ck0000811030-20230831
STATEMENT
OF ADDITIONAL INFORMATION
December
29, 2023
VILLERE
BALANCED FUND
TICKER:
VILLX
VILLERE
EQUITY FUND
TICKER:
VLEQX
601
Poydras St., Suite 1808, New Orleans, LA 70130
1-866-209-1129
This
Statement of Additional Information (“SAI”) is not a prospectus and it should be
read in conjunction with the Prospectus dated December 29, 2023, as may be
revised, of the Villere Balanced Fund (the “Balanced Fund”) and the Villere
Equity Fund (the “Equity Fund”), (each a “Fund” and collectively, the “Funds”),
each a series of Professionally Managed Portfolios (the “Trust”). St. Denis
J. Villere & Company, LLC (the “Adviser”) is the investment adviser to the
Funds. A copy of the Funds’ Prospectus is available on the Funds’ website at
www.villere.com and by calling the telephone number listed above.
The
Funds’ most recent Annual
Report to Shareholders
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 appearing in the Annual Report are
incorporated into this SAI by reference to the Funds’ Annual Report dated August
31, 2023 as filed with the Securities and Exchange Commission
(“SEC”).
TABLE
OF CONTENTS
THE
TRUST
The
Trust is a Massachusetts business trust organized on February 24, 1987, and is
registered with the 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 which 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 a Fund’s assets for any shareholder held personally liable for
obligations of the Fund 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 a Fund itself is unable to meet
its obligations.
The
Balanced Fund commenced operations on June 7, 2002, as successor to the Villere
Balanced Fund, a series of the Trust for Investment Managers. The predecessor
Villere Balanced Fund commenced operations on September 30, 1999.
The
Equity Fund commenced operations on May 31, 2013.
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 adviser with any other series of the Trust. 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.
INVESTMENT
POLICIES AND RISKS
Each
Fund is diversified. 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, the Fund may have a greater percentage of its assets
invested in securities of fewer issuers. A Fund is 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.
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 a 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 a Fund may lose value, regardless of the individual results of the
securities and other instruments in which a 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 a Fund invests
in securities of issuers located in or with significant exposure to countries
experiencing economic and financial difficulties, the value and liquidity of a
Fund’s investments may be negatively affected.
The
following information supplements the discussion of the Funds’ investment
objectives and policies as set forth in their Prospectus. There is no guarantee
that a Fund will achieve its investment objective.
The
Funds may invest in the following types of investments, each of which is subject
to certain risks, as discussed below.
EQUITY
SECURITIES.
Each Fund may invest in equity securities consistent with its investment
objective and strategies. Common stocks, preferred stocks and convertible
securities are examples of equity securities in which each Fund 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 a Fund
to the risk that the issuer may discontinue paying dividends.
To
the extent a Fund invests in the equity securities of small- or medium-sized
companies, it will be exposed to the risks of small- and medium-sized companies.
Small- and medium-sized companies may have narrower markets for their goods
and/or services and more limited managerial and financial resources than larger,
more established companies. Furthermore, such companies often have limited
product lines, services, markets or financial resources, or are dependent on a
small management group. In addition, because these stocks may not be well-known
to the investing public, do not have significant institutional ownership and are
typically followed by fewer security analysts, there will normally be less
publicly available information concerning these securities compared to what is
available for the securities of larger companies.
Adverse
publicity and investor perceptions, whether based on fundamental analysis, can
decrease the value and liquidity of securities held by a Fund. As a result,
their performance can be more volatile and they face greater risk of business
failure, which could increase the volatility of a Fund’s portfolio.
COMMON
STOCK.
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 the 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
STOCK.
Preferred stocks are equity securities that often pay dividends at a specific
rate and have a preference over common stocks in dividend payments and
liquidation of assets. A preferred stock is a blend of the characteristics of a
bond and common stock. It can offer the higher yield of a bond, but does not
have the seniority of a bond. Unlike common stock, a preferred stock’s
participation in the issuer’s growth may be limited. Although the dividend is
set at a fixed annual rate, it is subject to the risk that the dividend can be
changed or omitted by the issuer.
CONVERTIBLE
SECURITIES.
Convertible securities are securities (such as debt securities or preferred
stock) that may be converted into or exchanged for a specified amount of common
stock of the same or different issuer within a particular period of time at a
specified price or formula. A convertible security entitles the holder to
receive interest paid or accrued on debt or dividends paid on preferred stock
until the convertible stock matures or is redeemed, converted or exchanged.
While no securities investment is without some risk, investments in convertible
securities generally entail less risk than the issuer’s common stock. However,
the extent to which such risk is reduced depends in large measure upon the
degree to which the convertible security sells above its value as a fixed-income
security. In addition to the general risk associated with equity securities
discussed above, the market value of convertible securities is also affected by
prevailing interest rates, the credit quality of the issuer and any call
provisions. While convertible securities generally offer lower interest or
dividend yields than nonconvertible debt securities of similar quality, they do
enable the investor to benefit from increases in the market price of the
underlying common stock.
INITIAL
PUBLIC OFFERINGS.
Securities issued in initial public offerings (“IPOs”) are often issued by
unseasoned companies that have the risks of smaller capitalization companies.
Securities issued in IPOs have no trading history, and information about the
companies may be available for very limited periods. Securities issued in an IPO
frequently are very volatile in price, and the Fund’s may hold securities
purchased in an IPO for a very short period of time. As a result, the Equity
Fund’s investments in IPOs may increase portfolio turnover, which increases
brokerage and administrative costs and may result in taxable distributions to
shareholders.
At
any particular time or from time to time the Equity Fund may not be able to
invest in securities issued in IPOs, or invest to the extent desired because,
for example, only a small portion (if any) of the securities being offered in an
IPO may be made available to the Fund. In addition, under certain market
conditions a relatively small number of companies may issue securities in IPOs.
Similarly, as the number of investors to which IPO securities are allocated
increases, the number of securities issued to any one investor may decrease. The
investment performance of the Equity Fund during periods when it is unable to
invest significantly or at all in IPOs may be lower than
during
periods when it is able to do so. In addition, as the Equity Fund increases in
size, the impact of IPOs on the Fund’s performance will generally decrease.
There can be no assurance that investments in IPOs will improve the Equity
Fund’s performance.
RIGHTS
AND WARRANTS.
Rights and warrants are securities which entitle the holder to purchase the
securities of a company (usually, its common stock) at a specified price during
a specified time period. The value of a right or warrant is affected by many of
the same factors that determine the prices of common stocks. Rights and warrants
may be purchased directly or acquired in connection with a corporate
reorganization or exchange offer. A right is an instrument granting rights to
existing shareholders of a corporation to subscribe to shares of a new issue of
common stock at below the public offering price before the stock is offered to
the public. A warrant is an instrument issued by a corporation that gives the
holder the right to subscribe to a specific amount of the corporation’s capital
stock at a set price for a specified period of time. Rights and warrants do not
represent ownership of the securities, but only the right to buy the securities.
The prices of rights and warrants do not necessarily move parallel to the prices
of underlying securities. Rights and warrants may be considered speculative in
that they have no voting rights, pay no dividends and have no rights with
respect to the assets of a corporation issuing them.
FIXED-INCOME
SECURITIES.
Fixed-income securities include traditional debt securities issued by
corporations, such as bonds and debentures and debt securities that are
convertible into common stock and interests. Fixed-income securities that will
be eligible for purchase by a Fund include investment grade and high-yield
corporate debt securities. Investment grade securities are those rated BBB or
better by S&P Global Ratings (“S&P®”)
and those rated Baa or better by Moody’s Investors Service©,
Inc. (“Moody’s”) or their equivalent. Securities rated BBB by
S&P®
are considered investment grade, but Moody’s considers securities rated Baa to
have speculative characteristics. High-yield securities, or “junk bonds,” are
rated less than investment grade.
The
Balanced Fund reserves the right to invest up to 10% of its assets in securities
rated lower than BBB by S&P®
or lower than Baa by Moody’s. High-yield debt securities generally offer a
higher current yield than that available for higher-grade issues. However,
lower-rated securities involve higher risks in that they are especially subject
to adverse changes in general economic conditions and in the industries in which
the issuers are engaged, to changes in the financial condition of the issuers
and to price fluctuations in response to changes in interest rates. During
periods of economic downturn or rising interest rates, highly leveraged issuers
may experience financial stress that could adversely affect their ability to
make payments of interest and principal and increase the possibility of default.
The
market for high-yield debt securities is generally thinner and less active than
that for higher quality securities, which may limit a Fund’s ability to sell
such securities at fair value in response to changes in the economy or financial
markets. Adverse publicity and investor perceptions, whether based on
fundamental analysis, may also decrease the values and liquidity of lower-rated
securities, especially in a thinly traded market.
Ratings
of debt securities represent the rating agencies’ opinions regarding their
quality, but are not a guarantee of quality and may be reduced after a Fund has
acquired the security. If a security’s rating is reduced while it is held by a
Fund, the Adviser will consider whether the Fund should continue to hold the
security but is not required to dispose of it. Credit ratings attempt to
evaluate the safety of principal and interest payments and do not evaluate the
risks of fluctuations in market value. Also, rating agencies may fail to make
timely changes in credit ratings in
response
to subsequent events, so that an issuer’s current financial condition may be
better or worse than the rating indicates. The ratings for debt securities are
described in Appendix A.
Fixed-income
securities with longer maturities generally entail greater risk than those with
shorter maturities.
FOREIGN
SECURITIES.
The Balanced Fund may invest up to 5% of its assets in securities of foreign
issuers, including in emerging markets. The Equity Fund may invest up to 10% of
its assets in foreign securities through American Depositary Receipts (“ADRs”),
including in issuers in emerging markets.
Investing
in foreign securities involves certain risks not ordinarily associated with
investments in securities of domestic issuers. Foreign securities markets have,
for the most part, substantially less volume than the U.S. markets and
securities of many foreign companies are generally less liquid and their prices
more volatile than securities of U.S. companies. There is generally less
government supervision and regulation of foreign exchanges, brokers and issuers
than in the United States. The rights of investors in certain foreign countries
may be more limited than those of shareholders of U.S. issuers and a Fund may
have greater difficulty taking appropriate legal action to enforce its rights in
a foreign court than in a U.S. court. Investing in foreign securities also
involves risks associated with government, economic, monetary, and fiscal
policies (such as the adoption of protectionist trade measures), possible
foreign withholding taxes on dividends and interest payable to a Fund, possible
taxes on trading profits, inflation, and interest rates, economic expansion or
contraction, and global or regional political, economic or banking crises.
Furthermore, there is the risk of possible seizure, nationalization or
expropriation of the foreign issuer or foreign deposits and the possible
adoption of foreign government restrictions such as exchange controls. Also,
foreign issuers are not necessarily subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to those
applicable to domestic issuers and as a result, there may be less publicly
available information on such foreign issuers than is available from a domestic
issuer.
In
addition, the Balanced Fund may invest in foreign securities of companies that
are located in developing or emerging markets. The Equity Fund may invest in
foreign securities through ADRs of companies that are located in developing or
emerging markets. Investing in securities of issuers located in these markets
may pose greater risks not typically associated with investing in more
established markets, such as increased risk of social, political and economic
instability. Emerging market countries typically have smaller securities markets
than developed countries and therefore less liquidity and greater price
volatility than more developed markets. Securities traded in emerging markets
may also be subject to risks associated with the lack of modern technology, poor
infrastructure, the lack of capital base to expand business operations and the
inexperience of financial intermediaries, custodians and transfer agents.
Emerging market countries are also more likely to impose restrictions on the
repatriation of an investor’s assets and even where there is no outright
restriction on repatriation, the mechanics of repatriations may delay or impede
a Fund’s ability to obtain possession of its assets. As a result, there may be
an increased risk or price volatility associated with a Fund’s investments in
emerging market countries, which may be magnified by currency
fluctuations.
Dividends
and interest payable on a Fund’s foreign securities may be subject to foreign
withholding tax. Each Fund may also be subject to foreign taxes on its trading
profits. Some countries may also impose a transfer or stamp duty on certain
securities transactions. The imposition of these taxes will increase the cost to
the Funds of investing in those countries that impose these taxes. Based on the
Funds’ principal investment strategies, it is not expected that such taxes will
be offset by credits or deductions available to shareholders in the Funds under
U.S.
tax law. Thus, it is expected that such taxes will reduce the net return to the
Funds’ shareholders.
To
the extent a Fund invests in securities denominated in foreign currencies, the
Fund will be subject to the risk that a change in the value of any such currency
against the U.S. dollar will result in a corresponding change in the U.S. dollar
value of the Fund’s assets denominated in that currency. Investing in foreign
denominated securities may also result in transaction costs incurred in
connection with conversions between various currencies. In addition, only a
limited market currently exists for hedging transactions relating to currencies
in certain emerging markets and securities transactions undertaken in foreign
markets may not be settled promptly, subjecting the Funds to the risk of
fluctuating currency exchange rates pending settlement.
Each
Fund may invest in ADRs. ADRs represent receipts typically issued by a U.S. bank
or trust company which evidence ownership of underlying securities of foreign
issuers. ADR prices are denominated in U.S. dollars although the underlying
securities are denominated in a foreign currency. ADRs may be listed on a
national securities exchange or may be traded in the over-the-counter market.
Investments in ADRs involve risks similar to direct investment in the underlying
foreign security. Unsponsored ADRs are organized independently of the issuer of
the underlying security and without its cooperation. Available information about
the issuer of the unsponsored ADR may not be current or as readily available as
for sponsored ADRs and therefore the prices of unsponsored ADRs may be more
volatile than for sponsored ADRs.
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.
GOVERNMENT
OBLIGATIONS.
Each Fund may make short-term investments in U.S. government obligations. Such
obligations include Treasury bills, certificates of indebtedness, notes and
bonds, and issuers of such entities as the Government National Mortgage
Association (“GNMA”). Some of these obligations, such as those of the GNMA, are
supported by the full faith and credit of the U.S. Treasury.
AGENCY
OBLIGATIONS.
Each Fund may make short-term investments in agency obligations, such as the
Export-Import Bank of the United States, Tennessee Valley Authority, Resolution
Funding Corporation, Farmers Home Administration, Federal Home Loan Banks,
Federal Intermediate Credit Banks, Federal Farm Credit Banks, Federal Land
Banks, Federal Housing Administration, Federal National Mortgage Association
(“FNMA”), Federal Home Loan Mortgage Corporation and the Student Loan Marketing
Association. Some, such as those of the Export-Import Bank of United States, are
supported only by the right of the issuer to borrow from the Treasury; others,
such as those of the FNMA, are supported by only the discretionary authority of
the U.S. government to purchase the agency’s obligations; still others, such as
those of the Student Loan Marketing Association, are supported only by the
credit of the instrumentality. No assurance can be given that the U.S.
government would provide financial support to U.S. government-sponsored
instrumentalities because it is not obligated to do so by law.
As
of September 6, 2008, the Federal Housing Finance Agency (“FHFA”) has been
appointed to be the Conservator of the Federal Home Loan Mortgage Corporation
and FNMA for an indefinite period. In accordance with the Federal Housing
Finance Regulatory Reform Act of 2008 and the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992, as Conservator, the FHFA will
control and oversee the entities until the FHFA deems them financially sound and
solvent. During the Conservatorship, each entity’s obligations are expected to
be paid in the normal course of business. Although no express guarantee exists
for the debt or mortgage-backed securities issued by entities, the U.S.
Department of Treasury, through a secured lending credit facility and a Senior
Preferred Stock Purchase Agreement, has attempted to enhance the ability of the
entities to meet their obligations.
WHEN-ISSUED
SECURITIES.
Each Fund may from time to time purchase securities on a “when-issued” basis.
The price of such securities, which may be expressed in yield terms, is fixed at
the time the commitment to purchase is made, but delivery and payment for them
take place at a later date. Normally, the settlement date occurs within one
month of the purchase; during the period between purchase and settlement, no
payment is made by a Fund to the issuer and no interest accrues to the Fund. To
the extent that assets of a Fund are held in cash pending the settlement of a
purchase of securities, the Fund would not earn income; however, it is each
Fund’s intention to be fully invested to the extent practicable and subject to
the policies stated in this SAI and in the Funds’ Prospectus. While when-issued
securities may be sold prior to the settlement date, each Fund intends to
purchase them with the purpose of actually acquiring them unless a sale appears
desirable for investment reasons. At the time a Fund makes the commitment to
purchase a security on a when-issued basis, it will record the transaction and
reflect the value of the security in determining its per share net asset value
(“NAV”). The market value of the when-issued securities may be more or less than
the purchase price. The Funds do not believe that their NAV or income will be
adversely affected by their purchase of securities on a when-issued basis.
Rule
18f-4 under the 1940 Act permits a Fund to invest in securities on a when-issued
or forward-settling basis, or with a non-standard settlement cycle,
notwithstanding the limitation on the issuance of senior securities in Section
18 of the 1940 Act, provided that the Fund intends to physically settle the
transaction and the transaction will settle within 35 days of its trade date
(the “Delayed-Settlement Securities Provision”). A when-issued,
forward-settling, or non-standard settlement cycle security that does not
satisfy the Delayed-Settlement Securities Provision is treated as a derivatives
transaction under Rule 18f-4. See “Use of Derivatives, Hedging and Income
Transactions” below.
BORROWING.
Currently, the 1940 Act permits a Fund to borrow money from banks in amounts of
up to one-third of the 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.
The Funds have received Board approval and are permitted to lend up to 33 1/3%
of the securities in each of their portfolios. A Fund would lend securities from
its portfolio to brokers, dealers and financial institutions (but not
individuals) in order to increase the return on its portfolio. 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) 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 (6) 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.
In
the case of the Funds, loans must be secured by collateral consisting of:
(i) cash; (ii) securities issued or guaranteed by the U.S. government
or one of its agencies or instrumentalities; (iii) an irrevocable bank
letter of credit; (iv) Rule 2a-7 money market funds; (v) 3(c)(7) funds
managed in accordance with Rule 2a-7 under the 1940 Act or (vi) any combination
thereof, equal to not less than (a) 102% of the market value of the
securities loaned that are principally settled in the United States at the
inception of the loan and (b) 105% of the market value for securities that
are cleared and principally settled outside the United States at the inception
of the loan.
These
conditions may be subject to future modification. Such loans will be terminable
at any time upon specified notice. A Fund might experience the risk of loss if
the institution with which it has engaged in a portfolio loan transaction
breaches its agreement with the Fund. In addition, a Fund 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, a Fund 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, a Fund 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, a Fund 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 a Fund may receive as collateral
will not become part of the Fund’s investment portfolio at the time of the loan
and, in the event of a default by the borrower, the Fund will, if permitted by
law, dispose of such collateral except for such part thereof that is a security
in which the Fund is permitted to invest. During the time securities are on
loan, the borrower will pay a Fund any accrued income on those securities, and
the Fund may invest the cash collateral and earn income or receive an
agreed-upon fee from a borrower that has delivered cash-equivalent
collateral.
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.
SHORT-TERM
INVESTMENTS.
Each Fund may invest in any of the following securities and instruments for
defensive purposes:
CERTIFICATES
OF DEPOSIT, BANKERS’ ACCEPTANCES AND TIME DEPOSITS.
Each Fund 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 a Fund will be U.S.
dollar-denominated obligations of domestic banks, savings and loan associations
or financial institutions which, at the time of purchase, have capital, surplus
and undivided profits in excess of $100 million (including assets of both
domestic and foreign branches), based on latest published reports, or less than
$100 million 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, each Fund
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.
COMMERCIAL
PAPER AND SHORT-TERM NOTES.
Each Fund may invest a portion of its assets in commercial paper and short-term
notes. Commercial paper consists of unsecured promissory notes issued by
companies. 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 S&P®,
“Prime-1” or “Prime-2” by Moody’s, similarly rated by another nationally
recognized statistical rating organization or, if unrated, will be determined by
the Adviser to be of comparable quality. These rating symbols are described in
Appendix B.
MONEY
MARKET MUTUAL FUNDS.
Each Fund may invest in shares of money market mutual funds in connection with
the Fund’s management of daily cash positions or for longer periods. In addition
to the advisory and operational fees a Fund bears directly in connection with
its own operation, the Fund and its shareholders would also bear its pro rata
portions of each other money market fund’s advisory and operational expenses.
Each Fund currently intends to limit its investments in shares of money market
funds in accordance with the 1940 Act.
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.
SECTOR
EMPHASIS.
Each Fund may, from time to time, have greater than 25% of its assets in one
market sector (but not greater than 80% in any one market sector). To the extent
that a Fund focuses its investments in one or more sectors, it may be subject to
the risks affecting that sector more than if they were a more broadly
diversified fund. The Adviser’s judgment about which sectors offer the greatest
potential for long-term financial reward may, and likely will, change over time.
In fact, a Fund may focus its investments in any sector, depending on its
investment strategy.
OTHER
INVESTMENT COMPANIES.
Each Fund may invest in the securities of other registered investment companies,
including money market mutual funds, in accordance with the limitations
established under 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 the
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 funds) will be owned by a
Fund, or its affiliated persons, as a whole. In addition to the advisory and
operational fees each Fund bears directly in connection with its own operation,
each Fund would also bear its pro rata portions of each other investment
company’s advisory and operational expenses.
Section 12(d)(1)(A)
of the 1940 Act generally prohibits a fund from purchasing (1) more
than 3% of the total outstanding voting stock of another fund;
(2) securities of another fund having an aggregate value in excess of 5% of
the value of the acquiring fund; and (3) securities of the other fund and
all other funds having an aggregate value in excess of 10% of the value of the
total assets of the acquiring fund. There are some exceptions, however, to these
limitations pursuant to various rules promulgated by the SEC.
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 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%).
Rule
12d1-4 of the 1940 Act permits more types of fund of fund arrangements without
an exemptive order, subject to certain 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.
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 Funds shareholders to transact business and the Funds to
process transactions; inability to calculate the Funds’ 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.
CASH
HOLDINGS AND 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 Adviser. Such
measures could include, but are not limited to, investments in (1) cash and cash
equivalents, (2) short-term debt securities and (3) money market instruments. In
the event a Fund uses a money market fund for its cash position, there will be
some duplication of expenses because a Fund would bear its pro rata portion of
such money market fund’s advisory fees and operational expenses.
INVESTMENT
RESTRICTIONS
Each
Fund has adopted the following policies and investment restrictions as
fundamental policies (unless otherwise noted), which may not be changed without
the affirmative vote of the holders of a “majority” of the outstanding voting
securities of each Fund. 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 Fund represented at a meeting at
which the holders of more than 50% of the Fund’s outstanding shares are
represented or (ii) more than 50% of the outstanding shares of a Fund. A
Fund may not:
1. Make
loans to others, except (a) through the purchase of debt securities in
accordance with its investment objectives and policies, or (b) to the
extent the entry into a repurchase agreement is deemed to be a
loan.
2. (a) Borrow
money, except as stated in the Prospectus and this SAI. Any such borrowing will
be made only if immediately thereafter there is an asset coverage of at least
300% of all borrowings.
(b) Mortgage,
pledge or hypothecate any of its assets except in connection with any such
borrowings and only with respect to 33 1/3% of its assets.
3. Purchase
securities on margin, participate on a joint basis or joint and several basis in
any securities trading account, or underwrite securities. (Does not preclude a
Fund from obtaining such short-term credit as may be necessary for the clearance
of purchases and sales of its portfolio securities.)
4. Purchase
or sell real estate, commodities or commodity contracts (other than futures
transactions for the purposes and under the conditions described in the
Prospectus and in this SAI).
5. Invest
25% or more of the market value of its assets in the securities of companies
engaged in any one industry. (Does not apply to investment in the securities of
the U.S. government, its agencies or instrumentalities.)
6. Issue
senior securities, as defined in the 1940 Act, except that this restriction
shall not be deemed to prohibit a Fund from (a) making any permitted
borrowings, mortgages or pledges, or (b) entering into options, futures,
forward or repurchase transactions.
7. Purchase
the securities of any issuer, if as a result of such purchase more than 5% of
the total assets of a Fund would be invested in the securities of that issuer,
other than obligations of the U.S. government, its agencies or
instrumentalities, provided that up to 25% of the value of the Fund’s assets may
be invested without regard to this limitation.
PORTFOLIO
TURNOVER
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 Adviser, investment considerations warrant such
action. Portfolio turnover rate is calculated by dividing (1) the lesser of
purchases or sales of portfolio securities for the fiscal year by (2) the
monthly average of the value of portfolio securities owned during the 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
Funds had the following portfolio turnover rates for the last two fiscal years
ended August 31:
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| Portfolio
Turnover Rate |
2023 |
2022 |
|
| Balanced
Fund |
20% |
21% |
|
| Equity
Fund |
23% |
12% |
|
PORTFOLIO
HOLDINGS INFORMATION
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 policy was developed in consultation with the Adviser
and has been adopted by the Adviser. Information about the Funds’ portfolio
holdings will not be distributed to any third party except in accordance with
this policy. The Board considered the circumstances under which the Funds’
portfolio holdings may be disclosed under this policy 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 Adviser, the
principal underwriter or any other affiliated person of a Fund, its Adviser or
its Distributor. After due consideration, the Board determined that each Fund
has a legitimate business purpose for disclosing portfolio holdings to persons
described in the policy, 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
policy, 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 shareholders and potential conflicts of interest in making such
disclosures.
The
Board exercises continuing oversight of the disclosure of the Funds’ portfolio
holdings (1) by overseeing the implementation and enforcement of the
policy, 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 policies. The Board reserves the
right to amend the 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. Monthly portfolio disclosures are filed
quarterly with the SEC on Form N-PORT, with quarter-end disclosures being made
public 60 days after the end of each fiscal quarter. These reports are
available, free of charge, on the EDGAR database on the SEC’s website at
www.sec.gov. In addition, each Fund discloses its complete portfolio holdings on
the Funds’ website at www.villere.com generally within ten business days after
the month-end. 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, each Fund may provide its 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 Adviser or an affiliated person of the Adviser, the Adviser’s CCO, 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
Adviser who suspects a breach of this obligation must report the matter
immediately to the Adviser’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: fund administrator, fund accountant, custodian, transfer agent,
auditors, counsel to the Funds or the Trustees, 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 policy, when a Fund has
a legitimate business purpose and when 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 Adviser, its affiliates or employees or the Funds receive any
direct or indirect compensation in connection with the disclosure of information
about a Fund’s portfolio holdings.
There
can be no assurance that the 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 Adviser may make additional disclosure of the Funds’ portfolio
holdings on the Funds’ website. Shareholders can access the Funds’ website at
www.villere.com for additional information about the Funds, including, without
limitation, the periodic disclosure of its portfolio holdings.
TRUSTEES
AND EXECUTIVE OFFICERS
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 dates of birth and position 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 held are set forth
in the table below.
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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
Chairperson |
Indefinite
Term;
Since November 2018.
Indefinite
Term; Since February 2023. |
Retired;
Former 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). |
2 |
Independent
Director, Muzinich Direct Lending Income Fund, Inc. (2023 to present);
Independent Director, Muzinich BDC, Inc. (2019 to present); Independent
Trustee for the William Blair Funds (2013 to present) (18
series). |
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| |
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
|
Indefinite
Term;
Since September 2011.
|
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). |
2 |
Independent
Director, Muzinich Direct Lending Income Fund, Inc. (2023 to present);
Interested Trustee, Tidal Trust II (2022 to present) (36 series);
Independent Director, Muzinich BDC, Inc. (2019 to present); Interested
Trustee, Tidal ETF Trust I (2018 to Present) (37 series); Former
Interested Trustee, Direxion Funds (36 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). |
2 |
Independent
Director, Muzinich Direct Lending Income Fund, Inc. (2023 to present);
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 (investment
management firm); formerly Sr. Managing Director, Growth Equities, Banc
One Investment Advisors (investment management firm). |
2 |
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). |
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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). |
2 |
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 Client Experience, U.S. Bank Global Fund
Services, since March 2022; Senior Vice President and Head of Fund
Services Fund Administration Department, U.S. Bank Global Fund Services
(December 2003-March 2022). |
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. |
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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 |
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. |
Kathryn
E. LaPlante Johnson
(born 1998)
c/o U.S. Bank Global Fund
Services
615 East Michigan Street
Milwaukee, WI 53202 |
Assistant
Treasurer |
Indefinite
Term; Since November 2023. |
Mutual
Funds Administrator, U.S. Bank Global Fund Services since June 2020;
Business Administration Student, 2017-2021. |
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 are not “interested persons” of the Trust as defined in
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 purposes
of investment and investor services, nor does it share the same investment
adviser with any other series.
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 Trust has appointed Kathleen Barr, an
Independent Trustee, as Chairperson of the Board, and she acts as a liaison with
the Trust’s service providers, officers, legal counsel, and other Trustees
between meetings, helps to set Board meeting agendas, and serves as Chairperson
during executive sessions of the Independent Trustees. 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, who routinely interacts with the unaffiliated investment
advisers of the Trust and comprehensively manages the operational aspects of the
Funds in 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 is also responsible for, among other things, assisting the
Board in its oversight of the Trust’s compliance program under Rule 38a-1 under
the 1940 Act, reviewing and making recommendations regarding Independent Trustee
compensation and the Trustees’ annual “self-assessment.” The Nominating and
Governance Committee has appointed Independent Trustee Eric Falkeis 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 with respect
to the Funds during the Funds’ last fiscal year.
The
Audit Committee is comprised of all of the Independent Trustees. The Audit
Committee has appointed Independent Trustee Cynthia Fornelli as the Chairperson
of the Committee. 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 Funds during the Funds’ 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 Fund shares 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
Balanced Fund Shares |
Dollar
Range of
Equity Fund Shares |
Aggregate
Dollar
Range of Fund Shares
in the Trust |
| Independent
Trustees |
| Kathleen
T. Barr |
None |
None |
$10,001-$50,000 |
| Eric
W. Falkeis |
None |
None |
$50,001-$100,000 |
| Steven
J. Paggioli |
None |
None |
Over
$100,000 |
| Ashi
S. Parikh |
None |
None |
$50,001-$100,000 |
| Cynthia
Fornelli |
None |
None |
None |
Furthermore,
neither the Independent Trustees nor members of their immediate family, own
securities beneficially or of record in the Adviser, the Funds’ principal
underwriter, or any of their affiliates. Accordingly, neither the 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 Adviser, the Funds’ principal underwriter or any
of its affiliates.
COMPENSATION
Effective
January 1, 2024, the Independent Trustees were due to receive an annual retainer
of $145,000 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 Audit Committee receives additional
compensation of $20,000 annually, the Chairperson of the Nominating and
Governance Committee receives additional compensation of $8,000 annually and the
Chairperson of the Board of Trustees receives additional compensation of $30,000
annually, and such compensation is 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 August 31,
2023.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Name
of
Person/Position |
Aggregate
Compensation
From the Balanced Fund |
Aggregate
Compensation
From the
Equity Fund |
Pension
or Retirement Benefits
Accrued as Part of
Fund Expenses |
Estimated
Annual Benefits Upon
Retirement |
Total
Compensation
from
Fund and
Fund
Complex(1)
Paid
to Trustees |
| Kathleen
T. Barr, Independent Trustee |
$4,138 |
$3,744 |
None |
None |
$7,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Name
of
Person/Position |
Aggregate
Compensation
From the Balanced Fund |
Aggregate
Compensation
From the
Equity Fund |
Pension
or Retirement Benefits
Accrued as Part of
Fund Expenses |
Estimated
Annual Benefits Upon
Retirement |
Total
Compensation
from
Fund and
Fund
Complex(1)
Paid
to Trustees |
Eric
W. Falkeis,
Independent Trustee |
$4,491 |
$4,083 |
None |
None |
$8,574 |
Steven
J. Paggioli,
Independent Trustee |
$3,898 |
$3,509 |
None |
None |
$7,407 |
Ashi
S. Parikh,
Independent Trustee |
$3,898 |
$3,509 |
None |
None |
$7,407 |
Cynthia
Fornelli,
Independent Trustee |
$4,229 |
$3,808 |
None |
None |
$8,036 |
(1)
There are currently numerous unaffiliated portfolios comprising the Trust. The
term “Fund Complex” applies only to the Funds. For the fiscal year ended August
31, 2023, Trustees’ fees and expenses in the amount of $970,900. were incurred
by the Trust.
CODES
OF ETHICS
The
Trust and the Adviser have each adopted separate Codes of Ethics pursuant to
Rule 17j-1 under the 1940 Act. These Codes permit, subject to certain
conditions, access persons of the Adviser 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 in Rule 17j-1(c)(3) under the 1940 Act,
specifically where the Distributor is not affiliated with the Trust or the
Adviser, and no officer, director or general partner of the Distributor serves
as an officer, director or general partner of the Trust or the Adviser.
PROXY
VOTING POLICIES
The
Board has adopted proxy voting policies and procedures (“Policies”) on behalf of
the Trust which delegate the responsibility for voting proxies to the Adviser,
subject to the Board’s continuing oversight. The Policies require that the
Adviser vote proxies received in a manner consistent with the best interests of
a Fund and its shareholders. The Policies also require the Adviser to present to
the Board, at least annually, the Adviser’s proxy voting policies and a record
of each proxy voted by the Adviser on behalf of each Fund, including a report on
the resolution of all proxies identified by the Adviser as involving a conflict
of interest. The Adviser has adopted a proxy voting policy (the “Adviser’s
Policy”) that underscores the Adviser’s concern that all proxy voting decisions
be made in the best interests of the Funds.
The
Adviser considers each proxy proposal individually and makes decisions on a
case-by-case basis based on internal research, review of corporate governance,
and proposals by other companies in a particular sector.
The
Adviser generally votes with management on routine matters related to the
operation of a particular company and that is not expected to have a significant
impact on shareholders. The Adviser generally supports proposals that foster
good corporate governance practices, and will support proposals calling for
boards to consist of a majority of independent directors. The Adviser also
generally supports appropriate compensation plans to be used as incentive for
management, employees and directors, but will analyze each proposal regarding
compensation plans to ascertain the impact on corporate governance and
shareholder value. The Adviser will vote against plans that dilute shareholder
ownership interest without commensurate benefit. Votes on issues such as proxy
contests and defenses, tender offers, mergers and restructurings are reviewed on
a case-by-case basis.
Where
a proxy proposal raises a material conflict between the Adviser’s interests and
the Funds’ interests, the Adviser will resolve the conflict in one of the
following ways:
•Contact
the Board and ask for a recommendation on the vote; or
•Engage
an independent third party to assist in the resolution of the
conflict.
The
Funds are required to file Form N-PX, with the Funds’ complete proxy voting
records for the 12 months ended June 30th, no later than August 31st of each
year. Form N-PX for the Funds are available without charge, upon request, by
calling toll-free 1-866-209-1129 and on the SEC’s website at
www.sec.gov.
CONTROL
PERSONS, PRINCIPAL SHAREHOLDERS, AND MANAGEMENT OWNERSHIP
A
principal shareholder is any person who owns of record or beneficially 5% or
more of the outstanding shares of the Funds. A control person is one who owns
beneficially or through controlled companies more than 25% of the voting
securities of the Funds or acknowledges the existence of control. As of November
30, 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 November 30, 2023, the following shareholders were considered to be
either a control person or principal shareholder of the Funds:
Balanced
Fund
|
|
|
|
|
|
|
|
| |
| Name
and Address |
%
Ownership |
Type
of Ownership |
|
National
Financial Services, LLC
For
the Exclusive Benefit of Our Customers
Attn:
Mutual Funds Dept. 4th
Floor
499
Washington Blvd.
Jersey
City, NJ 07310-1995
|
33.64% |
Record |
Charles
Schwab & Co. Inc.
Special Custody A/C FBO Customers
Attn: Mutual
Funds
211 Main St.
San Francisco, CA 94105-1901
|
11.70% |
Record |
Equity
Fund
|
|
|
|
|
|
|
|
| |
| Name
and Address |
%
Ownership |
Type
of Ownership |
Charles
Schwab & Co. Inc.
Special Custody A/C FBO Customers
Attn: Mutual
Funds
211 Main St.
San Francisco, CA 94105-1901
|
20.60% |
Record |
THE
FUNDS’ INVESTMENT ADVISER
Investment
advisory services are provided to the Funds by St. Denis J. Villere &
Company, LLC, located at 601 Poydras Street, Suite 1808, New Orleans, Louisiana
70130, the Funds’ Adviser, pursuant to an investment advisory agreement (the
“Advisory Agreement”) with the Trust. The Adviser provides investment advisory
services to individual and institutional clients and investment companies. The
Adviser is controlled by Sandy Villere, III and George V. Young, who are both
portfolio managers of the Funds.
The
Advisory Agreement continues in effect for successive annual periods so long as
such continuation is approved at least annually by the vote of (1) the
Board (or a majority of the outstanding shares of the Fund), and (2) a
majority of the Independent Trustees, in each case cast in person at a meeting
called for the purpose of voting on such approval. The Advisory Agreement may be
terminated at any time, without penalty, by either party to the Advisory
Agreement, or by a majority of the outstanding voting securities held by Fund
shareholders, upon a 60-day written notice and is automatically terminated in
the event of its “assignment,” as defined in the 1940 Act. The Advisory
Agreement provides that the Adviser under such agreement shall not be liable 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.
As
compensation, the Funds pay the Adviser a monthly management fee (accrued daily)
based upon the average daily net assets of the Funds at the annual rate of
0.75%. However, the Adviser may voluntarily agree to reduce a portion of the
fees payable to it on a month‑to‑month basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Balanced
Fund
Fiscal Year Ended |
Fees
Accrued |
Fees
(Waived) or
Recouped |
Adviser
Reimbursement for
Fee Reductions
and/or Expense
Payments |
Net
Advisory Fees
Paid |
| August
31, 2023 |
$1,027,395 |
$(50,763) |
$0 |
$976,632 |
| August
31, 2022 |
$1,297,896 |
$(36,227) |
$0 |
$1,261,669 |
| August
31, 2021 |
$1,506,763 |
$0 |
$0 |
$1,506,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Equity
Fund
Fiscal Year Ended |
Fees
Accrued |
Fees
(Waived)
or Recouped |
Adviser
Reimbursement for
Fee Reductions
and/or Expense
Payments |
Net
Advisory Fees
Paid |
| August
31, 2023 |
$294,769 |
($24,169) |
$0 |
$270,600 |
| August
31, 2022 |
$350,822 |
$0 |
$0 |
$350,822 |
| August
31, 2021 |
$373,665 |
$0 |
$0 |
$373,665 |
The
Funds are responsible for their own operating expenses. The Adviser has
contractually agreed to reduce its fees and/or pay Fund expenses (excluding
Acquired Fund Fees and Expenses, interest expense in connection with investment
activities, taxes and extraordinary expenses) in order to limit Total Annual
Operating Expenses After Fee Waiver and/or Expense Reimbursement for shares of
the Balanced Fund to 0.99% of the Fund’s average net assets and 1.25% of the
Equity Fund’s average net assets (the “Expense Caps”). The Expense Caps will
remain in effect until at least December 31, 2024, and may continue for an
indefinite period thereafter, until the Board determines that the Expense Caps
are no longer in the best interest of the Funds and their shareholders. The
Adviser is permitted to be reimbursed for fee reductions and/or expense payments
made in the prior three years. Any such reimbursement is subject to the Board’s
review and approval. This reimbursement may be requested by the Adviser if the
aggregate amount actually paid by the Funds toward operating expenses for such
period (taking into account the reimbursement) does not exceed the lesser of the
Expense Caps in place at the time of waiver or at the time of
reimbursement.
PORTFOLIO
MANAGERS
The
following individuals serve as portfolio managers of the Funds: Mr. George V.
Young, Mr. St. Denis J. Villere, III and Mr. Lamar G. Villere. They are
primarily responsible for the day-to-day management of the Funds. The following
provides information regarding other accounts managed by the portfolio managers
as of August 31, 2023:
George
V. Young
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| 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 |
159 |
$344,768,922 |
0 |
$0 |
St.
Denis J. Villere, III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| 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 |
227 |
$363,099,956 |
0 |
$0 |
Lamar
G. Villere
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| 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 |
43 |
$109,989,251 |
0 |
$0 |
The
portfolio managers’ compensation is based on the income derived from each
individual’s ownership as a partner of St. Denis J. Villere & Co., LLC.
Portfolio manager compensation is not based on Fund performance. The portfolio
managers do not receive a bonus or deferred compensation as part of their
compensation, although they do participate in a 401(k) retirement
plan.
The
Adviser serves as investment manager for other investment accounts with
investment objectives and strategies substantially similar to the Funds, which
may create certain conflicts of interest in connection with the allocation and
timing of investment opportunities among the portfolio manager’s advised
accounts.
Although the portfolio managers manage other accounts for St. Denis J. Villere
& Co., LLC, potential conflicts are minimal as each Fund is managed as any
other account with similar objectives. There are many similar accounts and
securities are generally purchased and sold in blocks and allocated on a
rotating basis without any priority given. Each Fund and any separate accounts
managed similarly to the Fund are managed concurrently, and all portfolio
transactions are implemented according to the Adviser’s trade allocation
procedures. These procedures, among other things, ensure that all trades
allocated to advisory clients (including the Funds) fulfill the Adviser’s
fiduciary duty to each client and that securities are otherwise allocated on a
basis that is fair and nondiscriminatory. Such procedures are generally applied
in numerous instances, including, among other things, block and bunched trades,
cross transactions and private placements. In determining a fair allocation, the
Adviser takes into account a number of factors, including among other things,
the Adviser’s fiduciary duty to each client, any potential conflicts of
interest, the size of the transaction, the relative size of a client’s
portfolio, cash available for investment suitability, as well as each client’s
investment objectives.
The
following indicates the beneficial ownership of each portfolio manager in the
Funds as of August 31, 2023:
|
|
|
|
|
|
|
|
| |
| Portfolio
Manager |
Dollar
Range of Equity Securities in the
Balanced Fund |
Dollar
Range of Equity Securities in the
Equity Fund |
|
| (None,
$1-$10,000, $10,001-$50,000, $50,001-$100,000, $100,001-$500,000,
$500,001-$1,000,000, Over $1,000,000) |
| George
V. Young |
$100,001
- $500,000 |
$500,001-$1,000,000 |
| St.
Denis J. Villere, III |
None |
$10,001
- $50,000 |
| Lamar
G. Villere |
None |
Over
$1,000,000 |
THE
FUNDS’ SERVICE PROVIDERS
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, provides
certain administrative 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 Fund shares.
Pursuant
to the Administration Agreement, as compensation for its services, Fund Services
receives from the Funds a fee based on each Fund’s current average daily net
assets. Fund Services also is entitled to certain out-of-pocket expenses. Fund
Services also serves as fund accountant, transfer agent and dividend disbursing
agent under separate agreements. Additionally, Fund Services provides Chief
Compliance Officer services to the Trust under a separate agreement. The cost
for the Chief Compliance Officer services is charged to the Funds and approved
by the Board annually.
The
table below shows the amount of administration fees paid by the Funds to Fund
Services for the fiscal years shown.
|
|
|
|
|
| |
Balanced
Fund
Fiscal Year Ended |
Administration
Fee Paid |
| August
31, 2023 |
$111,515 |
| August
31, 2022 |
$143,343 |
| August
31, 2021 |
$162,129 |
|
| |
|
|
|
|
|
| |
Equity
Fund
Fiscal Period Ended |
Administration
Fee Paid |
| August
31, 2023 |
$45,066 |
| August
31, 2022 |
$48,722 |
| August
31, 2021 |
$52,837 |
|
| |
CUSTODIAN
U.S.
Bank National Association (“U.S. Bank N.A.” or the “Custodian”), is custodian of
the assets of each Fund pursuant to a custody agreement between the Custodian
and the Trust, whereby the Custodian holds and administers the Funds’ assets for
fees on a transactional basis plus out-of-pocket expenses. The Custodian’s
address is 1555 North 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.
PRINCIPAL
UNDERWRITER AND DISTRIBUTOR
Quasar
Distributors, LLC, 111 East Kilbourn Avenue, Suite 2200, Milwaukee, WI 53202
(“Quasar”), acts 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 administration
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 a member of 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 the Funds on a
60-day written notice when authorized either by a majority vote of the Funds’
shareholders or by vote of a majority of the Board, including a majority of the
Independent Trustees, or by Quasar on a 60-day written notice, and will
automatically terminate in the event of its “assignment” (as defined in the 1940
Act).
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 year ended August 31, 2023, the Funds paid the following amounts
for sub-accounting services:
|
|
|
|
|
| |
| Sub-Accounting
Services Fees |
|
| Villere
Balanced Fund |
$64,486 |
|
| Villere
Equity Fund |
$7,172 |
|
SECURITIES
LENDING AGENT
The
Funds participate in securities lending arrangements whereby they lend certain
of their portfolio securities to brokers, dealers and financial institutions
(not with individuals) in order to receive additional income and increase the
rate of return of its portfolio. U.S. Bank N.A. serves as the Funds’ securities
lending agent. For the most recent fiscal year ended August 31, 2023, the Funds’
securities lending activities resulted in the following:
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Balanced
Fund |
Equity
Fund |
|
Gross
income from securities lending activities: |
$ |
1,549,446 |
534,693 |
|
|
Fees
and/or compensation for securities lending activities and related
services: |
|
| |
|
Fees
paid to securities lending agent from a revenue split |
$ |
(23,992) |
(7,476) |
|
Fees
paid for any cash collateral management service (including fees deducted
from a pooled cash collateral reinvestment vehicle) that are not included
in the revenue split |
$ |
(10,047) |
(3,503) |
|
Administrative
fees not included in revenue split |
$ |
0 |
0 |
|
|
Indemnification
fee not included in revenue split |
$ |
0 |
0 |
|
|
Rebates
(paid to borrower) |
$ |
(1,459,425) |
(506,269) |
|
Other
fees not included in revenue split (specify) |
$ |
0 |
0 |
|
|
Aggregate
fees/compensation for securities lending activities: |
$ |
(1,493,465) |
(517,248) |
|
Net
income from securities lending activities: |
$ |
55,981 |
17,445 |
|
U.S.
Bank N.A. oversees the securities lending process, which includes the screening,
selection and ongoing review of borrowers, monitoring the availability of
securities, negotiating rebates, daily marking to market of loans, monitoring
and maintaining cash collateral levels, processing securities movements and
reinvesting cash collateral as directed by the Adviser. U.S. Bank N.A. does not
currently receive any fees for this service. Going forward, the Funds will pay a
portion of the income (net of rebate fees) or fees earned by it from securities
lending to U.S Bank N.A., the Funds’ securities lending agent.
EXECUTION
OF PORTFOLIO TRANSACTIONS
Pursuant
to the Advisory Agreement, the Adviser determines which securities are to be
purchased and sold by the Funds and which broker-dealers are eligible to execute
the Funds’ portfolio transactions. The purchases and sales of securities in the
over-the-counter market will generally be executed directly with a
“market-maker” unless, in the opinion of the Adviser, 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) which 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 Adviser will seek best execution. 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 best
execution, the Adviser considers such information, which is in addition to and
not in lieu of the services required to be performed by it under the 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 Authority
(“FINRA”) and the SEC.
While
it is the Adviser’s general policy to seek best execution in selecting a
broker-dealer to execute portfolio transactions for the Funds, in accordance
with Section 28(e) of the Securities Exchange Act of 1934, as amended, when it
is determined that more than one broker-dealer can deliver best execution,
weight is also given to the ability of a broker-dealer to furnish brokerage and
research services to the Funds or to the Adviser, even if the specific services
are not directly useful to the Funds and may be useful to the Adviser 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 Adviser to be
reasonable in relation to the value of the brokerage and/or research services
provided by such broker-dealer. Additionally, in accordance with procedures
adopted by the Trust, the Adviser may direct transactions to a broker-dealer
with which it has an affiliation. Currently, the Adviser does not use any soft
dollars for the Funds.
Investment
decisions for the Funds are made independently from those of other client
accounts managed or advised by the Adviser. Nevertheless, it is possible that at
times identical securities will be acceptable for both the Funds and one or more
of such client accounts. In such event, the position of the Funds and such
client 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 client
account seeks to acquire the same security as a Fund at the same time, the Fund
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, a Fund 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 client accounts simultaneously purchases or sells the same
security that a Fund is purchasing or selling, each day’s transactions in such
security will be allocated between a Fund and all such client accounts in a
manner deemed equitable by the Adviser, 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 a Fund is concerned. In other cases, however, it is
believed that the ability of a Fund to participate in volume transactions may
produce better executions for the Fund.
The
Funds do not effect securities transactions through brokers in accordance with
any formula, nor do they 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.
The
table below shows the amount of brokerage commissions paid by the Funds with
respect to transactions for the fiscal years shown.
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| August
31, 2023 |
August
31, 2022 |
August
31, 2021 |
|
| Brokerage
Fees Paid by the Balanced Fund |
$51,897 |
$63,697 |
$68,161 |
|
Brokerage
Fees Paid by the Equity
Fund |
$24,141 |
$18,300 |
$20,057 |
|
Each
of the Balanced Fund and the Equity Fund did not own securities of its regular
brokers or dealers as of the fiscal year ended August 31,
2023.
CAPITAL
STOCK
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. Each Fund, as a separate series of
the Trust, votes separately on matters affecting only the Fund (e.g.,
approval of the 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.
DETERMINATION
OF SHARE PRICE
The
NAV per share of a Fund is determined as of the close of regular trading on the
New York Stock Exchange (the “NYSE”) (generally 4:00 p.m., Eastern Standard
Time), each day 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 NYSE will
not be open for trading on the following holidays: 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
Day.
Generally,
a Fund’s investments are valued at market value or, in the absence of a market
value, at fair value as determined in good faith pursuant to procedures approved
by the Adviser. Pursuant to those procedures, the Adviser considers, among other
things: (1) the last sales price on the securities exchange, if any, on
which a security is primarily traded; (2) the mean between the bid and
asked prices; (3) price quotations from an approved pricing service, and
(4) other factors as necessary to determine a fair value under certain
circumstances.
Securities
primarily traded on U.S. national or foreign 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.
Short-term
debt obligations, including short-term debt obligations having a maturity of
less than 60 days, are valued at the mean evaluated price supplied by a pricing
service.
The
securities in a Fund’s portfolio, including ADRs, which are traded on securities
exchanges are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities are
being valued or, lacking any reported sales, at the mean between the last
available bid and asked price. Securities that are traded on more than one
exchange are valued on the exchange on which the security is principally traded.
All
other assets of a Fund are valued in such manner as the Adviser in good faith
deems appropriate to reflect their fair value.
PURCHASE
AND REDEMPTION INFORMATION
The
information provided below supplements the information contained in the Funds’
Prospectus regarding the purchase and redemption of Fund shares.
HOW
TO BUY SHARES.
In addition to purchasing shares directly from a Fund, you may purchase shares
of the Fund through certain financial intermediaries and their agents that have
made arrangements with the Fund and are authorized to buy and sell shares of the
Fund (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. Purchase orders through Financial Intermediaries are effected at the
next-determined NAV after receipt of the order by such Financial Intermediary
before the close of regular trading on the NYSE, generally 4:00 p.m., Eastern
Standard Time. Orders received after that time will be purchased at the
next-determined NAV.
The
public offering price of Fund shares is the NAV. Shares are purchased at the
public offering price next determined after Fund Services receives your order in
proper form as discussed in the Funds’ Prospectus. In order to receive that
day’s public offering price, Fund Services must receive your order in proper
form before the close of regular trading on the NYSE, normally 4:00 p.m.
Eastern time.
The
Trust reserves the right in its sole discretion (i) to suspend the
continued offering of a Fund’s shares, (ii) to reject purchase orders in
whole or in part when in the judgment of the Adviser such rejection is in the
best interest of the Fund, 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 Fund’s
shares.
In
addition to cash purchases, Fund 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 Fund shares must be readily marketable, their acquisition
consistent with a Fund’s investment objective and otherwise acceptable to the
Adviser and the Board.
AUTOMATIC
INVESTMENT PLAN.
As discussed in the Prospectus, each Fund provides an Automatic Investment Plan
(“AIP”) for the convenience of investors who wish to purchase shares of a Fund
on a regular basis. All record keeping and custodial costs of the AIP are paid
by the Funds. The market value of a Fund’s shares is subject to fluctuation.
Prior to participating in the AIP, an investor should note that this plan does
not assure a profit nor does it protect against depreciation in declining
markets.
HOW
TO SELL SHARES AND DELIVERY OF REDEMPTION PROCEEDS.
You can sell Fund shares any day the NYSE is open for regular trading. 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, a Fund
will typically borrow money through its line 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 a Fund and its remaining shareholders. Redemptions in-kind may be
used regularly in such circumstances and may also be used in stressed market
conditions.
A
Fund 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 Fund not reasonably practicable; or
(c) for such other period as the SEC may permit for the protection of a
Fund’s shareholders.
The
value of shares on redemption may be more or less than the investor’s cost,
depending upon the market value of a Fund’s portfolio securities at the time of
redemption.
TELEPHONE
REDEMPTIONS. As
described in the Prospectus, 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 a person claiming to be the
shareholder, a Fund or its authorized agents, may carry out the instructions
and/or 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, a Fund and its
agents use procedures that are reasonably designed to ensure that such
instructions are genuine, such as (1) obtaining some or all of the
following information: account number, name(s) and social security number(s)
registered to the account, and personal identification; (2) recording all
telephone transactions; and (3) sending written confirmation of each
transaction to the registered owner.
Fund
Services will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. If Fund Services fails to employ
reasonable procedures, a Fund and Fund Services may be liable for any losses due
to unauthorized or fraudulent instructions. If these procedures are followed,
however, to the extent permitted by applicable law, neither a Fund nor its
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 Fund Services.
During
periods of unusual market and shareholder activity, you may experience delays in
contacting Fund Services by telephone. In this event, you may wish to submit a
written redemption request, as described in the Prospectus. Telephone privileges
may be modified or terminated without notice.
REDEMPTIONS
IN-KIND.
The Trust has elected to be governed by Rule 18f-1 under the 1940 Act so that
each Fund is obligated to redeem its 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 the Fund. Each Fund has reserved the right to pay the redemption
price of its 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 would 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.
Each
Fund does not intend to hold any significant percentage of its portfolio in
illiquid securities, although a Fund, like most mutual funds, may from time to
time hold a small percentage of securities that are illiquid. In the unlikely
event a Fund were to elect to make an in-kind redemption, the Fund expects that
it 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
AND TAX INFORMATION
DISTRIBUTIONS.
Dividends from net investment income and distributions of net profits from the
sale of securities are generally made annually. Also, each Fund typically
distributes 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 be distributed on or about December 31 of each
year.
Each
distribution by a Fund is accompanied by a brief explanation of the form and
character of the distribution. In January of each year, the Funds will issue a
statement of the federal income tax status of all distributions to each
shareholder.
TAX
INFORMATION.
Each series of the Trust is treated as a separate entity for federal income tax
purposes. Each Fund has elected to qualify and intends to continue to qualify to
be treated 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 amount and timing of distributions. If a Fund fails to qualify as
a regulated investment company under Subchapter M, it will be taxed as a
corporation. Each Fund’s policy is to distribute to its shareholders all of its
investment company taxable income (ignoring the deduction for dividends paid)
and any net realized capital gains for each fiscal year in a manner that
complies with the distribution requirements of the Code, so that a Fund will not
be subject to any federal income or excise taxes. A Fund is not required to
consider tax consequences in making or disposing of its investments. However, a
Fund can give no assurances that its distributions will be sufficient to
eliminate all taxes in every year. To comply with the requirements of the Code
to avoid a nondeductible 4% excise tax, each Fund must also distribute (or be
deemed to have distributed) by December 31 of each calendar year (1) at
least 98% 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 a Fund paid
no federal income tax.
In
order to qualify as a regulated investment company, a 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 options, 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. A 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 a 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 a 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. A 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 ignoring the dividends paid deduction
(which generally includes dividends, interest, and
the
excess of net short-term capital gain over net long-term capital loss) and 90%
of the Fund’s net tax-exempt interest, if any.
A
Fund’s 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 Fund.
Net
capital losses incurred after October 31 and within the taxable year are deemed
to arise on the first business day of each Fund’s next taxable year. For the
fiscal year ended August 31, 2023, the Funds had no capital loss carryovers
available for federal income tax purposes.
Distributions
of net investment income and net short-term capital gains are taxable to
shareholders as ordinary income. A Fund may make taxable distributions to
shareholders even during periods in which the share price has declined. For
individual shareholders, a portion of the distributions paid by a Fund may be
qualified dividends currently eligible for taxation at long-term capital gain
rates to the extent the Fund reports 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 a Fund reports the
amount distributed as a qualifying dividend. The aggregate amount so reported to
either individual or corporate shareholders cannot, however, exceed the
aggregate amount of qualifying dividends received by the applicable Fund for its
taxable year. In view of each Fund’s investment policy, it is expected that
dividends from domestic corporations will be part of a Fund’s gross income and
that, accordingly, part of the distributions by the Fund may be eligible for
treatment as qualified dividend income for individual shareholders and for the
dividends-received deduction for corporate shareholders. However, the portion of
a Fund’s gross income attributable to qualifying dividends is largely dependent
on the Fund’s investment activities for a particular year and therefore cannot
be predicted with any certainty. The deduction may be reduced or eliminated if
the Fund shares held by an individual investor are held for less than 61 days,
or Fund shares held by a corporate investor are treated as debt-financed or are
held for less than 46 days. Dividends from the Funds, including distributions of
net long-term capital gains, and gain on the sale of shares of the Funds
generally are included in net investment income, which is subject to the 3.8%
Medicare surtax for taxpayers in the higher income brackets.
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 dividends paid by a real estate investment
trust ("REIT") and certain income from publicly traded partnerships. Regulations
recently adopted by the United States Treasury allow non-corporate shareholders
of a Fund to benefit from the 20% deduction with respect to net REIT dividends
received by the Fund if the Fund meets certain reporting requirements, but do
not permit any such deduction with respect to publicly traded
partnerships.
Upcoming
distributions generally increase the NAV of a Fund. If you buy shares shortly
before a distribution, the price you pay will reflect the value of the upcoming
distribution, which will nonetheless be taxable to you. Although distributions
generally are taxable when received, certain distributions declared in October,
November or December and paid in the following January are taxed as if received
in the prior December.
A
sale, exchange or redemption of Fund shares is a taxable event and will
generally result in capital gain or loss. A sale, exchange or redemption of Fund
shares at a loss within six 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 six-month period. Any loss
realized upon a redemption or sale may be disallowed under certain wash sale
rules to the extent shares of the Fund are purchased (through reinvestment of
distributions or otherwise) within 30 days before or after the redemption.
A
Fund may be subject to foreign withholding taxes on dividends and interest
earned with respect to securities of foreign corporations. Based on the Funds’
investment strategy, it is not expected that a Fund will be eligible to pass
through to shareholders credits or deductions with respect to such foreign taxes
paid by a Fund.
Under
the Code, each Fund 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 the rate of 24% in the case of non-exempt
shareholders who fail to furnish a Fund with their correct taxpayer
identification numbers and with required certifications regarding their status
under the federal income tax law or if the IRS notifies the Fund that such
backup withholding is required. 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 a Fund 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 amounts withheld may be credited against a
shareholder’s ultimate federal income tax liability if proper documentation is
provided. Each Fund reserves the right to refuse to open an account for any
person failing to provide a certified taxpayer identification
number.
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. Distributions from a Fund will be taxable to
shareholders even during periods in which the Fund’s share price has
declined.
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, partnerships, trusts and estates. Each shareholder who is not a
U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of a Fund, including the possibility that such a shareholder may be
subject to a U.S. withholding tax on amounts constituting ordinary
income.
Foreign
shareholders, including shareholders who are nonresident alien individuals, may
be subject to U.S. withholding tax on certain distributions at a rate of 30% or
such lower rates as may be prescribed by any applicable treaty. In addition, if
the requirements of legislation known as FATCA are not met, the United States
may impose a 30% U.S. withholding tax on certain foreign financial institutions
and other foreign entities with respect to distributions on and proceeds from
the sale or disposition of shares in the Funds. See the discussion below.
Shareholders should consult their tax advisers regarding the possible
implications of this legislation as well as the other U.S. federal, state, local
and foreign tax consequences of an investment in Fund shares.
The
Foreign Account Tax Compliance Act (“FATCA”).
A 30% withholding tax on a Fund’s ordinary income and qualified dividend
distributions 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 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 to amounts withheld under FATCA. You should consult your tax
adviser regarding the effect of FATCA based on your individual
circumstances.
The
foregoing discussion of tax law is based on existing provisions of the Code,
existing 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 a Fund and
certain shareholders therein, and, as such, is subject to change. In particular,
the consequences of an investment in shares of a Fund under the laws of any
state, local or foreign taxing jurisdictions are not discussed herein. The Funds
do not plan to seek a ruling from the IRS or an opinion of counsel with respect
to any tax matters. Each prospective investor should consult his, her, or its
own tax adviser to determine the application of the tax law and practice in his,
her, or its own particular circumstances.
This
discussion was prepared for the Funds. Any person reviewing this discussion
should seek advice based on such person’s particular circumstances from an
independent tax adviser.
MARKETING
AND SUPPORT PAYMENTS
The
Adviser, out of its own resources and without additional cost to a Fund or its
shareholders, may provide additional cash payments or other compensation to
certain financial intermediaries who sell shares of the Funds. Such payments may
be divided into categories as follows:
SUPPORT
PAYMENTS.
Payments may be made by the Adviser to certain financial intermediaries in
connection with the eligibility of a Fund to be offered in certain programs
and/or in connection with meetings between a Fund’s representatives and
financial intermediaries and their sales representatives. Such meetings may be
held for various purposes, including providing education and training about a
Fund 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
Adviser 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 entertainment; and/or
(iii) sponsorship support for the financial intermediary’s client seminars
and cooperative advertising. In addition, the Adviser pays for exhibit space or
sponsorships at regional or national events of financial
intermediaries.
During
the Funds’ fiscal year, the following financial intermediaries were paid out of
the Adviser’s revenues:
|
|
| |
| Firm |
| National
Financial Services, LLC |
| Charles
Schwab |
| TD
Ameritrade, Inc. |
| Fidelity
Investments |
| Merrill
Lynch FDS |
| Pershing |
| Raymond
James |
| Vanguard |
| UBS |
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 each Fund’s shares.
FINANCIAL
STATEMENTS
The
Funds’ Annual
Report
to Shareholders
for the fiscal year ended August 31, 2023, is available, without charge, upon
request by calling 1-866-209-1129, and the financial statements, accompanying
notes and report of the independent registered public accounting firm appearing
therein are incorporated by reference in this SAI.
APPENDIX
A
CORPORATE
BOND RATINGS
MOODY’S
INVESTORS SERVICE, INC.
Aaa:
Bonds which are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as “gilt edge.”
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa:
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations or protective elements
may be of greater amplitude or there may be other elements present which make
long-term risks appear somewhat larger than in Aaa securities.
A:
Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa:
Bonds which are rated Baa are considered medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba:
Bonds which are rated Ba are judged to have speculative elements: their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B:
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be
small.
Caa:
Bonds which are rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or
interest.
Ca:
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked
shortcomings.
STANDARD
& POOR’S RATINGS GROUP
AAA:
Bonds rated AAA are highest grade debt obligations. This rating indicates an
extremely strong capacity to pay principal and interest.
AA:
Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A:
Bonds rated A have a strong capacity to pay principal and interest, although
they are more susceptible to the adverse effects of changes in circumstances and
economic conditions.
BBB:
Bonds rated BBB are regarded as having an adequate capacity to pay principal and
interest. Whereas they normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay principal and interest for bonds in this category than
for bonds in the A category.
BB,
B, CCC, CC: Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer’s capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
The
ratings from AA to CCC may be modified by the addition of a plus or minus sign
to show relative standing within the major rating categories.
*Ratings
are generally given to securities at the time of issuance. While the rating
agencies may from time to time revise such ratings, they undertake no obligation
to do so.
APPENDIX
B
COMMERCIAL
PAPER RATINGS
MOODY’S
INVESTORS SERVICE, INC.
Prime-1:
Issuers (or related supporting institutions) rated “Prime-1” have a superior
ability for repayment of senior short-term debt obligations. “Prime-1” repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries, high rates of return on
funds employed, conservative capitalization structures with moderate reliance on
debt and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well-established access
to a range of financial markets and assured sources of alternate
liquidity.
Prime-2:
Issuers (or related supporting institutions) rated “Prime-2” have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative liquidity is
maintained.
STANDARD
& POOR’S RATINGS GROUP
A-1:This
highest category indicates that the degree of safety regarding timely payment is
strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus (+) sign designation.
A-2:
Capacity for timely payment on issues with this designation is satisfactory.
However, the relative degree of safety is not as high as for issues designated
“A-1”.
