Shareholder Letter

January 23, 2020

Dear Shareholder,

During the fourth quarter of 2019, the Osterweis Emerging Opportunity Fund (the Fund) generated a total return of 5.91% while the Russell 2000 Growth Index (the Index) returned 11.39%. The Fund’s annualized total returns over the one-year, five-year and since inception (10/1/2012) periods ending December 31, 2019 were 28.03%, 12.48% and 14.78%, respectively, compared to 28.48%, 9.34% and 12.64% for the Index over the same periods.

Performance data quoted represent 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 higher or lower 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 Adviser has contractually agreed to waive certain fees through June 30, 2021. Performance prior to December 1, 2016 is that of another investment vehicle (the Predecessor Fund) before the commencement of the Fund’s operations. The Predecessor Fund was converted into the Fund on November 30, 2016. The Predecessor Fund’s performance shown includes the deduction of the Predecessor Fund’s actual operating expenses. In addition, the Predecessor Fund’s performance shown has been recalculated using the management fee that applies to the Fund, which has the effect of reducing the Predecessor Fund’s performance. The Predecessor Fund was not a registered mutual fund and so was not subject to the same operating expenses or investment and tax restrictions as the Fund. If it had been, the Predecessor Fund’s performance may have been lower. The Fund’s gross expense ratio was 1.25% and net expense ratio was 1.13% as of June 30, 2019. The net expense ratio is applicable to investors. The Adviser has contractually agreed to waive certain fees through June 30, 2021.

The majority of the Fund’s 2019 equity performance was driven by a strong beginning to the year for technology stocks – particularly SaaS platforms, big data companies, ecommerce sites, and internet communications companies. These latter names experienced their typical swoon in the early fall but rallied in the fourth quarter to finish strong. However, the Fund still underperformed the Index during the fourth quarter due to a short-term rotation into value-oriented names and price declines in a few of our consumer stocks.

Looking ahead, we feel small caps are well positioned to outperform large caps. Although they have trailed their larger cap brethren for most of the past three years, the operating leverage created by the emerging trends in technology should have a far greater impact on smaller organizations than large ones. Likewise, smaller companies have much more potential for earnings growth expansion than do larger companies. Within small cap, our favorite themes include consumer driven health care, biotech, big data, and fintech.

We also believe growth stocks will continue to outperform value stocks for the foreseeable future, and we disagree with naysayers who claim that growth has peaked. Our companies routinely generate revenue growth of 20-50% with our average at roughly 30% presently. As long as the population of these names remains numerous, growth managers will seek out these stocks. Moreover, we think these firms should produce more margin going forward due to the attractiveness of their business models.

We thank you for your continued support.

Regards,

 
Jim Callinan
 

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Osterweis Capital Management is the adviser to the Osterweis Funds, which are distributed by Quasar Distributors, LLC. [43573]

Investment Team

James L. Callinan

Chief Investment Officer – Emerging Growth

James L. Callinan

Chief Investment Officer – Emerging Growth

Jim Callinan graduated from Harvard College (B.A. Economics), New York University (M.S. Accounting) and Harvard Business School (M.B.A.). Mr. Callinan holds the Chartered Financial Analyst designation.

Prior to joining Osterweis Capital Management in 2016, Mr. Callinan managed the Emerging Growth Partnership, LP, a concentrated small cap growth strategy he founded at RS and transitioned to his own firm. Before that, he was Co-Founder & Chief Investment Officer at RS Investments. He also co-founded the RS Growth Group LLC at Robertson Stephens Investment Management in 1996 and managed the RS Emerging Growth Fund from 1996 until 2010.

He began his career at Putnam Investments as an equity research analyst in 1987 and served as portfolio manager for the Putnam OTC Emerging Growth Fund from 1994 to 1996.

Mr. Callinan is an Executive Committee member of the of Weatherbie Capital (an Alger Company) Advisory Board and the Friends of Harvard Football Board.

Mr. Callinan is a principal of the firm and a Portfolio Manager for the emerging growth strategy. He is also a Portfolio Manager for the flexible balanced strategy.

Matthew C. Unger

Vice President & Analyst

Matthew C. Unger

Vice President & Analyst

Matt Unger graduated from Trinity University (B.S. Finance, cum laude) and Southern Methodist University, Cox School of Business (M.B.A.). Mr. Unger holds the Chartered Financial Analyst designation.

Prior to joining Osterweis Capital Management in 2016, Mr. Unger worked at Callinan Asset Management as a Research Analyst covering the health care service, medical technology and industrial sectors. Prior to that, he spent three years at RS Investments as a Research Associate covering small cap growth companies in the medical technology and industrial sectors. Before graduate school, Matt worked at Platte River Capital covering the medical device sector from 2008-2010.

Mr. Unger is an Analyst for the emerging growth strategy.

Bryan Wong

Vice President & Analyst

Bryan Wong

Vice President & Analyst

Bryan Wong graduated from Yale University (B.A. in Political Science and International Studies with distinction) and the University of California Berkeley, Haas School of Business (M.B.A., Investment Management Fellow). Mr. Wong holds the Chartered Financial Analyst designation and is a member of the CFA Society of San Francisco.

Prior to joining Osterweis Capital Management in 2014, Mr. Wong was a member of the investment team managing the endowment of the David and Lucile Packard Foundation. Before that, Mr. Wong was an Analyst from 2005 to 2009 at two long/short hedge funds.

Mr. Wong is a principal of the firm and an Analyst for the emerging growth strategy.

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.

The Russell 2000 Growth Index is a market capitalization weighted index representing those stocks within the approximately 2000 smallest companies in the universe of U.S. equities that exhibit growth characteristics.

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 Emerging Opportunity Fund may invest in unseasoned companies, which involve additional risks such as abrupt or erratic price movements. The Fund may invest in small and mid-sized companies, which may involve greater volatility than large-sized companies. The Fund may invest in IPOs and unseasoned companies that are in the early stages of their development and may pose more risk compared to more established companies. The Fund may invest in ETFs, which involve risks that do not apply to conventional funds. 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 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.

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.