UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-10401
Trust for Professional Managers
(Exact name of registrant as specified in charter)
(Exact name of registrant as specified in charter)
615 East Michigan Street
Milwaukee, WI 53202
(Address of principal executive offices) (Zip code)
(Address of principal executive offices) (Zip code)
Adam W. Smith
U.S. Bancorp Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
(Name and address of agent for service)
(Name and address of agent for service)
(414) 765-6115
Registrant's telephone number, including area code
Date of fiscal year end: August 31, 2019
Date of reporting period: February 28, 2019
Item 1. Reports to Stockholders.
Semi-Annual Report
February 28, 2019
Fiera Capital STRONG Nations Currency Fund
Institutional Class
(SCAFX)
Investment Adviser
Fiera Capital Inc.
375 Park Avenue, 8th Floor
New York, New York 10152
Phone: 1-844-GOFIERA (1-844-463-4372)
Table of Contents
LETTER TO SHAREHOLDERS | 3 | |
EXPENSE EXAMPLE | 8 | |
INVESTMENT HIGHLIGHTS | 10 | |
SCHEDULE OF INVESTMENTS | 13 | |
SCHEDULE OF OPEN FORWARD FOREIGN CURRENCY CONTRACTS | 15 | |
STATEMENT OF ASSETS AND LIABILITIES | 16 | |
STATEMENT OF OPERATIONS | 17 | |
STATEMENTS OF CHANGES IN NET ASSETS | 18 | |
FINANCIAL HIGHLIGHTS | 19 | |
NOTES TO FINANCIAL STATEMENTS | 20 | |
NOTICE OF PRIVACY POLICY & PRACTICES | 30 | |
ADDITIONAL INFORMATION | 31 |
Dear Shareholder,
Management Discussion Of Fund Performance
Our goal is to provide investors with the diversification benefits of currencies as an asset class, in a risk-managed fashion, with an emphasis on investing in currencies that are associated with nations with strong balance sheets that embrace freedom and promote fiscal sustainability, transparency and good governance.
Our risk management disciplines guide us in our effort to reduce volatility, mitigate periods of drawdown, and preserve capital for our investors. As a part of this discipline we utilize a number of proprietary technical indicators to help us determine when to hedge and when to be more fully invested. These technical studies, largely focused on a range of momentum moving average measures for each currency in our solution set and for various benchmarks, help us identify supply and demand imbalances that can be sources of material movements in exchange rates and their volatilities. It is important to note that our selection process and risk management are also informed in large measure by our STRONG nations screening process, our considerations of relative central bank policy, national growth and inflation rates, relative yield curve positioning, as well as by forward looking market indicators such as national equity market behavior.
As the chart below illustrates, we maintained a significant hedge posture throughout the period. Our decision to maintain a hedged position to the U.S. dollar was greatly influenced by our series of proprietary technical studies as the dollar strengthened and market volatilities became more elevated toward the end of 2018.
Fiera Capital Hedge Ratio (% allocation to USD)
Source: Fiera Capital
Stock Market Volatility (VIX Index)
Source: Fiera Capital
3
There were a number of important financial and geopolitical challenges facing the global economy during most of the current reporting period. Together, these challenges created an atmosphere of significant financial and economic uncertainty which, combined with the adverse financial conditions during this period, led to a meaningful rise in volatility and a sharp drop in the asset prices across many financial assets and geographies. Arguably, a major contributing factor to the sudden tightening in global financial conditions that belied these events was the Federal Reserve’s continued desire for policy tightening (including the tapering of asset purchases) in a perceived environment of rising geopolitical tensions, slowing global growth and weakening corporate earnings.
Other important drivers at work during this period included:
• | Continuing U.S./China trade tensions, with tariffs and counter-tariffs imposed by both sides on increasing volume of their respective exports, while multiple delegations of trade negotiators shuttled back and forth between Washington and Beijing to work out details of a possible trade agreement that would resolve the thorny issues related to the large US trade deficit, intellectual property, technology transfer, currency policy, and future enforceability. |
• | Deepening Brexit crisis – the British Parliament failed to reach a consensus on any of the myriad of alternatives for Brexit (hard Brexit, no Brexit, Article 50 extension, general election, new referendum etc.), as well as Theresa May’s own Brexit plan which has been rejected multiple times by Parliament. This gridlock resulted in increased risk of a disorderly Brexit that would leave unresolved many important issues related to the future relations of England with the EU and the fate of the Northern Irish Border, which could have significant negative economic and financial implications for the global economy. |
• | Rising tensions between the populist Italian government and Brussels manifested in the form of the Italian budget crisis and the ascendance of nationalist and Euroskeptic movements across Europe, weakening the cohesiveness among EU member states and thus threatening the foundation of the European Union. |
• | Continued political uncertainty in Washington with a divided government after the midterm elections. The White House’s adversarial relationship with Congress culminated in a long and unpopular US government shutdown. |
In short, the markets’ response to the catalysts during the latter half of 2018 were as follows:
• | Global equity markets swooned in the 4th quarter of 2018, with the S&P 500 erasing all its gains for 2018 in December, with a similar reaction in other developed and developing financial markets. |
• | Rising interest rates, widening credit spreads, and the rising of the U.S. dollar caused severe tightening in financial conditions, with especially negative consequences for assets and currencies of emerging markets. |
• | Purchasing manager indices continued to decline. China’s manufacturing gauge fell to 50.0 and into contraction territory and purchasing manager indices in various European economies continued to deteriorate. Though U.S. purchasing manager data were more resilient, the U.S. economy experienced disappointing retail sales and falling consumer confidence. |
• | Weakening global demand and excess supply conditions put downward pressure on oil and other commodities, with oil prices dropping more than 30% during the months of November and December. |
4
Global Purchasing Managers’ (PMI) Indices
Source: Fiera Capital
In response to these conditions, beginning in December, the Federal Reserve began to walk back on its hawkish testimony and signaled a more “prudent and patient” approach to the future policy path, involving possibly a slower pace of tapering of the Federal Reserve’s balance sheet. The European Central Bank (ECB) and Bank of Japan (BoJ) followed suit. Acknowledging the vulnerable economic and geopolitical backdrop, ECB downgraded its forecasts of growth and inflation in 2019 and put rate hikes on hold while discussing a new round of long-term lending programs (LTROs) targeting European financial institutions. Similarly, the BoJ lowered its inflation forecasts and signaled its commitment to ultra-accommodative policies, while the Peoples Bank of China cut the Reserve Requirement Ratio for Chinese banks and announced new tax cuts and several other easing measures.
The dovish tilt by the Fed and other central banks led to a meaningful pullback in the U.S. dollar in early January, and also led to a strong rally in global equities, commodities including oil and gold, and many of the emerging market currencies. The British pound ended the period higher on speculation that a no-deal Brexit will be averted.
As the chart below highlights, two of the perceived “safe haven” investments, the Swiss franc and the Japanese yen, had negative returns during the period. Our allocation to gold was a positive performance driver during the period.
The Fund generated a return of 0.00% for the six month period ended February 28, 2019. The 3-Month T-Bill returned 1.10% for the same period. The inverse of the U.S. Dollar Index, which represents the performance of major currencies (a considerable portion of which do not meet STRONG’s standards), had a return of -1.06% for the period.
5
Fund and Currency Returns 8/31/18 – 2/28/19
Jonathan E. Lewis | Iraj Kani, PhD |
Lead Portfolio Manager | Co-Portfolio Manager |
6
Mutual fund investing involves risk. Principal loss is possible. The Fund invests in foreign securities which involve greater volatility and political, economic and currency risks and differences in accounting methods. These risks are greater for investments in emerging markets. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. The Fund is non-diversified, meaning it may concentrate its assets in fewer individual holdings or geographical areas than a diversified fund. The Fund may also invest in gold, which involves additional risks, such as the possibility for substantial price fluctuations over a short period of time. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit and management risks, and the risk that a position could be closed when most advantageous. Investments in derivatives could lose more than the amount invested. The Fund may make short sales of securities, which involves the risk that losses may exceed the original amount invested. Diversification does not assure a profit, nor does it protect against a loss in a declining market.
A currency is a form of monetary unit issued by a sovereign nation as a mode of exchange. Currencies are stores of value subject to trading between nations and investors in foreign exchange markets, which determine the relative value of different currencies. The value of a currency is determined in comparison to another reference currency; thus, the value of one currency relative to another could rise due to strengthening economic conditions in the first nation and/or weakening economic conditions in the second. Since governments and their constituent central banks retain control over coinage and issuance, the value of currencies may also be affected by government fiscal policy, central bank monetary action, and trade policy (including tariffs, currency pegs, and capital controls). Further, non-US Dollar denominated short duration fixed income securities often proxy for currencies, but like other fixed income securities, introduce an element of interest rate risk as well.
• | The U.S. Dollar Index calculates the return of a trade weighted basket of currencies versus the Dollar. The inverse of this index measures the strength of a trade weighted basket of currencies against the U.S. Dollar. U.S. Dollar Index® and USDX® are trademarks and service marks of the ICE®. |
• | The CBOE Volatility Index (VIX) is a measure of the stock market’s expectation of volatility implied by S&P 500 Index options, calculated and published by the Chicago Board Options Exchange (CBOE). |
• | Purchasing Managers’ Indexes (PMI) are economic indicators derived from monthly surveys of private sector companies. ISM, SIPMM, and Markit Group separately compile Purchasing Managers’ Index (PMI) surveys on a monthly basis by polling businesses which represent the makeup of the respective business sector. |
It is not possible to invest directly in an index.
Fund holdings and sector allocations are subject to change and are not recommendations to buy or sell any security. For more complete information regarding performance and holdings, please refer to the schedule of investments of this report.
The Fiera Capital STRONG Nations Currency Fund is distributed by Quasar Distributors, LLC. Fiera Capital Inc. (the “Adviser”) is the adviser to the Fiera Capital STRONG Nations Currency Fund.
Effective October 30, 2015, Fiera Capital Corporation acquired 100% of the equity of Samson Capital Advisors LLC (“Samson”), the Fund’s prior investment adviser. On November 9, 2015, Samson’s advisory business was assumed by and combined with the Adviser. The Adviser is an indirect, wholly-owned subsidiary of Fiera Capital Corporation. Fiera Capital Corporation is a publicly traded management firm with headquarters in Montreal, Canada.
7
Fiera Capital STRONG Nations Currency Fund
Expense Example
(Unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund, and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (9/1/18 – 2/28/19).
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. In addition, you will be assessed fees for outgoing wire transfers, returned checks and stop payment orders at prevailing rates charged by U.S. Bancorp Fund Services, LLC, the Fund’s transfer agent. If you request that a redemption be made by wire transfer, currently a $15.00 fee is charged by the Fund’s transfer agent. IRA accounts will be charged a $15.00 annual maintenance fee. To the extent the Fund invests in shares of exchange-traded funds or other investment companies as part of its investment strategy, you will indirectly bear your proportionate share of any fees and expenses charged by the underlying funds in which the Fund invests in addition to the expenses of the Fund. Actual expenses of the underlying funds are expected to vary among the various underlying funds. These expenses are not included in the example. The example includes, but is not limited to, management fees, fund administration and accounting, custody and transfer agent fees. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
8
Fiera Capital STRONG Nations Currency Fund
Expense Example (Continued)
(Unaudited)
Institutional Class | |||
Expenses Paid | |||
Beginning | Ending | During Period | |
Account Value | Account Value | September 1, 2018 - | |
September 1, 2018 | February 28, 2019 | February 28, 2019* | |
Actual | $1,000.00 | $1,000.00 | $4.96 |
Hypothetical (5% return | |||
before expenses) | $1,000.00 | $1,019.84 | $5.01 |
* | Expenses are equal to the Fund’s annualized net expense ratio of 1.00%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
9
Fiera Capital STRONG Nations Currency Fund
Investment Highlights
(Unaudited)
The Fund seeks to generate positive returns with limited drawdowns over full market cycles and to provide investors with the diversification benefits of currencies as an asset class through investments in currencies that are associated with strong nations. The Fund focuses on the currencies of nations with healthy economies and financial systems, healthy fiscal trends, more democratic governance, rule of law, transparency and with societies that are becoming more free. We will also seek to hedge foreign currency exposures back into the dollar during periods of dollar rally.
STRONG nations are nations and regions that share the following characteristics:
S | Sustainability | |
Healthy Fiscal Trends | ||
T | Transparency | |
Readily Available Data | ||
R | Regulatory Quality | |
Rule of Law | ||
O | Openness | |
Freer Countries and FX (foreign exchange or Forex) Rates | ||
N | National Fundamentals | |
Healthier Economies and Financial Systems | ||
G | Governance | |
More Democratic |
Allocation of Securities
(% of Investments)*
* As of February 28, 2019
10
Fiera Capital STRONG Nations Currency Fund
Investment Highlights (Continued)
(Unaudited)
Average Annual Returns – As of February 28, 2019
Since | ||||
One | Three | Five | Inception | |
Year | Years | Years | (8/31/12) | |
Institutional Class | -3.61% | 0.01% | -2.35% | -2.78% |
ICE BofA Merrill Lynch | ||||
3 Month Treasury Bill Index | 2.04% | 1.13% | 0.70% | 0.56% |
Performance data quoted represents past performance and 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 1-844-GOFIERA (1-844-463-4372).
Short-term performance, in particular, is not a good indication of the Fund’s future performance, and an investment should not be made solely on returns.
Investment performance reflects fee waivers in effect. In the absence of such waivers, total return would be reduced.
The returns shown assume reinvestment of Fund distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The graph illustrates performance of a hypothetical investment made in Institutional Class shares of the Fund and a broad-based securities index on August 31, 2012, the inception date of the Fund. The graph does not reflect any future performance.
The ICE BofA Merrill Lynch 3 Month Treasury Bill Index is an unmanaged index that tracks 3 month U.S. government securities. One cannot invest directly in an index.
11
Fiera Capital STRONG Nations Currency Fund
Investment Highlights (Continued)
(Unaudited)
Institutional Class |
Growth of $100,000 Investment |
* Inception Date
12
Fiera Capital STRONG Nations Currency Fund
Schedule of Investments |
February 28, 2019 (Unaudited)
Principal | |||||||||
Amount | Currency | Value | |||||||
AUSTRALIA – 5.93% | |||||||||
Foreign Government Bonds – 5.93% | |||||||||
Australian Government Bond | |||||||||
1.750%, 11/21/2020 | 3,250,000 | AUD | $ | 2,307,084 | |||||
TOTAL AUSTRALIA (Cost $2,470,320) | 2,307,084 | ||||||||
Shares | |||||||||
GOLD – 8.54% | |||||||||
iShares Gold Trust (a) | 131,638 | USD | 1,656,006 | ||||||
SPDR Gold Shares (a) | 13,456 | USD | 1,668,410 | ||||||
TOTAL GOLD (Cost $2,792,418) | 3,324,416 | ||||||||
Principal | |||||||||
Amount | |||||||||
NEW ZEALAND – 8.32% | |||||||||
Foreign Government Bonds – 8.32% | |||||||||
New Zealand Government Bond | |||||||||
5.000%, 03/15/2019 | 4,750,000 | NZD | 3,239,075 | ||||||
TOTAL NEW ZEALAND | |||||||||
(Cost $3,496,656) | 3,239,075 | ||||||||
Shares | |||||||||
UNITED STATES – 71.30% | |||||||||
Money Market Funds – 5.10% | |||||||||
Fidelity Investments Money Market Funds – | |||||||||
Government Portfolio – Class I, 2.280% (b) | 1,984,993 | USD | 1,984,993 |
The accompanying notes are an integral part of these financial statements.
13
Fiera Capital STRONG Nations Currency Fund
Schedule of Investments (Continued) |
February 28, 2019 (Unaudited)
Principal | |||||||||||
Amount | Currency | Value | |||||||||
U.S. Government Notes/Bonds – 63.53% | |||||||||||
United States Treasury Note/Bond | |||||||||||
1.250%, 01/31/2020 | 1,750,000 | USD | $ | 1,729,561 | |||||||
1.375%, 04/30/2020 | 5,000,000 | USD | 4,932,812 | ||||||||
1.375%, 08/31/2020 | 9,500,000 | USD | 9,338,203 | ||||||||
1.125%, 06/30/2021 | 9,000,000 | USD | 8,724,375 | ||||||||
24,724,951 | |||||||||||
U.S. Treasury Bill – 2.67% | |||||||||||
United States Treasury Bill | |||||||||||
2.423%, 04/25/2019 (c) | 1,045,000 | USD | 1,041,192 | ||||||||
TOTAL UNITED STATES | |||||||||||
(Cost $28,115,674) | 27,751,136 | ||||||||||
Total Investments | |||||||||||
(Cost $36,875,068) – 94.09% | 36,621,711 | ||||||||||
Other Assets in Excess of Liabilities – 5.91% | 2,298,456 | ||||||||||
TOTAL NET ASSETS – 100.00% | $ | 38,920,167 |
Percentages are stated as a percent of net assets.
(a) | Non-income producing security. |
(b) | Seven day yield as of February 28, 2019. |
(c) | Rate shown is effective yield based on the purchase price. The calculation assumes the security is held to maturity. |
Currency abbreviations:
AUD – Australian Dollar
NZD – New Zealand Dollar
USD – U.S. Dollar
The accompanying notes are an integral part of these financial statements.
14
Fiera Capital STRONG Nations Currency Fund
Schedule of Open Forward Foreign Currency Contracts |
February 28, 2019 (Unaudited)
Purchase Contracts:
Amount of | Amount of | ||||||||||||||||
Forward | Currency to | Currency to | Unrealized | ||||||||||||||
Settlement | be Received in | be Delivered in | Appreciation/ | ||||||||||||||
Counterparty | Date | Local Currency | Local Currency | (Depreciation) | |||||||||||||
Citigroup, Inc. | 3/29/19 | AUD | 1,150,000 | USD | 819,687 | $ | (3,516 | ) | |||||||||
Citigroup, Inc. | 3/29/19 | CAD | 2,375,000 | USD | 1,800,120 | 5,985 | |||||||||||
State Street Bank & Trust Co. | 3/29/19 | CHF | 3,100,000 | USD | 3,107,427 | 7,416 | |||||||||||
J.P. Morgan Chase Bank, N.A. | 3/29/19 | CLP | 2,150,000,000 | USD | 3,304,642 | (26,813 | ) | ||||||||||
Standard Chartered Bank | 3/29/19 | ILS | 11,300,000 | USD | 3,129,423 | (5,840 | ) | ||||||||||
Citigroup, Inc. | 3/29/19 | SGD | 4,150,000 | USD | 3,068,569 | 2,448 | |||||||||||
$ | (20,320 | ) | |||||||||||||||
Sales Contracts: | |||||||||||||||||
Amount of | Amount of | ||||||||||||||||
Forward | Currency to | Currency to | Unrealized | ||||||||||||||
Settlement | be Received in | be Delivered in | Appreciation/ | ||||||||||||||
Counterparty | Date | Local Currency | Local Currency | (Depreciation) | |||||||||||||
Standard Chartered Bank | 3/29/19 | USD | 853,219 | NZD | 1,250,000 | $ | 1,437 | ||||||||||
$ | 1,437 | ||||||||||||||||
$ | (18,883 | ) |
Currency abbreviations:
AUD – Australian Dollar
CAD – Canadian Dollar
CHF – Swiss Franc
CLP – Chilean Peso
ILS – Israeli New Shekel
NZD – New Zealand Dollar
SGD – Singapore Dollar
USD – U.S. Dollar
The accompanying notes are an integral part of these financial statements.
15
Fiera Capital STRONG Nations Currency Fund
Statement of Assets and Liabilities |
February 28, 2019 (Unaudited)
ASSETS | ||||
Investments, at value (cost $36,875,068) | $ | 36,621,711 | ||
Foreign currency, at value (cost $2,231,596) | 2,226,687 | |||
Receivables: | ||||
Interest | 130,335 | |||
Unrealized appreciation on forward foreign currency contracts | 17,286 | |||
Other assets | 9,426 | |||
TOTAL ASSETS | 39,005,445 | |||
LIABILITIES | ||||
Payables: | ||||
To affiliates | 18,790 | |||
To adviser | 7,862 | |||
Unrealized depreciation on forward foreign currency contracts | 36,169 | |||
Accrued expenses and other liabilities | 22,457 | |||
TOTAL LIABILITIES | 85,278 | |||
NET ASSETS | $ | 38,920,167 | ||
Net assets consist of: | ||||
Paid-in capital | $ | 43,273,768 | ||
Accumulated deficit | (4,353,601 | ) | ||
NET ASSETS | $ | 38,920,167 | ||
Shares of beneficial interest outstanding (unlimited | ||||
number of shares authorized $0.001 par value) | 2,386,186 | |||
Net asset value, redemption price and offering price per share | $ | 16.31 |
The accompanying notes are an integral part of these financial statements.
16
Fiera Capital STRONG Nations Currency Fund
Statement of Operation |
For the Six Months Ended February 28, 2019 (Unaudited)
INVESTMENT INCOME | ||||
Interest income | $ | 308,619 | ||
TOTAL INVESTMENT INCOME | 308,619 | |||
EXPENSES | ||||
Management fees | 157,972 | |||
Administration and accounting fees | 39,353 | |||
Transfer agent fees and expenses | 17,190 | |||
Custody fees | 16,847 | |||
Audit and tax fees | 16,829 | |||
Federal and state registration fees | 10,556 | |||
Legal fees | 10,468 | |||
Chief Compliance Officer fees | 5,993 | |||
Trustees’ fees and related expenses | 4,005 | |||
Reports to shareholders | 3,081 | |||
Other expenses | 3,716 | |||
TOTAL EXPENSES | 286,010 | |||
Less expense waiver by Adviser (Note 4) | (60,335 | ) | ||
NET EXPENSES | 225,675 | |||
NET INVESTMENT INCOME | 82,944 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||
Net realized gain (loss) on: | ||||
Investments | (481,030 | ) | ||
Forward foreign currency contracts | (764,108 | ) | ||
Foreign currency translations | 18,434 | |||
(1,226,704 | ) | |||
Net change in unrealized appreciation on: | ||||
Investments | 1,027,606 | |||
Forward contracts | 48,661 | |||
Foreign currency translation | 6,205 | |||
1,082,472 | ||||
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS | (144,232 | ) | ||
NET DECREASE IN NET ASSETS FROM OPERATIONS | $ | (61,288 | ) |
The accompanying notes are an integral part of these financial statements.
17
Fiera Capital STRONG Nations Currency Fund
Statements of Changes in Net Assets |
Six Months Ended | ||||||||
February 28, 2019 | Year Ended | |||||||
(Unaudited) | August 31, 2018(1) | |||||||
FROM OPERATIONS | ||||||||
Net investment income | $ | 82,944 | $ | 135,644 | ||||
Net realized gain (loss) on: | ||||||||
Investments | (481,030 | ) | (140,331 | ) | ||||
Forward foreign currency contracts | (764,108 | ) | (884,390 | ) | ||||
Foreign currency translations | 18,434 | (216,033 | ) | |||||
Net change in unrealized | ||||||||
appreciation (depreciation) on: | ||||||||
Investments | 1,027,606 | (2,235,199 | ) | |||||
Forward foreign currency contracts | 48,661 | (787,890 | ) | |||||
Foreign currency translations | 6,205 | 28,385 | ||||||
Net decrease in net assets from operations | (61,288 | ) | (4,099,814 | ) | ||||
FROM DISTRIBUTIONS | ||||||||
Net dividends and distributions | — | (1,241,138 | ) | |||||
Net decrease in net assets resulting | ||||||||
from dividend and distributions paid | — | (1,241,138 | ) | |||||
FROM CAPITAL SHARE TRANSACTIONS | ||||||||
Proceeds from shares sold – Institutional Class | 1,700,767 | 501,215 | ||||||
Net asset value of shares issued | ||||||||
to shareholders in payment of | ||||||||
distributions declared – Institutional Class | — | 1,035,697 | ||||||
Payments for shares redeemed – Institutional Class | (23,356,129 | ) | (12,201,064 | ) | ||||
Net decrease in net assets | ||||||||
from capital share transactions | (21,655,362 | ) | (10,664,152 | ) | ||||
TOTAL DECREASE IN NET ASSETS | (21,716,650 | ) | (16,005,104 | ) | ||||
NET ASSETS: | ||||||||
Beginning of Period | 60,636,817 | 76,641,921 | ||||||
End of Period | $ | 38,920,167 | $ | 60,636,817 |
(1) | Net dividends and distributions include net investment income distributions of $1,241,138. End of period net assets include accumulated undistributed net investment loss of $1,620,347. |
The accompanying notes are an integral part of these financial statements.
18
Fiera Capital STRONG Nations Currency Fund
Financial Highlights |
Per Share Data for a Share Outstanding Throughout Each Period
Six Months | ||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
February 28, | ||||||||||||||||||||||||
2019 | Year Ended August 31, | |||||||||||||||||||||||
(Unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net Asset Value, | ||||||||||||||||||||||||
Beginning of Period | $ | 16.31 | $ | 17.64 | $ | 17.09 | $ | 16.80 | $ | 18.40 | $ | 19.07 | ||||||||||||
Income from | ||||||||||||||||||||||||
investment operations: | ||||||||||||||||||||||||
Net investment income (loss)(1) | 0.03 | 0.03 | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.01 | ) | ||||||||||||||
Net realized and unrealized | ||||||||||||||||||||||||
gain (loss) on investments | (0.03 | ) | (1.05 | ) | 0.56 | 0.30 | (1.59 | ) | (0.66 | ) | ||||||||||||||
Total from | ||||||||||||||||||||||||
investment operations | 0.00 | (1.02 | ) | 0.55 | 0.29 | (1.60 | ) | (0.67 | ) | |||||||||||||||
Less distributions paid: | ||||||||||||||||||||||||
From net investment income | — | (0.31 | ) | — | — | — | (0.00 | )(2) | ||||||||||||||||
Total distributions paid | — | (0.31 | ) | — | — | — | — | |||||||||||||||||
Net Asset Value, End of Period | $ | 16.31 | $ | 16.31 | $ | 17.64 | $ | 17.09 | $ | 16.80 | $ | 18.40 | ||||||||||||
Total return(3) | 0.00 | % | -5.82 | % | 3.22 | % | 1.73 | % | -8.70 | % | -3.51 | % | ||||||||||||
Supplemental Data and Ratios: | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $ | 38,920 | $ | 60,637 | $ | 76,642 | $ | 77,559 | $ | 82,658 | $ | 75,889 | ||||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||||||
Before waivers and | ||||||||||||||||||||||||
reimbursements of expenses(4) | 1.27 | % | 1.10 | % | 1.08 | % | 1.04 | % | 1.05 | % | 1.20 | % | ||||||||||||
After waivers and | ||||||||||||||||||||||||
reimbursements of expenses(4) | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | ||||||||||||
Ratio of net investment income (loss) | ||||||||||||||||||||||||
to average net assets: | ||||||||||||||||||||||||
Before waivers and | ||||||||||||||||||||||||
reimbursements of expenses(4) | 0.10 | % | 0.10 | % | (0.15 | )% | (0.11 | )% | (0.11 | )% | (0.23 | )% | ||||||||||||
After waivers and | ||||||||||||||||||||||||
reimbursements of expenses(4) | 0.37 | % | 0.20 | % | (0.07 | )% | (0.07 | )% | (0.06 | )% | (0.03 | )% | ||||||||||||
Portfolio turnover rate(3) | 7.24 | % | 29.58 | % | 46.42 | % | 237.80 | % | 311.92 | % | 131.27 | % |
(1) | Per share net investment income (loss) was calculated using average shares outstanding method. |
(2) | Rounds to less than $0.005 per share. |
(3) | Not annualized for periods less than one year. |
(4) | Annualized for periods less than one year. |
The accompanying notes are an integral part of these financial statements.
19
Fiera Capital STRONG Nations Currency Fund
Notes to Financial Statements
February 28, 2019 (Unaudited)
(1) | Organization |
Trust for Professional Managers (the “Trust”) was organized as a Delaware statutory trust under a Declaration of Trust dated May 29, 2001. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Fiera Capital STRONG Nations Currency Fund (the “Fund”), formerly known as the Samson STRONG Nations Currency Fund, represents a distinct series with its own investment objective and policies within the Trust. The investment objective of the Fund is to generate positive returns with limited drawdowns over full market cycles and to provide investors with the diversification benefits of currencies as an asset class through investments in currencies that are associated with strong nations. The Trust may issue an unlimited number of shares of beneficial interest at $0.001 par value. The assets of the Fund are segregated, and a shareholder’s interest is limited to the fund in which shares are held. The Fund currently offers only Institutional Class shares. Effective May 30, 2014, the Fund ceased offering its Investor Class shares to the public and began offering Institutional Class shares only. The remaining Investor Class shares converted to Institutional Class shares on May 30, 2014. The Fund became effective on August 31, 2012 and commenced investment operations on September 1, 2012. The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 “Financial Services—Investment Companies”. | |
(2) | Significant Accounting Policies |
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. These policies are in conformity with generally accepted accounting principles in the United States of America (“GAAP”). | |
(a) Investment Valuation | |
Each security owned by the Fund that is listed on a securities exchange, except for securities listed on the NASDAQ Stock Market, LLC (“NASDAQ”), is valued at its last sale price on that exchange on the date as of which assets are valued. Forward currency contracts are valued at the mean between the bid and asked prices by an approved independent pricing service (“Pricing Service”). | |
If the security is listed on more than one exchange, the Fund will use the price of the exchange that the Fund generally considers to be the principal exchange on which the security is traded. Portfolio securities listed on NASDAQ will be valued at the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If there has been no sale on such exchange or on NASDAQ on such day, the security is valued at the mean between the most recent bid and asked prices on such day or the security shall be valued at the latest sales price on the “composite market” for the day such security is being valued. The composite market is defined as a consolidation of the |
20
Fiera Capital STRONG Nations Currency Fund
Notes to Financial Statements (Continued)
February 28, 2019 (Unaudited)
trade information provided by national securities and foreign exchanges and over-the-counter markets as published by a Pricing Service. | |
If market quotations are not readily available, a security or other asset will be valued at its fair value as determined under fair value pricing procedures approved by the Board of Trustees. These fair value pricing procedures will also be used to price a security when corporate events, events in the securities market and/or world events cause the Adviser to believe that a security’s last sale price may not reflect its actual fair market value. The intended effect of using fair value pricing procedures is to ensure that the Fund is accurately priced. The Board of Trustees will regularly evaluate whether the Fund’s fair value pricing procedures continue to be appropriate in light of the specific circumstances of the Fund and the quality of prices obtained through the application of such procedures by the Trust’s valuation committee. | |
Foreign securities will be priced in their local currencies as of the close of their primary exchange or market or as of the time the Fund calculates its NAV, whichever is earlier. Foreign securities, currencies and other assets denominated in foreign currencies are then translated into U.S. dollars at the exchange rate of such currencies against the U.S. dollar, as provided by a Pricing Service or reporting agency. All assets denominated in foreign currencies will be converted into U.S. dollars using the applicable currency exchange rates as of the close of the New York Stock Exchange (“NYSE”), generally 4:00 p.m. Eastern Time. | |
Debt securities, including short-term debt instruments having a maturity of 60 days or less, are valued at the mean in accordance with prices supplied by a Pricing Service. Pricing Services may use various valuation methodologies such as the mean between the bid and the asked prices, matrix pricing and other analytical pricing models as well as market transactions and dealer quotations. If a price is not available from a Pricing Service, the most recent quotation obtained from one or more broker-dealers known to follow the issue will be obtained. Quotations will be valued at the mean between the bid and the offer. In the absence of available quotations, the securities will be priced at fair value. Any discount or premium is accreted or amortized using the constant yield method until maturity. | |
Money market funds, demand notes and repurchase agreements are valued at cost. If cost does not represent current market value the securities will be priced at fair value. | |
Redeemable securities issued by open-end, registered investment companies are valued at the NAVs of such companies for purchase and/or redemption orders placed on that day. If, on a particular day, a share of an investment company is not listed on NASDAQ, such security’s fair value will be determined. All exchange-traded funds are valued at the last reported sale price on the exchange on which the security is principally traded. In the event market quotations are not readily available, such security will be valued at its fair value. |
21
Fiera Capital STRONG Nations Currency Fund
Notes to Financial Statements (Continued)
February 28, 2019 (Unaudited)
FASB Accounting Standards Codification, “Fair Value Measurement” Topic 820 (“ASC 820”), establishes an authoritative definition of fair value and sets out a hierarchy for measuring fair value. ASC 820 requires an entity to evaluate certain factors to determine whether there has been a significant decrease in volume and level of activity for the security such that recent transactions and quoted prices may not be determinative of fair value and further analysis and adjustment may be necessary to estimate fair value. ASC 820 also requires enhanced disclosure regarding the inputs and valuation techniques used to measure fair value in those instances as well as expanded disclosure of valuation levels for major security types. These inputs are summarized in the three broad levels listed below: |
Level 1 – | Quoted prices in active markets for identical securities. | |
Level 2 – | Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). | |
Level 3 – | Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a summary of the inputs used to value the Fund’s investments carried at fair value as of February 28, 2019: |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||
Equities: | |||||||||||||||||
Gold Funds | $ | 3,324,416 | $ | — | $ | — | $ | 3,324,416 | |||||||||
Total Equities | $ | 3,324,416 | $ | — | $ | — | $ | 3,324,416 | |||||||||
Fixed Income(1): | |||||||||||||||||
Foreign Government Bonds | $ | — | $ | 5,546,159 | $ | — | $ | 5,546,159 | |||||||||
U.S. Government Bills | — | 1,041,192 | — | 1,041,192 | |||||||||||||
U.S. Government | |||||||||||||||||
Notes/Bonds | — | 24,724,951 | — | 24,724,951 | |||||||||||||
Total Fixed Income | $ | — | $ | 31,312,302 | $ | — | $ | 31,312,302 | |||||||||
Short-Term Investments | $ | 1,984,993 | $ | — | $ | — | $ | 1,984,993 | |||||||||
Total Investments | |||||||||||||||||
in Securities | $ | 5,309,409 | $ | 31,312,302 | $ | — | $ | 36,621,711 | |||||||||
Other Financial | |||||||||||||||||
Instruments(2) | $ | — | $ | (18,883 | ) | $ | — | $ | (18,883 | ) |
(1) | See the Schedule of Investments for geographic classifications. | |
(2) | Other financial instruments are forward contracts not reflected in the Schedule of Investments, which are reflected at the net unrealized appreciation (depreciation) of the instrument. See Schedule of Open Forward Foreign Currency Contracts for a list of purchases and sales contracts. |
The Fund measures Level 3 activity as of the end of the period. For the six months ended February 28, 2019, the Fund did not have any significant unobservable inputs |
22
Fiera Capital STRONG Nations Currency Fund
Notes to Financial Statements (Continued)
February 28, 2019 (Unaudited)
(Level 3 securities) used in determining fair value. Therefore, a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value is not applicable. | |
(b) Foreign Securities and Currency Transactions | |
Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. | |
The Fund does not isolate the portion of the results of operations from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Realized foreign exchange gains or losses arising from sales of portfolio securities and sales and maturities of short-term securities are reported within realized gain (loss) on investments. Net unrealized foreign exchange gains and losses arising from changes in the values of investments in securities from fluctuations in exchange rates are reported within unrealized gain (loss) on investments. | |
(c) Derivative Instruments | |
In pursuing its investment objective, the Fund may enter into derivative currency transactions, including currency forwards. The Fund’s investments in derivative currency transactions may result in net short exposure to a particular currency that is not offset by a long position in another currency. The Fund may use derivatives for many purposes, including for hedging, and as a substitute for direct investment in securities or other assets. | |
The fair value of derivative instruments as reported within the Statement of Assets and Liabilities as of February 28, 2019 was as follows: |
Asset Derivatives | ||||||||
Derivatives not accounted | Statement of Assets and | |||||||
for as hedging instruments | Liabilities Location | Value | ||||||
Foreign Exchange Contracts – | Appreciation on | |||||||
Forward Currency Contracts | forward foreign | |||||||
currency contracts | $ | 17,286 | ||||||
Total | $ | 17,286 | ||||||
Liability Derivatives | ||||||||
Derivatives not accounted | Statement of Assets and | |||||||
for as hedging instruments | Liabilities Location | Value | ||||||
Foreign Exchange Contracts – | Depreciation on | |||||||
Forward Currency Contracts | forward foreign | |||||||
currency contracts | $ | 36,169 | ||||||
Total | $ | 36,169 |
23
Fiera Capital STRONG Nations Currency Fund
Notes to Financial Statements (Continued)
February 28, 2019 (Unaudited)
The effect of derivative instruments on the Statement of Operations for the six months ended February 28, 2019: |
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income | |||||
Derivatives not accounted | Forward Foreign | ||||
for as hedging instruments | Currency Contracts | ||||
Foreign Exchange Contracts – | |||||
Forward Currency Contracts | $ | (764,108 | ) | ||
Total | $ | (764,108 | ) | ||
Change in Unrealized Appreciation or (Depreciation) | |||||
on Derivatives Recognized in Income | |||||
Derivatives not accounted | Forward Foreign | ||||
for as hedging instruments | Currency Contracts | ||||
Foreign Exchange Contracts – | |||||
Forward Currency Contracts | $ | 48,661 | |||
Total | $ | 48,661 |
The Fund is not subject to any Master Netting Arrangements; therefore, the Fund does not offset any assets or liabilities. | |
The average monthly notional amount of forward currency contracts, in U.S. dollars, during the six months ended February 28, 2019 were as follows: |
Purchase Contracts | Sales Contracts |
$22,208,101 | $1,887,665 |
Forward Currency Contracts | |
The Fund may enter into foreign currency forward exchange contracts. When entering into a forward currency contract, the Fund agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price at a future date. The market value of the contract fluctuates with changes in currency exchange rates. The contract is marked-to-market daily and the change in market value is recorded by the Fund as an unrealized gain or loss. The Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. | |
(d) Federal Income Taxes | |
The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended, necessary to qualify as a regulated investment company and to make the requisite distributions of income and capital gains to its shareholders sufficient to relieve it from all or substantially all federal income taxes. Therefore, no federal income tax provision has been provided. |
24
Fiera Capital STRONG Nations Currency Fund
Notes to Financial Statements (Continued)
February 28, 2019 (Unaudited)
(e) Distributions to Shareholders | |
The Fund will distribute any net investment income at least annually. The Fund will distribute any net realized long or short-term capital gains at least annually. Distributions from net realized gains for book purposes may include short-term capital gains. All short-term capital gains are included in ordinary income for tax purposes. Distributions to shareholders are recorded on the ex-dividend date. The Fund may also pay a special distribution at the end of the calendar year to comply with federal tax requirements. | |
Income and capital gain distributions may differ from GAAP, primarily due to timing differences in the recognition of income and gains and losses by the Fund. To the extent that these differences are attributable to permanent book and tax accounting differences, they are reclassified in the components of net assets. | |
(f) Use of Estimates | |
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |
(g) Share Valuation | |
The NAV per share of the Fund is calculated by dividing the sum of the value of the securities held by the Fund, plus cash or other assets, minus all liabilities (including estimated accrued expenses) by the total number of shares outstanding for the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on the days on which the NYSE is closed for trading. | |
(h) Expenses | |
Expenses associated with a specific fund in the Trust are charged to that fund. Common expenses are typically allocated evenly between the funds of the Trust, or other equitable means. | |
(i) Other | |
Investment transactions are recorded on the trade date. The Fund determines the gain or loss from investment transactions on the identified cost basis by comparing the original cost of the security lot sold with the net sale proceeds. Dividend income and expense is recognized on the ex-dividend date and interest income is recognized on an accrual basis. |
25
Fiera Capital STRONG Nations Currency Fund
Notes to Financial Statements (Continued)
February 28, 2019 (Unaudited)
(3) | Federal Tax Matters |
The tax character of distributions paid during the years ended August 31, 2018 and 2017 were as follows: |
Ordinary | Long-Term | ||||||||
Income | Capital Gain | ||||||||
August 31, 2018 | $ | 1,241,138 | $ | — | |||||
August 31, 2017 | $ | — | $ | — |
As of August 31, 2018, the components of accumulated earnings (losses) on a tax basis were as follows: |
Cost basis of investments for federal income tax purposes | $ | 62,262,012 | |||
Gross tax unrealized appreciation | 379,801 | ||||
Gross tax unrealized depreciation | (1,861,520 | ) | |||
Net tax unrealized depreciation | (1,481,719 | ) | |||
Undistributed ordinary income | — | ||||
Undistributed long-term capital gain | — | ||||
Total distributable earnings | — | ||||
Other accumulated losses | (2,810,594 | ) | |||
Total accumulated losses | $ | (4,292,313 | ) |
At August 31, 2018 the Fund deferred, on a tax basis, late-year ordinary losses and post-October capital losses of: |
Ordinary | Capital |
$(1,666,171) | $— |
At August 31, 2018 the Fund had tax basis capital losses which may be carried forward to offset future capital gains indefinitely. To the extent that the Fund may realize future net capital gains, those gains will be offset by any of the unused capital loss carryforward. |
Short-Term | Long-Term |
$367,286 | $822,961 |
GAAP requires that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or NAV per share. For the year ended August 31, 2018, the following reclassifications were made for permanent tax differences on the Statement of Assets and Liabilities. |
Accumulated Undistributed Net Investment Income/(Loss) | $ | (1,100,423 | ) | ||
Accumulated Net Realized Gain/(Loss) | 1,100,423 | ||||
Paid-in Capital | — |
26
Fiera Capital STRONG Nations Currency Fund
Notes to Financial Statements (Continued)
February 28, 2019 (Unaudited)
The Fund had no material uncertain tax positions and has not recorded a liability for unrecognized tax benefits as of August 31, 2018. The Fund recognized no interest and penalties related to uncertain tax benefits during the fiscal year 2018. At August 31, 2018, the fiscal years 2015-2018 remained open to examination in the Fund’s major tax jurisdictions. | |
(4) | Investment Adviser |
The Trust has an Investment Advisory Agreement (the “Agreement”) with the Adviser to furnish investment advisory services to the Fund. Under the terms of the Agreement, the Trust, on behalf of the Fund, compensates the Adviser for its management services at the annual rate of 0.70% of the Fund’s average daily net assets. | |
The Adviser has contractually agreed to waive its management fee and/or reimburse the Fund’s expenses at least through December 29, 2019 to the extent necessary to ensure that the Fund’s total operating expenses (exclusive of any front-end or contingent deferred sales loads, Rule 12b-1 plan fees, shareholder servicing plan fees, taxes, leverage (i.e., any expenses incurred in connection with borrowings made by the Fund), interest (including interest incurred in connection with bank and custody overdrafts), brokerage commissions and other transactional expenses, expenses incurred in connection with any merger or reorganization, dividends or interest on short positions, acquired fund fees and expenses or extraordinary expenses such as litigation) do not exceed 1.00% (the “Expense Limitation Cap”) of the average daily net assets of the Fund. For the six months ended February 28, 2019, expenses of $60,335 were waived or reimbursed by the Adviser. Any such waiver or reimbursement is subject to later adjustment to allow the Adviser to recoup amounts waived or reimbursed to the extent actual fees and expenses for a fiscal period do not exceed the lesser of: (1) the Expense Limitation Cap in place at the time of the waiver or reimbursement, or (2) the Expense Limitation Cap in place at the time of recoupment; provided, however, that the Adviser shall only be entitled to recoup such amounts over the following three years from the date of the waiver or reimbursement. The following table details the remaining waived or reimbursed expenses subject to potential recovery expiring: |
August 31, 2019 | $13,214 | ||
August 31, 2020 | $55,186 | ||
August 31, 2021 | $68,448 | ||
February 28, 2022 | $60,335 |
(5) | Related Party Transactions |
U.S. Bancorp Fund Services, LLC (doing business as U.S. Bank Global Fund Services) (“Fund Services”) acts as the Fund’s Administrator under an Administration Agreement. Fund Services prepares various federal and state regulatory filings, reports and returns for the Fund; prepares reports and materials to be supplied to the Trustees; monitors the activities of the Fund’s custodian, transfer agent and |
27
Fiera Capital STRONG Nations Currency Fund
Notes to Financial Statements (Continued)
February 28, 2019 (Unaudited)
accountants; coordinates the preparation and payment of the Fund’s expenses; and reviews the Fund’s expense accruals. Fund Services also serves as the fund accountant and transfer agent to the Fund. U.S. Bank, N.A. (“U.S. Bank”), an affiliate of Fund Services, serves as the Fund’s custodian. The Trust’s Chief Compliance Officer is also an employee of Fund Services. Fees and expenses incurred for the six months ended February 28, 2019, and owed as of February 28, 2019, are as follows: |
Incurred | Owed | ||||||||
Administration and Accounting | $ | 39,353 | $ | 6,325 | |||||
Transfer Agency | $ | 17,190 | $ | 4,116 | |||||
Custody | $ | 16,847 | $ | 6,360 | |||||
Chief Compliance Officer | $ | 5,993 | $ | 1,989 |
The Fund also has a line of credit with U.S. Bank (see Note 8). | |
Quasar Distributors, LLC (the “Distributor”) acts as the Fund’s principal underwriter in a continuous public offering of the Fund’s shares. The Distributor is an affiliate of Fund Services and U.S. Bank. | |
Certain officers of the Fund are also employees of Fund Services. A Trustee of the Trust is affiliated with Fund Services and U.S. Bank. This same Trustee is an interested person of the Distributor. |
(6) | Capital Share Transactions |
Transactions in shares of the Fund were as follows: |
Six Months Ended | Year Ended | ||||||||
February 28, 2019 | August 31, 2018 | ||||||||
Shares sold | 103,899 | 29,152 | |||||||
Shares redeemed | (1,434,447 | ) | (720,055 | ) | |||||
Shares issued in reinvestment of dividends | — | 61,722 | |||||||
Net decrease | (1,330,548 | ) | (629,181 | ) |
(7) | Investment Transactions |
The aggregate purchases and sales of securities, excluding short-term investments, for the Fund for the six months ended February 28, 2019, are summarized below. |
Purchases | |||||
U.S. Government | $ | 2,907,891 | |||
Other | — | ||||
Sales | |||||
U.S. Government | $ | 16,960,762 | |||
Other | 6,119,848 |
28
Fiera Capital STRONG Nations Currency Fund
Notes to Financial Statements (Continued)
February 28, 2019 (Unaudited)
(8) | Line of Credit |
The Fund has a line of credit in the amount of the lesser of $3,000,000 or 33.33% of the fair value of unencumbered assets of the Fund, as defined, which matures on August 9, 2019. This unsecured line of credit is intended to provide short-term financing, if necessary, and subject to certain restrictions, in connection with shareholder redemptions. Interest was scheduled to be incurred at the prime rate of 5.00% from September 1, 2018 through September 26, 2018, 5.25% from September 27, 2018 through December 19, 2018 and 5.50% thereafter. The credit facility is with the Fund’s custodian, U.S. Bank. During the six months ended February 28, 2019, the Fund did not utilize the line of credit. | |
(9) | New Accounting Pronouncement |
In August 2018, FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The primary focus of ASU 2018-13 is to improve the effectiveness of the disclosure requirements for fair value measurements. The changes affect all companies that are required to include fair value measurement disclosures. In general, the amendments in ASU 2018-13 are effective for all entities for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. An entity is permitted to early adopt the removed or modified disclosures upon the issuance of ASU 2018-13 and may delay adoption of the additional disclosures, which are required for public companies only, until their effective date. Management has chosen to early adopt the eliminated or modified disclosures for the six months ended February 28, 2019. | |
(10) | Subsequent Events |
Management has evaluated subsequent events after February 28, 2019 and through the date the financial statements were issued and determined there were no subsequent events that would require recognition or disclosure in financial statements. |
29
Fiera Capital STRONG Nations Currency Fund
Notice of Privacy Policy & Practices
We collect non-public personal information about you from the following sources:
• | information we receive about you on applications or other forms; |
• | information you give us orally; and |
• | information about your transactions with us or others. |
We do not disclose any non-public personal information about our shareholders or former shareholders without the shareholder’s authorization, except as permitted by law or in response to inquiries from governmental authorities. We may share information with affiliated parties and unaffiliated third parties with whom we have contracts for servicing the Fund. We will provide unaffiliated third parties with only the information necessary to carry out their assigned responsibility. All shareholder records will be disposed of in accordance with applicable law. We maintain physical, electronic and procedural safeguards to protect your non-public personal information and require third parties to treat your non-public personal information with the same high degree of confidentiality.
In the event that you hold shares of the Fund through a financial intermediary, including, but not limited to, a broker-dealer, bank or trust company, the privacy policy of your financial intermediary would govern how your non-public personal information would be shared with unaffiliated third parties.
30
Fiera Capital STRONG Nations Currency Fund
Additional Information
(Unaudited)
Tax Information
The Fund designated as long-term capital gain dividend, pursuant to Internal Revenue Code Section 852(b)(3), the amount necessary to reduce the earnings and profits of the Fund related to net capital gain to zero for the tax year ended August 31, 2018.
Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts that provide general indemnifications to other parties. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
Information about Trustees
The business and affairs of the Trust are managed under the direction of the Board of Trustees. Information pertaining to the Trustees of the Trust is set forth below. The Statement of Additional Information includes additional information about the Trustees and is available, without charge, upon request by calling 1-844-GOFIERA (1-844-463-4372).
Number of | Other | ||||
Term of | Portfolios | Principal | Directorships | ||
Name, | Position(s) | Office and | in the Trust | Occupation(s) | Held by Trustee |
Address and | Held with | Length of | Overseen | During the | During the |
Year of Birth | the Trust | Time Served | by Trustee | Past Five Years | Past Five Years |
Independent Trustees | |||||
Michael D. Akers, Ph.D. | Trustee | Indefinite | 28 | Professor, | Independent |
615 E. Michigan St. | Term; Since | Department of | Trustee, USA | ||
Milwaukee, WI 53202 | August 22, | Accounting, | MUTUALS | ||
Year of Birth: 1955 | 2001 | Marquette University | (an open-end | ||
(2004–present); | investment | ||||
Chair, Department | company with | ||||
of Accounting, | three portfolios). | ||||
Marquette University | |||||
(2004–2017). | |||||
Gary A. Drska | Trustee | Indefinite | 28 | Pilot, Frontier/ | Independent |
615 E. Michigan St. | Term; Since | Midwest Airlines, | Trustee, USA | ||
Milwaukee, WI 53202 | August 22, | Inc. (airline company) | MUTUALS | ||
Year of Birth: 1956 | 2001 | (1986–present). | (an open-end | ||
investment | |||||
company with | |||||
three portfolios). |
31
Fiera Capital STRONG Nations Currency Fund
Additional Information (Continued)
(Unaudited)
Number of | Other | ||||
Term of | Portfolios | Principal | Directorships | ||
Name, | Position(s) | Office and | in the Trust | Occupation(s) | Held by Trustee |
Address and | Held with | Length of | Overseen | During the | During the |
Year of Birth | the Trust | Time Served | by Trustee | Past Five Years | Past Five Years |
Jonas B. Siegel | Trustee | Indefinite | 28 | Retired | Independent |
615 E. Michigan St. | Term; Since | (2011–present); | Trustee, Gottex | ||
Milwaukee, WI 53202 | October 23, | Managing Director, | Trust (an open- | ||
Year of Birth: 1943 | 2009 | Chief Administrative | end investment | ||
Officer (“CAO”) and | company) | ||||
Chief Compliance | (2010–2016); | ||||
Officer (“CCO”), | Independent | ||||
Granite Capital | Manager, | ||||
International Group, | Ramius IDF | ||||
L.P. (an investment | fund complex | ||||
management firm) | (two closed-end | ||||
(1994–2011). | investment | ||||
companies) | |||||
(2010–2015); | |||||
Independent | |||||
Trustee, Gottex | |||||
Multi-Asset | |||||
Endowment fund | |||||
complex (three | |||||
closed-end | |||||
investment | |||||
companies) | |||||
(2010–2015); | |||||
Independent | |||||
Trustee, Gottex | |||||
Multi-Alternatives | |||||
fund complex | |||||
(three closed-end | |||||
investment | |||||
companies) | |||||
(2010–2015). |
32
Fiera Capital STRONG Nations Currency Fund
Additional Information (Continued)
(Unaudited)
Number of | Other | ||||
Term of | Portfolios | Principal | Directorships | ||
Name, | Position(s) | Office and | in the Trust | Occupation(s) | Held by Trustee |
Address and | Held with | Length of | Overseen | During the | During the |
Year of Birth | the Trust | Time Served | by Trustee | Past Five Years | Past Five Years |
Interested Trustee and Officers | |||||
Joseph C. Neuberger* | Chairperson | Indefinite | 28 | President (2017– | Trustee, USA |
615 E. Michigan St. | and | Term; Since | present), Chief | MUTUALS | |
Milwaukee, WI 53202 | Trustee | August 22, | Operating Officer | (an open- | |
Year of Birth: 1962 | 2001 | (2016–present), | end investment | ||
Executive Vice | company) | ||||
President (1994– | (2001–2018); | ||||
2017), U.S. | Trustee, Buffalo | ||||
Bancorp Fund | Funds (an open- | ||||
Services, LLC. | end investment | ||||
company) | |||||
(2003–2017). | |||||
John P. Buckel | President | Indefinite | N/A | Vice President, | N/A |
615 E. Michigan St. | and | Term; Since | U.S. Bancorp Fund | ||
Milwaukee, WI 53202 | Principal | January 24, | Services, LLC | ||
Year of Birth: 1957 | Executive | 2013 | (2004–present). | ||
Officer | |||||
Jennifer A. Lima | Vice | Indefinite | N/A | Vice President, | N/A |
615 E. Michigan St. | President, | Term; Since | U.S. Bancorp Fund | ||
Milwaukee, WI 53202 | Treasurer | January 24, | Services, LLC | ||
Year of Birth: 1974 | and | 2013 | (2002–present). | ||
Principal | |||||
Financial | |||||
and | |||||
Accounting | |||||
Officer |
* | Mr. Neuberger is an “interested person” of the Trust as defined by the 1940 Act by virtue of the fact that he is a board member and an interested person of Quasar Distributors, LLC (the “Distributor”), the Fund’s principal underwriter. |
33
Fiera Capital STRONG Nations Currency Fund
Additional Information (Continued)
(Unaudited)
Number of | Other | ||||
Term of | Portfolios | Principal | Directorships | ||
Name, | Position(s) | Office and | in the Trust | Occupation(s) | Held by Trustee |
Address and | Held with | Length of | Overseen | During the | During the |
Year of Birth | the Trust | Time Served | by Trustee | Past Five Years | Past Five Years |
Elizabeth B. Scalf | Chief | Indefinite | N/A | Senior Vice President, | N/A |
615 E. Michigan St. | Compliance | Term; Since | U.S. Bancorp Fund | ||
Milwaukee, WI 53202 | Officer, | July 1, | Services, LLC (February | ||
Year of Birth: 1985 | Vice | 2017 | 2017–present); Vice | ||
President | President and Assistant | ||||
and | CCO, Heartland | ||||
Anti-Money | Advisors, Inc. | ||||
Laundering | (December 2016– | ||||
Officer | January 2017); Vice | ||||
President and CCO, | |||||
Heartland Group, Inc. | |||||
(May 2016– | |||||
November 2016); | |||||
Vice President, CCO | |||||
and Senior Legal | |||||
Counsel (May 2016– | |||||
November 2016), | |||||
Assistant CCO and | |||||
Senior Legal Counsel | |||||
(January 2016–April | |||||
2016), Heartland | |||||
Advisors, Inc. | |||||
Adam W. Smith | Secretary | Indefinite | N/A | Vice President, | N/A |
615 E. Michigan St. | Term; Since | U.S. Bancorp Fund | |||
Milwaukee, WI 53202 | May 29, | Services, LLC | |||
Year of Birth: 1981 | 2015 | (2012–present). | |||
Kelly A. Burns | Assistant | Indefinite | N/A | Assistant Vice President, | N/A |
615 E. Michigan St. | Treasurer | Term; Since | U.S. Bancorp Fund | ||
Milwaukee, WI 53202 | April 23, | Services, LLC | |||
Year of Birth: 1987 | 2015 | (2011–present). | |||
Melissa Aguinaga | Assistant | Indefinite | N/A | Assistant Vice President, | N/A |
615 E. Michigan St. | Treasurer | Term; Since | U.S. Bancorp Fund | ||
Milwaukee, WI 53202 | July 1, | Services, LLC | |||
Year of Birth: 1987 | 2015 | (2010–present). | |||
Laura A. Carroll | Assistant | Indefinite | N/A | Assistant Vice President, | N/A |
615 E. Michigan St. | Treasurer | Term; Since | U.S. Bancorp Fund | ||
Milwaukee, WI 53202 | August 20, | Services, LLC | |||
Year of Birth: 1985 | 2018 | (2007–present). |
34
A NOTE ON FORWARD LOOKING STATEMENTS (Unaudited)
Except for historical information contained in this report for the Fund, the matters discussed in this report may constitute forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These include any adviser or portfolio manager predictions, assessments, analyses or outlooks for individual securities, industries, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for the Fund in the current Prospectus, other factors bearing on this report include the accuracy of the Adviser’s or portfolio managers’ forecasts and predictions, and the appropriateness of the investment programs designed by the Adviser or portfolio managers to implement their strategies efficiently and effectively. Any one or more of these factors, as well as other risks affecting the securities markets and investment instruments generally, could cause the actual results of the Fund to differ materially as compared to benchmarks associated with the Fund.
ADDITIONAL INFORMATION (Unaudited)
The Fund has adopted proxy voting policies and procedures that delegate to the Adviser the authority to vote proxies. A description of the Fund’s proxy voting policies and procedures is available without charge, upon request, by calling the Fund toll free at 1-844-GOFIERA (1-844-463-4372). A description of these policies and procedures is also included in the Fund’s Statement of Additional Information, which is available on the SEC’s website at http://www.sec.gov.
The Fund’s proxy voting record for the most recent 12-month period ended June 30 is available without charge, upon request, by calling, toll free, 1-844-GOFIERA (1-844-463-4372), or by accessing the SEC’s website at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC four times each fiscal year at quarter-ends. The Fund files the schedule of portfolio holdings with the SEC on Form N-CSR (second and fourth quarters) and on Form N-Q (or, once Form N-Q is rescinded, Form N-PORT) (first and third quarters). Shareholders may view the Fund’s Forms N-CSR and N-Q (or, once Form N-Q is rescinded, Form N-PORT) on the SEC’s website at www.sec.gov.
HOUSEHOLDING (Unaudited)
In an effort to decrease costs, the Fund intends to reduce the number of duplicate prospectuses and annual and semi-annual reports you receive by sending only one copy of each to those addresses shared by two or more accounts and to shareholders the Fund reasonably believes are from the same family or household. Once implemented, if you would like to discontinue householding for your accounts, please call toll-free at 1-844-GOFIERA (1-844-463-4372) to request individual copies of these documents. Once the Fund receives notice to stop householding, the Fund will begin sending individual copies 30 days after receiving your request. This policy does not apply to account statements.
Fiera Capital STRONG Nations Currency Fund
Investment Adviser | Fiera Capital Inc. |
375 Park Avenue | |
8th Floor | |
New York, New York 10152 | |
Legal Counsel | Godfrey & Kahn, S.C. |
833 East Michigan Street | |
Suite 1800 | |
Milwaukee, Wisconsin 53202 | |
Independent Registered Public | Deloitte & Touche LLP |
Accounting Firm | 555 East Wells Street |
Milwaukee, Wisconsin 53202 | |
Transfer Agent, Fund Accountant and | U.S. Bancorp Fund Services, LLC |
Fund Administrator | 615 East Michigan Street |
Milwaukee, Wisconsin 53202 | |
Custodian | U.S. Bank, N.A. |
Custody Operations | |
1555 North River Center Drive | |
Milwaukee, Wisconsin 53212 | |
Distributor | Quasar Distributors, LLC |
777 East Wisconsin Avenue | |
6th Floor | |
Milwaukee, Wisconsin 53202 |
This report is intended for shareholders of the Fund and may not be used as sales literature unless preceded or accompanied by a current prospectus.
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934).
Item 6. Investments.
(a) | Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form. |
(b) | Not Applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed‑End Management Investment Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.
Item 11. Controls and Procedures.
(a) | The Registrant’s President and Treasurer have reviewed the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d‑15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider. |
(b) | There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the last fiscal half-year covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies
Not applicable to open-end investment companies.
Item 13. Exhibits.
(a) | (1) Any code of ethics or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Not Applicable. |
(2) A separate certification for each principal executive and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule 23c‑1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies.
(4) Change in the registrant’s independent public accountant. There was no change in the registrant’s independent public accountant for the period covered by this report.
(b) | Certifications pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002. Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Trust for Professional Managers
By (Signature and Title)* /s/ John Buckel
John Buckel, President
Date April 30, 2019
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* /s/ John Buckel
John Buckel, President
Date April 30, 2019
By (Signature and Title)* /s/ Jennifer Lima
Jennifer Lima, Treasurer
Date April 30, 2019