Shareholder Letter

February 2, 2017

Dear Shareholder,

During the fourth quarter of 2016, the Osterweis Strategic Investment Fund (the Fund) generated a total return of 2.33%, outpacing the 1.10% return of the blended benchmark of 60% S&P 500 Index/40% Bloomberg Barclays U.S. Aggregate Bond Index (the Benchmark). The Fund’s annualized total returns over the one year, five year and since inception (August 31, 2010) periods ending December 31, 2016 were 9.82%, 9.37% and 9.50%, respectively, compared to 8.31%, 9.69% and 10.24% for the Benchmark over the same periods

Performance data quoted 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 the original investment. 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 returns. The Fund’s total expense ratio was 1.14% as of March 31, 2016.

The U.S. election outcome and subsequent market response was another reminder of how unpredictable political events can be. As discussed in the attached Investment Outlook, Trump is clearly pro-business and pro-growth, and if he is successful in implementing new policies, we expect that it will lead to faster economic growth in the coming years, which should be positive for equities. We also believe that an improving economy could portend higher inflation and higher interest rates in the coming year that will put pressure on longer term bonds.

As of the end of the year the Fund held 55% in equities, 43% in fixed income and 2% in cash. Although equity valuations are above their long-term average, we are still finding compelling investment opportunities. We would also point out that if Trump is successful in lowering the U.S. corporate tax rate, it could lead to higher after-tax corporate earnings, thereby bringing at least one valuation measure, the price-to-earnings (P/E) ratio, lower and more in line with its long-term average.

Over the past year we have repositioned the Fund’s equities to make sure they are consistent with our investment framework and with our view that the economy increasingly favors dominant companies in each industry or sub-industry…the “winner takes all” phenomenon. Today the vast majority of our holdings are extremely strong, market-leading companies that can grow and continue gaining market share over many years. Moreover, many of these companies are selling at reasonable valuations and some at compelling valuations.

On the fixed income side, we are continuing to focus on shorter duration, higher yielding bonds. Short duration can provide potential safety in a rising interest rate environment, and the greater credit sensitivity of our holdings could benefit from faster economic growth.

We thank you for your continued confidence in our management. All of our best wishes for a healthy, happy and prosperous New Year.


John Osterweis & Carl Kaufman

Investment Team

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This commentary contains the current opinions of the author 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.

Duration measures the sensitivity of a bond’s price (or the aggregate market value of a portfolio of bonds) to changes in interest rates. Bonds with longer durations generally have more volatile prices than bonds of comparable quality with shorter durations. Effective Duration is a duration calculation for bonds with embedded options and takes into account that expected cash flows will fluctuate as interest rates change. Effective duration is calculated only on the Fund’s fixed income holdings and cash.

The S&P 500 Index is an unmanaged index that is widely regarded as the standard for measuring large-cap U.S. stock market performance. The index does not incur expenses, is not available for investment, and includes the reinvestment of dividends.

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.

These indices do not incur expenses and are not available for investment. These indices include reinvestment of dividends and/or interest income.

Fund holdings are subject to change and should not be considered a recommendation to buy or sell any security.

Free cash flow represents the cash that a company is able to generate after laying out the money required to maintain and expand the company’s asset base. Free cash flow is important because it allows a company to pursue opportunities that enhance shareholder value.

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 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 Investment Fund may invest in small- and mid-capitalization companies, which tend to have limited liquidity and greater price volatility than large-capitalization companies. 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. The Fund may invest in Master Limited Partnerships, which involve risk related to energy prices, demand and changes in tax code. The 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. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. 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.

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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