NOTES TO FINANCIAL STATEMENTS
November 30, 2012 (Unaudited)
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 Heartland International Value Fund (the “Fund”) represents a distinct series with its own investment objectives and policies within the Trust (formerly known as the Heartland International Small Cap Fund). The investment objective of the Fund is long-term capital appreciation with modest current income. 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 became effective and commenced operations on October 1, 2010. Costs incurred by the Fund in connection with the organization, registration and the initial public offering of shares were paid by Heartland Advisors, Inc. (the “Advisor”).
|
(2)
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
The following is a summary of significant accounting policies followed by the Fund in preparation of the financial statements:
|
|
(a)
|
Investment Valuation:
Portfolio securities traded on a national securities exchange or in the over-the-counter market are valued at the closing price on the principal exchange or market as of the close of regular trading hours on the day the securities are being valued, or sales price on the Composite Market. Lacking any sales, securities are valued at the mean between the most recent quoted bid and asked prices on the principal exchange or market. Foreign securities are translated from the local currency into U.S. dollars using exchange rates as of the close of the New York Stock Exchange (“NYSE”) or using methods determined by the Trust’s Board of Trustees. The Fund may use a systematic fair valuation model provided by an independent pricing service to value foreign equity securities in order to capture events occurring between the time a foreign exchange closes and the close of the NYSE that may affect the value of the Fund’s securities traded on those foreign exchanges. These are generally categorized as Level 2 in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820 hierarchy. Debt securities other than short-term instruments are valued at the mean between the closing bid and asked prices provided by the independent pricing service. If the closing bid and asked prices are not readily available, the independent pricing service may provide a price determined by a matrix pricing method or other analytical pricing models. Debt securities having maturities of 60 days or less may be valued at acquisition cost, plus or minus any amortization or accretion. Securities and other assets for which quotations are not readily available or deemed unreliable are valued at their fair value as determined under procedures approved by the Trust’s Board of Trustees. These fair value procedures will also be used if it reasonably determines that a significant event, which materially affects the value of a security, occurs after the time at which the market price for the security is determined but prior to the time at which the Fund’s net asset value is calculated. Fair valuation of a particular security is an inherently subjective process, with no single standard to utilize when determining a security’s fair value. As such, different mutual funds could reasonably arrive at a different fair value price for the same security. In each case where a security is fair valued, consideration is given to the facts and circumstances relevant to the particular situation. This consideration includes reviewing various factors set forth in the pricing procedures adopted by the Board of Trustees and other factors as warranted. In making a fair value determination, factors that may be considered, among others, include: the type and structure of the security; unusual events or circumstances relating to the security’s issuer; general market conditions; prior day’s valuation; fundamental analytical data; size of the holding; cost of the security on the date of purchase; nature and duration of any restriction on disposition; trading activities and prices of similar securities or financial instruments.
|
|
|
(b)
|
Foreign Securities and Currency:
The Fund isolates the portion of the results of operations from changes in foreign exchange rates on investments from those resulting in market prices of securities held. Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, including investments in securities at fiscal period end, resulting from changes in the exchange rate. Investments in foreign securities entail certain risks. Individual foreign economies of certain countries may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency, diversification and balance of payments position. The internal politics of certain foreign countries may not be as stable as those of the United States. Since foreign securities normally are denominated and traded in foreign currencies, the value of the Fund’s assets may be affected favorably or unfavorably by currency exchange rates, currency exchange control regulations, foreign withholding taxes, and restrictions or prohibitions on the repatriation of foreign currencies. There may be less information publicly available about a foreign issuer than about a U.S. issuer, and foreign issuers are not generally subject to accounting, auditing, and financial reporting standards and practices comparable to those in the United States. The securities of some foreign issuers are less liquid and at times more volatile than securities of comparable U.S. issuers.
|
|
|
(c)
|
Federal Income Taxes:
The Fund’s policy is to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies (“RICs”) and to distribute substantially all of its taxable income to its shareholders. The Fund accordingly pays no Federal income taxes and no Federal income tax provision is recorded.
|
|
|
(d)
|
Distributions to Shareholders:
Net investment income and any net realized capital gains, if any, are distributed to each shareholder as a dividend. Dividends from the Fund are declared and paid at least annually. Dividends from the Fund are recorded on ex-dividend date and are determined in accordance with tax regulations.
|
|
|
(e)
|
Illiquid securities:
At November 30, 2012, 3.73% of the Fund’s net assets were illiquid as defined pursuant to guidelines established by the Advisor.
|
|
|
(f)
|
Use of Estimates:
The accompanying financial statements were prepared in conformity with GAAP, which requires management to make estimates and assumptions that affect the reporting 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 these estimates.
|
|
|
(g)
|
Other:
For financial reporting purposes, all transactions are accounted for on a trade-date basis. Net realized gains and losses on investments are computed on the identified cost basis. Dividend income is recognized on the ex-dividend date, and interest income is recognized on an accrual basis. The Fund amortizes and accretes premium and discount on investments utilizing the effective interest method. Foreign dividend income may be subject to foreign withholding taxes.
|
|
(3)
|
FAIR VALUE MEASUREMENTS
|
The Fund follows the FASB ASC Topic 820 hierarchy, under which various inputs are used in determining the value of the Fund’s investments.
The basis of the hierarchy is dependent upon various “inputs” used to determine the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below:
|
|
Level 1 –
|
Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access at the measurement date.
|
|
|
Level 2 –
|
Other significant observable inputs include quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or input other than quoted prices that are observable (either directly or indirectly) for the asset or liability. Includes short term investments in time deposits, international fair valued securities and portfolio securities lacking any sales referenced in Note 2.
|
|
|
Level 3 –
|
Significant unobservable prices or inputs (includes the Board of Trustees and Valuation Committee’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 as of November 30, 2012:
|
|
|
Level 1
(1)
|
|
|
Level 2
(1)(3)
|
|
|
Level 3
(2)
|
|
|
Total
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
$
|
9,012,985
|
|
|
$
|
12,058,105
|
|
|
$
|
—
|
|
|
$
|
21,071,090
|
|
|
Preferred Stock
|
|
|
410,895
|
|
|
|
—
|
|
|
|
—
|
|
|
|
410,895
|
|
|
Total Equity
|
|
|
9,423,880
|
|
|
|
12,058,105
|
|
|
|
—
|
|
|
|
21,481,985
|
|
|
Short-Term Investments
|
|
|
—
|
|
|
|
525,293
|
|
|
|
—
|
|
|
|
525,293
|
|
|
Total Investments in Securities
|
|
$
|
9,423,880
|
|
|
$
|
12,583,398
|
|
|
$
|
—
|
|
|
$
|
22,007,278
|
|
|
Futures Contracts*
|
|
$
|
139,020
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
139,020
|
|
* This amount represents the net appreciation on futures contracts sold. See the accompanying Schedule of Open Futures Contracts for additional information.
Transfers between Levels are recognized as of the beginning and end of the financial reporting period.
|
Transfers into Level 1
|
|
$
|
2,181,051
|
|
|
Transfers out of Level 1
|
|
|
—
|
|
|
Net transfers in and/or out of Level 1
|
|
$
|
2,181,051
|
|
|
Transfers into Level 2
|
|
$
|
—
|
|
|
Transfers out of Level 2
|
|
|
(2,181,051
|
)
|
|
Net transfers in and/or out of Level 2
|
|
$
|
(2,181,051
|
)
|
|
|
(1)
|
Transfers in and out of Level 1 and Level 2 resulted from foreign securities which were priced using a systematic fair valuation model as noted in Note 2a.
|
|
|
(2)
|
The Fund measures Level 3 activity as of the beginning and end of each financial reporting period. For the six months ended November 30, 2012, the Fund did not have significant unobservable inputs (Level 3) 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.
|
|
|
(3)
|
For further information regarding security characteristics and common stocks identified as Level 2 within the hierarchy, see the accompanying Schedule of Investments.
|
|
|
(4)
|
DERIVATIVE INSTRUMENTS
|
The FASB ASC Topic 815 hierarchy requires enhanced disclosure about the Fund’s derivative and hedging activities, including how such activities are accounted for and their effects on the Fund’s financial position, performance and cash flows. The Fund may invest in a broad array of financial instruments and securities, the value of which is “derived” from the performance of an underlying asset or a “benchmark” such as a security index, an interest rate, or a currency. In particular the Fund may engage in transactions in options, futures, options on futures contracts (a) to hedge against anticipated declines in the market value of its portfolio securities or currencies and against increases in the market values of securities or currencies it intends to acquire, (b) to manage exposure to changing interest rates (duration management), (c) to enhance total return or (d) to invest in eligible asset classes with a greater efficiency and lower cost than is possible through direct investment.
Options and futures can be highly volatile investments and involve certain risks. These strategies require the ability to anticipate future movements in securities prices, interest rates, currency exchange rates and other economic factors. Attempts to use such investments may not be successful and could result in reduction of the Fund’s total return. The Fund could experience losses if the prices of its options or futures positions move in a direction different than anticipated, or if the Fund were unable to close out its positions due to disruptions in the market or lack of liquidity. Over-the-counter options generally involve greater credit and liquidity risks than exchange traded options. Options and futures traded on foreign exchanges generally are not regulated by U.S. authorities, and may offer less liquidity and less protection to the Fund if the other party to the contract defaults.
The Fund’s use of options and futures and other investment techniques for hedging purposes involves the risk that changes in the value of a hedging investment will not match those of the asset or security being hedged. Hedging is the use of one investment to offset the effects of another investment. Imperfect or no correlation of the values of the hedging instrument and the hedged security or asset might occur because of characteristics of the instruments themselves or unrelated factors involving, for example, the markets on which the instruments are traded. As a result, hedging strategies may not always be successful. While hedging strategies can help reduce or eliminate portfolio losses, they can also reduce or eliminate portfolio gains.
FUTURES CONTRACTS
The Fund may enter into futures contracts for hedging purposes. A futures contract represents a commitment for a future purchase or sale of an asset at a specified price on a specified date. Upon entering into a futures contract, the Fund is required to deposit an initial margin with the broker in an amount equal to a certain percentage of the contract amount. The Fund receives from or pays to the broker, on a daily basis, an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as “variation margin,” and are recorded by the Fund as unrealized gains or losses. When the futures contract is closed, the Fund records a 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.
The Fund’s potential losses from the use of futures extend beyond its initial investment in such contracts. The use of futures contracts involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statements of Assets and Liabilities. The predominant risk is that the movement of a futures contract’s price may result in a loss, which could render the Fund’s hedging strategy unsuccessful. There is a minimal counterparty credit risk since futures contracts are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default.
The fair value of derivative instruments as reported within this Schedule of Investments as of November 30, 2012 was as follows:
|
|
Derivatives not accounted for as hedging instruments
|
Asset Derivative
|
|
Value
|
|
Liability Derivative
|
|
Value
|
|
|
|
Foreign Exchange Currency Futures Contracts
|
Net assets - Unrealized appreciation*
|
|
$
|
187,374
|
|
Net assets - Unrealized depreciation*
|
|
$
|
(48,354
|
)
|
|
|
Total
|
|
|
$
|
187,374
|
|
|
|
$
|
(48,354
|
)
|
|
|
*
|
Reflects cumulative unrealized appreciation (depreciation) of futures contracts as reported in the Schedule of Open Futures Contracts. Only the current days variation margin is reflected in the Statement of Assets and Liabilities.
|
The effect of derivative instruments on income for the six month period from June 1, 2012 through November 30, 2012 was as follows:
|
|
AMOUNT OF REALIZED GAIN OR (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME
|
|
|
|
|
|
Derivatives not accounted for as hedging instruments
|
|
Futures Contracts
|
|
|
|
Foreign Exchange Currency Futures Contracts
|
|
$
|
176,857
|
|
|
|
Total
|
|
$
|
176,857
|
|
|
|
CHANGE IN UNREALIZED APPRECIATION OR (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME
|
|
|
|
|
|
Derivatives not accounted for as hedging instruments
|
|
Futures Contracts
|
|
|
|
Foreign Exchange Currency Futures Contracts
|
|
$
|
(1,637
|
)
|
|
|
Total
|
|
$
|
(1,637
|
)
|
|
|
(5)
|
INVESTMENT MANAGEMENT FEES AND TRANSACTIONS WITH RELATED PARTIES
|
INVESTMENT ADVISOR
The Trust has an Investment Advisory Agreement (the “Agreement”) with the Advisor to furnish investment advisory services to the Fund. Under the terms of the Agreement, the Trust, on behalf of the Fund, compensates the Advisor for its management services at the annual rate of 0.85% of the Fund’s average daily net assets. The Advisor has agreed to waive its management fee and/or reimburse the Fund’s other expenses to the extent necessary to ensure that the Fund’s operating expenses (exclusive of front-end or contingent deferred sales loads, taxes, leverage, interest, brokerage commissions, expenses incurred in connection with any merger or reorganization, dividends or interest expenses on short positions, acquired fund fees and expenses and extraordinary expenses) do not exceed 1.75% of the Fund’s average daily net assets, through at least October 1, 2013. For the six months ended November 30, 2012, expenses of $71,392 were waived by the Advisor. Any such waiver or reimbursement is subject to later adjustment to allow the Advisor to recoup amounts waived or reimbursed to the extent actual fees and expenses for a fiscal period are less than the Fund’s expense limitation cap, provided, however, that the Advisor shall only be entitled to recoup such amounts over the following three fiscal years. Also, any such reimbursement will be reviewed and approved by the Board of Trustees. The Fund must pay its current ordinary operating expenses before the Advisor is entitled to any reimbursement of management fees and/or expenses. This operating expense limitation agreement can be terminated only by, or with the consent of, the Board of Trustees. The following table shows the remaining waived or reimbursed expenses subject to potential recovery expiring:
|
May 31, 2014
|
|
$
|
147,089
|
|
|
May 31, 2015
|
|
$
|
164,889
|
|
|
November 30, 2015
|
|
$
|
71,392
|
|
DISTRIBUTION PLAN
The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act (the “12b-1 Plan”), on behalf of the Fund, which authorizes it to pay ALPS Distributors, Inc. (the “Distributor”) a distribution fee of 0.25% of the Fund’s average daily net assets for services to prospective Fund shareholders and distribution of Fund shares. During the six months ended November 30, 2012, the Fund accrued expenses of $24,179 pursuant to the 12b-1 Plan.
RELATED PARTY TRANSACTIONS
U.S. Bancorp Fund Services, LLC (“USBFS” or the “Administrator”) acts as the Fund’s Administrator and Fund Accountant under an Administration Agreement. The Administrator performs various administrative and accounting services including preparing various federal and state regulatory filings, reports and returns for the Fund; preparing reports and materials to be supplied to the Trustees; monitoring the activities of the Fund’s custodian, transfer agent and fund accountant; coordinating the preparation and payment of the Fund’s expenses and reviewing the Fund’s expense accruals. For the six months ended November 30, 2012, the Fund incurred $41,749 in administration and accounting fees. At November 30, 2012, the Administrator was owed fees of $16,782.
USBFS also serves as the transfer agent to the Fund. For the six months ended November 30, 2012, the Fund incurred $22,561 in transfer agency fees and expenses. At November 30, 2012, the Fund owed transfer agency fees and expenses of $11,286.
Certain officers of the Fund are also employees of USBFS. A Trustee of the Trust is affiliated with USBFS and US Bank.
The Trust’s Chief Compliance Officer is also an employee of USBFS. For the six months ended November 30, 2012, the Fund was allocated $6,965 of the Trust’s Chief Compliance Officer fee. At November 30, 2012, fees of $3,473 were owed by the Fund for the Chief Compliance Officer’s services.
To discourage market timing and other short-term trading, shares that are redeemed or exchanged within 90 days are assessed a 2% fee on the current net asset value of the shares. The fee applies to shares being redeemed or exchanged in the order in which they are purchased, treating shares that have been held the longest in the account as being redeemed first. The fee is retained by the Fund for the benefit of the remaining shareholders. For financial statement purposes, these amounts are included in the Statements of Assets and Liabilities as “paid-in-capital.” The Fund retained redemption fees of $8, $392 and $86 during the six month period ended November 30, 2012, the year ended May 31, 2012 and the eight month period ended May 31, 2011, respectively.
|
(7)
|
INVESTMENT TRANSACTIONS
|
The aggregate purchases and sales of securities, excluding short-term investments, for the Fund for the six months ended November 30, 2012, were $5,080,026 and $3,653,923, respectively. There were no purchases or sales of U.S. government securities for the Fund.
|
(8)
|
FEDERAL INCOME TAX INFORMATION
|
The Fund’s policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. The Fund has qualified and intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code for federal income tax purposes and to distribute all taxable income and net capital gains. Accordingly, no provision has been made for federal income taxes. Passive foreign investment companies, foreign currency, and certain other investments could create book-tax differences that may have an impact on the character of the Fund’s distributions.
The Fund complies with the provisions of Accounting for Uncertainty in Income Taxes (the “Income Tax Statement” or “ASC 740.10.25” formerly “FIN 48”). The Income Tax Statement requires an evaluation of tax positions taken (or expected to be taken) in the course of preparing a Fund’s tax return to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. The Income Tax Statement requires management of the Fund to analyze all open tax years, as defined by IRS statute of limitations for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of and during the year ended May 31, 2012, the Fund did not have a liability for any unrecognized tax benefits. The Fund has no examination in progress and is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. At May 31, 2012, fiscal years 2011 and 2012 remain open to examination in the Fund’s major tax jurisdictions.
The tax character of distributions paid during the year ended May 31, 2012 were as follows:
|
|
|
Ordinary Income
|
|
|
Long-term Capital Gains
|
|
|
May 31, 2012
|
|
$
|
81,515
|
|
|
$
|
—
|
|
As of May 31, 2012, the components of accumulated earnings on a tax basis were as follows:
|
Cost basis of investments for federal income tax purposes
|
|
$
|
19,100,174
|
|
|
Gross tax unrealized appreciation
|
|
|
784,911
|
|
|
Gross tax unrealized depreciation
|
|
|
(2,457,058
|
)
|
|
Net tax unrealized depreciation
|
|
|
(1,672,147
|
)
|
|
Undistributed ordinary income
|
|
|
165,632
|
|
|
Undistributed long-term capital gain
|
|
|
—
|
|
|
Total distributable earnings
|
|
|
165,632
|
|
|
Other accumulated losses
|
|
|
(2,603,007
|
)
|
|
Total accumulated losses
|
|
$
|
(4,109,522
|
)
|
On the Statement of Assets and Liabilities, the following adjustments were made for permanent tax adjustments:
|
Undistributed Net
|
Accumulated Net
|
Paid-In
|
|
|
Investment Income/(Loss)
|
Realized Gain
|
Capital
|
|
|
$(109,736)
|
$109,736
|
$—
|
|
At May 31, 2012, the Fund had accumulated net realized capital loss carryover of $4,129 which will expire on May 31, 2019, as well as $1,249,852, which will be carried forward indefinitely to offset future realized capital gains.
At May 31, 2012, the Fund deferred, on a tax basis, post-October losses of:
|
Currency
|
Capital
|
|
|
$—
|
$1,348,073
|
|
(9)
FUND SHARE TRANSACTIONS
Transactions in shares of the Fund were as follows:
|
|
|
SIX MONTHS ENDED
|
|
|
YEAR ENDED
|
|
|
|
|
NOVEMBER 30, 2012
|
|
|
MAY 31, 2012
|
|
|
Shares Sold
|
|
|
119,785
|
|
|
|
861,070
|
|
|
Shares Reinvested
|
|
|
—
|
|
|
|
10,017
|
|
|
Shares Redeemed
|
|
|
(28,972
|
)
|
|
|
(515,307
|
)
|
|
Net Increase
|
|
|
90,813
|
|
|
|
355,780
|
|
(10)
SUBSEQUENT EVENTS
Management has evaluated subsequent events and determined that there were no material events that would require disclosure in the Fund’s financial statements through the date of issuance.
|
ADDITIONAL INFORMATION
|
|
(UNAUDITED)
|
|
|
EXPENSE EXAMPLES
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees and (2) ongoing costs, including advisory fees, distribution and service (12b-1) 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 from June 1, 2012 through November 30, 2012.
ACTUAL EXPENSES
The first line of the table below provides information about actual account values and actual expenses. 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 the Period” to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below 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 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 redemption 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. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
|
|
|
BEGINNING
|
|
|
ENDING
|
|
|
EXPENSES PAID
|
|
|
ANNUALIZED EXPENSE
|
|
|
|
|
ACCOUNT VALUE
|
|
|
ACCOUNT VALUE
|
|
|
DURING THE PERIOD
(
a
)
|
|
|
RATIO DURING
PERIOD
|
|
|
|
|
6/1/12
|
|
|
11/30/12
|
|
|
6/1/12 – 11/30/12
|
|
|
6/1/12 – 11/30/12
|
|
|
Actual
|
|
$
|
1,000.00
|
|
|
$
|
1,195.40
|
|
|
$
|
9.63
|
|
|
|
1.75
|
%
|
|
Hypothetical (5% return before expenses)
|
|
$
|
1,000.00
|
|
|
$
|
1,016.29
|
|
|
$
|
8.85
|
|
|
|
1.75
|
%
|
|
|
(a)
|
Expenses are equal to the Fund’s annualized expense ratio of 1.75% multiplied by the average account value over the period multiplied by 183/365 to reflect the one-half year period from June 1, 2012 to
November 30, 2012.
|
OTHER INFORMATION
The Fund has adopted proxy voting policies and procedures that delegate to the Advisor, 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 1-877-484-6838 or by visiting the Fund’s website www.heartlandinternationalfund.com. 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 period ended June 30, 2012 is available, without charge, either upon request by calling the Fund toll free at 1-877-484-6838 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 (first and third quarters). Shareholders may view the Fund’s Forms N-CSR and N-Q on the SEC’s website at http://www.sec.gov. The Fund’s Forms N-CSR and N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the public reference room may be obtained by calling 1-202-551-8090 (direct) or 1-800-SEC-0330 (general SEC number).
Pursuant to Section 853 of the Internal Revenue Code, the Heartland International Value Fund designates the following amounts as foreign taxes paid for the year ended May 31, 2012. Foreign taxes paid for purposes of Section 853 may be less than actual foreign taxes paid for financial statement purposes.
|
Creditable Foreign
|
Portion of Ordinary Income Distribution
|
|
|
Taxes Paid
|
derived from Foreign Sourced Income*
|
|
|
$26,876
|
100%
|
|
|
*
|
The Fund has not derived any income from ineligible foreign sources as defined under Section 901(j) of the Internal Revenue Code.
|
Foreign taxes paid or withheld should be included in taxable income with an offsetting deduction from gross income or as a credit for taxes paid to foreign governments.
Above figures may differ from those cited elsewhere in this report due to differences in the calculation of income and gains under U.S. generally accepted accounting principles (book) purposes and Internal Revenue Service (tax) purposes.
Shareholders are strongly advised to consult their own tax advisers with respect to the tax consequences of their investments in the Fund. In January, shareholders, excluding corporate shareholders, receive an IRS Form 1099-DIV regarding the federal tax status of the dividends and distributions they received in the calendar year.
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees (the “Trustees”) of Trust for Professional Managers (the “Trust”) met on August 30, 2012 to consider the renewal of the Investment Advisory Agreement (the “Agreement”) between the Trust, on behalf of the Heartland International Value Fund (the “Fund”), a series of the Trust, and Heartland Advisors, Inc., the Fund’s investment advisor (the “Advisor”). In advance of the meeting, the Trustees requested and received materials to assist them in considering the renewal of the Agreement. The materials provided contained information with respect to the factors enumerated below, including a copy of the Agreement, a memorandum prepared by the Trust’s outside legal counsel discussing in detail the Trustees’ fiduciary obligations and the factors they should assess in considering the renewal of the Agreement, detailed comparative information relating to the Fund’s performance, as well as the management fees and other expenses of the Fund, due diligence materials relating to the Advisor (including a due diligence questionnaire completed on behalf of the Fund by the Advisor, the Advisor’s Form ADV, select financial statements of the Advisor, bibliographic information of the Advisor’s key management and compliance personnel, comparative fee information for the Fund and a summary detailing key provisions of the Advisor’s written compliance program, including its Code of Ethics) and other pertinent information. The Trustees also received information periodically throughout the year that was relevant to the Agreement renewal process, including performance, management fee and other expense information. Based on their evaluation of the information provided by the Advisor, in conjunction with the Fund’s other service providers, the Trustees, by a unanimous vote (including a separate vote of the Trustees who are not “interested persons,” as that term is defined in the Investment Company Act of 1940, as amended (the “Independent Trustees”)), approved the continuation of the Agreement for an additional one-year term ending August 31, 2013.