Shareholder Letter

July 22, 2020

Dear Shareholder,

During the second quarter of 2020, the Osterweis Fund (the Fund) generated a total return of 17.85% compared to 20.54% for the S&P 500 Index (the S&P 500). The Fund’s annualized total returns over the one-year, five-year, ten-year, and twenty-year periods ending June 30, 2020 were 10.57%, 6.10%, 9.43%, and 6.72%, respectively, compared to 7.51%, 10.73%, 13.99%, and 5.91% for the S&P 500 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 Fund’s gross expense ratio was 1.20% and net expense ratio was 0.96% as of March 31, 2020. The Adviser has contractually agreed to waive certain fees through June 30, 2021.

As we enter the third quarter, we find ourselves in the midst of a second wave of Covid-19 that is complicating the recovery picture. Wall Street has generally remained optimistic thus far, buoyed by support from the Fed and continued progress towards a vaccine, but the situation remains fluid.

In our latest Outlook, we take a closer look at how we are positioning the Fund given this uncertainty. Most importantly, we are focusing on high quality companies that are well-positioned to weather the slowdown, however long it may last. This is not new for us – we have favored dominant companies for a while – but given the pandemic we think it is even more critical to own companies that are able to grow during the downturn, either organically or by taking market share from weaker competitors that are unable to survive.

We also discuss why we believe today’s low interest rate environment is potentially a major tailwind for equity markets. Stock prices are inversely correlated with interest rates and positively correlated with growth rates. We believe companies with clear paths to growth in this environment should generate favorable returns. Furthermore, many of these companies pay attractive dividends that we expect will grow over time as well. 

We thank you for your continued confidence in our management.

Sincerely,

John Osterweis & Team

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Investment Team

John S. Osterweis

Founder, Chairman & Co-Chief Investment Officer – Core Equity

John S. Osterweis

John S. Osterweis

Founder, Chairman & Co-Chief Investment Officer – Core Equity

John Osterweis graduated from Bowdoin College (B.A. in Philosophy, cum laude), and Stanford Graduate School of Business (M.B.A. with top honors in Finance).

After graduating from business school, he served as a Senior Analyst concentrating on the forest products and paper industry for several regional brokerage firms and later for E.F. Hutton & Company, Inc. In addition to his activities as an analyst, Mr. Osterweis served as Director of Research for two firms and managed equity portfolios for over ten years.

In late 1982, Mr. Osterweis decided to devote full time to his portfolio management activities, and in April of 1983 launched Osterweis Capital Management.

For a number of years Mr. Osterweis served as Director of the Lucas Museum of Narrative Art, Director on the Stanford Alumni Association Executive Board, Trustee of Bowdoin College, Director and Vice Chairman of Mt. Zion Hospital and Medical Center, and President of the Board of Directors for Summer Search Foundation. He currently serves as a Trustee of the San Francisco Ballet Association Director of the San Francisco Free Clinic, and President Emeritus of the San Francisco Ballet Endowment Foundation, as well as Trustee Emeritus of Summer Search Foundation and of Bowdoin College.

Mr. Osterweis is a member of the firm’s Management Committee, a principal of the firm and the co-lead Portfolio Manager for the core equity and flexible balanced strategies.

Larry Cordisco

Co-Chief Investment Officer – Core Equity

Larry Cordisco

Co-Chief Investment Officer – Core Equity

Larry Cordisco graduated from the University of California, Santa Barbara (B.A. in Political Science), Georgetown University (M.P.P.) and Columbia Business School (M.B.A.).

Before joining Osterweis in 2019, he was a Co-Portfolio Manager of the Meridian Contrarian Fund at Arrowmark Partners/Meridian Funds. Prior to co-managing the Contrarian Fund, Larry was an equity analyst for 11 years, most recently as Vice President of Investment Research for the Meridian Contrarian Fund. Before that he was an analyst within the technology group at Banc of America Securities. He was also a business and technology consultant for Accenture in San Francisco and began his professional career in the public sector as a District Aide for Congressman George Miller.

Mr. Cordisco is a co-lead Portfolio Manager for the core equity strategy and portfolio manager for the flexible balanced strategy.

Gregory S. Hermanski

Vice President & Portfolio Manager

Gregory S. Hermanski

Vice President & Portfolio Manager

Greg Hermanski graduated from The University of California, Los Angeles (B.A. in Business/Economics).

Prior to joining Osterweis Capital Management in 2002, Mr. Hermanski was a Vice President at Robertson Stephens and Co. where he was in charge of convertible bond research. Prior to that, Mr. Hermanski was a Research Analyst covering convertible, high yield, and distressed securities at Imperial Capital, LLC and a Valuation Consultant for Price Waterhouse, LLC.

Mr. Hermanski is a principal of the firm and a Portfolio Manager for the core equity strategy.

Nael Fakhry

Vice President & Portfolio Manager

Nael Fakhry

Vice President & Portfolio Manager

Nael Fakhry graduated from Stanford University (B.A. in History, Phi Beta Kappa) and the University of California Berkeley, Walter A. Haas School of Business (M.B.A., C.J. White Scholar).

Prior to joining Osterweis Capital Management in 2011, Mr. Fakhry worked as an Associate at American Securities, a private equity firm, and as an Analyst in the investment banking division of Morgan Stanley.

Mr. Fakhry is a principal of the firm and a Portfolio Manager for the core equity strategy.

Dave Sherry

Senior Analyst

Dave Sherry

Senior Analyst

Dave Sherry graduated from Princeton University (A.B. in Economics) and from the Anderson School at UCLA (M.B.A). Mr. Sherry holds the Chartered Financial Analyst designation.

Prior to joining Osterweis Capital Management in 2017, Mr. Sherry was a Managing Director at Inflection Partners LLC, where he founded a long/short strategy that focused on the technology sector. Before that, Mr. Sherry held portfolio manager positions at EGM Capital, Partech International and LGT Asset Management. He began his investment career at Franklin Templeton Investments.

Mr. Sherry is a Senior Analyst for the core equity strategy.

Andrew Chang

Analyst

Andrew Chang graduated from Stanford University (B.S. in Management Science & Engineering, Phi Beta Kappa, Tau Beta Pi) and from the Wharton School at the University of Pennsylvania (M.B.A).

Prior to joining Osterweis Capital Management in 2020, Mr. Chang was a Senior Associate at Mill Road Capital. Before that, Mr. Chang was an Associate at Darlington Partners. He began his investment career at Goldman Sachs Investment Partners.

He also serves on the board of Project Open Hand.

Mr. Chang is an Analyst for the core equity 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 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.

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

Earnings growth is not representative of the fund’s future performance.

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 Fund may invest in medium and smaller sized companies, which involve additional risks such as limited liquidity and greater volatility. 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.

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.