical accounting information of the Accounting
Survivor, including the adoption of the Accounting Survivor’s fiscal year end of
October 31.
The
Funds’ most recent Annual Report to shareholders for the year ended October 31,
2022
is available, without charge, upon request by calling the number listed above.
The financial statements, accompanying notes and report of independent
registered public accounting firm, Tait, Weller & Baker LLP, appearing in
the Annual Report are incorporated into this SAI by reference to the Funds’
Annual Report as filed with the Securities and Exchange Commission (“SEC”).
THE
TRUST
The
Trust is a Massachusetts business trust organized on February 24, 1987 and
is registered with the Securities and Exchange Commission (“SEC”) as an open-end
management investment company. Prior to May 1991, the Trust was known as
the Avondale Investment Trust. The Trust’s Agreement and Declaration of Trust
(the “Declaration of Trust”) permits the Trust’s Board of Trustees (the “Board”)
to issue an unlimited number of full and fractional shares of beneficial
interest, without par value, which may be issued in any number of series. The
Trust consists of various series that represent separate investment portfolios.
The Board may, from time to time, issue other series, the assets and liabilities
of which will be separate and distinct from any other series. This SAI relates
only to the Funds.
The
shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Trust.
The
Declaration of Trust also provides for indemnification and reimbursement of
expenses out of the Funds’ assets for any shareholder held personally liable for
obligations of the Funds or the Trust. The Declaration of Trust provides that
the Trust shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the Funds or the Trust and satisfy any
judgment thereon. All such rights are limited to the assets of the Funds. The
Declaration of Trust further provides that the Trust may maintain appropriate
insurance (for example, fidelity bonding and errors and omissions insurance) for
the protection of the Trust, its shareholders, trustees, officers, employees and
agents to cover possible tort and other liabilities. However, the activities of
the Trust as an investment company would not likely give rise to liabilities in
excess of the Trust’s total assets. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which both inadequate insurance exists and the Funds themselves are unable to
meet its obligations.
Retail
and Institutional Class shares of the Mid Cap Fund commenced operations on
October 31, 2012.
Retail
Shares of the Large Cap Fund commenced operations on March 31, 2009. Prior
to April 30, 2010, the Large Cap Fund’s Retail Shares were an unnamed
class of shares. Institutional Shares of the Large Cap Fund commenced operations
on April 30, 2010. Prior to April 30, 2012, Retail Shares were known
as Class R Shares and Institutional Shares were known as Class I
Shares. The Accounting Survivor commenced operations in March 1928. As of the
date of the Reorganization, the Accounting Survivor did not have any Retail
Class shares outstanding.
The
Century Small Cap Select Fund (the “Predecessor Fund”) was organized as a
diversified series of Century Capital Management Trust in August 1999, with
the Institutional Class commencing operations on December 9, 1999 and the
Investor Class commencing operations on February 24, 2000. Effective at the
close of business on September 15, 2017, the Predecessor Fund reorganized
into a newly formed series of the Trust named the Congress Small Cap Growth
Fund. The Predecessor Fund’s Institutional Class reorganized into the Small Cap
Fund’s Institutional Class and the Predecessor Fund’s Investor Class reorganized
into the Small Cap Fund’s Retail Class. The Predecessor Fund’s fiscal year was
from November 1 to October 31.
The
Funds do not hold themselves out as related to any other series within the Trust
for purposes of investment and investor services, nor do they share the same
investment advisor with any other series of the Trust. Effective
September 15, 2017, the Mid Cap Fund and the Large Cap Fund changed their
fiscal years to commence on November 1 and end on October 31, each year.
The Small Cap Fund’s fiscal year is from November 1 to October 31. The
Funds’ Prospectus and this SAI are a part of the Trust’s Registration Statement
filed with the SEC. Copies of the Trust’s complete Registration Statement may be
obtained from the SEC upon payment of the prescribed fee or may be accessed free
of charge at the SEC’s website at www.sec.gov.
The
Funds are diversified. This means that as to 75% of its total assets, a Fund may
not invest more than 5% of its total assets in the securities of a single issuer
or hold more than 10% of the outstanding voting securities of a single issuer.
Under applicable federal securities laws, the diversification of a mutual fund’s
holdings is measured at the time a Fund purchases a security. If a Fund
purchases a security and holds it for a period of time, the security may become
a larger percentage of the Fund’s total assets due to movements in the financial
markets. If the market affects several securities held by a Fund, that Fund may
have a greater percentage of its assets invested in securities of fewer issuers.
The Fund would then be subject to the risk that its performance may be hurt
disproportionately by the poor performance of relatively few securities despite
the Fund qualifying as a diversified fund under applicable federal securities
laws.
All
percentage limitations on investments will apply at the time of investment and
will not be considered violated unless an excess or deficiency occurs or exists
immediately after and as a result of the investment. As a result, the actual
investments making up a Fund’s portfolio may not at a particular time comport
with any such limitation due to increases or decreases in the values of
securities or market capitalizations of the issuers of securities held by the
Fund.
The
following information supplements the discussion of the Funds’ principal
investment strategies as set forth in the combined Prospectus. The Funds may
invest in the following types of investments, each of which is subject to
certain risks, as discussed below.
Market
and Regulatory Risk.
Events
in the financial markets and economy may cause volatility and uncertainty and
affect performance. Such adverse effect on performance could include a decline
in the value and liquidity of securities held by the Fund, unusually high and
unanticipated levels of redemptions, an increase in portfolio turnover, a
decrease in net asset value (“NAV”), and an increase in Fund expenses. It may
also be unusually difficult to identify both investment risks and opportunities,
in which case investment objectives may not be met. Market events may affect a
single issuer, industry, sector, or the market as a whole. Traditionally liquid
investments may experience periods of diminished liquidity. During a general
downturn in the financial markets, multiple asset classes may decline in value
and the Fund may lose value, regardless of the individual results of the
securities and other instruments in which the Fund invests. It is impossible to
predict whether or for how long such market events will continue, particularly
if they are unprecedented, unforeseen or widespread events or conditions,
pandemics, epidemics, and other similar circumstances in one or more countries
or regions. Therefore, it is important to understand that the value of your
investment may fall, sometimes sharply and for extended periods, and you could
lose money.
Governmental
and regulatory actions, including tax law changes, may also impair portfolio
management and have unexpected or adverse consequences on particular markets,
strategies, or investments. Policy and legislative changes in the United States
and in other countries are affecting many aspects of financial regulation, and
may in some instances contribute to decreased liquidity and increased volatility
in the financial markets. The impact of these changes on the markets, and the
practical implications for market participants, may not be fully known for some
time. In addition, economies and financial markets throughout the world are
becoming increasingly interconnected. As a result, whether or not the Fund
invests in securities of issuers located in or with significant exposure to
countries experiencing economic and financial difficulties, the value and
liquidity of the Fund’s investments may be negatively affected.
Equity
Securities.
Common
stocks, preferred stocks and convertible securities are examples of equity
securities in which the Funds may invest. All investments in equity securities
are subject to market risks that may cause their prices to fluctuate over time.
Historically, the equity markets have moved in cycles and the value of the
securities in a
Fund’s
portfolio may fluctuate substantially from day to day. Owning an equity security
can also subject the Funds to the risk that the issuer may discontinue paying
dividends.
Common
Stocks.
Common
stocks represent a proportionate share of the ownership of a company and its
value is based on the success of the company’s business, any income paid to
stockholders, the value of its assets, and general market conditions. In
addition to the general risks set forth above, investments in common stocks are
subject to the risk that in the event a company in which a Fund invests is
liquidated, the holders of preferred stock and creditors of that company will be
paid in full before any payments are made to a Fund as a holder of common stock.
It is possible that all assets of that company will be exhausted before any
payments are made to a Fund.
Preferred
Stocks.
Preferred
stock generally has a preference as to dividends and upon liquidation over an
issuer’s common stock but ranks junior to other income securities in an issuer’s
capital structure. Preferred stock generally pays dividends in cash (or
additional shares of preferred stock) at a defined rate but, unlike interest
payments on other income securities, preferred stock dividends are payable only
if declared by the issuer’s board of directors. Dividends on preferred stock may
be cumulative, meaning that, in the event the issuer fails to make one or more
dividend payments on the preferred stock, no dividends may be paid on the
issuer’s common stock until all unpaid preferred stock dividends have been paid.
Preferred stock also may provide that, in the event the issuer fails to make a
specified number of dividend payments, the holders of the preferred stock will
have the right to elect a specified number of directors to the issuer’s board.
Preferred stock also may be subject to optional or mandatory redemption
provisions.
Convertible
Securities.
Traditional
convertible securities include corporate bonds, notes and preferred stocks that
may be converted into or exchanged for common stock, and other securities that
also provide an opportunity for equity participation. These securities are
convertible either at a stated price or a stated rate (that is, for a specific
number of shares of common stock or other security). As with other fixed income
securities, the price of a convertible security generally varies inversely with
interest rates. While providing a fixed income stream, a convertible security
also affords the investor an opportunity, through its conversion feature, to
participate in the capital appreciation of the common stock into which it is
convertible. As the market price of the underlying common stock declines,
convertible securities tend to trade increasingly on a yield basis and so may
not experience market value declines to the same extent as the underlying common
stock. When the market price of the underlying common stock increases, the price
of a convertible security tends to rise as a reflection of higher yield or
capital appreciation. In such situations, the Funds may have to pay more for a
convertible security than the value of the underlying common stock.
Smaller
Company Equity Securities.
As
discussed in the Prospectus, the Funds invest in the equity securities of
companies with small market capitalizations. Such investments may involve
greater risk than is usually associated with larger, more established companies.
These companies often have sales and earnings growth rates that exceed those of
companies with larger market capitalization. Such growth rates may in turn be
reflected in more rapid share price appreciation. However, companies with small
market capitalizations often have limited product lines, markets or financial
resources and may be dependent upon a relatively small management group. These
securities may have limited marketability and may be subject to more abrupt or
erratic movements in price than securities of companies with larger market
capitalizations or market averages in general. Therefore, to the extent the
Funds invest in securities with small market capitalizations, the net asset
value of a Fund may fluctuate more widely than market averages.
Other
Investment Companies.
Each
Fund may invest in the securities of other registered investment companies,
including money market mutual funds, subject to the limitations set forth in the
Investment Company Act of 1940, as amended, (the “1940 Act”). Investments in the
securities of other investment companies may involve duplication of advisory
fees and certain other expenses. By investing in another investment company, a
Fund becomes a shareholder of that investment company. As a result, Fund
shareholders indirectly will bear a Fund’s proportionate share of the fees and
expenses paid by shareholders of the other investment company, in addition to
the fees and expenses Fund shareholders directly bear in connection with the
Fund’s own operations.
Each
Fund currently intends to limit its investments in securities issued by other
investment companies so that not more than 3% of the outstanding voting stock of
any one investment company (other than money market fund) will be owned by a
Fund, or it affiliated persons, as a whole. In addition to the advisory and
operational fees a Fund bears directly in connection with its own operation, the
Fund would also bear its pro rata portion of each other investment company’s
advisory and operational expenses.
Section
12(d)(1)(A) of the 1940 Act restricts investments by registered investment
companies in securities of other registered investment companies. The
acquisition of shares by the Funds in other registered investment companies is
therefore subject to the restrictions of Section 12(d)(1) of the 1940 Act,
except as may be permitted by Rule and/or an exemptive order obtained by the
other registered investment companies that permits the Funds to invest in the
other registered investment companies beyond the limits of Section 12(d)(1),
subject to certain terms and conditions, including that the Funds enter into an
agreement with the other registered investment companies regarding the terms of
the investment.
In
accordance with Section 12(d)(1)(F) and Rule 12d1-3 of the 1940 Act, the
provisions of Section 12(d)(1) shall not apply to securities purchased or
otherwise acquired by a Fund if (i) immediately after such purchase or
acquisition not more than 3% of the total outstanding stock of such registered
investment company (other than money market funds) is owned by the Fund and all
affiliated persons of the Fund; and (ii) the Fund is not proposing to offer
or sell any security issued by it through a principal underwriter or otherwise
at a public or offering price including a sales load or service fee that exceeds
the limits set forth in Rule 2341 of the Conduct Rules of the Financial Industry
Regulatory Authority (“FINRA”) applicable to a fund of funds (e.g.,
8.5%).
The
SEC has
adopted revisions to the rules permitting funds to invest in other investment
companies to streamline and enhance the regulatory framework applicable to fund
of funds arrangements. While Rule 12d1-4 permits
more types of fund of fund arrangements without an exemptive order, it imposes
new conditions, including limits on control and voting of acquired funds’
shares, evaluations and findings by investment advisers, fund investment
agreements, and limits on most three-tier fund structures.
Exchange-Traded
Funds.
The
Fund may also invest in shares of exchange-traded funds (“ETFs”). ETFs are
typically open-end investment companies that are bought and sold on a national
securities exchange. An ETF is similar to a traditional mutual fund but trades
at different prices during the day on a securities exchange like a
stock.
Similar
to investments in other investment companies discussed above, the Fund’s
investments in ETFs will involve duplication of advisory fees and other expenses
since the Fund will be investing in another investment company. In addition, the
Fund’s investment in ETFs is also subject to its limitations on investments in
investment companies discussed above. To the extent the Fund invests in ETFs
which focus on a particular market segment or industry, the Fund will also be
subject to the risks associated with investing in those sectors or industries.
The shares of the ETFs in which the Fund will invest will be listed on a
national securities exchange and the Fund will purchase and sell these shares on
the secondary market at their current market price, which may be more or less
than their net asset value (“NAV”). Investors in the Fund should be aware that
index-based ETFs are subject to “tracking
risk,”
which is the risk that an ETF will not be able to replicate exactly the
performance of the index it tracks.
As
a purchaser of ETF shares on the secondary market, the Fund are subject to the
market risk associated with owning any security whose value is based on market
price. ETF shares historically have tended to trade at or near their NAV, but
there is no guarantee that they will continue to do so. Unlike traditional
mutual funds, shares of an ETF may be purchased and redeemed directly from the
ETF only in large blocks and only through participating organizations that have
entered into contractual agreements with the ETF. The
Fund does not expect to enter into such agreements and therefore will not be
able to purchase and redeem its ETF shares directly from the ETF’s
issuers.
Foreign
Securities.
The
Funds may invest their assets in U.S. dollar-denominated foreign equity
securities including in American Depositary Receipts (“ADRs”) and Global
Depositary Receipts (“GDRs”) issued by U.S. depository banks, which are traded
on U.S. exchanges. The Mid Cap Fund and the Large Cap Fund may each invest up to
20% of its total assets in foreign securities. The Small Cap Fund may invest in
foreign securities without limit, but such investments are not expected to
exceed 20% of the Small Cap Fund’s total assets. In determining whether a
company is foreign, the Advisor will consider various factors including where
the company is headquartered, where the company’s principal operations are
located, where the company’s revenues are derived, where the principal trading
market is located and the country in which the company is legally organized. The
weight given to each of these factors will vary depending upon the
circumstances. Investments in foreign securities may involve a greater degree of
risk than those in domestic securities.
ADRs
in registered form are dollar‑denominated securities designed for use in the
U.S. securities markets. ADRs are sponsored and issued by domestic banks and
they represent and may be converted into underlying foreign securities deposited
with the domestic bank or a correspondent bank. ADRs do not eliminate the risks
inherent in investing in the securities of foreign issuers. By investing in ADRs
rather than directly in the foreign security, however, a Fund may avoid currency
risk during the settlement period for either purchases or sales. There is a
large, liquid market in the United States for most ADRs. GDRs are receipts
representing an arrangement with a major foreign bank similar to that for ADRs.
GDRs are not necessarily denominated in the currency of the underlying security.
Securities
of foreign companies 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. Many foreign countries lack uniform accounting and
disclosure standards comparable to those applicable to U.S. companies, and it
may be more difficult to obtain reliable information regarding an issuer’s
financial condition and operations.
Brexit.
Uncertainties
surrounding the sovereign debt of a number of European Union (“EU”) countries
and the viability of the EU have disrupted and may in the future disrupt markets
in the United States and around the world. If one or more countries leave the EU
or the EU dissolves, the world’s securities markets likely will be significantly
disrupted. In January 2020, the United Kingdom (“UK”) left the EU, commonly
referred to as “Brexit,” and the UK ceased to be a member of the EU. Following a
transition period during which the EU and the UK Government engaged in a series
of negotiations regarding the terms of the UK’s future relationship with the EU,
the EU and the UK Government signed an agreement on December 30, 2020 regarding
the economic relationship between the UK and the EU. This agreement became
effective on May 1, 2021. The UK and the EU also negotiated a Memorandum of
Understanding, which creates a framework for voluntary regulatory cooperation in
financial services between the UK and the EU. There is significant market
uncertainty regarding Brexit’s ramifications, and the range and potential
implications of possible political, regulatory, economic, and market outcomes
are difficult to predict. This long-term uncertainty may affect other countries
in the EU and elsewhere, and may cause volatility within the EU, triggering
prolonged economic downturns in certain European countries. In addition, Brexit
may create additional and substantial economic stresses for the UK,
including
a contraction of the UK economy and price volatility in UK stocks, decreased
trade, capital outflows, devaluation of the British pound, wider corporate bond
spreads due to uncertainty, and declines in business and consumer spending as
well as foreign direct investment. Brexit may also adversely affect UK-based
financial firms that have counterparties in the EU or participate in market
infrastructure (trading venues, clearing houses, settlement facilities) based in
the EU. These events and the resulting market volatility may have an adverse
effect on the performance of a Fund.
Commercial
Paper and Short-Term Notes.
The
Funds may invest a portion of their assets in commercial paper and short‑term
notes. Commercial paper consists of unsecured promissory notes issued by
companies. Issues of commercial paper and short‑term notes will normally have
maturities of less than nine months and fixed rates of return, although such
instruments may have maturities of up to one year.
Commercial
paper and short-term notes will consist of issues rated at the time of purchase
“A‑2” or higher by Standard & Poor’s Ratings Group or “Prime‑1” or “Prime‑2”
by Moody’s Investors Service, Inc., similarly rated by another nationally
recognized statistical rating organization or, if unrated, will be determined by
the Advisor to be of comparable quality. These rating symbols are described in
Appendix A.
Certificates
of Deposit, Bankers’ Acceptances and Time Deposits.
The
Funds may hold certificates of deposit, bankers’ acceptances and time deposits.
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers’ acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are “accepted” by a bank, meaning in effect that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Certificates of deposit and bankers’ acceptances acquired by the Funds will be
dollar-denominated obligations of domestic banks, savings and loan associations
or financial institutions if the principal amount of such bank obligations are
fully insured by the U.S. government.
In
addition to buying certificates of deposit and bankers’ acceptances, the Funds
also may make interest-bearing time or other interest-bearing deposits in
commercial or savings banks. Time deposits are non-negotiable deposits
maintained at a banking institution for a specified period of time at a
specified interest rate.
Corporate
Debt Securities.
Corporate
debt securities include, but are not limited to, debt obligations offered by
public or private corporations either registered or unregistered. The market
value of such securities may fluctuate in response to interest rates and the
creditworthiness of the issuer. The ratings of debt securities are described in
Appendix A.
U.S.
Treasury Securities.
The
Small Cap Fund may invest in U.S. Treasuries. U.S. Treasury securities are
direct obligations of the U.S. government and are backed by the full faith and
credit of the U.S. Treasury. U.S. Treasury securities differ only in their
interest rates, maturities, and dates of issuance. Treasury Bills have
maturities of one year or less. Treasury Notes have maturities of one to ten
years, and Treasury Bonds generally have maturities of greater than ten years at
the date of issuance. Yields on short-, intermediate-, and long-term U.S.
Treasury securities are dependent on a variety of factors, including the general
conditions of the money and bond markets, the size of a particular offering, and
the maturity of the obligation.
Illiquid
Investments and Restricted Securities.
Pursuant
to Rule 22e-4 under the 1940 Act, a Fund may not acquire any “illiquid
investment” if, immediately after the acquisition, the Fund would have invested
more than 15% of its net assets in illiquid investments that are assets. An
“illiquid investment” is any investment that a Fund reasonably expects cannot be
sold or disposed of in current market conditions in seven calendar days or less
without the sale or disposition significantly changing the market value of the
investment. Each Fund has implemented a liquidity risk management program
and
related procedures to identify illiquid investments pursuant to Rule 22e-4. The
15% limits are applied as of the date a Fund purchases an illiquid investment.
It is possible that a Fund’s holding of illiquid investment could exceed the 15%
limit, for example as a result of market developments or
redemptions.
Each
Fund may purchase certain restricted securities that can be resold to
institutional investors and which may be determined not to be illiquid
investments pursuant to the Fund’s liquidity risk management program. In many
cases, those securities are traded in the institutional market under Rule 144A
under the 1933 Act and are called Rule 144A securities.Investments in illiquid
investments involve more risks than investments in similar securities that are
readily marketable. Illiquid investments may trade at a discount from
comparable, more liquid investments. Investment of a Fund’s assets in illiquid
investments may restrict the ability of the Fund to dispose of its investments
in a timely fashion and for a fair price as well as its ability to take
advantage of market opportunities. The risks associated with illiquidity will be
particularly acute where a Fund’s operations require cash, such as when the Fund
has net redemptions, and could result in the Fund borrowing to meet short-term
cash requirements or incurring losses on the sale of illiquid
investments.Illiquid investments are often restricted securities sold in private
placement transactions between issuers and their purchasers and may be neither
listed on an exchange nor traded in other established markets. In many cases,
the privately placed securities may not be freely transferable under the laws of
the applicable jurisdiction or due to contractual restrictions on resale. To the
extent privately placed securities may be resold in privately negotiated
transactions, the prices realized from the sales could be less than those
originally paid by a Fund or less than the fair value of the securities. In
addition, issuers whose securities are not publicly traded may not be subject to
the disclosure and other investor protection requirements that may be applicable
if their securities were publicly traded. If any privately placed securities
held by a Fund are required to be registered under the securities laws of one or
more jurisdictions before being resold, the Fund may be required to bear the
expenses of registration. Private placement investments may involve investments
in smaller, less seasoned issuers, which may involve greater risks than
investments in more established companies. These issuers may have limited
product lines, markets or financial resources, or they may be dependent on a
limited management group. In making investments in private placement securities,
a Fund may obtain access to material non-public information, which may restrict
the Fund’s ability to conduct transactions in those securities.
Repurchase
Agreements.
The
Funds may enter into repurchase agreements. However, each Fund may not invest
more than 15% of its net assets in repurchase agreements. For purposes of the
1940 Act, a repurchase agreement may be deemed to be a loan from a Fund to
the seller of the security subject to the repurchase agreement. Under such
agreements, the seller of the security agrees to repurchase it at a mutually
agreed upon time and price. The repurchase price may be higher than the purchase
price, the difference being income to the Fund, or the purchase and repurchase
prices may be the same, with interest at a stated rate due to the Fund together
with the repurchase price on repurchase. In either case, the income to the Fund
is unrelated to the interest rate on the security itself. Such repurchase
agreements will be made only with banks with assets of $500 million or more
that are insured by the Federal Deposit Insurance Corporation or with government
securities dealers recognized by the Federal Reserve Board and registered as
broker‑dealers with the SEC or exempt from such registration. A Fund will
generally enter into repurchase agreements of short durations, from overnight to
one week, although the underlying securities generally have longer maturities. A
Fund may not enter into a repurchase agreement with more than seven days to
maturity if, as a result, more than 15% of the value of its net assets would be
invested in illiquid securities, including such repurchase
agreements.
Because
a repurchase agreement may be deemed to be a loan under the 1940 Act, it is
not clear whether a court would consider the security acquired by a Fund subject
to a repurchase agreement as being owned by the Fund or as being collateral for
a loan by a Fund to the seller. In the event of the commencement of bankruptcy
or insolvency proceedings with respect to the seller of the security before its
repurchase under a repurchase agreement, a Fund may encounter delays and incur
costs before being able to sell the security. Delays may involve loss of
interest or a decline in price of the security. If a court characterizes the
transaction as a loan, and the Fund has not perfected a security interest in the
security, the Fund may be required to return the security to
the
seller’s estate and be treated as an unsecured creditor of the seller. As an
unsecured creditor, the Fund would be at risk of losing some or all of the
principal and income involved in the transaction. As with any unsecured debt
instrument purchased for the Funds, the Advisor seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
other party, in this case the seller of the security.
Apart
from the risk of bankruptcy or insolvency proceedings, there is also the risk
that the seller may fail to repurchase the security. However, each Fund will
always receive as collateral for any repurchase agreement to which it is a party
securities acceptable to it, the market value of which is equal to at least 100%
of the amount invested by a Fund plus accrued interest, and the Fund will make
payment against such securities only upon physical delivery or evidence of book
entry transfer to the account of its custodian. If the market value of the
security subject to the repurchase agreement becomes less than the repurchase
price (including interest), a Fund will direct the seller of the security to
deliver additional securities so that the market value of all securities subject
to the repurchase agreement will equal or exceed the repurchase price. It is
possible that the Fund will be unsuccessful in seeking to impose on the seller a
contractual obligation to deliver additional securities.
Borrowing.
Currently,
the 1940 Act permits the Funds to borrow money from banks in amounts of up to
one‑third of a Fund’s total assets (including the amount borrowed). To the
extent permitted by the 1940 Act, or the rules and regulations thereunder, a
Fund may also borrow an additional 5% of its total assets without regard to the
foregoing limitation for temporary purposes, such as the clearance of portfolio
transactions. To limit the risks attendant to borrowing, the 1940 Act requires a
Fund to maintain at all times an “asset coverage” of at least 300% of the amount
of its borrowings. Asset coverage means the ratio that the value of a Fund’s
total assets, minus liabilities other than borrowings, bears to the aggregate
amount of all borrowings. Borrowing money to increase a Fund’s investment
portfolio is known as “leveraging.” Borrowing, especially when used for
leverage, may cause the value of a Fund’s shares to be more volatile than if the
Fund did not borrow. This is because borrowing tends to magnify the effect of
any increase or decrease in the value of a Fund’s portfolio holdings. Borrowed
money thus creates an opportunity for greater gains, but also greater losses. To
repay borrowings, a Fund may have to sell securities at a time and at a price
that is unfavorable to the Fund. There also are costs associated with borrowing
money, and these costs would offset and could eliminate the Fund's net
investment income in any given period.
The
use of borrowing by a Fund involves special risk considerations that may not be
associated with other funds having similar objectives and policies. Since
substantially all of a Fund’s assets fluctuate in value, while the interest
obligation resulting from a borrowing will be fixed by the terms of the Fund’s
agreement with its lender, the net asset value per share of the Fund will tend
to increase more when its portfolio securities increase in value and to decrease
more when its portfolio assets decrease in value than would otherwise be the
case if the Fund did not borrow funds. In addition, interest costs on borrowings
may fluctuate with changing market rates of interest and may partially offset or
exceed the return earned on borrowed funds. Under adverse market conditions, a
Fund might have to sell portfolio securities to meet interest or principal
payments at a time when fundamental investment considerations would not favor
such sales. Each Fund will reduce its borrowing amount within three days, if
that Fund’s asset coverage falls below the amount required by the 1940
Act.
Securities
Lending.
Each
Fund reserves the right, pending receipt of Board approval, to lend securities
from its portfolio to brokers, dealers and financial institutions (but not
individuals) in order to increase the return on its portfolio, subject to a
maximum of 33% of a Fund’s total assets. The SEC currently requires that the
following conditions must be met whenever a Fund’s portfolio securities are
loaned: (1) the Fund must receive at least 100% cash collateral from the
borrower; (2) the borrower must increase such collateral whenever the
market value of the securities rises above the level of such collateral;
(3) the Fund must be able to terminate the loan at any time; (4) the
Fund must receive reasonable interest on the loan, as well as any dividends,
interest or other distributions on the loaned securities, and any increase in
market value; (5) the Fund may pay only reasonable custodian fees
approved
by the Board in connection with the loan; (6) while voting rights on the
loaned securities may pass to the borrower, the Board must terminate the loan
and regain the right to vote the securities if a material event adversely
affecting the investment occurs, and (7) the Fund may not loan its
portfolio securities so that the value of the loaned securities is more than
one‑third of its total asset value, including collateral received from such
loans. These conditions may be subject to future modification. Such loans will
be terminable at any time upon specified notice. The Funds might experience the
risk of loss if the institution with which they have engaged in a portfolio loan
transaction breaches its agreement with the Funds. In addition, the Funds will
not enter into any portfolio security lending arrangement having a duration of
longer than one year. The principal risk of portfolio lending is potential
default or insolvency of the borrower. In either of these cases, the Funds could
experience delays in recovering securities or collateral or could lose all or
part of the value of the loaned securities. As part of participating in a
lending program, the Funds may be required to invest in collateralized debt or
other securities that bear the risk of loss of principal. In addition, all
investments made with the collateral received are subject to the risks
associated with such investments. If such investments lose value, the Funds will
have to cover the loss when repaying the collateral.
Any
loans of portfolio securities are fully collateralized based on values that are
marked‑to‑market daily. Any securities that the Funds may receive as collateral
will not become part of the Funds’ investment portfolio at the time of the loan
and, in the event of a default by the borrower, the Funds will, if permitted by
law, dispose of such collateral except for such part thereof that is a security
in which the Funds are permitted to invest. During the time securities are on
loan, the borrower will pay the Funds any accrued income on those securities,
and the Funds may invest the cash collateral and earn income or receive an
agreed‑upon fee from a borrower that has delivered cash-equivalent
collateral.
Reverse
Repurchase Agreements.
The
Funds may borrow funds for temporary purposes by entering into reverse
repurchase agreements in accordance with each Fund’s investment restrictions.
Pursuant to such agreements, a Fund would sell portfolio securities to financial
institutions such as banks and broker-dealers and agree to repurchase the
securities at the mutually agreed-upon date and price. The Funds would enter
into reverse repurchase agreements only to avoid otherwise selling securities
during unfavorable market conditions to meet redemptions. Rule 18f-4 under the
1940 Act permits a Fund to enter into reverse repurchase agreements, provided
that the Fund treats the reverse repurchase agreements as a borrowing subject to
the asset coverage requirements under the 1940 Act (see “Borrowing"
above).
The
use of reverse repurchase agreements by a Fund creates leverage which increases
the Fund’s investment risk. If the income and gains on securities purchased with
the proceeds of reverse repurchase agreements exceed the cost of the agreements,
a Fund’s earnings or NAV will increase faster than otherwise would be the case.
Conversely, if the income and gains fail to exceed the costs, earnings or NAV
would decline faster than otherwise would be the case. The Funds will seek to
enter reverse repurchase agreements only when the interest income to be earned
from the investment of the proceeds of the transaction is greater than the
interest expense of the transaction. Reverse repurchase agreements involve the
risk that the market value of the securities sold by a Fund may decline below
the price at which the Fund is obligated to repurchase the
securities.
Sector
Focus.
The
Funds may invest greater than 25% of their assets in one or more of the
following sectors: consumer discretionary, consumer staples, energy, financials,
health care, industrials, materials, information technology, real estate,
utilities, and communications services. If a Fund’s portfolio is overweighted in
a certain sector, any negative development affecting that sector will have a
greater impact on the Fund than a fund that is not overweighted in that sector.
Information
Technology Risk.
As of October 31,
2022,
the Mid Cap Fund and Large Cap Fund each invested greater than 25% of their
assets in the information technology sector. The information technology sector
can be significantly affected by rapid obsolescence of existing technology,
short
product
cycles, falling prices and profits, competition from new market entrants,
government regulation, and general economic conditions.
Use
of Derivatives, Hedging and Income Transactions.
The
Funds are prohibited from investing in derivatives, excluding certain currency
and interest rate hedging transactions. This restriction is not fundamental and
may be changed by the Funds without a shareholder vote. If the Funds do
determine to invest in derivatives in the future, they will comply with Rule
18f-4 under the 1940 Act.
Special
Risks Related to Cyber Security.
The
Funds and their service providers are susceptible to cyber security risks that
include, among other things, theft, unauthorized monitoring, release, misuse,
loss, destruction or corruption of confidential and highly restricted data;
denial of service attacks; unauthorized access to relevant systems, compromises
to networks or devices that the Funds and their service providers use to service
the Funds’ operations; or operational disruption or failures in the physical
infrastructure or operating systems that support the Funds and their service
providers. Cyber attacks against or security breakdowns of the Funds or their
service providers may adversely impact the Funds and their shareholders,
potentially resulting in, among other things, financial losses; the inability of
Fund shareholders to transact business and the Funds to process transactions;
inability to calculate a Fund’s NAV; violations of applicable privacy and other
laws; regulatory fines, penalties, reputational damage, reimbursement or other
compensation costs; and/or additional compliance costs. The Funds may incur
additional costs for cyber security risk management and remediation purposes. In
addition, cyber security risks may also impact issuers of securities in which
the Funds invest, which may cause the Funds’ investment in such issuers to lose
value. There can be no assurance that the Funds or their service providers will
not suffer losses relating to cyber attacks or other information security
breaches in the future.
Temporary
Defensive Positions.
The
Funds may take temporary defensive measures that are inconsistent with a Fund’s
normal investment policies and strategies in response to adverse market,
economic, political, or other conditions as determined by the Advisor.
Such measures could include, but are not limited to, investments in (1) highly
liquid short-term fixed income securities issued by or on behalf of municipal or
corporate issuers, obligations of the U.S. government and its agencies,
commercial paper, and bank certificates of deposit; (2) repurchase agreements
involving any such securities; and (3) other money market
instruments.
The
Trust (on behalf of the Funds) has adopted the following restrictions as
fundamental policies, which may not be changed without the affirmative vote of
the holders of a “majority” of the outstanding voting securities of the Funds.
Under the 1940 Act, the “vote of the holders of a majority of the outstanding
voting securities” means the vote of the holders of the lesser of (i) 67%
of the shares of the Funds represented at a meeting at which the holders of more
than 50% of the Funds’ outstanding shares are represented or (ii) more than
50% of the outstanding shares of the Funds.
As
a matter of fundamental policy, the Funds may not:
1.With
respect to 75% of its total assets, invest more than 5% of their total assets in
the securities of a single issuer or hold more than 10% of the outstanding
voting securities of a single issuer;
2.As
discussed in more detail on p. B-9, borrow money or issue senior
securities, except through reverse repurchase agreements or otherwise as
permitted under the 1940 Act, as interpreted, modified or otherwise permitted by
regulatory authority. Generally, issuing senior securities is prohibited under
the 1940 Act; however, certain exceptions apply such as in the case of reverse
repurchase agreements, borrowing, and certain other leveraging
transactions;
3.Act
as underwriter (except to the extent the Funds may be deemed to be an
underwriter in connection with the sale of securities in its investment
portfolio);
4.Invest
25% or more of its net assets, calculated at the time of purchase and taken at
market value, in securities of issuers in any one industry or group of
industries (other than U.S. government securities);
5.Purchase
or sell real estate, unless acquired as a result of ownership of securities
(although the Funds may purchase and sell securities that are secured by real
estate and securities of companies that invest or deal in real
estate);
6.Purchase
or sell physical commodities, unless acquired as a result of ownership of
securities or other instruments. This limitation shall not prevent a Fund from
purchasing, selling, or entering into futures contracts, or acquiring securities
or other instruments thereon backed by, or related to, physical commodities;
or
7.Make
loans of money (except purchases of debt securities consistent with the
investment policies of the Funds). For purposes of this limitation, entering
into repurchase agreements, lending securities and acquiring any debt security
are not deemed to be the making of loans.
Although
the Funds generally will not invest for short‑term trading purposes, portfolio
securities may be sold without regard to the length of time they have been held
when, in the opinion of the Advisor, investment considerations warrant such
action. The portfolio turnover rate is calculated by dividing (1) the
lesser of purchases or sales of portfolio securities for a fiscal year by
(2) the monthly average of the value of portfolio securities owned during
such fiscal year. A 100% turnover rate would occur if all the securities in a
Fund’s portfolio, with the exception of securities whose maturities at the time
of acquisition were one year or less, were sold and either repurchased or
replaced within one year. A high rate of portfolio turnover (100% or more)
generally leads to higher transaction costs and may result in a greater number
of taxable transactions. (See “Execution of Portfolio Transactions”)
The
portfolio turnover for the Mid Cap Fund for the following fiscal years is set
forth below.
|
|
|
|
|
| |
| Portfolio
Turnover Rate for the Mid Cap Fund |
Turnover |
| Fiscal
Year Ended October 31, 2022 |
16% |
| Fiscal
Year Ended October 31, 2021 |
14% |
The
portfolio turnover for the Large Cap Fund for the following fiscal years is set
forth below.
|
|
|
|
|
| |
| Portfolio
Turnover Rate for the Large Cap Fund |
Turnover |
| Fiscal
Year Ended October 31, 2022 |
23% |
| Fiscal
Year Ended October 31, 2021 |
19% |
The
portfolio turnover for the Small Cap Fund for the following fiscal years is set
forth below.
|
|
|
|
|
| |
| Portfolio
Turnover Rate for the Small Cap Fund |
Turnover |
| Fiscal
Year Ended October 31, 2022 |
23% |
| Fiscal
Year Ended October 31, 2021 |
50% |
The
Trust, on behalf of the Funds, has adopted a portfolio holdings disclosure
policy that governs the timing and circumstances of disclosure of portfolio
holdings of the Funds. The Advisor has also adopted a policy with respect to
disclosure of portfolio holdings of the Funds (the “Advisor’s Policy”).
Information about the Funds’
portfolio
holdings will not be distributed to any third party except in accordance with
the portfolio holdings policies and the Advisor’s Policy (the “Disclosure
Policies”). The Advisor and the Board considered the circumstances under which
the Funds’ portfolio holdings may be disclosed under the Disclosure Policies and
the actual and potential material conflicts that could arise in such
circumstances between the interests of the Funds’ shareholders and the interests
of the Advisor, distributor or any other affiliated person of the Funds, its
Advisor or its distributor. After due consideration, the Advisor and the Board
determined that the Funds have a legitimate business purpose for disclosing
portfolio holdings to persons described in the Disclosure Policies, including
mutual fund rating or statistical agencies, or persons performing similar
functions, and internal parties involved in the investment process,
administration or custody of the Funds. Pursuant to the Disclosure Policies, the
Trust’s Chief Compliance Officer (“CCO”), President and Treasurer are each
authorized to consider and authorize dissemination of portfolio holdings
information to additional third parties, after considering the best interests of
the Funds' shareholders and potential conflicts of interest in making such
disclosures.
The
Board exercises continuing oversight of the disclosure of the Funds’ portfolio
holdings by (1) overseeing the implementation and enforcement of the
Disclosure Policies, Codes of Ethics and other relevant policies of the Funds
and their service providers by the Trust’s CCO, (2) by considering reports
and recommendations by the Trust’s CCO concerning any material compliance
matters (as defined in Rule 38a‑1 under the 1940 Act), and (3) by
considering to approve any amendment to the Disclosure Policies. The Board
reserves the right to amend the Disclosure Policies at any time without prior
notice to shareholders in its sole discretion.
Disclosure
of the Funds’ complete holdings is required to be made quarterly within
60 days of the end of each period covered by the Annual Report and
Semi‑Annual Report to Fund shareholders and in the quarterly holdings report on
Form N-PORT. These reports are available, free of charge, on the EDGAR
database on the SEC’s website at www.sec.gov. The Funds disclose their month‑end
portfolio holdings on the Funds’ website at www.congressasset.com/funds within
15 business days after the month‑end. The month‑end portfolio holdings for the
Funds will remain posted on the website until the following month‑end portfolio
holdings are posted. Portfolio holdings information posted on the Funds’ website
may be separately provided to any person, commencing on the day after it is
first published on the Funds’ website. In addition, the Funds may provide their
complete portfolio holdings at the same time that it is filed with the
SEC.
In
the event of a conflict between the interests of the Funds and the interests of
the Advisor or an affiliated person of the Advisor, the CCO of the Advisor, in
consultation with the Trust’s CCO, shall make a determination in the best
interests of the Funds, and shall report such determination to the Board at the
end of the quarter in which such determination was made. Any employee of the
Advisor who suspects a breach of this obligation must report the matter
immediately to the Advisor’s CCO or to his or her supervisor.
In
addition, material non‑public holdings information may be provided without lag
as part of the normal investment activities of the Funds to each of the
following entities, which, by explicit agreement or by virtue of their
respective duties to the Funds, are required to maintain the confidentiality of
the information disclosed, including a duty not to trade on non‑public
information: the fund administrator, fund accountant, custodian, transfer agent,
auditors, counsel to the Funds or the Board, broker‑dealers (in connection with
the purchase or sale of securities or requests for price quotations or bids on
one or more securities) and regulatory authorities. Portfolio holdings
information not publicly available with the SEC or through the Funds’ website
may only be provided to additional third parties, including mutual fund ratings
or statistical agencies, in accordance with the Disclosure Policies, when the
Funds have a legitimate business purpose and the third-party recipient is
subject to a confidentiality agreement that includes a duty not to trade on
non‑public information.
In
no event shall the Advisor, its affiliates or employees, the Funds, or any other
party receive any direct or indirect compensation in connection with the
disclosure of information about the Funds’ portfolio holdings.
There
can be no assurance that the Disclosure Policies will protect the Funds from
potential misuse of portfolio holdings information by individuals or entities to
which it is disclosed
From
time to time, the Advisor may make additional disclosure of the Funds’ portfolio
holdings on the Funds’ website. Shareholders can access the Funds’ website at
www.congressasset.com/funds for additional information about the Funds,
including, without limitation, the periodic disclosure of its portfolio
holdings.
The
Board is responsible for the overall management of the Trust, including general
supervision and review of the investment activities of the Funds. The Board, in
turn, elects the officers of the Trust, who are responsible for administering
the day-to-day operations of the Trust and its separate series. The current
trustees and officers of the Trust, their year of birth, positions with the
Trust, terms of office with the Trust and length of time served, their principal
occupations for the past five years and other directorships are set forth in the
table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Name,
Address
And Age |
Position
with
the Trust(1) |
Term
of Office(2) and Length of Time Served |
Principal
Occupation During Past Five Years |
Number
of Portfolios
in Fund Complex(3)
Overseen by Trustees |
Other
Directorships Held During the Past 5 Years |
| Independent
Trustees of the Trust |
Kathleen
T. Barr
(born 1955)
c/o U.S. Bank Global Fund Services
615 East
Michigan Street
Milwaukee, WI 53202 |
Trustee |
Indefinite
Term;
Since November 2018. |
Retired;
Chair of the Governing Council, Independent Directors Council (since
2020); formerly, President, owner of a registered investment adviser,
Productive Capital Management, Inc. (2010 to 2013); formerly, Chief
Administrative Officer, Senior Vice President and Senior Managing Director
of Allegiant Asset Management Company (merged with PNC Capital Advisors,
LLC in 2009); formerly, Chief Administrative Officer, Chief Compliance
Officer and Senior Vice President of PNC Funds and PNC Advantage Funds
(f/k/a Allegiant Funds) (registered investment companies). |
3 |
Independent
Director, Muzinich BDC, Inc. (2019 to present); Independent Trustee for
the William Blair Funds (2013 to present) (19
series). |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Name,
Address
And Age |
Position
with
the Trust(1) |
Term
of Office(2) and Length of Time Served |
Principal
Occupation During Past Five Years |
Number
of Portfolios
in Fund Complex(3)
Overseen by Trustees |
Other
Directorships Held During the Past 5 Years |
Eric
W. Falkeis
(born 1973)
c/o U.S. Bank Global Fund Services
615
East Michigan Street
Milwaukee, WI 53202 |
Trustee
Chairperson |
Indefinite
Term;
Since September 2011.
Indefinite
Term; Since August 2019. |
Chief
Growth Officer, Tidal Financial Group (2022 to present); Chief Executive
Officer, Tidal ETF Services LLC (2018 to present); formerly, Chief
Operating Officer, Direxion Funds (2013 to 2018); formerly, Senior Vice
President and Chief Financial Officer (and other positions), U.S. Bancorp
Fund Services, LLC (1997 to 2013). |
3 |
Interested
Trustee, Tital ETF Trust II (2022 to present) ([ ] series) Independent
Director, Muzinich BDC, Inc. (2019 to present); Interested Trustee, Tidal
ETF Trust (2018 to Present) (36 series); Former Interested Trustee,
Direxion Funds (22 series), Direxion Shares ETF Trust (112 series) and
Direxion Insurance Trust (2013 to 2018). |
Steven
J. Paggioli
(born 1950)
c/o U.S. Bank Global Fund Services
615
East Michigan Street
Milwaukee, WI 53202 |
Trustee |
Indefinite
Term;
Since May 1991. |
Consultant;
formerly, Executive Vice President, Investment Company Administration, LLC
(mutual fund administrator). |
3 |
Independent
Director, Muzinich BDC, Inc. (2019 to present); Independent Trustee, AMG
Funds (1993 to present) (42 series). |
Ashi
S. Parikh
(born 1966)
c/o U.S. Bank Global Fund Services
615 East
Michigan Street
Milwaukee, WI 53202 |
Trustee |
Indefinite
Term;
Since June 2020. |
Investment
professional; formerly, Chief Executive and Chief Investment Officer and
various other positions, RidgeWorth Investments, LLC (global investment
management firm) (2006 to 2017); formerly, Chief Investment Officer
Institutional Growth Equities, Eagle Asset Management (financial advisor);
formerly Sr. Managing Director, Growth Equities, Banc One Investment
Advisors (financial adviser). |
3 |
Board
of Directors Member, Investment Working Group, The Ohio State University
Endowments and Foundation (2016 to present); Board of Directors, World
Methodist Council, Investment Committee (2018 to present); Independent
Trustee, PNC Funds (2018 to 2019) (32 series); Interested Trustee,
RidgeWorth Funds (2014 to 2017) (35
series). |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Name,
Address
And Age |
Position
with
the Trust(1) |
Term
of Office(2) and Length of Time Served |
Principal
Occupation During Past Five Years |
Number
of Portfolios
in Fund Complex(3)
Overseen by Trustees |
Other
Directorships Held During the Past 5 Years |
Cynthia
M. Fornelli
(born 1960)
c/o U.S. Bank Global Fund Services
615
East Michigan Street Milwaukee, WI 53202
|
Trustee |
Indefinite
Term; Since January 2022. |
Independent
Director of TriplePoint Venture Growth BDC Corp. (2019 to present);
Retired; formerly, Executive Director of the Center for Audit Quality
(2007-2019); formerly, Senior Vice President of Regulatory Conflicts
Management at Bank of America (2005-2007); formerly, Deputy Director,
Division of Investment Management with the U.S. Securities and Exchange
Commission (1998-2005). |
3 |
Independent
Director, TriplePoint Private Venture Credit, Inc. (2020 to
present). |
| Officers
of the Trust |
Jason
F. Hadler
(born 1975)
c/o U.S. Bank Global Fund Services
615
East Michigan Street
Milwaukee, WI 53202 |
President
& Principal Executive Officer |
Indefinite
Term; Since September 2021. |
Senior
Vice President and Head of Fund Services Fund Administration Department,
U.S. Bank Global Fund Services since December 2003. |
Not
Applicable. |
Not
Applicable. |
Carl
G. Gee, Esq.
(born 1990)
c/o U.S. Bank Global Fund Services
615
East Michigan Street Milwaukee, WI 53202 |
Secretary
& Vice President |
Indefinite
Term;
Since February 2021. |
Assistant
Secretary of the Trust (2020-2021); Assistant Vice President and Counsel,
U.S. Bank Global Fund Services since August 2016; Summer Associate, Husch
Blackwell LLP (2015); Law Clerk, Brady Corporation (global printing
systems, labels and safety products company) (2014-2015). |
Not
Applicable. |
Not
Applicable. |
Craig
Benton
(born 1985)
c/o U.S. Bank Global Fund Services
615 East
Michigan Street Milwaukee, WI 53202 |
Treasurer
& Vice President |
Indefinite
Term;
Since December 2021. |
Assistant
Treasurer of the Trust (2016-2021); Assistant Vice President, U.S. Bank
Global Fund Services since November 2007. |
Not
Applicable. |
Not
Applicable. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Name,
Address
And Age |
Position
with
the Trust(1) |
Term
of Office(2) and Length of Time Served |
Principal
Occupation During Past Five Years |
Number
of Portfolios
in Fund Complex(3)
Overseen by Trustees |
Other
Directorships Held During the Past 5 Years |
Melissa
Breitzman
(born 1983)
c/o U.S. Bank Global Fund Services
615 East
Michigan Street Milwaukee, WI 53202 |
Assistant
Treasurer |
Indefinite
Term;
Since August 2016. |
Assistant
Vice President, U.S. Bank Global Fund Services since June 2005. |
Not
Applicable. |
Not
Applicable. |
Kyle
J. Buscemi
(born 1996)
c/o U.S. Bank Global Fund Services
615
East Michigan Street
Milwaukee, WI
53202 |
Assistant
Treasurer |
Indefinite
Term;
Since June 2022. |
Mutual
Funds Administrator, U.S. Bank Global Fund Services since June 2018;
Business Administration Student, 2014-2018. |
Not
Applicable. |
Not
Applicable. |
Jennifer
N. Smith
(born 1985)
c/o U.S. Bank Global Fund Services
615 East
Michigan Street
Milwaukee, WI 53202 |
Assistant
Treasurer |
Indefinite
Term; Since February 2023. |
Mutual
Funds Administrator, U.S. Bank Global Fund Services since 2007. |
Not
Applicable. |
Not
Applicable. |
Gazala
Khan
(born 1969)
c/o U.S. Bank Global Fund Services
615 East
Michigan Street Milwaukee, WI 53202 |
Chief
Compliance Officer
Anti-Money
Laundering Officer |
Indefinite
Term;
Since November 2022. |
Vice
President and Compliance Officer, U.S. Bank Global Fund Services since
July 2022; Chief Compliance Officer Matthews Asia Fund (May 2019-July 15,
2022); Chief Compliance Officer GS Trust/VIT (June 2009-May 2019); Vice
President GSAM (May 2005-June 2009); Staff Accountant, SEC Office of
Compliance Inspection and Examination (1999-2005) |
Not
Applicable. |
Not
Applicable. |
(1)All
Trustees of the Trust who are not “interested persons” of the Trust as defined
under the 1940 Act (“Independent Trustees”).
(2)Under
the terms of the Board’s retirement policy, a Trustee shall retire at the end of
the calendar year in which he or she reaches the age of 78.
(3)The
Trust is comprised of numerous series managed by unaffiliated investment
advisers. The term “Fund Complex” applies only to the Funds. The Funds do not
hold themselves out as related to any other series within the Trust for
investment purposes.
Additional
Information Concerning the Board of Trustees
The
Role of the Board
The
Board oversees the management and operations of the Trust. Like all mutual
funds, the day-to-day management and operation of the Trust is the
responsibility of the various service providers to the Trust, such as the
Adviser, the Distributor, the Administrator, the Custodian, and the Transfer
Agent, each of whom is discussed in greater detail in this Statement of
Additional Information. The Board has appointed various senior employees of the
Administrator as officers of the Trust, with responsibility to monitor and
report to the Board on the Trust’s operations. In conducting this oversight, the
Board receives regular reports from these officers and the service providers.
For example, the Treasurer reports as to financial reporting matters and the
President reports as to matters relating to the Trust’s operations. In addition,
the Adviser provides regular reports on the investment strategy and performance
of the Funds. The Board has appointed a Chief Compliance Officer who administers
the Trust’s compliance program and regularly reports to the Board as to
compliance matters. These reports are provided as part of formal “Board
Meetings” which are typically held quarterly, in person, and involve the Board’s
review of recent operations. In addition, various members of the Board also meet
with management in less formal settings, between formal “Board Meetings,” to
discuss various topics. In all cases, however, the role of the Board and of any
individual Trustee is one of oversight and not of management of the day-to-day
affairs of the Trust and its oversight role does not make the Board a guarantor
of the Trust’s investments, operations or activities.
Board
Structure, Leadership
The
Board has structured itself in a manner that it believes allows it to perform
its oversight function effectively. It has established three standing
committees, a Nominating and Governance Committee, an Audit Committee, and a
Qualified Legal Compliance Committee, which are discussed in greater detail
below under “Trust Committees.” The Board is entirely comprised of Trustees who
are Independent Trustees, which are Trustees that are not affiliated with the
Adviser, the principal underwriter, or their affiliates. The Independent
Trustees have engaged their own independent counsel to advise them on matters
relating to their responsibilities in connection with the Trust. The Nominating
and Governance Committee, Audit Committee and Qualified Legal Compliance
Committee are comprised of all of the Independent Trustees. The Chairperson of
the Board is an Independent Trustee. The Board has determined not to combine the
Chairperson position and the principal executive officer position and has
appointed a Vice President of the Administrator as the President of the Trust.
The Board reviews its structure and the structure of its committees annually.
The Board has determined that the structure of the Independent Chairperson, the
composition of the Board, and the function and composition of its various
committees are appropriate means to address any potential conflicts of interest
that may arise.
Board
Oversight of Risk Management
As
part of its oversight function, the Board receives and reviews various risk
management reports and discusses these matters with appropriate management and
other personnel. Because risk management is a broad concept comprised of many
elements (e.g., investment risk, issuer and counterparty risk, compliance risk,
operational risks, business continuity risks, etc.), the oversight of different
types of risks is handled in different ways. For example, the Audit Committee
meets with the Treasurer and the Trust’s independent registered public
accounting firm to discuss, among other things, the internal control structure
of the Trust’s financial reporting function. The Board meets regularly with the
Chief Compliance Officer to discuss compliance and operational risks and how
they are managed. The Board also receives reports from the Adviser as to
investment risks of the Fund. In addition to these reports, from time to time
the Board receives reports from the Administrator and the Adviser as to
enterprise risk management.
Information
about Each Trustee’s Qualification, Experience, Attributes or Skills
The
Board believes that each of the Trustees has the qualifications, experience,
attributes and skills (“Trustee Attributes”) appropriate to their continued
service as Trustees of the Trust in light of the Trust’s business and structure.
In addition to a demonstrated record of business and/or professional
accomplishment, each of the Trustees has served on the Board for a number of
years. They have substantial board experience and, in their service to the
Trust, have gained substantial insight as to the operation of the Trust. They
have demonstrated a commitment to discharging their oversight duties as trustees
in the interests of shareholders. The Board annually conducts a
“self-assessment” wherein the effectiveness of the Board and individual Trustees
is reviewed.
In
addition to the information provided in the chart above, below is certain
additional information concerning each particular Trustee and his/her Trustee
Attributes. The information is not all-inclusive. Many Trustee Attributes
involve intangible elements, such as intelligence, integrity, work ethic, the
ability to work together, the ability to communicate effectively, the ability to
exercise judgment, to ask incisive questions, and commitment to shareholder
interests.
Ms.
Barr’s Trustee Attributes include her substantial mutual fund experience,
including her role as Chair of the Governing Council for the Independent
Directors Council and member of the ICI Board of Governors. She has executive
experience as the former owner of a registered investment adviser (Productive
Capital Management, Inc.), as the Chief Administrative Officer, Senior Vice
President and Senior Managing Director of Allegiant Asset Management Company
(merged with PNC Capital Advisors LLC in 2009), and as the Chief Administrative
Officer, Chief Compliance Officer and Senior Vice President of PNC Funds and PNC
Advantage Funds (f/k/a Allegiant Funds). Ms. Barr also currently serves on the
board of several registered investment companies. Ms. Barr has been determined
to qualify as an Audit Committee financial expert for the Trust. The Board
believes Ms. Barr’s experience, qualifications, attributes or skills on an
individual basis and in combination with those of the other Trustees led to the
conclusion that she possesses the requisite skills and attributes as a Trustee
to carry out oversight responsibilities with respect to the Trust.
Mr.
Falkeis’ Trustee Attributes include his substantial mutual fund experience and
his experience with financial, accounting, investment and regulatory matters
through his former position as Senior Vice President and Chief Financial Officer
(and other positions) of U.S. Bancorp Fund Services, LLC, a full-service
provider to ETFs, mutual funds and alternative investment products. Mr. Falkeis
currently serves as Chief Executive Officer of Tidal ETF Services LLC (2018 to
present), and he has experience consulting with investment advisers regarding
the legal structure of investment companies, distribution channel analysis,
marketing and actual distribution of those funds. Mr. Falkeis also has
substantial managerial, operational and risk oversight experience through his
former positions as Chief Operating Officer and Trustee of the Direxion Funds
and the Direxion Exchange Traded Funds. Mr. Falkeis has been determined to
qualify as an Audit Committee financial expert for the Trust. The Board believes
Mr. Falkeis’ experience, qualifications, attributes or skills on an individual
basis and in combination with those of the other Trustees led to the conclusion
that he possesses the requisite skills and attributes as a Trustee to carry out
oversight responsibilities with respect to the Trust.
Mr.
Paggioli’s Trustee Attributes include his substantial mutual fund and investment
advisory experience. Mr. Paggioli is an independent consultant on investment
company and investment advisory matters. He has held a number of senior
positions with mutual fund and investment advisory organizations and related
businesses, including Executive Vice President, Director and Principal of the
Wadsworth Group (fund administration, distribution transfer agency and
accounting services). He serves on the boards of several investment management
companies and advisory firms. He is a member of the Board of Governors of the
Investment Company Institute and of the Governing Council of the Independent
Directors Council. He has served on various industry association and
self-regulatory committees and formerly worked on the staff of the SEC. Mr.
Paggioli has been determined to qualify as an Audit Committee financial expert
for the Trust. The Board believes Mr. Paggioli’s experience,
qualifications, attributes or skills on an individual basis and in
combination
with those of the other Trustees led to the conclusion that he possesses the
requisite skills and attributes as a Trustee to carry out oversight
responsibilities with respect to the Trust.
Mr. Parikh’s
Trustee Attributes include his substantial investment and executive experience
in the asset management industry, including his position as Chief Executive
Officer and Chief Investment Officer of Ridgeworth Investments (global
investment management firm with over $41 billion in assets). He has also
served as a Trustee of several investment trusts (including private investment
trusts). Mr. Parikh has ongoing responsibility as a member of the
Investment Working Group as part of the Board of Directors for the Ohio State
University Endowments & Foundation, as well as an ongoing position as a
member of the Investment Committee for the World Methodist Council Endowment
Fund (a charitable religious foundation). Mr. Parikh has been determined to
qualify as an Audit Committee financial expert for the Trust. The Board believes
Mr. Parikh possesses the requisite skills and attributes as a Trustee to
carry out oversight responsibilities with respect to the Trust.
Ms.
Fornelli’s Trustee Attributes include her substantial governance, legal,
regulatory and business experience, including her role as an Independent
Director of TriplePoint Venture Growth BDC Corp and TriplePoint Private Venture
Credit, Inc. She has broad leadership experience in strategy formulation,
corporate governance and risk management. She has executive experience as the
Executive Director of Center for Audit Quality (2007-2019), Senior Vice
President of Regulatory and Conflicts Management at Bank of America (2005-2007)
and Deputy Director, Division of Investment Management with the US Securities
and Exchange Commission (1998-2005). Ms. Fornelli has been determined to qualify
as an Audit Committee financial expert for the Trust. The Board believes Ms.
Fornelli’s experience, qualifications, attributes or skills on an individual
basis and in combination with those of the other Trustees led to the conclusion
that she possesses the requisite skills and attributes as a Trustee to carry out
oversight responsibilities with respect to the Trust.
Trust
Committees
The
Trust has three standing committees: the Nominating and Governance Committee,
and the Audit Committee, which also serves as the Qualified Legal Compliance
Committee (“QLCC”).
The
Nominating and Governance Committee, comprised of all of the Independent
Trustees, is responsible for seeking and reviewing candidates for consideration
as nominees for Trustees and meets only as necessary. The Nominating and
Governance Committee has appointed Independent Trustee Kathleen Barr as the
Chairperson of the Committee. The Nominating and Governance Committee will
consider nominees nominated by shareholders. Recommendations for consideration
by shareholders by the Nominating Committee should be sent to the President of
the Trust in writing together with the appropriate biographical information
concerning each such proposed Nominee, and such recommendation must comply with
the notice provisions set forth in the Trust By-Laws. In general, to comply with
such procedures, such nominations, together with all required biographical
information, must be delivered to and received by the President of the Trust at
the principal executive offices of the Trust not later than 120 days and no more
than 150 days prior to the shareholder meeting at which any such nominee would
be voted on. The
Nominating and Governance Committee met one time during the Fund’s last fiscal
year with respect to the Fund.
The
Audit Committee is comprised of all of the Independent Trustees. The Audit
Committee generally meets on a quarterly basis with respect to the various
series of the Trust, and may meet more frequently. The function of the Audit
Committee, with respect to each series of the Trust, is to review the scope and
results of the audit of such series’ financial statements and any matters
bearing on the audit or the financial statements, and to ensure the integrity of
the series’ pricing and financial reporting. The
Audit Committee met one time with respect to the Fund during the Fund’s last
fiscal year.
The
function of the QLCC is to receive reports from an attorney retained by the
Trust of evidence of a material violation by the Trust or by any officer,
director, employee or agent of the Trust. The
QLCC did not meet during the Fund’s last fiscal year with respect to the
Fund.
Trustee
Ownership of Fund Shares and Other Interests
The
following table shows the amount of shares in the Funds and the amount of shares
in other portfolios of the Trust owned by the Trustees as of the calendar year
ended December 31,
2022.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Name |
Dollar
Range of Congress Mid Cap Growth Fund Shares |
Dollar
Range of Congress Large Cap Growth Fund Shares |
Dollar
Range of Congress Small Cap Growth Fund Shares |
Aggregate
Dollar Range of Fund Shares in the Trust |
| Kathleen
T. Barr |
None |
None |
None |
$10,001
- $50,000 |
| Eric
W. Falkeis |
$10,001
- $50,000 |
None |
None |
$50,001-$100,000 |
| Steven
J. Paggioli |
None |
None |
None |
Over
$100,000 |
| Ashi
S. Parikh |
None |
None |
None |
$50,001-$100,000 |
| Cynthia
M. Fornelli |
None |
None |
None |
None |
As
of December 31,
2022,
neither the then Independent Trustees nor members of their immediate family, own
securities beneficially or of record in the Funds, the Advisor, the Funds’
principal underwriter, or any of their affiliates. Accordingly, as of that date,
neither the then Independent Trustees nor members of their immediate family,
have had a direct or indirect interest during the two most recently completed
calendar years, the value of which exceeds $120,000, in the Advisor, the Funds’
principal underwriter or any of its affiliates.
Compensation
Effective
February 16, 2022, Independent Trustees were due to receive an annual retainer
of $142,000 allocated among each of the various portfolios comprising the Trust,
an additional $8,000 per regularly scheduled Board meeting, and an additional
$3,500 per special meeting, paid by the Trust or applicable advisors/portfolios,
as well as reimbursement for expenses incurred in connection with attendance at
Board meetings. The Chairperson of the Board receives an additional annual
retainer of $21,000 also allocated among each of the various portfolios
comprising the Trust. Independent Trustees receive additional fees from the
applicable portfolios for any special meetings at rates assessed by the Trustees
depending on the length of the meeting and whether in-person attendance is
required. All Trustees will be reimbursed for expenses in connection with each
Board meeting attended, which reimbursement is allocated among applicable
portfolios of the Trust. The Trust has no pension or retirement plan. No other
entity affiliated with the Trust pays any compensation to the Trustees. Set
forth below is the rate of compensation received by the following Independent
Trustees for the fiscal year ended. fiscal year ended October 31,
2022.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Name
of Person/Position |
Congress
Mid Cap Growth Fund |
Congress
Large Cap Growth Fund |
Congress
Small Cap Growth Fund |
Pension
or Retirement Benefits Accrued as Part of Fund Expenses |
Estimated
Annual Benefits Upon Retirement |
Total
Compensation from Funds and Fund Complex(1)
Paid to Trustees |
|
Kathleen
T. Barr, Trustee |
$7,665 |
$4,566 |
$4,258 |
None |
None |
$16,489 |
|
|
|
|
|
|
| |
| Eric
W. Falkeis, Trustee |
$8,481 |
$5,383 |
$5,074 |
None |
None |
$18,938 |
|
|
|
|
|
|
| |
| Steve
J. Paggioli, Trustee |
$7,665 |
$4,566 |
$4,258 |
None |
None |
$16,489 |
| Ashi
S. Parikh, Trustee |
$7,665 |
$4,566 |
$4,258 |
None |
None |
$16,489 |
|
Cynthia
M. Fornelli(2) |
$7,665 |
$4,566 |
$4,258 |
None |
None |
$16,489 |
(1)There
are currently numerous unaffiliated portfolios comprising the Trust. The term
“Fund Complex” applies only to the Funds. For the fiscal period ended
October 31, 2021, Trustees’ fees and expenses in the amount of $979,500
were incurred by the Trust.
(2)Prior
to her appointment, Ms. Fornelli was paid as a consultant to the Trust between
January 1, 2021 through December 31, 2021.
Codes
of Ethics
The
Trust and the Advisor have each adopted separate Codes of Ethics under Rule
17j-1 of the 1940 Act. These Codes permit, subject to certain conditions, access
persons of the Advisor to invest in securities that may be purchased or held by
the Fund. The Distributor, as defined below, relies on the principal
underwriter’s exception under Rule 17j-1(c)(3), of the 1940 Act, specifically
where the Distributor is not affiliated with the
Trust
or the Advisor, and no officer, director or general partner of the Distributor
serves as an officer, director or general partner of the Trust or the
Advisor.
The
Board has adopted Proxy Voting Policies and Procedures (“Proxy Policies”) on
behalf of the Trust which delegate the responsibility for voting proxies to the
Advisor, subject to the Board’s continuing oversight. The Proxy Policies require
that the Advisor vote proxies received in a manner consistent with the best
interests of the Funds and its shareholders. The Proxy Policies also require the
Advisor to present to the Board, at least annually, the Advisor’s Proxy Policies
and a record of each proxy voted by the Advisor on behalf of the Funds,
including a report on the resolution of all proxies identified by the Advisor as
involving a conflict of interest.
The
Advisor has adopted Proxy Policies that underscore the Advisor’s concern that
all proxies voting decisions be made in the best interest of the Funds’
shareholders. The Advisor considers each proxy proposal individually and makes
decisions on a case‑by‑case basis. At all times, however, the Advisor will act
in a prudent and diligent manner intended to enhance the economic value of the
assets of a Fund. The Advisor believes that market conditions and other economic
considerations will influence how decisions are made on proxy proposals. Where a
proxy proposal raises a material conflict between the Advisor’s interests and a
Fund’s interests, the Advisor will disclose the conflict to the Board and obtain
the Board’s consent to vote or direct the matter to an independent third party,
selected by the Board, for a vote determination. If the Board’s consent or the
independent third party’s determination is not received in a timely manner, the
Advisor will abstain from voting the proxy. The Advisor’s Policy is attached as
Appendix B.
The
Trust is required to file a Form N‑PX, with each Fund’s complete proxy voting
record for the 12 months ended June 30, no later than August 31 of each year.
Form N‑PX for the Funds will be available without charge, upon request, by
calling toll‑free 1‑888‑688‑1299 and on the SEC’s website at www.sec.gov.
A
principal shareholder is any person who owns of record or beneficially owns 5%
or more of the outstanding shares of a Fund. A control person is any person who
owns beneficially or through controlled companies more than 25% of the voting
securities of a Fund or acknowledges the existence of control. As of
January 31,
2023, the
Trustees and Officers of the Trust as a group did not own more than 1% of the
outstanding shares of the Funds.
As
of January 31,
2023,
the following shareholders were considered to be either a control person or
principal shareholder of the Mid Cap Fund, the Large Cap Fund and the Small Cap
Fund:
Principal
Shareholders of the Congress Mid Cap Growth Fund
Retail
Class Shares
|
|
|
|
|
|
|
|
| |
| Name
and Address |
%
Ownership |
Type
of Ownership |
National
Financial Services LLC
200 Liberty St.
New York, NY
10281-1003
|
67.41% |
Record |
Charles
Schwab & Co, Inc.
211 Main St.
San Francisco, CA
94105-1905
|
15.96% |
Record |
Merrill
Lynch Pierce Fenner & Smith
4800 Deer Lake Dr. E
Jacksonville,
FL 32246-6484 |
5.31% |
Record |
|
|
| |
Institutional
Class Shares
|
|
|
|
|
|
|
|
| |
| Name
and Address |
%
Ownership |
Type
of Ownership |
NFS
LLC FEBO
FIIOC as agent for Qualified Employee Benefit Plans
401K
FINOPS-IC Funds
100 Magellan Way KWIC
Covington, KY
41015-1987 |
30.78% |
Record |
Morgan
Stanley Smith Barney
1 New York Plaza, Floor 12
New York, NY
10004-1932 |
21.31% |
Record |
Charles
Schwab & Co, Inc.
211 Main St.
San Francisco, CA
94105-1905
|
17.57% |
Record |
Band
& Co c/o US Bank NA
1555 N Rivercenter Drive Suite
302
Milwaukee, WI 53212-3958 |
7.12% |
Record |
Principal
Control Persons of the Congress Mid Cap Growth Fund
|
|
|
|
|
|
|
|
| |
| Name
and Address |
%
Ownership |
Type
of Ownership |
National
Financial Services LLC
200 Liberty St.
New York, NY
10281-1003
|
32.14% |
Record |
Principal
Shareholders of the Congress Large Cap Growth Fund
Retail
Class Shares
|
|
|
|
|
|
|
|
| |
| Name
and Address |
%
Ownership |
Type
of Ownership |
Charles
Schwab & Co, Inc.
211 Main St.
San Francisco, CA
94105-1905 |
58.96% |
Record |
|
|
| |
Morgan
Stanley Smith Barney
Harborside Financial Center
Plaza 2, Third
Floor
Jersey City, NJ 07311 |
16.18% |
Record |
Merrill
Lynch Pierce Fenner & Smith
For the Sole Benefit of its
Customers
4800 Deer Lake Drive E
Jacksonville, FL
32246-6484 |
5.21% |
Record |
Institutional
Class Shares
|
|
|
|
|
|
|
|
| |
| Name
and Address |
%
Ownership |
Type
of Ownership |
NFS
LLC FEBO
FIIOC as agent for Qualified Employee Benefit Plans
401K
FINOPS-IC Funds
100 Magellan Way KWIC
Covington, KY
41015-1987 |
23.33% |
Record |
Morgan
Stanley Smith Barney
1 New York Plaza, Floor 12
New York, NY
10004-1932
|
7.24% |
Record |
Charles
Schwab & Co, Inc.
211 Main St.
San Francisco, CA
94105-1905
|
6.20% |
Record |
Principal
Shareholders of the Congress Small Cap Growth Fund
Retail
Class Shares
|
|
|
|
|
|
|
|
| |
| Name
and Address |
%
Ownership |
Type
of Ownership |
National
Financial Services, LLC
499 Washington Blvd Fl 4th
Jersey City, NJ
07310-1995
|
38.09% |
Record |
Charles
Schwab Co. Inc.
211 Main St.
San Francisco, CA
94105-1905
|
32.37% |
Record |
Institutional
Class Shares
|
|
|
|
|
|
|
|
| |
| Name
and Address |
%
Ownership |
Type
of Ownership |
Morgan
Stanley Smith Barney
1 New York Plaza, Floor 12
New York, NY
10004-1932 |
27.73% |
Record |
National
Financial Services, LLC
499 Washington Blvd.
Jersey City, NJ
07310-1995 |
18.70% |
Record |
Wells
Fargo Clearing Services LLC
Special Custody Acct For The
Exclusive
Benefit of Customers
2801 Market Street
Saint Louis, MO
63103-2523 |
15.86% |
Record |
Charles
Schwab Co. Inc.
211 Main St.
San Francisco, CA 94105-1905 |
8.77% |
Record |
|
|
| |
Principal
Control Persons of the Congress Small Cap Growth Fund
|
|
|
|
|
|
|
|
| |
| Name
and Address |
%
Ownership |
Type
of Ownership |
National
Financial Services, LLC
499 Washington Blvd Fl 4th
Jersey City, NJ
07310-1995 |
22.63% |
Record |
As
stated in the Prospectus, investment advisory services are provided to the Funds
by Congress Asset Management Company, LLP, the Advisor, 2 Seaport Lane,
5th
Floor, Boston, MA 02210, pursuant to an investment advisory agreement (the
“Investment Advisory Agreement”). The Investment Advisory Agreement will
continue in effect from year to year only if such continuance is specifically
approved at least annually by the Board or by vote of a majority of the Funds’
outstanding voting securities and by a majority of the Independent Trustees, who
are not parties to the Investment Advisory Agreement or interested persons of
any such party, in each case cast in person at a meeting called for the purpose
of voting on the Investment Advisory Agreement. The Investment Advisory
Agreement is terminable without penalty by the Trust on behalf of the Funds on
not more than 60 days’, nor less than 30 days’, written notice to the Advisor
when authorized either by a majority vote of the Funds’ shareholders or by a
vote of a majority of the Trustees, or by the Advisor on not more than 60 days’,
nor less than 30 days’, written notice to the Trust, and will automatically
terminate in the event of its “assignment” (as defined in the 1940 Act). The
Investment Advisory Agreement provides that the Advisor shall not be liable
under such agreement for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in the execution of
portfolio transactions for the Funds, except for willful misfeasance, bad faith
or gross negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties thereunder.
In
consideration of the services provided by the Advisor pursuant to the Investment
Advisory Agreement, the Advisor is entitled to receive from the Funds an
investment advisory fee computed daily and paid monthly, based on a rate equal
to 0.60% of the Mid Cap Fund, 0.50% of the Large Cap Fund, and 0.85% of the
Small
Cap
Fund’s average daily net assets as specified in the Funds’ Prospectus. However,
the Advisor may voluntarily agree to reduce a portion of the fees payable to it
on a month‑to‑month basis.
The
Funds paid the following fees to the Advisor for the period shown:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Mid
Cap Fund |
|
| Year
Ended October 31, 2022 |
Year
Ended October 31, 2021 |
Year
Ended October 31, 2020 |
| |
| Fees
Accrued |
$8,570,671 |
$9,383,803 |
$6,794,908 |
| |
| Fees
Waived |
$0 |
$0 |
$0 |
| |
| Net
Advisory Fee Paid |
$8,570,671 |
$9,383,803 |
$6,794,908 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Large
Cap Fund* |
|
| Year
Ended October 31, 2022 |
Year
Ended October 31, 2021 |
Year
Ended October 31, 2020 |
| |
| Fees
Accrued |
$2,141,074 |
$2,276,917 |
$1,797,391 |
| |
| Fees
Waived |
$0 |
$0 |
$0 |
| |
| Net
Advisory Fee Paid |
$2,141,074 |
$2,276,917 |
$1,797,391 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Small
Cap Fund |
|
| Year
Ended October 31, 2022 |
Year
Ended October 31, 2021 |
Year
Ended October 31, 2020 |
| |
| Fees
Accrued |
$2,646,658 |
$1,258,945 |
$700,512 |
| |
| Fees
Waived |
($296,189) |
($203,049) |
($200,684) |
| |
| Net
Advisory Fee Paid |
$2,350,469 |
$1,055,896 |
$499,828 |
| |
The
Funds are responsible for their own operating expenses. The Advisor has
contractually agreed to reduce fees and/or pay Fund expenses (excluding Acquired
Fund Fees and Expense, interest expense in connection with investment
activities, tax, and extraordinary expenses, Rule 12b-1 fees, shareholder
servicing fees and any other class-specific expenses) in order to limit the
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement for shares of the Congress Mid Cap Growth Fund is 0.85% of the
Fund’s average net assets (the “Expense Cap”). The Expense Cap for the Congress
Mid Cap Growth Fund is indefinite, but will remain in effect until at least
February 28,
2024.
The Expense Cap for the Congress Large Cap Growth Fund is 0.95% of the Fund’s
average net assets. The Expense Cap for the Congress Large Cap Growth Fund is
indefinite, but will remain in effect until at least September 30,
2024,
and may continue thereafter as determined by the Board. The Accounting Survivor
did not have any expense caps. The Expense Cap for the Congress Small Cap Growth
Fund is 1.00% of the Fund’s average net assets. The Expense Cap for the Small
Cap Growth Fund is indefinite, but will remain in effect until at least
September
30, 2024
and may continue thereafter as determined by the Board. The Advisor is
permitted, with Board approval, to be reimbursed for fee reductions and/or
expenses payments made in the prior three years from the date the fees were
waived and expenses were paid. This reimbursement may be requested if the
aggregate amount actually paid by a Fund toward operating expenses for such
period (taking into account any reimbursement) does not exceed the lesser of the
Expense Cap in place at the time of waiver or at the time of
reimbursement.
Portfolio
Managers.
Messrs. Todd W.
Solomon, CFA and Gregg A. O’Keefe, CFA serve as portfolio managers for the
Mid Cap Fund, and are jointly and primarily responsible for the day‑to‑day
management of the Mid Cap Fund. Mr.
Daniel A Lagan,
CFA and Mr. Matthew Lagan serve as portfolio managers for the Large Cap Fund,
and are primarily responsible for the day‑to‑day management of the Large Cap
Fund. Mr. Gregg O’Keefe, CFA serves as portfolio manager for the Small Cap Fund,
and is primarily responsible for the day-to-day management of the Small Cap
Fund.
The
following provides information regarding other accounts managed by Daniel
Lagan
as of October 31,
2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Category
of Account |
Total
Number of Accounts Managed |
Total
Assets in Accounts Managed |
Number
of Accounts for which Advisory Fee is Based on Performance |
Assets
in Accounts for which Advisory Fee is Based on Performance |
| Other
Registered Investment Companies |
0 |
$0 |
0 |
0 |
| Other
Pooled Investment Vehicles |
1 |
$7,633,448 |
0 |
0 |
| Other
Accounts |
117 |
$359,307,371 |
0 |
0 |
The
following provides information regarding other accounts managed by Gregg
O’Keefe
as of October 31,
2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Category
of Account |
Total
Number of Accounts Managed |
Total
Assets in Accounts Managed |
Number
of Accounts for which Advisory Fee is Based on Performance |
Assets
in Accounts for which Advisory Fee is Based on Performance |
| Other
Registered Investment Companies |
0 |
$0 |
0 |
0 |
| Other
Pooled Investment Vehicles |
0 |
$0 |
0 |
0 |
| Other
Accounts |
224 |
$1,327,750,906 |
0 |
0 |
The
following provides information regarding other accounts managed by Todd
Solomon
as of October 31,
2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Category
of Account |
Total
Number of Accounts Managed |
Total
Assets in Accounts Managed |
Number
of Accounts for which Advisory Fee is Based on Performance |
Assets
in Accounts for which Advisory Fee is Based on Performance |
| Other
Registered Investment Companies |
1 |
$104,956,622 |
0 |
0 |
| Other
Pooled Investment Vehicles |
1 |
$36,436,908 |
0 |
0 |
| Other
Accounts |
64 |
$577,133,540 |
0 |
0 |
The
following provides information regarding other accounts managed by Matthew
Lagan
as of October 31,
2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Category
of Account |
Total
Number of Accounts Managed |
Total
Assets in Accounts Managed |
Number
of Accounts for which Advisory Fee is Based on Performance |
Assets
in Accounts for which Advisory Fee is Based on Performance |
| Other
Registered Investment Companies |
0 |
$0 |
0 |
0 |
| Other
Pooled Investment Vehicles |
0 |
$0 |
0 |
0 |
| Other
Accounts |
58 |
$126,868,159 |
0 |
0 |
Portfolio
Managers’ Compensation.
Portfolio Managers receive a competitive base salary and benefits package. They
are eligible for a bonus that is derived from a number of metrics including
personal performance, investment performance, firm-wide net asset flows, and net
operating income. They are also eligible for and may receive an equity
participation. The benchmarks to measure investment performance would be the
Russell 1000®
Growth Index for Large Cap Growth Fund, Russell Mid Cap Growth Index for Mid Cap
Growth Fund, and Russell 2000®
Growth Index for Small Cap Growth Fund.
Conflicts
of Interest for Portfolio Managers.
Because the Advisor performs investment management services for various clients,
certain conflicts of interest could arise. The Advisor may give advice and take
action with respect to its other clients and/or funds that may differ from
advice given or the timing or nature of action taken with respect to the Funds.
The Advisor will have no obligation to purchase or sell for the Funds, or to
recommend for purchase or sale by the Funds, any security that the Advisor, its
principals, its affiliates, or its employees may purchase for themselves or for
other clients and/or funds at the same time or the same price. Where the Advisor
buys or sells the same security for two or more clients, it may place concurrent
orders with a single broker, to be executed together as a single “block” in
order to facilitate orderly and efficient execution.
Portfolio
Managers’ Ownership in the Funds.
The following indicates the beneficial ownership of the Portfolio Managers of
each Fund as of October 31, 2022:
|
|
|
|
|
| |
| Amount
Invested Key |
| A. |
None |
| B. |
$1-$10,000 |
| C. |
$10,001-$50,000 |
| D. |
$50,001-$100,000 |
| E. |
$100,001-$500,000 |
| F. |
$500,001-$1,000,000 |
| G. |
Over
$1,000,000 |
|
|
|
|
|
|
|
|
|
|
|
| |
| Name
of Portfolio Manager |
Dollar
Range of Equity Securities in the each Fund |
|
| Mid
Cap Fund |
Large
Cap Fund |
Small
Cap Fund |
| Daniel
A. Lagan |
C |
F |
E |
| Gregg
A. O’Keefe |
G |
E |
E |
| Todd
W. Solomon |
F |
E |
E |
| Matthew
Lagan |
A |
F |
F |
Administrator,
Transfer Agent and Fund Accountant
Pursuant
to an administration agreement (the “Administration Agreement”), U.S. Bancorp
Fund Services, LLC, doing business as U.S. Bank Global Fund Services (“Fund
Services”) 615 East Michigan Street, Milwaukee, Wisconsin 53202 acts as the
Administrator to the Funds. Fund Services provides certain services to the Funds
including, among other responsibilities, coordinating the negotiation of
contracts and fees with, and the monitoring of performance and billing of, the
Funds’ independent contractors and agents; preparation for signature by an
officer of the Trust of all documents required to be filed for compliance by the
Trust and the Funds with applicable laws and regulations, excluding those of the
securities laws of various states; arranging for the computation of performance
data, including NAV and yield; responding to shareholder inquiries; and
arranging for the maintenance of books and records of the Funds, and providing,
at its own expense, office facilities, equipment and personnel necessary to
carry out its duties. In this capacity, Fund Services does not have any
responsibility or authority for the management of the Funds, the determination
of investment policy, or for any matter pertaining to the distribution of the
Funds’ shares.
Pursuant
to the Administration Agreement, as compensation for its services, Fund Services
will receive from the Funds, a fee based on the Funds’ current average daily net
assets. Fund Services also is entitled to certain out‑of‑pocket expenses. Fund
Services also acts as fund accountant, transfer agent and dividend disbursing
agent under separate agreements. Additionally, Fund Services provides CCO
services to the Trust under a separate agreement. The cost of the Chief
Compliance Officer’s services is charged to the Funds and approved by the Board
annually.
For
the fiscal years ended October 31, the Mid Cap Fund paid Fund Services the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Fund
Administration Fees Paid |
2022 |
2021 |
2020 |
| |
| Mid
Cap Fund |
$677,179 |
$698,927 |
$582,816 |
| |
For
the fiscal years ended October 31, the Large Cap Fund paid Fund Services the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Fund
Administration Fees Paid |
2022 |
2021 |
2020 |
| |
| Large
Cap Fund |
$220,802 |
$211,757 |
$197,952 |
| |
For
the fiscal years ended October 31, the Small Cap Fund paid Fund Services the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Fund
Administration Fees Paid |
2022 |
2021 |
2020 |
| |
| Small
Cap Fund |
$157,669 |
$75,525 |
$54,803 |
| |
Custodian
U.S.
Bank N.A. (the “Custodian”), is the custodian of the assets of the Funds
pursuant to a custody agreement between the Custodian and the Trust, whereby the
Custodian provides for fees on a transactional basis plus out‑of‑pocket
expenses. The Custodian’s address is 1555 N. RiverCenter Drive, Suite 302,
Milwaukee, Wisconsin 53212. The Custodian does not participate in decisions
relating to the purchase and sale of securities by the Funds. Fund Services and
the Custodian are affiliated entities under the common control of U.S. Bancorp.
The Custodian and its affiliates may participate in revenue sharing arrangements
with the service providers of mutual funds in which the Funds may
invest.
Independent
Registered Public Accounting Firm and Legal Counsel
Tait,
Weller & Baker LLP, Two Liberty Place, 50 South 16th Street,
Suite 2900, Philadelphia, Pennsylvania 19102, is the independent registered
public accounting firm, providing audit services, tax services and assistance
with respect to the preparation of filings with the U.S. Securities and Exchange
Commission for the Funds.
Sullivan
& Worcester LLP, 1633 Broadway, 32nd Floor, New York, New York 10019, serves
as legal counsel to the Trust. Sullivan & Worcester also serves as
independent legal counsel to the Board of Trustees.
Pursuant
to the Investment Advisory Agreement, the Advisor determines which securities
are to be purchased and sold by the Funds and which broker‑dealers are eligible
to execute the Funds’ portfolio transactions. Purchases and sales of securities
in the OTC market will generally be executed directly with a “market‑maker”
unless, in the opinion of the Advisor, a better price and execution can
otherwise be obtained by using a broker for the transaction.
Purchases
of portfolio securities for the Funds also may be made directly from issuers or
from underwriters. Where possible, purchase and sale transactions will be
effected through dealers (including banks) that specialize in the types of
securities that the Funds will be holding, unless better executions are
available elsewhere. Dealers and underwriters usually act as principal for their
own accounts. Purchases from underwriters will include a concession paid by the
issuer to the underwriter and purchases from dealers will include the spread
between the bid and the asked price. If the execution and price offered by more
than one dealer or underwriter are comparable, the order may be allocated to a
dealer or underwriter that has provided research or other services as discussed
below.
In
placing portfolio transactions, the Advisor will use its reasonable efforts to
choose broker‑dealers capable of providing the services necessary to obtain the
most favorable price and execution available. The full range and quality of
services available will be considered in making these determinations, such as
the size of the order, the difficulty of execution, the operational facilities
of the firm involved, the firm’s risk in positioning a block of securities, and
other factors. In those instances where it is reasonably determined that more
than one broker‑dealer can offer the services needed to obtain the most
favorable price and execution available, consideration may be given to those
broker‑dealers that furnish or supply research and statistical information to
the Advisor, to the extent the Advisor may lawfully and appropriately use such
research and information in its investment advisory capacity, as well as provide
other services in addition to execution services. The Advisor considers such
information, which is in addition to and not in lieu of the services required to
be performed by it under the Investment Advisory Agreement, to be useful in
varying degrees, but of indeterminable value. Portfolio transactions may be
placed with broker‑dealers that sell shares of the Funds subject to rules
adopted by the Financial Industry Regulatory Association and the
SEC.
While
it is the Funds’ general policy to first seek to obtain the most favorable price
and execution available in selecting a broker‑dealer to execute portfolio
transactions for the Funds, weight is also given to the ability of a
broker‑dealer to furnish brokerage and research services (as defined by
Section 28(e) under the Exchange Act) to the Funds or to the Advisor, even
if the specific services are not directly useful to the Funds and may be useful
to the Advisor in advising other clients. In negotiating commissions with a
broker or evaluating the spread to be paid to a dealer, the Funds may therefore
pay a higher commission or spread than would be the case if no weight were given
to the furnishing of these supplemental services, provided that the amount of
such commission or spread has been determined in good faith by the Advisor to be
reasonable in relation to the value of the brokerage and/or research services
provided by such broker‑dealer. The standard of reasonableness is to be measured
in light of the Advisor’s overall responsibilities to the Funds. The Advisor
will not receive hard dollar credits or, if the Advisor does, the amount of such
credits will be immaterial.
Investment
decisions for the Funds are made independently from those of other client
accounts or mutual funds (“Other Accounts”) managed or advised by the Advisor.
Nevertheless, it is possible that at times identical securities will be
acceptable for both the Funds and one or more of such other accounts. In such
event, the position of the Funds and such other accounts in the same issuer may
vary and the length of time that each may choose to hold its investment in the
same issuer may likewise vary. However, to the extent any of such other accounts
seeks to acquire the same security as the Funds at the same time, the Funds may
not be able to acquire as large a portion of such security as it desires, or it
may have to pay a higher price or obtain a lower yield for such security.
Similarly, the Funds may not be able to obtain as high a price for, or as large
an execution of, an order to sell any particular security at the same time. If
one or more of such other accounts simultaneously purchases or sells the same
security that the Funds are purchasing or selling, each day’s transactions in
such security will be allocated between the Funds and all such other accounts in
a manner deemed equitable by the Advisor, taking into account the respective
sizes of the accounts and the amount being purchased or sold. It is recognized
that in some cases this system could have a detrimental effect on the price or
value of the security insofar as the Funds are concerned. In other cases,
however, it is believed that the ability of the Funds to participate in volume
transactions may produce better executions for the Funds.
The
Funds do not effect securities transactions through brokers in accordance with
any formula, nor does it effect securities transactions through brokers for
selling shares of the Funds. However, as stated above, broker‑dealers who
execute brokerage transactions may effect purchase of shares of the Funds for
their customers.
For
the fiscal years ended October 31, the Funds paid aggregate brokerage
commissions in the amount of:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Aggregate
Brokerage Commissions Paid |
2022 |
2021 |
2020 |
| |
| Mid
Cap Fund |
$84,212 |
$116,464 |
$189,097 |
| |
| Large
Cap Fund |
$26,600 |
$38,569 |
$37,470 |
| |
|
Small
Cap Fund(1) |
$235,454 |
$92,270 |
$35,417 |
| |
(1)
The commissions amounts paid will vary year to year based on a number of
factors, including, but not limited to: overall trading activity and frequency,
often reflected in the Fund's turnover ratio, the specific markets where the
Fund was active, the specific brokers that were used, and any increase or
decrease in net assets of the Fund.
Advisors
may obtain proprietary and third-party research through client commission
arrangements. In a client commission arrangement, the Advisor agrees with a
broker effecting trades for the Advisors’ client accounts that a portion of the
commissions paid by the accounts will be credited to purchase research services
as directed by the Advisor. The research provided in connection with such
arrangements is intended to comply with Section 28(e) of the Securities Exchange
Act of 1934, as amended, and the SEC’s related interpretative guidance.
Participating in client commission arrangements enables the Advisor to
consolidate payments for research services through one or more channels using
accumulated client commissions and helps to facilitate the Advisors’ receipt of
research services and ability to provide best execution in the trading
process.
As
of the fiscal years ended October 31, the following was paid to firms for
research, statistical or other services provided to the Advisor from the amounts
above:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Research,
Statistical Or Other Services Provided |
2022 |
2021 |
2020 |
| |
| Large
Cap Fund |
$6,585 |
$6,988 |
$9,385 |
| |
| Mid
Cap Fund |
$18,153 |
$23,874 |
$36,200 |
| |
| Small
Cap Fund |
$49,726 |
$20,047 |
$6,940 |
| |
As
of the close of the fiscal period ended
October 31, 2022,
the Funds did not own any securities of their regular broker‑dealers as defined
by Rule 10b‑1 under the 1940 Act.
Shares
issued by the Funds have no preemptive, conversion, or subscription rights.
Shares issued and sold by the Funds are deemed to be validly issued, fully paid
and non‑assessable by the Trust. Shareholders have equal and exclusive rights as
to dividends and distributions as declared by the Funds and to the net assets of
the Funds upon liquidation or dissolution. The Funds, as separate series of the
Trust, votes separately on matters affecting only the Funds (e.g.,
approval of the Investment Advisory Agreement); all series of the Trust vote as
a single class on matters affecting all series jointly or the Trust as a whole
(e.g.,
election or removal of Trustees). Voting rights are not cumulative, so that the
holders of more than 50% of the shares voting in any election of Trustees can,
if they so choose, elect all of the Trustees. While the Trust is not required
and does not intend to hold annual meetings of shareholders, such meetings may
be called by the Board in its discretion, or upon demand by the holders of 10%
or more of the outstanding shares of the Trust, for the purpose of electing or
removing Trustees.
The
NAV of the Funds is determined once daily as of the close of public trading on
the New York Stock Exchange (“NYSE”) (normally, 4:00 p.m., Eastern time)
each day that the NYSE is open for trading. The NYSE annually announces the days
on which it will not be open for trading. It is expected that the Exchange will
be closed on Saturdays and Sundays and on New Year’s Day, Martin Luther King Jr.
Day, Presidents’ Day, Good Friday, Memorial Day, Juneteenth National
Independence Day, Independence Day, Labor Day, Thanksgiving Day and Christmas.
The Funds do not expect to determine the NAV on any day when the Exchange is not
open for trading even if there is sufficient trading in their portfolio
securities on such days to materially affect the NAV per share.
Securities
primarily traded on U.S. national securities exchanges for which market
quotations are readily available shall be valued at either the last reported
sale price on the day of valuation, or the exchange’s official closing price, if
applicable. If there has been no sale on such day, then the mean between the bid
and asked prices will be used. Securities and assets for which market quotations
are not readily available (including restricted securities which are subject to
limitations as to their sale) are valued at fair value as determined in good
faith under procedures approved by or under the direction of the Adviser.
Trading
in foreign securities markets is normally completed well before the close of the
NYSE. In addition, foreign securities trading may not take place on all days on
which the NYSE is open for trading, and may occur in certain foreign markets on
days on which the Funds’ NAV is not calculated. Events affecting the values of
portfolio securities that occur between the time their prices are determined and
the close of the NYSE will not be reflected in the calculation of NAV unless the
Adviser
deems that the particular event would affect NAV, in which case an adjustment
will be made in such manner as the Adviser
in good faith deems appropriate to determine fair market value. Assets or
liabilities expressed in foreign currencies are translated, in determining NAV,
into U.S. dollars based on the spot exchange rates, or at such other rates as
the Advisor, pursuant to fair value procedures adopted by the Adviser,
may determine to be appropriate.
The
information provided below supplements the information contained in the
Prospectus regarding the purchase and redemption of the Funds’
shares.
How
to Buy Shares
In
addition to purchasing shares directly from the Funds, you may purchase shares
of the Funds through certain financial intermediaries and their agents that have
made arrangements with the Funds and are authorized to buy and sell shares of
the Funds (collectively, “Financial Intermediaries”). Investors should contact
their Financial
Intermediary
directly for appropriate instructions, as well as information pertaining to
accounts and any service or transaction fees that may be charged. If you
transmit your order to these Financial Intermediaries before the close of
regular trading (generally, 4:00 p.m., Eastern Time) on a day that the NYSE is
open for business, your order will be priced at the Funds’ NAV next computed
after it is received by the Financial Intermediary. Investors should check with
their Financial Intermediary to determine if it participates in these
arrangements.
The
public offering price of the Funds’ shares is the NAV. Shares are purchased at
the public offering price next determined after the transfer agent receives your
order in good order, as discussed in the Funds’ Prospectus. In order to receive
that day’s public offering price, the transfer agent must receive your order in
good order before the close of regular trading on the NYSE, generally
4:00 p.m., Eastern Time.
The
Trust reserves the right in its sole discretion (i) to suspend the
continued offering of the Funds’ shares, (ii) to reject purchase orders in
whole or in part when in the judgment of the Advisor or the distributor such
rejection is in the best interest of the Funds, and (iii) to reduce or
waive the minimum for initial and subsequent investments for certain fiduciary
accounts or under circumstances where certain economies can be achieved in sales
of the Funds’ shares.
In
addition to cash purchases, the Funds’ shares may be purchased by tendering
payment in‑kind in the form of shares of stock, bonds or other securities. Any
securities used to buy the Funds’ shares must be readily marketable, their
acquisition consistent with the Funds’ objective and otherwise acceptable to the
Advisor and the Board.
Automatic
Investment Plan
As
discussed in the Prospectus, the Funds provide an Automatic Investment Plan
(“AIP”) for the convenience of investors who wish to purchase shares of the
Funds on a regular basis. All record keeping and custodial costs of the AIP are
paid by the Funds. The market value of the Funds’ shares is subject to
fluctuation. Prior to participating in the AIP the investor should keep in mind
that this plan does not assure a profit nor protect against depreciation in
declining markets.
How
to Sell Shares and Delivery of Redemption Proceeds
You
can sell your Fund shares any day the NYSE is open for regular trading, either
directly to the Funds or through your Financial Intermediary.
The
Funds typically send redemption proceeds on the next business day (a day when
the NYSE is open for normal business) after the redemption request is received
in good order and prior to market close, regardless of whether the redemption
proceeds are sent via check, wire, or automated clearing house (ACH) transfer.
Under unusual circumstances, the Funds may suspend redemptions, or postpone
payment for up to seven days, as permitted by federal securities
law.
The
Funds typically expect that they will hold cash or cash equivalents to meet
redemption requests. The Funds may also use the proceeds from the sale of
portfolio securities to meet redemption requests if consistent with the
management of the Funds. In situations in which investment holdings in cash or
cash equivalents are not sufficient to meet redemption requests or when the sale
of portfolio securities is not sufficient to meet redemption requests, the Funds
will typically borrow money through their respective lines of credit. These
redemption methods will be used regularly and may also be used in stressed
market conditions. The Funds reserve the right to pay redemption proceeds to you
in whole or in part through a redemption in-kind as described under “Redemptions
In-Kind” below. Redemptions in-kind are typically used to meet redemption
requests that are a large percentage of a Fund’s net assets in order to minimize
the effect of large redemptions on the Fund and its remaining shareholders.
Redemptions in-kind may be used regularly in such circumstances and may also be
used in stressed market conditions.
The
Funds may suspend the right of redemption or postpone the date of payment during
any period when (a) trading on the NYSE is restricted as determined by the
SEC or the NYSE is closed for other than weekends and holidays; (b) an
emergency exists as determined by the SEC making disposal of portfolio
securities or valuation of net assets of the Funds not reasonably practicable;
or (c) for such other period as the SEC may permit for the protection of
the Funds’ shareholders.
The
value of shares on redemption or repurchase may be more or less than the
investor’s cost, depending upon the market value of the Funds’ portfolio
securities at the time of redemption or repurchase.
Telephone
Redemptions
Shareholders
with telephone transaction privileges established on their account may redeem
Fund shares by telephone. Upon receipt of any instructions or inquiries by
telephone from shareholders, the Funds or their authorized agents may carry out
the instructions and/or to respond to the inquiry consistent with the
shareholder’s previously established account service options. For joint
accounts, instructions or inquiries from either party will be carried out
without prior notice to the other account owners. In acting upon telephone
instructions, the Funds and their agents use procedures that are reasonably
designed to ensure that such instructions are genuine. These include recording
all telephone calls, requiring pertinent information about the account and
sending written confirmation of each transaction to the registered
owner.
The
transfer agent will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. If the transfer agent fails to employ
reasonable procedures, a Fund and the transfer agent may be liable for any
losses due to unauthorized or fraudulent instructions. If these procedures are
followed, however, that to the extent permitted by applicable law, neither the
Funds nor their agents will be liable for any loss, liability, cost or expense
arising out of any redemption request, including any fraudulent or unauthorized
request. For additional information, contact the transfer agent.
Redemptions
In-Kind
The
Trust has elected to be governed by Rule 18f-1 under the 1940 Act so that
the Funds are obligated to redeem their shares solely in cash up to the lesser
of $250,000 or 1% of its net asset value during any 90-day period for any
shareholder of a Fund. The Funds have reserved the right to pay the redemption
price of their shares in excess of $250,000 or 1% of its net asset value, either
totally or partially, by a distribution in‑kind of portfolio securities (instead
of cash). The securities so distributed would be valued at the same amount as
that assigned to them in calculating the NAV for the shares being sold. If a
shareholder receives a distribution in‑kind, the shareholder could incur
brokerage or other charges in converting the securities to cash and will bear
any market risks associated with such securities until they are converted into
cash. A redemption in‑kind is treated as a taxable transaction and a sale of the
redeemed shares, generally resulting in capital gain or loss to you, subject to
certain loss limitation rules.
The
Funds do not intend to hold any significant percentage of their portfolios in
illiquid securities, although the Funds, like virtually all mutual funds, may
from time to time hold a small percentage of securities that are illiquid. In
the unlikely event the Funds were to elect to make an in‑kind redemption, the
Funds expect that they would follow the Trust protocol of making such
distribution by way of a pro rata distribution of securities that are traded on
a public securities market or are otherwise considered liquid pursuant to the
Fund’s liquidity policies and procedures. Except as otherwise may be approved by
the Trustees, the securities that would not be included in an in-kind
distribution include (1) unregistered securities which, if distributed, would be
required to be registered under the Securities Act of 1933 (the “1933 Act”), as
amended; (2) securities issued by entities in countries which (a) restrict or
prohibit the holding of securities by non-nationals other than through qualified
investment vehicles, such as a fund, or (b) permit transfers of ownership of
securities to be effected only by transactions conducted on a local stock
exchange; and (3) certain Fund assets that, although they may be liquid
and
marketable, must be traded through the marketplace or with the counterparty to
the transaction in order to effect a change in beneficial
ownership.
Distributions
Dividends
of net investment income and distributions of net capital gains from the sale of
securities are generally made annually, as described in the Prospectus. Also,
the Funds typically distribute any undistributed net investment income on or
about December 31 of each year. Any net capital gains realized through the
period ended October 31 of each year will also typically be distributed by
December 31 of each year.
Each
distribution by the Funds is accompanied by a brief explanation of the form and
character of the distribution. In January of each year, the Funds will issue to
each shareholder a statement of the federal income tax status of all
distributions that relate to the previous year.
A
dividend or distribution paid shortly after a purchase of shares by a
shareholder would represent, in substance, a partial return of capital (to the
extent it is paid on the shares so purchased), even though it would be subject
to income taxes.
Tax
Information
Each
series of the Trust is treated as a separate entity for federal income tax
purposes. Each Fund has elected and intends to continue to qualify annually as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the “Code”), and to comply with all applicable requirements
regarding the source of its income, diversification of its assets and the timing
and amount of its distributions. The Funds’ policy is to distribute to their
shareholders all of their investment company taxable income (before the
dividends paid deduction) and any net realized capital gains for each fiscal
year in a manner that complies with the distribution requirements applicable to
regulated investment companies under the Code, so that the Funds will not be
subject to any federal income or excise taxes. However, the Funds can give no
assurances that their distributions will be sufficient to eliminate all taxes in
all periods. In order to avoid a nondeductible excise tax, each Fund must also
distribute (or be deemed to have distributed) by December 31 of each
calendar year (1) at least 98.0% of its ordinary income for such year,
(2) at least 98.2% of the excess of its realized capital gains over its
realized capital losses for the 12‑month period ending on October 31 during
such year and (3) any amounts from the prior calendar year that were not
distributed and on which the Funds paid no federal income
tax. If a Fund fails to qualify as a regulated investment company under
Subchapter M, it will be taxed as a corporation.
In
order to qualify as a regulated investment company, each Fund must, among other
things, derive at least 90% of its gross income each year from dividends,
interest, payments with respect to loans of stock and securities, gains from the
sale or other disposition of stock or securities or foreign currency gains
related to investments in stock or securities, or other income (generally
including gains from futures or forward contracts) derived with respect to the
business of investing in stock, securities or currency, and net income derived
from an interest in a qualified publicly traded partnership. Each Fund also must
satisfy the following two asset diversification tests. At the end of each
quarter of each taxable year, (i) at least 50% of the value of the Fund’s
total assets must be represented by cash and cash items (including receivables),
U.S. Government securities, the securities of other regulated investment
companies, and other securities, with such other securities being limited in
respect of any one issuer to an amount not greater than 5% of the value of the
Fund’s total assets and not more than 10% of the outstanding voting securities
of such issuer, and (ii) not more than 25% of the value of the Fund’s total
assets may be invested in the securities of any one issuer (other than U.S.
Government securities or the securities of other regulated investment
companies), the securities of any two or more issuers (other than the securities
of other regulated investment companies) that the Fund controls (by owning 20%
or more of their outstanding
voting
stock) and that are determined to be engaged in the same or similar trades or
businesses or related trades or businesses, or the securities of one or more
qualified publicly traded partnerships. Each Fund must also distribute each
taxable year sufficient dividends to its shareholders to claim a dividends paid
deduction equal to at least the sum of 90% of the Fund’s investment company
taxable income before the dividends paid deduction (which generally includes
dividends, interest, and the excess of net short short‑term capital gain over
net long‑term capital loss) and 90% of the Fund’s net tax‑exempt interest, if
any.
The
Funds’ ordinary income generally consists of interest and dividend income, less
expenses. Net realized capital gains for a fiscal period are computed by taking
into account any capital loss carryforward of the Funds. As of October 31,
2022,
the Funds did not have any capital loss carryforwards.
Distributions
of net investment income and net short‑term capital gains are taxable to
shareholders as ordinary income. For individual shareholders, a portion of the
distributions paid by the Funds may be qualified dividends currently eligible
for taxation at long‑term capital gain rates to the extent the Funds report the
amount distributed as a qualifying dividend and certain holding period
requirements are met. In the case of corporate shareholders, a portion of the
distributions may qualify for the inter‑corporate dividends‑received deduction
to the extent the Funds report the amount distributed as a qualifying dividend
and certain holding period requirements are met. The aggregate amount so
reported to either individual or corporate shareholders cannot, however, exceed
the aggregate amount of qualifying dividends received by the Funds for their
taxable year. In view of the Funds’ investment policy, it is expected that
dividends from domestic corporations will be part of the Funds’ gross income and
that, accordingly, part of the distributions by the Funds may be eligible for
treatment as qualified dividend income by individual shareholders or for the
dividends‑received deduction for corporate shareholders. However, the portion of
the Funds’ gross income attributable to qualifying dividends is largely
dependent on the Funds’ investment activities for a particular year and
therefore cannot be predicted with any certainty. The deduction may be reduced
or eliminated if the Funds’ shares held by an individual investor are held for
less than 61 days or shares held by a corporate investor are treated as
debt‑financed or are held for less than 46 days.
For
taxable years beginning after 2017 and before 2025, non-corporate taxpayers
generally may deduct 20% of “qualified business income” derived either directly
or through partnerships or S corporations. For this purpose, “qualified business
income” generally includes ordinary real estate investment trust (“REIT”)
dividends and income derived from master limited partnership (“MLP”)
investments. Non-corporate shareholders can claim the qualified business income
deduction with respect to REIT dividends received by the Fund if the Fund meets
certain holding period and reporting requirements. There is currently no
mechanism for a Fund, to the extent that the Fund invests in MLPs, to pass
through to non-corporate shareholders the character of income derived from MLP
investments so as to allow such shareholders to claim this deduction. It is
uncertain whether future legislation or other guidance will enable a Fund to
pass through to non-corporate shareholders the ability to claim this deduction.
The
Funds may be subject to foreign taxes and withholding on dividends and interest
earned with respect to securities of foreign corporations. Based on the
principal investment strategies of the Funds, it is not expected that the Funds
will be eligible to pass through to shareholders any credits or deductions with
respect to such foreign taxes. The Fund may also be subject to foreign income
taxes on gains recognized on the disposition of foreign securities.
Redemption
of Fund shares may result in recognition of a taxable gain or loss. Any loss
realized upon redemption of shares within 6 months from the date of their
purchase will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gains during such 6-month
period. Any loss realized upon a redemption may be disallowed under certain wash
sale rules to the extent shares of the Funds are purchased (through reinvestment
of distributions or otherwise) within 30 days before or after the
redemption.
Under
the Code, the Funds will be required to report to the Internal Revenue Service
(“IRS”) all distributions of ordinary income and capital gains as well as gross
proceeds from the redemption or exchange of Fund shares, except in the case of
exempt shareholders, which includes most corporations. Pursuant to the backup
withholding provisions of the Code, distributions of any taxable income and
capital gains and proceeds from the redemption of Fund shares may be subject to
withholding of federal income tax at a rate of 24% in the case of non‑exempt
shareholders who fail to furnish the Funds with their taxpayer identification
numbers and with required certifications regarding their status under the
federal income tax law. If the withholding provisions are applicable, any such
distributions and proceeds, whether taken in cash or reinvested in additional
shares, will be reduced by the amounts required to be withheld. Corporate and
other exempt shareholders should provide the Funds with their taxpayer
identification numbers or certify their exempt status in order to avoid possible
erroneous application of backup withholding. Backup withholding is not an
additional tax and any amount withheld may be credited against a shareholder’s
ultimate federal income tax liability if proper documentation is provided. The
Funds reserve the right to refuse to open an account for any person failing to
provide a certified taxpayer identification number.
In
addition to the federal income tax, certain individuals, trusts and estates may
be subject to a 3.8% Medicare tax. The Medicare tax is imposed on the lesser of:
(i) the taxpayer’s investment income, net of deductions properly allocable to
such income, or (ii) the amount by which the taxpayer’s modified adjusted gross
income exceeds certain thresholds ($250,000 for married individuals filing
jointly, $200,000 for unmarried individuals and $125,000 for married individuals
filing separately). Each Fund’s distributions are includable in a shareholder’s
investment income for purposes of this Medicare tax. In addition, any capital
gain realized by a shareholder upon a sale or redemption of Fund shares is
includable in such shareholder’s investment income for purposes of this Medicare
tax.
Distributions
and the transactions referred to in the preceding paragraphs may be subject to
state and local income taxes, and the tax treatment thereof may differ from the
federal income tax treatment.
The
foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. citizens or residents and U.S. domestic
corporations, estates the income of which is subject to United States federal
income taxation regardless of its source and trusts that (1) are subject to the
primary supervision of a court within the United States and one or more United
States persons have the authority to control all substantial decisions of the
trust or (2) have a valid election in effect under applicable United States
Treasury regulations to be treated as a United States person. Each shareholder
who is not a U.S. person should consider the U.S. and foreign tax consequences
of ownership of shares of the Funds, including the possibility that such a
shareholder may be subject to a U.S. withholding tax at a rate of 30% (or
at a lower rate under an applicable income tax treaty) on amounts constituting
ordinary income.
The
Foreign Account Tax Compliance Act (“FATCA”).
A 30% withholding tax on a Fund’s ordinary income generally applies if paid to a
foreign entity unless: (i) if the foreign entity is a “foreign financial
institution,” it undertakes certain due diligence, reporting, withholding and
certification obligations, (ii) if the foreign entity is not a “foreign
financial institution,” it identifies certain of its U.S. investors or (iii) the
foreign entity is otherwise excepted under FATCA. If applicable, and subject to
any intergovernmental agreement, withholding under FATCA is required generally
with respect to ordinary income distributions from the Funds. If withholding is
required under FATCA on a payment related to your shares, investors that
otherwise would not be subject to withholding (or that otherwise would be
entitled to a reduced rate of withholding) on such payment generally will be
required to seek a refund or credit from the IRS to obtain the benefits of such
exemption or reduction. The Funds will not pay any additional amounts in respect
of amounts withheld under FATCA. You should consult your tax advisor regarding
the effect of FATCA based on your individual circumstances.
The
foregoing discussion of tax law is based on existing provisions of the Code,
final and proposed regulations thereunder, and current administrative rulings
and court decisions, all of which are subject to change. Any such
changes
could affect the validity of this discussion. The discussion also represents
only a general summary of tax law and practice currently applicable to the Funds
and certain shareholders therein, and, as such, is subject to change. In
particular, the consequences of an investment in shares of the Funds under the
laws of any state, local or foreign taxing jurisdictions are not discussed
herein. Each prospective investor should consult his or her own tax advisor to
determine the application of the tax law and practice in his or her own
particular circumstances.
The
advice herein was prepared for the Funds. Any person reviewing this discussion
should seek advice based on such person’s particular circumstances from an
independent tax advisor. The Funds do not intend to seek any rulings from the
Internal Revenue Service or an opinion of counsel with respect to any tax
issues.
Quasar
Distributors, LLC, 111 East Kilbourn Avenue, Suite 2200, Milwaukee, Wisconsin
53202 (“Quasar”), serves as the Funds’ principal underwriter in a continuous
public offering of the Funds’ shares. Pursuant to a distribution agreement
between the Funds and Quasar (the “Distribution Agreement”), Quasar acts as the
Funds’ principal underwriter and distributor and provides certain administrative
services and promotes and arranges for the sale of the Funds’ shares. Quasar is
a registered broker‑dealer under the Securities Exchange Act of 1934, as
amended, and is a member of the Financial Industry Regulatory Authority
(“FINRA”).
The
Distribution Agreement between the Funds and Quasar will continue in effect only
if such continuance is specifically approved at least annually by the Board or
by vote of a majority of each Fund’s outstanding voting securities and, in
either case, by a majority of the Independent Trustees. The Distribution
Agreement is terminable without penalty by the Trust on behalf of each Fund on
60 days’ written notice when authorized either by a majority vote of each Fund’s
shareholders or by vote of a majority of the Board, including a majority of the
Independent Trustees, or by Quasar on 60 days’ written notice, and will
automatically terminate in the event of its “assignment” (as defined in the
1940 Act).
Distribution
Plan
The
Funds have adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b‑1
under the 1940 Act for Retail Class shares of the Funds under which each Fund
pays the Distributor an amount which is accrued daily and paid quarterly, at an
annual rate of up to 0.25% of the average daily net assets of Retail Class
shares of each Fund. Amounts paid under the Plan, by each Fund, are paid to the
Distributor to compensate broker-dealers and service providers that provide
distribution-related services to the Retail Class shares for the costs of the
services provided and the expenses borne in the distribution of each Fund’s
Retail Class shares, including overhead and telephone expenses; printing and
distribution of prospectuses and reports used in connection with the offering of
each Fund’s Retail Class shares to prospective investors; and preparation,
printing and distribution of sales literature and advertising materials. The
services provided by selected dealers pursuant to the Plan are primarily
designed to promote the sale of shares of each Fund and include the furnishing
of office space and equipment, telephone facilities, personnel and assistance to
each Fund in servicing such shareholders. The services provided by the
administrators pursuant to the Plan are designed to provide support services to
each Fund and include establishing and maintaining shareholders’ accounts and
records, processing purchase and redemption transactions, answering routine
client inquiries regarding each Fund and providing other services to each Fund
as may be required.
Under
the Plan, the Trustees will be furnished quarterly with information detailing
the amount of expenses paid under the Plan and the purposes for which payments
were made. The Plan may be terminated at any time by vote of a majority of the
Trustees of the Trust who are not interested persons. Continuation of the Plan
is considered by such Trustees no less frequently than annually. With the
exception of the Distributor, in its capacity as the Funds’ principal
underwriter and distribution coordinator, no interested person has or had a
direct or indirect financial interest in the Plan or any related
agreement.
While
there is no assurance that the expenditures of each Fund’s assets to finance
distribution of shares will have the anticipated results, the Board believes
there is a reasonable likelihood that one or more of such benefits will result,
and because the Board is in a position to monitor the distribution expenses, it
is able to determine the benefit of such expenditures in deciding whether to
continue the Plan.
The
tables below show the amount of Rule 12b‑1 fees incurred and the allocation
of such fees by Retail Class shares of the Funds for the fiscal period ended
October 31,
2022.
|
|
|
|
|
| |
|
| 12b-1
fees incurred for 2022 |
| Mid
Cap Fund – Retail Class shares |
$103,653 |
| Large
Cap Fund – Retail Class Shares |
$7,881 |
| Small
Cap Fund – Retail Class Shares |
$222,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Advertising
and Marketing |
Printing
and Postage |
Payment
to Distributor |
Payment
to Dealers |
Compensation
to Sales Personnel |
Other
Expenses |
Interest,
Carrying or Other Financing Charges |
| Mid
Cap Fund – Retail Class Shares |
$0 |
$0 |
$0 |
$103,653 |
$0 |
$0 |
$0 |
| Large
Cap Fund – Retail Class |
$0 |
$0 |
$0 |
$7,881 |
$0 |
$0 |
$0 |
| Small
Cap Fund – Retail Class |
$0 |
$0 |
$0 |
$222,693 |
$0 |
$0 |
$0 |
Sub-Accounting
Service Fees
In
addition to the fees that the Funds may pay to its Transfer Agent, the Board has
authorized the Funds to pay service fees, at the annual rate of up to 0.10% of
applicable average net assets or $22 per account, to intermediaries such as
banks, broker-dealers, financial advisers or other financial institutions, for
sub-administration, sub-transfer agency, recordkeeping (collectively,
“sub-accounting services”) and other shareholder services associated with
shareholders whose shares are held of record in omnibus, networked, or other
group accounts or accounts traded through registered securities clearing agents.
Any sub-accounting fees paid by the Funds are included in the total amount of
“Other Expenses” listed in each Fund’s Fees and Expenses table in the
Prospectus.
For
the fiscal period ended October 31,
2022,
the Funds paid the following amounts for sub-accounting services:
|
|
|
|
|
| |
| Sub-Accounting
Services Fees |
|
| Mid
Cap Fund |
$756,109 |
|
| Large
Cap Fund |
$136,777 |
|
| Small
Cap Fund |
$161,053 |
|
The
Advisor, out of its own resources and without additional cost to the Funds or
their shareholders, may provide additional cash payments or other compensation
to certain Financial Intermediaries who sell shares of the Funds. These payments
may be divided into categories as follows:
Support
Payments.
Payments
may be made by the Advisor to certain Financial Intermediaries in connection
with supervisory support services such as, back-office integration, account
establishment and investor support services. In addition, such support services
may be a pre-requisite for the eligibility of the Funds to be offered in certain
programs and/or in connection with meetings between the Funds’ representatives
and Financial Intermediaries and their sales representatives. Such meetings may
be held for various purposes, including providing education and training about
the Funds and other general financial topics to assist Financial Intermediaries’
sales representatives in making informed recommendations to, and decisions on
behalf of, their clients.
Entertainment,
Conferences and Events.
The
Advisor also may pay cash or non-cash compensation to sales representatives of
financial intermediaries in the form of (i) occasional gifts;
(ii) occasional meals, tickets or other entertainments; and/or
(iii) sponsorship support for the financial intermediary’s client seminars
and cooperative advertising. In addition, the Advisor pays for exhibit space or
sponsorships at regional or national events of financial
intermediaries.
During
the Fund’s fiscal year, the following financial intermediaries were paid out of
the Advisor’s revenues:
|
|
| |
| Firm |
| Ameriprise
Financial Services Incorporated |
| Axos |
| Charles
Schwab |
| E*Trade
Securities LLC |
| Edward
D. Jones & Company |
| Janney
Montgomery Scott LLC |
| J.P.
Morgan Securities LLC |
| LPL
Financial LLC |
| Merrill
Lynch Pierce Fenner & Smith |
| Mid
Atlantic Clearing & Settlement |
| Morgan
Stanley Smith Barney LLC |
| MSCS
Financial Services LLV |
| National
Financial |
| Nationwide
Investment Services Corp. |
| Oppenheimer
& Company Incorporated |
| Pershing
LLC |
| Raymond
James & Associates Inc. |
| RBC
Capital Markets LLC |
| Reliance
Trust Company |
| SEI
Private Trust Company |
| Stockcross
Financial Services Inc. |
| T
Rowe Price |
| TD
Ameritrade Incorporated |
| UBS
Financial Services Incorporated |
| Vanguard
Marketing Corporation |
| Wells
Fargo Clearing Services LLC |
The
prospect of receiving, or the receipt of additional payments or other
compensation as described above by financial intermediaries may provide such
intermediaries and/or their salespersons with an incentive to favor sales of
shares of the Funds, and other mutual funds whose affiliates make similar
compensation available, over sale of shares of mutual funds (or non‑mutual fund
investments) not making such payments. You may wish to take such payment
arrangements into account when considering and evaluating any recommendations
relating to the Fund shares.
The
Funds’ Annual Report to shareholders for the fiscal year ended October 31,
2022, is available, without charge, upon request by calling 1-888-688-1299 and
the financial statements, accompanying notes and report of the independent
registered public accounting firm, Tait, Weller & Baker LLP, appearing
therein are incorporated by reference into this SAI.
DESCRIPTION
OF SECURITIES RATINGS
Short-Term
Credit Ratings
An
S&P Global Ratings short-term issue credit rating is generally assigned to
those obligations considered short-term in the relevant market. The following
summarizes the rating categories used by S&P Global Ratings for short-term
issues:
“A-1”
- A short-term obligation rated “A-1” is rated in the highest category by
S&P Global Ratings. The obligor’s capacity to meet its financial commitments
on the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor’s capacity to
meet its financial commitment on these obligations is extremely
strong.
“A-2”
- A short-term obligation rated “A-2” is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor’s capacity to meet
its financial commitments on the obligation is satisfactory.
“A-3”
- A short-term obligation rated “A-3” exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to weaken an obligor’s capacity to meet its financial commitments on the
obligation.
“B”
- A short-term obligation rated “B” is regarded as vulnerable and has
significant speculative characteristics. The obligor currently has the capacity
to meet its financial commitments; however, it faces major ongoing uncertainties
that could lead to the obligor’s inadequate capacity to meet its financial
commitments.
“C”
- A short-term obligation rated “C” is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitments on the obligation.
“D”
- A short-term obligation rated “D” is in default or in breach of an imputed
promise. For non-hybrid capital instruments, the “D” rating category is used
when payments on an obligation are not made on the date due, unless S&P
Global Ratings believes that such payments will be made within any stated grace
period. However, any stated grace period longer than five business days will be
treated as five business days. The “D” rating also will be used upon the filing
of a bankruptcy petition or the taking of a similar action and where default on
an obligation is a virtual certainty, for example due to automatic stay
provisions. A rating on an obligation is lowered to “D” if it is subject to a
distressed exchange offer.
Local
Currency and Foreign Currency Ratings - S&P Global Ratings’ issuer credit
ratings make a distinction between foreign currency ratings and local currency
ratings. A foreign currency rating on an issuer will differ from the local
currency rating on it when the obligor has a different capacity to meet its
obligations denominated in its local currency, versus obligations denominated in
a foreign currency.
“NR”
- This indicates that a rating has not been assigned or is no longer
assigned.
Moody’s
Investors Service (“Moody’s”) short-term ratings are forward-looking opinions of
the relative credit risks of financial obligations with an original maturity of
thirteen months or less and reflect both on the likelihood of a default or
impairment on contractual financial obligations and the expected financial loss
suffered in the event of default or impairment.
Moody’s
employs the following designations to indicate the relative repayment ability of
rated issuers:
“P-1”
- Issuers (or supporting institutions) rated Prime-1 have a superior ability to
repay short-term debt obligations.
“P-2”
- Issuers (or supporting institutions) rated Prime-2 have a strong ability to
repay short-term debt obligations.
“P-3”
- Issuers (or supporting institutions) rated Prime-3 have an acceptable ability
to repay short-term obligations.
“NP”
- Issuers (or supporting institutions) rated Not Prime do not fall within any of
the Prime rating categories.
“NR”
- Is assigned to an unrated issuer.
Fitch,
Inc. / Fitch Ratings Ltd. (“Fitch”) short-term issuer or obligation rating is
based in all cases on the short-term vulnerability to default of the rated
entity and relates to the capacity to meet financial obligations in accordance
with the documentation governing the relevant obligation. Short-term deposit
ratings may be adjusted for loss severity. Short-term ratings are assigned to
obligations whose initial maturity is viewed as “short-term” based on market
convention. Typically, this means up to 13 months for corporate, sovereign, and
structured obligations and up to 36 months for obligations in U.S. public
finance markets. The following summarizes the rating categories used by Fitch
for short-term obligations:
“F1”
- Securities possess the highest short-term credit quality. This designation
indicates the strongest intrinsic capacity for timely payment of financial
commitments; may have an added “+” to denote any exceptionally strong credit
feature.
“F2”
- Securities possess good short-term credit quality. This designation indicates
good intrinsic capacity for timely payment of financial
commitments.
“F3”
- Securities possess fair short-term credit quality. This designation indicates
that the intrinsic capacity for timely payment of financial commitments is
adequate.
“B”
- Securities possess speculative short-term credit quality. This designation
indicates minimal capacity for timely payment of financial commitments, plus
heightened vulnerability to near term adverse changes in financial and economic
conditions.
“C”
- Securities possess high short-term default risk. Default is a real
possibility.
“RD”
- Restricted default. Indicates an entity that has defaulted on one or more of
its financial commitments, although it continues to meet other financial
obligations. Typically applicable to entity ratings only.
“D”
- Default. Indicates a broad-based default event for an entity, or the default
of a short-term obligation.
Plus
(+) or minus (-) - The “F1” rating may be modified by the addition of a plus (+)
or minus (-) sign to show the relative status within that major rating
category.
“NR”
- Is assigned to an unrated issue of a rated issuer.
The
DBRS® Ratings Limited (“DBRS”) short-term debt rating scale provides an opinion
on the risk that an issuer will not meet its short-term financial obligations in
a timely manner. Ratings are based on quantitative and qualitative
considerations relevant to the issuer and the relative ranking of claims. The
R-1 and R-2 rating categories are further denoted by the sub-categories
“(high)”, “(middle)”, and “(low)”.
The
following summarizes the ratings used by DBRS for commercial paper and
short-term debt:
“R-1
(high)” - Short-term debt rated “R-1 (high)” is of the highest credit quality.
The capacity for the payment of short-term financial obligations as they fall
due is exceptionally high. Unlikely to be adversely affected by future
events.
“R-1
(middle)” - Short-term debt rated “R-1 (middle)” is of superior credit quality.
The capacity for the payment of short-term financial obligations as they fall
due is very high. Differs from “R-1 (high)” by a relatively modest degree.
Unlikely to be significantly vulnerable to future events.
“R-1
(low)” - Short-term debt rated “R-1 (low)” is of good credit quality. The
capacity for the payment of short-term financial obligations as they fall due is
substantial. Overall strength is not as favorable as higher rating categories.
May be vulnerable to future events, but qualifying negative factors are
considered manageable.
“R-2
(high)” - Short-term debt rated “R-2 (high)” is considered to be at the upper
end of adequate credit quality. The capacity for the payment of short-term
financial obligations as they fall due is acceptable. May be vulnerable to
future events.
“R-2
(middle)” - Short-term debt rated “R-2 (middle)” is considered to be of adequate
credit quality. The capacity for the payment of short-term financial obligations
as they fall due is acceptable. May be vulnerable to future events or may be
exposed to other factors that could reduce credit quality.
“R-2
(low)” - Short-term debt rated “R-2 (low)” is considered to be at the lower end
of adequate credit quality. The capacity for the payment of short-term financial
obligations as they fall due is acceptable. May be vulnerable to future events.
A number of challenges are present that could affect the issuer’s ability to
meet such obligations.
“R-3”
- Short-term debt rated “R-3” is considered to be at the lowest end of adequate
credit quality. There is a capacity for the payment of short-term financial
obligations as they fall due. May be vulnerable to future events and the
certainty of meeting such obligations could be impacted by a variety of
developments.
“R-4”
- Short-term debt rated “R-4” is considered to be of speculative credit quality.
The capacity for the payment of short-term financial obligations as they fall
due is uncertain.
“R-5”
- Short-term debt rated “R-5” is considered to be of highly speculative credit
quality. There is a high level of uncertainty as to the capacity to meet
short-term financial obligations as they fall due.
“D”
- Short-term debt rated “D” is assigned when the issuer has filed under any
applicable bankruptcy, insolvency or winding up statute or there is a failure to
satisfy an obligation after the exhaustion of grace periods, a downgrade to “D”
may occur. DBRS may also use “SD” (Selective Default) in cases where only some
securities are impacted, such as the case of a “distressed
exchange”.
Long-Term
Credit Ratings
The
following summarizes the ratings used by S&P Global Ratings for long-term
issues:
“AAA”
- An obligation rated “AAA” has the highest rating assigned by S&P Global
Ratings. The obligor’s capacity to meet its financial commitments on the
obligation is extremely strong.
“AA”
- An obligation rated “AA” differs from the highest-rated obligations only to a
small degree. The obligor’s capacity to meet its financial commitments on the
obligation is very strong.
“A”
- An obligation rated “A” is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor’s capacity to meet its financial
commitments on the obligation is still strong.
“BBB”
- An obligation rated “BBB” exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to weaken
the obligor’s capacity to meet its financial commitments on the
obligation.
“BB,”
“B,” “CCC,” “CC” and “C” - Obligations rated “BB,” “B,” “CCC,” “CC” and “C” are
regarded as having significant speculative characteristics. “BB” indicates the
least degree of speculation and “C” the highest. While such obligations will
likely have some quality and protective characteristics, these may be outweighed
by large uncertainties or major exposure to adverse conditions.
“BB”
- An obligation rated “BB” is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions that could lead to the
obligor’s inadequate capacity to meet its financial commitments on the
obligation.
“B”
- An obligation rated “B” is more vulnerable to nonpayment than obligations
rated “BB”, but the obligor currently has the capacity to meet its financial
commitments on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor’s capacity or willingness to meet its
financial commitments on the obligation.
“CCC”
- An obligation rated “CCC” is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitments on the obligation. In the event of
adverse
business, financial, or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitments on the obligation.
“CC”
- An obligation rated “CC” is currently highly vulnerable to nonpayment. The
“CC” rating is used when a default has not yet occurred but S&P Global
Ratings expects default to be a virtual certainty, regardless of the anticipated
time to default.
“C”
- An obligation rated “C” is currently highly vulnerable to nonpayment, and the
obligation is expected to have lower relative seniority or lower ultimate
recovery compared with obligations that are rated higher.
“D”
- An obligation rated “D” is in default or in breach of an imputed promise. For
non-hybrid capital instruments, the “D” rating category is used when payments on
an obligation are not made on the date due, unless S&P Global Ratings
believes that such payments will be made within five business days in the
absence of a stated grace period or within the earlier of the stated grace
period or 30 calendar days. The
“D”
rating also will be used upon the filing of a bankruptcy petition or the taking
of similar action and where default on an obligation is a virtual certainty, for
example due to automatic stay provisions. An obligation’s rating is lowered to
“D” if it is subject to a distressed exchange offer.
Plus
(+) or minus (-) - The ratings from “AA” to “CCC” may be modified by the
addition of a plus (+) or minus (-) sign to show relative standing within the
rating categories.
“NR”
- This indicates that a rating has not been assigned, or is no longer
assigned.
Local
Currency and Foreign Currency Risks - S&P Global Ratings’ issuer credit
ratings make a distinction between foreign currency ratings and local currency
ratings. An issuer’s foreign currency rating will differ from its local currency
rating on it when the obligor has a different capacity to meet its obligations
denominated in its local currency, versus obligations denominated in a foreign
currency.
Moody’s
long-term ratings are forward-looking opinions of the relative credit risks of
financial obligations with an original maturity of one year or more. Such
ratings reflect both on the likelihood of default or impairment on contractual
financial obligations and the expected financial loss suffered in the event of
default or impairment. The following summarizes the ratings used by Moody’s for
long-term debt:
“Aaa”
- Obligations rated “Aaa” are judged to be of the highest quality, subject to
the lowest level of credit risk.
“Aa”
- Obligations rated “Aa” are judged to be of high quality and are subject to
very low credit risk.
“A”
- Obligations rated “A” are judged to be upper-medium grade and are subject to
low credit risk.
“Baa”
- Obligations rated “Baa” are judged to be medium-grade and subject to moderate
credit risk and as such may possess certain speculative
characteristics.
“Ba”
- Obligations rated “Ba” are judged to be speculative and are subject to
substantial credit risk.
“B”
- Obligations rated “B” are considered speculative and are subject to high
credit risk.
“Caa”
- Obligations rated “Caa” are judged to be speculative of poor standing and are
subject to very high credit risk.
“Ca”
- Obligations rated “Ca” are highly speculative and are likely in, or very near,
default, with some prospect of recovery of principal and interest.
“C”
- Obligations rated “C” are the lowest rated and are typically in default, with
little prospect for recovery of principal or interest.
Note:
Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating
classification from “Aa” through “Caa.” The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the
lower end of that generic rating category.
“NR”
- Is assigned to unrated obligations.
The
following summarizes long-term ratings used by Fitch:
“AAA”
- Securities considered to be of the highest credit quality. “AAA” ratings
denote the lowest expectation of credit risk. They are assigned only in cases of
exceptionally strong capacity for payment of financial commitments. This
capacity is highly unlikely to be adversely affected by foreseeable
events.
“AA”
- Securities considered to be of very high credit quality. “AA” ratings denote
expectations of very low credit risk. They indicate very strong capacity for
payment of financial commitments. This capacity is not significantly vulnerable
to foreseeable events.
“A”
- Securities considered to be of high credit quality. “A” ratings denote
expectations of low credit risk. The capacity for payment of financial
commitments is considered strong. This capacity may, nevertheless, be more
vulnerable to adverse business or economic conditions than is the case for
higher ratings.
“BBB”
- Securities considered to be of good credit quality. “BBB” ratings indicate
that expectations of credit risk are currently low. The capacity for payment of
financial commitments is considered adequate, but adverse business or economic
conditions are more likely to impair this capacity.
“BB”
- Securities considered to be speculative. “BB” ratings indicate that there is
an elevated vulnerability to credit risk, particularly in the event of adverse
changes in business or economic conditions over time; however, business or
financial alternatives may be available to allow financial commitments to be
met.
“B”
- Securities considered to be highly speculative. “B” ratings indicate that
material credit risk is present.
“CCC”
- A “CCC” rating indicates that substantial credit risk is present.
“CC”
- A “CC” rating indicates very high levels of credit risk.
“C”
- A “C” rating indicates exceptionally high levels of credit risk.
Defaulted
obligations typically are not assigned “RD” or “D” ratings but are instead rated
in the “CCC” to “C” rating categories, depending on their recovery prospects and
other relevant characteristics. Fitch believes that this approach better aligns
obligations that have comparable overall expected loss but varying vulnerability
to default and loss.
Plus
(+) or minus (-) may be appended to a rating to denote relative status within
major rating categories. Such suffixes are not added to the “AAA” obligation
rating category, or to corporate finance obligation ratings in the categories
below “CCC”.
“NR”
- Is assigned to an unrated issue of a rated issuer.
The
DBRS long-term rating scale provides an opinion on the risk of default. That is,
the risk that an issuer will fail to satisfy its financial obligations in
accordance with the terms under which an obligation has been issued. Ratings are
based on quantitative and qualitative considerations relevant to the issuer, and
the relative ranking of claims. All rating categories other than AAA and D also
contain subcategories “(high)” and “(low)”. The absence of either a “(high)” or
“(low)” designation indicates the rating is in the middle of the category. The
following summarizes the ratings used by DBRS for long-term debt:
“AAA”
- Long-term debt rated “AAA” is of the highest credit quality. The capacity for
the payment of financial obligations is exceptionally high and unlikely to be
adversely affected by future events.
“AA”
- Long-term debt rated “AA” is of superior credit quality. The capacity for the
payment of financial obligations is considered high. Credit quality differs from
“AAA” only to a small degree. Unlikely to be significantly vulnerable to future
events.
“A”
- Long-term debt rated “A” is of good credit quality. The capacity for the
payment of financial obligations is substantial, but of lesser credit quality
than “AA.” May be vulnerable to future events, but qualifying negative factors
are considered manageable.
“BBB”
- Long-term debt rated “BBB” is of adequate credit quality. The capacity for the
payment of financial obligations is considered acceptable. May be vulnerable to
future events.
“BB”
- Long-term debt rated “BB” is of speculative, non-investment grade credit
quality. The capacity for the payment of financial obligations is uncertain.
Vulnerable to future events.
“B”
- Long-term debt rated “B” is of highly speculative credit quality. There is a
high level of uncertainty as to the capacity to meet financial
obligations.
“CCC”,
“CC” and “C” - Long-term debt rated in any of these categories is of very highly
speculative credit quality. In danger of defaulting on financial obligations.
There is little difference between these three categories, although “CC” and “C”
ratings are normally applied to obligations that are seen as highly likely to
default, or subordinated to obligations rated in the “CCC” to “B” range.
Obligations in respect of which default has not technically taken place but is
considered inevitable may be rated in the “C” category.
“D”
- A security rated “D” is assigned when the issuer has filed under any
applicable bankruptcy, insolvency or winding up statute or there is a failure to
satisfy an obligation after the exhaustion of grace periods, a downgrade to “D”
may occur. DBRS may also use “SD” (Selective Default) in cases where only some
securities are impacted, such as the case of a “distressed
exchange”.
Municipal
Note Ratings
An
S&P Global Ratings U.S. municipal note rating reflects S&P Global
Ratings’ opinion about the liquidity factors and market access risks unique to
the notes. Notes due in three years or less will likely receive a note rating.
Notes with an original maturity of more than three years will most likely
receive a long-term debt rating. In determining which type of rating, if any, to
assign, S&P Global Ratings’ analysis will review the following
considerations:
• Amortization
schedule - the larger the final maturity relative to other maturities, the more
likely it will be treated as a note; and
• Source
of payment - the more dependent the issue is on the market for its refinancing,
the more likely it will be treated as a note.
Municipal
Short-Term Note rating symbols are as follows:
“SP-1”
- A municipal note rated “SP-1” exhibits a strong capacity to pay principal and
interest. An issue determined to possess a very strong capacity to pay debt
service is given a plus (+) designation.
“SP-2”
- A municipal note rated “SP-2” exhibits a satisfactory capacity to pay
principal and interest, with some vulnerability to adverse financial and
economic changes over the term of the notes.
“SP-3”
- A municipal note rated “SP-3” exhibits a speculative capacity to pay principal
and interest.
“D”
- This rating is assigned upon failure to pay the note when due, completion of a
distressed exchange offer, or the filing of a bankruptcy petition or the taking
of similar action and where default on an obligation is a virtual certainty, for
example due to automatic stay provisions.
Moody’s
uses the global short-term Prime rating scale (listed above under Short-Term
Credit Ratings) for commercial paper issued by U.S. municipalities and
nonprofits. These commercial paper programs may be backed by external letters of
credit or liquidity facilities, or by an issuer’s self-liquidity.
For
other short-term municipal obligations, Moody’s uses one of two other short-term
rating scales, the Municipal Investment Grade (“MIG”) and Variable Municipal
Investment Grade (“VMIG”) scales provided below.
Moody’s
uses the MIG scale for U.S. municipal cash flow notes, bond anticipation notes
and certain other short-term obligations, which typically mature in three years
or less. Under certain circumstances, Moody’s uses the MIG scale for bond
anticipation notes with maturities of up to five years.
MIG
Scale
“MIG-1”
- This designation denotes superior credit quality. Excellent protection is
afforded by established cash flows, highly reliable liquidity support, or
demonstrated broad-based access to the market for refinancing.
“MIG-2”
- This designation denotes strong credit quality. Margins of protection are
ample, although not as large as in the preceding group.
“MIG-3”
- This designation denotes acceptable credit quality. Liquidity and cash-flow
protection may be narrow, and market access for refinancing is likely to be less
well-established.
“SG”
- This designation denotes speculative-grade credit quality. Debt instruments in
this category may lack sufficient margins of protection.
“NR”
- Is assigned to an unrated obligation.
In
the case of variable rate demand obligations (“VRDOs”), a two-component rating
is assigned: a long or short-term debt rating and a demand obligation rating.
The long-term rating addresses the issuer’s ability to meet scheduled principal
and interests payments. The short-term demand obligation rating addresses the
ability of the issuer or the liquidity provider to make payments associated with
the purchase-price-upon demand feature (“demand feature”) of the VRDO. The
short-term demand obligation rating uses the VMIG scale. VMIG ratings with
liquidity support use as an input the short-term Counterparty Risk Assesment of
the support provider, or the long-term rating of the underlying obligor in the
absence of third party liquidity support. Transitions of VMIG Ratings of demand
obligations with conditional liquidity support differ from transitions on the
Prime scale to reflect the risk that external liquidity support will terminate
if the issuer’s long-term rating drops below investment grade.
Moody’s
typically assigns the VMIG short-term demand obligation rating if the frequency
of the demand feature is less than every three years. If the frequency of the
demand feature is less than three years but the purchase price is payable only
with remarketing proceeds, the short-term demand obligation rating is
“NR”.
“VMIG-1”
- This designation denotes superior credit quality. Excellent protection is
afforded by the superior short-term credit strength of the liquidity provider
and structural and legal protections that ensure the timely payment of purchase
price upon demand.
“VMIG-2”
- This designation denotes strong credit quality. Good protection is afforded by
the strong short-term credit strength of the liquidity provider and structural
and legal protections that ensure the timely payment of purchase price upon
demand.
“VMIG-3”
- This designation denotes acceptable credit quality. Adequate protection is
afforded by the satisfactory short-term credit strength of the liquidity
provider and structural and legal protections that ensure the timely payment of
purchase price upon demand.
“SG”
- This designation denotes speculative-grade credit quality. Demand features
rated in this category may be supported by a liquidity provider that does not
have a sufficiently strong short-term rating or may lack the structural and/or
legal protections necessary to ensure the timely payment of purchase price upon
demand.
“NR”
- Is assigned to an unrated obligation.
About
Credit Ratings
An
S&P Global Ratings issue credit rating is a forward-looking opinion about
the creditworthiness of an obligor with respect to a specific financial
obligation, a specific class of financial obligations, or a specific financial
program (including ratings on medium-term note programs and commercial paper
programs). It takes into consideration the creditworthiness of guarantors,
insurers, or other forms of credit enhancement on the obligation and takes into
account the currency in which the obligation is denominated. The opinion
reflects S&P Global Ratings’ view of the obligor’s capacity and willingness
to meet its financial commitments as they come due, and this opinion may assess
terms, such as collateral security and subordination, which could affect
ultimate payment in the event of default.
Ratings
assigned on Moody’s global long-term and short-term rating scales are
forward-looking opinions of the relative credit risks of financial obligations
issued by non-financial corporates, financial institutions, structured finance
vehicles, project finance vehicles, and public sector entities.
Fitch’s
credit ratings relating to issuers are an opinion on the relative ability of an
entity to meet financial commitments, such as interest, preferred dividends,
repayment of principal, insurance claims or counterparty obligations. Fitch
credit ratings are used by investors as indications of the likelihood of
receiving the money owed to them in accordance with the terms on which they
invested. Fitch’s credit ratings cover the global spectrum of corporate,
sovereign financial, bank, insurance, and public finance entities (including
supranational and sub-national entities) and the securities or other obligations
they issue, as well as structured finance securities backed by receivables or
other financial assets.
Credit
ratings provided by DBRS are forward-looking opinions about credit risk which
reflect the creditworthiness of an issuer, rated entity, security and/or
obligation. Credit ratings are not statements of fact. While historical
statistics and performance can be important considerations, credit ratings are
not based solely on such; they include subjective considerations and involve
expectations for future performance that cannot be guaranteed. To the extent
that future events and economic conditions do not match expectations, credit
ratings assigned to issuers, entities, securities and/or obligations can change.
Credit ratings are also based on approved and applicable methodologies
(“Methodologies”), which are periodically updated and when material changes are
deemed necessary, this may also lead to rating changes.
Credit
ratings typically provide an opinion on the risk that investors may not be
repaid in accordance with the terms under which the obligation was issued. In
some cases, credit ratings may also include consideration for the relative
ranking of claims and recovery, should default occur. Credit ratings are meant
to provide opinions on relative measures of risk and are not based on
expectations of any specific default probability, nor are they meant to predict
such.
The
data and information on which DBRS bases its opinions is not audited or verified
by DBRS, although, DBRS conducts a reasonableness review of information received
and relied upon in accordance with its Methodologies and policies.
DBRS
uses rating symbols as a concise method of expressing its opinion to the market,
but there are a limited number of rating categories for the possible slight risk
differentials that exist across the rating spectrum and DBRS does not assert
that credit ratings in the same category are of “exactly” the same
quality.
2023
PRIVACY & PROXY NOTICE
PRIVACY
POLICIES AND PROCEDURES
The
trust and confidence of you, our customers, is important to us at Congress Asset
Management Company. For this reason, we are careful in the way we collect and
handle non-public, personal information about you, our clients (“Client
Information”). This Privacy Notice describes our policies and practices
regarding your information and how it is obtained, disseminated, and
protected.
Information
We Collect
We
may collect Client Information from the following sources:
•Information
we receive on contracts or other forms, such as your name, address, date of
birth, and social security number
•Information
relating to transactions with us, our affiliates and others, such as the
purchase and sale of securities and account balances
•Information
we receive from third parties, such as custodians, wealth management and
financial service firms, as required or permitted by law
•The
retention period for which we hold your personal data varies depending on the
purpose for which we are using your personal data and legal obligations (laws or
regulation may set a minimum period for which we have to keep your
data)
Information
We Disclose
We
disclose Client Information about you or our former clients to third parties
only to the extent required or permitted by law. Such sharing of your
information is applied to:
•Everyday
business purposes such as processing transactions, maintaining and or servicing
your account
•Cooperating
with regulatory authorities, responding to court orders and legal
investigations
•Taking
reasonable and necessary steps to prevent fraud, unauthorized transactions,
etc.
Opting
Out
The
information we disclose is limited, and essential to servicing your account,
protecting your privacy and meeting obligations under state and federal law. We
do not disclose Client Information that requires a notice to you for limiting
such disclosures, otherwise known as “opting-out.” However, should we wish to
disclose additional Client Information of yours, we will only do so with your
written permission as discussed below.
Opt-In
Process for Sharing Additional Client Information
Our
current business practices require us to obtain affirmative written permission
from you (“Opting-In”), before we disclose any Client Information outside of
what is discussed above in the “Information We Disclose” section of this notice.
In the event we wish to share such additional Client Information, we will
provide you an Opt-In form describing the additional Client Information we seek
to share, with whom we wish to share it with, and for what purpose. Until such
form is received by us from you, indicating your permission, such additional
Client Information about you will not be shared.
Information
Security
•We
maintain an Information Protection and Cybersecurity program and provide ongoing
awareness and training to our employees
•We
continue to evaluate our efforts to protect confidential Client information and
to keep our privacy policy and practices current
•We
restrict access to Client Information to employees and service providers who are
involved in providing products and services to our clients
•Employees
with access to Client Information may not use or disclose such information,
except for Congress Asset Management Company business use
•We
maintain physical, electronic, and procedural safeguards in order to protect
Client Information
•When
there is a need to dispose of confidential Client Information, we require our
employees to shred, not discard the information
If
you have any questions regarding our Privacy Policy, please call us at
800-542-7888 or write to us at 2 Seaport Lane, Boston, MA 02210.
PROXY
POLICIES AND PROCEDURES
PROXY
POLICIES
Responsibility
Congress
Asset Management Company’s responsibility as an investment manager and plan
fiduciary, as outlined in rule 206(4)-6 under the Investment Advisers Act of
1940, and the Employee Retirement Income Security Act of 1974 and subsequent
Department of Labor policy statements, includes the duty to vote proxies on
behalf of our clients when proxy voting authority has been delegated to
us.
Congress
Asset Management Company accepts its fiduciary responsibility to vote proxies
under these circumstances. This statement is intended to set forth those
policies and guidelines to be followed in carrying out our
responsibility.
General
Principles of Voting
Proxy
voting rights have been declared by the Department of Labor to be valuable plan
assets and therefore must be exercised in accordance with the fiduciary duties
of loyalty and prudence. This policy statement has been carefully crafted to
meet the requirements of loyalty and prudence and will be employed by the Proxy
Committee (the “Proxy Committee”) in its proxy voting procedures and
decisions.
The
duty of loyalty requires that a voting fiduciary exercise its proxy voting
authority solely in the interests of its clients, or plan participants and
beneficiaries, and for the exclusive purpose of providing plan benefits to
participants and beneficiaries. The voting fiduciary is prohibited from
subordinating the interests of participants and beneficiaries to unrelated
objectives.
The
duty of prudence requires that proxy voting authority be exercised with the
care, skill, prudence, and diligence that a similarly situated prudent person
knowledgeable in such matters would exercise. In keeping with its fiduciary
responsibilities, Congress Asset Management Company will vote proxies in
accordance with the “economic best interests” of its clients, plan participants
and beneficiaries. Congress Asset Management Company will consider the long-term
impact of business plans on all affected parties including shareholders, debt
holders, employees, retired workers, and communities in which the firm
operates.
Decisions
Free of Outside Influence
Generally,
Congress Asset Management Company will vote on the recommendation of the
issuer’s management. However, Congress shall take into consideration the general
positions of trustees and other fiduciaries in deciding how to vote proxies.
Congress Asset Management Company currently utilizes the services of Broadridge
Investor Communications, an independent administrator of proxy voting services.
Such services may include voting execution, comprehensive reporting, and
supporting justification. However, any influence imposed upon us by a person or
persons who have a direct personal or financial interest in the outcome will be
rejected as a violation of ERISA and our moral obligation to plan participants,
and clients. On contested issues the guiding principle shall be the long term
“economic best interests” of all affected parties. The interest of any one group
shall not dominate the decision to the detriment of other affected
parties.
Clients
and prospective clients should be aware that Congress Asset Management typically
follows the recommendation of the AFL-CIO when voting proxies for Taft-Hartley
clients, while at the same time actively soliciting new business from the
Taft-Hartley market. Voting to such recommendations may at times be different
from how we vote our other clients’ proxies and in opposition to the interests
of such other clients. In addition, upon a client’s request, Congress will
engage Glass Lewis for ESG voting recommendations.
Congress
Asset Management at the direction of a client’s Investment Policy statement has
the ability to direct proxy voting decisions to a 3rd party proxy advice vendor.
These voting recommendations may at times be different from how we vote other
clients’ proxies and in opposition to the interests of such other
clients.
PROXY
PROCEDURES
Proxy
Committee
The
Proxy Committee shall have responsibility for setting the proxy voting policy at
Congress Asset Management Company. Proxies will be voted in the economic best
interest of each individual client, ERISA plan participant, and beneficiaries.
The Proxy Committee will use available resources as needed to assist in
evaluating proxy issues and setting policies that are appropriate for each
client. Congress Asset Management Company has an agreement with Broadridge
Investor Communications to provide integrated third-party research and
electronic, automated, rules-based voting capabilities via the Broadridge
ProxyEdge service for each individual proxy.
In
the event of a vote that falls outside of the standard proxy voting rules for
Congress Asset Management Company, the Proxy Committee will meet to review a
specific vote. When the Proxy Committee reaches a decision concerning the proxy
vote in question, Broadridge ProxyEdge shall be instructed to vote accordingly
and no further action shall be required. A simple majority of the Proxy
Committee shall be required for a final ruling on proxy issues.
Record
Keeping
1)Proxy
Committee minutes and meeting material including the basis for any voting
decision including whether the advice of any individual outside of the
organization was acted upon.
2)Records
will be maintained detailing how proxies were voted, and for which accounts they
were voted.
Records
of proxy voting will be made available to Clients and ERISA Plan Sponsors upon a
written request by email to [email protected] or by mail to Congress
Asset Management Company, 2 Seaport Lane, 5th Floor, Boston, MA
02210.
PROXY
COMMITTEE:
Daniel
A. Lagan Gregg A. O’Keefe Marc
Pezzuto
