Shareholder Letter

January 13, 2017

Dear Shareholders,

During the fourth quarter of 2016, the Osterweis Strategic Income Fund (the Fund) generated a total return of 1.76%, compared to -2.98% for the Bloomberg Barclays U.S. Aggregate Bond Index (the BC Agg). The Fund’s annualized total returns over the one year, five year and ten year periods ending December 31, 2016 were 10.95%, 5.19% and 6.06%, respectively, compared to 2.65%, 2.23% and 4.34% for the BC Agg over the same periods.

The performance data quoted above represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling (866) 236-0050. An investment should not be made solely on the basis of returns. The Fund’s gross expense ratio was 0.83% as of March 31, 2016.

As discussed in our Investment Outlook, 2016 was a year of surprises most notably the Brexit and election of Donald Trump. After a shaky start, high yield performed well, equities were quite subdued until after the election and investment grade bonds were having a good year until the election when inflation and rising rate fears took hold. Looking at the economy, the U.S. unemployment rate has fallen, wages have started to climb and consumer confidence is as high as it’s been since August of 2001. At this point, we think it is too early to quantify how much the new administration’s fiscal stimulus will boost growth for 2017, but at a minimum we are assuming a continuation of the slow growth we have experienced for the past few years. Additionally, elections abroad in 2017 could bring further surprises.

We still feel that the best strategy is to continue to focus on shorter duration higher yielding bonds with the opportunistic use of convertibles that provide income and could benefit from rising equity markets. Additionally, we are likely to see some volatility as the Trump administration starts to implement its new policies, so we have an above average cash position with which to buy the dips. We thank you for your continued confidence in our management. Here is to 2017 and beyond!

Sincerely,

Carl Kaufman
Simon Lee
Bradley Kane

Investment Team

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This commentary contains the current opinions of the authors as of the date above, which are subject to change at any time. This commentary has been distributed for informational purposes only and is not a recommendation or offer of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed.

The Bloomberg Barclays U.S. Aggregate Bond Index (BC Agg) is an unmanaged index which is widely regarded as the standard for measuring U.S. investment grade bond market performance. This index does not incur expenses and is not available for investment. The index includes reinvestment of dividends and/or interest income.

Criteria for Recommended Funds: Recommended funds are evaluated by Litman Gregory based on a combination of qualitative and quantitative measures, including absolute and relative long-term performance metrics when compared to an appropriate benchmark and peer group, manager skill, investment process and the discipline by which the process is applied, quality and tenure of research team, shareholder orientation, assets under management, and fund expenses. Recommended reflects Litman Gregory’s confidence in a fund’s potential to outperform a relevant benchmark over the long term.

The Osterweis Funds are available by prospectus only. The Funds’ investment objectives, risks, charges and expenses must be considered carefully before investing. The summary and statutory prospectuses contain this and other important information about the Funds. You may obtain a summary or statutory prospectus by calling toll free at (866) 236-0050, or by visiting www.osterweis.com/statpro. Please read the prospectus carefully before investing to ensure the Fund is appropriate for your goals and risk tolerance.

Mutual fund investing involves risk. Principal loss is possible.

The Osterweis Strategic Income Fund may invest in debt securities that are un-rated or rated below investment grade. Lower-rated securities may present an increased possibility of default, price volatility or illiquidity compared to higher-rated securities. The Fund may invest in foreign and emerging market securities, which involve greater volatility and political, economic and currency risks and differences in accounting methods. These risks may increase for emerging markets. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Small- and mid-capitalization companies tend to have limited liquidity and greater price volatility than large-capitalization companies. Higher turnover rates may result in increased transaction costs, which could impact performance. From time to time, the Fund may have concentrated positions in one or more sectors subjecting the Fund to sector emphasis risk. The Fund may invest in municipal securities which are subject to the risk of default.

While the fund is no-load, management fees and other expenses still apply. Please refer to the prospectus for more information.

Osterweis Capital Management is the adviser to the Osterweis Funds, which are distributed by Quasar Distributors, LLC.

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