UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: (811-22708)
Brown Advisory Funds
(Exact name of Registrant as specified in charter)
901 South Bond Street Suite 400
Baltimore, MD 21231
(Address of principal executive offices) (Zip code)
David M. Churchill
President
Brown Advisory Funds
901 South Bond Street Suite 400
Baltimore, MD 21231
(Name and address of agent for service)
(410) 537-5400
Registrant's telephone number, including area code
Date of fiscal year end: June 30
Date of reporting period: December 31, 2014
Item 1. Reports to Stockholders.
SEMI-ANNUAL REPORT
December 31, 2014
Brown Advisory Growth Equity Fund
Brown Advisory Value Equity Fund
Brown Advisory Flexible Equity Fund
Brown Advisory Equity Income Fund
Brown Advisory Sustainable Growth Fund
Brown Advisory Small-Cap Growth Fund
Brown Advisory Small-Cap Fundamental Value Fund
Brown Advisory Opportunity Fund
Brown Advisory Multi-Strategy Fund
Brown Advisory Intermediate Income Fund
Brown Advisory Total Return Fund
Brown Advisory Strategic Bond Fund
Brown Advisory Maryland Bond Fund
Brown Advisory Tax Exempt Bond Fund
Brown Advisory Mortgage Securities Fund
Brown Advisory – WMC Strategic European Equity Fund
Brown Advisory – WMC Japan Alpha Opportunities Fund
Brown Advisory – Somerset Emerging Markets Fund
Brown Advisory Emerging Markets Small-Cap Fund
The views in the report contained herein were those of the Funds’ investment adviser, Brown Advisory LLC, or, for the sub-advised funds, of the respective sub-adviser, as of December 31, 2014 and may not reflect their views on the date this report is first published or anytime thereafter. This report may contain discussions about certain investments both held and not held in the portfolio as of December 31, 2014. All current and future holdings are subject to risk and are subject to change. While these views are intended to assist shareholders in understanding their investment in each Fund, they do not constitute investment advice, are not a guarantee of future performance and are not intended as an offer or solicitation with respect to the purchase or sale of any security. Performance figures include the reinvestment of dividend and capital gain distributions.
The Global Industry Classification Standard (GICS®) was developed by and is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS® is a service mark of MSCI, Inc. and S&P and has been licensed for use by the Administrator, U.S. Bancorp Fund Services, LLC.
TOPIX Index Values and TOPIX Marks are subject to the proprietary rights owned by the Tokyo Stock Exchange, Inc.
TABLE OF CONTENTS
| Brown Advisory Growth Equity Fund | |
| A Message to our Shareholders, December 31, 2014 | 1 |
| Schedule of Investments, December 31, 2014 | 3 |
| Brown Advisory Value Equity Fund | |
| A Message to our Shareholders, December 31, 2014 | 4 |
| Schedule of Investments, December 31, 2014 | 6 |
| Brown Advisory Flexible Equity Fund | |
| A Message to our Shareholders, December 31, 2014 | 7 |
| Schedule of Investments, December 31, 2014 | 9 |
| Brown Advisory Equity Income Fund | |
| A Message to our Shareholders, December 31, 2014 | 10 |
| Schedule of Investments, December 31, 2014 | 12 |
| Brown Advisory Sustainable Growth Fund | |
| A Message to our Shareholders, December 31, 2014 | 13 |
| Schedule of Investments, December 31, 2014 | 15 |
| Brown Advisory Small-Cap Growth Fund | |
| A Message to our Shareholders, December 31, 2014 | 16 |
| Schedule of Investments, December 31, 2014 | 18 |
| Brown Advisory Small-Cap Fundamental Value Fund | |
| A Message to our Shareholders, December 31, 2014 | 20 |
| Schedule of Investments, December 31, 2014 | 22 |
| Brown Advisory Opportunity Fund | |
| A Message to our Shareholders, December 31, 2014 | 23 |
| Schedule of Investments, December 31, 2014 | 25 |
| Brown Advisory Multi-Strategy Fund | |
| A Message to our Shareholders, December 31, 2014 | 27 |
| Schedule of Investments, December 31, 2014 | 30 |
| Brown Advisory Intermediate Income Fund | |
| A Message to our Shareholders, December 31, 2014 | 31 |
| Schedule of Investments, December 31, 2014 | 32 |
| Brown Advisory Total Return Fund | |
| A Message to our Shareholders, December 31, 2014 | 34 |
| Schedule of Investments, December 31, 2014 | 35 |
| Brown Advisory Strategic Bond Fund | |
| A Message to our Shareholders, December 31, 2014 | 37 |
| Schedule of Investments, December 31, 2014 | 38 |
| Brown Advisory Maryland Bond Fund | |
| A Message to our Shareholders, December 31, 2014 | 41 |
| Schedule of Investments, December 31, 2014 | 42 |
| Brown Advisory Tax Exempt Bond Fund | |
| A Message to our Shareholders, December 31, 2014 | 46 |
| Schedule of Investments, December 31, 2014 | 47 |
| Brown Advisory Mortgage Securities Fund | |
| A Message to our Shareholders, December 31, 2014 | 50 |
| Schedule of Investments, December 31, 2014 | 51 |
| Brown Advisory – WMC Strategic European Equity Fund | |
| A Message to our Shareholders, December 31, 2014 | 56 |
| Schedule of Investments, December 31, 2014 | 58 |
| Brown Advisory – WMC Japan Alpha Opportunities Fund | |
| A Message to our Shareholders, December 31, 2014 | 60 |
| Schedule of Investments, December 31, 2014 | 62 |
| Brown Advisory – Somerset Emerging Markets Fund | |
| A Message to our Shareholders, December 31, 2014 | 65 |
| Schedule of Investments, December 31, 2014 | 66 |
| Brown Advisory Emerging Markets Small-Cap Fund | |
| A Message to our Shareholders, December 31, 2014 | 68 |
| Schedule of Investments, December 31, 2014 | 70 |
| Statements of Assets and Liabilities | 72 |
| Statements of Operations | 77 |
| Statements of Changes in Net Assets | 82 |
| Financial Highlights | 92 |
| Notes to Financial Statements | 136 |
| Additional Information | 157 |
GLOSSARY OF TERMS
Alpha refers to the abnormal rate of return on a security or portfolio in excess of what would be predicted by an equilibrium model like the capital asset pricing model (CAPM).
Barclays 1-10 Year Blended Municipal Bond Index is a market index of high quality, domestic fixed income securities with maturities of less than 10 years.
Barclays Intermediate US Aggregate Bond Index represents domestic taxable investment-grade bonds with index components for government and corporate securities, mortgage pass-through securities and asset-backed securities with average maturities and durations in the intermediate range. This index represents a sector of the Barclays US Aggregate Bond Index.
Barclays Mortgage Backed Securities Index is a market value-weighted index which covers the mortgage-backed securities component of the Barclays US Aggregate Bond Index. The index is composed of agency mortgage-backed passthrough securities of the Government National Mortgage Association (Ginnie Mae), the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac) with a minimum $150 million par amount outstanding and a weighted-average maturity of at least 1 year. The index includes reinvestment of income.
Barclays US Aggregate Bond Index is a broad-based benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS, ABS and CMBS.
Basis point is a unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly used for calculating changes in interest rates, equity indexes and the yield of a fixed-income security. 1% is equal to 100 basis points.
Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.
Book value is the net asset value of a company, calculated by total assets minus intangible assets (patents, goodwill) and liabilities.
Cash flow measures the cash generating capability of a company by adding non-cash charges (e.g. depreciation) and interest expense to pretax income.
Correlation is a statistical measurement of how two securities move in relation to each other.
Dividend Yield is a financial ratio that shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock.
Downside Capture is a statistical measure of a fund’s performance in down markets. For example, a fund with downside capture of 90% would only have declined 90% as much as the related index during the same down market period.
Duration is a measure of the sensitivity of the price of a fixed-income investment to a change in interest rates. Duration is expressed as a number of years. Rising interest rates mean falling bond prices, while declining interest rates mean rising bond prices.
Earnings growth is a measure of growth in a company’s net income over a specific period, often one year. The term can apply to actual data from previous periods or estimated data for future periods.
Earnings per share (EPS) is calculated by taking the total earnings divided by the number of shares outstanding.
Earnings Yield is the earnings per share for the most recent 12-month period divided by the current market price per share. The earnings yield shows the percentage of each dollar invested in the stock that was earned by the company.
EBITDA is the Earnings Before Interest, Taxes, Depreciation and Amortization. An approximate measure of a company’s operating cash flow based on data from the company’s income statement.
Enterprise Value (EV) is a measure of a company’s value, often used as an alternative to straightforward market capitalization. Enterprise Value is calculated as market capitalization plus debt, minority interest and preferred shares, minus total cash and cash equivalents.
Forward price to earnings ratio uses forecasted earnings, rather than current earnings, to calculate the price to earnings ratio.
Free Cash Flow is the operating cash flows (net income plus amortization and depreciation) minus capital expenditures and dividends. Free cash flow is the amount of cash that a company has left over after it has paid all of its expenses, including investments.
Gross Domestic Product (GDP) is the monetary value of all the goods and services produced by an economy over a specified period. It includes consumption, government purchases, investments, and exports minus imports.
MSCI All Country World Index ex-U.S. is a market capitalization weighted index designed to provide a broad measure of stock performance throughout the world, with the exception of U.S.-based companies.
MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets.
GLOSSARY OF TERMS
MSCI Emerging Markets Small-Cap Index is a free float-adjusted market capitalization index that is designed to measure small cap equity market performance in the global emerging markets.
MSCI Europe Index is an index that captures large and mid cap representation across 15 developed market countries in Europe.
Price to Book Value Ratio is ratio used to compare a stock’s market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter’s book value per share.
Price to earnings ratio (P/E) is a common tool for comparing the prices of different common stocks and is calculated by dividing the current market price of a stock by the earnings per share.
Return of Capital (ROC) is a return from an investment that is not considered income. The return of capital is when some or all of the money an investor has in an investment is paid back to him or her, thus decreasing the value of the investment.
Return on Capital Employed (ROCE) is a financial ratio that measures a company’s profitability and the efficiency with which its capital is employed. Return on Capital Employed (ROCE) is calculated as: ROCE = Earnings Before Interest and Tax (EBIT) / Capital Employed.
Return on Equity (ROE) is the amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested.
Return on Invested Capital (ROIC) is a calculation used to assess a company’s efficiency at allocating the capital under its control to profitable investments. ROIC is typically calculated by taking a company’s net income, subtracting dividends the company paid out and dividing that amount by the company’s total capital.
Russell 1000® Growth Index measures the performance of the large-cap growth segment of the of the U.S. equity universe. It includes those Russell 1000® companies with higher price to book value ratios and higher forecasted growth values.
Russell 1000® Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000® companies with lower price to book value ratios and lower expected growth values.
Russell 2000® Growth Index measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000® companies with higher price to book value ratios and higher forecasted growth values.
Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index.
Russell 2000® Value Index measures the performance of the small-cap value segment of the U.S. equity universe. It includes those Russell 2000® companies with lower price to book value ratios and lower forecasted growth values.
Russell 3000® Index measures the performance of the 3,000 largest U.S. companies representing approximately 98% of the investable U.S. equity market.
S&P Balanced Equity and Bond – Moderate Index is the moderate profile of the S&P Balanced Equity and Bond Series which combines investable S&P indices for core equity and fixed income to provide a regulary rebalanced multi-asset measure for conservative, moderate and growth risk-reward profiles.
S&P 500 Index (“S&P 500”) is a market-value weighted index representing the performance of 500 widely held, publicly traded large capitalization stocks.
Tier 1 Capital Ratio is a comparison between a banking firm’s core equity capital and total risk-weighted assets. A firm’s core equity capital is known as its Tier 1 capital and is the measure of a bank’s financial strength based on the sum of its equity capital and disclosed reserves, and sometimes non-redeemable, non-cumulative preferred stock. A firm’s risk-weighted assets include all assets that the firm holds that are systematically weighted for credit risk. Central banks typically develop the weighting scale for different asset classes, such as cash and coins, which have zero risk, versus a letter or credit, which carries more risk.
TOPIX Total Return U.S. Dollar Hedged Index is a market capitalization-weighted index of all companies listed on the First Section of the Tokyo Stock Exchange, hedged to eliminate the impact of the change in value between the US Dollar and Japanese Yen.
Turnover refers to a fund buying or selling securities. (The fund “turns over” its portfolio.) A fund pays transaction costs, such as commissions, when it buys and sells securities. Additionally, a higher turnover rate may result in higher taxes when the fund shares are held in a taxable account.
Yield Curve is a line that plots the yields of securities having equal credit quality but different maturity dates.
The broad based market indexes referenced in the following management commentaries are considered representative of their indicated market, the indexes are unmanaged and do not reflect the deduction of fees, such as, investment management and fund accounting fees, or taxes associated with a mutual fund. Investors cannot invest directly in an index.
Brown Advisory Growth Equity Fund
A Message to Our Shareholders
December 31, 2014
Dear Shareholder:
During the six-month period ended December 31, 2014, the Brown Advisory Growth Equity Fund Investor Shares (the “Fund”) increased 4.51% in value. During the same period, the Russell 1000 Growth Index, the Fund’s benchmark, increased 6.34%.
The energy sector has been volatile recently, driven quite visibly by the abrupt drop in crude oil prices starting in June. Energy was the best-performing sector in the Index during the first half of the year, but it finished the calendar year with its worst return since 2008. Energy has been the largest detractor from our performance over the last six months. We have maintained positions for many years in three oilfield service companies, and all three have what we consider to be extremely high-quality business models. We have a clear understanding of their fundamentals, and our investment thesis for them is based on those fundamentals, not on our ability to forecast the price of oil. We are focused on the fact that each offers highly differentiated products or services to the marketplace, and we believe that each is capable of growing faster than the average company in our benchmark. However, we always operate in an environment where the price of oil largely determines the price movements of these stocks on a day-to-day basis. We have selectively added to some of our energy positions, as we are attracted to their upside potential from these levels; however, we acknowledge the near-term risk that remains in these stocks due to continuing uncertainty in oil prices.
After a period of volatility, Whole Foods has been a top contributor to the portfolio. We added to our existing position prior to and during this period on weakness driven by disappointing short-term sales results. We held numerous discussions with the company’s management team (and the management teams of several competitors), and toured stores in several states along with stores of competitors. Our confidence was bolstered by the fact that Whole Foods offers a highly distinctive shopping experience that its competitors simply cannot match today. Additionally, we felt that the market’s concerns about competition being the primary driver behind sluggish sales growth were exaggerated. Our patience was rewarded after the company reported better-than-expected sales during the quarter, and investors poured back into the stock.
Health care was also a strong contributor during the period. About this time a year ago, we were writing about Intuitive Surgical, which at the time was one of our worst-performing holdings. The company manufactures the da Vinci robotic surgical device, an indispensable tool used by surgeons to conduct minimally invasive procedures. The company released a new version of the system in early 2014 that dramatically increased the addressable market for the product. The new system opened new avenues for procedure growth in general surgery, offsetting a maturing market for gynecological procedures. As procedure growth began to recover, the stock made a dramatic rebound. Similarly to our approach with Whole Foods, we had been adding to Intuitive Surgical on price weakness in 2013.
As volatility in the markets has increased, our name turnover has increased accordingly. We are sensitive to how much we are willing to pay for even the best business models we can find. Fluctuations in valuation give us the opportunity to refresh the portfolio with new ideas, and to that end we initiated four new positions in the portfolio over the last six months.
Recent underperformance relative to our benchmark is certainly frustrating. A variety of factors have contributed to that underperformance—opportunities that we missed, the systemic shock of rapidly declining oil prices, and a market more focused on yield than on growth, to name a few. History tells us that these factors shouldn’t persist forever. We have the utmost confidence that holding a concentrated portfolio of what we believe are best-in-breed business models, while being mindful of valuation, may help us in seeking outperformance vs. a passive benchmark over time.
Sincerely,
Kenneth M. Stuzin, CFA
Portfolio Manager
www.brownadvisoryfunds.com
Brown Advisory Growth Equity Fund
A Message to Our Shareholders
December 31, 2014
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. Investments in smaller and medium capitalization companies generally carry greater risk than is customarily associated with larger companies for various reasons such as narrower markets, limited financial resources and less liquid stock. The value of the Fund’s investments in REITs may change in response to changes in the real estate market such as declines in the value of real estate, lack of available capital or financing opportunities, and increases in property taxes or operating costs. Investments in foreign securities entail certain risks not associated with investments in domestic securities, such as volatility of currency exchange rates, and in some cases, political and economic instability and relatively illiquid markets. The Fund may invest in ETFs, which may trade at a discount to the aggregate value of the underlying securities and although expense ratios for ETFs are generally low, frequent trading of ETFs by the Fund can generate brokerage expenses. Earnings growth is not a measure of the Fund’s future performance.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
www.brownadvisoryfunds.com
Brown Advisory Growth Equity Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 97.7% | | | |
| | | | |
| Consumer Discretionary — 8.6% | | | |
| | 793,775 | | Discovery Communications, Inc. — Class A* | | | 27,345,549 | |
| | 1,188,223 | | Discovery Communications, Inc. — Class C* | | | 40,066,880 | |
| | 170,683 | | Fossil Group, Inc.* | | | 18,901,435 | |
| | 1,176,811 | | Starbucks Corp. | | | 96,557,342 | |
| | 499,505 | | TripAdvisor, Inc.* | | | 37,293,043 | |
| | | | | | | 220,164,249 | |
| Consumer Staples — 13.3% | | | | |
| | 456,386 | | Costco Wholesale Corp. | | | 64,692,715 | |
| | 1,076,718 | | Estee Lauder Companies, Inc. | | | 82,045,912 | |
| | 919,305 | | Mead Johnson Nutrition Co. | | | 92,426,925 | |
| | 2,014,491 | | Whole Foods Market, Inc. | | | 101,570,636 | |
| | | | | | | 340,736,188 | |
| Energy — 8.3% | | | | |
| | 472,850 | | Core Laboratories NV | | | 56,902,769 | |
| | 1,549,655 | | FMC Technologies, Inc.* | | | 72,585,840 | |
| | 986,529 | | Schlumberger NV | | | 84,259,442 | |
| | | | | | | 213,748,051 | |
| Financials — 4.5% | | | | |
| | 3,854,582 | | Charles Schwab Corp. | | | 116,369,831 | |
| | | | | |
| Health Care — 18.5% | | | | |
| | 854,778 | | Bristol-Myers Squibb Co. | | | 50,457,545 | |
| | 379,552 | | Covance, Inc.* | | | 39,412,680 | |
| | 1,001,278 | | DaVita HealthCare Partners, Inc.* | | | 75,836,796 | |
| | 1,461,148 | | Express Scripts Holding Co.* | | | 123,715,401 | |
| | 875,905 | | Gilead Sciences, Inc.* | | | 82,562,805 | |
| | 197,224 | | Intuitive Surgical, Inc.* | | | 104,319,663 | |
| | | | | | | 476,304,890 | |
| Industrials — 11.0% | | | | |
| | 353,941 | | Colfax Corp.* | | | 18,252,737 | |
| | 1,097,451 | | Danaher Corp. | | | 94,062,525 | |
| | 1,608,457 | | Fastenal Co. | | | 76,498,215 | |
| | 710,495 | | Stericycle, Inc.* | | | 93,131,685 | |
| | | | | | | 281,945,162 | |
| Information Technology — 30.5% | | | | |
| | 1,532,034 | | Amphenol Corp. | | | 82,438,750 | |
| | 560,312 | | ANSYS, Inc.* | | | 45,945,584 | |
| | 827,923 | | Apple, Inc. | | | 91,386,141 | |
| | 1,057,640 | | Cognizant Technology Solutions Corp.* | | | 55,695,322 | |
| | 2,921,339 | | Genpact, Ltd.* | | | 55,300,947 | |
| | 94,082 | | Google, Inc. — Class A* | | | 49,925,554 | |
| | 94,082 | | Google, Inc. — Class C* | | | 49,524,765 | |
| | 1,302,254 | | National Instruments Corp. | | | 40,487,077 | |
| | 311,952 | | NetSuite, Inc.* | | | 34,055,800 | |
| | 1,161,537 | | QUALCOMM, Inc. | | | 86,337,045 | |
| | 1,239,881 | | Salesforce.com, Inc.* | | | 73,537,342 | |
| | 446,455 | | Visa, Inc. | | | 117,060,501 | |
| | | | | | | 781,694,828 | |
| Materials — 3.0% | | | | |
| | 731,924 | | Ecolab, Inc. | | | 76,500,696 | |
| Total Common Stocks (Cost $1,835,208,502) | | | 2,507,463,895 | |
| | | | | |
| Short-Term Investments — 2.3% | | | | |
| | | | | |
| Money Market Funds — 2.3% | | | | |
| | 58,030,224 | | DWS Cash Account Trust — Government | | | | |
| | | | & Agency Securities Portfolio, 0.03%# | | | 58,030,224 | |
| Total Short-Term Investments (Cost $58,030,224) | | | 58,030,224 | |
| Total Investments — 100.0% (Cost $1,893,238,726) | | | 2,565,494,119 | |
| Other Assets in Excess of Liabilities — 0.0% | | | 270,560 | |
| NET ASSETS — 100.0% | | $ | 2,565,764,679 | |
| PORTFOLIO HOLDINGS | | |
| % of Net Assets | | |
| | | |
| Information Technology | 30.5% | |
| Health Care | 18.5% | |
| Consumer Staples | 13.3% | |
| Industrials | 11.0% | |
| Consumer Discretionary | 8.6% | |
| Energy | 8.3% | |
| Financials | 4.5% | |
| Materials | 3.0% | |
| Money Market Funds | 2.3% | |
| Other Assets and Liabilities | 0.0% | |
| | 100.0% | |
| * | Non-Income Producing |
| # | Annualized seven-day yield as of December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Value Equity Fund
A Message to Our Shareholders
December 31, 2014
Dear Shareholder:
During the six-month period ended December 31, 2014, the Brown Advisory Value Equity Fund Investor Shares (the “Fund”) decreased 3.07% in value. During the same period, the Russell 1000 Value Index, the Fund’s benchmark, increased 4.78%.
The six-month period ended December 31, 2014, was a challenging one for the Fund. The lion’s share of our underperformance stemmed from our concentration in the energy sector. A nearly 50% correction in oil prices during the period weighed on our energy names. We were disproportionately impacted by our mix of oil services & production companies, which underperformed the integrated oil majors and refiners. Our three largest detractors were Ensco, Schlumberger and Canadian Natural Resources.
An unwelcome brew of macroeconomic forces, including a strong dollar, weak commodities and global deflation fears, also weighed on our other economically sensitive holdings. Sectors with a high proportion of international sales, notably industrials and materials, did not fare particularly well. Separately, within financials, our U.S.-centric interest-rate-sensitive banks generated favorable positive returns but could not keep pace with the stronger returns from higher-yielding REITs. Lastly, given the heightened uncertainty of the past few months, investors scrambled back into consumer staples stocks, utilities and REITs in a search for stability and yield. We have been largely underweight these traditionally defensive sectors and continue to look for opportunities in these areas, but we see very little value in these crowded trades.
Our lone port in the storm during the period has been technology, the best-performing sector for the Fund during the period ended December 31, 2014. We benefited from our overweight in the sector, and three of our top-five portfolio return contributors were technology holdings Apple, NetApp and Cisco. Despite strong recent performance, these companies still offer attractive total return potential in our view, as we believe they are trading at a discount to the broader market and just as importantly they are actively returning capital to shareholders through buybacks and dividends.
The relatively modest returns produced by equities over the past six months somewhat camouflage a high level of volatility during the period, and we took advantage of that volatility to initiate positions in a number of new names across a wide range of sectors, including CommScope, eBay, Informatica, Oceaneering International, Plains GP Holdings, Sanofi, Suncor Energy, Synovus Financial and Unilever NV. We eliminated our positions in Canadian Natural Resources, Guess?, Hartford Financial, Kennametal and Oracle.
Unilever was a notable addition because we have considered many consumer staples companies to be prohibitively expensive for us for nearly two years due to premium valuations in the sector. Unilever fell back into a reasonable valuation range and was trading at a discount to its peers on the heels of slowing growth in emerging markets and the negative currency-translation effects of the strengthening U.S. dollar. Unilever in our view is a high-quality company with an under-levered balance sheet, and it has one of the highest growth rates in the consumer staples sector. We expect the company’s attractively priced brands and new product introductions to drive higher growth and margins.
While we believe that we’re likely closer to a bottom in the energy sector, predicting the timing of that bottom is difficult if not impossible given the many uncertain factors that impact oil prices on a day-to-day basis. One of our new additions, Plains GP Holdings, represents part of our effort to rebalance our energy exposure to companies that are less exposed to oil-price uncertainty. Plains is a midstream holding company that owns one of the largest pipelines in the United States. It has a strong balance sheet, and it is led by a veteran management team that has historically delivered solid results through a variety of market conditions. The company’s cash flows are driven primarily from diversified fee-based revenues and contracts that have little relation to swings in commodity prices. With a balance of growth, earnings stability and dividend yield, Plains GP Holdings, in our view, is an attractive investment opportunity in a currently uncertain sector.
We remain committed to our longstanding process of finding what we believe are good franchises at prices with low downside risk. During the recent six-month period, we fell short of our performance benchmark primarily due to the impact of unexpected economic circumstances. Our investment methodology remains patient and disciplined, and our views are often contrarian. Our portfolio has traded at a material valuation discount to its benchmark and will seek to achieve attractive upside. Many of our companies either generate strong growing free cash flows or have the potential to materially improve profitability from depressed levels. We strongly believe that we are being more than adequately compensated for near-term risks and that our portfolio is positioned to create longer-term shareholder value.
Sincerely,
Richard Bernstein, CFA
Portfolio Manager
www.brownadvisoryfunds.com
Brown Advisory Value Equity Fund
A Message to Our Shareholders
December 31, 2014
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. Investments in medium capitalization companies generally carry greater risk than is customarily associated with larger companies for various reasons such as narrower markets, limited financial resources and less liquid stock. The value of the Fund’s investments in REITs may change in response to changes in the real estate market such as declines in the value of real estate, lack of available capital or financing opportunities, and increases in property taxes or operating costs. The Fund may invest in ETFs, which may trade at a discount to the aggregate value of the underlying securities and although expense ratios for ETFs are generally low, frequent trading of ETFs by the Fund can generate brokerage expenses. Investments in foreign securities entail certain risks not associated with investments in domestic securities, such as volatility of currency exchange rates, and in some cases, political and economic instability and relatively illiquid markets. These risks are greater for investments in emerging markets. Diversification does not guarantee a profit or protect from loss in a declining market.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary on Terms.
www.brownadvisoryfunds.com
Brown Advisory Value Equity Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 95.3% | | | |
| | | | |
| Consumer Discretionary — 9.5% | | | |
| | 145,620 | | Best Buy, Inc. | | | 5,676,268 | |
| | 148,766 | | Coach, Inc. | | | 5,587,651 | |
| | 155,254 | | GameStop Corp. | | | 5,247,585 | |
| | 88,156 | | Garmin, Ltd. | | | 4,657,281 | |
| | | | | | | 21,168,785 | |
| Consumer Staples — 2.5% | | | | |
| | 141,578 | | Unilever NV ADR | | | 5,527,205 | |
| | | | | |
| Energy — 14.1% | | | | |
| | 118,240 | | ENSCO PLC | | | 3,541,288 | |
| | 76,232 | | National Oilwell Varco, Inc. | | | 4,995,483 | |
| | 64,475 | | Occidental Petroleum Corp. | | | 5,197,330 | |
| | 81,973 | | Oceaneering International, Inc. | | | 4,820,832 | |
| | 136,070 | | Plains GP Holdings LP | | | 3,494,277 | |
| | 53,821 | | Schlumberger NV | | | 4,596,852 | |
| | 143,964 | | Suncor Energy, Inc. | | | 4,575,176 | |
| | | | | | | 31,221,238 | |
| Financials — 24.4% | | | | |
| | 213,793 | | Charles Schwab Corp. | | | 6,454,411 | |
| | 98,534 | | City National Corp. | | | 7,962,532 | |
| | 126,962 | | JPMorgan Chase & Co. | | | 7,945,282 | |
| | 30,250 | | M&T Bank Corp. | | | 3,800,005 | |
| | 107,090 | | Northern Trust Corp. | | | 7,217,866 | |
| | 656,339 | | Regions Financial Corp. | | | 6,930,940 | |
| | 196,515 | | SunTrust Banks, Inc. | | | 8,233,978 | |
| | 202,532 | | Synovus Financial Corp. | | | 5,486,592 | |
| | | | | | | 54,031,606 | |
| Health Care — 14.5% | | | | |
| | 76,453 | | Baxter International, Inc. | | | 5,603,240 | |
| | 221,080 | | Hologic, Inc.* | | | 5,911,679 | |
| | 55,477 | | Merck & Co., Inc. | | | 3,150,539 | |
| | 56,305 | | Novartis AG ADR | | | 5,217,221 | |
| | 112,941 | | Sanofi S.A. ADR | | | 5,151,239 | |
| | 122,546 | | Teva Pharmaceutical Industries, Ltd. ADR | | | 7,047,621 | |
| | | | | | | 32,081,539 | |
| Industrials — 5.0% | | | | |
| | 143,026 | | Joy Global, Inc. | | | 6,653,570 | |
| | 64,088 | | PACCAR, Inc. | | | 4,358,625 | |
| | | | | | | 11,012,195 | |
| Information Technology — 22.2% | | | | |
| | 60,997 | | Apple, Inc. | | | 6,732,849 | |
| | 53,269 | | Check Point Software Technologies, Ltd.* | | | 4,185,345 | |
| | 247,907 | | Cisco Systems, Inc. | | | 6,895,533 | |
| | 145,797 | | CommScope Holdings Co, Inc.* | | | 3,328,546 | |
| | 61,770 | | eBay, Inc.* | | | 3,466,532 | |
| | 102,398 | | Informatica Corp.* | | | 3,904,948 | |
| | 58,237 | | Microchip Technology, Inc. | | | 2,627,071 | |
| | 90,750 | | Microsoft Corp. | | | 4,215,338 | |
| | 146,503 | | NetApp, Inc. | | | 6,072,549 | |
| | 104,054 | | QUALCOMM, Inc. | | | 7,734,334 | |
| | | | | | | 49,163,045 | |
| Materials — 3.1% | | | | |
| | 194,031 | | Potash Corp. of Saskatchewan, Inc. | | | 6,853,175 | |
| Total Common Stocks (Cost $170,572,633) | | | 211,058,788 | |
| | | | | |
| Short-Term Investments — 1.6% | | | | |
| | | | | |
| Money Market Funds — 1.6% | | | | |
| | 3,513,465 | | DWS Cash Account Trust — Government | | | | |
| | | | & Agency Securities Portfolio, 0.03%# | | | 3,513,465 | |
| Total Short-Term Investments (Cost $3,513,465) | | | 3,513,465 | |
| Total Investments — 96.9% (Cost $174,086,098) | | | 214,572,253 | |
| Other Assets in Excess of Liabilities — 3.1% | | | 6,865,115 | |
| NET ASSETS — 100.0% | | $ | 221,437,368 | |
| PORTFOLIO HOLDINGS | | |
| % of Net Assets | | |
| | | |
| Financials | 24.4% | |
| Information Technology | 22.2% | |
| Health Care | 14.5% | |
| Energy | 14.1% | |
| Consumer Discretionary | 9.5% | |
| Industrials | 5.0% | |
| Materials | 3.1% | |
| Consumer Staples | 2.5% | |
| Money Market Funds | 1.6% | |
| Other Assets and Liabilities | 3.1% | |
| | 100.0% | |
ADR — American Depositary Receipt
| * | Non-Income Producing |
| # | Annualized seven-day yield as of December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Flexible Equity Fund
A Message to Our Shareholders
December 31, 2014
Dear Shareholder:
During the six-month period ended December 31, 2014, the Brown Advisory Flexible Equity Fund Investor Shares (the “Fund”) increased 8.46% in value. The S&P 500 Index, the Fund’s benchmark, increased 6.12% during the same period. The Fund lagged the benchmark for the 12-month period with a return of 12.73% versus the benchmark return of 13.69%. The three- and five-year annualized returns of 21.75% and 15.79% compare favorably to the benchmark returns of 20.41% and 15.45% for the same periods, respectively. Since inception on November 30, 2006, the Fund has returned 6.47% versus the benchmark return of 7.16%. The Fund’s gross expense ratio, per the Prospectus dated October 31, 2014, is 0.96%.
Performance data quoted represents past performance and is no guarantee of future results. Performance for periods greater than one year is annualized. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. Shares redeemed or exchanged within 14 days of purchase will be charged a 1.00% fee. Performance data quoted does not reflect the redemption or exchange fee. If reflected, total returns would be reduced. For the most recent month-end performance, please call 1-800-540-6807.
We repeat our message from previous communications that investors should temper their expectations for stock-market returns over the next five years, compared to what they experienced over the previous five. Today’s starting conditions, though not excessive, are so different from those of 2009 in terms of valuation, economic activity and investor sentiment that moderation of future returns should be expected.
We seek to do better than the market averages over time, though of course we don’t expect this in every time period. We keep several thoughts in mind to help stay sharp in ever-changing investment markets. First, we try to keep things simple. We use a checklist to keep our focus and find new ideas to periodically freshen our portfolio. The checklist helps us know what we are looking for and looking to avoid in company attributes and then to spot the bargain price moments to get involved in the stocks. Second, we stress ongoing learning about the business models that produce cash flows to business owners, as well as the market and human behaviors that set the prices for these businesses. Lastly, we stay ready to swing at good investment pitches but we try not to swing too often.
The big news in financial markets and the economy in the latter half of 2014 was the dramatic change in the price of oil. Oil is a commodity with a long price cycle related to the high capital intensity and long lead times required to increase its supply. High prices eventually produce supply from increased investment and technology improvements, which leads to lower prices. Low prices eventually limit supply from lack of investment, which leads to higher prices. Demand responds to price as well, but the dramatic swings in oil price generally come from supply, and it can take a long time for supply to change. The recent decline in energy-sector stocks piques our interest in them, but it is much easier to describe the cycle in retrospect than to predict its future turning points. We will be watching developments in the energy sector closely.
The biggest contributors to the Fund’s results in the six-month period were Visa, a global payments processor; Edwards Lifesciences, a manufacturer of devices to treat cardiovascular disease; and Lowes, a leading home-improvement retailer. All of these top contributors reported good business progress and rising valuation during the period.
The most significant detractors to the Fund’s performance were Copa Holdings, a Latin American airline; Occidental Petroleum, an integrated energy company; and National Oilwell Varco, a manufacturer of equipment for oil and gas drilling. Copa’s shares declined due to concerns about growth and currency translation, particularly in Venezuela, and National Oilwell Varco and Occidental Petroleum shares fell with the decline in the price of oil.
New investment Priceline, an online travel company, has an attractive business model and in our view great economics from serving as the intermediary aggregating both demand for and supply of hotel rooms through its Booking.com platform, which contributes most of the company’s profits. Concerns about increasing competition, slowing growth and potentially reduced travel resulting from Ebola contagion fears created a bargain opportunity in Priceline’s share price. California Resources is a spinoff from existing holding Occidental Petroleum, and the fact that it is a spinoff explains its small position size in the portfolio.
Eliminations since our last report include CME Group, the securities exchange operator; General Motors, a leading auto manufacturer; Mondelez International, the former Kraft Foods Inc.; and Rogers Communications, a Canadian telecom and media company. These stocks were sold because we revised our assessment of their future profitability and prospects relative to their valuation.
www.brownadvisoryfunds.com
Brown Advisory Flexible Equity Fund
A Message to Our Shareholders
December 31, 2014
We look for bargains among long-term attractive businesses with shareholder-oriented managers. These bargains can arise due to short-term investor perceptions, temporary business difficulties that will improve, or as-yet-undiscovered opportunities and unrecognized changes for the better. We remain optimistic about the long-term outlook for equities of good companies purchased at reasonable prices and our ability to find them.
Sincerely,
R. Hutchings Vernon, CFA
Portfolio Manager
Michael L. Foss, CFA
Portfolio Manager
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. The Flexible Equity Fund may invest in securities of foreign issuers. Investments in such securities entail certain risks not associated with investments in domestic securities, such as volatility of currency exchange rates, and in some cases, political and economic instability and relatively illiquid markets. These risks are greater for investments in emerging markets. The value of the Fund’s investments in REITs may change in response to changes in the real estate market such as declines in the value of real estate, lack of available capital or financing opportunities, and increases in property taxes or operating costs. The Fund may invest in ETFs, which may trade at a discount to the aggregate value of the underlying securities and although expense ratios for ETFs are generally low, frequent trading of ETFs by the Fund can generate brokerage expenses. Investments in smaller companies generally carry greater risk than is customarily associated with larger companies for various reasons such as narrower markets, limited financial resources and less liquid stock. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer term debt securities. Investments in lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
www.brownadvisoryfunds.com
Brown Advisory Flexible Equity Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 92.5% | | | |
| | | | |
| Consumer Discretionary — 14.5% | | | |
| | 210,006 | | Best Buy, Inc. | | | 8,186,034 | |
| | 79,571 | | CarMax, Inc.* | | | 5,297,837 | |
| | 92,878 | | Lowe’s Companies, Inc. | | | 6,390,006 | |
| | 19,935 | | Time Warner Cable, Inc. | | | 3,031,316 | |
| | 64,434 | | TJX Companies, Inc. | | | 4,418,884 | |
| | 72,550 | | Walt Disney Co. | | | 6,833,485 | |
| | | | | | | 34,157,562 | |
| Consumer Staples — 1.3% | | | | |
| | 31,462 | | PepsiCo, Inc. | | | 2,975,047 | |
| | | | | |
| Energy — 7.4% | | | | |
| | 25,263 | | California Resources Corp.* | | | 139,199 | |
| | 187,383 | | Kinder Morgan, Inc. | | | 7,928,177 | |
| | 62,063 | | National Oilwell Varco, Inc. | | | 4,066,989 | |
| | 64,958 | | Occidental Petroleum Corp. | | | 5,236,264 | |
| | | | | | | 17,370,629 | |
| Financials — 19.1% | | | | |
| | 38,704 | | American Express Co. | | | 3,601,020 | |
| | 124,286 | | Bank of America Corp. | | | 2,223,477 | |
| | 70,054 | | Berkshire Hathaway, Inc.* | | | 10,518,608 | |
| | 202,742 | | Charles Schwab Corp. | | | 6,120,781 | |
| | 65,422 | | Franklin Resources, Inc. | | | 3,622,416 | |
| | 81,407 | | JPMorgan Chase & Co. | | | 5,094,450 | |
| | 271,845 | | Regions Financial Corp. | | | 2,870,683 | |
| | 18,316 | | T. Rowe Price Group, Inc. | | | 1,572,612 | |
| | 172,616 | | Wells Fargo Co. | | | 9,462,809 | |
| | | | | | | 45,086,856 | |
| Health Care — 11.6% | | | | |
| | 48,437 | | Anthem, Inc. | | | 6,087,078 | |
| | 38,831 | | Edwards Lifesciences Corp.* | | | 4,946,293 | |
| | 105,005 | | Express Scripts Holding Co.* | | | 8,890,773 | |
| | 38,280 | | Merck & Co., Inc. | | | 2,173,921 | |
| | 91,524 | | Teva Pharmaceutical Industries, Ltd. ADR | | | 5,263,545 | |
| | | | | | | 27,361,610 | |
| Industrials — 11.3% | | | | |
| | 124,833 | | Canadian National Railway Co. | | | 8,602,242 | |
| | 12,519 | | Canadian Pacific Railway, Ltd. | | | 2,412,286 | |
| | 38,768 | | Copa Holdings S.A. | | | 4,017,916 | |
| | 15,040 | | NOW, Inc.* | | | 386,979 | |
| | 86,877 | | Owens Corning | | | 3,111,065 | |
| | 37,290 | | United Rentals, Inc.* | | | 3,803,953 | |
| | 36,623 | | United Technologies Corp. | | | 4,211,645 | |
| | | | | | | 26,546,086 | |
| Information Technology — 26.1% | | | | |
| | 52,415 | | Accenture PLC | | | 4,681,184 | |
| | 51,432 | | Apple, Inc. | | | 5,677,064 | |
| | 89,000 | | eBay, Inc.* | | | 4,994,680 | |
| | 7,139 | | Google, Inc. — Class A* | | | 3,788,382 | |
| | 9,549 | | Google, Inc. — Class C* | | | 5,026,594 | |
| | 14,854 | | International Business Machines Corp. | | | 2,383,176 | |
| | 86,910 | | MasterCard, Inc. | | | 7,488,166 | |
| | 119,896 | | Microsoft Corp. | | | 5,569,169 | |
| | 3,263 | | Priceline Group, Inc.* | | | 3,720,505 | |
| | 81,774 | | QUALCOMM, Inc. | | | 6,078,261 | |
| | 46,756 | | Visa, Inc. | | | 12,259,423 | |
| | | | | | | 61,666,604 | |
| Telecommunication Services — 1.2% | | | | |
| | 37,264 | | Crown Castle International Corp. | | | 2,932,677 | |
| Total Common Stocks (Cost $162,194,258) | | | 218,097,071 | |
| | | | | |
| Warrants — 0.2% | | | | |
| | 20,000 | | Wells Fargo Co.* | | | 427,200 | |
| Total Warrants (Cost $221,300) | | | 427,200 | |
| | | | | |
| Short-Term Investments — 6.8% | | | | |
| | | | | |
| Money Market Funds — 6.8% | | | | |
| | 16,094,196 | | DWS Cash Account Trust — Government | | | | |
| | | | & Agency Securities Portfolio, 0.03%# | | | 16,094,196 | |
| Total Short-Term Investments (Cost $16,094,196) | | | 16,094,196 | |
| Total Investments — 99.5% (Cost $178,509,754) | | | 234,618,467 | |
| Other Assets in Excess of Liabilities — 0.5% | | | 1,115,236 | |
| NET ASSETS — 100.0% | | $ | 235,733,703 | |
| PORTFOLIO HOLDINGS | | |
| % of Net Assets | | |
| | | |
| Information Technology | 26.1% | |
| Financials | 19.1% | |
| Consumer Discretionary | 14.5% | |
| Health Care | 11.6% | |
| Industrials | 11.3% | |
| Energy | 7.4% | |
| Money Market Funds | 6.8% | |
| Consumer Staples | 1.3% | |
| Telecommunication Services | 1.2% | |
| Warrants | 0.2% | |
| Other Assets and Liabilities | 0.5% | |
| | 100.0% | |
ADR — American Depositary Receipt
| * | Non-Income Producing |
| # | Annualized seven-day yield as of December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Equity Income Fund
A Message to Our Shareholders
December 31, 2014
Dear Shareholder:
During the six-month period ended December 31, 2014, the Brown Advisory Equity Income Fund Investor Shares (the “Fund”) increased 3.84% in value. During the same period, the S&P 500 Index, the Fund’s benchmark, increased 6.12%.
The end of 2014 will likely be remembered by investors for the swift and severe drop in oil prices that occurred. There is no shortage of commentaries as to the causes of what eventually turned into a more than 50% decline in prices. Global demand has slowed, though it is still growing. Supply has increased from the U.S. and other countries. Geopolitics has also played a role—particularly the decision by major OPEC producer Saudi Arabia to maintain production at a relatively full pace within the cartel in order to prevent the loss of market share.
The Fund’s energy holdings declined but still managed to perform better than the sector in the Index, adding to returns on a relative basis. The stock price of midstream oil and gas company Kinder Morgan, our largest energy holding by weighting, bucked the downward trend of the group and rose during the period. Kinder Morgan embarked on a strategy to simplify its corporate structure by acquiring the outstanding shares of all its affiliated, separately traded entities to form a single corporation. In our view, tax benefits from the reorganization will boost the new corporation’s earnings growth rate, and we also believe that the new Kinder Morgan will benefit from a more attractive stock currency for potential acquisitions in the future.
Holdings in the information technology sector were also a positive contributor to performance, with notable moves from Apple and Automatic Data Processing. Enthusiasm over the much-anticipated launch of the next-generation iPhone 6 drove Apple’s earnings and stock price higher during the period. Automatic Data Processing rose as the payroll processor spun-off its auto dealer information services unit, CDK Global. We sold the resulting CDK Global shares that we received based on an outlook for limited dividends from the newly public company.
Our worst-performing sectors relative to the Index were health care and consumer staples. Health care was the best-performing sector for the Index overall during the period, driven by strong performances from various fast-growing companies in the biopharmaceutical and medical products areas. Unfortunately, our slower-growing pharmaceutical stocks Merck, Novartis and Johnson & Johnson did not participate in the rally and were little changed during the period. In consumer staples, the strengthening U.S. dollar created a meaningful headwind for internationally oriented consumer-product companies. As a result, we expect holdings such as Unilever, Philip Morris International and Coca-Cola to have a more difficult time growing their sales in the year ahead.
We reduced our consumer staples weighting during the period by exiting Kraft Foods after the firm’s CEO, who we greatly admired, announced his retirement. We sold our position in offshore driller Ensco, which will struggle to grow its earnings and dividend in an environment of prolonged low oil prices. We also eliminated the shares of California Resources that we received when it was spun off from holding Occidental Petroleum, due to the unlikelihood that it would pay a dividend anytime soon. We added to our other holdings within energy during the period, so we remain overweight the sector despite the sales of Ensco and California Resources.
We added two new investments during the period, Copa Holdings and Nielsen. Copa is a growing regional airline throughout the Americas operating out of a well-established hub in Panama. We initiated a position after the stock declined amid deteriorating business conditions in Venezuela, resulting in lower near-term earnings. We believe Copa will return to growing its earnings at an attractive rate once the economic conditions in Venezuela and elsewhere in South America improve. Management is committed to returning cash to shareholders through the firm’s dividend, which is supported by what we consider to be a very strong balance sheet with excess cash. Nielsen, the media ratings firm, possesses a number of the characteristics we look for in a stock—steady and predictable growth, an attractive dividend yield, a defensible business leadership position and a capable management team with a good capital-allocation history.
Investors have benefited from dazzling market returns over a nearly six-year bull market in U.S. stocks. Amid such robust returns, it has been a challenge for the Fund—an income- and quality-oriented portfolio that seeks below-market volatility—to keep up with the galloping pace. While we do think that U.S. large-cap stocks have the potential to outperform many other asset classes in the year ahead, it is unlikely in our view that they will deliver the level of returns investors have realized over the past several years. We believe that U.S. stock investors should prepare for a period of these more modest expected returns, where the defensive portfolio attributes of this Fund can hopefully help in seeking to produce above-benchmark results.
www.brownadvisoryfunds.com
Brown Advisory Equity Income Fund
A Message to Our Shareholders
December 31, 2014
While we are cautiously optimistic for stock returns in the coming year, we are hearing a warning bell that has been useful to us in the past. In short, many of our holdings are hitting their upside price targets, and we are not finding many alternatives to replace them. Cash levels in the Fund are elevated as a result. We will remain disciplined in deploying this cash into new opportunities in order to deliver on our key long-term objectives of an attractive and growing dividend stream, a competitive return relative to the Index and low portfolio volatility.
Sincerely,
Michael L. Foss, CFA
Portfolio Manager
Brian E. Graney, CFA
Portfolio Manager
Past performance does not guarantee future results.
Mutual fund investing involves risk. Principal loss is possible. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investments in lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities. Investments in smaller and medium capitalization companies generally carry greater risk than is customarily associated with larger companies for various reasons such as narrower markets, limited financial resources and less liquid stock. The value of the Fund’s investments in REITs and Real Estate may change in response to changes in the real estate market such as declines in the value of real estate, lack of available capital or financing opportunities, and increases in property taxes or operating costs. The Fund may invest in ETFs, which may trade at a discount to the aggregate value of the underlying securities and although expense ratios for ETFs are generally low, frequent trading of ETFs by the Fund can generate brokerage expenses. Investments in foreign securities entail certain risks not associated with investments in domestic securities, such as volatility of currency exchange rates, and in some cases, political and economic instability and relatively illiquid markets. Investing in Master Limited Partnerships (“MLPs”) entails risk related to fluctuations in energy prices, decreases in supply of or demand for energy commodities, unique tax consequences due to the partnership structure and various other risks. Privately Placement issued securities are restricted securities that are not publicly traded. Delay or difficulty in selling such securities may result in a loss to the Fund.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
www.brownadvisoryfunds.com
Brown Advisory Equity Income Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 83.3% | | | |
| | | | |
| Consumer Discretionary — 14.3% | | | |
| | 112,382 | | Best Buy, Inc. | | | 4,380,650 | |
| | 125,191 | | GameStop Corp. | | | 4,231,456 | |
| | 94,119 | | Garmin, Ltd. | | | 4,972,307 | |
| | 32,541 | | McDonald’s Corp. | | | 3,049,092 | |
| | 55,324 | | Target Corp. | | | 4,199,645 | |
| | 21,789 | | Time Warner Cable, Inc. | | | 3,313,235 | |
| | 72,696 | | V.F. Corp. | | | 5,444,930 | |
| | | | | | | 29,591,315 | |
| Consumer Staples — 10.2% | | | | |
| | 169,460 | | Altria Group, Inc. | | | 8,349,294 | |
| | 71,602 | | Coca-Cola Co. | | | 3,023,036 | |
| | 59,528 | | Philip Morris International, Inc. | | | 4,848,556 | |
| | 127,191 | | Unilever NV ADR | | | 4,965,537 | |
| | | | | | | 21,186,423 | |
| Energy — 11.3% | | | | |
| | 208,372 | | Kinder Morgan, Inc. | | | 8,816,220 | |
| | 59,589 | | Occidental Petroleum Corp. | | | 4,803,469 | |
| | 310,749 | | Plains GP Holdings LP | | | 7,980,034 | |
| | 34,488 | | Total S.A. ADR | | | 1,765,786 | |
| | | | | | | 23,365,509 | |
| Financials — 12.0% | | | | |
| | 65,329 | | Cincinnati Financial Corp. | | | 3,386,002 | |
| | 45,536 | | Erie Indemnity Co. | | | 4,133,303 | |
| | 80,688 | | JPMorgan Chase & Co. | | | 5,049,455 | |
| | 32,472 | | M&T Bank Corp. | | | 4,079,133 | |
| | 137,105 | | OneBeacon Insurance Group, Ltd. | | | 2,221,101 | |
| | 25,426 | | T. Rowe Price Group, Inc. | | | 2,183,076 | |
| | 70,341 | | Wells Fargo Co. | | | 3,856,093 | |
| | | | | | | 24,908,163 | |
| Health Care — 12.2% | | | | |
| | 71,484 | | AbbVie, Inc. | | | 4,677,913 | |
| | 47,320 | | Johnson & Johnson | | | 4,948,252 | |
| | 72,405 | | Merck & Co., Inc. | | | 4,111,880 | |
| | 68,736 | | Novartis AG ADR | | | 6,369,078 | |
| | 92,681 | | Teva Pharmaceutical Industries, Ltd. ADR | | | 5,330,084 | |
| | | | | | | 25,437,207 | |
| Industrials — 8.4% | | | | |
| | 22,070 | | Copa Holdings S.A. | | | 2,287,335 | |
| | 125,575 | | Healthcare Services Group, Inc. | | | 3,884,035 | |
| | 52,916 | | Nielsen Holdings NV | | | 2,366,932 | |
| | 56,784 | | PACCAR, Inc. | | | 3,861,880 | |
| | 43,382 | | United Technologies Corp. | | | 4,988,930 | |
| | | | | | | 17,389,112 | |
| Information Technology — 12.6% | | | | |
| | 42,531 | | Accenture PLC | | | 3,798,444 | |
| | 37,831 | | Apple, Inc. | | | 4,175,786 | |
| | 74,523 | | Automatic Data Processing, Inc. | | | 6,212,982 | |
| | 151,335 | | Microsoft Corp. | | | 7,029,511 | |
| | 66,298 | | QUALCOMM, Inc. | | | 4,927,930 | |
| | | | | | | 26,144,653 | |
| Materials — 1.3% | | | | |
| | 20,528 | | Praxair, Inc. | | | 2,659,608 | |
| | | | | |
| Telecommunication Services — 1.0% | | | | |
| | 53,663 | | Rogers Communications, Inc. | | | 2,085,344 | |
| Total Common Stocks (Cost $128,008,995) | | | 172,767,334 | |
| | | | | |
| Preferred Stocks — 3.2% | | | | |
| | 86,110 | | Public Storage, Inc. — Series O | | | 2,237,999 | |
| | 177,771 | | Public Storage, Inc. — Series S | | | 4,494,051 | |
| Total Preferred Stocks (Cost $6,763,771) | | | 6,732,050 | |
| | | | | |
| Real Estate Investment Trusts — 6.5% | | | | |
| | 111,460 | | Plum Creek Timber Co., Inc. | | | 4,769,374 | |
| | 188,470 | | Redwood Trust, Inc. | | | 3,712,859 | |
| | 70,061 | | W.P. Carey, Inc. | | | 4,911,276 | |
| Total Real Estate Investment Trusts (Cost $12,306,808) | | | 13,393,509 | |
| | | | | |
| Short-Term Investments — 6.7% | | | | |
| | | | | |
| Money Market Funds — 6.7% | | | | |
| | 13,919,063 | | DWS Cash Account Trust — Government & | | | | |
| | | | Agency Securities Portfolio, 0.03%# | | | 13,919,063 | |
| Total Short-Term Investments (Cost $13,919,063) | | | 13,919,063 | |
| Total Investments — 99.7% (Cost $160,998,637) | | | 206,811,956 | |
| Other Assets in Excess of Liabilities — 0.3% | | | 716,333 | |
| NET ASSETS — 100.0% | | $ | 207,528,289 | |
| PORTFOLIO HOLDINGS | | |
| % of Net Assets | | |
| | | |
| Consumer Discretionary | 14.3% | |
| Information Technology | 12.6% | |
| Health Care | 12.2% | |
| Financials | 12.0% | |
| Energy | 11.3% | |
| Consumer Staples | 10.2% | |
| Industrials | 8.4% | |
| Money Market Funds | 6.7% | |
| Real Estate Investment Trusts | 6.5% | |
| Preferred Stocks | 3.2% | |
| Materials | 1.3% | |
| Telecommunication Services | 1.0% | |
| Other Assets and Liabilities | 0.3% | |
| | 100.0% | |
ADR — American Depositary Receipt
#Annualized seven-day yield as of December 31, 2014.
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Sustainable Growth Fund
A Message to Our Shareholders
December 31, 2014
Dear Shareholder:
During the six-month period ended December 31, 2014, the Brown Advisory Sustainable Growth Fund Advisor Shares (the “Fund”) increased 5.45% in value. During the same period, the Russell 1000® Growth Index, the Fund’s benchmark, increased 6.34%.
We fell short of our benchmark over the last six months but ended the period on a positive note, outperforming the benchmark in the fourth quarter. The portfolio benefited from good stock-specific performance in the consumer discretionary and industrials sectors, thanks to solid results from Nike, TJX, Pall and IDEXX Laboratories. We also benefited from our underweight allocation in energy. Generally, we have limited exposure to traditional energy companies. Their businesses rarely offer compelling environmental business advantages (EBA), and they are dependent on a highly unpredictable commodity price, which makes building a strong fundamental investment case difficult.
Performance within the health care and information technology sectors detracted from the Fund’s performance. Within health care, our underweight to the sector coupled with lagging performance from specific stocks negatively impacted Fund performance. Biotechnology stocks performed extremely well during the last six months, and our underweight hurt our relative results. Similarly, within technology, our underexposure to mega-cap names including Apple and Microsoft (which disproportionately affect our market-cap-weighted benchmark’s performance due to their size) negatively impacted our results. Disappointing results from Trimble and Stratasys also led to our relative underperformance in technology.
We added six new names to the portfolio during the period: Amazon.com, Bristol-Myers Squibb, IDEXX Laboratories, Novo Nordisk, NXP Semiconductors and TE Connectivity.
Amazon has a leadership position in e-commerce and cloud-computing services that has led to rapid top-line growth over the last number of years. We believe that the strength of these two trends can support healthy growth for Amazon going forward. The company’s EBA stems from its cloud-computing business (Amazon Web Services or AWS), which helps companies use scaled and shared infrastructure that is inherently more efficient than traditional, on-premise computing.
Bristol-Myers has a leadership position in immunotherapy, and we believe that its emerging solutions will revolutionize how cancer will be treated in the future. We are particularly attracted to the potential of its PD1 immunotherapy treatment for lung cancer, as well as its large pipeline for use in multiple tumor types in earlier lines of therapy for cancer treatment. The company has leading environmental initiatives in its internal operations. Bristol sees a strategic advantage in driving climate change initiatives in order to control costs and also to prepare the company for long-term requirements of climate-change-induced risks.
IDEXX Laboratories is the leading provider of veterinarian diagnostic, reference lab and consulting services. It is the leading innovator in the industry with a research and development budget that is several times greater than its nearest competitor. We are attracted to the company’s recent move toward direct sales and believe that this will help drive a higher level of organic growth going forward. The company’s EBA is centered on two businesses (Water Testing and Livestock, Poultry and Dairy Diagnostics) that together represent roughly 20% of sales and 25% of operating profits. The water business provides testing solutions for detection of E. coli and other microbials, helping to ensure water safety for two billion people around the world. IDEXX sells diagnostic tests used to manage the health status of livestock and poultry to ensure the quality and safety of milk and food. IDEXX was a leading player in the eradication of mad cow disease a few years ago.
Novo Nordisk is the global leader in diabetes treatment with a leading share of the diabetes care market. We are constructive on the company’s new innovations that are set to hit the market in the next 18 months, and we believe that its new offerings could accelerate its earnings growth rate. Novo has a tremendous track record in sustainability. It published its first environmental report in 1994, and in 2004 it began including environmental performance alongside its financial performance in every annual report.
TE Connectivity manufactures over 500,000 products to connect and protect the flow of power and data inside products found in many markets and industries. We are attracted to the company’s strong market positions in transportation and industrial applications, both of which are seeing increased electronic content due to improved safety and environmental performance.
NXP Semiconductors is a supplier of high-performance mixed-signal semiconductor solutions that has expertise in security, connectivity and low-power capability. Low-power semiconductors and sensors make the world a smarter, safer and more efficient place. NXP’s solutions enable LED lighting applications, safer and more efficient cars, low-power notebook computers and secure-payment networks.
www.brownadvisoryfunds.com
Brown Advisory Sustainable Growth Fund
A Message to Our Shareholders
December 31, 2014
We exited our positions in Cummins, IHS, Qualcomm, Rockwood Holdings, Waters and Whole Foods to make room for these new positions that we believe offer more favorable prospects.
To conclude, we feel very good about the stocks in our portfolio. Keeping a long-term focus that seeks companies which we believe exhibit the three tenets of our investment philosophy—strong fundamentals, sustainable competitive advantages including EBA, and valuation discipline—is critical to our process. Our approach is to hold material positions in companies that we believe are making the right investments to thrive over our long-term investment horizon.
Sincerely,
Karina Funk
Portfolio Manager
David Powell
Portfolio Manager
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. The Fund’s investment focus on environmental factors could cause it to make or avoid investments that could result in the Fund underperforming similar funds that do not have an environmental focus. Investments in smaller capitalization companies generally carry greater risk than is customarily associated with larger companies for various reasons such as narrower markets, limited financial resources and less liquid stock. Investments in foreign securities entail certain risks not associated with investments in domestic securities, such as volatility of currency exchange rates, and in some cases, political and economic instability and relatively illiquid markets. These risks are greater for investments in emerging markets.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
www.brownadvisoryfunds.com
Brown Advisory Sustainable Growth Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 97.6% | | | |
| | | | |
| Consumer Discretionary — 18.3% | | | |
| | 17,794 | | Amazon.com, Inc.* | | | 5,522,368 | |
| | 93,454 | | BorgWarner, Inc. | | | 5,135,297 | |
| | 6,690 | | Chipotle Mexican Grill, Inc.* | | | 4,579,372 | |
| | 183,162 | | LKQ Corp.* | | | 5,150,516 | |
| | 70,442 | | Nike, Inc. | | | 6,772,998 | |
| | 71,311 | | Starbucks Corp. | | | 5,851,068 | |
| | 75,459 | | TJX Companies, Inc. | | | 5,174,978 | |
| | | | | | | 38,186,597 | |
| Health Care — 13.2% | | | | |
| | 71,378 | | Bristol-Myers Squibb Co. | | | 4,213,443 | |
| | 78,001 | | Cerner Corp.* | | | 5,043,545 | |
| | 35,321 | | IDEXX Laboratories, Inc.* | | | 5,237,045 | |
| | 101,281 | | Novo Nordisk A.S. | | | 4,286,212 | |
| | 69,171 | | Thermo Fisher Scientific, Inc. | | | 8,666,434 | |
| | | | | | | 27,446,679 | |
| Industrials — 28.9% | | | | |
| | 109,175 | | A. O. Smith Corp. | | | 6,158,562 | |
| | 75,325 | | Canadian National Railway Co. | | | 5,190,646 | |
| | 92,451 | | Danaher Corp. | | | 7,923,975 | |
| | 66,963 | | J.B. Hunt Transport Services, Inc. | | | 5,641,633 | |
| | 48,433 | | Middleby Corp.* | | | 4,799,710 | |
| | 64,087 | | Pall Corp. | | | 6,486,245 | |
| | 61,812 | | Stericycle, Inc.* | | | 8,102,317 | |
| | 118,941 | | Verisk Analytics, Inc.* | | | 7,618,171 | |
| | 93,788 | | Westinghouse Air Brake Technologies Corp. | | | 8,149,239 | |
| | | | | | | 60,070,498 | |
| Information Technology — 31.5% | | | | |
| | 75,593 | | Akamai Technologies, Inc.* | | | 4,759,335 | |
| | 41,476 | | Apple, Inc. | | | 4,578,121 | |
| | 53,116 | | Arm Holdings PLC ADR | | | 2,459,271 | |
| | 59,337 | | eBay, Inc.* | | | 3,329,993 | |
| | 9,031 | | Google, Inc. — Class A* | | | 4,792,391 | |
| | 7,158 | | Google, Inc. — Class C* | | | 3,767,971 | |
| | 60,675 | | Intuit, Inc. | | | 5,593,628 | |
| | 69,572 | | NXP Semiconductors NV* | | | 5,315,301 | |
| | 97,133 | | Salesforce.com, Inc.* | | | 5,760,958 | |
| | 53,584 | | Stratasys, Ltd.* | | | 4,453,366 | |
| | 131,117 | | TE Connectivity, Ltd. | | | 8,293,150 | |
| | 121,015 | | Trimble Navigation, Ltd.* | | | 3,211,738 | |
| | 35,388 | | Visa, Inc. | | | 9,278,734 | |
| | | | | | | 65,593,957 | |
| Materials — 5.7% | | | | |
| | 65,023 | | Ecolab, Inc. | | | 6,796,204 | |
| | 38,934 | | Praxair, Inc. | | | 5,044,289 | |
| | | | | | | 11,840,493 | |
| Total Common Stocks (Cost $143,197,959) | | | 203,138,224 | |
| | | | | | | | |
| Short-Term Investments — 2.5% | | | | |
| | | | | |
| Money Market Funds — 2.5% | | | | |
| | 5,147,346 | | DWS Cash Account Trust — Government & | | | | |
| | | | Agency Securities Portfolio, 0.03%# | | | 5,147,346 | |
| Total Short-Term Investments (Cost $5,147,346) | | | 5,147,346 | |
| Total Investments — 100.1% (Cost $148,345,305) | | | 208,285,570 | |
| Liabilities in Excess of Other Assets — (0.1)% | | | (222,831 | ) |
| NET ASSETS — 100.0% | | $ | 208,062,739 | |
| PORTFOLIO HOLDINGS | | |
| % of Net Assets | | |
| | | |
| Information Technology | 31.5% | |
| Industrials | 28.9% | |
| Consumer Discretionary | 18.3% | |
| Health Care | 13.2% | |
| Materials | 5.7% | |
| Money Market Funds | 2.5% | |
| Other Assets and Liabilities | (0.1)% | |
| | 100.0% | |
ADR — American Depositary Receipt
| * | Non-Income Producing |
| # | Annualized seven-day yield as of December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Small-Cap Growth Fund
A Message to Our Shareholders
December 31, 2014
Dear Shareholder:
During the six-month period ended December 31, 2014, the Brown Advisory Small-Cap Growth Fund Investor Shares (the “Fund”) rose 3.23% in value. During the same period, the Russell 2000 Growth Index (the “Index”), the Fund’s benchmark, increased 3.31%.
For the six months ended December 31, 2014, stock prices rose solidly as a robust fourth-quarter rally made up for relatively weak returns in the third quarter. The primary story lines during the period were the growing outperformance of large caps relative to small caps, the eclectic set of sectors that led the market’s performance and the continued ascent of the biopharmaceutical complex contrasted with the collapse in the energy sector.
Smaller companies spent the bulk of 2014 consolidating gains from prior years and small-cap returns generally lagged those of large-cap stocks. Higher-beta biopharmaceutical stocks and yield proxies such as REITs, consumer staples and utilities were the biggest drivers of benchmark returns. This leadership pairing is rare. Typically, we would anticipate a lack of positive correlation between these two market segments. However, the common underlying force spurring gains across these subsectors was the anticipation of continued low interest rates. Low rates force investors to chase yield, a phenomenon that we have seen play out for several years. Biotech stocks are also impacted heavily by interest rates because they are long-duration assets whose ultimate projected payoff is often years in the future. So, their stock prices are heavily influenced by changes in the discount rate that investors apply to their future potential earnings.
With the meteoric rise over the last few years of the biopharmaceutical complex, its weighting in the benchmark has grown considerably. It now represents more than half of the benchmark’s health care weighting and more than 14% of the entire Index. To provide some context, this weighting is greater than that achieved in early 2000 during the height of speculative fervor within the sector. In stark contrast, the energy segment has shrunk considerably to approximately 3% of the benchmark, well below historical averages thanks to the recent collapse in oil prices.
Performance attribution for the quarter was notably influenced by our positioning relative to these major sector swings. Our underweight in the energy sector was a positive contributor to performance during the six-month period, and our lone energy holding, Helix Energy Services, fell approximately 16% for the period, which compared favorably to the approximate 45% decline of the energy stocks within the benchmark. On the other hand, our large underweight to biopharmaceutical stocks was a headwind, despite strong absolute performance from our health care holdings.
But as always, it is not stock selection that drives our decision-making, nor sector allocation. The focus of our research is squarely on the progress of each of our holdings relative to its investment thesis.
On the positive side of the ledger were Knight Transportation, Receptos, MAXIMUS, Sapient and Fair Isaac. Our investment thesis for Knight Transportation finally played out in 2014, and the stock moved higher as earnings expectations were revised upward on improved business activity from an improving U.S. economy and the company’s achievement of greater pricing power. Receptos, a clinical-stage biopharmaceutical company, nearly tripled during the period following positive data surrounding its clinical efforts to treat multiple sclerosis. MAXIMUS, a multiyear holding, rebounded from concerns that its prodigious growth would slow in the second half of 2014 and into 2015. Strong earnings and preliminary guidance by management allayed investor fears. Sapient was acquired by Publicis at a sizable premium. Finally, Fair Isaac demonstrated progress against its long-term plan to drive the “consumerization” of its FICO Score product, and to increase the proportion of its business sold on a subscription basis.
Many of our primary detractors for the period were the same stocks that propelled us in 2013 and early 2014. Online vacation-rental provider HomeAway started the year on a high note as listings growth impressed investors and speculation spread regarding a potential take-out by Priceline. However, the stock eventually retreated when a buyout did not materialize. E2 Open, a relatively small position, was greatly challenged when three of its customers were acquired, leading to lost revenues. Interactive Intelligence, a long-term holding, declined as investors worried about future earnings uncertainty driven by its ongoing shift from a license-based to a subscription-based business model. Taking a three-year view, we believe that Interactive Intelligence will further its technology advantage over incumbent and upstart players in the multibillion contact center software market, opening the door to market-share gains and increased profitability.
www.brownadvisoryfunds.com
Brown Advisory Small-Cap Growth Fund
A Message to Our Shareholders
December 31, 2014
We believe that our research-driven, relatively concentrated investment strategy can produce competitive returns over the long-term. While our approach has the potential to lead to periods of both higher and lower relative short-term performance, it is the best way we know to seek what Einstein referred to as the most powerful force on Earth—the power of compounding. We look forward to updating you on our progress in 2015.
Sincerely,
Christopher A. Berrier
Portfolio Manager
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. Investments in smaller companies generally carry greater risk than is customarily associated with larger companies for various reasons such as narrower markets, limited financial resources and less liquid stock. The value of the Fund’s investments in REITs may change in response to changes in the real estate market such as declines in the value of real estate, lack of available capital or financing opportunities, and increases in property taxes or operating costs. The Fund may invest in ETFs, which may trade at a discount to the aggregate value of the underlying securities and although expense ratios for ETFs are generally low, frequent trading of ETFs by the Fund can generate brokerage expenses. Investments in foreign securities entail certain risks not associated with investments in domestic securities, such as volatility of currency exchange rates, and in some cases, political and economic instability and relatively illiquid markets. These risks are greater for investments in emerging markets. Privately Placement issued securities are restricted securities that are not publicly traded. Delay or difficulty in selling such securities may result in a loss to the Fund.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
www.brownadvisoryfunds.com
Brown Advisory Small-Cap Growth Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 96.7% | | | |
| | | | |
| Consumer Discretionary — 7.1% | | | |
| | 3,584 | | ANN, Inc.* | | | 130,744 | |
| | 81,315 | | Ascent Capital Group, Inc.* | | | 4,304,003 | |
| | 115,927 | | Bright Horizons Family Solutions, Inc.* | | | 5,449,728 | |
| | 22,472 | | CoStar Group, Inc.* | | | 4,126,533 | |
| | 22,205 | | Harman International Industries, Inc. | | | 2,369,496 | |
| | 135,707 | | Krispy Kreme Doughnuts, Inc.* | | | 2,678,856 | |
| | | | | | | 19,059,360 | |
| Consumer Staples — 1.9% | | | | |
| | 23,887 | | PriceSmart, Inc. | | | 2,178,972 | |
| | 33,084 | | Treehouse Foods, Inc.* | | | 2,829,675 | |
| | | | | | | 5,008,647 | |
| Energy — 1.9% | | | | |
| | 238,013 | | Helix Energy Solutions Group, Inc.* | | | 5,164,882 | |
| | | | | |
| Financials — 5.6% | | | | |
| | 84,020 | | City National Corp. | | | 6,789,656 | |
| | 88,831 | | ConnectOne Bancorp, Inc. | | | 1,687,789 | |
| | 115,246 | | Prosperity Bancshares, Inc. | | | 6,380,019 | |
| | | | | | | 14,857,464 | |
| Health Care — 12.5% | | | | |
| | 18,195 | | Acceleron Pharma, Inc.* | | | 708,877 | |
| | 23,866 | | Cardiovascular Systems, Inc.* | | | 717,889 | |
| | 87,875 | | Charles River Laboratories International, Inc.* | | | 5,592,365 | |
| | 37,948 | | Coherus BioSciences, Inc.* | | | 619,311 | |
| | 47,574 | | Covance, Inc.* | | | 4,940,084 | |
| | 118,191 | | Dyax Corp.* | | | 1,661,766 | |
| | 9,348 | | Endologix, Inc.* | | | 142,931 | |
| | 41,741 | | Henry Schein, Inc.* | | | 5,683,037 | |
| | 35,624 | | IDEXX Laboratories, Inc.* | | | 5,281,971 | |
| | 38,064 | | Incyte Corp.* | | | 2,782,859 | |
| | 30,701 | | Omeros Corp.* | | | 760,771 | |
| | 19,414 | | Receptos, Inc.* | | | 2,378,409 | |
| | 12,327 | | Ultragenyx Pharmaceutical, Inc.* | | | 540,909 | |
| | 42,912 | | WuXi PharmaTech, Inc. ADR* | | | 1,444,847 | |
| | | | | | | 33,256,026 | |
| Industrials — 25.1% | | | | |
| | 91,473 | | Advisory Board Company* | | | 4,480,347 | |
| | 40,552 | | Colfax Corp.* | | | 2,091,267 | |
| | 86,371 | | Corporate Executive Board Co. | | | 6,264,489 | |
| | 102,587 | | DigitalGlobe, Inc.* | | | 3,177,119 | |
| | 75,239 | | Esco Technologies, Inc. | | | 2,776,319 | |
| | 43,859 | | Healthcare Services Group, Inc. | | | 1,356,559 | |
| | 111,247 | | HEICO Corp. | | | 6,719,319 | |
| | 120,028 | | Hexcel Corp.* | | | 4,979,962 | |
| | 69,338 | | IDEX Corp. | | | 5,397,270 | |
| | 189,487 | | Knight Transportation, Inc. | | | 6,378,132 | |
| | 80,274 | | Landstar System, Inc. | | | 5,822,273 | |
| | 108,849 | | Roadrunner Transportation Systems, Inc.* | | | 2,541,624 | |
| | 75,478 | | Team, Inc.* | | | 3,053,840 | |
| | 204,881 | | Waste Connections, Inc. | | | 9,012,715 | |
| | 60,308 | | Woodward, Inc. | | | 2,968,963 | |
| | | | | | | 67,020,198 | |
| Information Technology — 40.6% | | | | |
| | 198,226 | | Applied Micro Circuits Corp.* | | | 1,292,434 | |
| | 261,395 | | Aruba Networks, Inc.* | | | 4,752,161 | |
| | 86,680 | | Blackbaud, Inc. | | | 3,749,777 | |
| | 224,536 | | Broadridge Financial Solutions, Inc. | | | 10,369,073 | |
| | 164,512 | | BroadSoft, Inc.* | | | 4,774,138 | |
| | 55,784 | | Cavium, Inc.* | | | 3,448,567 | |
| | 27,203 | | CommVault Systems, Inc.* | | | 1,406,123 | |
| | 210,130 | | CoreLogic, Inc.* | | | 6,638,007 | |
| | 16,473 | | Cvent, Inc.* | | | 458,608 | |
| | 134,766 | | E2open, Inc.* | | | 1,295,101 | |
| | 305,247 | | EXFO, Inc.*† | | | 1,053,102 | |
| | 121,354 | | Fair Isaac Corp. | | | 8,773,894 | |
| | 211,056 | | Genpact, Ltd.* | | | 3,995,290 | |
| | 18,236 | | Global Payments, Inc. | | | 1,472,192 | |
| | 291,731 | | HomeAway, Inc.* | | | 8,687,749 | |
| | 113,504 | | Informatica Corp.* | | | 4,328,475 | |
| | 176,985 | | Interactive Intelligence Group, Inc.* | | | 8,477,582 | |
| | 150,417 | | MAXIMUS, Inc. | | | 8,248,868 | |
| | 247,867 | | Pegasystems, Inc. | | | 5,148,198 | |
| | 69,227 | | PROS Holdings, Inc.* | | | 1,902,358 | |
| | 6,846 | | Riverbed Technology, Inc.* | | | 139,727 | |
| | 204,757 | | Sapient Corp.* | | | 5,094,354 | |
| | 74,735 | | Synchronoss Technologies, Inc.* | | | 3,128,407 | |
| | 35,600 | | Ultimate Software Group, Inc.* | | | 5,226,614 | |
| | 19,464 | | WEX, Inc.* | | | 1,925,379 | |
| | 131,530 | | Xoom Corp.* | | | 2,303,090 | |
| | | | | | | 108,089,268 | |
| Materials — 2.0% | | | | |
| | 67,636 | | Rockwood Holdings, Inc. | | | 5,329,717 | |
| Total Common Stocks (Cost $170,760,921) | | | 257,785,562 | |
| | | | | |
| Private Placements — 0.9% | | | | |
| | 17,200 | | Greenspring Global Partners IV-B, L.P.*^† | | | 2,222,387 | |
| | 64,769 | | Greenspring Global Partners V-B, L.P.*~† | | | 85,884 | |
| Total Private Placements (Cost $764,907) | | | 2,308,271 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Small-Cap Growth Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | | |
| Short-Term Investments — 2.6% | | | |
| | | |
| Money Market Funds — 2.6% | | |
| | 7,085,040 | | DWS Cash Account Trust — Government | | | |
| | | | & Agency Securities Portfolio, 0.03%# | | | 7,085,040 | |
| Total Short-Term Investments (Cost $7,085,040) | | | 7,085,040 | |
| Total Investments — 100.2% (Cost $178,610,868) | | | 267,178,873 | |
| Liabilities in Excess of Other Assets — (0.2)% | | | (638,764 | ) |
| NET ASSETS — 100.0% | | $ | 266,540,109 | |
| PORTFOLIO HOLDINGS | | |
| % of Net Assets | | |
| | | |
| Information Technology | 40.6% | |
| Industrials | 25.1% | |
| Health Care | 12.5% | |
| Consumer Discretionary | 7.1% | |
| Financials | 5.6% | |
| Money Market Funds | 2.6% | |
| Materials | 2.0% | |
| Energy | 1.9% | |
| Consumer Staples | 1.9% | |
| Private Placements | 0.9% | |
| Other Assets and Liabilities | (0.2)% | |
| | 100.0% | |
ADR — American Depositary Receipt
| * | Non-Income Producing |
| ^ | Security is exempt from registration under Rule 144A of the Securities Act of 1933. Security is fair valued under the supervision of the Board of Trustees and was acquired from February 2008 to September 2014 as part of a $2,000,000 capital commitment. At December 31, 2014, $1,720,000 of the capital commitment has been fulfilled by the Fund. |
| ~ | Security is exempt from registration under Rule 144A of the Securities Act of 1933. Security is fair valued under the supervision of the Board of Trustees and was acquired from October 2012 to September 2014 as part of a $100,000 capital commitment. At December 31, 2014, $64,769 of the capital commitment has been fulfilled by the Fund. |
| † | All or a portion of this security is considered illiquid. At December 31, 2014, the total market value of securities considered illiquid was $2,709,009 or 1.0% of net assets. |
| # | Annualized seven-day yield as of December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Small-Cap Fundamental Value Fund
A Message to Our Shareholders
December 31, 2014
Dear Shareholder:
During the six-month period ended December 31, 2014, the Brown Advisory Small-Cap Fundamental Value Fund Investor Shares (the “Fund”) increased 3.94% in value. During the same period, the Russell 2000 Value Index (the “Index” or the “Benchmark”), increased 0.01%.
The biggest contributor to the Fund’s outperformance during the six-month period was stock selection in the consumer discretionary, energy, materials and information technology sectors. The largest detractors to performance were in the health care and industrial sectors. The overwhelming source of our relative performance was due to our energy investments, which held their value during a period when the energy constituents of the benchmark declined markedly. We attribute the disparity in returns to the manifestation of our investment philosophy—namely, our focus on companies that generate consistent and sustainable levels of free cash flow.
Denny’s was the Fund’s largest individual contributor to performance during the period. Denny’s reported improving same-store sales as the year progressed, as the company’s remodel program and new advertising campaign drove increasing traffic to its restaurants. The company raised 2014 guidance after its third-quarter report, and the management team continues to return money to shareholders through an aggressive share repurchase program (from the start of the year through the end of September 2014, Denny’s had bought back 6% of its outstanding shares). Core-Mark and Broadridge also contributed to returns, with both benefiting from solid operational performance and commendable capital-allocation decisions.
The largest detractor from performance was EnPro Industries, a diversified manufacturer of engineered industrial products. EnPro Industries sold off along with the industrial sector in reaction to the decline in energy prices and concerns about global GDP growth. We still like the EnPro story and used recent weakness in the stock to add to our position. We feel that the market is assigning little to no value to EnPro’s unconsolidated GST subsidiary and that the company’s outstanding asbestos litigation is likely to be settled in the near future.
We added six new names to the Fund’s portfolio during the recent six-month period. One of these positions was Clearwater Paper Corp. Clearwater is a leading North American producer of private-label tissue and paperboard products. We believe that Clearwater might be on the verge of seeing meaningful margin expansion and growth in free cash flow, but we also believe that the market currently underappreciates these potential improvements. The management team at Clearwater has done an admirable job utilizing the cash flows from its strong paperboard platform to develop a leading private-label tissue business in the predictable and relatively consolidated North American market. We believe that completion of its Shelby, NC, Thru Air Dried (TAD) facility is a material catalyst for Clearwater for a number of reasons. The new capacity may allow Clearwater to match the quality of products from branded manufacturers, maintain lower prices, gain increasing market share for its private-label products, drive margins closer to long-term targets of 15 to 17%, and set up an inflection point for free-cash-flow growth and return of capital to shareholders as the firm’s capital expenditures drops by 60% from 2012 levels. Lastly, we believe that the July 29, 2014, refinancing of Clearwater’s 7.125% senior notes was overlooked by the market and provides a tangible catalyst to earnings vs. market expectations for the second half of 2014 and the coming year.
Three of our exits during the period were a result of corporate actions. We sold Susser Petroleum after the announcement of the Susser Holdings transaction with Energy Transfer Partners. NorthStar Realty Finance Corp completed its announced spin-off July 1st of NorthStar Asset Management, and we sold our remaining stake in the realty-finance company to increase our position in the new asset-management spinoff. GFI Group was subject to a bidding war between CME Group and BGC Partners, and we sold our position in excess of the current buyout offer as the market participants began speculating.
In the early part of 2015, we are focused on the risks associated with significant duress in the large and economically important energy sector, especially against a backdrop of nearly two-and-a-half years of strong absolute performance for small-cap stocks. During these times, we feel that our focus on investments in companies generating high levels of sustainable free cash flow is especially appropriate and essential for providing a risk-management framework for our client’s capital.
Sincerely,
J. David Schuster
Portfolio Manager
www.brownadvisoryfunds.com
Brown Advisory Small-Cap Fundamental Value Fund
A Message to Our Shareholders
December 31, 2014
Past performance is not a guarantee of future results.
Investments in smaller companies generally carry greater risk than is customarily associated with larger companies for various reasons such as narrower markets, limited financial resources and less liquid stock. The value of the Fund’s investments in REITs may change in response to changes in the real estate market such as declines in the value of real estate, lack of available capital or financing opportunities, and increases in property taxes or operating costs. The Fund may invest in ETFs, which may trade at a discount to the aggregate value of the underlying securities and although expense ratios for ETFs are generally low, frequent trading of ETFs by the Fund can generate brokerage expenses. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investments in foreign securities entail certain risks not associated with investments in domestic securities, such as volatility of currency exchange rates, and in some cases, political and economic instability and relatively illiquid markets. The risks of investments in derivatives, including options, futures contracts and options on futures contracts include imperfect correlation between the value of these instruments and the underlying assets; risks of default by the other party to the derivative transactions; risks that the transactions may result in losses that partially or completely offset gains in portfolio positions; and risks that the derivative transactions may not be liquid. Private Placement issued securities are restricted securities that are not publicly traded. Delay or difficulty in selling such securities may result in a loss to the Fund.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
www.brownadvisoryfunds.com
Brown Advisory Small-Cap Fundamental Value Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 93.0% | | | |
| | | |
| Consumer Discretionary — 15.6% | | |
| | 256,965 | | Ascent Capital Group, Inc.* | | | 13,601,158 | |
| | 256,430 | | Cato Corp. | | | 10,816,217 | |
| | 484,166 | | Core-Mark Holding Co., Inc. | | | 29,984,400 | |
| | 322,396 | | Culp, Inc.† | | | 6,989,545 | |
| | 2,425,682 | | Denny’s Corp.* | | | 25,008,782 | |
| | 617,676 | | Destination Maternity Corp. | | | 9,851,932 | |
| | 299,257 | | Starz, Inc.* | | | 8,887,933 | |
| | | | | | | 105,139,967 | |
| Consumer Staples — 1.2% | | | |
| | 88,332 | | Casey’s General Stores, Inc. | | | 7,978,146 | |
| | | | |
| Energy — 4.9% | | | |
| | 270,349 | | Bristow Group, Inc. | | | 17,786,261 | |
| | 382,771 | | RigNet, Inc.* | | | 15,705,094 | |
| | | | | | | 33,491,355 | |
| Financials — 27.0% | | | |
| | 1,339,281 | | American Capital, Ltd.* | | | 19,566,895 | |
| | 380,094 | | American Equity Investment Life Holding Co. | | | 11,094,944 | |
| | 170,239 | | Assurant, Inc. | | | 11,649,455 | |
| | 433,628 | | Capitol Federal Financial, Inc. | | | 5,541,766 | |
| | 423,534 | | Cash America International, Inc. | | | 9,580,339 | |
| | 160,603 | | Farmers Capital Bank Corp.*† | | | 3,740,444 | |
| | 202,699 | | Fly Leasing, Ltd. ADR | | | 2,665,492 | |
| | 784,279 | | Forest City Enterprises, Inc.* | | | 16,705,143 | |
| | 128,442 | | Kemper Corp. | | | 4,638,041 | |
| | 502,209 | | Maiden Holdings, Ltd. | | | 6,423,253 | |
| | 372,064 | | National General Holdings Corp. | | | 6,924,111 | |
| | 708,795 | | Northstar Asset Management Group, Inc. | | | 15,997,503 | |
| | 336,520 | | OceanFirst Financial Corp.† | | | 5,767,953 | |
| | 507,625 | | Oritani Financial Corp. | | | 7,817,425 | |
| | 235,551 | | Pacific Premier Bancorp, Inc.* | | | 4,082,099 | |
| | 203,966 | | Renasant Corp. | | | 5,900,736 | |
| | 750,017 | | Synovus Financial Corp. | | | 20,317,961 | |
| | 1,617,274 | | TFS Financial Corp. | | | 24,073,123 | |
| | | | | | | 182,486,683 | |
| Health Care — 1.9% | | | |
| | 16,508 | | Addus HomeCare Corp.* | | | 400,649 | |
| | 291,762 | | Air Methods Corp.* | | | 12,846,281 | |
| | | | | | | 13,246,930 | |
| Industrials — 16.3% | | | |
| | 631,706 | | Albany International Corp.† | | | 23,998,511 | |
| | 402,043 | | DigitalGlobe, Inc.* | | | 12,451,272 | |
| | 438,982 | | EnPro Industries, Inc.* | | | 27,550,510 | |
| | 409,272 | | Kadant, Inc.† | | | 17,471,822 | |
| | 355,468 | | McGrath RentCorp | | | 12,747,082 | |
| | 226,450 | | Thermon Group Holdings, Inc.* | | | 5,477,826 | |
| | 334,475 | | TriMas Corp.* | | | 10,465,723 | |
| | | | | | | 110,162,746 | |
| Information Technology — 16.9% | | | |
| | 629,029 | | Broadridge Financial Solutions, Inc. | | | 29,048,559 | |
| | 409,538 | | CoreLogic, Inc.* | | | 12,937,305 | |
| | 556,758 | | CTS Corp.† | | | 9,926,995 | |
| | 50,858 | | DST Systems, Inc. | | | 4,788,281 | |
| | 476,456 | | Echostar Corp.* | | | 25,013,940 | |
| | 214,138 | | MAXIMUS, Inc. | | | 11,743,328 | |
| | 661,150 | | MoneyGram International, Inc.* | | | 6,009,853 | |
| | 131,159 | | MTS Systems Corp. | | | 9,840,860 | |
| | 272,285 | | Vishay Precision Group, Inc.*† | | | 4,672,411 | |
| | | | | | | 113,981,532 | |
| Materials — 6.7% | | | |
| | 227,169 | | Clearwater Paper Corp.* | | | 15,572,435 | |
| | 200,754 | | Innophos Holdings, Inc. | | | 11,734,071 | |
| | 181,196 | | KMG Chemicals, Inc. | | | 3,623,920 | |
| | 235,551 | | Neenah Paper, Inc. | | | 14,196,659 | |
| | | | | | | 45,127,085 | |
| Telecommunication Services — 2.5% | | | |
| | 246,258 | | Atlantic Tele-Network, Inc. | | | 16,644,578 | |
| Total Common Stocks (Cost $486,642,802) | | 628,259,022 | |
| | | | |
| Real Estate Investment Trusts — 3.2% | | | |
| | 1,140,771 | | Campus Crest Communities, Inc. | | | 8,339,036 | |
| | 1,646,182 | | MFA Financial, Inc. | | | 13,152,994 | |
| Total Real Estate Investment Trusts (Cost $20,619,838) | | 21,492,030 | |
| | | | |
| Short-Term Investments — 3.3% | | | |
| | | | |
| Money Market Funds — 3.3% | | | |
| | 22,793,940 | | DWS Cash Account Trust — Government | | | | |
| | | | & Agency Securities Portfolio, 0.03%# | | | 22,793,940 | |
| Total Short-Term Investments (Cost $22,793,940) | | 22,793,940 | |
| Total Investments — 99.5% (Cost $530,056,580) | | | 672,544,992 | |
| Other Assets in Excess of Liabilities — 0.5% | | | 3,133,438 | |
| NET ASSETS — 100.0% | | $ | 675,678,430 | |
| PORTFOLIO HOLDINGS | | |
| % of Net Assets | | |
| | | |
| Financials | 27.0% | |
| Information Technology | 16.9% | |
| Industrials | 16.3% | |
| Consumer Discretionary | 15.6% | |
| Materials | 6.7% | |
| Energy | 4.9% | |
| Money Market Funds | 3.3% | |
| Real Estate Investment Trusts | 3.2% | |
| Telecommunication Services | 2.5% | |
| Health Care | 1.9% | |
| Consumer Staples | 1.2% | |
| Other Assets and Liabilities | 0.5% | |
| | 100.0% | |
ADR — American Depositary Receipt
| * | Non-Income Producing |
| † | All or a portion of this security is considered illiquid. At December 31, 2014, the total market value of securities considered illiquid was $18,721,356 or 2.8% of net assets. |
| # | Annualized seven-day yield as of December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Opportunity Fund
A Message to Our Shareholders
December 31, 2014
Dear Shareholder:
During the six-month period ended December 31, 2014, the Brown Advisory Opportunity Fund (the “Fund”) increased 4.05% in value. During the same period, the Russell 3000 Index, the Fund’s benchmark, increased 5.25%.
During the six-month period, health care was our best-performing sector, primarily driven by several of our biotechnology positions. Biotechnology, in general, continues to perform well after having a banner year in 2013. Receptos, our largest biotechnology holding, has a robust drug development program, and it is currently developing a drug for the treatment of multiple sclerosis with promising efficacy and safety indications. Recently, some favorable data was released showing efficacy of this drug to treat another illness, which has attracted investors to the stock. This stock along with several other biotech holdings moved higher as investors continue to embrace the sector broadly. Intuitive Surgical, another of our health care holdings, was also a big positive contributor. About this time a year ago, we were writing about it as one of our worst-performing holdings. However, the company recently released a new version of its da Vinci robotic surgical device, an indispensable tool used by surgeons to conduct minimally invasive procedures. The new version of the system has opened new avenues in areas such as general surgery, which has rejuvenated procedure growth, and the stock rebounded during the recent period.
The price of crude oil and the energy sector declined dramatically over the last six months. This decline was exacerbated when OPEC, which controls the majority of excess oil production capacity, announced that it would not reduce production levels in order to support the price of crude. This announcement was viewed as a marked departure from its past behavior (traditionally OPEC has chosen to tighten supply in an effort to bolster declining oil prices) and came as a surprise to many market participants. We hold several quality oil-related businesses in the portfolio, and we are closely monitoring how the ongoing situation with oil prices is impacting our holdings. While consensus expectations are for oil prices to recover, we have been selective about making changes to our energy positions. For example, in July, energy-sector valuations broadly started to compress, and we upgraded from a commodity-oriented holding into what we view as a higher-quality company that offers specialized technology to the marketplace. Historically, the best opportunities for long-term outperformance in the energy sector have been during periods when oil prices are low, yet we are cognizant of the fact that the oil market may not have hit its bottom yet.
Performance of our technology holdings was mixed. Two of our best performers during the period—Apple and Fair Isaac—are technology firms, while HomeAway suffered through a more difficult period. HomeAway has an excellent technology platform for enabling vacation rentals, and in our view, the firm is supported by strong fundamentals; however, the recent rise in the dollar and concerns regarding heightened competition have weighed on the stock price. We have been adding to our HomeAway position on this weakness as our investment thesis remains intact.
This has been a challenging period for the Opportunity Fund from a relative return standpoint. Our goal as always is to find exceptional investment opportunities using our bottom-up research process, and while we are disappointed in our recent underperformance, we recognize that good long-term investment strategies have a high probability of eventually going through interim periods of weakness. Despite the fact that markets are trading at or near all-time highs, we are still able to find opportunities that we believe have either been ignored or misunderstood by Wall Street. We will continue to populate the portfolio with these ideas as we believe that this approach will produce competitive returns over the long-term.
Sincerely,
Maneesh Bajaj, CFA
Portfolio Manager
Eric Gordon, CFA
Portfolio Manager
Paul Li, Ph.D., CFA
Portfolio Manager
www.brownadvisoryfunds.com
Brown Advisory Opportunity Fund
A Message to Our Shareholders
December 31, 2014
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. The Fund invests in small and medium capitalization companies which carry greater risk than is associated with larger companies for various reasons, such as narrower markets, limited financial resources and less liquid stock. The value of the Fund’s investments in REITs may change in response to changes in the real estate market such as declines in the value of real estate, lack of available capital or financing opportunities, and increases in property taxes or operating costs. The Fund may invest in ETFs, which may trade at a discount to the aggregate value of the underlying securities and although expense ratios for ETFs are generally low, frequent trading of ETFs by the Fund can generate brokerage expenses. Investments in foreign securities entail certain risks not associated with investments in domestic securities, such as volatility of currency exchange rates, and in some cases, political and economic instability and relatively illiquid markets. These risks are greater for investments in emerging markets. Private Placement issued securities are restricted securities that are not publicly traded. Delay or difficulty in selling such securities may result in a loss to the Fund.
Diversification does not assure a profit or protect against loss in a declining market.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
www.brownadvisoryfunds.com
Brown Advisory Opportunity Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 96.6% | | | |
| | | | |
| Consumer Discretionary — 14.0% | | | |
| | 1,000 | | Alibaba Group Holding, Ltd.* | | | 103,940 | |
| | 545 | | Amazon.com, Inc.* | | | 169,141 | |
| | 4,239 | | Best Buy, Inc. | | | 165,236 | |
| | 3,028 | | Bright Horizons Family Solutions, Inc.* | | | 142,346 | |
| | 171 | | Chipotle Mexican Grill, Inc.* | | | 117,051 | |
| | 3,792 | | Discovery Communications, Inc.* | | | 127,866 | |
| | 1,914 | | Garmin, Ltd. | | | 101,117 | |
| | 7,322 | | Krispy Kreme Doughnuts, Inc.* | | | 144,536 | |
| | 4,129 | | LKQ Corp.* | | | 116,107 | |
| | 2,191 | | Lowe’s Companies, Inc. | | | 150,741 | |
| | 2,050 | | Starbucks Corp. | | | 168,203 | |
| | 2,805 | | Under Armour, Inc.* | | | 190,460 | |
| | | | | | | 1,696,744 | |
| Consumer Staples — 5.0% | | | | |
| | 1,584 | | Estee Lauder Companies, Inc. | | | 120,701 | |
| | 1,540 | | Mead Johnson Nutrition Co. | | | 154,832 | |
| | 1,702 | | PriceSmart, Inc. | | | 155,256 | |
| | 3,388 | | Whole Foods Market, Inc. | | | 170,823 | |
| | | | | | | 601,612 | |
| Energy — 6.8% | | | | |
| | 971 | | Core Laboratories NV | | | 116,850 | |
| | 1,314 | | Dril-Quip, Inc.* | | | 100,823 | |
| | 3,250 | | FMC Technologies, Inc.* | | | 152,230 | |
| | 3,716 | | Helix Energy Solutions Group, Inc.* | | | 80,637 | |
| | 1,310 | | National Oilwell Varco, Inc. | | | 85,844 | |
| | 2,397 | | Oceaneering International, Inc. | | | 140,968 | |
| | 1,728 | | Schlumberger NV | | | 147,589 | |
| | | | | | | 824,941 | |
| Financials — 16.3% | | | | |
| | 11,902 | | American Capital, Ltd.* | | | 173,888 | |
| | 9,352 | | Charles Schwab Corp. | | | 282,337 | |
| | 3,197 | | City National Corp. | | | 258,350 | |
| | 2,946 | | ConnectOne Bancorp, Inc. | | | 55,974 | |
| | 5,894 | | Forest City Enterprises, Inc.* | | | 125,542 | |
| | 3,468 | | JPMorgan Chase & Co. | | | 217,027 | |
| | 1,914 | | Prosperity Bancshares, Inc. | | | 105,959 | |
| | 2,903 | | Realogy Holdings Corp.* | | | 129,155 | |
| | 11,009 | | Regions Financial Corp. | | | 116,255 | |
| | 2,888 | | SunTrust Banks, Inc. | | | 121,007 | |
| | 6,776 | | Synovus Financial Corp. | | | 183,562 | |
| | 13,616 | | TFS Financial Corp. | | | 202,674 | |
| | | | | | | 1,971,730 | |
| Health Care — 14.4% | | | | |
| | 1,293 | | athenahealth, Inc.* | | | 188,390 | |
| | 2,126 | | Baxter International, Inc. | | | 155,815 | |
| | 2,495 | | Bristol-Myers Squibb Co. | | | 147,280 | |
| | 991 | | Coherus BioSciences, Inc.* | | | 16,173 | |
| | 2,269 | | DaVita HealthCare Partners, Inc.* | | | 171,854 | |
| | 5,306 | | Dyax Corp.* | | | 74,602 | |
| | 2,702 | | Express Scripts Holding Co.* | | | 228,778 | |
| | 413 | | Intuitive Surgical, Inc.* | | | 218,452 | |
| | 1,194 | | Juno Therapeutics, Inc.* | | | 62,351 | |
| | 822 | | Merck & Co., Inc. | | | 46,682 | |
| | 2,194 | | Omeros Corp.* | | | 54,367 | |
| | 1,857 | | Receptos, Inc.* | | | 227,501 | |
| | 11,976 | | Tandem Diabetes Care, Inc.* | | | 152,095 | |
| | | | | | | 1,744,340 | |
| Industrials — 9.8% | | | | |
| | 2,427 | | Albany International Corp. | | | 92,202 | |
| | 1,312 | | Canadian National Railway Co. | | | 90,410 | |
| | 4,384 | | Colfax Corp.* | | | 226,083 | |
| | 1,412 | | EnPro Industries, Inc.* | | | 88,617 | |
| | 4,395 | | Fastenal Co. | | | 209,026 | |
| | 3,474 | | HEICO Corp. | | | 209,829 | |
| | 805 | | United Rentals, Inc.* | | | 82,118 | |
| | 3,656 | | Woodward, Inc. | | | 179,985 | |
| | | | | | | 1,178,270 | |
| Information Technology — 27.3% | | | | |
| | 3,559 | | Apple, Inc. | | | 392,842 | |
| | 9,215 | | Applied Micro Circuits Corp.* | | | 60,082 | |
| | 6,077 | | Aruba Networks, Inc.* | | | 110,480 | |
| | 2,998 | | BroadSoft, Inc.* | | | 87,002 | |
| | 1,934 | | Check Point Software Technologies, Ltd.* | | | 151,954 | |
| | 1,539 | | Criteo S.A. ADR* | | | 62,206 | |
| | 2,554 | | E2open, Inc.* | | | 24,544 | |
| | 2,223 | | eBay, Inc.* | | | 124,755 | |
| | 3,834 | | Fair Isaac Corp. | | | 277,198 | |
| | 143 | | Google, Inc. — Class A* | | | 75,884 | |
| | 143 | | Google, Inc. — Class C* | | | 75,275 | |
| | 6,702 | | HomeAway, Inc.* | | | 199,586 | |
| | 3,120 | | Informatica Corp.* | | | 118,981 | |
| | 2,763 | | Interactive Intelligence Group, Inc.* | | | 132,348 | |
| | 3,541 | | Microsemi Corp.* | | | 100,494 | |
| | 1,342 | | MTS Systems Corp. | | | 100,690 | |
| | 2,991 | | National Instruments Corp. | | | 92,990 | |
| | 2,123 | | NetApp, Inc. | | | 87,998 | |
| | 6,863 | | Pegasystems, Inc. | | | 142,545 | |
| | 151 | | Priceline Group, Inc.* | | | 172,172 | |
| | 2,548 | | QUALCOMM, Inc. | | | 189,393 | |
| | 2,793 | | salesforce.com, Inc.* | | | 165,653 | |
| | 1,866 | | Stratasys Ltd.* | | | 155,083 | |
| | 740 | | Visa, Inc. | | | 194,028 | |
| | | | | | | 3,294,183 | |
| Materials — 2.4% | | | | |
| | 1,711 | | Ecolab, Inc. | | | 178,834 | |
| | 892 | | Praxair, Inc. | | | 115,567 | |
| | | | | | | 294,401 | |
| Telecommunication Services — 0.6% | | | | |
| | 2,350 | | Zayo Group Holdings, Inc.* | | | 71,840 | |
| Total Common Stocks (Cost $8,757,756) | | | 11,678,061 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Opportunity Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | |
| Short-Term Investments — 3.9% | | |
| | | |
| Money Market Funds — 3.9% | | |
| | 467,076 | | DWS Cash Account Trust — Government | | | |
| | | | & Agency Securities Portfolio, 0.03%# | | | 467,076 | |
| Total Short-Term Investments (Cost $467,076) | | 467,076 | |
| Total Investments — 100.5% (Cost $9,224,832) | | 12,145,137 | |
| Liabilities in Excess of Other Assets — (0.5)% | | (63,944 | ) |
| NET ASSETS — 100.0% | $ | 12,081,193 | |
| PORTFOLIO HOLDINGS | | |
| % of Net Assets | | |
| | | |
| Information Technology | 27.3% | |
| Financials | 16.3% | |
| Health Care | 14.4% | |
| Consumer Discretionary | 14.0% | |
| Industrials | 9.8% | |
| Energy | 6.8% | |
| Consumer Staples | 5.0% | |
| Money Market Funds | 3.9% | |
| Materials | 2.4% | |
| Telecommunication Services | 0.6% | |
| Other Assets and Liabilities | (0.5)% | |
| | 100.0% | |
ADR — American Depositary Receipt
| * | Non-Income Producing |
| # | Annualized seven-day yield as of December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Multi-Strategy Fund
A Message to Our Shareholders
December 31, 2014
Dear Shareholder:
The Brown Advisory Multi-Strategy Fund (the “Fund”) commenced operations on October 31, 2014. Since inception to December 31, 2014, the Fund returned 0.63%, while the S&P Balanced Equity and Bond – Moderate Index, the Fund’s benchmark, returned 1.98%.
For the period ended December 31, 2014, the Fund benefited from its heavy emphasis on U.S.-dollar-denominated assets, as the U.S. dollar and U.S. equity market meaningfully outperformed other markets. For example, the Russell 3000 Index (a broad index of U.S. equities) returned 2.42% during this time period, whereas the MSCI All Country World Index ex-U.S. (a broad index of non-U.S. equities) declined 2.91%. The Fund’s exposure to international markets and the energy sector were the main detractors to performance during the period.
As this is our first letter to shareholders, we would like to use this opportunity to talk about the Fund’s investment philosophy and approach, and to provide some insight into the Fund’s current positioning. The Fund employs a global asset allocation approach to create a portfolio with a blend of actively managed equity funds and alpha-oriented fixed income funds. The objective of this Fund is to provide attractive long-term capital appreciation and income generation.
The investment industry often falls short in discussing risk with investors, using terms like standard deviation or value-at-risk that have little meaning to many people. In other words, if we tell you that one portfolio has a standard deviation of 12% and another’s standard deviation is 10%, you may have a vague understanding that the latter portfolio is less volatile, but that information may not help you very much without context.
We want you to understand how we think about risk and how we attempt to minimize the risk present at any given time within the Fund’s portfolio. We view risk simply as the possibility of losing capital over a longer-term period. Instead of focusing on various risk metrics or ratios, we are more concerned with the potential drawdown of the Fund within a range of reasonably foreseeable downside scenarios.
We develop upside and downside scenarios for each asset class represented in the Fund’s portfolio. We are not attempting to predict the future, but we are attempting to understand the drivers of future return opportunity and risk for each asset class. We then tilt the portfolio toward the investment strategies with the most upside potential relative to the amount of downside risk.
This methodology is probably best illustrated by speaking about one of the current portfolio tilts in the Fund’s asset allocation. One of the bigger challenges that we currently face is the fact that U.S. fixed income investments have offered relatively low yields, and if those yields rise even moderately, the loss of principal on those investments could exceed the income received. One conventional approach to solving this problem in recent years has been to allocate some assets away from fixed income and buy high-yielding dividend stocks. This solution might protect the portfolio from declining bond prices if rates rise, but it also exposes the equity portion of the portfolio to the same rising-rate risk factor. We believe that high-yielding stocks could potentially produce greater downside drawdown in a rising-interest-rate environment.
We have chosen a different solution, one that leverages opportunities to invest in fixed income portfolios that use diverse tools to minimize their interest-rate exposure. The Brown Advisory Strategic Bond Fund, one of our holdings, is a good example. It is an unconstrained portfolio that seeks to deliver the majority of its returns through fundamental sector and credit analysis, and it uses hedging strategies to reduce its exposure to interest rates. This portfolio seeks to achieve strong upside potential with lower interest-rate risk.
2014 was marked by uneven performance in both investment markets and economies across the globe. For the most part, the only attractive returns across global markets were generated in assets denominated in U.S. dollars. The main driver of the imbalanced returns in 2014 was the fact that the global economy continues to progress, but its engine is firing on only one cylinder, the U.S.
The eurozone slipped closer to recession and more importantly deflation as the year progressed, and China’s growth also slowed. The U.S. economy was the only major developed economy that experienced positive economic momentum. The positive environment enabled the Federal Reserve to end quantitative easing by tapering its bond purchases, and the Fed even began talking about the potential to increase short-term interest rates. This backdrop should have presented challenges for the U.S. fixed income sector, but in fact 2014 proved to be a profitable year to invest in bonds, as yields fell throughout the year. Global investors purchased U.S. bonds at unprecedented levels in 2014, in large part because fears of deflation in Europe drove European yields to new historic lows, with many nations seeing their 10-year bond yield drop below 1%.
www.brownadvisoryfunds.com
Brown Advisory Multi-Strategy Fund
A Message to Our Shareholders
December 31, 2014
The two markets that saw the most movement in the back half of 2014 were currencies and energy. The U.S. dollar rallied aggressively as the prospects for higher rates in the U.S. and lower rates in the rest of the world took hold. The rising dollar has proven a headwind to investing in assets not priced in dollars.
Oil markets were hit on three fronts, resulting in the largest percentage decline in prices since the 2008-09 financial crisis. The rising dollar, increased oil supply from U.S. shale producers and declining demand from Europe and emerging markets pushed oil prices down. The price declined even further as OPEC chose to maintain high production levels despite the decline in demand.
This backdrop presents quite the puzzle for allocating a global portfolio. We ended the year with a healthy exposure of over 40% to U.S. equities, as we expect U.S. companies to benefit from more favorable fundamentals, but we are carefully monitoring two things: overall valuations and exposure to the rising dollar. We believe that Asia will be among the largest beneficiaries of declining oil prices, and thus we anticipate that our position in the Brown Advisory Emerging Markets Small-Cap Fund can be a key driver for returns in 2015. The current sub-adviser of this portfolio, Macquarie Funds Management Hong Kong Limited, has meaningful exposure to consumer stocks in India and China. Both of these economies are large oil importers (so they benefit from the decline in oil prices), and both are still seeing rising incomes.
Investing in European equities presents another interesting challenge for us, given the uncertainties involved with the start of the ECB’s quantitative-easing program. History suggests that these programs often produce positive results for local equity markets, and a similar outcome in Europe in the first half of 2015 seems reasonably likely. The challenge for us is that we also expect the U.S. dollar to appreciate versus the euro, which could erase a lot of the return for our U.S.-based investors. Instead of attempting to thread this currency needle, we are seeking European exposure through the Brown Advisory - WMC Strategic European Equity Fund, sub-advised by Wellington Management, which invests in multinational companies that have the potential to experience positive business fundamentals from the declining euro.
Overall, we believe that the investment environment is relatively challenging at the moment, but we also see excellent opportunities, especially at the individual-security level. Quantitative easing has forced money flows to shift across regions and asset classes in peculiar ways in recent years, which has helped to create many of the opportunities we see. Therefore, in spite of the challenges, we are optimistic about the specific investments within the Brown Advisory Multi-Strategy Fund.
Sincerely,
Paul Chew
Portfolio Manager
www.brownadvisoryfunds.com
Brown Advisory Multi-Strategy Fund
A Message to Our Shareholders
December 31, 2014
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. The Fund is considered a “funds of funds” and an investor will indirectly bear the principal risks and its share of the fees and expenses of the underlying funds. Shareholders will pay higher expenses than they would if they invested directly in the underlying funds. The Fund may invest in foreign securities, which involve political, economic and currency risks, greater volatility and differences in accounting methods. Investments in small and medium capitalization companies generally carry greater risk than is customarily associated with larger companies for various reasons, such as narrower markets, limited financial resources and less liquid stock. The Fund may invest in ETFs, which may trade at a discount to the aggregate value of the underlying securities and although expense ratios for ETFs are generally low, frequent trading of ETFs by the Fund can generate brokerage expenses. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investments in lower rated and non-rated securities present a greater risk of loss to principal and interest than higher rated securities. Investments in asset-backed and mortgage-backed securities include additional risks that an investor should be aware of, including credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments. In addition, the Fund is susceptible to risks from investments in derivatives, U.S. Government securities, private placements, REITs and municipal securities.
Fund holdings and sector allocations are subject to change and should not be considered as a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
www.brownadvisoryfunds.com
Brown Advisory Multi-Strategy Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | | |
| Affiliated Mutual Funds (Note 3) — 96.6% | | | |
| | | | |
| Domestic Equity Funds — 46.0% | | | |
| | 6,817 | | Brown Advisory Flexible Equity Fund | | | 109,002 | |
| | 1,740 | | Brown Advisory Small-Cap | | | | |
| | | | Fundamental Value Fund | | | 41,057 | |
| | 556 | | Brown Advisory Small-Cap Growth Fund | | | 18,252 | |
| | 2,268 | | Brown Advisory Value Equity Fund | | | 39,409 | |
| | | | | | | 207,720 | |
| Foreign Equity Funds — 15.4% | | | | |
| | 2,264 | | Brown Advisory — Somerset Emerging | | | | |
| | | | Markets Fund | | | 21,512 | |
| | 4,105 | | Brown Advisory — WMC Strategic | | | | |
| | | | European Equity Fund | | | 39,413 | |
| | 903 | | Brown Advisory Emerging | | | | |
| | | | Markets Small-Cap Fund* | | | 8,819 | |
| | | | | | | 69,744 | |
| Bond Funds — 35.2% | | | | |
| | 4,055 | | Brown Advisory Strategic Bond Fund | | | 40,667 | |
| | 11,798 | | Brown Advisory Total Return Fund | | | 118,570 | |
| | | | | | | 159,237 | |
| Total Affiliated Mutual Funds (Cost $445,078) | | | 436,701 | |
| | | | | |
| Short-Term Investments — 4.1% | | | | |
| | | | | |
| Money Market Funds — 4.1% | | | | |
| | 18,688 | | DWS Cash Account Trust — Government | | | | |
| | | | & Agency Securities Portfolio, 0.03%# | | | 18,688 | |
| Total Short-Term Investments (Cost $18,688) | | | 18,688 | |
| Total Investments — 100.7% (Cost $463,766) | | | 455,389 | |
| Liabilities in Excess of Other Assets — (0.7)% | | | (3,124 | ) |
| NET ASSETS — 100.0% | | $ | 452,265 | |
| PORTFOLIO HOLDINGS | | |
| % of Net Assets | | |
| | | |
| Domestic Equity Funds | 46.0% | |
| Bond Funds | 35.2% | |
| Foreign Equity Funds | 15.4% | |
| Money Market Funds | 4.1% | |
| Other Assets and Liabilities | (0.7)% | |
| | 100.0% | |
| * | Non-Income Producing |
| # | Annualized seven-day yield as of December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Intermediate Income Fund
A Message to Our Shareholders
December 31, 2014
Dear Shareholder:
The Brown Advisory Intermediate Income Fund Investor Shares (the “Fund”) returned 0.74% during the six-month period ended December 31, 2014. During the same time period, the Barclays Intermediate US Aggregate Bond Index, the Fund’s benchmark, returned 1.24%.
Throughout this period, we positioned the Fund conservatively with regard to duration in the belief that interest rates were more likely to rise than to fall. This turned out to be incorrect—rates broadly fell during the period—but we were also positioned in anticipation of a flattening yield curve, and the Fund benefited when the yield curve did in fact flatten dramatically. Going into this period, we thought about the most likely reasons why rates might rise (an improving economy and/or Fed rate hikes) and the reasons they might fall (increasing foreign demand for U.S. bonds or tempered expectations for long-term U.S. economic growth). All of these scenarios favored longer-term bonds more than short- or intermediate-term bonds; hence our belief that the curve was likely to flatten.
Our relative underperformance can be attributed to our overweight in corporate credit, a sector that experienced weakness in sympathy with global economic issues, and our underweight in mortgages, which performed well in a falling-rate environment. We had anticipated a decline in mortgage demand as the Federal Reserve backed off its buying program.
Our opportunistic positions in the tax-exempt municipal market helped our performance. We have built an allocation in this sector purely for pricing reasons. Though the Fund does not strive for tax-exempt income, we tend to buy and hold positions in this sector for a period of time when prices become particularly attractive.
We remain focused on our core philosophy of seeking sectors and bonds that we believe are underpriced on a fundamental basis, while maintaining the core stability that investors should expect from what we believe is a high-quality, intermediate bond fund.
Sincerely,
Paul D. Corbin
Portfolio Manager
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. The Fund is subject to interest rate risk which is the risk that debt securities in the Fund’s portfolio will decline in value because of increases in market interest rates. Investments in Asset Backed and Mortgage Backed Securities include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments. Investments in debt securities typically decrease in value when interest rates rise. The risk is usually greater for longer-term debt securities. Inflation-indexed bonds see the principal value of the security increased as the Consumer Price Index increases. Should the Consumer Price Index decline, those securities should be adversely impacted.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
www.brownadvisoryfunds.com
Brown Advisory Intermediate Income Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | |
| Corporate Bonds & Notes — 29.4% | | | | | | | |
| | 1,635,000 | | BB&T Corp. Callable 12/15/2019 @ 100^# | | | 0.95 | % | 01/15/2020 | | | 1,636,547 | |
| | 1,615,000 | | Bed Bath & Beyond, Inc. Callable 05/01/2024 @ 100^ | | | 3.75 | % | 08/01/2024 | | | 1,639,188 | |
| | 1,640,000 | | Camden Property Trust Callable 06/15/2024 @ 100^ | | | 3.50 | % | 09/15/2024 | | | 1,632,082 | |
| | 1,615,000 | | Celgene Corp. | | | 2.30 | % | 08/15/2018 | | | 1,629,745 | |
| | 1,555,000 | | Citigroup, Inc.# | | | 1.93 | % | 05/15/2018 | | | 1,607,657 | |
| | 1,610,000 | | Education Realty Operating Partnership, L.P. Callable 09/01/2024 @ 100^ | | | 4.60 | % | 12/01/2024 | | | 1,651,799 | |
| | 6,410,000 | | Fannie Mae | | | 2.63 | % | 09/06/2024 | | | 6,499,836 | |
| | 1,610,000 | | First American Financial Corp. | | | 4.60 | % | 11/15/2024 | | | 1,635,583 | |
| | 1,640,000 | | FMC Technologies, Inc. | | | 2.00 | % | 10/01/2017 | | | 1,629,333 | |
| | 1,630,000 | | Healthcare Trust of America, Inc. Callable 05/15/2021 @ 100^ | | | 3.38 | % | 07/15/2021 | | | 1,629,417 | |
| | 1,625,000 | | JB Hunt Transport Services, Inc. | | | 2.40 | % | 03/15/2019 | | | 1,627,480 | |
| | 1,625,000 | | JPMorgan Chase & Co.# | | | 0.87 | % | 01/28/2019 | | | 1,626,604 | |
| | 1,510,000 | | Kinder Morgan Energy Partners L.P. | | | 5.30 | % | 09/15/2020 | | | 1,628,029 | |
| | 1,625,000 | | Morgan Stanley# | | | 1.08 | % | 01/24/2019 | | | 1,629,818 | |
| | 850,000 | | Morgan Stanley | | | 4.35 | % | 09/08/2026 | | | 856,246 | |
| | 1,650,000 | | News America, Inc. | | | 3.00 | % | 09/15/2022 | | | 1,641,666 | |
| | 1,565,000 | | Providence Health & Services Floating Note# | | | 1.19 | % | 10/01/2017 | | | 1,577,141 | |
| | 1,595,000 | | Realty Income Corp. Callable 07/15/2026 @ 100^ | | | 4.13 | % | 10/15/2026 | | | 1,629,650 | |
| | 2,425,000 | | Royal Bank of Canada# | | | 0.77 | % | 03/15/2019 | | | 2,445,474 | |
| | 1,330,000 | | Saint Barnabas Health System | | | 4.00 | % | 07/01/2028 | | | 1,362,270 | |
| | 1,615,000 | | Sunoco Logistics Partners Operations L.P. Callable 01/01/2024 @ 100^ | | | 4.25 | % | 04/01/2024 | | | 1,636,203 | |
| | 2,250,000 | | Sutter Health | | | 1.09 | % | 08/15/2053 | | | 2,240,505 | |
| | 1,620,000 | | TIAA Asset Management Finance Co., LLC~ | | | 4.13 | % | 11/01/2024 | | | 1,662,894 | |
| | 1,540,000 | | Verizon Communications, Inc. | | | 3.65 | % | 09/14/2018 | | | 1,628,204 | |
| | 1,960,000 | | Weatherford International, Ltd. Callable 01/15/2022 @ 100^ | | | 4.50 | % | 04/15/2022 | | | 1,747,077 | |
| | 1,550,000 | | Zions Bancorporation Callable 05/11/2023 @100^ | | | 4.50 | % | 06/13/2023 | | | 1,639,252 | |
| Total Corporate Bonds & Notes (Cost $47,715,482) | | | | | | | | 47,769,700 | |
| | | | | | | | | | |
| Municipal Bonds — 14.2% | | | | | | | | | |
| | 670,000 | | District of Columbia Income Tax Secured Revenue Bonds, Series 2010F | | | 4.71 | % | 12/01/2022 | | | 753,951 | |
| | 2,185,000 | | Florida Hurricane Catastrophe Revenue Bonds | | | 2.11 | % | 07/01/2018 | | | 2,203,573 | |
| | 1,000,000 | | Illinois State Sales Tax Revenue | | | 2.30 | % | 06/15/2019 | | | 1,013,700 | |
| | 1,560,000 | | Indiana State Bond Bank Revenue | | | 1.02 | % | 07/15/2016 | | | 1,566,334 | |
| | 3,200,000 | | Maryland State Health & Higher Education Revenue Bonds | | | 3.99 | % | 07/01/2028 | | | 3,192,704 | |
| | 5,735,000 | | Michigan, State of | | | 2.55 | % | 11/01/2015 | | | 5,838,115 | |
| | 1,420,000 | | New York City TFA Future Tax Callable 08/01/2024 @ 100^ | | | 5.00 | % | 08/01/2032 | | | 1,681,607 | |
| | 1,420,000 | | New York City Water Callable 06/15/2024 @ 100^ | | | 5.00 | % | 06/15/2036 | | | 1,654,186 | |
| | 1,700,000 | | New York State Thruway Authority Callable 07/01/2025 @ 100^ | | | 5.00 | % | 01/01/2027 | | | 2,049,758 | |
| | 2,750,000 | | Port Authority New York & New Jersey | | | 5.31 | % | 12/01/2019 | | | 3,147,650 | |
| Total Municipal Bonds (Cost $22,640,265) | | | | | | | | 23,101,578 | |
| | | | | | | | | | |
| Mortgage Backed Securities — 9.6% | | | | | | | | | |
| | 4,795 | | FHLMC, Pool# C00210 | | | 8.00 | % | 01/01/2023 | | | 5,575 | |
| | 458,296 | | FHLMC, Pool# 1B0889# | | | 2.15 | % | 05/01/2033 | | | 486,519 | |
| | 373,141 | | FHLMC, Pool# 1J0203# | | | 2.22 | % | 04/01/2035 | | | 397,469 | |
| | 3,908,785 | | FHLMC PC, Pool# Q2-5749 | | | 4.00 | % | 04/01/2044 | | | 4,172,836 | |
| | 216,628 | | FHLMC REMIC, Series 2782 | | | 4.00 | % | 11/15/2033 | | | 225,226 | |
| | 28,203 | | FNMA, Pool# 254089 | | | 6.00 | % | 12/01/2016 | | | 29,142 | |
| | 284,633 | | FNMA, Pool# 842239 | | | 5.00 | % | 09/01/2020 | | | 305,038 | |
| | 21,051 | | FNMA, Pool# 539082 | | | 7.00 | % | 08/01/2028 | | | 21,393 | |
| | 28,939 | | FNMA, Pool# 625536 | | | 6.00 | % | 01/01/2032 | | | 32,772 | |
| | 42,546 | | FNMA, Pool# 628837 | | | 6.50 | % | 03/01/2032 | | | 48,492 | |
| | 194,761 | | FNMA, Pool# 663238 | | | 5.50 | % | 09/01/2032 | | | 217,680 | |
| | 71,097 | | FNMA, Pool# 744805# | | | 1.89 | % | 11/01/2033 | | | 73,116 | |
| | 56,221 | | FNMA, Pool# 741373# | | | 2.41 | % | 12/01/2033 | | | 58,811 | |
| | 73,842 | | FNMA, Pool# 764342# | | | 1.90 | % | 02/01/2034 | | | 76,535 | |
| | 108,012 | | FNMA, Pool# 848817 | | | 5.00 | % | 01/01/2036 | | | 119,285 | |
| | 2,372,786 | | FNMA, Pool# AS1474 | | | 4.50 | % | 01/01/2044 | | | 2,579,871 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Intermediate Income Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Par | | | | | | | | | |
| Value/Shares | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | |
| Mortgage Backed Securities — (Continued) | | | | | | | |
| | 1,400,108 | | FNMA, Pool# AV7911 | | | 4.50 | % | 01/01/2044 | | | 1,522,738 | |
| | 2,660,462 | | FNMA REMIC Trust, Series 2013-115† | | | 3.00 | % | 04/25/2031 | | | 298,417 | |
| | 83,451 | | GNMA, Pool# 781450 | | | 5.00 | % | 06/15/2017 | | | 87,133 | |
| | 26,629 | | GNMA, Pool# 487110 | | | 6.50 | % | 04/15/2029 | | | 31,232 | |
| | 34,924 | | GNMA, Pool# 781186 | | | 9.00 | % | 06/15/2030 | | | 40,907 | |
| | 6,849 | | GNMA, Pool# 571166 | | | 7.00 | % | 08/15/2031 | | | 7,102 | |
| | 2,277,947 | | GNMA REMIC Trust, Series 2010-124 | | | 2.72 | % | 05/16/2037 | | | 2,300,309 | |
| | 3,078,143 | | GNMA REMIC Trust, Series 2013-79† | | | 3.00 | % | 01/20/2042 | | | 355,984 | |
| | 2,000,000 | | GNMA REMIC Trust, Series 2014-01 | | | 3.29 | % | 03/16/2054 | | | 2,044,115 | |
| Total Mortgage Backed Securities (Cost $15,258,400) | | | | | | | | 15,537,697 | |
| | | | | | | | | | |
| Asset Backed Securities — 1.2% | | | | | | | | | |
| | 2,000,000 | | Freddie Mac STACR Debt Notes, Series 2014-DN1# | | | 2.37 | % | 02/25/2024 | | | 1,967,416 | |
| Total Asset Backed Securities (Cost $2,000,000) | | | | | | | 1,967,416 | |
| | | | | | | | | | |
| U.S. Treasury Notes — 17.5% | | | | | | | | | |
| | 11,365,000 | | United States Treasury Note | | | 0.25 | % | 07/15/2015 | | | 11,372,989 | |
| | 2,430,000 | | United States Treasury Note | | | 0.38 | % | 02/15/2016 | | | 2,431,140 | |
| | 6,470,000 | | United States Treasury Note | | | 0.63 | % | 10/15/2016 | | | 6,472,530 | |
| | 7,720,000 | | United States Treasury Note | | | 2.75 | % | 02/15/2024 | | | 8,124,096 | |
| Total U.S. Treasury Notes (Cost $28,186,474) | | | | | | | | 28,400,755 | |
| | | | | | | | | | |
| Affiliated Mutual Funds (Note 3) — 19.2% | | | | | | | | | |
| | 3,092,653 | | Brown Advisory Mortgage Securities Fund | | | | | | | | 31,143,018 | |
| Total Affiliated Mutual Funds (Cost $31,354,566) | | | | | | | | 31,143,018 | |
| | | | | | | | | | |
| Short-Term Investments — 7.7% | | | | | | | | | |
| | | | | | | | | | |
| U.S. Treasury Bills — 5.0% | | | | | | | | | |
| | 8,095,000 | | United States Treasury Bill | | | | | | | | 8,094,741 | |
| | | | | | | | | | |
| Money Market Funds — 2.7% | | | | | | | | | |
| | 4,488,139 | | DWS Cash Account Trust — Government & Agency Securities Portfolio, 0.03%* | | | 4,488,139 | |
| Total Short-Term Investments (Cost $12,583,052) | | | | | | | | 12,582,880 | |
| Total Investments — 98.8% (Cost $159,738,239) | | | | | | | | 160,503,044 | |
| Other Assets in Excess of Liabilities — 1.2% | | | | | | | | 2,018,828 | |
| NET ASSETS — 100.0% | | | | | | | $ | 162,521,872 | |
| PORTFOLIO HOLDINGS | | |
| % of Net Assets | | |
| | | |
| Corporate Bonds & Notes | 29.4% | |
| Affiliated Mutual Funds | 19.2% | |
| U.S. Treasury Notes | 17.5% | |
| Municipal Bonds | 14.2% | |
| Mortgage Backed Securities | 9.6% | |
| U.S. Treasury Bills | 5.0% | |
| Money Market Funds | 2.7% | |
| Asset Backed Securities | 1.2% | |
| Other Assets and Liabilities | 1.2% | |
| | 100.0% | |
| ^ | Continuously callable with 30 days notice. |
| # | Variable rate security. Rate disclosed is as of December 31, 2014. |
| † | Interest Only Security |
| ~ | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2014, the value of these securities amounted to $1,662,894 or 1.0% of net assets. |
| * | Annualized seven-day yield as of December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Total Return Fund
A Message to Our Shareholders
December 31, 2014
Dear Shareholder:
The Brown Advisory Total Return Fund Investor Shares (the “Fund”) commenced operations on October 30, 2014. For the period from inception to December 31, 2014, the Fund was up 0.64%, slightly behind the 0.69% return for the Barclays US Aggregate Bond Index, the Fund’s benchmark.
The Fund’s strategy is to combine bottom-up credit selection with macroeconomic analysis to build concentrated weightings and positions in our highest-conviction ideas. We analyze macroeconomic ideas based on scenario analysis as opposed to point forecasts, and we look for investment positioning that can perform reasonably well in a wide range of market scenarios.
For the period, the Fund was mostly neutral-weighted with regard to duration, but positioned for the yield curve to flatten. This positioning was a good example of our scenario-based macro process. We believed that if interest rates were to rise, it would be because economic sentiment was improving and near-term Fed rate hikes appeared more likely to occur. That would cause short- and intermediate-term rates to rise more than long-term rates. On the other hand, we saw several reasons why rates might fall, including increasing foreign demand and/or a downgrade in the long-term growth prospects for the U.S. Both of these would be more likely to benefit longer-term bonds more than short- or intermediate-term bonds. As it happened, in December, falling rates in Europe in particular pushed many foreign buyers into the U.S. market, causing the yield curve to flatten considerably. This was a major benefit to the portfolio.
We also benefited from positive results from several bottom-up credit ideas, such as Alleghany Corp., E*Trade Financial, Bed Bath and Beyond, and DaVita Healthcare.
Offsetting these positive contributors was generalized underperformance by credit (where we are overweight) and outperformance by mortgage bonds (where we are underweight) relative to the overall benchmark’s performance.
Looking forward, the weaker performance in credit is creating some interesting opportunities, especially for higher-quality high-yield issues. In late December, we added some names that fit this description, such as Royal Caribbean, Spectrum Brands and DaVita Healthcare. We believe that our disciplined credit process can add value whether credit is widening or tightening, and that this has the potential to be a key driver of performance going forward.
Sincerely,
Thomas D.D. Graff, CFA
Portfolio Manager
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investments in Asset-Backed and Mortgage-Backed securities include additional risks that investor should be aware of including credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments. Investments in lower rated and non-rated securities present a great risk of loss to principal and interest than higher rated securities. In addition, the fund is susceptible to risks from investments in derivatives, U.S. Government securities, and changes in interest rates. Income from tax-exempt funds may be subject to state and local taxes and a portion of income may be subject to the Federal Alternative minimum tax for certain investors.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
www.brownadvisoryfunds.com
Brown Advisory Total Return Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | |
| Corporate Bonds & Notes — 37.6% | | | | | | | |
| | 525,000 | | 21st Century Fox America, Inc. | | | 6.15 | % | 02/15/2041 | | | 670,557 | |
| | 645,000 | | Alleghany Corp. Callable 03/15/2044 @ 100^ | | | 4.90 | % | 09/15/2044 | | | 679,294 | |
| | 990,000 | | Ally Financial, Inc. | | | 3.25 | % | 09/29/2017 | | | 992,475 | |
| | 650,000 | | Bank of America Corp.# | | | 1.27 | % | 01/15/2019 | | | 659,881 | |
| | 645,000 | | Bed Bath & Beyond, Inc. Callable 02/01/2044 @ 100^ | | | 5.17 | % | 08/01/2044 | | | 676,404 | |
| | 665,000 | | Camden Property Trust Callable 06/15/2024 @ 100^ | | | 3.50 | % | 09/15/2024 | | | 661,789 | |
| | 650,000 | | Celgene Corp. Callable 11/15/2043 @ 100^ | | | 4.63 | % | 05/15/2044 | | | 676,943 | |
| | 935,000 | | CIT Group, Inc.~ | | | 5.50 | % | 02/15/2019 | | | 989,347 | |
| | 542,000 | | Citigroup, Inc.# | | | 1.93 | % | 05/15/2018 | | | 560,354 | |
| | 625,000 | | Crown Americas, LLC Callable 02/01/2016 @ 103^ | | | 6.25 | % | 02/01/2021 | | | 660,938 | |
| | 630,000 | | Davita Healthcare Partners, Inc. Callable 07/15/2019 @ 103^ | | | 5.13 | % | 07/15/2024 | | | 643,781 | |
| | 650,000 | | E*TRADE Financial Corp. Callable 11/15/2017 @ 104^ | | | 5.38 | % | 11/15/2022 | | | 666,250 | |
| | 570,000 | | Education Realty Operating Partnership, L.P. Callable 09/01/2024 @ 100^ | | | 4.60 | % | 12/01/2024 | | | 584,798 | |
| | 650,000 | | First American Financial Corp. | | | 4.60 | % | 11/15/2024 | | | 660,329 | |
| | 660,000 | | Healthcare Trust of America, Inc. Callable 05/15/2021 @ 100^ | | | 3.38 | % | 07/15/2021 | | | 659,764 | |
| | 635,000 | | Ineos Finance PLC Callable 05/01/2015 @ 106^~ | | | 7.50 | % | 05/01/2020 | | | 669,131 | |
| | 655,000 | | JB Hunt Transport Services, Inc. | | | 2.40 | % | 03/15/2019 | | | 656,000 | |
| | 655,000 | | JPMorgan Chase & Co.# | | | 0.87 | % | 01/28/2019 | | | 655,646 | |
| | 605,000 | | Kinder Morgan Energy Partners L.P. | | | 5.30 | % | 09/15/2020 | | | 652,290 | |
| | 585,000 | | Legg Mason, Inc. | | | 5.63 | % | 01/15/2044 | | | 671,702 | |
| | 660,000 | | Methanex Corp. Callable 09/01/2024 @ 100^ | | | 4.25 | % | 12/01/2024 | | | 658,436 | |
| | 650,000 | | Morgan Stanley | | | 4.35 | % | 09/08/2026 | | | 654,776 | |
| | 605,000 | | Realty Income Corp. Callable 07/15/2026 @ 100^ | | | 4.13 | % | 10/15/2026 | | | 618,143 | |
| | 600,000 | | Reynolds Group Issuer, LLC Callable 08/15/2015 @ 104^ | | | 7.88 | % | 08/15/2019 | | | 633,750 | |
| | 630,000 | | Rockwood Specialties Group, Inc. Callable 10/15/2015 @ 103^ | | | 4.63 | % | 10/15/2020 | | | 652,838 | |
| | 635,000 | | Royal Caribbean Cruises, Ltd. | | | 5.25 | % | 11/15/2022 | | | 669,925 | |
| | 555,000 | | Spectra Energy Partners L.P. Callable 06/25/2043 @ 100^ | | | 5.95 | % | 09/25/2043 | | | 661,219 | |
| | 500,000 | | Spectrum Brands, Inc. Callable 11/15/2016 @ 103^ | | | 6.38 | % | 11/15/2020 | | | 523,750 | |
| | 645,000 | | Sunoco Logistics Partners Operations L.P. Callable 01/01/2024 @ 100^ | | | 4.25 | % | 04/01/2024 | | | 653,468 | |
| | 650,000 | | TIAA Asset Management Finance Co., LLC~ | | | 4.13 | % | 11/01/2024 | | | 667,211 | |
| | 460,000 | | Validus Holdings, Ltd. | | | 8.88 | % | 01/26/2040 | | | 644,812 | |
| | 515,000 | | Verizon Communications, Inc. | | | 6.55 | % | 09/15/2043 | | | 660,758 | |
| | 705,000 | | Weatherford International, Ltd. | | | 7.00 | % | 03/15/2038 | | | 679,851 | |
| | 625,000 | | Zions Bancorporation Callable 05/11/2023 @ 100^ | | | 4.50 | % | 06/13/2023 | | | 660,989 | |
| Total Corporate Bonds & Notes (Cost $22,777,060) | | | | | | | | 22,787,599 | |
| | | | | | | | | | |
| Mortgage Backed Securities — 20.3% | | | | | | | | | |
| | 600,000 | | FHLMC PC, Pool# Q3-0148 | | | 4.00 | % | 12/01/2044 | | | 646,425 | |
| | 300,000 | | FHLMC PC, Pool# Q3-0222 | | | 4.00 | % | 12/01/2044 | | | 321,716 | |
| | 300,000 | | FHLMC PC, Pool# Q3-0223 | | | 4.00 | % | 12/01/2044 | | | 320,594 | |
| | 598,398 | | FNMA, Pool# AX5946 | | | 4.00 | % | 10/01/2044 | | | 639,584 | |
| | 300,000 | | FNMA, Pool# AX9501 | | | 4.50 | % | 12/01/2044 | | | 327,056 | |
| | 1,760,000 | | FNMA, 3.5%, Due TBA January | | | 3.50 | % | 01/15/2044 | | | 1,834,800 | |
| | 7,705,000 | | FNMA, 4.0%, Due TBA January | | | 4.00 | % | 01/15/2044 | | | 8,223,793 | |
| Total Mortgage Backed Securities (Cost $12,277,568) | | | | | | | | 12,313,968 | |
| | | | | | | | | | |
| Asset Backed Securities — 8.4% | | | | | | | | | |
| | 750,000 | | Freddie Mac STACR Debt Notes, Series 2014-DN1# | | | 2.37 | % | 02/25/2024 | | | 737,781 | |
| | 770,000 | | Freddie Mac STACR Debt Notes, Series 2014-DN2# | | | 1.82 | % | 04/25/2024 | | | 746,636 | |
| | 1,150,000 | | Freddie Mac STACR Debt Notes, Series 2014-DN3# | | | 2.57 | % | 08/25/2024 | | | 1,143,893 | |
| | 750,000 | | Octagon Investment Partners XXII, Series 2014-22 A#~ | | | 1.71 | % | 11/25/2025 | | | 750,000 | |
| | 1,000,000 | | OZLM Funding, Ltd., Series 2013-4#~ | | | 1.98 | % | 07/22/2025 | | | 961,500 | |
| | 750,000 | | OZLM Funding, Ltd., Series 2014-9a A1#~ | | | 1.81 | % | 01/20/2027 | | | 744,951 | |
| Total Asset Backed Securities (Cost $5,111,769) | | | | | | | | 5,084,761 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Total Return Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Par | | | | | | | | | |
| Value/Shares | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | |
| Municipal Bonds — 6.1% | | | | | | | |
| | 400,000 | | Bay Area Toll Authority | | | 7.04 | % | 04/01/2050 | | | 595,216 | |
| | 225,000 | | California State | | | 7.50 | % | 04/01/2034 | | | 334,705 | |
| | 115,000 | | California State | | | 7.55 | % | 04/01/2039 | | | 177,582 | |
| | 1,500,000 | | New Jersey Turnpike Authority | | | 7.10 | % | 01/01/2041 | | | 2,176,995 | |
| | 410,000 | | Port Authority of New York and New Jersey Callable 10/15/2024 @ 100^ | | | 4.43 | % | 10/15/2034 | | | 421,029 | |
| Total Municipal Bonds (Cost $3,621,011) | | | | | | | | 3,705,527 | |
| | | | | | | | | | |
| U.S. Treasury Securities — 20.7% | | | | | | | | | |
| | 1,720,000 | | United States Treasury Bond | | | 3.63 | % | 02/15/2044 | | | 2,024,359 | |
| | 4,600,000 | | United States Treasury Note† | | | 0.25 | % | 07/15/2015 | | | 4,603,234 | |
| | 4,590,000 | | United States Treasury Note | | | 1.25 | % | 10/31/2015 | | | 4,627,294 | |
| | 1,315,000 | | United States Treasury Note | | | 0.38 | % | 02/15/2016 | | | 1,315,616 | |
| Total U.S. Treasury Securities (Cost $12,474,277) | | | | | | | | 12,570,503 | |
| | | | | | | | | | |
| Short-Term Investments — 27.2% | | | | | | | | | |
| | | | | | | | | | |
| Money Market Funds — 27.2% | | | | | | | | | |
| | 16,518,932 | | DWS Cash Account Trust — Government & Agency Securities Portfolio, 0.03%* | | | 16,518,932 | |
| Total Short-Term Investments (Cost $16,518,932) | | | | | | | | 16,518,932 | |
| Total Investments — 120.3% (Cost $72,780,617) | | | | | | | | 72,981,290 | |
| Liabilities in Excess of Other Assets — (20.3)% | | | | | | | | (12,296,337 | ) |
| NET ASSETS — 100.0% | | | | | | | $ | 60,684,953 | |
| ^ | Continuously callable with 30 days notice. |
| ~ | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2014, the value of these securities amounted to $4,782,140 or 7.9% of net assets. |
| † | A portion of this security is pledged as collateral in connection with open futures contracts. |
| # | Variable rate security. Rate disclosed is as of December 31, 2014. |
| * | Annualized seven-day yield as of December 31, 2014. |
Futures Contracts — Long (Note 8)
| Issue | Contracts | Expiration Date | Notional Amount | Unrealized Appreciation |
| U.S. Treasury Long Bond Futures March 2015 | 30 | 04/01/15 | $4,265,655 | $71,179 |
Futures Contracts — Short (Note 8)
| | | | | | | | | | | Unrealized | |
| Issue | | Contracts | | Expiration Date | | Notional Amount | | | Appreciation (Depreciation) |
| U.S. Treasury 10-Year Note Futures March 2015 | | (60) | | 04/01/15 | | $ | (7,566,893 | ) | | | $ | (41,001 | ) |
| U.S. Treasury 5-Year Note Futures March 2015 | | (69) | | 04/07/15 | | | (8,216,065 | ) | | | | 9,838 | |
| | | | | | | $ | (15,782,958 | ) | | | $ | (31,163 | ) |
| PORTFOLIO HOLDINGS | | |
| % of Net Assets | | |
| | | |
| Corporate Bonds & Notes | 37.6% | |
| Money Market Funds | 27.2% | |
| Mortgage Backed Securities | 20.3% | |
| U.S. Treasury Securities | 20.7% | |
| Asset Backed Securities | 8.4% | |
| Municipal Bonds | 6.1% | |
| Other Assets and Liabilities | (20.3)% | |
| | 100.0% | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Strategic Bond Fund
A Message to Our Shareholders
December 31, 2014
Dear Shareholder:
During the six months ended December 31, 2014, the Brown Advisory Strategic Bond Fund Advisor Shares (the “Fund”) returned 0.30%, while the Barclays Intermediate US Aggregate Bond Index, the Fund’s benchmark, returned 1.24%. Prior to October 31, 2014, the Fund was known as the Brown Advisory Tactical Bond Fund.
The Fund’s strategy is to seek attractive returns using a combination of concentrated, bottom-up credit selection, macroeconomic positioning and a low duration. The prospectus was updated effective October 31, 2014, in order to leverage our research capabilities and to pursue opportunities through individual credit selection and in certain debt-market dislocations. The update also allows us to use futures and swaps to hedge interest-rate risk. We analyze macroeconomic ideas based on a rigorous due diligence and underwriting process, and we take a dynamic and multifaceted approach to pricing risk.
During the final two months of the period, the Fund operated with a duration close to 1.0, in line with our portfolio objective of avoiding most of the risk associated with rising interest rates. Our high-yield exposure in the final two months of the year grew from 30% to 40% as we found opportunities in late November and early December to invest in higher-rated, defensive, individual high-yield bonds. We have largely avoided the energy sector, and our positioning reflected our view that defensive, noncyclical credits would outperform. Investment-grade corporates made up just under 20% of the portfolio, and municipal bonds, our best-performing sector, composed roughly 28% of the portfolio. We also built an exposure to certain structured products that in our view offer compelling relative value on a risk-adjusted basis.
In December, the high-yield market experienced considerable volatility. Our lack of energy exposure and our emphasis on defensive and higher-rated investments boosted our performance. Several bottom-up credit ideas, such as Alleghany Corp., E*Trade Financial and Aramark, also contributed positively to returns. Performance was hurt by the generalized underperformance of credit and municipal bonds (where we have meaningful allocations) vs. Treasury bonds (we are short Treasuries in order to bring down portfolio duration).
Looking forward, the weaker performance in credit is creating some interesting opportunities, especially for higher-quality high-yield names. In late December, we added some names that fit this description, such as Royal Caribbean, Spectrum Brands and Davita Healthcare. We believe that our disciplined credit process has the potential to add value regardless of whether credit is widening or tightening, and that has the potential to be a key driver of performance going forward.
Sincerely,
Thomas D.D. Graff, CFA
Portfolio Manager
Robert H. Snyder
Portfolio Manager
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investments in lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities. Municipal securities are subject to adverse political or economic factors, including changes in the tax law. Inflation-indexed bonds see the principal value of the security increased as the Consumer Price Index increases. Should the Consumer Price Index decline, those securities should be adversely impacted. A non-diversified fund may concentrate its assets in fewer individual holdings than a diversified fund. Therefore, non-diversified Fund is more exposed to individual stock volatility than a diversified fund. The fund may make short sales of securities, which involve the risk that losses in a security may exceed the original amount invested in that security. The risks of investments in derivatives, including options on futures contracts and options on futures contracts include imperfect correlation between the value of these instruments and the underlying assets; risks of default by the other party to the derivative transactions; risks that the transactions may result in losses that partially or completely offset gains in portfolio positions; and risks that the derivative transactions may not be liquid. Income from tax-exempt securities may be subject to state and local taxes and a portion of income may be subject to the federal alternative minimum tax for certain investors.
Diversification does not assure a profit or protect against loss in a declining market.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
www.brownadvisoryfunds.com
Brown Advisory Strategic Bond Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | |
| Corporate Bonds & Notes — 49.2% | | | | | | |
| | 500,000 | | Alleghany Corp. Callable 03/15/2044 @ 100^ | | | 4.90 | % | 09/15/2044 | | | 526,584 | |
| | 350,000 | | Ally Financial, Inc. | | | 3.25 | % | 09/29/2017 | | | 350,875 | |
| | 500,000 | | Aramark Corp. Callable 03/15/2015 @ 104^ | | | 5.75 | % | 03/15/2020 | | | 518,750 | |
| | 500,000 | | Camden Property Trust Callable 06/15/2024 @ 100^ | | | 3.50 | % | 09/15/2024 | | | 497,586 | |
| | 500,000 | | CCO Holdings, LLC Callable 04/30/2015 @ 105^ | | | 6.50 | % | 04/30/2021 | | | 526,875 | |
| | 500,000 | | Celanese U.S. Holdings, LLC | | | 4.63 | % | 11/15/2022 | | | 497,500 | |
| | 500,000 | | Community Health Systems, Inc. Callable 02/01/2017 @ 104^ | | | 5.13 | % | 08/01/2021 | | | 521,250 | |
| | 500,000 | | CIT Group, Inc.~ | | | 5.50 | % | 02/15/2019 | | | 529,062 | |
| | 500,000 | | Constellation Brands, Inc. | | | 4.25 | % | 05/01/2023 | | | 497,500 | |
| | 250,000 | | Crown Americas, LLC Callable 02/01/2016 @ 103^ | | | 6.25 | % | 02/01/2021 | | | 264,375 | |
| | 500,000 | | Davita Healthcare Partners, Inc. Callable 07/15/2019 @ 103^ | | | 5.13 | % | 07/15/2024 | | | 510,937 | |
| | 250,000 | | E*TRADE Financial Corp. Callable 11/15/2017 @ 104^ | | | 5.38 | % | 11/15/2022 | | | 256,250 | |
| | 500,000 | | Ecolab, Inc. | | | 4.35 | % | 12/08/2021 | | | 545,613 | |
| | 500,000 | | Education Realty Operating Partnership, L.P. Callable 09/01/2024 @ 100^ | | | 4.60 | % | 12/01/2024 | | | 512,981 | |
| | 405,000 | | First American Financial Corp. | | | 4.60 | % | 11/15/2024 | | | 411,435 | |
| | 500,000 | | Fresenius Medical Care U.S. Finance II, Inc. 07/17/2024 @ 100^~ | | | 4.75 | % | 10/15/2024 | | | 507,500 | |
| | 420,000 | | Goldman Sachs Group, Inc.# | | | 1.25 | % | 10/23/2019 | | | 422,443 | |
| | 500,000 | | Goodyear Tire & Rubber Co. Callable 03/01/2016 @ 105^ | | | 6.50 | % | 03/01/2021 | | | 532,500 | |
| | 500,000 | | HCA, Inc. | | | 6.50 | % | 02/15/2020 | | | 561,500 | |
| | 500,000 | | HD Supply, Inc. Callable 12/15/20017 @ 104^~ | | | 5.25 | % | 12/15/2021 | | | 510,000 | |
| | 500,000 | | Healthcare Trust of America, Inc. Callable 05/15/2021 @ 100^ | | | 3.38 | % | 07/15/2021 | | | 499,821 | |
| | 500,000 | | HJ Heinz Co. Callable 04/15/2015 @ 102^ | | | 4.25 | % | 10/15/2020 | | | 506,250 | |
| | 500,000 | | Ineos Finance, PLC Callable 05/01/2015 @ 106^~ | | �� | 7.50 | % | 05/01/2020 | | | 526,875 | |
| | 420,000 | | Kinder Morgan, Inc. Callable 03/01/2025 @ 100^ | | | 4.30 | % | 06/01/2025 | | | 421,071 | |
| | 250,000 | | Kinetic Concepts, Inc. Callable 11/01/2015 @ 105^ | | | 10.50 | % | 11/01/2018 | | | 272,500 | |
| | 250,000 | | Kinetic Concepts, Inc. Callable 11/01/2015 @ 106^ | | | 12.50 | % | 11/01/2019 | | | 277,500 | |
| | 500,000 | | KLX, Inc. Callable 12/01/2017 @ 104^~ | | | 5.88 | % | 12/01/2022 | | | 506,250 | |
| | 500,000 | | Kraft Foods Group, Inc. | | | 3.50 | % | 06/06/2022 | | | 513,191 | |
| | 500,000 | | Lear Corp. Callable 01/15/2020 @ 103^ | | | 5.25 | % | 01/15/2025 | | | 508,750 | |
| | 420,000 | | Methanex Corp. Callable 09/01/2024 @ 100^ | | | 4.25 | % | 12/01/2024 | | | 419,005 | |
| | 500,000 | | MGM Resorts International | | | 6.00 | % | 03/15/2023 | | | 505,000 | |
| | 420,000 | | Morgan Stanley | | | 4.35 | % | 09/08/2026 | | | 423,086 | |
| | 500,000 | | Realty Income Corp. Callable 05/01/2023 @ 100^ | | | 4.65 | % | 08/01/2023 | | | 539,370 | |
| | 500,000 | | Reynolds Group Issuer, LLC 08/15/2015 @ 104^ | | | 7.88 | % | 08/15/2019 | | | 528,125 | |
| | 350,000 | | Rockwood Specialties Group, Inc. 10/15/2015 @ 104^ | | | 4.63 | % | 10/15/2020 | | | 362,688 | |
| | 400,000 | | Royal Caribbean Cruises, Ltd. | | | 5.25 | % | 11/15/2022 | | | 422,000 | |
| | 500,000 | | Sealed Air Corp. 09/01/2022 @ 100^~ | | | 4.88 | % | 12/01/2022 | | | 497,500 | |
| | 500,000 | | Spectrum Brands, Inc. 11/15/2016 @ 103^ | | | 6.38 | % | 11/15/2020 | | | 523,750 | |
| | 410,000 | | TIAA Asset Management Finance Co., LLC~ | | | 4.13 | % | 11/01/2024 | | | 420,856 | |
| | 400,000 | | Verizon Communications, Inc. | | | 3.65 | % | 09/14/2018 | | | 422,910 | |
| | 250,000 | | Weatherford International, Ltd. Callable 01/15/2022 @ 100^ | | | 4.50 | % | 04/15/2022 | | | 222,842 | |
| | 410,000 | | Zions Bancorporation Callable 05/11/2023 @100^ | | | 4.50 | % | 06/13/2023 | | | 433,609 | |
| Total Corporate Bonds & Notes (Cost $19,222,906) | | | | | | | 19,254,465 | |
| | | | | | | | | |
| Municipal Bonds — 25.7% | | | | | | | | |
| | 250,000 | | Alachua County Health Facilities Authority Callable 12/01/2024 @ 100^ | | | 5.00 | % | 12/01/2033 | | | 286,373 | |
| | 250,000 | | Chicago O'Hare International Airport Callable 01/01/2023 @ 100^ | | | 5.00 | % | 01/01/2039 | | | 276,430 | |
| | 250,000 | | Franklin County Health Care Facilities Friendship Village Callable 11/15/2024 @ 100^ | | | 5.00 | % | 11/15/2034 | | | 273,415 | |
| | 1,000,000 | | Metropolitan Transportation Authority New York Callable 11/15/2024 @ 100^ | | | 5.00 | % | 11/15/2033 | | | 1,170,230 | |
| | 1,100,000 | | New Jersey State Turnpike Authority Callable 07/01/2024 @ 100^ | | | 5.00 | % | 01/01/2034 | | | 1,268,399 | |
| | 1,100,000 | | New York State Thruway Authority Callable 01/01/2025 @ 100^ | | | 5.00 | % | 01/01/2031 | | | 1,299,804 | |
| | 1,500,000 | | Pennsylvania Turnpike Commission Callable 12/01/2024 @ 100^ | | | 5.00 | % | 12/01/2030 | | | 1,754,940 | |
| | 1,000,000 | | Pennsylvania Turnpike Commission 12/01/2024 @ 100^ | | | 5.25 | % | 12/01/2039 | | | 1,141,480 | |
| | 1,000,000 | | South Carolina State Public Service Authority 12/01/2024 @ 100^ | | | 5.00 | % | 12/01/2039 | | | 1,140,560 | |
| | 1,000,000 | | South Central Connecticut Regional Water Authority 08/01/2024 @ 100^ | | | 5.00 | % | 08/01/2039 | | | 1,153,320 | |
| | 250,000 | | Wisconsin Health & Educational Facilities Authority 05/01/2024 @ 100^ | | | 5.00 | % | 05/01/2027 | | | 277,455 | |
| Total Municipal Bonds (Cost $10,033,684) | | | | | | | 10,042,406 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Strategic Bond Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Par | | | | | | | | | |
| Value/Shares | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | |
| Asset Backed Securities — 13.4% | | | | | | | |
| | 750,000 | | Freddie Mac STACR Debt Notes, Series 2014-DN1# | | | 2.37 | % | 02/25/2024 | | | 737,781 | |
| | 750,000 | | Freddie Mac STACR Debt Notes, Series 2014-DN2# | | | 1.82 | % | 04/25/2024 | | | 727,243 | |
| | 850,000 | | Freddie Mac STACR Debt Notes, Series 2014-DN3# | | | 2.57 | % | 08/25/2024 | | | 845,486 | |
| | 1,250,000 | | Octagon Investment Partners XXII, Series 2014-22 A#~ | | | 1.71 | % | 11/25/2025 | | | 1,250,000 | |
| | 1,000,000 | | OZLM Funding, Ltd., Series 2013-4#~ | | | 1.98 | % | 07/22/2025 | | | 961,500 | |
| | 750,000 | | OZLM Funding, Ltd., Series 2014-9a A1#~ | | | 1.81 | % | 01/20/2027 | | | 744,951 | |
| Total Asset Backed Securities (Cost $5,291,446) | | | | | | | 5,266,961 | |
| | | | | | | | | | |
| Mutual Funds — 1.8% | | | | | | | | | |
| | 8,166 | | Eaton Vance Massachusetts Municipal Bond Fund | | | | | | | | 116,447 | |
| | 10,000 | | Invesco Pennsylvania Value Municipal Income Trust | | | | | | | | 138,400 | |
| | 9,276 | | PIMCO California Municipal Income Fund II | | | | | | | | 88,215 | |
| | 8,341 | | PIMCO California Municipal Income Fund III | | | | | | | | 89,332 | |
| | 11,168 | | PIMCO New York Municipal Income Fund II | | | | | | | | 136,026 | |
| | 300 | | PIMCO New York Municipal Income Fund III | | | | | | | | 2,931 | |
| | 8,000 | | Pioneer Municipal High Income Advantage Trust | | | | | | | | 119,760 | |
| Total Mutual Funds (Cost $658,467) | | | | | | | | 691,111 | |
| | | | | | | | | | |
| Short-Term Investments — 9.9% | | | | | | | | | |
| | | | | | | | | | |
| U.S. Treasury Bills — 1.4% | | | | | | | | | |
| | 565,000 | | United States Treasury Bill` | | | | | | | | 564,965 | |
| | | | | | | | | | |
| Money Market Funds — 8.5% | | | | | | | | | |
| | 3,302,625 | | DWS Cash Account Trust — Government & Agency Securities Portfolio, 0.03%* | | | 3,302,625 | |
| Total Short-Term Investments (Cost $3,867,590) | | | | | | | | 3,867,590 | |
| Total Investments — 100.0% (Cost $39,074,093) | | | | | | | | 39,122,533 | |
| Liabilities in Excess of Other Assets — (0.0)% | | | | | | | | (3,866 | ) |
| NET ASSETS — 100.0% | | | | | | | $ | 39,118,667 | |
| ^ | Continuously callable with 30 days notice. |
| ~ | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2014, the value of these securities amounted to $6,454,494, or 16.5% of net assets. |
| ` | A portion of this security is pledged as collateral in connection with open derivatives positions. |
| # | Variable rate security. Rate disclosed is as of December 31, 2014. |
| * | Annualized seven-day yield as of December 31, 2014. |
Credit Default Swap Contracts (Note 6) — Sell ProtectionÄ
| | | | Termination | Notional | Unrealized |
| Counterparty | Reference Entity | Rate | Date | Amount† | Depreciation |
| Credit Suisse | Markit CDX North American High Yield Index Series 23 | 5.00% | 12/20/19 | $3,500,000 | $(5,813) |
| Ä | If the Fund is a seller of protection and a credit event occurs, i.e. bankruptcy or failure to pay, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of the protection an amount up to or equal to the notional amount of the swap and take delivery of the reference obligations or underlying securities comprising the reference index or (ii) pay a net settlement amount in the form of cash or securities up to or equal to the notional amount of the swap less the recovery value of the reference obligation or underlying securities comprising the reference index. |
| † | The maximum potential amount (if, after a credit event the value of the related obligation or obligations were determined to have a value of zero) the Fund could be required to pay as seller of credit protection or entitled to as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Strategic Bond Fund
Schedule of Investments
December 31, 2014 (Unaudited)
Futures Contracts — Short (Note 8)
| | | | | | | | | | | Unrealized Appreciation | |
| Issue | | Contracts | | Expiration Date | | Notional Amount | | | (Depreciation) |
| U.S. Treasury 10-Year Note Futures March 2015 | | (90) | | 04/01/15 | | $ | (11,427,957 | ) | | | $ | 16,116 | |
| U.S. Treasury 5-Year Note Futures March 2015 | | (80) | | 04/07/15 | | | (9,558,592 | ) | | | | 44,108 | |
| U.S. Treasury Long Bond Futures March 2015 | | (45) | | 04/01/15 | | | (6,432,611 | ) | | | | (72,766 | ) |
| | | | | | | $ | (27,419,160 | ) | | | $ | (12,542 | ) |
| PORTFOLIO HOLDINGS | | |
| % of Net Assets | | |
| | | |
| Corporate Bonds & Notes | 49.2% | |
| Municipal Bonds | 25.7% | |
| Asset Backed Securities | 13.4% | |
| Money Market Funds | 8.5% | |
| Mutual Funds | 1.8% | |
| U.S. Treasury Bills | 1.4% | |
| Other Assets and Liabilities | 0.0% | |
| | 100.0% | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Maryland Bond FundA Message to Our Shareholders
December 31, 2014
Dear Shareholder:
During the six-month period ended December 31, 2014, the total return of the Brown Advisory Maryland Bond Fund (the “Fund”) was 0.99% vs. 1.42% for the benchmark the Barclays 1-10 Year Blended Municipal Bond Index. While our Fund lagged the benchmark by 43 basis points, there were two key factors, our overweight to alpha sectors and the Fund’s yield-curve structure, which positively influenced performance for the period.
First, the Maryland market is generally a high-quality market dominated by state and local general-obligation issuance, a fact that presents an inherent challenge for Maryland-focused portfolios when compared to national portfolios. There are fewer opportunities in Maryland in sectors that provide higher yield and alpha opportunities, such as airports, health care, hospitals and power. To this point, the overall Maryland market underperformed the National market. The Fund can invest up to 20% of holdings in non-Maryland issues. We have used this capacity to mitigate the lack of yield in the Maryland market by focusing our non-Maryland holdings in longer-maturity alpha sectors, and this stance helped us during the period.
The second factor that strongly contributed to performance was our yield-curve barbell structure. Throughout the year, we added exposure to short and long maturities while reducing our holdings in the three-to-seven-year part of the yield curve. In particular, we have reduced our exposure to five-year maturities. As the yield curve continues to flatten in anticipation of Fed rate hikes, we believe that the three-to-seven-year portion of the yield curve will be the most vulnerable.
The Fund’s best-performing holdings for the six-month period were focused in alpha sectors, namely, hospitals, health care (Continuous Care Retirement Communities), airports and power. Stability holdings, specifically those state and local general obligation bonds with shorter maturities, were the weakest performers for the period.
The Fund maintained short-to-neutral duration position throughout the period. Given our view that curve positioning will drive performance, we expect to maintain a relatively neutral duration in the near term.
The Fund seeks to provide a high level of current income consistent with preservation of principal within an intermediate maturity structure.
Sincerely,
Monica M. Hausner
Portfolio Manager
Stephen M. Shutz, CFA
Portfolio Manager
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. The Fund is non-diversified which means it may invest a large percentage of its assets in the securities of fewer issuers. Investment in a limited number of issuers exposes the Fund to greater market risk than if its assets were diversified among a greater number of issuers. The Fund is also subject to interest rate risk which is the risk that debt securities in the Fund’s portfolio will decline in value because of an increase in market interest rates. Municipal securities are subject to adverse political or economic factors, including changes in the tax law. Income from tax-exempt funds may be subject to state and local taxes and a portion of income may be subject to the federal alternative minimum tax for certain investors.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
www.brownadvisoryfunds.com
Brown Advisory Maryland Bond Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | |
| Municipal Bonds — 97.3% | | | | | | | |
| | | | | | | | |
| General Obligation Bonds — 45.5% | | | | | | | |
| | 2,250,000 | | Alachua County Health Shands Teaching Hospital Callable 12/01/2024 @ 100^ | | | 5.00 | % | 12/01/2034 | | | 2,571,210 | |
| | 565,000 | | Anne Arundel County Maryland Consolidated General Improvements | | | 5.00 | % | 03/01/2015 | | | 569,644 | |
| | 500,000 | | Anne Arundel County Maryland Consolidated General Improvements | | | 4.00 | % | 04/01/2015 | | | 504,905 | |
| | 5,075,000 | | Anne Arundel County Maryland Consolidated General Improvements Callable 04/01/2024 @ 100^ | | | 5.00 | % | 04/01/2030 | | | 6,165,871 | |
| | 1,425,000 | | Baltimore County Maryland Consolidated Public Improvement | | | 5.00 | % | 09/01/2015 | | | 1,471,341 | |
| | 250,000 | | Baltimore County Maryland Consolidated Public Improvement | | | 5.00 | % | 10/15/2015 | | | 259,613 | |
| | 1,280,000 | | Baltimore County Maryland Consolidated Public Improvement | | | 5.00 | % | 10/15/2015 | | | 1,329,216 | |
| | 315,000 | | Baltimore County Maryland Consolidated Public Improvement | | | 5.00 | % | 11/01/2015 | | | 327,767 | |
| | 1,000,000 | | Baltimore County Maryland Consolidated Public Improvement | | | 5.00 | % | 02/01/2016 | | | 1,051,960 | |
| | 2,070,000 | | Baltimore County Maryland Consolidated Public Improvement | | | 5.00 | % | 10/15/2016 | | | 2,238,539 | |
| | 450,000 | | Baltimore County Maryland Consolidated Public Improvement Series A | | | 3.00 | % | 10/15/2016 | | | 470,619 | |
| | 575,000 | | Baltimore County Maryland Consolidated Public Improvement Series A | | | 5.00 | % | 11/01/2017 | | | 643,563 | |
| | 1,290,000 | | Baltimore County Maryland Consolidated Public Improvement Series A, Callable 10/15/2022 @100^ | | | 5.00 | % | 10/15/2024 | | | 1,551,715 | |
| | 2,025,000 | | Baltimore County Maryland Metropolitan District | | | 4.00 | % | 08/01/2016 | | | 2,141,033 | |
| | 575,000 | | Baltimore County Maryland Pension Funding | | | 5.00 | % | 08/01/2015 | | | 591,387 | |
| | 790,000 | | Carroll County Maryland Public Improvement | | | 3.00 | % | 11/01/2015 | | | 808,865 | |
| | 1,000,000 | | Carroll County Maryland Public Improvement | | | 5.00 | % | 11/01/2015 | | | 1,040,530 | |
| | 500,000 | | Carroll County Maryland Public Improvement | | | 4.00 | % | 12/01/2015 | | | 517,680 | |
| | 1,930,000 | | Charles County Maryland County Public Improvement Series A | | | 5.00 | % | 02/01/2015 | | | 1,937,971 | |
| | 660,000 | | Charles County Maryland County Public Improvement Callable 3/1/2015 @ 100^ | | | 4.25 | % | 03/01/2016 | | | 664,574 | |
| | 3,000,000 | | Frederick City Maryland Consolidated Public Improvement | | | 5.00 | % | 09/01/2016 | | | 3,230,970 | |
| | 1,820,000 | | Frederick County Maryland Consolidated Public Improvement | | | 4.00 | % | 02/01/2016 | | | 1,895,293 | |
| | 1,040,000 | | Frederick County Maryland Public Facilities Series A | | | 3.00 | % | 08/01/2016 | | | 1,083,025 | |
| | 330,000 | | Harford County Maryland Consolidated Public Improvement | | | 5.00 | % | 07/01/2015 | | | 338,072 | |
| | 200,000 | | Harford County Maryland Consolidated Public Improvement | | | 5.00 | % | 12/01/2015 | | | 208,904 | |
| | 1,000,000 | | Harford County Maryland Consolidated Public Improvement | | | 5.00 | % | 03/15/2016 | | | 1,057,040 | |
| | 1,500,000 | | Houston Texas Community College Callable 02/15/2023 @ 100^ | | | 5.00 | % | 02/15/2034 | | | 1,734,075 | |
| | 2,000,000 | | Howard County Maryland Consolidated Public Improvement Project Series A | | | 4.00 | % | 04/15/2015 | | | 2,022,640 | |
| | 300,000 | | Howard County Maryland Consolidated Public Improvement Project Series A | | | 5.00 | % | 08/15/2015 | | | 309,114 | |
| | 1,000,000 | | Howard County Maryland Consolidated Public Improvement Project Series A | | | 5.00 | % | 02/15/2016 | | | 1,053,670 | |
| | 2,020,000 | | Howard County Maryland Metropolitan District Project Series B | | | 5.00 | % | 08/15/2016 | | | 2,170,874 | |
| | 1,095,000 | | Maryland National Capital Park & Planning Commission | | | 3.00 | % | 01/15/2015 | | | 1,096,259 | |
| | 945,000 | | Maryland National Capital Park & Planning Commission | | | 3.00 | % | 01/15/2016 | | | 972,660 | |
| | 550,000 | | Maryland State & Local Facilities Loan | | | 5.00 | % | 08/01/2015 | | | 565,675 | |
| | 735,000 | | Maryland State & Local Facilities Loan | | | 5.50 | % | 08/01/2015 | | | 758,086 | |
| | 5,000,000 | | Maryland State & Local Facilities Loan | | | 5.00 | % | 08/01/2015 | | | 5,142,500 | |
| | 500,000 | | Maryland State & Local Facilities Loan 2nd Series A | | | 5.00 | % | 08/01/2015 | | | 514,250 | |
| | 505,000 | | Maryland State & Local Facilities Loan | | | 5.00 | % | 03/15/2016 | | | 533,931 | |
| | 500,000 | | Maryland State & Local Facilities Loan | | | 5.00 | % | 08/01/2016 | | | 536,535 | |
| | 6,335,000 | | Maryland State & Local Facilities Loan 2nd Series B | | | 5.00 | % | 08/01/2016 | | | 6,797,898 | |
| | 1,000,000 | | Maryland State & Local Facilities Loan 1st Series B | | | 5.00 | % | 03/15/2017 | | | 1,097,010 | |
| | 835,000 | | Maryland State & Local Facilities Loan 2nd Series B | | | 5.25 | % | 08/15/2017 | | | 934,014 | |
| | 10,000,000 | | Maryland State & Local Facilities Loan | | | 5.00 | % | 08/01/2024 | | | 12,622,500 | |
| | 2,175,000 | | Montgomery County Maryland Consolidated Public Improvement Series A | | | 5.00 | % | 05/01/2015 | | | 2,210,627 | |
| | 565,000 | | Montgomery County Maryland Consolidated Public Improvement Series A | | | 5.00 | % | 08/01/2015 | | | 581,103 | |
| | 1,495,000 | | Montgomery County Maryland Consolidated Public Improvement Series A | | | 5.00 | % | 05/01/2016 | | | 1,588,737 | |
| | 2,000,000 | | Montgomery County Maryland Consolidated Public Improvement Series A | | | 5.00 | % | 08/01/2016 | | | 2,146,140 | |
| | 825,000 | | Montgomery County Maryland Consolidated Public Improvement | | | 5.00 | % | 11/01/2016 | | | 893,731 | |
| | 750,000 | | Prince Georges County Maryland Public Improvement Series A | | | 5.00 | % | 07/15/2015 | | | 769,763 | |
| | 1,275,000 | | Prince Georges County Maryland Public Improvement | | | 5.00 | % | 09/15/2015 | | | 1,318,847 | |
| | 2,400,000 | | Prince Georges County Maryland Public Improvement | | | 5.00 | % | 08/01/2016 | | | 2,575,368 | |
| | 800,000 | | Prince Georges County Maryland Public Improvement Series A | | | 5.00 | % | 09/01/2016 | | | 861,216 | |
| | 565,000 | | Washington County Maryland Public Improvement | | | 4.50 | % | 01/01/2015 | | | 565,000 | |
| | 1,500,000 | | Washington Suburban Sanitary District | | | 5.00 | % | 06/01/2015 | | | 1,530,645 | |
| | 1,600,000 | | Washington Suburban Sanitary District | | | 4.00 | % | 06/01/2015 | | | 1,626,016 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Maryland Bond Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | |
| Municipal Bonds — (Continued) | | | | | | | |
| | | | | | | | |
| General Obligation Bonds — (Continued) | | | | | | | |
| | 250,000 | | Washington Suburban Sanitary District Series A | | | 4.00 | % | 06/01/2015 | | | 254,065 | |
| | 200,000 | | Washington Suburban Sanitary District | | | 5.00 | % | 06/01/2016 | | | 213,232 | |
| | 1,500,000 | | Washington Suburban Sanitary District | | | 5.00 | % | 06/01/2016 | | | 1,599,240 | |
| | 1,215,000 | | Washington Suburban Sanitary District | | | 5.00 | % | 06/01/2017 | | | 1,342,344 | |
| | 2,405,000 | | Worcester County | | | 5.00 | % | 03/01/2016 | | | 2,538,165 | |
| | | | | | | | | | | | 96,147,237 | |
| Refunded Bonds — 0.5% | | | | | | | | | |
| | 180,000 | | Frederick County Maryland Consolidated Public Improvement Series | | | 4.00 | % | 02/01/2016 | | | 187,270 | |
| | 250,000 | | Frederick County Maryland Public Facilities Callable 8/1/2015 @ 100^ | | | 5.00 | % | 08/01/2016 | | | 257,110 | |
| | 665,000 | | Maryland State & Local Facilities Loan 2nd Series A, Callable 8/1/2015 @ 100^ | | | 5.00 | % | 08/01/2017 | | | 683,913 | |
| | | | | | | | | | | | 1,128,293 | |
| Revenue Bonds — 51.3% | | | | | | | | | |
| | 500,000 | | Baltimore County Maryland Economic Development Various Garrison Forest School Incorporate# | | | 3.00 | % | 10/01/2031 | | | 513,905 | |
| | 1,485,000 | | Baltimore Maryland Wastewater Project Series E | | | 4.00 | % | 07/01/2015 | | | 1,513,230 | |
| | 405,000 | | Baltimore Maryland Wastewater Project Series A | | | 3.40 | % | 07/01/2016 | | | 423,059 | |
| | 1,000,000 | | Baltimore Maryland Wastewater Project | | | 5.00 | % | 07/01/2016 | | | 1,068,960 | |
| | 1,400,000 | | Baltimore Maryland Wastewater Project Series D, Callable 01/01/2024 @ 100^ | | | 5.00 | % | 07/01/2029 | | | 1,671,180 | |
| | 5,000,000 | | Baltimore Maryland Wastewater Project Series D, Callable 01/01/2024 @ 100^ | | | 5.00 | % | 07/01/2038 | | | 5,790,050 | |
| | 1,000,000 | | California Tobacco Securitization Agency | | | 4.00 | % | 06/01/2018 | | | 1,079,240 | |
| | 255,000 | | Chicago Illinois Midway International Airport Callable 01/01/2024 @ 100^ | | | 5.00 | % | 01/01/2027 | | | 297,042 | |
| | 500,000 | | Chicago Illinois Motor Fuel Tax Revenue Callable 01/01/2024 @ 100^ | | | 5.00 | % | 01/01/2027 | | | 565,100 | |
| | 1,000,000 | | Chicago Illinois O’Hare International Airport General Third Lien Series B | | | 5.25 | % | 01/01/2018 | | | 1,122,300 | |
| | 900,000 | | Chicago Illinois Wastewater Second Lien Project | | | 5.00 | % | 01/01/2017 | | | 976,635 | |
| | 500,000 | | Chicago Illinois Wastewater Second Lien Project | | | 5.00 | % | 01/01/2024 | | | 590,685 | |
| | 1,000,000 | | Chicago Illinois Water Revenue Second Lien Project Callable 11/01/2024 @ 100^ | | | 5.00 | % | 11/01/2026 | | | 1,185,710 | |
| | 2,855,000 | | Colorado Health Facilities Authority Revenue Covenant Retirement | | | 5.00 | % | 12/01/2022 | | | 3,165,795 | |
| | 2,000,000 | | Dallas Texas Rapid Transit Sales Tax Callable 12/01/2024 @ 100^ | | | 5.00 | % | 12/01/2032 | | | 2,396,860 | |
| | 550,000 | | Franklin County Health Care Facilities Friendship Village Callable 11/15/2024 @ 100^ | | | 5.00 | % | 11/15/2034 | | | 601,513 | |
| | 2,460,000 | | Frederick County Maryland Special Obligation Subordinated Urbana Community | | | | | | | | | |
| | | | Development Authority Series B, Callable 7/1/2020 @ 100^ | | | 5.50 | % | 07/01/2040 | | | 2,514,538 | |
| | 375,000 | | Frederick County Maryland Special Obligation Urbana Community Development Authority Series A | | | 4.00 | % | 07/01/2017 | | | 400,834 | |
| | 550,000 | | Idaho Health Facilities Authority Revenue Series A, Callable 03/01/2024 @ 100^ | | | 5.00 | % | 03/01/2034 | | | 620,631 | |
| | 750,000 | | Indiana Finance Authority Series A, Callable 09/15/2024 @ 100^ | | | 5.00 | % | 09/15/2028 | | | 855,112 | |
| | 700,000 | | Jurupa California Public Financing Authority Series A, Callable 09/01/2024 @ 100^ | | | 5.00 | % | 09/01/2025 | | | 827,540 | |
| | 1,920,000 | | Lower Colorado River Authority Series A, Callable 05/15/2022 @ 100^ | | | 5.00 | % | 05/15/2029 | | | 2,209,901 | |
| | 1,000,000 | | Maryland State Community Development Administration Series C | | | 3.85 | % | 09/01/2015 | | | 1,023,160 | |
| | 495,000 | | Maryland State Community Development Administration | | | 0.15 | % | 09/01/2015 | | | 494,238 | |
| | 440,000 | | Maryland State Community Development Administration | | | 0.25 | % | 03/01/2016 | | | 439,094 | |
| | 250,000 | | Maryland State Community Development Administration | | | 0.40 | % | 09/01/2016 | | | 249,507 | |
| | 1,255,000 | | Maryland State Community Development Administration | | | 2.75 | % | 03/01/2024 | | | 1,261,250 | |
| | 1,050,000 | | Maryland State Community Development Administration Callable 03/01/2024 @ 100^ | | | 2.80 | % | 09/01/2024 | | | 1,056,027 | |
| | 500,000 | | Maryland State Community Development Administration Callable 03/01/2024 @ 100^ | | | 2.90 | % | 03/01/2025 | | | 505,365 | |
| | 745,000 | | Maryland State Community Development Administration Callable 03/01/2024 @ 100^ | | | 2.95 | % | 09/01/2025 | | | 753,858 | |
| | 200,000 | | Maryland State Department of Transportation | | | 5.00 | % | 03/01/2015 | | | 201,644 | |
| | 100,000 | | Maryland State Department of Transportation | | | 5.00 | % | 06/01/2015 | | | 102,043 | |
| | 5,000,000 | | Maryland State Department of Transportation | | | 4.00 | % | 06/01/2015 | | | 5,081,300 | |
| | 3,200,000 | | Maryland State Department of Transportation | | | 4.00 | % | 02/15/2016 | | | 3,335,872 | |
| | 1,000,000 | | Maryland State Department of Transportation | | | 5.50 | % | 02/01/2017 | | | 1,102,230 | |
| | 500,000 | | Maryland State Department of Transportation Callable 5/15/2017 @ 100^ | | | 4.00 | % | 05/15/2020 | | | 534,180 | |
| | 200,000 | | Maryland State Economic Development Corporation — | | | | | | | | | |
| | | | Salisbury University Project Callable 6/1/2023 @ 100^ | | | 5.00 | % | 06/01/2027 | | | 222,392 | |
| | 400,000 | | Maryland State Economic Development Corporation — | | | | | | | | | |
| | | | Senior Student Housing Towson University Project Callable 7/1/2022 @ 100^ | | | 5.00 | % | 07/01/2027 | | | 439,420 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Maryland Bond Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | |
| Municipal Bonds — (Continued) | | | | | | | |
| | | | | | | | |
| Revenue Bonds — (Continued) | | | | | | | |
| | 500,000 | | Maryland State Economic Development Corporation — | | | | | | | |
| | | | University of Maryland College Park Project Callable 6/1/2016 @ 100^ | | | 5.00 | % | 06/01/2022 | | | 526,275 | |
| | 1,250,000 | | Maryland State Health & Higher Educational Facilities — | | | | | | | | | |
| | | | Anne Arundel Health Systems Callable 07/01/2024 @ 100^ | | | 5.00 | % | 07/01/2025 | | | 1,467,200 | |
| | 1,395,000 | | Maryland State Health & Higher Educational Facilities — Charlestown Community Project | | | 5.00 | % | 01/01/2018 | | | 1,504,005 | |
| | 650,000 | | Maryland State Health & Higher Educational Facilities — | | | | | | | | | |
| | | | Edenwald Series A, Callable 7/1/2016 @ 100^ | | | 5.20 | % | 01/01/2024 | | | 673,536 | |
| | 1,000,000 | | Maryland State Health & Higher Educational Facilities — | | | | | | | | | |
| | | | Edenwald Series A, Callable 7/1/2016 @ 100^ | | | 5.40 | % | 01/01/2037 | | | 1,027,380 | |
| | 1,000,000 | | Maryland State Health & Higher Educational Facilities — | | | | | | | | | |
| | | | Greater Baltimore Medical Center Callable 7/1/2021 @ 100^ | | | 5.00 | % | 07/01/2023 | | | 1,153,030 | |
| | 3,400,000 | | Maryland State Health & Higher Educational Facilities — | | | | | | | | | |
| | | | Johns Hopkins Health System Callable 5/15/2020 @ 100^ | | | 5.00 | % | 05/15/2040 | | | 3,742,924 | |
| | 350,000 | | Maryland State Health & Higher Educational Facilities — Johns Hopkins Health System Series B# | | | 4.30 | % | 05/15/2048 | | | 355,593 | |
| | 500,000 | | Maryland State Health & Higher Educational Facilities — Johns Hopkins University Series A | | | 5.00 | % | 07/01/2018 | | | 569,270 | |
| | 500,000 | | Maryland State Health & Higher Educational Facilities — Lifebridge Health | | | 5.00 | % | 07/01/2017 | | | 542,270 | |
| | 250,000 | | Maryland State Health & Higher Educational Facilities — | | | | | | | | | |
| | | | Lifebridge Health Callable 7/1/2017 @ 100^ | | | 5.00 | % | 07/01/2018 | | | 274,500 | |
| | 100,000 | | Maryland State Health & Higher Educational Facilities — | | | | | | | | | |
| | | | Loyal University Callable 10/01/2024 @ 100^ | | | 4.00 | % | 10/01/2030 | | | 107,825 | |
| | 300,000 | | Maryland State Health & Higher Educational Facilities — | | | | | | | | | |
| | | | Loyal University Callable 10/01/2024 @ 100^ | | | 4.00 | % | 10/01/2031 | | | 321,906 | |
| | 500,000 | | Maryland State Health & Higher Educational Facilities — Medstar Health | | | 5.00 | % | 08/15/2023 | | | 596,310 | |
| | 3,290,000 | | Maryland State Health & Higher Educational Facilities — | | | | | | | | | |
| | | | Medstar Health Callable 08/15/2023 @ 100^ | | | 5.00 | % | 08/15/2038 | | | 3,651,867 | |
| | 500,000 | | Maryland State Health & Higher Educational Facilities — | | | | | | | | | |
| | | | Mercy Medical Center Callable 7/1/2022 @ 100^ | | | 5.00 | % | 07/01/2024 | | | 559,065 | |
| | 1,000,000 | | Maryland State Health & Higher Educational Facilities — | | | | | | | | | |
| | | | Mercy Medical Center Callable 7/1/2021 @ 100^ | | | 6.00 | % | 07/01/2025 | | | 1,162,200 | |
| | 1,130,000 | | Maryland State Health & Higher Educational Facilities — | | | | | | | | | |
| | | | Mercy Medical Center Callable 7/1/2021 @ 100^ | | | 6.25 | % | 07/01/2031 | | | 1,303,591 | |
| | 200,000 | | Maryland State Health & Higher Educational Facilities — | | | | | | | | | |
| | | | Mercy Ridge Callable 7/1/2017 @ 100^ | | | 4.50 | % | 07/01/2035 | | | 203,930 | |
| | 1,000,000 | | Maryland State Health & Higher Educational Facilities — | | | | | | | | | |
| | | | Peninsula Regional Medical Center Callable 7/1/2016 @ 100^ | | | 5.00 | % | 07/01/2026 | | | 1,056,570 | |
| | 260,000 | | Maryland State Health & Higher Educational Facilities — | | | | | | | | | |
| | | | University of Maryland Medical System Series F | | | 5.00 | % | 07/01/2018 | | | 291,957 | |
| | 500,000 | | Maryland State Health & Higher Educational Facilities — | | | | | | | | | |
| | | | University of Maryland Medical System Callable 7/1/2018 @ 100^ | | | 5.50 | % | 07/01/2024 | | | 560,610 | |
| | 250,000 | | Maryland State Health & Higher Educational Facilities — | | | | | | | | | |
| | | | University of Maryland Medical System Callable 7/1/2019 @ 100^ | | | 5.00 | % | 07/01/2034 | | | 273,157 | |
| | 1,640,000 | | Maryland State Health & Higher Educational Facilities — Upper Chesapeake Hospitals | | | 5.50 | % | 01/01/2018 | | | 1,715,702 | |
| | 240,000 | | Maryland State Health & Higher Educational Facilities — | | | | | | | | | |
| | | | Western Medical Health Series A, Callable 7/1/2016 @ 100^ | | | 5.00 | % | 01/01/2025 | | | 256,138 | |
| | 1,750,000 | | Maryland State Industrial Development Financing Authority Multi-Modal# | | | 2.00 | % | 09/01/2040 | | | 1,767,850 | |
| | 1,250,000 | | Maryland State Industrial Development Financing Authority Multi-Modal — | | | | | | | | | |
| | | | McDonogh School Series B# | | | 1.10 | % | 09/01/2040 | | | 1,255,437 | |
| | 750,000 | | Maryland State Transportation Authority Series A | | | 3.00 | % | 07/01/2016 | | | 779,648 | |
| | 4,255,000 | | Maryland State Transportation Authority Airport Baltimore/Washington | | | 5.00 | % | 03/01/2022 | | | 5,032,261 | |
| | 1,715,000 | | Maryland State Water Quality Financing | | | 5.00 | % | 03/01/2015 | | | 1,729,080 | |
| | 500,000 | | Maryland State Water Quality Financing Series A | | | 5.00 | % | 09/01/2015 | | | 516,225 | |
| | 2,820,000 | | Maryland State Water Quality Financing | | | 5.00 | % | 03/01/2017 | | | 3,087,280 | |
| | 500,000 | | Minneapolis & St Paul Minnesota Metropolitan Series A, Callable 01/01/2024 @ 100^ | | | 5.00 | % | 01/01/2026 | | | 598,625 | |
| | 785,000 | | Montgomery County Maryland Housing Opportunities Revenue Bonds | | | 1.60 | % | 07/01/2018 | | | 793,321 | |
| | 950,000 | | Montgomery County Maryland Parking Revenue System Project Bethesda Parking Lot District | | | 4.00 | % | 06/01/2015 | | | 965,048 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Maryland Bond Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Par | | | | | | | | | |
| Value/Shares | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | |
| Municipal Bonds — (Continued) | | | | | | | |
| | | | | | | | |
| Revenue Bonds — (Continued) | | | | | | | |
| | 1,385,000 | | Montgomery County Maryland Parking Revenue System Project Bethesda Parking Lot District | | | 4.00 | % | 06/01/2015 | | | 1,406,938 | |
| | 630,000 | | Nassau County New York Local Economic Callable 07/01/2024 @ 100^ | | | 5.00 | % | 07/01/2026 | | | 729,830 | |
| | 585,000 | | New Jersey State Turnpike Authority Series A, Callable 07/01/2022 @ 100^ | 5.00 | % | 01/01/2038 | | | 657,002 | |
| | 1,095,000 | | New York City TFA Future Tax Callable 08/01/2024 @ 100^ | | | 5.00 | % | 08/01/2032 | | | 1,296,732 | |
| | 5,000,000 | | New York City Water Callable 06/15/2024 @ 100^ | | | 5.00 | % | 06/15/2036 | | | 5,824,600 | |
| | 700,000 | | New York State Mortgage Agency | | | 0.85 | % | 04/01/2016 | | | 703,269 | |
| | 500,000 | | Oklahoma State Municipal Power Authority Callable 1/1/2023 @ 100^ | | | 4.00 | % | 01/01/2043 | | | 518,195 | |
| | 2,000,000 | | Pennsylvania Economic Development Financing Series A, Callable 08/01/2024 @ 100^ | | | 5.00 | % | 02/01/2025 | | | 2,403,720 | |
| | 1,000,000 | | Private Colleges & Universities Authority | | | 5.00 | % | 04/01/2023 | | | 1,155,460 | |
| | 1,810,000 | | Puerto Rico Sales Tax Financing Corp. Revenue Bonds First Subseries A-1 | 7.93 | %~ | 08/01/2024 | | | 817,378 | |
| | 250,000 | | Railsplitter Tobacco Settlement Authority | | | 5.00 | % | 06/01/2016 | | | 264,680 | |
| | 3,000,000 | | Tobacco Settlement Financing Corp. | | | 5.00 | % | 06/01/2017 | | | 3,281,640 | |
| | 1,000,000 | | University of Maryland System Auxiliary Facility & Tuition Revenue Series D | | | 3.00 | % | 04/01/2015 | | | 1,007,280 | |
| | 350,000 | | University of Maryland System Auxiliary Facility & Tuition Revenue | | | 5.00 | % | 04/01/2015 | | | 354,298 | |
| | 500,000 | | University of Maryland System Auxiliary Facility & Tuition Revenue Series B | | | 3.75 | % | 10/01/2015 | | | 513,565 | |
| | | | | | | | | | | | 108,547,573 | |
| Total Municipal Bonds (Cost $201,889,099) | | | | | | | | 205,823,103 | |
| | | | | | | | | | |
| Short-Term Investments — 1.1% | | | | | | | | | |
| | | | | | | | | | |
| Money Market Funds — 1.1% | | | | | | | | | |
| | 2,233,423 | | DWS Cash Account Trust – Tax-Exempt Portfolio, 0.01%* | | | | | | | | 2,233,423 | |
| Total Short-Term Investments (Cost $2,233,423) | | | | | | | | 2,233,423 | |
| Total Investments — 98.4% (Cost $204,122,522) | | | | | | | | 208,056,526 | |
| Other Assets in Excess of Liabilities — 1.6% | | | | | | | | 3,468,742 | |
| TOTAL NET ASSETS — 100.0% | | | | | | | $ | 211,525,268 | |
| PORTFOLIO HOLDINGS | | |
| % of Net Assets | | |
| | | |
| Revenue Bonds | 51.3% | |
| General Obligation Bonds | 45.5% | |
| Money Market Funds | 1.1% | |
| Refunded Bonds | 0.5% | |
| Other Assets and Liabilities | 1.6% | |
| | 100.0% | |
| ^ | Continuously callable with 30 days notice. |
| # | Variable rate security. Rate disclosed is as of December 31, 2014. |
| ~ | Zero coupon bond. Rate disclosed is yield to maturity as of December 31, 2014. |
| * | Annualized seven-day yield as of December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Tax Exempt Bond Fund
A Message to Our Shareholders
December 31, 2014
Dear Shareholder:
During the six-month period ended December 31, 2014, the Brown Advisory Tax Exempt Bond Fund (the “Fund”) increased 1.51% in value. During the same period, the Barclays 1-10 Year Blended Municipal Bond Index, the Fund’s benchmark, increased 1.42%.
The Fund’s strategic positioning worked well during the past six months. The municipal yield curve continued to flatten, with long AAA-rated bond yields grinding lower by 42 basis points (bps) during the period. In contrast, shorter bonds sold off during the period as the market began adjusting those shorter maturities in anticipation of Federal Reserve rate hikes. Yields on three-year AAA-rated bonds rose 22 bps during the period. This “twist” in the yield curve benefited the Fund as we maintained a duration “barbell” with relative overweight positions in longer maturities and very short maturities. The genesis of this barbell was driven equally by the relative attractiveness of the long end of the yield curve and by our specific underweight to the potentially vulnerable three-to-five-year portion of the curve. The Fund maintained a neutral overall duration position for the period. Looking forward, we believe that curve positioning will drive outperformance more than the general movement in interest rates.
Sector and individual credit selection was also a positive contributor to the Fund’s outperformance. The Fund maintains an overweight to revenue-backed issues, where we believe there is an upside thesis. Of those sectors, health care-related credits such as not-for-profit hospitals and senior living (health care) were the largest contributor. On a combined basis, these holdings returned 5.90% for the period versus the Index’s health care return of 2.35%. The Fund also maintained a combined overweight of roughly 9% to these two sectors during the period, which contributed 63 bps of relative outperformance.
Transportation revenue bonds, particularly airport and toll road issues, also performed well. The Fund’s transportation holdings returned 4.90% for the period versus the Index’s transportation return of 1.82%, contributing 35 bps of relative outperformance. This wide differential in sector performance is largely explained by the difference in transportation composition in the Fund vs. the Index. The Fund’s exposure has been more closely tied to entities that benefit from improving U.S. consumer confidence, whereas Index composition is more closely tied to larger, state-supported issues backed by tax revenues that we believe offer less opportunity for upside. We believe that the recent decline in fuel prices can further benefit our exposure in this sector.
Broad credit quality across the municipal market is improving, but we also believe that relative valuation and credit selection will play an increasingly important role in future performance. We remain focused on our core philosophy of seeking sectors and bonds that are underpriced on a fundamental basis, while maintaining the core stability that investors should expect from what we believe is a high-quality municipal bond fund.
Sincerely,
Stephen M. Shutz, CFA
Portfolio Manager
Monica M. Hausner
Portfolio Manager
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. The Fund is non-diversified which means it may invest a large percentage of its assets in the securities of fewer issuers. Concentration in a limited number of issuers exposes the Fund to greater market risk than if its assets were diversified among a greater number of issuers. The Fund is also subject to interest rate risk which is the risk that debt securities in the Fund’s portfolio will decline in value because of an increase in market interest rates. This risk is usually greater for longer-term debt securities. Income from tax-exempt funds may be subject to state and local taxes and a portion of income may be subject to the Federal Alternative minimum tax for certain investors.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
www.brownadvisoryfunds.com
Brown Advisory Tax Exempt Bond Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | |
| Municipal Bonds — 97.4% | | | | | | | |
| | | | | | | | |
| General Obligation Bonds — 31.2% | | | | | | | |
| | 2,980,000 | | Adams Colorado 12 Five Star Schools | | | 3.00 | % | 12/15/2015 | | | 3,060,996 | |
| | 1,500,000 | | Alamo Community College District | | | 3.50 | % | 02/15/2015 | | | 1,506,285 | |
| | 5,200,000 | | Albuquerque New Mexico | | | 5.00 | % | 07/01/2016 | | | 5,563,480 | |
| | 1,135,000 | | Alpine Utah School District | | | 5.00 | % | 03/15/2016 | | | 1,199,877 | |
| | 3,120,000 | | Arapahoe County School District No 5 Cherry Creek | | | 5.00 | % | 12/15/2016 | | | 3,393,343 | |
| | 975,000 | | Burnsville-Eagan-Savage Independent School District | | | 2.00 | % | 02/01/2016 | | | 990,629 | |
| | 1,500,000 | | Cheshire Connecticut | | | 4.00 | % | 08/01/2015 | | | 1,533,465 | |
| | 3,500,000 | | Chicago Illinois | | | 5.00 | % | 01/01/2024 | | | 3,819,025 | |
| | 2,080,000 | | Cook County Community High School District | | | 5.00 | % | 12/01/2018 | | | 2,352,480 | |
| | 895,000 | | Coon Rapids Minnesota, City of | | | 2.00 | % | 02/01/2016 | | | 909,759 | |
| | 1,750,000 | | Fort Bend Independent School District | | | 3.00 | % | 08/15/2016 | | | 1,824,462 | |
| | 1,360,000 | | Fountain Hills Arizona, Town of | | | 2.00 | % | 07/01/2016 | | | 1,391,375 | |
| | 1,320,000 | | Gwinnett County School District | | | 5.00 | % | 02/01/2016 | | | 1,388,587 | |
| | 1,185,000 | | Harris County Texas Improvement | | | 5.00 | % | 09/01/2015 | | | 1,222,884 | |
| | 975,000 | | Harris County Texas Improvement | | | 5.00 | % | 09/01/2016 | | | 1,046,838 | |
| | 845,000 | | Hudson New Jersey | | | 2.00 | % | 03/15/2015 | | | 847,941 | |
| | 3,630,000 | | Hurst Euless Bedford Independent School District | | 0.49 | %~ | 08/15/2016 | | | 3,896,805 | |
| | 1,000,000 | | Illinois, State of | | | 4.00 | % | 07/01/2016 | | | 1,045,400 | |
| | 1,475,000 | | Kane County School District No 129 West Aurora | | | 2.00 | % | 02/01/2016 | | | 1,497,862 | |
| | 1,250,000 | | King County Public Hospital District No 2 | | | 5.00 | % | 12/01/2015 | | | 1,303,637 | |
| | 1,000,000 | | Lake Travis Independent School District | | | 2.00 | % | 02/15/2015 | | | 1,002,400 | |
| | 690,000 | | Lexington-Fayette Urban County Government | | | 5.00 | % | 01/01/2016 | | | 722,747 | |
| | 1,255,000 | | Louisville & Jefferson County Kentucky | | | 4.00 | % | 04/01/2015 | | | 1,267,312 | |
| | 1,400,000 | | Lubbock Texas | | | 2.00 | % | 02/15/2015 | | | 1,403,290 | |
| | 1,250,000 | | Lufkin Independent School District | | | 2.00 | % | 08/15/2015 | | | 1,264,612 | |
| | 725,000 | | Maricopa County Union High School District No 216 Agua Fria | | | 4.00 | % | 07/01/2016 | | | 761,924 | |
| | 1,000,000 | | Maryland, State of | | | 5.00 | % | 08/01/2015 | | | 1,028,500 | |
| | 2,000,000 | | McKinney Independent School District | | | 5.00 | % | 02/15/2016 | | | 2,107,040 | |
| | 530,000 | | McLeod Minnesota, County of | | | 2.00 | % | 02/01/2016 | | | 538,496 | |
| | 1,000,000 | | Midland Texas Independent School District | | | 2.00 | % | 02/15/2015 | | | 1,002,400 | |
| | 1,000,000 | | Milwaukee Wisconsin Metropolitan Sewage District | | | 5.50 | % | 10/01/2015 | | | 1,040,240 | |
| | 1,400,000 | | Murfreesboro Tennessee | | | 1.00 | % | 04/01/2015 | | | 1,403,136 | |
| | 1,315,000 | | Nashville & Davidson County — District Energy System Series A | | | 3.00 | % | 10/01/2015 | | | 1,343,378 | |
| | 1,000,000 | | New York New York Series C | | | 5.00 | % | 08/01/2015 | | | 1,028,280 | |
| | 1,000,000 | | New York New York Series J | | | 5.00 | % | 08/01/2016 | | | 1,071,890 | |
| | 765,000 | | Oil City Area School District | | | 0.35 | % | 05/15/2015 | | | 764,985 | |
| | 890,000 | | Oil City Area School District | | | 0.60 | % | 05/15/2016 | | | 889,279 | |
| | 1,000,000 | | Pennsylvania, Commonwealth of | | | 5.50 | % | 02/01/2015 | | | 1,004,520 | |
| | 1,000,000 | | Richardson Texas Independent School District | | | 3.00 | % | 02/15/2015 | | | 1,003,480 | |
| | 775,000 | | Royal Oak Michigan School District | | | 5.00 | % | 05/01/2016 | | | 821,516 | |
| | 1,655,000 | | South Carolina, State of | | | 5.00 | % | 04/01/2015 | | | 1,675,373 | |
| | 1,100,000 | | South Windsor Connecticut | | | 5.00 | % | 08/15/2015 | | | 1,132,868 | |
| | 900,000 | | Urbandale Iowa | | | 2.00 | % | 06/01/2015 | | | 906,507 | |
| | 4,040,000 | | Washington Multnomah & Yamhill | | | 3.00 | % | 06/15/2015 | | | 4,092,964 | |
| | 1,010,000 | | Wisconsin, State of Series A | | | 5.00 | % | 05/01/2015 | | | 1,026,544 | |
| | | | | | | | | | | | 70,098,811 | |
| Refunded Bonds — 14.6% | | | | | | | | | |
| | 2,105,000 | | Anchorage Alaska, City of Series A, Callable 03/01/2015 @ 100^ | | | 5.00 | % | 03/01/2020 | | | 2,122,135 | |
| | 1,800,000 | | Arizona State University Callable 03/01/2015 @ 100^ | | | 5.00 | % | 09/01/2023 | | | 1,814,580 | |
| | 2,000,000 | | Delaware River Joint Toll Bridge Commission Callable 07/01/2015 @ 100^ | | | 4.50 | % | 07/01/2030 | | | 2,043,720 | |
| | 1,760,000 | | District of Columbia Callable 01/01/2016 @ 100^ | | | 5.00 | % | 01/01/2019 | | | 1,843,354 | |
| | 3,000,000 | | Easton Area School District Callable 04/01/2016 @ 100^ | | | 7.50 | % | 04/01/2021 | | | 3,269,280 | |
| | 2,835,000 | | Easton Area School District Callable 04/01/2016 @ 100^ | | | 7.50 | % | 04/01/2022 | | | 3,089,470 | |
| | 1,000,000 | | Hammond School Building Corp. Callable 01/15/2015 @ 100^ | | | 5.00 | % | 07/15/2020 | | | 1,001,900 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Tax Exempt Bond Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | |
| Municipal Bonds — (Continued) | | | | | | | |
| | | | | | | | |
| Refunded Bonds — (Continued) | | | | | | | |
| | 1,375,000 | | Indiana State Office Building Commission | | | 5.25 | % | 07/01/2015 | | | 1,410,007 | |
| | 3,420,000 | | Louisville & Jefferson County Water Callable 11/15/2016 @ 100^ | | | 5.00 | % | 11/15/2028 | | | 3,706,938 | |
| | 1,490,000 | | Marion & Clackamas Counties Oregon Callable 06/15/2016 @ 100^ | | | 4.38 | % | 06/15/2021 | | | 1,576,867 | |
| | 1,370,000 | | Montgomery, County of Callable 10/15/2016 @ 100^ | | | 5.00 | % | 10/15/2028 | | | 1,480,491 | |
| | 2,500,000 | | Nevada System of Higher Education Callable 01/01/2016 @ 100^ | | | 5.00 | % | 07/01/2026 | | | 2,619,175 | |
| | 1,425,000 | | New Jersey Economic Development Authority Callable 09/01/2015 @ 100^ | | | 5.25 | % | 09/01/2019 | | | 1,473,521 | |
| | 2,000,000 | | Ohio Water Development Authority Callable 06/01/2015 @ 100^ | | | 4.75 | % | 12/01/2024 | | | 2,038,800 | |
| | 1,000,000 | | Pierce County School District Callable 06/01/2016 @ 100^ | | | 5.00 | % | 12/01/2024 | | | 1,065,850 | |
| | 500,000 | | Shaler Area School District Callable 09/01/2016 @ 100^ | | | 5.25 | % | 09/01/2028 | | | 540,365 | |
| | 1,000,000 | | Socorro Independent School District Callable 12/01/2023 @ 100^ | | | 5.00 | % | 08/15/2026 | | | 1,074,180 | |
| | 500,000 | | Terrace Park Ohio, Village of Callable 12/01/2015 @ 100^ | | | 5.00 | % | 12/01/2021 | | | 522,175 | |
| | | | | | | | | | | | 32,692,808 | |
| Revenue Bonds — 51.6% | | | | | | | | | |
| | 2,100,000 | | Alabama 21st Century Authority — Tobacco Settlement Series A | | | 4.00 | % | 06/01/2015 | | | 2,132,550 | |
| | 1,500,000 | | Alabama 21st Century Authority — Tobacco Settlement | | | 5.00 | % | 06/01/2017 | | | 1,643,835 | |
| | 750,000 | | Anaheim Public Financing Authority | | | 5.00 | % | 05/01/2016 | | | 793,357 | |
| | 750,000 | | Anaheim Public Financing Authority | | | 5.00 | % | 05/01/2017 | | | 818,437 | |
| | 1,000,000 | | Arizona Health Facilities Authority | | | 5.00 | % | 02/01/2019 | | | 1,131,870 | |
| | 2,000,000 | | Arizona Health Facilities Authority Callable 02/01/2022 @ 100^ | | | 5.00 | % | 02/01/2034 | | | 2,190,660 | |
| | 660,000 | | Austin Community College District | | | 5.00 | % | 02/01/2016 | | | 692,677 | |
| | 1,080,000 | | Cathedral City Redevelopment Successor Agency | | | 3.00 | % | 08/01/2016 | | | 1,119,323 | |
| | 3,000,000 | | Chicago Illinois Motor Fuel Tax Revenue Callable 01/01/2024 @ 100^ | | | 5.00 | % | 01/01/2027 | | | 3,390,600 | |
| | 3,000,000 | | Chicago Midway International Airport Callable 01/01/2024 @ 100^ | | | 5.00 | % | 01/01/2028 | | | 3,468,900 | |
| | 5,000,000 | | Chicago Wastewater Project Callable 01/01/2024 @ 100^ | | | 5.00 | % | 01/01/2044 | | | 5,519,900 | |
| | 300,000 | | Colorado Health Facilities Authority — Covenant Retirement Communities | | | 5.00 | % | 12/01/2020 | | | 333,570 | |
| | 1300000 | | Colorado Health Facilities Authority Revenue — | | | | | | | | | |
| | | | Covenant Retirement Communities, Inc. Series A, Callable 12/01/2022 @ 100^ | 5.00 | % | 12/01/2027 | | | 1,411,306 | |
| | 335,000 | | Cook County Sales Tax Revenue | | | 4.00 | % | 11/15/2015 | | | 346,065 | |
| | 2,455,000 | | Dallas/Fort Worth International Airport Callable 11/01/2023 @ 100^ | | | 5.25 | % | 11/01/2030 | | | 2,911,090 | |
| | 1,600,000 | | Delaware Transportation Authority | | | 5.00 | % | 07/01/2015 | | | 1,639,296 | |
| | 4,885,000 | | Denver Health & Hospital Authority Callable 12/01/2023 @ 100^ | | | 5.00 | % | 12/01/2039 | | | 5,316,981 | |
| | 1,050,000 | | Florida Department of Environmental Protection | | | 3.00 | % | 07/01/2015 | | | 1,065,141 | |
| | 1,000,000 | | Florida Water Pollution Control Financing Corp. | | | 2.75 | % | 01/15/2015 | | | 1,001,050 | |
| | 1,200,000 | | Franklin Ohio Health Care, County of Callable 11/15/2024 @ 100^ | | | 5.00 | % | 11/15/2044 | | | 1,287,912 | |
| | 2,570,000 | | Hamilton County Convention Facilities Authority | | | 2.00 | % | 12/01/2015 | | | 2,608,653 | |
| | 1,000,000 | | Harris County Cultural Education Facilities Finance Corp. | | | 5.00 | % | 11/15/2018 | | | 1,129,970 | |
| | 1,000,000 | | Harris County-Houston Sports Authority Callable 11/15/2024 @ 100^ | | | 5.00 | % | 11/15/2053 | | | 1,094,780 | |
| | 1,000,000 | | Indiana Finance Authority | | | 4.00 | % | 02/01/2015 | | | 1,003,290 | |
| | 1,000,000 | | Indiana Finance Authority | | | 5.00 | % | 02/01/2016 | | | 1,052,000 | |
| | 1,000,000 | | Indiana Finance Authority Callable 09/15/2024 @ 100^ | | | 5.00 | % | 09/15/2025 | | | 1,166,420 | |
| | 1,000,000 | | Indiana Finance Authority Series A, Callable 09/15/2024 @ 100^ | | | 5.00 | % | 09/15/2028 | | | 1,140,150 | |
| | 3,000,000 | | Indiana Municipal Power Agency Callable 01/01/2025 @ 100^ | | | 5.00 | % | 01/01/2032 | | | 3,505,170 | |
| | 1,150,000 | | Iowa State University | | | 2.00 | % | 07/01/2015 | | | 1,160,373 | |
| | 425,000 | | Jurupa California Public Financing Authority | | | 4.00 | % | 09/01/2016 | | | 447,886 | |
| | 2,205,000 | | Kansas Development Finance Authority | | | 5.00 | % | 06/01/2016 | | | 2,345,150 | |
| | 1,500,000 | | Lincoln Nebraska — Lincoln Electric System | | | 4.00 | % | 09/01/2015 | | | 1,538,610 | |
| | 2,500,000 | | Miami Beach Florida Health Facilities Callable 11/15/2024 @ 100^ | | | 5.00 | % | 11/15/2039 | | | 2,768,800 | |
| | 3,000,000 | | Miami-Dade Florida Aviation Revenue, County of Callable 10/01/2024 @ 100^ | 5.00 | % | 10/01/2034 | | | 3,461,310 | |
| | 2,000,000 | | New Jersey State Turnpike Authority Callable 07/01/2024 @ 100^ | | | 5.00 | % | 01/01/2030 | | | 2,343,860 | |
| | 2,430,000 | | New Jersey Transportation System | | | 5.25 | % | 12/15/2023 | | | 2,858,336 | |
| | 1,465,000 | | New York City Transitional Finance Authority Future Tax Secured Revenue | | | 5.00 | % | 11/01/2015 | | | 1,524,376 | |
| | 1,000,000 | | New York City Transitional Finance Authority Future Tax Secured Revenue | | | 5.00 | % | 11/01/2015 | | | 1,040,530 | |
| | 1,610,000 | | New York City Water Callable 06/15/2024 @ 100^ | | | 5.00 | % | 06/15/2036 | | | 1,875,521 | |
| | 2,545,000 | | New York Metropolitan Transportation Authority Callable 05/15/2023 @ 100^ | 5.00 | % | 11/15/2038 | | | 2,878,039 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Tax Exempt Bond Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Par | | | | | | | | | |
| Value/Shares | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | |
| Municipal Bonds — (Continued) | | | | | | | |
| | | | | | | | |
| Revenue Bonds — (Continued) | | | | | | | |
| | 2,000,000 | | New York Metropolitan Transportation Authority Callable 05/15/2023 @ 100^ | | | 5.00 | % | 11/15/2042 | | | 2,247,660 | |
| | 1,000,000 | | New York State Dormitory Authority | | | 5.00 | % | 02/15/2015 | | | 1,005,970 | |
| | 1,000,000 | | New York State Dormitory Authority | | | 4.00 | % | 10/01/2015 | | | 1,028,580 | |
| | 2,780,000 | | New York State Dormitory Authority | | | 5.00 | % | 02/15/2016 | | | 2,928,202 | |
| | 1,000,000 | | New York State Environmental Facilities Corp. | | | 5.00 | % | 06/15/2015 | | | 1,022,340 | |
| | 1,730,000 | | New York State Environmental Facilities Corp. | | | 2.00 | % | 11/15/2015 | | | 1,757,888 | |
| | 1,760,000 | | Niagara County New York Tobacco | | | 5.00 | % | 05/15/2024 | | | 2,076,870 | |
| | 1,250,000 | | Palm Beach County Florida Health Corp. Callable 12/01/2024 @ 100^ | | | 5.00 | % | 12/01/2031 | | | 1,416,000 | |
| | 3,000,000 | | Pennsylvania Turnpike Commission Callable 12/01/2024 @ 100^ | | | 5.00 | % | 12/01/2038 | | | 3,367,530 | |
| | 3,000,000 | | Pennsylvania Turnpike Commission Callable 12/01/2024 @ 100^ | | | 5.00 | % | 12/01/2044 | | | 3,380,910 | |
| | 1,810,000 | | Puerto Rico Sales Tax Financing Corp. Revenue Bonds First Subseries A-1 | | 7.93 | %~ | 08/01/2024 | | | 817,378 | |
| | 675,000 | | Railsplitter Tobacco Settlement Authority | | | 5.00 | % | 06/01/2017 | | | 736,047 | |
| | 1,340,000 | | Rhode Island Clean Water Finance Agency — Water Pollution Control Series B | | | 3.00 | % | 10/01/2015 | | | 1,368,663 | |
| | 1,305,000 | | Sedgwick County Public Building Commission | | | 5.00 | % | 02/01/2015 | | | 1,310,364 | |
| | 4,000,000 | | Skagit County Washington Public Hospital District Callable 12/01/2023 @ 100^ | | | 5.00 | % | 12/01/2037 | | | 4,266,480 | |
| | 2,000,000 | | Tobacco Settlement Financing Corp. | | | 5.00 | % | 06/01/2017 | | | 2,187,760 | |
| | 2,550,000 | | Tobacco Settlement Financing Corp. Louisiana Revenue Bonds | | | 5.00 | % | 05/15/2019 | | | 2,897,897 | |
| | 1,000,000 | | Tucson Arizona Water System Revenue Bonds | | | 3.00 | % | 07/01/2015 | | | 1,014,470 | |
| | 850,000 | | Tulsa County Industrial Authority | | | 4.00 | % | 09/01/2016 | | | 898,399 | |
| | 1,775,000 | | Virginia College Building Authority | | | 4.00 | % | 09/01/2016 | | | 1,880,950 | |
| | 1,450,000 | | Wayne County Michigan Airport Callable 12/01/2024 @ 100^ | | | 5.00 | % | 12/01/2039 | | | 1,662,947 | |
| | 1,360,000 | | Wisconsin Health & Educational Facilities Authority Callable 05/01/2024 @ 100^ | | | 5.00 | % | 05/01/2027 | | | 1,509,355 | |
| | | | | | | | | | | | 115,940,404 | |
| Total Municipal Bonds (Cost $217,177,164) | | | | | | | | 218,732,023 | |
| | | | | | | | | | |
| Short-Term Investments — 3.9% | | | | | | | | | |
| | | | | | | | | | |
| Money Market Fund — 3.9% | | | | | | | | | |
| | 8,677,373 | | DWS Cash Account Trust – Tax-Exempt Portfolio, 0.01%* | | | | | | | | 8,677,373 | |
| Total Short-Term Investments Fund (Cost $8,677,373) | | | | | | | | 8,677,373 | |
| Total Investments — 101.3% (Cost $225,854,537) | | | | | | | | 227,409,396 | |
| Liabilities in Excess of Other Assets — (1.3)% | | | | | | | | (2,814,064 | ) |
| TOTAL NET ASSETS — 100.0% | | | | | | | $ | 224,595,332 | |
| PORTFOLIO HOLDINGS | | |
| % of Net Assets | | |
| | | |
| Revenue Bonds | 51.6% | |
| General Obligation Bonds | 31.2% | |
| Refunded Bonds | 14.6% | |
| Money Market Funds | 3.9% | |
| Other Assets and Liabilities | (1.3)% | |
| | 100.0% | |
| ^ | Continuously callable with 30 days notice. |
| # | Variable rate security. Rate disclosed is as of December 31, 2014. |
| ~ | Zero coupon bond. Rate disclosed is yield to maturity as of December 31, 2014. |
| * | Annualized seven-day yield as of December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Mortgage Securities Fund
A Message to Our Shareholders
December 31, 2014
Dear Shareholder:
During the six-month period ended December 31, 2014, the Brown Advisory Mortgage Securities Fund Institutional Shares (the “Fund”) was up 1.39%, trailing the Barclays Mortgage Backed Securities Index, the Fund’s benchmark, which was up 1.97%.
The Fund’s investment process is centered on finding mortgage-related bonds that we believe will enjoy slower principal-payment speeds. This generally involves finding pools where the characteristics of the underlying borrowers might suggest that they will have less incentive to refinance their loans. This includes loans with smaller loan balances, lower equity, recent purchases, etc. The quality of our prepayment analysis was tested over the last six months, when mortgage rates dropped materially and borrowers were presented with fresh opportunities to refinance. According to Freddie Mac, the average 30-year mortgage rate was 3.83% at the end of December, down from 4.46% at the end of June. Our positions performed extremely well on a prepayment basis. The Fund’s pass-through positions had a constant prepayment rate (CPR) of just 2.49% vs. 11.47% for generic MBS of the same coupon. (CPR is a measure of prepayment—the stated figures roughly approximate the annualized percentage of loans within a pool that are being prepaid.) This added to returns, as slower repayments of principal allowed the portfolio to collect more coupon payments.
However, the Fund was not as well positioned relative to the persistent decline in mortgage spreads during 2014. The narrowing spreads were somewhat surprising, as the Federal Reserve concluded its mortgage-purchasing program in 2014. In addition, we believed that demand from banks was likely to wane regardless of the direction of rates. Higher rates would cause banks to prefer making floating rate loans over long-term MBS, while lower rates would squeeze net interest margins (NIM), making MBS less attractive. On top of that, MBS spreads began this period relatively tight despite these obvious headwinds.
As it happened, bank demand remained robust despite falling NIM, as banks just generally had so much deposit money to put to work that they increased both securities holdings and traditional lending. Additionally, money managers also expanded MBS holdings. This more than offset the decline in demand from the Fed and pushed the spreads tighter. As of December 31, the nominal spread on the current-coupon Fannie Mae MBS is near all-time tights.
We are comfortable with the current composition of the portfolio, as we see the tightening of the MBS spread as purely technical. In addition, we see real prepayment risks should mortgage rates keep dropping; a large number of borrowers are holding loans with rates near 4.5%, as this was the prevailing rate for the second half of 2013 and first half of 2014. With borrowing rates now dropping into the 3.8% area, these loans are coming into a refinancing window. Historically, large refinance opportunities have put upward pressure on MBS spreads. However, we do not feel that we need spreads to actually widen for this portfolio to outperform. Should spreads simply stabilize at these very tight levels, we are confident that our prepayment analysis can produce meaningful alpha going forward.
Sincerely,
Thomas D.D. Graff, CFA
Portfolio Manager
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investments in Asset-Backed and Mortgage-Backed securities include additional risks that investor should be aware of including credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments. Certain fixed income securities held by the Fund may be difficult (or impossible) to sell at the time and at the price the Adviser would like. As a result, the Fund may have to hold these securities longer than it would like and may forego other investment opportunities. Issuers may experience an acceleration in prepayments of mortgage loans or other receivables backing the issuers’ fixed income securities when interest rates decline, which can shorten the maturity of the security, force the Fund to invest in securities with lower interest rates, and reduce the Fund’s return. Issuers may decrease prepayments of principal when interest rates increase, extending the maturity of a fixed income security and causing the value of the security to decline. Investing involves risk. Principal loss is possible. Investors should consult a tax professional for advice and information concerning the tax features of mortgage backed securities and fixed coupon bonds. Mortgage-backed securities (MBS) are bonds secured by a mortgage or collection of mortgages. Diversification does not assure a profit nor protect against loss in a declining market. Investing involves risk. Principal loss is possible. Investors should consult a tax professional for advice and information concerning the tax features of mortgage backed securities and fixed coupon bonds.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
www.brownadvisoryfunds.com
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | |
| Mortgage Backed Securities — 79.4% | | | | | | | |
| | 39,283 | | Federal Home Loan Banks, Series SB-2016 Callable 12/25/2013 @ 100^ | | | 4.89 | % | 12/23/2016 | | | 41,198 | |
| | 134,994 | | Federal Home Loan Banks, Series MI-2017 | | | 4.78 | % | 01/25/2017 | | | 142,827 | |
| | 265 | | FHLMC PC, Pool# G1-1357 | | | 5.50 | % | 01/01/2018 | | | 280 | |
| | 1,075 | | FHLMC PC, Pool# E0-1488 | | | 5.00 | % | 10/01/2018 | | | 1,130 | |
| | 535 | | FHLMC PC, Pool# C9-0242 | | | 6.00 | % | 12/01/2018 | | | 605 | |
| | 12,795 | | FHLMC PC, Pool# G1-1778 | | | 5.50 | % | 10/01/2020 | | | 13,846 | |
| | 336 | | FHLMC PC, Pool# G1-1924 | | | 5.50 | % | 03/01/2021 | | | 366 | |
| | 1,177 | | FHLMC PC, Pool# C9-0428 | | | 6.00 | % | 03/01/2021 | | | 1,329 | |
| | 171 | | FHLMC PC, Pool# J0-1540 | | | 5.00 | % | 04/01/2021 | | | 180 | |
| | 1,272 | | FHLMC PC, Pool# G1-2110 | | | 5.50 | % | 06/01/2021 | | | 1,386 | |
| | 1,382 | | FHLMC PC, Pool# G1-2522 | | | 5.00 | % | 02/01/2022 | | | 1,485 | |
| | 2,401 | | FHLMC PC, Pool# G1-2600 | | | 5.50 | % | 03/01/2022 | | | 2,616 | |
| | 1,604 | | FHLMC PC, Pool# G1-2710 | | | 5.50 | % | 07/01/2022 | | | 1,752 | |
| | 122 | | FHLMC PC, Pool# 84-5640# | | | 2.24 | % | 08/01/2023 | | | 128 | |
| | 24,447 | | FHLMC PC, Pool# G1-3584 | | | 4.50 | % | 06/01/2024 | | | 26,284 | |
| | 54,127 | | FHLMC PC, Pool# J1-1196 | | | 4.50 | % | 11/01/2024 | | | 58,476 | |
| | 11 | | FHLMC PC, Pool# C3-6309 | | | 7.00 | % | 02/01/2030 | | | 12 | |
| | 90 | | FHLMC PC, Pool# G0-1317 | | | 7.00 | % | 10/01/2031 | | | 107 | |
| | 19 | | FHLMC PC, Pool# C5-8701 | | | 7.00 | % | 10/01/2031 | | | 20 | |
| | 52 | | FHLMC PC, Pool# G0-1391 | | | 7.00 | % | 04/01/2032 | | | 61 | |
| | 214,119 | | FHLMC PC, Pool# 1B0889# | | | 2.15 | % | 05/01/2033 | | | 227,306 | |
| | 21,996 | | FHLMC PC, Pool# 1B-1275# | | | 2.28 | % | 10/01/2033 | | | 23,606 | |
| | 1,460,897 | | FHLMC PC, Pool# C9-1771 | | | 4.50 | % | 06/01/2034 | | | 1,605,334 | |
| | 339,558 | | FHLMC PC, Pool# 1J0203# | | | 2.22 | % | 04/01/2035 | | | 361,696 | |
| | 1,754 | | FHLMC PC, Pool# A4-6671 | | | 5.00 | % | 08/01/2035 | | | 1,937 | |
| | 2,037 | | FHLMC PC, Pool# G0-8079 | | | 5.00 | % | 09/01/2035 | | | 2,252 | |
| | 13,897 | | FHLMC PC, Pool# 1B-3950# | | | 5.42 | % | 11/01/2035 | | | 14,398 | |
| | 101,384 | | FHLMC PC, Pool# 1L-1263# | | | 2.38 | % | 03/01/2036 | | | 108,324 | |
| | 12,561 | | FHLMC PC, Pool# 1J-1317# | | | 2.38 | % | 04/01/2036 | | | 13,445 | |
| | 5,482 | | FHLMC PC, Pool# 1G-2408# | | | 1.99 | % | 06/01/2036 | | | 5,784 | |
| | 15,332 | | FHLMC PC, Pool# 84-7625# | | | 1.95 | % | 07/01/2036 | | | 16,160 | |
| | 11,882 | | FHLMC PC, Pool# G0-2274 | | | 5.00 | % | 07/01/2036 | | | 13,127 | |
| | 447 | | FHLMC PC, Pool# A5-9220 | | | 5.00 | % | 04/01/2037 | | | 493 | |
| | 7,456 | | FHLMC PC, Pool# 1J-0573# | | | 2.47 | % | 08/01/2037 | | | 8,044 | |
| | 4,857 | | FHLMC PC, Pool# 1B-4292# | | | 2.45 | % | 09/01/2038 | | | 5,064 | |
| | 5,612,958 | | FHLMC PC, Pool# Q1-9823 | | | 3.50 | % | 06/01/2043 | | | 5,846,662 | |
| | 2,652,210 | | FHLMC PC, Pool# Q2-5713 | | | 4.00 | % | 04/01/2044 | | | 2,843,684 | |
| | 4,803,902 | | FHLMC PC, Pool# Q2-8135 | | | 4.00 | % | 08/01/2044 | | | 5,128,420 | |
| | 13,417,336 | | FHLMC PC, Pool# Q2-8300 | | | 3.50 | % | 09/01/2044 | | | 14,026,313 | |
| | 1,258,759 | | FHLMC PC, Pool# Q2-9657 | | | 3.50 | % | 11/01/2044 | | | 1,310,615 | |
| | 2,255,435 | | FHLMC PC, Pool# Q3-0222 | | | 4.00 | % | 12/01/2044 | | | 2,418,697 | |
| | 1,887,621 | | FHLMC PC, Pool# Q3-0223 | | | 4.00 | % | 12/01/2044 | | | 2,017,197 | |
| | 6,114,517 | | FHLMC PC, Pool# Q3-0148 | | | 4.00 | % | 12/01/2044 | | | 6,587,631 | |
| | 15,899,961 | | FHLMC REMIC, Series 4318~ | | | 2.50 | % | 08/15/2022 | | | 1,020,747 | |
| | 27,647 | | FHLMC REMIC, Series 2692 | | | 5.00 | % | 12/15/2022 | | | 27,795 | |
| | 11,614,354 | | FHLMC REMIC, Series 4329~ | | | 2.50 | % | 01/15/2023 | | | 806,296 | |
| | 216,177 | | FHLMC REMIC, Series 3571 | | | 4.00 | % | 09/15/2024 | | | 228,712 | |
| | 53,950 | | FHLMC REMIC, Series 3636 | | | 4.00 | % | 08/15/2027 | | | 54,618 | |
| | 2,569,797 | | FHLMC REMIC, Series 4092~ | | | 3.00 | % | 09/15/2031 | | | 333,410 | |
| | 10,438,923 | | FHLMC REMIC, Series 4186~ | | | 3.00 | % | 03/15/2033 | | | 1,624,881 | |
| | 3,748,006 | | FHLMC REMIC, Series 4309~ | | | 3.00 | % | 08/15/2039 | | | 436,287 | |
| | 666,625 | | FHLMC REMIC, Series 3878 | | | 3.00 | % | 04/15/2041 | | | 682,167 | |
| | 2,437 | | FNMA, Pool# 576086 | | | 6.00 | % | 03/01/2016 | | | 2,466 | |
| | 35,137 | | FNMA, Pool# 254089 | | | 6.00 | % | 12/01/2016 | | | 36,306 | |
| | 257 | | FNMA, Pool# 555013 | | | 5.50 | % | 11/01/2017 | | | 272 | |
| | 1,941 | | FNMA, Pool# 725544 | | | 5.50 | % | 12/01/2017 | | | 2,049 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | |
| Mortgage Backed Securities — (Continued) | | | | | | | |
| | 12,775 | | FNMA, Pool# 763020 | | | 3.50 | % | 08/01/2018 | | | 13,511 | |
| | 58,251 | | FNMA, Pool# 744697 | | | 4.50 | % | 10/01/2018 | | | 61,304 | |
| | 15,582 | | FNMA, Pool# 725185 | | | 5.00 | % | 02/01/2019 | | | 16,724 | |
| | 51,692 | | FNMA, Pool# 803941# | | | 2.44 | % | 11/01/2019 | | | 52,603 | |
| | 14,808 | | FNMA, Pool# 255626 | | | 5.00 | % | 03/01/2020 | | | 15,911 | |
| | 110 | | FNMA, Series 1990-105 | | | 6.50 | % | 09/25/2020 | | | 118 | |
| | 71,288 | | FNMA, Pool# 970382 | | | 4.50 | % | 03/01/2023 | | | 75,890 | |
| | 972 | | FNMA, Pool# 303585 | | | 7.00 | % | 10/01/2025 | | | 1,128 | |
| | 1,244 | | FNMA, Pool# 303713 | | | 6.50 | % | 02/01/2026 | | | 1,421 | |
| | 13,854 | | FNMA, Pool# 539082 | | | 7.00 | % | 08/01/2028 | | | 14,078 | |
| | 2,873 | | FNMA, Pool# 592751 | | | 7.00 | % | 06/01/2031 | | | 3,048 | |
| | 26,045 | | FNMA, Pool# 625536 | | | 6.00 | % | 01/01/2032 | | | 29,495 | |
| | 39,887 | | FNMA, Pool# 628837 | | | 6.50 | % | 03/01/2032 | | | 45,461 | |
| | 956 | | FNMA, Pool# 555531 | | | 5.50 | % | 06/01/2033 | | | 1,078 | |
| | 1,129 | | FNMA, Pool# 555591 | | | 5.50 | % | 07/01/2033 | | | 1,273 | |
| | 51,237 | | FNMA, Pool# 748643# | | | 1.93 | % | 09/01/2033 | | | 53,993 | |
| | 1,218 | | FNMA, Pool# 555876 | | | 5.50 | % | 10/01/2033 | | | 1,383 | |
| | 105,909 | | FNMA, Pool# 744805# | | | 1.89 | % | 11/01/2033 | | | 108,917 | |
| | 143,122 | | FNMA, Pool# 741373# | | | 2.41 | % | 12/01/2033 | | | 149,717 | |
| | 88,340 | | FNMA, Pool# 764342# | | | 1.90 | % | 02/01/2034 | | | 91,561 | |
| | 3,743 | | FNMA, Pool# 725424 | | | 5.50 | % | 04/01/2034 | | | 4,218 | |
| | 141,102 | | FNMA, Pool# 780488# | | | 1.89 | % | 07/01/2034 | | | 145,474 | |
| | 1,611 | | FNMA, Pool# 735022 | | | 5.50 | % | 12/01/2034 | | | 1,810 | |
| | 44,792 | | FNMA, Pool# 796283 | | | 5.50 | % | 12/01/2034 | | | 50,257 | |
| | 12,846 | | FNMA, Pool# 735263# | | | 2.15 | % | 01/01/2035 | | | 13,773 | |
| | 6,293 | | FNMA, Pool# 821252# | | | 1.99 | % | 05/01/2035 | | | 6,663 | |
| | 1,335 | | FNMA, Pool# 255706 | | | 5.50 | % | 05/01/2035 | | | 1,499 | |
| | 101 | | FNMA, Pool# 735580 | | | 5.00 | % | 06/01/2035 | | | 112 | |
| | 129,806 | | FNMA, Pool# 836715# | | | 2.36 | % | 10/01/2035 | | | 130,558 | |
| | 171,290 | | FNMA, Pool# 836335# | | | 5.34 | % | 10/01/2035 | | | 175,892 | |
| | 8,998 | | FNMA, Pool# 851372# | | | 2.34 | % | 12/01/2035 | | | 9,561 | |
| | 1,973 | | FNMA, Pool# 256022 | | | 5.50 | % | 12/01/2035 | | | 2,212 | |
| | 219 | | FNMA, Pool# 849496 | | | 5.50 | % | 12/01/2035 | | | 246 | |
| | 36,533 | | FNMA, Pool# 848817 | | | 5.00 | % | 01/01/2036 | | | 40,347 | |
| | 1,485 | | FNMA, Pool# 845341 | | | 5.50 | % | 01/01/2036 | | | 1,666 | |
| | 2,266 | | FNMA, Pool# 256059 | | | 5.50 | % | 01/01/2036 | | | 2,539 | |
| | 3,194 | | FNMA, Pool# 880371# | | | 2.37 | % | 02/01/2036 | | | 3,413 | |
| | 100,464 | | FNMA, Pool# 865849# | | | 2.14 | % | 03/01/2036 | | | 108,856 | |
| | 5,493 | | FNMA, Pool# 891332# | | | 2.02 | % | 04/01/2036 | | | 5,824 | |
| | 6,037 | | FNMA, Pool# 745480# | | | 5.70 | % | 04/01/2036 | | | 6,493 | |
| | 123,600 | | FNMA, Pool# 882017# | | | 1.93 | % | 05/01/2036 | | | 133,532 | |
| | 3,279 | | FNMA, Pool# 901006# | | | 2.13 | % | 09/01/2036 | | | 3,498 | |
| | 11,220 | | FNMA, Pool# 902188# | | | 2.30 | % | 11/01/2036 | | | 12,159 | |
| | 269 | | FNMA, Pool# 905690 | | | 5.50 | % | 12/01/2036 | | | 301 | |
| | 108,377 | | FNMA, Pool# 888445# | | | 3.29 | % | 04/01/2037 | | | 116,427 | |
| | 26,268 | | FNMA, Pool# 888463# | | | 5.82 | % | 05/01/2037 | | | 28,302 | |
| | 563 | | FNMA, Pool# 960392 | | | 5.50 | % | 12/01/2037 | | | 630 | |
| | 6,756 | | FNMA, Pool# 933628# | | | 5.15 | % | 07/01/2038 | | | 7,235 | |
| | 6,849 | | FNMA, Pool# 965185# | | | 1.74 | % | 09/01/2038 | | | 7,239 | |
| | 23,433 | | FNMA, Pool# AC4824# | | | 3.48 | % | 10/01/2039 | | | 24,965 | |
| | 12,569 | | FNMA, Pool# AH4794 | | | 5.00 | % | 02/01/2041 | | | 13,969 | |
| | 35,645 | | FNMA, Pool# AI1170 | | | 5.00 | % | 04/01/2041 | | | 39,466 | |
| | 17,626 | | FNMA, Pool# AR1150 | | | 3.00 | % | 01/01/2043 | | | 17,872 | |
| | 1,113,354 | | FNMA, Pool# AS1429 | | | 4.00 | % | 12/01/2043 | | | 1,189,984 | |
| | 6,593,614 | | FNMA, Pool# AW1237 | | | 4.00 | % | 05/01/2044 | | | 7,077,712 | |
| | 6,721,330 | | FNMA, Pool# AW7036 | | | 4.00 | % | 06/01/2044 | | | 7,225,817 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | |
| Mortgage Backed Securities — (Continued) | | | | | | | |
| | 9,639,752 | | FNMA, Pool# AS2719 | | | 4.00 | % | 06/01/2044 | | | 10,344,453 | |
| | 1,876,702 | | FNMA, Pool# AW2834 | | | 4.50 | % | 07/01/2044 | | | 2,048,707 | |
| | 5,608,915 | | FNMA, Pool# AS3037 | | | 3.50 | % | 08/01/2044 | | | 5,860,651 | |
| | 1,871,553 | | FNMA, Pool# AS2985 | | | 4.00 | % | 08/01/2044 | | | 2,008,810 | |
| | 2,141,854 | | FNMA, Pool# AX0767 | | | 4.00 | % | 08/01/2044 | | | 2,299,279 | |
| | 6,870,951 | | FNMA, Pool# AW8190 | | | 4.00 | % | 09/01/2044 | | | 7,345,510 | |
| | 1,023,014 | | FNMA, Pool# AX4809 | | | 4.00 | % | 09/01/2044 | | | 1,095,972 | |
| | 4,874,946 | | FNMA, Pool# AX2763 | | | 4.00 | % | 09/01/2044 | | | 5,217,782 | |
| | 2,249,600 | | FNMA, Pool# AX1728 | | | 5.00 | % | 09/01/2044 | | | 2,502,841 | |
| | 1,042,689 | | FNMA, Pool# AX3142 | | | 5.00 | % | 09/01/2044 | | | 1,160,217 | |
| | 4,347,460 | | FNMA, Pool# AX5946 | | | 4.00 | % | 10/01/2044 | | | 4,646,685 | |
| | 1,236,247 | | FNMA, Pool# AX9501 | | | 4.50 | % | 12/01/2044 | | | 1,347,739 | |
| | 432,089 | | FNMA REMIC Trust, Series 2003-122 | | | 4.00 | % | 12/25/2018 | | | 452,054 | |
| | 15,922 | | FNMA REMIC Trust, Series 2012-1 | | | 1.75 | % | 12/25/2021 | | | 16,112 | |
| | 1,225,000 | | FNMA REMIC Trust, Series 2011-18 | | | 4.00 | % | 10/25/2025 | | | 1,259,352 | |
| | 5,724,958 | | FNMA REMIC Trust, Series 2012-139~ | | | 2.50 | % | 12/25/2027 | | | 579,702 | |
| | 384,018 | | FNMA REMIC Trust, Series 2013-15~ | | | 3.00 | % | 03/25/2028 | | | 46,689 | |
| | 5,013,830 | | FNMA REMIC Trust, Series 2013-115~ | | | 3.00 | % | 04/25/2031 | | | 562,389 | |
| | 17,468,330 | | FNMA REMIC Trust, Series 2014-14~ | | | 3.00 | % | 04/25/2031 | | | 1,811,796 | |
| | 13,247,163 | | FNMA REMIC Trust, Series 2013-104~ | | | 3.00 | % | 08/25/2032 | | | 1,470,063 | |
| | 14,733,172 | | FNMA REMIC Trust, Series 2013-45~ | | | 3.00 | % | 05/25/2033 | | | 2,285,336 | |
| | 716,803 | | FNMA REMIC Trust, Series 2012-10# | | | 0.72 | % | 02/25/2042 | | | 723,720 | |
| | 2,433,446 | | FNMA REMIC Trust, Series 2013-34~ | | | 3.00 | % | 05/25/2042 | | | 329,349 | |
| | 17,317,774 | | FNMA REMIC Trust, Series 2012-146~ | | | 3.00 | % | 11/25/2042 | | | 2,262,914 | |
| | 11,827,582 | | FNMA REMIC Trust, Series 2013-20~ | | | 3.50 | % | 11/25/2042 | | | 1,529,270 | |
| | 20,106 | | FNMA REMIC Trust, Series 2003-W10 | | | 4.30 | % | 06/25/2043 | | | 21,718 | |
| | 6,836 | | FNMA REMIC Trust, Series 2003-W12 | | | 4.48 | % | 06/25/2043 | | | 7,275 | |
| | 41,015 | | FNMA REMIC Trust, Series 2003-W12 | | | 4.55 | % | 06/25/2043 | | | 44,324 | |
| | 22,376 | | FNMA REMIC Trust, Series 2003-W12 | | | 4.68 | % | 06/25/2043 | | | 23,966 | |
| | 26,105 | | FNMA REMIC Trust, Series 2003-W12 | | | 5.00 | % | 06/25/2043 | | | 28,065 | |
| | 29 | | GNMA, Pool# 180963X | | | 9.50 | % | 11/15/2016 | | | 29 | |
| | 816 | | GNMA, Pool# 781403X | | | 6.00 | % | 02/15/2017 | | | 843 | |
| | 133 | | GNMA, Pool# 198708X | | | 9.50 | % | 04/15/2017 | | | 135 | |
| | 675 | | GNMA, Pool# 250287X | | | 8.00 | % | 09/15/2017 | | | 677 | |
| | 30,089 | | GNMA, Pool# 595167X | | | 5.50 | % | 11/15/2017 | | | 31,584 | |
| | 14,919 | | GNMA, Pool# 552929X | | | 5.00 | % | 12/15/2017 | | | 15,812 | |
| | 2,852 | | GNMA, Pool# 607669X | | | 5.00 | % | 02/15/2018 | | | 3,031 | |
| | 10,176 | | GNMA, Pool# 594102X | | | 4.50 | % | 09/15/2018 | | | 10,613 | |
| | 12,883 | | GNMA, Pool# 780576X | | | 7.00 | % | 12/15/2022 | | | 14,674 | |
| | 54,604 | | GNMA, Pool# 723460X | | | 4.00 | % | 12/15/2024 | | | 58,051 | |
| | 1,850 | | GNMA, Pool# 780195X | | | 8.00 | % | 07/15/2025 | | | 2,165 | |
| | 17,975 | | GNMA, Pool# 487110 | | | 6.50 | % | 04/15/2029 | | | 21,082 | |
| | 362 | | GNMA, Pool# 536231X | | | 9.00 | % | 07/15/2030 | | | 363 | |
| | 5,424 | | GNMA, Pool# 571166 | | | 7.00 | % | 08/15/2031 | | | 5,625 | |
| | 6,491 | | GNMA, Pool# 004017M | | | 6.00 | % | 08/20/2037 | | | 7,410 | |
| | 4,049 | | GNMA, Pool# 565240X | | | 6.50 | % | 09/15/2037 | | | 4,623 | |
| | 4,122 | | GNMA, Pool# 676322X | | | 7.00 | % | 09/15/2037 | | | 4,378 | |
| | 16,976 | | GNMA, Pool# 646058X | | | 6.00 | % | 11/15/2037 | | | 19,192 | |
| | 17,996 | | GNMA REMIC Trust, Series 201-03 | | | 3.00 | % | 01/16/2027 | | | 18,709 | |
| | 20,539,919 | | GNMA REMIC Trust, Series 2013-170~ | | | 2.50 | % | 05/16/2028 | | | 1,773,747 | |
| | 1,743,633 | | GNMA REMIC Trust, Series 2013-168~ | | | 2.50 | % | 11/16/2028 | | | 168,324 | |
| | 2,773 | | GNMA REMIC Trust, Series 2010-159 | | | 2.16 | % | 01/16/2033 | | | 2,772 | |
| | 1,690 | | GNMA REMIC Trust, Series 2003-97 | | | 4.50 | % | 03/20/2033 | | | 1,767 | |
| | 8,954 | | GNMA REMIC Trust, Series 2011-6 | | | 2.20 | % | 01/16/2035 | | | 8,950 | |
| | 174,305 | | GNMA REMIC Trust, Series 2010-32 | | | 3.00 | % | 03/20/2036 | | | 175,702 | |
| | 933,958 | | GNMA REMIC Trust, Series 2010-124 | | | 2.72 | % | 05/16/2037 | | | 943,126 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Par | | | | | | | | | |
| Value/Shares | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | |
| Mortgage Backed Securities — (Continued) | | | | | | | |
| | 20,509 | | GNMA REMIC Trust, Series 2010-2 | | | 4.00 | % | 01/20/2038 | | | 21,378 | |
| | 9,722,647 | | GNMA REMIC Trust, Series 2012-65~ | | | 3.00 | % | 07/20/2039 | | | 1,029,511 | |
| | 13,595,132 | | GNMA REMIC Trust, Series 2013-79~ | | | 3.00 | % | 01/20/2042 | | | 1,572,261 | |
| | 1,140,075 | | GNMA REMIC Trust, Series 2011-121# | | | 0.56 | % | 03/16/2043 | | | 1,131,397 | |
| | 725,000 | | GNMA REMIC Trust, Series 2012-44 | | | 2.95 | % | 08/16/2043 | | | 715,399 | |
| | 9,500,000 | | GNMA REMIC Trust, Series 2014-104 | | | 3.50 | % | 07/16/2044 | | | 9,857,400 | |
| | 715,000 | | GNMA REMIC Trust, Series 2011-126 | | | 2.65 | % | 01/16/2045 | | | 724,627 | |
| | 6,867,000 | | GNMA REMIC Trust, Series 2013-85# | | | 2.86 | % | 02/16/2049 | | | 6,234,024 | |
| | 8,000,000 | | GNMA REMIC Trust, Series 2013-73# | | | 2.70 | % | 10/16/2052 | | | 7,326,636 | |
| | 8,000,000 | | GNMA REMIC Trust, Series 2014-01 | | | 3.29 | % | 03/16/2054 | | | 8,176,460 | |
| Total Mortgage Backed Securities (Cost $165,080,133) | | | | | | | | 164,900,635 | |
| | | | | | | | | | |
| Local Government Housing Agency Bonds — 12.1% | | | | | | | | | |
| | 2,165,000 | | Delaware State Housing Authority Callable 1/1/2021 @ 100^ | | | 2.75 | % | 12/01/2041 | | | 2,093,295 | |
| | 7,867,909 | | Illinois Housing Development Authority Callable 1/1/2023 @ 100^ | | | 2.75 | % | 06/01/2043 | | | 7,518,495 | |
| | 6,885,449 | | Minnesota Housing Finance Agency Callable 1/1/2023 @ 100^ | | | 2.70 | % | 09/01/2041 | | | 6,782,443 | |
| | 1,150,000 | | Missouri Housing Development Commission Callable 11/1/2019 @ 100^ | 2.65 | % | 11/01/2040 | | | 1,101,643 | |
| | 7,780,982 | | Virginia State Housing Development Authority Homeownership Tax Mortgage Bonds | | | 3.25 | % | 08/25/2042 | | | 7,537,826 | |
| Total Local Government Housing Agency Bonds (Cost $24,129,044) | | | | | | | | 25,033,702 | |
| | | | | | | | | | |
| Asset Backed Securities — 7.2% | | | | | | | | | |
| | 3,320,000 | | Freddie Mac STACR Debt Notes, Series 2014-DN1# | | | 2.37 | % | 02/25/2024 | | | 3,265,910 | |
| | 6,500,000 | | Freddie Mac STACR Debt Notes, Series 2014-DN2# | | | 1.82 | % | 04/25/2024 | | | 6,302,774 | |
| | 4,500,000 | | Freddie Mac STACR Debt Notes, Series 2014-DN4# | | | 2.57 | % | 10/25/2024 | | | 4,489,497 | |
| | 984,131 | | SLM Student Loan Trust 2007-1, Series 2007-1# | | | 0.29 | % | 01/25/2022 | | | 981,395 | |
| Total Asset Backed Securities (Cost $15,247,756) | | | | | | | | 15,039,576 | |
| | | | | | | | | | |
| Short-Term Investments — 1.6% | | | | | | | | | |
| | | | | | | | | | |
| Money Market Funds — 1.6% | | | | | | | | | |
| | 3,309,361 | | DWS Cash Account Trust — Government & Agency Securities Portfolio, 0.03%* | | | | | | | | 3,309,361 | |
| Total Short-Term Investments (Cost $3,309,361) | | | | | | | | 3,309,361 | |
| Total Investments — 100.3% (Cost $207,766,294) | | | | | | | | 208,283,274 | |
| Liabilities in Excess of Other Assets — (0.3)% | | | | | | | | (540,078 | ) |
| NET ASSETS — 100.0% | | | | | | | $ | 207,743,196 | |
| PORTFOLIO HOLDINGS | | |
| % of Net Assets | | |
| | | |
| Mortgage Backed Securities | 79.4% | |
| Local Government Housing Agency Bonds | 12.1% | |
| Asset Backed Securities | 7.2% | |
| Money Market Funds | 1.6% | |
| Other Assets and Liabilities | (0.3)% | |
| | 100.0% | |
| ^ | Continuously callable with 30 days notice. |
| # | Variable rate security. Rate disclosed is as of December 31, 2014. |
| ~ | Interest Only Security |
| * | Annualized seven-day yield as of December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Mortgage Securities Fund
Schedule of Securities Sold Short
December 31, 2014 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | |
| Mortgage Backed Securities — (5.6)% | | | | | | | |
| | 6,000,000 | | FNMA, 3.5%, Due TBA January | | | 3.50 | % | 01/15/2044 | | | 6,255,001 | |
| | 5,000,000 | | FNMA, 4.0%, Due TBA January | | | 4.00 | % | 01/15/2044 | | | 5,336,660 | |
| Total Mortgage Backed Securities (Proceeds $11,566,875) | | | | | | | | 11,591,661 | |
Percentages are stated as a percent of net assets.
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory – WMC Strategic European Equity Fund
A Message to Our Shareholders
December 31, 2014
Dear Shareholder:
During the six-month period ended December 31, 2014, the Brown Advisory - WMC Strategic European Equity Fund Institutional Shares (the “Fund”) fell 7.22%. During the same period, the MSCI Europe Index, the Fund’s benchmark, fell 11.05%, resulting in a relative outperformance by the Fund to its benchmark of 3.83%.
We take a bottom-up approach to building the portfolio where we aim to identify companies that benefit from a structural growth advantage, are competitively well-positioned and attractively valued. This fundamental process leads us to hold certain sector overweights and underweights.
Despite sluggish absolute performance over the period, the Fund outperformed the Index primarily due to strong stock selection. Selection within the industrials, consumer staples and financials sectors contributed to relative performance. Sector allocation, primarily a byproduct of the bottom-up stock selection process, also was additive to relative results. Our underweight to energy helped, especially in light of uncertainty around oil prices. Our industrials overweight weighed on performance, although this was more than offset by the energy underweight. Part of the industrials underperformance was linked to concerns around faltering oil prices. However, for many of our industrials holdings, this is less of an issue than the market might perceive—our industrials holdings tend to be more capital-goods oriented and have a strong competitive position in their respective markets and have thus been relatively insulated from the oil-related selloff.
Top contributors to relative returns during the period included Kone Oyj, ASML Holding and Julius Baer. Shares of Kone, a Finland-based global solution provider for installation and maintenance of elevators and escalators, rose due to strong results with particularly encouraging news around order growth that heartened the market. Shares of ASML Holding, a lithography-focused semiconductor capital equipment maker, rose during the fourth quarter. The company held its first Capital Markets Day since 2007, which was well-received by the market. After being buffeted by concerns on AUM and margin compression, shares of Julius Baer, a Switzerland-based private bank, recovered with pleasing results.
Top detractors from relative returns included Alfa Laval, SKF and Jeronimo Martins. Shares of Alfa Laval fell due to questions about its marine and diesel business and in sympathy with the oil- and gas-related sell-off. SKF, a Sweden-based global supplier of roller bearings and seals, suffered when the market was underwhelmed by the pace of recovery of its automotive division, and we chose to eliminate the position. Shares of Portugal-based retailer Jeronimo Martins also fell during the period, and the name was eliminated. The firm’s recent results, combined with market insights that we gained during a recent research trip to Poland, caused us to change our view on the stock.
We reviewed our holdings during the period and initiated new positions in L’Oreal, Berendsen and Banca Generali. We like L’Oreal’s structural growth profile, and in our view, the company is well-diversified from a geographic perspective and benefits from strong brand loyalty. We believe that the company has a strong return-on-capital profile, generates a meaningful amount of free-cash flow and has a high-quality balance sheet. Berendsen operates in a fragmented industry, and we consider this textile-service firm to be the market leader in several geographies including the UK and Scandinavia. Following a change in management, the company has, over time, become more focused on its core growth businesses, which account for roughly 75% of the overall business. The company has delivered consistent organic earnings growth, and we see the potential for an improvement in its return on capital employed. Lastly, Banca Generali is benefiting from a strong structural backdrop, in our opinion—namely, the continued restructuring of the financial industry. In addition to this, strategy execution remains strong as evidenced by the success of its new advisory platform.
We eliminated Diageo based on more near-term question marks around the competitive environment. We also eliminated Intertek, a product-inspection services company, based on acquisition activity and recent management changes, which added to uncertainty around the name.
Looking forward, we continue to believe that companies will have to deliver on the hopes for a broad earnings recovery in Europe. The low-growth environment appears to be with us for some time, and we expect that many companies will be challenged. As a result, stock picking should be very important going forward. The market reacts quite drastically to unexpected results in earnings; stocks that disappoint are being hit hard, while those companies that are going to deliver or continue to deliver are being rewarded. We still see a meaningful disconnect between valuations in the peripheral (e.g., Italy and Spain) vs. core (e.g., Germany and Sweden) areas of Europe as well as between higher-quality and lower-quality areas. In the peripheral areas, investor demand
www.brownadvisoryfunds.com
Brown Advisory – WMC Strategic European Equity Fund
A Message to Our Shareholders
December 31, 2014
and expectations have driven stock prices higher despite a lack of notable improvements in earnings revisions. This is in contrast to the core area of Europe where valuations do not seem to fully price in the level of expected earnings. In terms of our portfolio, the relative premium versus the broad market continues to trend at historically low levels, despite a recent modest increase.
Sincerely,
C. Dirk Enderlein, CFA
Portfolio Manager
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. Investments focused in a single geographic region may be exposed to greater risk than investments diversified among various geographies. Investments in foreign securities entail certain risks not associated with investments in domestic securities, such as volatility of currency exchange rates, and in some cases, political and economic instability and relatively illiquid markets. These risks are greater in emerging markets. Investments in smaller and medium capitalization companies generally carry greater risk than is customarily associated with larger companies for various reasons such as narrower markets, limited financial resources and less liquid stock. The Fund may invest in ETFs, which may trade at a discount to the aggregate value of the underlying securities and although expense ratios for ETFs are generally low, frequent trading of ETFs by the Fund can generate brokerage expenses. The value of investments in REITs may change in response to changes in the real estate market such as declines in the value of real estate, lack of available capital or financing opportunities, and increases in property taxes or operating costs. Derivatives involve risks different from, and in certain cases, greater than the risks presented by more traditional investments. Investors will indirectly bear the principal risks and its share of the fees and expenses of the Fund’s investment in other Investment Companies.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
www.brownadvisoryfunds.com
Brown Advisory – WMC Strategic European Equity Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 97.5% | | | |
| | | | |
| Belgium — 4.9% | | | |
| | 56,425 | | Anheuser-Busch InBev S.A. | | | 6,350,163 | |
| | 44,549 | | UCB S.A. | | | 3,387,401 | |
| | | | | | | 9,737,564 | |
| Denmark — 4.4% | | | | |
| | 207,239 | | DSV A/S | | | 6,310,221 | |
| | 90,924 | | H. Lundbeck A/S | | | 1,804,785 | |
| | 1,124 | | Royal Unibrew A/S* | | | 197,041 | |
| | 42,693 | | Spar Nord Bank A/S | | | 399,062 | |
| | | | | | | 8,711,109 | |
| Finland — 4.9% | | | | |
| | 149,823 | | Kone OYJ | | | 6,821,120 | |
| | 65,104 | | Sampo OYJ | | | 3,047,812 | |
| | | | | | | 9,868,932 | |
| France — 13.1% | | | | |
| | 88,008 | | Bureau Veritas S.A. | | | 1,949,906 | |
| | 121,825 | | Edenred S.A. | | | 3,369,201 | |
| | 104,541 | | Legrand S.A. | | | 5,484,042 | |
| | 27,682 | | L’oreal | | | 4,633,200 | |
| | 44,064 | | Pernod Ricard S.A. | | | 4,897,183 | |
| | 64,519 | | Sanofi | | | 5,882,243 | |
| | | | | | | 26,215,775 | |
| Germany — 10.4% | | | | |
| | 42,887 | | Bayer AG | | | 5,845,876 | |
| | 23,806 | | Gerry Weber International AG | | | 976,275 | |
| | 19,698 | | Hugo Boss AG | | | 2,409,694 | |
| | 424,063 | | Infineon Technologies AG | | | 4,487,386 | |
| | 25,501 | | NORMA Group SE | | | 1,217,190 | |
| | 97,542 | | ProSiebenSat.1 Media AG | | | 4,075,640 | |
| | 42,314 | | United Internet AG | | | 1,906,035 | |
| | | | | | | 20,918,096 | |
| Italy — 1.3% | | | | |
| | 44,501 | | Banca Generali SpA | | | 1,237,718 | |
| | 36,291 | | DiaSorin SpA | | | 1,462,106 | |
| | | | | | | 2,699,824 | |
| Netherlands — 5.1% | | | | |
| | 42,563 | | ASML Holding NV | | | 4,598,837 | |
| | 61,781 | | Heineken NV | | | 4,386,936 | |
| | 99,681 | | ING Groep NV* | | | 1,287,848 | |
| | | | | | | 10,273,621 | |
| Sweden — 10.6% | | | | |
| | 174,278 | | Alfa Laval AB | | | 3,295,564 | |
| | 88,916 | | ASSA ABLOY AB | | | 4,696,232 | |
| | 209,565 | | Atlas Copco AB | | | 5,831,286 | |
| | 40,477 | | Axis Communications AB | | | 1,031,925 | |
| | 199,929 | | Nordea Bank AB | | | 2,314,335 | |
| | 235,612 | | Trelleborg AB | | | 3,966,468 | |
| | | | | | | 21,135,810 | |
| Switzerland — 16.9% | | | | |
| | 463 | | BELIMO Holding AG | | | 1,080,190 | |
| | 50,714 | | Cie Financiere Richemont S.A. | | | 4,496,234 | |
| | 3,722 | | Daetwyler Holding AG | | | 475,513 | |
| | 12,335 | | Geberit AG | | | 4,172,966 | |
| | 908 | | Givaudan S.A. | | | 1,628,822 | |
| | 2,268 | | INFICON Holding AG | | | 703,190 | |
| | 100,030 | | Julius Baer Gruppe AG | | | 4,567,171 | |
| | 11,303 | | Kuehne & Nagel International AG | | | 1,535,347 | |
| | 934 | | LEM Holding S.A. | | | 692,843 | |
| | 186 | | Lindt & Spruengli AG | | | 919,671 | |
| | 11,757 | | Roche Holding, Ltd. | | | 3,185,468 | |
| | 967 | | SGS S.A. | | | 1,974,585 | |
| | 17,417 | | Tecan Trading AG | | | 1,978,595 | |
| | 377,544 | | UBS Group* | | | 6,489,868 | |
| | | | | | | 33,900,463 | |
| United Kingdom — 25.9% | | | | |
| | 95,351 | | Berendsen | | | 1,629,763 | |
| | 973,601 | | Booker Group | | | 2,473,207 | |
| | 188,890 | | British American Tobacco PLC | | | 10,236,148 | |
| | 251,186 | | Compass Group | | | 4,293,503 | |
| | 173,896 | | Halma PLC | | | 1,852,332 | |
| | 107,962 | | Jardine Lloyd Thompson Group PLC | | | 1,503,418 | |
| | 260,748 | | Prudential PLC | | | 6,028,371 | |
| | 75,468 | | Reckitt Benckiser Group PLC | | | 6,112,461 | |
| | 272,100 | | Smith & Nephew PLC | | | 4,906,663 | |
| | 113,896 | | Spectris PLC | | | 3,719,645 | |
| | 63,170 | | Spirax-Sarco Engineering PLC | | | 2,812,134 | |
| | 86,411 | | SuperGroup PLC* | | | 1,198,656 | |
| | 38,002 | | Victrex PLC | | | 1,226,251 | |
| | 104,168 | | WH Smith PLC | | | 2,178,331 | |
| | 21,330 | | Whitbread PLC | | | 1,578,556 | |
| | | | | | | 51,749,439 | |
| Total Common Stocks (Cost $196,503,083) | | | 195,210,633 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory – WMC Strategic European Equity Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | |
| Short-Term Investments — 2.0% | | |
| | | |
| Money Market Funds — 2.0% | | |
| | 3,994,382 | | DWS Cash Account Trust — Government | | | |
| | | | & Agency Securities Portfolio, 0.03%# | | | 3,994,382 | |
| Total Short-Term Investments (Cost $3,994,382) | | 3,994,382 | |
| Total Investments — 99.5% (Cost $200,497,465) | | 199,205,015 | |
| Other Assets in Excess of Liabilities — 0.5% | | 990,584 | |
| NET ASSETS — 100.0% | $ | 200,195,599 | |
| PORTFOLIO HOLDINGS | | |
| % of Net Assets | | |
| | | |
| United Kingdom | 25.9% | |
| Switzerland | 16.9% | |
| France | 13.1% | |
| Sweden | 10.6% | |
| Germany | 10.4% | |
| Netherlands | 5.1% | |
| Finland | 4.9% | |
| Belgium | 4.9% | |
| Denmark | 4.4% | |
| Money Market Funds | 2.0% | |
| Italy | 1.3% | |
| Other Assets and Liabilities | 0.5% | |
| | 100.0% | |
| * | Non-Income Producing |
| # | Annualized seven-day yield as of December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory – WMC Japan Alpha Opportunities Fund
A Message to Our Shareholders
December 31, 2014 (Unaudited)
Dear Shareholder:
During the six-month period ended December 31, 2014, the Brown Advisory - WMC Japan Alpha Opportunities Fund Institutional Shares (the “Fund”) increased 8.07% in value. During the same period, the TOPIX Total Return U.S. Dollar Hedged Index, the Fund’s benchmark, increased 12.01%. The unhedged TOPIX Total Return Index returned -4.65% in U.S. dollar terms for the same period, as the Japanese yen depreciated relative to the U.S. dollar.
Strong performance in Japanese equities led the region higher in local currency terms during the period. Early on in the period, data was mixed. Following the April 1 sales-tax hike, Japan’s economy contracted during the second quarter of 2014, the largest quarterly contraction since 2009. On the bright side, Japan’s unemployment rate fell to 3.5%, and average monthly wages climbed 2.6% from a year earlier, the largest jump since 1997. During the second half of the period, several market-friendly policy moves including the extension of the quantitative/qualitative easing by the Bank of Japan (BOJ), public pension fund reform, postponement of the second round sales tax hike and re-election of the LDP government led to continued foreign buying and yen weakness. This market optimism more than offset weaknesses created by global events such as the tapering of U.S. monetary stimulus, falling energy prices and simmering Russian tensions.
Outperformance of “foreign favorite” larger-cap stocks as well as names characterized by higher growth and momentum within the benchmark created a headwind for the portfolio and contributed to underperformance. For the six-month period, the best-performing factors across Japan were growth and safety, while volatility and leverage were among the worst-performing factors. In terms of valuation, yield and leverage remain attractive relative to their own history.
Stock selection weighed on relative returns, particularly due to negative results within the information technology, consumer discretionary, health care and industrials sectors. This was partially offset by positive selection within the financials and materials sectors. Sector allocation, a residual of bottom-up stock selection by the underlying managers, also had an impact on performance. Our overweight allocations to information technology and materials weighed on relative results, while our underweight to the industrials and consumer staples sectors aided relative performance.
Top relative detractors included manufacturer of semiconductor, computer and communication equipment Fujitsu, life insurance company T&D Holdings, and oil-and-gas exploration and production company Inpex. Top relative contributors included our underweight position in telecommunication and Internet businesses provider Softbank, our avoidance of global cigarette manufacturing and tobacco company Japan Tobacco, and our underweight position in Japanese mega bank Mizuho Financial.
During the period, the team reduced the portfolio’s position in Yamato Kogyo, a steel company with manufacturing facilities in Japan, Korea, the U.S., Thailand and Bahrain. The team believes that the U.S. steel market may be peaking. We added to Mitsubishi Electric during the period. The team believes that the electronics conglomerate is attractively valued vs. machinery-company peers and that a number of the firm’s businesses are poised to benefit from structural growth drivers.
The Fund utilized currency forwards during the period to hedge against the fluctuation in the yen as it relates to the securities held in the portfolio. These positions meaningfully contributed to the Fund’s absolute performance during the period as the Japanese yen depreciated 18.4% relative to the U.S. dollar,
As we continue to monitor the Japanese economy and equity market, we are looking for increases in consumption and risk appetites to help drive growth in 2015. The verdict is still mixed on Abenomics and its impact on the economy. Even though the yen depreciated further during the period, economically sensitive sectors such as financials and real estate continued to underperform, while many consumer staples stocks continued to rerate despite mediocre growth prospects. In 2015, we will also see the introduction of the new corporate governance code, which includes items such as the mandatory appointment of multiple independent outside directors and the unwinding of parent-subsidiary dual listings and cross shareholdings. We believe that this new code, together with the previously introduced stewardship code, will help accelerate corporate structural reforms and boost the market.
Sincerely,
Kent M. Stahl, CFA
Portfolio Manager
Gregg R. Thomas, CFA
Portfolio Manager
www.brownadvisoryfunds.com
Brown Advisory – WMC Japan Alpha Opportunities Fund
A Message to Our Shareholders
December 31, 2014 (Unaudited)
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. Investments focused in a single geographic region may be exposed to greater risk than investments diversified among various geographies. Investments in foreign securities entail certain risks not associated with investments in domestic securities, such as volatility of currency exchange rates, and in some cases, political and economic instability and relatively illiquid markets. These risks are greater in emerging markets. Investments in smaller and medium capitalization companies generally carry greater risk than is customarily associated with larger companies for various reasons such as narrower markets, limited financial resources and less liquid stock. The Fund may invest in ETFs, which may trade at a discount to the aggregate value of the underlying securities and although expense ratios for ETFs are generally low, frequent trading of ETFs by the Fund can generate brokerage expenses. The value of investments in REITs may change in response to changes in the real estate market such as declines in the value of real estate, lack of available capital or financing opportunities, and increases in property taxes or operating costs. Derivatives involve risks different from, and in certain cases, greater than the risks presented by more traditional investments. Investors will indirectly bear the principal risks and its share of the fees and expenses of the Fund’s investment in other Investment Companies.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
www.brownadvisoryfunds.com
Brown Advisory – WMC Japan Alpha Opportunities Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 89.4% | | | |
| | | | |
| Japan — 89.4% | | | |
| | | | |
| Consumer Discretionary — 23.7% | | | |
| | 287,400 | | Adastria Holdings Co., Ltd. | | | 7,516,098 | |
| | 149,300 | | Aeon Delight Co., Ltd. | | | 3,478,585 | |
| | 401,200 | | Aisan Industry Co., Ltd. | | | 3,432,297 | |
| | 184,856 | | Aisin Seiki Co., Ltd. | | | 6,641,585 | |
| | 258,800 | | Artnature, Inc. | | | 2,882,649 | |
| | 209,300 | | Avex Group Holdings, Inc. | | | 3,422,999 | |
| | 97,900 | | Cookpad, Inc. | | | 3,333,905 | |
| | 78,700 | | Cyber Agent, Inc. | | | 2,950,500 | |
| | 172,400 | | DaikyoNishikawa Co. | | | 5,097,247 | |
| | 237,400 | | Denso Corp. | | | 11,064,700 | |
| | 172,300 | | Doutor Nichires Holdings Co., Ltd. | | | 2,477,387 | |
| | 183,000 | | En-Japan, Inc. | | | 2,882,015 | |
| | 250,000 | | Exedy Corp. | | | 6,018,730 | |
| | 224,000 | | Fuji Heavy Industries, Ltd. | | | 7,926,461 | |
| | 497,500 | | Funai Electric Co., Ltd. | | | 5,937,600 | |
| | 133,200 | | Gendai Agency, Inc. | | | 748,204 | |
| | 63,100 | | H.I.S. Co., Ltd. | | | 1,781,366 | |
| | 822,100 | | Honda Motor Co., Ltd. | | | 24,119,005 | |
| | 389,620 | | Honeys Co., Ltd. | | | 3,052,455 | |
| | 67,400 | | Hoshizaki Electric Co., Ltd. | | | 3,247,868 | |
| | 243,200 | | Iida Group Holdings Co., Ltd. | | | 2,962,546 | |
| | 339,940 | | Isuzu Motors, Ltd. | | | 4,140,575 | |
| | 1,834,000 | | Kayaba Industry Co., Ltd. | | | 7,797,266 | |
| | 459,000 | | Keihin Corp. | | | 6,812,770 | |
| | 345,000 | | Kuroda Electric Co., Ltd. | | | 4,754,960 | |
| | 697,500 | | Mitsubishi Motors Corp. | | | 6,371,987 | |
| | 290,500 | | Moshi Moshi Hotline, Inc. | | | 2,681,188 | |
| | 74,600 | | Nintendo Co., Ltd. | | | 7,785,079 | |
| | 940,880 | | Nippon Television Holdings, Inc. | | | 13,810,453 | |
| | 542,400 | | Nishimatsuya Chain Co., Ltd. | | | 4,407,883 | |
| | 225,200 | | Pal Co., Ltd. | | | 6,155,623 | |
| | 149,300 | | Proto Corp. | | | 2,148,991 | |
| | 1,087,510 | | Rakuten, Inc. | | | 15,122,711 | |
| | 75,400 | | Shimamura Co. | | | 6,506,790 | |
| | 91,100 | | Tachi-S Co., Ltd. | | | 1,251,502 | |
| | 382,000 | | Takata Corp. | | | 4,605,414 | |
| | 155,000 | | TechnoPro Holdings, Inc. | | | 2,553,139 | |
| | 605,000 | | Teijin, Ltd. | | | 1,608,031 | |
| | 254,900 | | Tenma Corp. | | | 3,374,753 | |
| | 305,900 | | Tokai Rika Co., Ltd. | | | 6,421,157 | |
| | 123,600 | | Topre Corp. | | | 1,770,420 | |
| | 2,147,380 | | Toshiba Corp. | | | 9,056,149 | |
| | 500,700 | | Toyoda Gosei Co., Ltd. | | | 10,071,200 | |
| | 733,400 | | Toyota Boshoku Corp. | | | 9,736,485 | |
| | 161,080 | | Toyota Industries Corp. | | | 8,255,632 | |
| | 47,100 | | Tri-Stage, Inc. | | | 600,523 | |
| | 423,880 | | TS Tech Co., Ltd. | | | 9,914,000 | |
| | 643,500 | | TV Asahi Holdings Corp. | | | 10,135,753 | |
| | 312,900 | | Xebio Co., Ltd. | | | 5,208,513 | |
| | 140,600 | | Yondoshi Holdings, Inc. | | | 2,193,466 | |
| | | | | | | 286,226,615 | |
| Consumer Staples — 2.2% | | | | |
| | 293,980 | | Asahi Group Holdings, Ltd. | | | 9,094,958 | |
| | 208,600 | | Cawachi, Ltd. | | | 3,091,650 | |
| | 99,100 | | Rohto Pharmaceutical Co., Ltd. | | | 1,238,151 | |
| | 51,500 | | Seven & I Holdings Co., Ltd. | | | 1,852,524 | |
| | 162,800 | | Tsuruha Holdings, Inc. | | | 9,420,122 | |
| | 75,600 | | Welcia Holdings Co., Ltd. | | | 2,238,385 | |
| | | | | | | 26,935,790 | |
| Energy — 2.1% | | | | |
| | 1,505,240 | | Inpex Corp. | | | 16,757,794 | |
| | 208,600 | | Japan Petroleum Exploration Co. | | | 6,553,631 | |
| | 126,400 | | MODEC, Inc. | | | 2,121,703 | |
| | | | | | | 25,433,128 | |
| Financials — 16.1% | | | | |
| | 698,100 | | Dai-ichi Life Insurance Co., Ltd. | | | 10,597,055 | |
| | 608,000 | | Eighteenth Bank, Ltd. | | | 1,696,856 | |
| | 552,000 | | Higashi-Nippon Bank, Ltd. | | | 1,537,417 | |
| | 196,300 | | IBJ Leasing Co., Ltd. | | | 3,895,358 | |
| | 218,700 | | Ichiyoshi Securities Co., Ltd. | | | 2,352,499 | |
| | 331,000 | | Jaccs Co., Ltd. | | | 1,677,051 | |
| | 803,800 | | Kenedix, Inc. | | | 3,660,089 | |
| | 1,614,800 | | Leopalace 21 Corp. | | | 10,187,079 | |
| | 168,400 | | Matsui Securities Co., Ltd. | | | 1,457,131 | |
| | 569,730 | | Mitsubishi Estate Co., Ltd. | | | 12,004,710 | |
| | 6,720,640 | | Mitsubishi UFJ Financial Group, Inc. | | | 36,924,739 | |
| | 1,022,500 | | Mitsubishi UFJ Lease & Finance Co., Ltd. | | | 4,808,645 | |
| | 4,593,300 | | Mizuho Financial Group, Inc. | | | 7,699,764 | |
| | 489,000 | | Oita Bank, Ltd. | | | 1,726,958 | |
| | 464,000 | | Pocket Card Co., Ltd. | | | 2,227,152 | |
| | 6,046,000 | | Shinsei Bank, Ltd. | | | 10,522,569 | |
| | 538,010 | | Sony Financial Holdings, Inc. | | | 7,922,263 | |
| | 755,830 | | Sumitomo Mitsui Financial Group, Inc. | | | 27,325,313 | |
| | 1,866,230 | | T&D Holdings, Inc. | | | 22,372,090 | |
| | 645,000 | | Tochigi Bank, Ltd. | | | 2,858,360 | |
| | 313,260 | | Tokio Marine Holdings, Inc. | | | 10,173,964 | |
| | 115,440 | | Tokyo TY Financial Group, Inc. | | | 3,223,800 | |
| | 546,000 | | Yamanashi Chuo Bank, Ltd. | | | 2,209,675 | |
| | 201,900 | | Zenkoku Hosho Co., Ltd. | | | 5,729,413 | |
| | | | | | | 194,789,950 | |
| Health Care — 5.4% | | | | |
| | 84,000 | | Asahi Intecc Co., Ltd. | | | 4,093,440 | |
| | 205,400 | | CMIC Holdings Co., Ltd. | | | 3,213,735 | |
| | 430,100 | | Daiichi Sankyo Co., Ltd. | | | 6,013,986 | |
| | 326,800 | | Eisai Co., Ltd. | | | 12,638,395 | |
| | 113,300 | | Message Co., Ltd. | | | 3,112,066 | |
| | 135,000 | | Nippon Shinyaku Co., Ltd. | | | 4,337,359 | |
| | 21,800 | | Ono Pharmaceutical Co., Ltd. | | | 1,930,074 | |
| | 183,025 | | Shionogi & Co., Ltd. | | | 4,728,607 | |
| | 49,500 | | Suzuken Co., Ltd. | | | 1,367,357 | |
| | 588,100 | | Takeda Pharmaceutical Co., Ltd. | | | 24,346,049 | |
| | | | | | | 65,781,068 | |
| Industrials — 11.8% | | | | |
| | 146,500 | | Amada Co., Ltd. | | | 1,255,328 | |
| | 171,400 | | Asahi Diamond Industrial Co., Ltd. | | | 1,791,998 | |
| | 230,000 | | Daifuku Co., Ltd. | | | 2,573,492 | |
| | 269,600 | | Denyo Co., Ltd. | | | 4,021,396 | |
| | 724,020 | | DMG Mori Seiki Co. | | | 8,965,074 | |
| | 63,100 | | Eagle Industry Co., Ltd. | | | 1,151,177 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory – WMC Japan Alpha Opportunities Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — (Continued) | | | |
| | | | |
| Japan — (Continued) | | | |
| | | | |
| Industrials — (Continued) | | | |
| | 39,800 | | East Japan Railway Co. | | | 2,999,760 | |
| | 332,200 | | Fuji Machine Manufacturing Co., Ltd. | | | 3,077,126 | |
| | 149,300 | | Futaba Corp. | | | 2,166,137 | |
| | 146,500 | | Glory, Ltd. | | | 3,946,871 | |
| | 442,400 | | Hino Motors, Ltd. | | | 5,823,452 | |
| | 269,600 | | Hisaka Works, Ltd. | | | 2,182,056 | |
| | 470,200 | | Hitachi Chemical Co., Ltd. | | | 8,306,933 | |
| | 554,010 | | Hitachi Metals, Ltd. | | | 9,413,118 | |
| | 836,100 | | Hosiden Corp. | | | 4,656,477 | |
| | 1,045,000 | | IHI Corp. | | | 5,292,360 | |
| | 184,900 | | Jamco Corp. | | | 4,774,225 | |
| | 2,699,000 | | Japan Steel Works, Ltd. | | | 9,549,408 | |
| | 825,000 | | Kawasaki Heavy Industries, Ltd. | | | 3,751,724 | |
| | 243,000 | | Kubota Corp. | | | 3,527,091 | |
| | 1,399,410 | | Makino Milling Machine Co., Ltd. | | | 10,315,445 | |
| | 1,231,659 | | Mitsui O.S.K. Lines, Ltd. | | | 3,649,089 | |
| | 287,100 | | Nikkiso Co., Ltd. | | | 2,656,330 | |
| | 645,000 | | Sanwa Holdings Corp. | | | 4,496,399 | |
| | 910,940 | | Sumitomo Electric Industries, Ltd. | | | 11,376,981 | |
| | 70,600 | | THK Co., Ltd. | | | 1,696,652 | |
| | 221,200 | | Tomoe Engineering Co., Ltd. | | | 3,173,717 | |
| | 1,139,000 | | Toshiba Machine Co., Ltd. | | | 4,513,498 | |
| | 176,000 | | Tsubakimoto Chain Co. | | | 1,414,452 | |
| | 577,800 | | Ushio, Inc. | | | 6,017,240 | |
| | 86,400 | | Zuiko Corp. | | | 3,727,010 | |
| | | | | | | 142,262,016 | |
| Information Technology — 15.8% | | | | |
| | 56,200 | | Alpha Systems, Inc. | | | 776,344 | |
| | 690,910 | | Anritsu Corp. | | | 4,806,361 | |
| | 515,200 | | Canon, Inc. | | | 16,374,992 | |
| | 113,900 | | Dai-ichi Seiko Co., Ltd. | | | 2,264,916 | |
| | 475,000 | | DeNA Co., Ltd. | | | 5,674,073 | |
| | 87,800 | | Digital Garage, Inc. | | | 1,322,849 | |
| | 567,966 | | Ferrotec Corp. | | | 2,992,881 | |
| | 3,368,000 | | Fujitsu, Ltd. | | | 17,957,053 | |
| | 577,800 | | GREE, Inc. | | | 3,478,255 | |
| | 419,000 | | Infomart Corp. | | | 3,943,843 | |
| | 102,500 | | Internet Initiative Japan, Inc. | | | 2,084,902 | |
| | 178,100 | | Itochu Techno-Solutions Corp. | | | 6,284,144 | |
| | 105,900 | | Japan Digital Laboratory Co., Ltd. | | | 1,422,819 | |
| | 773,200 | | Japan Display, Inc. | | | 2,359,801 | |
| | 227,900 | | Melco Holdings, Inc. | | | 3,391,148 | |
| | 356,300 | | Mimasu Semiconductor Industry Co., Ltd. | | | 3,460,999 | |
| | 187,800 | | Miraial Co., Ltd. | | | 2,638,085 | |
| | 772,800 | | Mitsubishi Electric Corp. | | | 9,179,365 | |
| | 661,600 | | Mitsumi Electric Co., Ltd. | | | 5,235,026 | |
| | 117,200 | | Mobile Create Co., Ltd. | | | 812,743 | |
| | 728,600 | | NET One Systems Co., Ltd. | | | 4,293,216 | |
| | 821,700 | | Nichicon Corp. | | | 6,418,701 | |
| | 169,900 | | Nippon Ceramic Co., Ltd. | | | 2,504,352 | |
| | 120,400 | | NSD Co., Ltd. | | | 1,762,919 | |
| | 111,700 | | OBIC Co., Ltd. | | | 3,624,633 | |
| | 172,900 | | Outsourcing, Inc. | | | 2,550,772 | |
| | 128,000 | | Recruit Holdings Co., Ltd | | | 3,676,072 | |
| | 162,100 | | Rohm Co., Ltd. | | | 9,767,054 | |
| | 308,000 | | Sanken Electric Co. | | | 2,449,170 | |
| | 2,202,000 | | SCREEN Holdings Co., Ltd. | | | 12,939,764 | |
| | 191,500 | | SCSK Corp. | | | 4,797,002 | |
| | 431,700 | | Shinkawa, Ltd. | | | 2,339,512 | |
| | 1,147,500 | | Shinko Electric Industries Co., Ltd. | | | 7,767,817 | |
| | 110,400 | | SoftBank Corp. | | | 6,571,372 | |
| | 178,800 | | SUMCO Corp. | | | 2,559,720 | |
| | 58,300 | | TDK Corp. | | | 3,433,605 | |
| | 378,700 | | Tokyo Seimitsu Co., Ltd. | | | 7,627,304 | |
| | 321,000 | | Yaskawa Electric Corp. | | | 4,100,174 | |
| | 484,300 | | Yokogawa Electric Corp. | | | 5,314,248 | |
| | 64,300 | | Zuken, Inc. | | | 648,281 | |
| | | | | | | 191,606,287 | |
| Materials — 10.2% | | | | |
| | 626,000 | | Aichi Steel Corp. | | | 2,194,362 | |
| | 757,400 | | Asahi Glass Co. | | | 3,687,158 | |
| | 239,100 | | Chubu Steel Plate Co., Ltd. | | | 1,005,559 | |
| | 239,100 | | Fujimi, Inc. | | | 3,474,747 | |
| | 519,980 | | JSR Corp. | | | 8,925,089 | |
| | 1,543,000 | | Kobe Steel, Ltd. | | | 2,657,815 | |
| | 240,700 | | Maruichi Steel Tube, Ltd. | | | 5,122,893 | |
| | 2,052,000 | | Mitsubishi Gas Chemical Co., Inc. | | | 10,298,771 | |
| | 5,378,000 | | Mitsubishi Materials Corp. | | | 17,841,112 | |
| | 3,413,000 | | Mitsui Chemicals, Inc. | | | 9,666,907 | |
| | 158,900 | | Neturen Co., Ltd. | | | 1,058,198 | |
| | 220,400 | | Nippon Shokubai Co., Ltd. | | | 2,887,240 | |
| | 160,000 | | Nitto Denko Corp. | | | 8,940,082 | |
| | 71,800 | | Osaka Titanium Technologies Co., Ltd. | | | 1,365,406 | |
| | 1,583,000 | | Showa Denko KK | | | 1,948,689 | |
| | 1,761,000 | | Sumitomo Bakelite Co., Ltd. | | | 6,843,988 | |
| | 527,500 | | Sumitomo Riko Co., Ltd. | | | 3,966,044 | |
| | 172,250 | | Tokyo Ohka Kogyo Co., Ltd. | | | 5,270,079 | |
| | 1,831,400 | | Tokyo Steel Manufacturing Co., Ltd. | | | 11,264,210 | |
| | 308,000 | | Toyo Kohan Co., Ltd. | | | 1,634,262 | |
| | 1,011,000 | | Ube Industries, Ltd. | | | 1,503,187 | |
| | 341,600 | | Yamato Kogyo Co., Ltd. | | | 9,554,056 | |
| | 793,100 | | Yodogawa Steel Works, Ltd. | | | 2,950,005 | |
| | | | | | | 124,059,859 | |
| Telecommunication Services — 2.0% | | | | |
| | 156,920 | | KDDI Corp. | | | 9,858,349 | |
| | 280,920 | | Nippon Telegraph & Telephone Corp. | | | 14,350,132 | |
| | | | | | | 24,208,481 | |
| Utilities — 0.1% | | | | |
| | 206,600 | | Shizuoka Gas Co., Ltd. | | | 1,290,318 | |
| Total Common Stocks (Cost $1,105,461,850) | | | 1,082,593,512 | |
| | | | | |
| Real Estate Investment Trusts — 0.6% | | | | |
| | | | | |
| Japan — 0.6% | | | | |
| | 615 | | Daiwa Office Investment Corp. | | | 3,453,213 | |
| | 2,768 | | GLP J-REIT | | | 3,083,256 | |
| Total Real Estate Investment Trusts (Cost $5,889,562) | | | 6,536,469 | |
| | | | | |
| Mutual Funds — 0.4% | | | | |
| | | | | |
| Japan — 0.4% | | | | |
| | 428,860 | | Nomura AM TOPIX ETF | | | 5,162,933 | |
| Total Mutual Funds (Cost $5,143,283) | | | 5,162,933 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory – WMC Japan Alpha Opportunities Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | | |
| Short-Term Investments — 11.1% | | | |
| | | | |
| Money Market Funds — 11.1% | | | |
| | 134,592,303 | | DWS Cash Account Trust — Government & | | | |
| | | | Agency Securities Portfolio, 0.03%# | | | 134,592,303 | |
| Total Short-Term Investments (Cost $134,592,303) | | | 134,592,303 | |
| Total Investments — 101.5% (Cost $1,251,086,998) | | | 1,228,885,217 | |
| Liabilities in Excess of Other Assets — (1.5)% | | | (17,793,372 | ) |
| NET ASSETS — 100.0% | | $ | 1,211,091,845 | |
| * | Non-Income Producing |
| # | Annualized seven-day yield as of December 31, 2014. |
| PORTFOLIO HOLDINGS | | |
| % of Net Assets | | |
| | | |
| Consumer Discretionary | 23.7% | |
| Financials | 16.1% | |
| Information Technology | 15.8% | |
| Industrials | 11.8% | |
| Money Market Funds | 11.1% | |
| Materials | 10.2% | |
| Health Care | 5.4% | |
| Consumer Staples | 2.2% | |
| Energy | 2.1% | |
| Telecommunication Services | 2.0% | |
| Real Estate Investment Trusts | 0.6% | |
| Mutual Funds | 0.4% | |
| Utilities | 0.1% | |
| Other Assets and Liabilities | (1.5)% | |
| | 100.0% | |
Forward Currency Exchange Contracts (Note 7)
The Brown Advisory – WMC Japan Alpha Opportunities Fund had the following outstanding contracts as of December 31, 2014:
| | | | | | Settlement | | | Unrealized | |
| Currency to be Delivered | | Currency to be Received | Date | Counterparty | | Depreciation | |
| Japanese Yen | 133,913,775,000 | | U.S. Dollars | 1,103,842,651 | 1/16/15 | HSBC Bank USA, N.A. | | $ | (14,310,100 | ) |
| Japanese Yen | 5,212,670,000 | | U.S. Dollars | 43,309,709 | 3/18/15 | Bank of America, N.A. | | | (239,622 | ) |
| U.S. Dollars | 49,553,415 | | Japanese Yen | 5,877,481,000 | 3/18/15 | Goldman Sachs & Co. | | | (449,885 | ) |
| | | | | | | | | $ | (14,999,607 | ) |
Futures Contracts Long — (Note 8)
The Brown Advisory – WMC Japan Alpha Opportunities Fund had the following open long futures contracts as of December 31, 2014:
| Issue | Contracts | Expiration Date | Notional Amount | Unrealized Depreciation |
| TOPIX Index Futures Contracts | 790 | March 14, 2015 | $94,862,901 | $(1,909,538) |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory – Somerset Emerging Markets Fund
A Message to Our Shareholders
December 31, 2014 (Unaudited)
Dear Shareholder:
During the six-month period ended December 31, 2014, the Brown Advisory - Somerset Emerging Markets Fund Institutional Shares (the “Fund”) decreased by 5.61%, while the Fund’s benchmark, the MSCI Emerging Markets Index, decreased by 7.84%, which equates to a relative outperformance by the Fund to its benchmark of 2.23%.
The Fund’s lack of weighting in energy stocks was a major contributor to relative performance, as the falling oil price caused a material sell-off for much of the sector. On a country basis, meanwhile, the Fund’s relatively small weighting in China detracted from its performance against the Index, whereas the reverse was true for the Fund’s small weighting in Russia, which contributed to relative performance.
From an individual stock perspective, the most meaningful contributors to the Fund’s performance were China Mobile, Turk Sise Cam and Aboitiz Power. Samart Corporation, a Thai telecom and industrials holding company that we added to the portfolio in the third quarter of 2014, was the best-performing stock on an absolute basis. The two most impactful detractors from performance were OTP Bank and Nokian Renkaat. Both stocks declined primarily due to their exposure to Russia, whose economy and stock market were squeezed by falling oil prices.
There was a moderate amount of portfolio activity during the second half of 2014. We bought seven new stocks and sold two. Specifically during the third quarter, the Fund purchased Jeronimo Martins, Tianhe Chemicals, eMemory Technology, Merry Electronics and Samart Corporation. More recently in the fourth quarter, we added Smiles, a Brazilian airline points company, and Union National Bank, which was largely an opportunistic buy as the sell-off in the UAE made the stock’s valuation attractive. Tianhe Chemicals did not work out well, and we sold the stock in the fourth quarter after questions were raised about its end customers and its accounting policies. Although allegations against the company were not proven, we nonetheless grew less comfortable with the firm’s corporate governance, so we decided to sell out of the stock. The only other sale was Top Glove, which we sold in August because it encountered considerably greater competition than we had anticipated, and its margins had become commoditized.
In terms of general outlook, we are happier with the portfolio at the moment than we were at the beginning of the period, though we are cautious in terms of our general emerging markets outlook. In particular, we have real concerns about the potential impact if Chinese authorities choose to devalue the yuan, a scenario that we view as increasingly likely. Perhaps symptomatic of our negative short-to-medium-term outlook, some of the additions to the portfolio over the last year have been less sensitive to the wider macro environment—for example, SK Hynix, and to a lesser extent, eMemory Technology.
Sincerely,
Edward Lam
Portfolio Manager
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. Investments in foreign securities entail certain risks not associated with investments in domestic securities, such as volatility of currency exchange rates, and in some cases, political and economic instability and relatively illiquid markets. These risks are greater for investments in emerging markets. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management, and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. The Fund invests in smaller companies which carry greater risk than is associated with larger companies for various reasons, such as narrower markets, limited financial resources and less liquid stock. The Fund may invest in ETFs, which may trade at a discount to the aggregate value of the underlying securities and although expense ratios for ETFs are generally low, frequent trading of ETFs by the Fund can generate brokerage expenses. Multi-investment management styles may lead to higher transaction expenses compared to single investment management styles. Outcomes depend on the skill of the sub-advisor and the advisor and the allocation of assets among them.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
www.brownadvisoryfunds.com
Brown Advisory – Somerset Emerging Markets Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 79.9% | | | |
| | | | |
| Brazil — 5.5% | | | |
| | 226,340 | | Cielo S.A. | | | 3,541,673 | |
| | 591,540 | | Porto Seguro S.A. | | | 6,765,035 | |
| | 186,069 | | Smiles S.A. | | | 3,223,414 | |
| | | | | | | 13,530,122 | |
| Chile — 5.3% | | | | |
| | 3,221,349 | | AFP Habitat S.A.† | | | 4,872,855 | |
| | 4,855,311 | | Aguas Andinas S.A. | | | 2,781,197 | |
| | 345,740 | | Cia Cervecerias Unidas S.A. | | | 3,277,803 | |
| | 1,399,468 | | Inversiones Aguas Metropolitan | | | 2,167,849 | |
| | | | | | | 13,099,704 | |
| China — 4.8% | | | | |
| | 324,714 | | AAC Technologies Holdings, Inc. | | | 1,726,912 | |
| | 859,500 | | China Mobile, Ltd. | | | 10,067,106 | |
| | | | | | | 11,794,018 | |
| Finland — 1.5% | | | | |
| | 149,091 | | Nokian Renkaat | | | 3,636,868 | |
| | | | | |
| Hungary — 3.6% | | | | |
| | 618,737 | | OTP Bank PLC | | | 8,924,976 | |
| | | | | |
| Indonesia — 2.3% | | | | |
| | 24,482,000 | | Telekomunikasi Indonesia | | | 5,626,667 | |
| | | | | |
| Luxembourg — 1.6% | | | | |
| | 54,772 | | Millicom International Cellular | | | 4,058,338 | |
| | | | | |
| Malaysia — 1.5% | | | | |
| | 108,109 | | British American Tobacco Malayasia Berhad | | | 2,002,271 | |
| | 331,390 | | Public Bank Berhad | | | 1,731,281 | |
| | | | | | | 3,733,552 | |
| Morocco — 0.5% | | | | |
| | 98,302 | | Maroc Telecom S.A. | | | 1,231,260 | |
| | | | | |
| Philippines — 6.7% | | | | |
| | 5,956,761 | | Aboitiz Power Corp. | | | 5,665,356 | |
| | 3,584,192 | | Metropolitan Bank & Trust | | | 6,608,571 | |
| | 65,220 | | Philippine Long Distance Corp. | | | 4,208,930 | |
| | | | | | | 16,482,857 | |
| Poland — 4.2% | | | | | | |
| | 37,153 | | Bank Pekao S.A. | | | 1,867,167 | |
| | 61,807 | | Powszechny Zaklad Ubezpieczen S.A. | | | 8,434,952 | |
| | | | | | | 10,302,119 | |
| Portugal — 0.7% | | | | |
| | 164,963 | | Jeronimo Martins SGPS S.A. | | | 1,652,998 | |
| | | | | |
| South Africa — 7.8% | | | | |
| | 1,667,261 | | Nampak, Ltd. | | | 6,266,744 | |
| | 1,690,354 | | Sanlam, Ltd. | | | 10,171,342 | |
| | 186,612 | | Shoprite Holding, Ltd. | | | 2,700,789 | |
| | | | | | | 19,138,875 | |
| South Korea — 12.9% | | | | |
| | 65,173 | | KT&G Corp. | | | 4,525,181 | |
| | 26,065 | | NCSoft Corp. | | | 4,274,520 | |
| | 381,490 | | Nexen Tire Corp.† | | | 4,393,443 | |
| | 8,476 | | Samsung Electronics Co., Ltd. | | | 10,190,224 | |
| | 193,709 | | SK Hynix, Inc.* | | | 8,278,236 | |
| | | | | | | 31,661,604 | |
| Taiwan — 10.0% | | | | |
| | 146,000 | | eMemory Technology, Inc. | | | 1,677,356 | |
| | 160,710 | | Formosa International Hotels | | | 1,716,224 | |
| | 1,140,000 | | Merry Electronics Co. | | | 3,982,045 | |
| | 5,664,000 | | Pou Chen Corp. | | | 6,830,001 | |
| | 539,000 | | President Chain Store Corp. | | | 4,163,141 | |
| | 1,438,000 | | Taiwan Semiconductor Manufacturing Co. | | | 6,335,068 | |
| | | | | | | 24,703,835 | |
| Thailand — 1.0% | | | | |
| | 2,003,800 | | Samart Corp. PLC | | | 2,365,646 | |
| | | | | |
| Turkey — 5.8% | | | | |
| | 1,756,310 | | Aksa Akrilik Kimya Sanayii† | | | 5,580,073 | |
| | 2,033,598 | | Anadolu Hayat Emeklilik AS† | | | 4,459,126 | |
| | 2,811,737 | | Turkiye Sise Ve Cam Fabrikalari | | | 4,367,068 | |
| | | | | | | 14,406,267 | |
| United Arab Emirates — 4.2% | | | | |
| | 828,385 | | First Gulf Bank | | | 3,805,064 | |
| | 1,711,587 | | National Bank Abu Dhabi | | | 6,460,412 | |
| | 30,874 | | Union National Bank | | | 48,431 | |
| | | | | | | 10,313,907 | |
| Total Common Stocks (Cost $198,351,509) | | | 196,663,613 | |
| | | | | |
| Preferred Stocks — 1.0% | | | | |
| | | | | |
| Brazil — 1.0% | | | | |
| | 351,900 | | AES Tiete S.A. | | | 2,401,699 | |
| Total Preferred Stocks (Cost $3,662,285) | | | 2,401,699 | |
| | | | | |
| Exchange Traded Funds — 9.5% | | | | |
| India — 9.5% | | | | | | |
| | 259,982 | | iShares India 50 ETF | | | 7,773,462 | |
| | 199,490 | | iShares MSCI India ETF | | | 6,002,654 | |
| | 1,325,500 | | iShares MSCI India ETF (Singapore)*† | | | 9,636,385 | |
| Total Exchange Traded Funds (Cost $22,208,924) | | | 23,412,501 | |
| | | | | |
| Short-Term Investments — 11.0% | | | | |
| | | | | |
| Money Market Funds — 11.0% | | | | |
| | 27,086,120 | | DWS Cash Account Trust — Government | | | | |
| | | | & Agency Securities Portfolio, 0.03%# | | | 27,086,120 | |
| Total Short-Term Investments (Cost $27,086,120) | | | 27,086,120 | |
| Total Investments — 101.4% (Cost $251,308,838) | | | 249,563,933 | |
| Liabilities in Excess of Other Assets — (1.4)% | | | (3,482,222 | ) |
| NET ASSETS — 100.0% | | $ | 246,077,211 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory – Somerset Emerging Markets Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| PORTFOLIO HOLDINGS | | |
| % of Net Assets | | |
| | | |
| South Korea | 12.9% | |
| Money Market Funds | 11.0% | |
| Taiwan | 10.0% | |
| India | 9.5% | |
| South Africa | 7.8% | |
| Philippines | 6.7% | |
| Brazil | 6.5% | |
| Turkey | 5.8% | |
| Chile | 5.3% | |
| China | 4.8% | |
| United Arab Emirates | 4.2% | |
| Poland | 4.2% | |
| Hungary | 3.6% | |
| Indonesia | 2.3% | |
| Luxembourg | 1.6% | |
| Finland | 1.5% | |
| Malaysia | 1.5% | |
| Thailand | 1.0% | |
| Portugal | 0.7% | |
| Morocco | 0.5% | |
| Other Assets and Liabilities | (1.4)% | |
| | 100.0% | |
| * | Non-Income Producing |
| † | All or a portion of this security is considered illiquid. At December 31, 2014, the total market value of securities considered illiquid was $16,178,772 or 6.6% of net assets. |
| # | Annualized seven-day yield as of December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Emerging Markets Small-Cap Fund
A Message to Our Shareholders
December 31, 2014 (Unaudited)
Dear Shareholder:
The Brown Advisory Emerging Markets Small-Cap Fund commenced operations on November 21, 2014. For the period from inception to December 31, 2014, the Brown Advisory Emerging Markets Small-Cap Fund Institutional Shares (the “Fund”) decreased by 2.30% in value. During the same period, the MSCI Emerging Markets Small Cap Index), the Fund’s benchmark, decreased by 3.24%.
Asia ex-Japan:
Investors grew more cautious as they turned their attention to the weakening Russian currency and began to fear that contagion could spread into other emerging markets. The positive side of these currency fears, however, was that they emboldened Chinese policymakers to act. Chinese stocks enjoyed a strong month of performance, with China one of the few markets to make gains in December after its policymakers continued to ease, providing the impetus for investors to turn more bullish on China’s outlook.
We see the broad share-price declines of recent months as part of the natural functioning of financial markets, which gives rise to new opportunities as valuations retreat. Asia ex-Japan stocks still trade at attractive valuations while their growth profile remains robust. This gives conviction to our view that the declines in December represent a market correction and equities have further room to rally, especially in light of the stimulative measures announced by Chinese policymakers. We maintain an optimistic outlook on stocks in the region over the medium-to-long term.
Positive contribution to performance largely came from positions in Chinese financials, which rallied in response to the measures put in place by the Chinese government in November and December 2014. Korean stocks also contributed positively to performance, though this was more a case of individual stocks making notable contributions rather than the broad-based advance we saw in China.
Singapore and Hong Kong were detractors in December, largely as a result of individual stock selection. In the case of Singapore, it was an oil services company that declined heavily, in line with the sharp declines in energy prices, while two stocks in Hong Kong sold off for idiosyncratic reasons.
From an individual stock perspective, the key contributors to performance included Medy-tox Inc., a Korean pharmaceuticals company, which rose 32% in December after it reported better-than-expected sales growth in the third quarter along with a strong pipeline of new products. China Galaxy Securities, a Chinese securities broker, climbed 22% in December and China Taiping Insurance, a Chinese insurance company, rose by 11%. Both stocks were beneficiaries of Chinese policymakers’ accommodative stance, which gave investors more confidence in Chinese financial stocks. China Galaxy Securities also benefited from a series of broker-rating upgrades during the month.
Key detractors from performance included Dawnrays Pharmaceuticals, a Chinese pharmaceutical company, which fell 32% on news of the sudden resignation of its CEO. Ezion Holdings, a Singaporean oil-services company, dropped 17% in response to the sharp decline in oil prices. Wasion Group, a Chinese manufacturer of smart meters, declined 13% on profit-taking following strong share price performance in recent months. The company’s outlook, however, remains positive.
Generally we have adopted a more defensive stance in response to the high level of volatility in stocks. Following a strong quarter for Hong Kong and Chinese stocks, we took profits on our holdings and reduced our allocation to the region. We reallocated proceeds in part into Korean stocks, where valuations have returned to more reasonable levels after several months of underperformance.
We believe that the growth outlook is still intact in Asia, particularly in sectors geared to domestic demand such as consumer sectors, health care and utilities—all areas currently emphasized within the Portfolio. As a result, the one-year forward earnings-growth expectation of the Segment is 15% vs. the benchmark average of 13%, while earnings revision trends have been strongly positive, reflecting the quality of companies in the universe as well as the Portfolio. We are cautiously optimistic, as we see good bottom-up opportunities balanced by an increasingly noisy macroeconomic environment.
Most markets within the Asia ex-Japan universe still trade below their respective 10-year average price-to-earnings ratio. China remains the most undervalued market in Asia on most dimensions. We believe that the number of opportunities available allows us to identify growth trends at different points of economic cycles.
www.brownadvisoryfunds.com
Brown Advisory Emerging Markets Small-Cap Fund
A Message to Our Shareholders
December 31, 2014 (Unaudited)
Non-Asia ex-Japan:
Non-Asia ex-Japan stock markets represent just over one-fifth of the Fund’s benchmark. At this point in time, the Fund has no direct exposure to these markets. The absence of non-Asian exposure represents a manager-selection decision and not a tactical or strategic asset-allocation decision. We do believe that the Fund will gain meaningful relative exposure to these markets over time.
During the period, concerns over a strengthening U.S. dollar alongside broad-based global economic weakness led many investors to flee higher-risk assets. The only source of market strength during the period came from India. Economic reforms, lower energy prices and anticipated rate cuts that came to fruition at the start of the new year propelled the Indian stock market to a double-digit advance in U.S. dollar terms during the period.
In the long run, we maintain the view that the consumption story will be the main driver of growth for smaller emerging market companies. We believe that the key to generating excess returns is to identify companies across the region that are not fully priced by the market, and that focused and rigorous fundamental analysis is the best way to do so. Our investment discipline combines a value-oriented process with a search for higher-quality growth companies, and by applying this discipline in markets that are realizing stronger economic growth, we believe that we can deliver alpha in both rising and falling markets.
Sincerely,
Paul Chew
Chief Investment Officer, Brown Advisory LLC
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. The Fund may invest in foreign securities which involve political, economic and currency risks, greater volatility and differences in accounting methods. These risks are greater for investments in emerging markets. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management, and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. Investments in small and medium capitalization companies generally carry greater risk than is customarily associated with larger companies for various reasons such as narrower markets, limited financial resources and less liquid stock. The Fund may invest in ETFs, which may trade at a discount to the aggregate value of the underlying securities and although expense ratios for ETFs are generally low, frequent trading of ETFs by the Fund can generate brokerage expenses. In addition, the fund is susceptible to risks from investments in derivatives, private placements, REITs, and its investments in other investment companies.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
www.brownadvisoryfunds.com
Brown Advisory Emerging Markets Small-Cap Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 78.8% | | | |
| | | | |
| China — 31.5% | | | |
| | 1,748,000 | | BBMG Corp. | | | 1,453,197 | |
| | 461,000 | | China Medical System Holdings, Ltd. | | | 759,494 | |
| | 3,999,000 | | China Power International Development, Ltd. | | | 2,017,843 | |
| | 667,200 | | China Taiping Insurance Holdings Co., Ltd.* | | | 1,896,059 | |
| | 2,135,000 | | CITIC Telecom International Holdings, Ltd. | | | 798,334 | |
| | 737,000 | | Dah Chong Hong Holdings, Ltd. | | | 397,262 | |
| | 716,000 | | Dawnrays Pharmaceutical Holdings, Ltd. | | | 455,869 | |
| | 81,000 | | Golden Eagle Retail Group, Ltd. | | | 90,822 | |
| | 170,500 | | Great Wall Motor Co., Ltd. | | | 964,429 | |
| | 2,251,000 | | Guotai Junan International Holdings, Ltd. | | | 1,696,653 | |
| | 267,000 | | Haier Electronics Group Co., Ltd. | | | 631,639 | |
| | 482,000 | | Ju Teng International Holdings, Ltd. | | | 236,570 | |
| | 3,104,000 | | Lee & Man Paper Manufacturing, Ltd. | | | 1,733,309 | |
| | 1,165,000 | | Luye Pharma Group, Ltd.* | | | 1,489,116 | |
| | 20,090 | | New Oriental Education & | | | | |
| | | | Technology Group, Inc. ADR* | | | 410,037 | |
| | 153,100 | | Poly Culture Group Corp., Ltd.* | | | 469,062 | |
| | 900,000 | | Sa Sa International Holdings, Ltd. | | | 627,849 | |
| | 146,400 | | Samsonite International S.A. | | | 433,849 | |
| | 690,000 | | Sunny Optical Technology Co., Ltd. | | | 1,184,811 | |
| | 1,290,000 | | Towngas China Co., Ltd. | | | 1,303,945 | |
| | 1,524,000 | | Wasion Group Holdings, Ltd. | | | 1,414,730 | |
| | | | | | | 20,464,879 | |
| Indonesia — 1.8% | | | | |
| | 422,400 | | Matahari Department Store TBK | | | 508,976 | |
| | 2,690,900 | | Matahari Putra Prima TBK | | | 661,018 | |
| | | | | | | 1,169,994 | |
| Malaysia — 1.0% | | | | |
| | 672,200 | | Westports Holdings Bhd. | | | 645,958 | |
| | | | | |
| Philippines — 5.1% | | | | |
| | 10,998,000 | | Megaworld Corp. | | | 1,136,457 | |
| | 190,800 | | Robinsons Retail Holdings, Inc. | | | 322,887 | |
| | 352,440 | | Semirara Mining & Power Corp. | | | 1,114,257 | |
| | 3,250,700 | | SSI Group, Inc.* | | | 720,157 | |
| | | | | | | 3,293,758 | |
| Singapore — 4.9% | | | | |
| | 322,000 | | Comfortdelgro Corp., Ltd. | | | 630,128 | |
| | 1,130,000 | | Ezion Holdings, Ltd. | | | 954,495 | |
| | 244,000 | | M1, Ltd. | | | 663,167 | |
| | 991,000 | | Silverlake Axis, Ltd. | | | 935,617 | |
| | | | | | | 3,183,407 | |
| South Korea — 17.9% | | | | |
| | 9,535 | | Cosmax, Inc.* | | | 860,752 | |
| | 5,740 | | Coway Co., Ltd. | | | 437,684 | |
| | 6,130 | | Cuckoo Electronics Co., Ltd.* | | | 986,765 | |
| | 16,098 | | Daesang Corp. | | | 487,443 | |
| | 19,623 | | Dongbu Insurance Co., Ltd. | | | 979,930 | |
| | 4,566 | | E-Mart Co., Ltd | | | 844,972 | |
| | 7,173 | | Hana Tour Service, Inc. | | | 507,154 | |
| | 13,247 | | Hansae Co., Ltd. | | | 476,570 | |
| | 15,461 | | Hotel Shilla Co., Ltd. | | | 1,282,434 | |
| | 2,141 | | Hyundai Department Store Co., Ltd. | | | 238,132 | |
| | 12,079 | | KEPCO Plant Service & Engineering Co., Ltd. | | | 875,452 | |
| | 36,236 | | Korea Kolmar Co., Ltd. | | | 1,440,232 | |
| | 15,071 | | Loen Entertainment, Inc.* | | | 599,067 | |
| | 2,914 | | Medy-Tox, Inc. | | | 842,253 | |
| | 6,075 | | Naturalendo Tech Co., Ltd.* | | | 251,312 | |
| | 23,804 | | Paradise Co., Ltd. | | | 507,410 | |
| | | | | | | 11,617,562 | |
| Taiwan — 12.7% | | | | |
| | 50,000 | | Catcher Technology Co., Ltd. | | | 386,122 | |
| | 160,000 | | Giant Manufacturing Co., Ltd. | | | 1,413,932 | |
| | 207,000 | | Grand Ocean Retail Group, Ltd. | | | 361,599 | |
| | 99,000 | | King Slide Works Co., Ltd. | | | 1,260,984 | |
| | 940,000 | | King’s Town Bank | | | 973,823 | |
| | 11,000 | | LARGAN Precision Co., Ltd. | | | 823,419 | |
| | 142,000 | | Merida Industry Co., Ltd. | | | 958,780 | |
| | 117,000 | | PChome Online, Inc. | | | 1,256,110 | |
| | 107,000 | | Poya Co. | | | 807,327 | |
| | | | | | | 8,242,096 | |
| Thailand — 3.9% | | | | |
| | 133,700 | | Bumrungrad Hospital Public Co., Ltd. | | | 570,474 | |
| | 417,000 | | Intouch Holdings Public Co., Ltd. | | | 993,920 | |
| | 339,464 | | Major Cineplex Group Public Co., Ltd. | | | 284,769 | |
| | 622,900 | | Thaicom Public Co., Ltd. | | | 653,989 | |
| | | | | | | 2,503,152 | |
| Total Common Stocks (Cost $52,477,218) | | | 51,120,806 | |
| | | | | |
| Participatory Notes — 11.0% | | | | |
| | | | | |
| India — 11.0% | | | | |
| | 79,773 | | Aurobindo Pharma, Ltd. | | | 1,430,121 | |
| | 14,898 | | Credit Analysis & Research, Ltd. | | | 348,463 | |
| | 138,949 | | Exide Industries, Ltd. | | | 389,978 | |
| | 115,929 | | Glenmark Pharmaceuticals, Ltd. | | | 1,409,448 | |
| | 324,932 | | UPL, Ltd. | | | 1,777,509 | |
| | 144,613 | | Yes Bank, Ltd. | | | 1,749,189 | |
| Total Participatiory Notes (Cost $7,122,967) | | | 7,104,708 | |
| | | | | |
| Short-Term Investments — 9.6% | | | | |
| | | | | |
| Money Market Funds — 9.6% | | | | |
| | 6,253,144 | | DWS Cash Account Trust — Government | | | | |
| | | | & Agency Securities Portfolio, 0.03%# | | | 6,253,144 | |
| Total Short-Term Investments (Cost $6,253,144) | | | 6,253,144 | |
| Total Investments — 99.4% (Cost $65,853,329) | | | 64,478,658 | |
| Other Assets in Excess of Liabilities — 0.6% | | | 395,052 | |
| NET ASSETS — 100.0% | | $ | 64,873,710 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Brown Advisory Emerging Markets Small-Cap Fund
Schedule of Investments
December 31, 2014 (Unaudited)
| PORTFOLIO HOLDINGS | | |
| % of Net Assets | | |
| | | |
| China | 31.5% | |
| South Korea | 17.9% | |
| Taiwan | 12.7% | |
| India | 11.0% | |
| Money Market Funds | 9.6% | |
| Philippines | 5.1% | |
| Singapore | 4.9% | |
| Thailand | 3.9% | |
| Indonesa | 1.8% | |
| Malaysia | 1.0% | |
| Other Assets and Liabilities | 0.6% | |
| | 100.0% | |
| * | Non-Income Producing |
| # | Annualized seven-day yield as of December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Statements of Assets and Liabilities
December 31, 2014 (Unaudited)
| | | BROWN | | | BROWN | | | BROWN | | | BROWN | |
| | | ADVISORY | | | ADVISORY | | | ADVISORY | | | ADVISORY | |
| | | GROWTH | | | VALUE | | | FLEXIBLE | | | EQUITY | |
| | | EQUITY | | | EQUITY | | | EQUITY | | | INCOME | |
| | | FUND | | | FUND | | | FUND | | | FUND | |
| ASSETS | | | | | | | | | | | | |
| Investments: | | | | | | | | | | | | |
| Total investments, at cost | | $ | 1,893,238,726 | | | $ | 174,086,098 | | | $ | 178,509,754 | | | $ | 160,998,637 | |
| Net unrealized appreciation | | | 672,255,393 | | | | 40,486,155 | | | | 56,108,713 | | | | 45,813,319 | |
| Total investments, at market value | | | 2,565,494,119 | | | | 214,572,253 | | | | 234,618,467 | | | | 206,811,956 | |
| Cash | | | — | | | | — | | | | 53,101 | | | | — | |
| Receivables: | | | | | | | | | | | | | | | | |
| Investment securities sold | | | 2,870,015 | | | | 6,784,787 | | | | — | | | | — | |
| Fund shares sold | | | 4,484,674 | | | | 391,905 | | | | 987,865 | | | | 352,445 | |
| Interest and dividends | | | 1,733,597 | | | | 322,861 | | | | 242,680 | | | | 500,888 | |
| Prepaid expenses and other assets | | | 78,405 | | | | 44,100 | | | | 52,698 | | | | 45,907 | |
| Total Assets | | | 2,574,660,810 | | | | 222,115,906 | | | | 235,954,811 | | | | 207,711,196 | |
| LIABILITIES | | | | | | | | | | | | | | | | |
| Payables: | | | | | | | | | | | | | | | | |
| Investment securities purchased | | | 4,484,260 | | | | 467,468 | | | | — | | | | — | |
| Fund shares redeemed | | | 2,276,263 | | | | 7,987 | | | | 12,476 | | | | — | |
| Accrued Liabilities: | | | | | | | | | | | | | | | | |
| Investment advisory fees | | | 1,323,630 | | | | 116,262 | | | | 116,924 | | | | 106,266 | |
| Administration, accounting, and transfer agent fees | | | 275,552 | | | | 25,134 | | | | 24,545 | | | | 21,301 | |
| Custodian fees | | | 14,920 | | | | 1,562 | | | | 1,943 | | | | 1,159 | |
| Service fees | | | 298,063 | | | | 29,059 | | | | 29,216 | | | | 24,233 | |
| Business management fees | | | 110,302 | | | | 9,689 | | | | 9,744 | | | | 8,856 | |
| Distribution fees | | | 29,766 | | | | 962 | | | | 7,794 | | | | 1,989 | |
| Other liabilities | | | 83,375 | | | | 20,415 | | | | 18,466 | | | | 19,103 | |
| Total Liabilities | | | 8,896,131 | | | | 678,538 | | | | 221,108 | | | | 182,907 | |
| NET ASSETS | | $ | 2,565,764,679 | | | $ | 221,437,368 | | | $ | 235,733,703 | | | $ | 207,528,289 | |
| COMPONENTS OF NET ASSETS | | | | | | | | | | | | | | | | |
| Paid-in capital | | $ | 1,868,219,298 | | | $ | 179,428,975 | | | $ | 181,572,917 | | | $ | 160,379,572 | |
| Undistributed (Accumulated) net investment income (loss) | | | (1,414,613 | ) | | | 455,260 | | | | 4,238 | | | | 68,774 | |
| Accumulated net realized gain (loss) | | | 26,704,601 | | | | 1,067,296 | | | | (1,952,163 | ) | | | 1,266,853 | |
| Unrealized appreciation on investments | | | 672,255,393 | | | | 40,486,155 | | | | 56,108,713 | | | | 45,813,319 | |
| Unrealized depreciation – foreign receivables | | | — | | | | (318 | ) | | | (2 | ) | | | (229 | ) |
| NET ASSETS | | $ | 2,565,764,679 | | | $ | 221,437,368 | | | $ | 235,733,703 | | | $ | 207,528,289 | |
| COMPUTATION OF NET ASSET VALUE | | | | | | | | | | | | | | | | |
| Institutional Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | 252,850,392 | | | $ | 53,387 | | | $ | 119,479 | | | $ | 18,361,496 | |
| Shares outstanding (unlimited shares authorized) | | | 13,043,460 | | | | 3,072 | | | | 7,470 | | | | 1,365,741 | |
| Net asset value per share | | $ | 19.39 | | | $ | 17.38 | | | $ | 15.99 | | | $ | 13.44 | |
| Investor Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | 2,264,878,956 | | | $ | 219,928,999 | | | $ | 222,249,868 | | | $ | 185,923,434 | |
| Shares outstanding (unlimited shares authorized) | | | 117,154,170 | | | | 12,649,613 | | | | 13,912,566 | | | | 13,837,733 | |
| Net asset value per share | | $ | 19.33 | | | $ | 17.39 | | | $ | 15.97 | | | $ | 13.44 | |
| Advisor Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | 48,035,331 | | | $ | 1,454,982 | | | $ | 13,364,356 | | | $ | 3,243,359 | |
| Shares outstanding (unlimited shares authorized) | | | 2,565,236 | | | | 83,088 | | | | 836,249 | | | | 241,727 | |
| Net asset value per share | | $ | 18.73 | | | $ | 17.51 | | | $ | 15.98 | | | $ | 13.42 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Statements of Assets and Liabilities
December 31, 2014 (Unaudited)
| | | BROWN | | | BROWN | | | BROWN | | | | |
| | | ADVISORY | | | ADVISORY | | | ADVISORY | | | BROWN | |
| | | SUSTAINABLE | | | SMALL-CAP | | | SMALL-CAP | | | ADVISORY | |
| | | GROWTH | | | GROWTH | | | FUNDAMENTAL | | | OPPORTUNITY | |
| | | FUND | | | FUND | | | VALUE FUND | | | FUND | |
| ASSETS | | | | | | | | | | | | |
| Investments: | | | | | | | | | | | | |
| Total investments, at cost | | $ | 148,345,305 | | | $ | 178,610,868 | | | $ | 530,056,580 | | | $ | 9,224,832 | |
| Net unrealized appreciation | | | 59,940,265 | | | | 88,568,005 | | | | 142,488,412 | | | | 2,920,305 | |
| Total investments, at market value | | | 208,285,570 | | | | 267,178,873 | | | | 672,544,992 | | | | 12,145,137 | |
| Cash | | | 13,997 | | | | — | | | | — | | | | 240 | |
| Receivables: | | | | | | | | | | | | | | | | |
| Investment securities sold | | | — | | | | — | | | | 89,268 | | | | — | |
| Fund shares sold | | | 86,871 | | | | 274,147 | | | | 2,824,634 | | | | — | |
| Interest and dividends | | | 87,997 | | | | 116,405 | | | | 1,046,586 | | | | 6,831 | |
| Prepaid expenses and other assets | | | 35,364 | | | | 40,766 | | | | 56,076 | | | | 15,676 | |
| Total Assets | | | 208,509,799 | | | | 267,610,191 | | | | 676,561,556 | | | | 12,167,884 | |
| LIABILITIES | | | | | | | | | | | | | | | | |
| Payables: | | | | | | | | | | | | | | | | |
| Investment securities purchased | | | — | | | | 669,220 | | | | — | | | | 57,884 | |
| Fund shares redeemed | | | 183,452 | | | | 100,062 | | | | 164,318 | | | | 5,856 | |
| Accrued Liabilities: | | | | | | | | | | | | | | | | |
| Investment advisory fees | | | 107,338 | | | | 198,071 | | | | 479,553 | | | | 8,885 | |
| Administration, accounting, and transfer agent fees | | | 23,159 | | | | 29,570 | | | | 69,599 | | | | 1,927 | |
| Custodian fees | | | 1,110 | | | | 2,069 | | | | 4,437 | | | | 303 | |
| Service fees | | | 22,740 | | | | 33,874 | | | | 80,388 | | | | 1,523 | |
| Business management fees | | | 8,945 | | | | 11,651 | | | | 28,209 | | | | 508 | |
| Distribution fees | | | 81,002 | | | | 3,564 | | | | 20,238 | | | | — | |
| Other liabilities | | | 19,314 | | | | 22,001 | | | | 36,384 | | | | 9,805 | |
| Total Liabilities | | | 447,060 | | | | 1,070,082 | | | | 883,126 | | | | 86,691 | |
| NET ASSETS | | $ | 208,062,739 | | | $ | 266,540,109 | | | $ | 675,678,430 | | | $ | 12,081,193 | |
| COMPONENTS OF NET ASSETS | | | | | | | | | | | | | | | | |
| Paid-in capital | | $ | 156,280,521 | | | $ | 170,850,285 | | | $ | 531,479,141 | | | $ | 14,867,994 | |
| Accumulated net investment loss | | | (685,235 | ) | | | (1,409,832 | ) | | | (2,071,762 | ) | | | (68,761 | ) |
| Accumulated net realized gain (loss) | | | (7,472,812 | ) | | | 8,531,651 | | | | 3,782,639 | | | | (5,638,345 | ) |
| Unrealized appreciation on investments | | | 59,940,265 | | | | 88,568,005 | | | | 142,488,412 | | | | 2,920,305 | |
| NET ASSETS | | $ | 208,062,739 | | | $ | 266,540,109 | | | $ | 675,678,430 | | | $ | 12,081,193 | |
| COMPUTATION OF NET ASSET VALUE | | | | | | | | | | | | | | | | |
| Institutional Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | 31,841,935 | | | $ | 8,501,479 | | | $ | 34,340,149 | | | $ | — | |
| Shares outstanding (unlimited shares authorized) | | | 2,179,807 | | | | 258,942 | | | | 1,454,929 | | | | — | |
| Net asset value per share | | $ | 14.61 | | | $ | 32.83 | | | $ | 23.60 | | | $ | — | |
| Investor Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | 47,142,043 | | | $ | 252,193,271 | | | $ | 602,776,795 | | | $ | 12,081,193 | |
| Shares outstanding (unlimited shares authorized) | | | 3,240,824 | | | | 15,274,896 | | | | 25,542,207 | | | | 504,993 | |
| Net asset value per share | | $ | 14.55 | | | $ | 16.51 | | | $ | 23.60 | | | $ | 23.92 | |
| Advisor Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | 129,078,761 | | | $ | 5,845,359 | | | $ | 38,561,486 | | | $ | — | |
| Shares outstanding (unlimited shares authorized) | | | 8,928,174 | | | | 367,699 | | | | 1,639,303 | | | | — | |
| Net asset value per share | | $ | 14.46 | | | $ | 15.90 | | | $ | 23.52 | | | $ | — | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Statements of Assets and Liabilities
December 31, 2014 (Unaudited)
| | | BROWN | | | BROWN | | | BROWN | | | BROWN | |
| | | ADVISORY | | | ADVISORY | | | ADVISORY | | | ADVISORY | |
| | | MULTI- | | | INTERMEDIATE | | | TOTAL | | | STRATEGIC | |
| | | STRATEGY | | | INCOME | | | RETURN | | | BOND | |
| | | FUND | | | FUND | | | FUND | | | FUND | |
| ASSETS | | | | | | | | | | | | |
| Investments: | | | | | | | | | | | | |
| Total investments – unaffiliated, at cost | | $ | 18,688 | | | $ | 128,383,673 | | | $ | 72,780,617 | | | $ | 39,074,093 | |
| Total investments – affiliated, at cost (Note 3) | | | 445,078 | | | | 31,354,566 | | | | — | | | | — | |
| Total cost of investments | | | 463,766 | | | | 159,738,239 | | | | 72,780,617 | | | | 39,074,093 | |
| Net unrealized appreciation – unaffiliated | | | — | | | | 976,353 | | | | 200,673 | | | | 48,440 | |
| Net unrealized depreciation – affiliated (Note 3) | | | (8,377 | ) | | | (211,548 | ) | | | — | | | | — | |
| Total unrealized appreciation (depreciation) | | | (8,377 | ) | | | 764,805 | | | | 200,673 | | | | 48,440 | |
| Total investments, at market value | | | 455,389 | | | | 160,503,044 | | | | 72,981,290 | | | | 39,122,533 | |
| Deposit at broker – credit default swaps (Note 6) | | | — | | | | — | | | | — | | | | 112,307 | |
| Deposit at broker – futures contracts (Note 8) | | | — | | | | — | | | | 70,370 | | | | 241,480 | |
| Gross unrealized appreciation – credit default swaps (Note 6) | | | — | | | | — | | | | — | | | | — | |
| Receivables: | | | | | | | | | | | | | | | | |
| Investment securities sold | | | — | | | | 1,634,623 | | | | 3,181,028 | | | | 429,522 | |
| Fund shares sold | | | — | | | | 73,175 | | | | 44,600 | | | | 32,429 | |
| Interest and dividends | | | — | | | | 686,545 | | | | 427,571 | | | | 290,953 | |
| Expense Reimbursement due from Adviser | | | 4,228 | | | | — | | | | — | | | | — | |
| Prepaid expenses and other assets | | | 20,532 | | | | 31,922 | | | | 31,614 | | | | 34,830 | |
| Total Assets | | | 480,149 | | | | 162,929,309 | | | | 76,736,473 | | | | 40,264,054 | |
| LIABILITIES | | | | | | | | | | | | | | | | |
| Gross unrealized depreciation – credit default swaps (Note 6) | | | — | | | | — | | | | — | | | | 5,813 | |
| Variation margin – futures contracts (Note 8) | | | — | | | | — | | | | 15,469 | | | | 44,844 | |
| Payables: | | | | | | | | | | | | | | | | |
| Investment securities purchased | | | — | | | | 10,051 | | | | 15,972,381 | | | | — | |
| Fund shares redeemed | | | — | | | | 297,198 | | | | — | | | | 1,056,525 | |
| Blue Sky Registration Fees | | | 23,138 | | | | — | | | | 34,863 | | | | — | |
| Accrued Liabilities: | | | | | | | | | | | | | | | | |
| Investment advisory fees, net | | | — | | | | 33,533 | | | | 14,427 | | | | 10,797 | |
| Administration, accounting, and transfer agent fees | | | 144 | | | | 23,925 | | | | 3,345 | | | | 3,807 | |
| Custodian fees | | | 304 | | | | 1,885 | | | | 580 | | | | 238 | |
| Service fees | | | — | | | | 6,921 | | | | 2,267 | | | | 1,498 | |
| Business management fees | | | 19 | | | | 6,921 | | | | 2,442 | | | | 1,498 | |
| Distribution fees | | | — | | | | 6,665 | | | | — | | | | 9,342 | |
| Other liabilities | | | 4,279 | | | | 20,338 | | | | 5,746 | | | | 11,025 | |
| Total Liabilities | | | 27,884 | | | | 407,437 | | | | 16,051,520 | | | | 1,145,387 | |
| NET ASSETS | | $ | 452,265 | | | $ | 162,521,872 | | | $ | 60,684,953 | | | $ | 39,118,667 | |
| COMPONENTS OF NET ASSETS | | | | | | | | | | | | | | | | |
| Paid-in capital | | $ | 456,024 | | | $ | 161,825,678 | | | $ | 60,389,711 | | | $ | 39,306,120 | |
| Accumulated net investment loss | | | (590 | ) | | | (530,920 | ) | | | (3,141 | ) | | | (274,690 | ) |
| Accumulated net realized gain | | | 5,208 | | | | 462,309 | | | | 57,694 | | | | 57,152 | |
| Unrealized appreciation (depreciation) on investments | | | (8,377 | ) | | | 764,805 | | | | 200,673 | | | | 48,440 | |
| Unrealized appreciation (depreciation) – futures contracts (Note 8) | | | — | | | | — | | | | 40,016 | | | | (12,542 | ) |
| Unrealized depreciation – credit default swaps (Note 6) | | | — | | | | — | | | | — | | | | (5,813 | ) |
| NET ASSETS | | $ | 452,265 | | | $ | 162,521,872 | | | $ | 60,684,953 | | | $ | 39,118,667 | |
| COMPUTATION OF NET ASSET VALUE | | | | | | | | | | | | | | | | |
| Institutional Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | 452,265 | | | $ | — | | | $ | 4,344,161 | | | $ | — | |
| Shares outstanding (unlimited shares authorized) | | | 45,191 | | | | — | | | | 432,067 | | | | — | |
| Net asset value per share | | $ | 10.01 | | | $ | — | | | $ | 10.05 | | | $ | — | |
| Investor Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | — | | | $ | 152,350,865 | | | $ | 56,340,792 | | | $ | 35,010,942 | |
| Shares outstanding (unlimited shares authorized) | | | — | | | | 14,237,507 | | | | 5,604,139 | | | | 3,489,409 | |
| Net asset value per share | | $ | — | | | $ | 10.70 | | | $ | 10.05 | | | $ | 10.03 | |
| Advisor Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | — | | | $ | 10,171,007 | | | $ | — | | | $ | 4,107,725 | |
| Shares outstanding (unlimited shares authorized) | | | — | | | | 969,391 | | | | — | | | | 409,406 | |
| Net asset value per share | | $ | — | | | $ | 10.49 | | | $ | — | | | $ | 10.03 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Statements of Assets and Liabilities
December 31, 2014 (Unaudited)
| | | | | | | | | | | | BROWN | |
| | | BROWN | | | BROWN | | | BROWN | | | ADVISORY – | |
| | | ADVISORY | | | ADVISORY | | | ADVISORY | | | WMC | |
| | | MARYLAND | | | TAX EXEMPT | | | MORTGAGE | | | STRATEGIC | |
| | | BOND | | | BOND | | | SECURITIES | | | EUROPEAN | |
| | | FUND | | | FUND | | | FUND | | | EQUITY FUND | |
| ASSETS | | | | | | | | | | | | |
| Investments: | | | | | | | | | | | | |
| Total investments, at cost | | $ | 204,122,522 | | | $ | 225,854,537 | | | $ | 207,766,294 | | | $ | 200,497,465 | |
| Net unrealized appreciation (depreciation) | | | 3,934,004 | | | | 1,554,859 | | | | 516,980 | | | | (1,292,450 | ) |
| Total investments, at market value | | | 208,056,526 | | | | 227,409,396 | | | | 208,283,274 | | | | 199,205,015 | |
| Foreign currency | | | — | | | | — | | | | — | | | | 3 | |
| Receivables: | | | | | | | | | | | | | | | | |
| Investment securities sold | | | — | | | | — | | | | 11,583,601 | | | | — | |
| Fund shares sold | | | 1,104,436 | | | | 1,692,750 | | | | 31 | | | | 1,796,602 | |
| Interest and dividends | | | 2,740,155 | | | | 2,241,402 | | | | 916,552 | | | | 223,145 | |
| Prepaid expenses and other assets | | | 8,145 | | | | 21,802 | | | | 34,674 | | | | 51,570 | |
| Total Assets | | | 211,909,262 | | | | 231,365,350 | | | | 220,818,132 | | | | 201,276,335 | |
| LIABILITIES | | | | | | | | | | | | | | | | |
| Securities sold short, at market value | | | | | | | | | | | | | | | | |
| (proceeds of $0, $0, $11,566,875 and $0, respectively) | | | — | | | | — | | | | 11,591,661 | | | | — | |
| Payables: | | | | | | | | | | | | | | | | |
| Investment securities purchased | | | — | | | | 6,361,204 | | | | 1,346,811 | | | | 170,148 | |
| Fund shares redeemed | | | 2,574 | | | | 48,003 | | | | — | | | | 671,890 | |
| Distributions | | | 256,052 | | | | 238,756 | | | | — | | | | — | |
| Accrued Liabilities: | | | | | | | | | | | | | | | | |
| Investment advisory fees | | | 53,083 | | | | 54,573 | | | | 52,712 | | | | 155,456 | |
| Administration, accounting, and transfer agent fees | | | 32,308 | | | | 30,139 | | | | 33,418 | | | | 24,227 | |
| Custodian fees | | | 1,234 | | | | 1,218 | | | | 2,390 | | | | 23,994 | |
| Service fees | | | 8,847 | | | | 9,096 | | | | 1,954 | | | | 2,234 | |
| Business management fees | | | 8,847 | | | | 9,096 | | | | 8,785 | | | | 8,636 | |
| Distribution fees | | | — | | | | — | | | | — | | | | 237 | |
| Other liabilities | | | 21,049 | | | | 17,933 | | | | 37,205 | | | | 23,914 | |
| Total Liabilities | | | 383,994 | | | | 6,770,018 | | | | 13,074,936 | | | | 1,080,736 | |
| NET ASSETS | | $ | 211,525,268 | | | $ | 224,595,332 | | | $ | 207,743,196 | | | $ | 200,195,599 | |
| COMPONENTS OF NET ASSETS | | | | | | | | | | | | | | | | |
| Paid-in capital | | $ | 207,332,223 | | | $ | 223,382,036 | | | $ | 207,136,569 | | | $ | 211,216,483 | |
| Accumulated net investment loss | | | (564 | ) | | | (123 | ) | | | (218,714 | ) | | | (165,245 | ) |
| Accumulated net realized gain (loss) | | | 259,605 | | | | (341,440 | ) | | | 333,147 | | | | (9,538,662 | ) |
| Unrealized appreciation (depreciation) on investments | | | 3,934,004 | | | | 1,554,859 | | | | 516,980 | | | | (1,292,450 | ) |
| Unrealized depreciation on securities sold short | | | — | | | | — | | | | (24,786 | ) | | | — | |
| Unrealized depreciation – foreign receivables | | | — | | | | — | | | | — | | | | (24,527 | ) |
| NET ASSETS | | $ | 211,525,268 | | | $ | 224,595,332 | | | $ | 207,743,196 | | | $ | 200,195,599 | |
| COMPUTATION OF NET ASSET VALUE | | | | | | | | | | | | | | | | |
| Institutional Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | — | | | $ | — | | | $ | 161,181,825 | | | $ | 182,703,446 | |
| Shares outstanding (unlimited shares authorized) | | | — | | | | — | | | | 16,008,176 | | | | 19,036,036 | |
| Net asset value per share | | $ | — | | | $ | — | | | $ | 10.07 | | | $ | 9.60 | |
| Investor Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | 211,525,268 | | | $ | 224,595,332 | | | $ | 46,561,371 | | | $ | 17,109,237 | |
| Shares outstanding (unlimited shares authorized) | | | 19,613,442 | | | | 22,263,959 | | | | 4,625,844 | | | | 1,783,280 | |
| Net asset value per share | | $ | 10.78 | | | $ | 10.09 | | | $ | 10.07 | | | $ | 9.59 | |
| Advisor Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | — | | | $ | — | | | $ | — | | | $ | 382,916 | |
| Shares outstanding (unlimited shares authorized) | | | — | | | | — | | | | — | | | | 39,953 | |
| Net asset value per share | | $ | — | | | $ | — | | | $ | — | | | $ | 9.58 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Statements of Assets and Liabilities
December 31, 2014 (Unaudited)
| | BROWN ADVISORY – | | | | | | | | |
| | WMC JAPAN ALPHA | | BROWN ADVISORY – | | BROWN ADVISORY |
| | OPPORTUNITIES | | SOMERSET EMERGING | | EMERGING MARKETS |
| | FUND | | | MARKETS FUND | | SMALL-CAP FUND |
| ASSETS | | | | | | | | | | | |
| Investments: | | | | | | | | | | | |
| Total investments, at cost | | $ | 1,251,086,998 | | | | $ | 251,308,838 | | | | $ | 65,853,329 | |
| Net unrealized depreciation | | | (22,201,781 | ) | | | | (1,744,905 | ) | | | | (1,374,671 | ) |
| Total investments, at market value | | | 1,228,885,217 | | | | | 249,563,933 | | | | | 64,478,658 | |
| Foreign currency | | | 13,951 | | | | | 103,800 | | | | | — | |
| Deposit at broker – futures contracts (Note 8) | | | 3,677,317 | | | | | — | | | | | — | |
| Variation margin – futures contracts (Note 8) | | | 4,154 | | | | | — | | | | | — | |
| Gross unrealized appreciation – | | | | | | | | | | | | | | |
| forward foreign currency contracts (Note 7) | | | — | | | | | — | | | | | — | |
| Receivables: | | | | | | | | | | | | | | |
| Investment securities sold | | | 3,100,411 | | | | | — | | | | | 202,648 | |
| Fund shares sold | | | 2,558,943 | | | | | 391,518 | | | | | 463,750 | |
| Interest and dividends | | | 1,741,879 | | | | | 738,821 | | | | | 58,703 | |
| Prepaid expenses and other assets | | | 45,954 | | | | | 54,798 | | | | | 32,664 | |
| Total Assets | | | 1,240,027,826 | | | | | 250,852,870 | | | | | 65,236,423 | |
| LIABILITIES | | | | | | | | | | | | | | |
| Gross unrealized depreciation – | | | | | | | | | | | | | | |
| forward foreign currency contracts (Note 7) | | | 14,999,607 | | | | | — | | | | | — | |
| Payables: | | | | | | | | | | | | | | |
| Investment securities purchased | | | 4,666,766 | | | | | 133,058 | | | | | 238,265 | |
| Fund shares redeemed | | | 7,918,602 | | | | | 4,342,190 | | | | | — | |
| Blue Sky registration fees | | | — | | | | | — | | | | | 34,863 | |
| Accrued Liabilities: | | | | | | | | | | | | | | |
| Investment advisory fees | | | 1,078,951 | | | | | 192,649 | | | | | 66,806 | |
| Administration, accounting, and transfer agent fees | | | 138,858 | | | | | 29,905 | | | | | 3,591 | |
| Custodian fees | | | 42,337 | | | | | 43,453 | | | | | 13,227 | |
| Service fees | | | 1,474 | | | | | 4,947 | | | | | 307 | |
| Business management fees | | | 53,948 | | | | | 10,703 | | | | | 2,672 | |
| Distribution fees | | | 68 | | | | | 330 | | | | | — | |
| Other liabilities | | | 35,370 | | | | | 18,424 | | | | | 2,982 | |
| Total Liabilities | | | 28,935,981 | | | | | 4,775,659 | | | | | 362,713 | |
| NET ASSETS | | $ | 1,211,091,845 | | | | $ | 246,077,211 | | | | $ | 64,873,710 | |
| COMPONENTS OF NET ASSETS | | | | | | | | | | | | | | |
| Paid-in capital | | $ | 1,118,778,455 | | | | $ | 257,669,914 | | | | $ | 66,291,348 | |
| Accumulated net investment loss | | | (56,577,597 | ) | | | | (905,362 | ) | | | | (36,768 | ) |
| Accumulated net realized gain (loss) | | | 188,117,598 | | | | | (8,912,206 | ) | | | | (5,951 | ) |
| Unrealized depreciation on investments | | | (22,201,781 | ) | | | | (1,744,905 | ) | | | | (1,374,671 | ) |
| Unrealized depreciation – futures contracts (Note 8) | | | (1,909,538 | ) | | | | — | | | | | — | |
| Unrealized depreciation – forward foreign currency contracts (Note 7) | | | (14,999,607 | ) | | | | — | | | | | — | |
| Unrealized depreciation – foreign receivables | | | (115,685 | ) | | | | (30,230 | ) | | | | (248 | ) |
| NET ASSETS | | $ | 1,211,091,845 | | | | $ | 246,077,211 | | | | $ | 64,873,710 | |
| COMPUTATION OF NET ASSET VALUE | | | | | | | | | | | | | | |
| Institutional Shares: | | | | | | | | | | | | | | |
| Net assets | | $ | 1,199,391,043 | | | | $ | 206,806,325 | | | | $ | 62,113,794 | |
| Shares outstanding (unlimited shares authorized) | | | 111,233,461 | | | | | 21,779,877 | | | | | 6,355,240 | |
| Net asset value per share | | $ | 10.78 | | | | $ | 9.50 | | | | $ | 9.77 | |
| Investor Shares: | | | | | | | | | | | | | | |
| Net assets | | $ | 11,581,717 | | | | $ | 38,741,123 | | | | $ | 2,759,916 | |
| Shares outstanding (unlimited shares authorized) | | | 1,074,531 | | | | | 4,083,467 | | | | | 282,435 | |
| Net asset value per share | | $ | 10.78 | | | | $ | 9.49 | | | | $ | 9.77 | |
| Advisor Shares: | | | | | | | | | | | | | | |
| Net assets | | $ | 119,085 | | | | $ | 529,763 | | | | $ | — | |
| Shares outstanding (unlimited shares authorized) | | | 11,058 | | | | | 55,907 | | | | | — | |
| Net asset value per share | | $ | 10.77 | | | | $ | 9.48 | | | | $ | — | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Statements of Operations
For the Six Months Ended December 31, 2014 (Unaudited)
| | | BROWN | | | BROWN | | | BROWN | | | BROWN | |
| | | ADVISORY | | | ADVISORY | | | ADVISORY | | | ADVISORY | |
| | | GROWTH | | | VALUE | | | FLEXIBLE | | | EQUITY | |
| | | EQUITY | | | EQUITY | | | EQUITY | | | INCOME | |
| | | FUND | | | FUND | | | FUND | | | FUND | |
| INVESTMENT INCOME | | | | | | | | | | | | |
| Dividend income | | $ | 10,216,799 | | | $ | 2,691,930 | | | $ | 1,561,980 | | | $ | 3,141,727 | |
| Less: foreign taxes withheld | | | (77,886 | ) | | | (53,327 | ) | | | (17,009 | ) | | | (41,617 | ) |
| Interest Income | | | 7,339 | | | | 1,113 | | | | 2,165 | | | | 1,670 | |
| Total investment income | | | 10,146,252 | | | | 2,639,716 | | | | 1,547,136 | | | | 3,101,780 | |
| EXPENSES | | | | | | | | | | | | | | | | |
| Investment advisory fees | | | 8,067,877 | | | | 719,529 | | | | 615,211 | | | | 609,660 | |
| Service fees | | | 1,832,024 | | | | 179,865 | | | | 152,937 | | | | 138,953 | |
| Business management fees | | | 672,323 | | | | 59,961 | | | | 51,267 | | | | 50,805 | |
| Administration, accounting, and transfer agent fees | | | 523,475 | | | | 47,616 | | | | 42,903 | | | | 39,792 | |
| Miscellaneous expenses | | | 115,656 | | | | 11,102 | | | | 9,339 | | | | 10,105 | |
| Registration fees | | | 56,026 | | | | 21,841 | | | | 30,471 | | | | 22,040 | |
| Professional fees | | | 101,367 | | | | 18,207 | | | | 16,738 | | | | 16,847 | |
| Trustee fees and expenses | | | 64,552 | | | | 5,808 | | | | 4,800 | | | | 4,818 | |
| Distribution fees | | | 60,193 | | | | 1,983 | | | | 15,955 | | | | 3,976 | |
| Custodian fees | | | 42,053 | | | | 4,136 | | | | 6,243 | | | | 3,488 | |
| Insurance fees | | | 25,319 | | | | 2,258 | | | | 1,672 | | | | 1,864 | |
| Total Expenses | | | 11,560,865 | | | | 1,072,306 | | | | 947,536 | | | | 902,348 | |
| NET INVESTMENT INCOME (LOSS) | | | (1,414,613 | ) | | | 1,567,410 | | | | 599,600 | | | | 2,199,432 | |
| NET REALIZED AND UNREALIZED GAIN (LOSS) | | | | | | | | | | | | | | | | |
| Net realized gain on investments | | | 74,110,815 | | | | 6,922,614 | | | | 1,404,863 | | | | 2,592,634 | |
| Net change in unrealized appreciation (depreciation) on: | | | | | | | | | | | | | | | | |
| Investments | | | 45,273,970 | | | | (15,680,852 | ) | | | 15,271,617 | | | | 2,924,029 | |
| Foreign receivables | | | — | | | | (318 | ) | | | (2 | ) | | | (48 | ) |
| Net change in unrealized appreciation (depreciation) | | | 45,273,970 | | | | (15,681,170 | ) | | | 15,271,615 | | | | 2,923,981 | |
| NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 119,384,785 | | | | (8,758,556 | ) | | | 16,676,478 | | | | 5,516,615 | |
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | $ | 117,970,172 | | | $ | (7,191,146 | ) | | $ | 17,276,078 | | | $ | 7,716,047 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Statements of Operations
For the Six Months Ended December 31, 2014 (Unaudited)
| | | BROWN | | | BROWN | | | BROWN | | | | |
| | | ADVISORY | | | ADVISORY | | | ADVISORY | | | BROWN | |
| | | SUSTAINABLE | | | SMALL-CAP | | | SMALL-CAP | | | ADVISORY | |
| | | GROWTH | | | GROWTH | | | FUNDAMENTAL | | | OPPORTUNITY | |
| | | FUND | | | FUND | | | VALUE FUND | | | FUND | |
| INVESTMENT INCOME | | | | | | | | | | | | |
| Dividend income | | $ | 705,555 | | | $ | 640,355 | | | $ | 4,443,942 | | | $ | 53,050 | |
| Less: foreign taxes withheld | | | (7,229 | ) | | | — | | | | (2,225 | ) | | | (360 | ) |
| Interest Income | | | 966 | | | | 1,710 | | | | 3,789 | | | | 45 | |
| Total investment income | | | 699,292 | | | | 642,065 | | | | 4,445,506 | | | | 52,735 | |
| EXPENSES | | | | | | | | | | | | | | | | |
| Investment advisory fees | | | 628,601 | | | | 1,209,487 | | | | 2,686,539 | | | | 49,506 | |
| Distribution fees | | | 163,501 | | | | 7,893 | | | | 35,947 | | | | — | |
| Service fees | | | 133,701 | | | | 207,137 | | | | 454,499 | | | | 8,736 | |
| Registration fees | | | 22,617 | | | | 23,834 | | | | 34,345 | | | | 10,621 | |
| Professional fees | | | 17,016 | | | | 19,557 | | | | 30,613 | | | | 9,404 | |
| Business management fees | | | 52,383 | | | | 71,146 | | | | 158,032 | | | | 2,912 | |
| Administration, accounting, and transfer agent fees | | | 43,621 | | | | 55,897 | | | | 124,988 | | | | 3,905 | |
| Miscellaneous expenses | | | 14,346 | | | | 15,843 | | | | 28,351 | | | | 1,653 | |
| Custodian fees | | | 3,457 | | | | 6,009 | | | | 10,896 | | | | 611 | |
| Trustee fees and expenses | | | 5,962 | | | | 6,582 | | | | 14,616 | | | | 276 | |
| Insurance fees | | | 1,941 | | | | 2,735 | | | | 5,536 | | | | 108 | |
| Total Expenses | | | 1,087,146 | | | | 1,626,120 | | | | 3,584,362 | | | | 87,732 | |
| Expenses waived by adviser – expense cap (Note 3) | | | — | | | | — | | | | — | | | | (369 | ) |
| Net Expenses | | | 1,087,146 | | | | 1,626,120 | | | | 3,584,362 | | | | 87,363 | |
| NET INVESTMENT INCOME (LOSS) | | | (387,854 | ) | | | (984,055 | ) | | | 861,144 | | | | (34,628 | ) |
| NET REALIZED AND UNREALIZED GAIN (LOSS) | | | | | | | | | | | | | | | | |
| Net realized gain on investments | | | 9,003,510 | | | | 20,948,008 | | | | 25,436,187 | | | | 762,222 | |
| Net change in unrealized appreciation (depreciation) | | | 2,594,501 | | | | (11,590,229 | ) | | | (287,550 | ) | | | (269,156 | ) |
| NET REALIZED AND UNREALIZED GAIN | | | 11,598,011 | | | | 9,357,779 | | | | 25,148,637 | | | | 493,066 | |
| INCREASE IN NET ASSETS FROM OPERATIONS | | $ | 11,210,157 | | | $ | 8,373,724 | | | $ | 26,009,781 | | | $ | 458,438 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Statements of Operations
For the Six Months Ended December 31, 2014 (Unaudited)
| | | BROWN | | | BROWN | | | BROWN | | | BROWN | |
| | | ADVISORY | | | ADVISORY | | | ADVISORY | | | ADVISORY | |
| | | MULTI- | | | INTERMEDIATE | | | TOTAL | | | STRATEGIC | |
| | | STRATEGY | | | INCOME | | | RETURN | | | BOND | |
| | | FUND | | | FUND | | | FUND | | | FUND | |
| INVESTMENT INCOME | | | | | | | | | | | | |
| Dividend income – unaffiliated | | $ | — | | | $ | — | | | $ | — | | | $ | 190,725 | |
| Dividend income – affiliated (Note 3) | | | 2,630 | | | | 505,168 | | | | — | | | | — | |
| Less: foreign taxes withheld | | | — | | | | — | | | | — | | | | — | |
| Interest Income | | | 1 | | | | 1,762,472 | | | | 118,647 | | | | 19,232 | |
| Total investment income | | | 2,631 | | | | 2,267,640 | | | | 118,647 | | | | 209,957 | |
| EXPENSES | | | | | | | | | | | | | | | | |
| Investment advisory fees | | | 155 | | | | 304,214 | | | | 20,965 | | | | 68,979 | |
| Service fees | | | — | | | | 50,702 | | | | 3,154 | | | | 14,676 | |
| Business management fees | | | 26 | | | | 50,702 | | | | 3,494 | | | | 6,605 | |
| Administration, accounting, and transfer agent fees | | | 144 | | | | 45,991 | | | | 3,345 | | | | 6,616 | |
| Registration fees | | | 3,340 | | | | 18,745 | | | | 4,761 | | | | 12,713 | |
| Miscellaneous expenses | | | 1,445 | | | | 17,719 | | | | 1,446 | | | | 1,957 | |
| Professional fees | | | 2,802 | | | | 17,091 | | | | 3,194 | | | | 10,863 | |
| Distribution fees | | | — | | | | 14,112 | | | | — | | | | 24,544 | |
| Trustee fees and expenses | | | 42 | | | | 247 | | | | 403 | | | | 699 | |
| Custodian fees | | | 304 | | | | 4,801 | | | | 580 | | | | 810 | |
| Insurance fees | | | 21 | | | | 2,072 | | | | 82 | | | | 230 | |
| Total Expenses | | | 8,279 | | | | 526,396 | | | | 41,424 | | | | 148,692 | |
| Expenses waived by adviser – expense cap (Note 3) | | | (7,453 | ) | | | — | | | | (769 | ) | | | (2,774 | ) |
| Expenses waived by adviser – investments in affiliates (Note 3) | | | — | | | | (51,607 | ) | | | — | | | | — | |
| Net Expenses | | | 826 | | | | 474,789 | | | | 40,655 | | | | 145,918 | |
| NET INVESTMENT INCOME (LOSS) | | | 1,805 | | | | 1,792,851 | | | | 77,992 | | | | 64,039 | |
| NET REALIZED AND UNREALIZED GAIN (LOSS) | | | | | | | | | | | | | | | | |
| Net realized gain (loss) on: | | | | | | | | | | | | | | | | |
| Investments – unaffiliated | | | — | | | | 272,088 | | | | 66,809 | | | | 315,188 | |
| Investments – affiliated (Note 3) | | | (4 | ) | | | 34,566 | | | | — | | | | — | |
| Credit default swaps (Note 6) | | | — | | | | — | | | | — | | | | 64,567 | |
| Futures contracts (Note 8) | | | — | | | | — | | | | (9,115 | ) | | | (37,822 | ) |
| Capital gain distribution from other RICs – affiliated (Note 3) | | | 5,212 | | | | 238,536 | | | | — | | | | — | |
| Net realized gain (loss) | | | 5,208 | | | | 545,190 | | | | 57,694 | | | | 341,933 | |
| Net change in unrealized appreciation (depreciation) on: | | | | | | | | | | | | | | | | |
| Investments – unaffiliated | | | — | | | | (695,864 | ) | | | 200,673 | | | | (102,830 | ) |
| Investments – affiliated (Note 3) | | | (8,377 | ) | | | (220,415 | ) | | | — | | | | — | |
| Credit default swaps (Note 6) | | | — | | | | — | | | | — | | | | (146,689 | ) |
| Futures contracts (Note 8) | | | — | | | | — | | | | 40,016 | | | | (12,542 | ) |
| Net change in unrealized appreciation (depreciation) | | | (8,377 | ) | | | (916,279 | ) | | | 240,689 | | | | (262,061 | ) |
| NET REALIZED AND UNREALIZED GAIN (LOSS) | | | (3,169 | ) | | | (371,089 | ) | | | 298,383 | | | | 79,872 | |
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | $ | (1,364 | ) | | $ | 1,421,762 | | | $ | 376,375 | | | $ | 143,911 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Statements of Operations
For the Six Months Ended December 31, 2014 (Unaudited)
| | | BROWN | | | BROWN | | | BROWN | | | BROWN | |
| | | ADVISORY | | | ADVISORY | | | ADVISORY | | ADVISORY – WMC |
| | | MARYLAND | | | TAX EXEMPT | | | MORTGAGE | | | STRATEGIC | |
| | | BOND | | | BOND | | | SECURITIES | | | EUROPEAN | |
| | | FUND | | | FUND | | | FUND | | | EQUITY FUND | |
| INVESTMENT INCOME | | | | | | | | | | | | |
| Dividend income | | $ | — | | | $ | — | | | $ | — | | | $ | 1,248,867 | |
| Less: foreign taxes withheld | | | — | | | | — | | | | — | | | | (136,278 | ) |
| Interest Income | | | 2,304,035 | | | | 2,452,059 | | | | 3,382,445 | | | | 372 | |
| Total investment income | | | 2,304,035 | | | | 2,452,059 | | | | 3,382,445 | | | | 1,112,961 | |
| EXPENSES | | | | | | | | | | | | | | | | |
| Investment advisory fees | | | 316,454 | | | | 321,870 | | | | 317,342 | | | | 973,692 | |
| Distribution fees | | | — | | | | — | | | | — | | | | 409 | |
| Service fees | | | 52,742 | | | | 53,645 | | | | 12,042 | | | | 13,425 | |
| Registration fees | | | 4,356 | | | | 19,060 | | | | 23,606 | | | | 32,674 | |
| Professional fees | | | 16,125 | | | | 17,156 | | | | 15,376 | | | | 15,763 | |
| Business management fees | | | 52,742 | | | | 53,645 | | | | 52,890 | | | | 54,094 | |
| Administration, accounting, and transfer agent fees | | | 55,968 | | | | 54,719 | | | | 63,212 | | | | 46,492 | |
| Miscellaneous expenses | | | 10,765 | | | | 7,113 | | | | 8,927 | | | | 8,519 | |
| Custodian fees | | | 3,524 | | | | 3,853 | | | | 7,413 | | | | 79,846 | |
| Trustee fees and expenses | | | 6,489 | | | | 5,967 | | | | 5,020 | | | | 5,388 | |
| Insurance fees | | | 1,793 | | | | 1,912 | | | | 1,705 | | | | 1,826 | |
| Total Expenses | | | 520,958 | | | | 538,940 | | | | 507,533 | | | | 1,232,128 | |
| NET INVESTMENT INCOME (LOSS) | | | 1,783,077 | | | | 1,913,119 | | | | 2,874,912 | | | | (119,167 | ) |
| NET REALIZED AND UNREALIZED GAIN (LOSS) | | | | | | | | | | | | | | | | |
| Net realized gain (loss) on investments | | | 959,202 | | | | 122,055 | | | | 1,160,926 | | | | (9,219,675 | ) |
| Net change in unrealized appreciation (depreciation) on: | | | | | | | | | | | | | | | | |
| Investments | | | (593,344 | ) | | | 1,127,830 | | | | (1,029,170 | ) | | | (8,340,833 | ) |
| Foreign receivables | | | — | | | | — | | | | — | | | | (22,436 | ) |
| Securities sold short | | | — | | | | — | | | | (24,786 | ) | | | — | |
| Net change in unrealized appreciation (depreciation) | | | (593,344 | ) | | | 1,127,830 | | | | (1,053,956 | ) | | | (8,363,269 | ) |
| NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 365,858 | | | | 1,249,885 | | | | 106,970 | | | | (17,582,944 | ) |
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | $ | 2,148,935 | | | $ | 3,163,004 | | | $ | 2,981,882 | | | $ | (17,702,111 | ) |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Statements of Operations
For the Six Months Ended December 31, 2014 (Unaudited)
| | BROWN ADVISORY – | | | | | | | | |
| | WMC JAPAN ALPHA | | BROWN ADVISORY – | | BROWN ADVISORY |
| | OPPORTUNITIES | | SOMERSET EMERGING | | EMERGING MARKETS |
| | FUND | | MARKETS FUND | | SMALL-CAP FUND |
| INVESTMENT INCOME | | | | | | | | | | | |
| Dividend income | | $ | 8,960,005 | | | | $ | 2,390,294 | | | | $ | 84,190 | |
| Less: foreign taxes withheld | | | (893,271 | ) | | | | (312,377 | ) | | | | (11,551 | ) |
| Interest Income | | | 12,822 | | | | | 5,422 | | | | | 373 | |
| Total investment income | | | 8,079,556 | | | | | 2,083,339 | | | | | 73,012 | |
| EXPENSES | | | | | | | | | | | | | | |
| Investment advisory fees | | | 5,915,781 | | | | | 1,125,427 | | | | | 80,190 | |
| Custodian fees | | | 145,739 | | | | | 171,450 | | | | | 13,227 | |
| Administration, accounting, and transfer agent fees | | | 252,139 | | | | | 53,662 | | | | | 3,591 | |
| Business management fees | | | 295,789 | | | | | 62,524 | | | | | 3,208 | |
| Registration fees | | | 54,837 | | | | | 31,605 | | | | | 3,888 | |
| Professional fees | | | 49,312 | | | | | 18,260 | | | | | 2,741 | |
| Miscellaneous expenses | | | 54,338 | | | | | 11,199 | | | | | 1,913 | |
| Service fees | | | 5,757 | | | | | 26,530 | | | | | 344 | |
| Trustee fees and expenses | | | 28,796 | | | | | 5,923 | | | | | 478 | |
| Insurance fees | | | 9,693 | | | | | 2,139 | | | | | 200 | |
| Distribution fees | | | 119 | | | | | 660 | | | | | — | |
| Total Expenses | | | 6,812,300 | | | | | 1,509,379 | | | | | 109,780 | |
| NET INVESTMENT INCOME (LOSS) | | | 1,267,256 | | | | | 573,960 | | | | | (36,768 | ) |
| NET REALIZED AND UNREALIZED GAIN (LOSS) | | | | | | | | | | | | | | |
| Net realized gain (loss) on: | | | | | | | | | | | | | | |
| Investments | | | 7,172,642 | | | | | 298,340 | | | | | (5,951 | ) |
| Futures contracts (Note 8) | | | 9,349,505 | | | | | — | | | | | — | |
| Forward foreign currency contracts (Note 7) | | | 181,749,044 | | | | | — | | | | | — | |
| Net realized gain (loss) | | | 198,271,191 | | | | | 298,340 | | | | | (5,951 | ) |
| Net change in unrealized appreciation (depreciation) on: | | | | | | | | | | | | | | |
| Investments | | | (91,847,213 | ) | | | | (15,565,083 | ) | | | | (1,374,671 | ) |
| Futures contracts (Note 8) | | | (3,079,132 | ) | | | | — | | | | | — | |
| Forward foreign currency contracts (Note 7) | | | (8,544,298 | ) | | | | — | | | | | — | |
| Foreign receivables | | | (125,127 | ) | | | | (30,608 | ) | | | | (248 | ) |
| Net change in unrealized appreciation (depreciation) | | | (103,595,770 | ) | | | | (15,595,691 | ) | | | | (1,374,919 | ) |
| NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 94,675,421 | | | | | (15,297,351 | ) | | | | (1,380,870 | ) |
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | $ | 95,942,677 | | | | $ | (14,723,391 | ) | | | $ | (1,417,638 | ) |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Statements of Changes in Net Assets
| | | BROWN ADVISORY | | | BROWN ADVISORY | |
| | | GROWTH EQUITY FUND | | | VALUE EQUITY FUND | |
| | Six Months Ended | | | | Six Months Ended | | | |
| | | December 31, | | | Year Ended | | | December 31, | | | Year Ended | |
| | | 2014 | | | June 30, | | | 2014 | | | June 30, | |
| | | (Unaudited) | | | 2014 | | | (Unaudited) | | | 2014 | |
| OPERATIONS | | | | | | | | | | | | |
| Net investment income (loss) | | $ | (1,414,613 | ) | | $ | (3,026,706 | ) | | $ | 1,567,410 | | | $ | 2,447,782 | |
| Net realized gains | | | 74,110,815 | | | | 68,484,570 | | | | 6,922,614 | | | | 16,997,084 | |
| Net change in unrealized appreciation (depreciation) | | | 45,273,970 | | | | 338,915,369 | | | | (15,681,170 | ) | | | 31,519,020 | |
| Increase (Decrease) in Net Assets from Operations | | | 117,970,172 | | | | 404,373,233 | | | | (7,191,146 | ) | | | 50,963,886 | |
| DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | | | | | | | | | |
| Net investment income: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | — | | | | (835 | ) | | | (128 | ) |
| Investor Shares | | | — | | | | — | | | | (3,161,833 | ) | | | (1,812,794 | ) |
| Advisor Shares | | | — | | | | — | | | | (16,853 | ) | | | (10,159 | ) |
| Net realized gain: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (7,762,347 | ) | | | (946,386 | ) | | | (1,614 | ) | | | — | |
| Investor Shares | | | (69,561,008 | ) | | | (14,286,774 | ) | | | (6,779,612 | ) | | | — | |
| Advisor Shares | | | (1,508,212 | ) | | | (297,701 | ) | | | (45,355 | ) | | | — | |
| Total Distributions to Shareholders | | | (78,831,567 | ) | | | (15,530,861 | ) | | | (10,006,102 | ) | | | (1,823,081 | ) |
| CAPITAL SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 36,137,525 | | | | 114,398,361 | | | | 40,756 | | | | — | |
| Investor Shares | | | 127,568,731 | | | | 1,019,160,535 | | | | 13,179,724 | | | | 43,671,979 | |
| Advisor Shares | | | 2,336,040 | | | | 32,019,095 | | | | 9,412 | | | | 500 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 7,203,702 | | | | 912,323 | | | | 1,614 | | | | — | |
| Investor Shares | | | 62,066,856 | | | | 13,350,521 | | | | 4,242,468 | | | | 322,261 | |
| Advisor Shares | | | 1,473,353 | | | | 290,801 | | | | 51,115 | | | | 8,720 | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (28,484,870 | ) | | | (23,531,450 | ) | | | — | | | | — | |
| Investor Shares | | | (456,036,118 | ) | | | (547,273,104 | ) | | | (22,077,418 | ) | | | (11,853,550 | ) |
| Advisor Shares | | | (4,935,778 | ) | | | (10,321,727 | ) | | | (128,738 | ) | | | (401,578 | ) |
| Redemption fees: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 37 | | | | 154 | | | | — | | | | — | |
| Investor Shares | | | 999 | | | | 4,850 | | | | — | | | | 193 | |
| Advisor Shares | | | 43 | | | | 2 | | | | — | | | | — | |
| Increase (Decrease) from Capital Share Transactions | | | (252,669,480 | ) | | | 599,010,361 | | | | (4,681,067 | ) | | | 31,748,525 | |
| Increase (Decrease) in Net Assets | | | (213,530,875 | ) | | | 987,852,733 | | | | (21,878,315 | ) | | | 80,889,330 | |
| NET ASSETS | | | | | | | | | | | | | | | | |
| Beginning of year | | | 2,779,295,554 | | | | 1,791,442,821 | | | | 243,315,683 | | | | 162,426,353 | |
| End of year | | $ | 2,565,764,679 | | | $ | 2,779,295,554 | | | $ | 221,437,368 | | | $ | 243,315,683 | |
| Undistributed (Accumulated) net investment income (loss) | | $ | (1,414,613 | ) | | $ | — | | | $ | 455,260 | | | $ | 2,067,371 | |
| SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 1,903,793 | | | | 6,267,064 | | | | 2,200 | | | | — | |
| Investor Shares | | | 6,621,444 | | | | 58,154,868 | | | | 722,253 | | | | 2,658,481 | |
| Advisor Shares | | | 124,531 | | | | 1,829,286 | | | | 504 | | | | 31 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 369,039 | | | | 49,444 | | | | 92 | | | | — | |
| Investor Shares | | | 3,179,655 | | | | 739,231 | | | | 240,912 | | | | 18,628 | |
| Advisor Shares | | | 77,914 | | | | 16,570 | | | | 2,883 | | | | 500 | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (1,458,132 | ) | | | (1,275,736 | ) | | | — | | | | — | |
| Investor Shares | | | (23,597,782 | ) | | | (29,939,374 | ) | | | (1,205,368 | ) | | | (692,354 | ) |
| Advisor Shares | | | (264,401 | ) | | | (579,987 | ) | | | (7,074 | ) | | | (22,764 | ) |
| Increase (Decrease) from Capital Share Transactions | | | (13,043,939 | ) | | | 35,261,366 | | | | (243,598 | ) | | | 1,962,522 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Statements of Changes in Net Assets
| | | BROWN ADVISORY | | | BROWN ADVISORY | |
| | | FLEXIBLE EQUITY FUND | | | EQUITY INCOME FUND | |
| | Six Months Ended | | | | Six Months Ended | | | |
| | | December 31, | | | Year Ended | | | December 31, | | | Year Ended | |
| | | 2014 | | | June 30, | | | 2014 | | | June 30, | |
| | | (Unaudited) | | | 2014 | | | (Unaudited) | | | 2014 | |
| OPERATIONS | | | | | | | | | | | | |
| Net investment income | | $ | 599,600 | | | $ | 710,542 | | | $ | 2,199,432 | | | $ | 3,893,279 | |
| Net realized gains | | | 1,404,863 | | | | 1,912,542 | | | | 2,592,634 | | | | 11,151,487 | |
| Net change in unrealized appreciation (depreciation) | | | 15,271,615 | | | | 22,754,176 | | | | 2,923,981 | | | | 18,099,266 | |
| Increase in Net Assets from Operations | | | 17,276,078 | | | | 25,377,260 | | | | 7,716,047 | | | | 33,144,032 | |
| DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | | | | | | | | | |
| Net investment income: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (672 | ) | | | (7,405 | ) | | | (200,904 | ) | | | (132,683 | ) |
| Investor Shares | | | (980,117 | ) | | | (368,373 | ) | | | (1,901,036 | ) | | | (3,811,080 | ) |
| Advisor Shares | | | (20,673 | ) | | | (28,875 | ) | | | (28,718 | ) | | | (56,126 | ) |
| Net realized gain: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | — | | | | (823,551 | ) | | | (411 | ) |
| Investor Shares | | | — | | | | — | | | | (8,462,343 | ) | | | (6,248,858 | ) |
| Advisor Shares | | | — | | | | — | | | | (144,101 | ) | | | (98,052 | ) |
| Total Distributions to Shareholders | | | (1,001,462 | ) | | | (404,653 | ) | | | (11,560,653 | ) | | | (10,347,210 | ) |
| CAPITAL SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 118,556 | | | | 2,923,927 | | | | 155,001 | | | | 16,604,412 | |
| Investor Shares | | | 53,265,939 | | | | 69,789,625 | | | | 12,880,356 | | | | 20,766,881 | |
| Advisor Shares | | | 2,479,672 | | | | 11,380,969 | | | | 184,672 | | | | 702,263 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | — | | | | 970,546 | | | | 108,931 | |
| Investor Shares | | | 371,990 | | | | 180,778 | | | | 5,091,848 | | | | 4,310,334 | |
| Advisor Shares | | | 19,373 | | | | 27,104 | | | | 162,443 | | | | 144,327 | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (3,229,303 | ) | | | (134,923 | ) | | | (90,761 | ) | | | — | |
| Investor Shares | | | (9,221,187 | ) | | | (12,584,573 | ) | | | (8,970,165 | ) | | | (39,823,968 | ) |
| Advisor Shares | | | (4,918,211 | ) | | | (4,893,918 | ) | | | (343,535 | ) | | | (234,450 | ) |
| Redemption fees: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | — | | | | — | | | | — | |
| Investor Shares | | | — | | | | 322 | | | | — | | | | — | |
| Advisor Shares | | | — | | | | 191 | | | | — | | | | — | |
| Increase from Capital Share Transactions | | | 38,886,829 | | | | 66,689,502 | | | | 10,040,405 | | | | 2,578,730 | |
| Increase in Net Assets | | | 55,161,445 | | | | 91,662,109 | | | | 6,195,799 | | | | 25,375,552 | |
| NET ASSETS | | | | | | | | | | | | | | | | |
| Beginning of year | | | 180,572,258 | | | | 88,910,149 | | | | 201,332,490 | | | | 175,956,938 | |
| End of year | | $ | 235,733,703 | | | $ | 180,572,258 | | | $ | 207,528,289 | | | $ | 201,332,490 | |
| Undistributed net investment income | | $ | 4,238 | | | $ | 406,100 | | | $ | 68,774 | | | $ | — | |
| SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 7,470 | | | | 220,376 | | | | 11,652 | | | | 1,280,070 | |
| Investor Shares | | | 3,488,890 | | | | 5,170,097 | | | | 947,287 | | | | 1,621,159 | |
| Advisor Shares | | | 159,826 | | | | 867,329 | | | | 13,659 | | | | 54,858 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | — | | | | 71,619 | | | | 8,097 | |
| Investor Shares | | | 23,062 | | | | 12,758 | | | | 376,041 | | | | 339,005 | |
| Advisor Shares | | | 1,201 | | | | 1,913 | | | | 12,006 | | | | 11,304 | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (211,066 | ) | | | (10,272 | ) | | | (6,614 | ) | | | — | |
| Investor Shares | | | (596,673 | ) | | | (928,933 | ) | | | (657,661 | ) | | | (3,069,500 | ) |
| Advisor Shares | | | (329,011 | ) | | | (362,982 | ) | | | (25,080 | ) | | | (18,262 | ) |
| Increase from Capital Share Transactions | | | 2,543,699 | | | | 4,970,286 | | | | 742,909 | | | | 226,731 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Statements of Changes in Net Assets
| | | BROWN ADVISORY | | | BROWN ADVISORY | |
| | | SUSTAINABLE GROWTH FUND | | | SMALL-CAP GROWTH FUND | |
| | Six Months Ended | | | | Six Months Ended | | | |
| | | December 31, | | | Year Ended | | | December 31, | | | Year Ended | |
| | | 2014 | | | June 30, | | | 2014 | | | June 30, | |
| | | (Unaudited) | | | 2014 | | | (Unaudited) | | | 2014 | |
| OPERATIONS | | | | | | | | | | | | |
| Net investment loss | | $ | (387,854 | ) | | $ | (611,908 | ) | | $ | (984,055 | ) | | $ | (2,463,016 | ) |
| Net realized gains | | | 9,003,510 | | | | 10,473,938 | | | | 20,948,008 | | | | 31,585,276 | |
| Net change in unrealized appreciation (depreciation) | | | 2,594,501 | | | | 28,972,269 | | | | (11,590,229 | ) | | | 24,366,462 | |
| Increase in Net Assets from Operations | | | 11,210,157 | | | | 38,834,299 | | | | 8,373,724 | | | | 53,488,722 | |
| DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | | | | | | | | | |
| Net realized gain: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (655,994 | ) | | | (303,352 | ) | | | (978,695 | ) | | | (369,008 | ) |
| Investor Shares | | | (998,289 | ) | | | (384,995 | ) | | | (30,219,392 | ) | | | (13,816,372 | ) |
| Advisor Shares | | | (2,685,927 | ) | | | (1,452,293 | ) | | | (686,814 | ) | | | (304,670 | ) |
| Total Distributions to Shareholders | | | (4,340,210 | ) | | | (2,140,640 | ) | | | (31,884,901 | ) | | | (14,490,050 | ) |
| CAPITAL SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 1,275,351 | | | | 5,077,590 | | | | 263,749 | | | | 2,951,287 | |
| Investor Shares | | | 3,317,530 | | | | 19,256,931 | | | | 5,642,341 | | | | 26,226,777 | |
| Advisor Shares | | | 1,522,869 | | | | 6,421,891 | | | | 999,100 | | | | 2,139,136 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 523,469 | | | | 240,303 | | | | 867,109 | | | | 336,338 | |
| Investor Shares | | | 577,034 | | | | 218,672 | | | | 17,079,397 | | | | 7,763,483 | |
| Advisor Shares | | | 2,496,115 | | | | 1,353,148 | | | | 522,789 | | | | 185,410 | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (1,403,181 | ) | | | (12,964,879 | ) | | | (413,970 | ) | | | (2,934,502 | ) |
| Investor Shares | | | (5,216,514 | ) | | | (2,502,788 | ) | | | (33,541,927 | ) | | | (67,246,745 | ) |
| Advisor Shares | | | (11,942,899 | ) | | | (24,082,304 | ) | | | (2,451,890 | ) | | | (1,202,041 | ) |
| Redemption fees: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | — | | | | — | | | | — | |
| Investor Shares | | | 59 | | | | — | | | | 232 | | | | 72 | |
| Advisor Shares | | | 17 | | | | 1,025 | | | | — | | | | — | |
| Decrease from Capital Share Transactions | | | (8,850,150 | ) | | | (6,980,411 | ) | | | (11,033,070 | ) | | | (31,780,785 | ) |
| Increase (Decrease) in Net Assets | | | (1,980,203 | ) | | | 29,713,248 | | | | (34,544,247 | ) | | | 7,217,887 | |
| NET ASSETS | | | | | | | | | | | | | | | | |
| Beginning of year | | | 210,042,942 | | | | 180,329,694 | | | | 301,084,356 | | | | 293,866,469 | |
| End of year | | $ | 208,062,739 | | | $ | 210,042,942 | | | $ | 266,540,109 | | | $ | 301,084,356 | |
| Accumulated net investment loss | | $ | (685,235 | ) | | $ | (297,381 | ) | | $ | (1,409,832 | ) | | $ | (425,777 | ) |
| SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 88,203 | | | | 376,843 | | | | 7,458 | | | | 78,822 | |
| Investor Shares | | | 232,797 | | | | 1,428,380 | | | | 320,475 | | | | 1,462,019 | |
| Advisor Shares | | | 106,791 | | | | 481,546 | | | | 59,172 | | | | 121,903 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 35,538 | | | | 17,853 | | | | 26,324 | | | | 9,512 | |
| Investor Shares | | | 39,334 | | | | 16,295 | | | | 1,031,365 | | | | 435,906 | |
| Advisor Shares | | | 171,202 | | | | 101,132 | | | | 32,777 | | | | 10,786 | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (96,716 | ) | | | (994,246 | ) | | | (11,843 | ) | | | (83,303 | ) |
| Investor Shares | | | (361,145 | ) | | | (182,207 | ) | | | (1,887,478 | ) | | | (3,692,883 | ) |
| Advisor Shares | | | (842,190 | ) | | | (1,804,877 | ) | | | (143,937 | ) | | | (69,091 | ) |
| Decrease from Capital Share Transactions | | | (626,186 | ) | | | (559,281 | ) | | | (565,687 | ) | | | (1,726,329 | ) |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Statements of Changes in Net Assets
| | | BROWN ADVISORY SMALL-CAP | | | BROWN ADVISORY | |
| | | FUNDAMENTAL VALUE FUND | | | OPPORTUNITY FUND | |
| | Six Months Ended | | | | Six Months Ended | | | |
| | | December 31, | | | Year Ended | | | December 31, | | | Year Ended | |
| | | 2014 | | | June 30, | | | 2014 | | | June 30, | |
| | | (Unaudited) | | | 2014 | | | (Unaudited) | | | 2014 | |
| OPERATIONS | | | | | | | | | | | | |
| Net investment income (loss) | | $ | 861,144 | | | $ | 1,840,245 | | | $ | (34,628 | ) | | $ | (68,001 | ) |
| Net realized gains | | | 25,436,187 | | | | 29,407,001 | | | | 762,222 | | | | 996,471 | |
| Net change in unrealized appreciation (depreciation) | | | (287,550 | ) | | | 76,764,405 | | | | (269,156 | ) | | | 1,311,409 | |
| Increase in Net Assets from Operations | | | 26,009,781 | | | | 108,011,651 | | | | 458,438 | | | | 2,239,879 | |
| DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | | | | | | | | | |
| Net investment income: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (194,841 | ) | | | (140,496 | ) | | | — | | | | — | |
| Investor Shares | | | (2,670,771 | ) | | | (3,540,086 | ) | | | — | | | | — | |
| Advisor Shares | | | (125,976 | ) | | | (95,529 | ) | | | — | | | | — | |
| Net realized gain: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (1,600,207 | ) | | | (670,124 | ) | | | — | | | | — | |
| Investor Shares | | | (28,747,456 | ) | | | (19,658,734 | ) | | | — | | | | — | |
| Advisor Shares | | | (1,814,795 | ) | | | (760,942 | ) | | | — | | | | — | |
| Total Distributions to Shareholders | | | (35,154,046 | ) | | | (24,865,911 | ) | | | — | | | | — | |
| CAPITAL SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 14,551,209 | | | | 17,839,759 | | | | — | | | | — | |
| Investor Shares | | | 65,764,174 | | | | 172,880,303 | | | | 820,446 | | | | 1,317,533 | |
| Advisor Shares | | | 19,369,146 | | | | 5,013,486 | | | | — | | | | — | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 1,724,030 | | | | 801,537 | | | | — | | | | — | |
| Investor Shares | | | 17,869,433 | | | | 12,588,210 | | | | — | | | | — | |
| Advisor Shares | | | 1,911,251 | | | | 851,303 | | | | — | | | | — | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (1,044,238 | ) | | | (1,162,598 | ) | | | — | | | | — | |
| Investor Shares | | | (40,555,905 | ) | | | (67,733,638 | ) | | | (878,660 | ) | | | (1,049,564 | ) |
| Advisor Shares | | | (3,497,781 | ) | | | (3,337,506 | ) | | | — | | | | — | |
| Redemption fees: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | — | | | | — | | | | — | |
| Investor Shares | | | 15 | | | | 635 | | | | — | | | | — | |
| Advisor Shares | | | 1,126 | | | | 32 | | | | — | | | | — | |
| Increase (Decrease) from Capital Share Transactions | | | 76,092,460 | | | | 137,741,523 | | | | (58,214 | ) | | | 267,969 | |
| Increase in Net Assets | | | 66,948,195 | | | | 220,887,263 | | | | 400,224 | | | | 2,507,848 | |
| NET ASSETS | | | | | | | | | | | | | | | | |
| Beginning of year | | | 608,730,235 | | | | 387,842,972 | | | | 11,680,969 | | | | 9,173,121 | |
| End of year | | $ | 675,678,430 | | | $ | 608,730,235 | | | $ | 12,081,193 | | | $ | 11,680,969 | |
| Undistributed (Accumulated) net investment income (loss) | | $ | (2,071,762 | ) | | $ | 58,682 | | | $ | (68,761 | ) | | $ | (34,133 | ) |
| SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 611,327 | | | | 777,261 | | | | — | | | | — | |
| Investor Shares | | | 2,780,326 | | | | 7,643,580 | | | | 35,491 | | | | 60,945 | |
| Advisor Shares | | | 808,840 | | | | 217,599 | | | | — | | | | — | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 73,145 | | | | 34,883 | | | | — | | | | — | |
| Investor Shares | | | 758,465 | | | | 549,691 | | | | — | | | | — | |
| Advisor Shares | | | 81,365 | | | | 37,268 | | | | — | | | | — | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (44,050 | ) | | | (50,536 | ) | | | — | | | | — | |
| Investor Shares | | | (1,712,102 | ) | | | (2,974,633 | ) | | | (38,628 | ) | | | (48,362 | ) |
| Advisor Shares | | | (147,984 | ) | | | (145,557 | ) | | | — | | | | — | |
| Increase (Decrease) from Capital Share Transactions | | | 3,209,332 | | | | 6,089,556 | | | | (3,137 | ) | | | 12,583 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Statements of Changes in Net Assets
| | BROWN ADVISORY | | | BROWN ADVISORY | |
| | MULTI-STRATEGY FUND | | | INTERMEDIATE INCOME FUND | |
| | | Period Ended | | | Six Months Ended | | | |
| | | December 31, | | | | December 31, | | | Year Ended | |
| | | 2014* | | | | 2014 | | | June 30, | |
| | | (Unaudited) | | | | (Unaudited) | | | 2014 | |
| OPERATIONS | | | | | | | | | | | | | |
| Net investment income | | $ | 1,805 | | | | $ | 1,792,851 | | | $ | 3,598,494 | |
| Net realized gains | | | 5,208 | | | | | 545,190 | | | | 41,616 | |
| Net change in unrealized appreciation (depreciation) | | | (8,377 | ) | | | | (916,279 | ) | | | 2,189,550 | |
| Increase (Decrease) in Net Assets from Operations | | | (1,364 | ) | | | | 1,421,762 | | | | 5,829,660 | |
| DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | | | | | | |
| Net investment income: | | | | | | | | | | | | | |
| Institutional Shares | | | (2,395 | ) | | | | — | | | | — | |
| Investor Shares | | | — | | | | | (1,995,130 | ) | | | (3,569,560 | ) |
| Advisor Shares | | | — | | | | | (108,856 | ) | | | (193,169 | ) |
| Net realized gain: | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | | — | | | | — | |
| Investor Shares | | | — | | | | | — | | | | (4,271,648 | ) |
| Advisor Shares | | | — | | | | | — | | | | (275,860 | ) |
| Total Distributions to Shareholders | | | (2,395 | ) | | | | (2,103,986 | ) | | | (8,310,237 | ) |
| CAPITAL SHARE TRANSACTIONS | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | |
| Institutional Shares | | | 454,162 | | | | | — | | | | — | |
| Investor Shares | | | — | | | | | 16,143,655 | | | | 78,227,331 | |
| Advisor Shares | | | — | | | | | 29,015 | | | | 448,258 | |
| Reinvestment of distributions: | | | | | | | | | | | | | |
| Institutional Shares | | | 1,862 | | | | | — | | | | — | |
| Investor Shares | | | — | | | | | 442,871 | | | | 3,631,333 | |
| Advisor Shares | | | — | | | | | 67,095 | | | | 314,913 | |
| Redemption of shares: | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | | — | | | | — | |
| Investor Shares | | | — | | | | | (70,969,053 | ) | | | (113,719,031 | ) |
| Advisor Shares | | | — | | | | | (2,493,808 | ) | | | (4,129,873 | ) |
| Redemption fees: | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | | — | | | | — | |
| Investor Shares | | | — | | | | | 65 | | | | 50 | |
| Advisor Shares | | | — | | | | | — | | | | — | |
| Increase (Decrease) from Capital Share Transactions | | | 456,024 | | | | | (56,780,160 | ) | | | (35,227,019 | ) |
| Increase (Decrease) in Net Assets | | | 452,265 | | | | | (57,462,384 | ) | | | (37,707,596 | ) |
| NET ASSETS | | | | | | | | | | | | | |
| Beginning of period/year | | | — | | | | | 219,984,256 | | | | 257,691,852 | |
| End of period/year | | $ | 452,265 | | | | $ | 162,521,872 | | | $ | 219,984,256 | |
| Accumulated net investment loss | | $ | (590 | ) | | | $ | (530,920 | ) | | $ | (219,785 | ) |
| SHARE TRANSACTIONS | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | |
| Institutional Shares | | | 45,006 | | | | | — | | | | — | |
| Investor Shares | | | — | | | | | 1,506,693 | | | | 7,311,163 | |
| Advisor Shares | | | — | | | | | 2,758 | | | | 42,887 | |
| Reinvestment of distributions: | | | | | | | | | | | | | |
| Institutional Shares | | | 185 | | | | | — | | | | — | |
| Investor Shares | | | — | | | | | 13,632 | | | | 342,553 | |
| Advisor Shares | | | — | | | | | 6,398 | | | | 30,195 | |
| Redemption of shares: | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | | — | | | | — | |
| Investor Shares | | | — | | | | | (6,589,529 | ) | | | (10,601,394 | ) |
| Advisor Shares | | | — | | | | | (237,168 | ) | | | (391,768 | ) |
| Increase (Decrease) from Capital Share Transactions | | | 45,191 | | | | | (5,297,216 | ) | | | (3,266,364 | ) |
| * | Commenced operations on October 31, 2014. The information presented is for the period from October 31, 2014 to December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Statements of Changes in Net Assets
| | BROWN ADVISORY | | | BROWN ADVISORY | |
| | TOTAL RETURN FUND | | | STRATEGIC BOND FUND | |
| | | Period Ended | | | Six Months Ended | | | |
| | | December 31, | | | | December 31, | | | Year Ended | |
| | | 2014* | | | | 2014 | | | June 30, | |
| | | (Unaudited) | | | | (Unaudited) | | | 2014 | |
| OPERATIONS | | | | | | | | | | | | | |
| Net investment income (loss) | | $ | 77,992 | | | | $ | 64,039 | | | $ | (17,668 | ) |
| Net realized gains | | | 57,694 | | | | | 341,933 | | | | 662,074 | |
| Net change in unrealized appreciation (depreciation) | | | 240,689 | | | | | (262,061 | ) | | | 314,492 | |
| Increase in Net Assets from Operations | | | 376,375 | | | | | 143,911 | | | | 958,898 | |
| DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | | | | | | |
| Net investment income: | | | | | | | | | | | | | |
| Institutional Shares | | | (6,177 | ) | | | | — | | | | — | |
| Investor Shares | | | (74,956 | ) | | | | (184,113 | ) | | | — | |
| Advisor Shares | | | — | | | | | (16,546 | ) | | | (110,929 | ) |
| Total Distributions to Shareholders | | | (81,133 | ) | | | | (200,659 | ) | | | (110,929 | ) |
| CAPITAL SHARE TRANSACTIONS | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | |
| Institutional Shares | | | 4,322,246 | | | | | — | | | | — | |
| Investor Shares | | | 56,519,711 | | | | | 35,242,998 | | | | — | |
| Advisor Shares | | | — | | | | | 563,718 | | | | 4,168,994 | |
| Reinvestment of distributions: | | | | | | | | �� | | | | | |
| Institutional Shares | | | 2 | | | | | — | | | | — | |
| Investor Shares | | | 6,100 | | | | | 10,666 | | | | — | |
| Advisor Shares | | | — | | | | | 12,621 | | | | 15,079 | |
| Redemption of shares: | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | | — | | | | — | |
| Investor Shares | | | (458,518 | ) | | | | (135,662 | ) | | | — | |
| Advisor Shares | | | — | | | | | (20,918,045 | ) | | | (6,203,314 | ) |
| Redemption fees: | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | | — | | | | — | |
| Investor Shares | | | 170 | | | | | — | | | | — | |
| Advisor Shares | | | — | | | | | — | | | | — | |
| Increase (Decrease) from Capital Share Transactions | | | 60,389,711 | | | | | 14,776,296 | | | | (2,019,241 | ) |
| Increase (Decrease) in Net Assets | | | 60,684,953 | | | | | 14,719,548 | | | | (1,171,272 | ) |
| NET ASSETS | | | | | | | | | | | | | |
| Beginning of period/year | | | — | | | | | 24,399,119 | | | | 25,570,391 | |
| End of period/year | | $ | 60,684,953 | | | | $ | 39,118,667 | | | $ | 24,399,119 | |
| Accumulated net investment loss | | $ | (3,141 | ) | | | $ | (274,690 | ) | | $ | (138,070 | ) |
| SHARE TRANSACTIONS | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | |
| Institutional Shares | | | 432,067 | | | | | — | | | | — | |
| Investor Shares | | | 5,649,353 | | | | | 3,501,848 | | | | — | |
| Advisor Shares | | | — | | | | | 56,167 | | | | 426,035 | |
| Reinvestment of distributions: | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | | — | | | | — | |
| Investor Shares | | | 610 | | | | | 1,063 | | | | — | |
| Advisor Shares | | | — | | | | | 1,257 | | | | 1,553 | |
| Redemption of shares: | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | | — | | | | — | |
| Investor Shares | | | (45,824 | ) | | | | (13,502 | ) | | | — | |
| Advisor Shares | | | — | | | | | (2,079,374 | ) | | | (638,450 | ) |
| Increase (Decrease) from Capital Share Transactions | | | 6,036,206 | | | | | 1,467,459 | | | | (210,862 | ) |
| * | Commenced operations on October 30, 2014. The information presented is for the period from October 30, 2014 to December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Statements of Changes in Net Assets
| | | BROWN ADVISORY | | | BROWN ADVISORY | |
| | | MARYLAND BOND FUND | | | TAX EXEMPT BOND FUND | |
| | Six Months Ended | | | | Six Months Ended | | | |
| | | December 31, | | | Year Ended | | | December 31, | | | Year Ended | |
| | | 2014 | | | June 30, | | | 2014 | | | June 30, | |
| | | (Unaudited) | | | 2014 | | | (Unaudited) | | | 2014 | |
| OPERATIONS | | | | | | | | | | | | |
| Net investment income | | $ | 1,783,077 | | | $ | 4,437,861 | | | $ | 1,913,119 | | | $ | 3,305,444 | |
| Net realized gains (losses) | | | 959,202 | | | | 341,254 | | | | 122,055 | | | | (463,496 | ) |
| Net change in unrealized appreciation (depreciation) | | | (593,344 | ) | | | 1,397,876 | | | | 1,127,830 | | | | 4,078,241 | |
| Increase in Net Assets from Operations | | | 2,148,935 | | | | 6,176,991 | | | | 3,163,004 | | | | 6,920,189 | |
| DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | | | | | | | | | |
| Net investment income: | | | | | | | | | | | | | | | | |
| Investor Shares | | | (1,783,669 | ) | | | (4,437,861 | ) | | | (1,913,119 | ) | | | (3,305,444 | ) |
| Net realized gain: | | | | | | | | | | | | | | | | |
| Investor Shares | | | (1,040,851 | ) | | | (1,707,914 | ) | | | — | | | | (27,107 | ) |
| Total Distributions to Shareholders | | | (2,824,520 | ) | | | (6,145,775 | ) | | | (1,913,119 | ) | | | (3,332,551 | ) |
| CAPITAL SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Investor Shares | | | 30,252,911 | | | | 134,290,934 | | | | 61,443,386 | | | | 225,415,569 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Investor Shares | | | 834,526 | | | | 1,556,130 | | | | 401,397 | | | | 557,364 | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Investor Shares | | | (24,603,977 | ) | | | (182,327,223 | ) | | | (43,676,809 | ) | | | (186,274,382 | ) |
| Increase (Decrease) from Capital Share Transactions | | | 6,483,460 | | | | (46,480,159 | ) | | | 18,167,974 | | | | 39,698,551 | |
| Increase (Decrease) in Net Assets | | | 5,807,875 | | | | (46,448,943 | ) | | | 19,417,859 | | | | 43,286,189 | |
| NET ASSETS | | | | | | | | | | | | | | | | |
| Beginning of year | | | 205,717,393 | | | | 252,166,336 | | | | 205,177,473 | | | | 161,891,284 | |
| End of year | | $ | 211,525,268 | | | $ | 205,717,393 | | | $ | 224,595,332 | | | $ | 205,177,473 | |
| Undistributed (Accumulated) net investment income (loss) | | $ | (564 | ) | | $ | 28 | | | $ | (123 | ) | | $ | (123 | ) |
| SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Investor Shares | | | 2,803,692 | | | | 12,545,458 | | | | 6,118,803 | | | | 22,962,219 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Investor Shares | | | 77,471 | | | | 145,627 | | | | 39,958 | | | | 56,344 | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Investor Shares | | | (2,279,241 | ) | | | (17,015,043 | ) | | | (4,349,855 | ) | | | (19,017,976 | ) |
| Increase (Decrease) from Capital Share Transactions | | | 601,922 | | | | (4,323,958 | ) | | | 1,808,906 | | | | 4,000,587 | |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Statements of Changes in Net Assets
| | | | | | | | | BROWN ADVISORY – | |
| | | BROWN ADVISORY | | | WMC STRATEGIC | |
| | | MORTGAGE SECURITIES FUND | | | EUROPEAN EQUITY FUND | |
| | Six Months Ended | | | | Six Months Ended | | | |
| | | December 31, | | | Period Ended | | | December 31, | | | Period Ended | |
| | | 2014 | | | June 30, | | | 2014 | | | June 30, | |
| | | (Unaudited) | | | 2014* | | | (Unaudited) | | | 2014** | |
| OPERATIONS | | | | | | | | | | | | | | |
| Net investment income (loss) | | $ | 2,874,912 | | | $ | 1,578,439 | | | $ | (119,167 | ) | | $ | 2,146,513 | |
| Net realized gains (losses) | | | 1,160,926 | | | | 920,861 | | | | (9,219,675 | ) | | | (347,221 | ) |
| Net change in unrealized appreciation (depreciation) | | | (1,053,956 | ) | | | 1,546,150 | | | | (8,363,269 | ) | | | 7,046,292 | |
| Increase (Decrease) in Net Assets from Operations | | | 2,981,882 | | | | 4,045,450 | | | | (17,702,111 | ) | | | 8,845,584 | |
| DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | | | | | | | | | |
| Net investment income: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (2,458,906 | ) | | | (322,103 | ) | | | (2,028,154 | ) | | | — | |
| Investor Shares | | | (683,409 | ) | | | (1,381,608 | ) | | | (161,265 | ) | | | — | |
| Advisor Shares | | | — | | | | — | | | | (3,195 | ) | | | — | |
| Net realized gain: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (1,220,433 | ) | | | — | | | | — | | | | — | |
| Investor Shares | | | (354,459 | ) | | | — | | | | — | | | | — | |
| Advisor Shares | | | — | | | | — | | | | — | | | | — | |
| Total Distributions to Shareholders | | | (4,717,207 | ) | | | (1,703,711 | ) | | | (2,192,614 | ) | | | — | |
| CAPITAL SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 53,420,749 | | | | 133,244,915 | | | | 51,656,780 | | | | 199,664,123 | |
| Investor Shares | | | 7,240,401 | | | | 200,853,490 | | | | 3,622,719 | | | | 17,731,422 | |
| Advisor Shares | | | — | | | | — | | | | 259,900 | | | | 286,619 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 1,021,370 | | | | 15,168 | | | | 136,737 | | | | — | |
| Investor Shares | | | 522,732 | | | | 362,917 | | | | 131,427 | | | | — | |
| Advisor Shares | | | — | | | | — | | | | 2,681 | | | | — | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (23,380,054 | ) | | | (1,880,000 | ) | | | (53,386,761 | ) | | | (5,104,407 | ) |
| Investor Shares | | | (28,537,853 | ) | | | (135,747,053 | ) | | | (3,107,509 | ) | | | (501,971 | ) |
| Advisor Shares | | | — | | | | — | | | | (91,834 | ) | | | (55,235 | ) |
| Redemption fees: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | — | | | | — | | | | — | |
| Investor Shares | | | — | | | | — | | | | — | | | | — | |
| Advisor Shares | | | — | | | | — | | | | 49 | | | | — | |
| Increase (Decrease) from Capital Share Transactions | | | 10,287,345 | | | | 196,849,437 | | | | (775,811 | ) | | | 212,020,551 | |
| Increase (Decrease) in Net Assets | | | 8,552,020 | | | | 199,191,176 | | | | (20,670,536 | ) | | | 220,866,135 | |
| NET ASSETS | | | | | | | | | | | | | | | | |
| Beginning of period | | | 199,191,176 | | | | — | | | | 220,866,135 | | | | — | |
| End of period | | $ | 207,743,196 | | | $ | 199,191,176 | | | $ | 200,195,599 | | | $ | 220,866,135 | |
| Undistributed (Accumulated) net investment income (loss) | | $ | (218,714 | ) | | $ | 48,689 | | | $ | (165,245 | ) | | $ | 2,146,536 | |
| SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 5,273,268 | | | | 13,118,411 | | | | 5,224,782 | | | | 19,876,042 | |
| Investor Shares | | | 715,169 | | | | 20,017,629 | | | | 366,197 | | | | 1,773,327 | |
| Advisor Shares | | | — | | | | — | | | | 25,838 | | | | 28,371 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 101,607 | | | | 1,493 | | | | 14,053 | | | | — | |
| Investor Shares | | | 51,931 | | | | 35,819 | | | | 13,521 | | | | — | |
| Advisor Shares | | | — | | | | — | | | | 276 | | | | — | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (2,301,436 | ) | | | (185,167 | ) | | | (5,575,210 | ) | | | (503,631 | ) |
| Investor Shares | | | (2,812,878 | ) | | | (13,381,826 | ) | | | (320,226 | ) | | | (49,539 | ) |
| Advisor Shares | | | — | | | | — | | | | (9,134 | ) | | | (5,398 | ) |
| Increase (Decrease) from Capital Share Transactions | | | 1,027,661 | | | | 19,606,359 | | | | (259,903 | ) | | | 21,119,172 | |
| * | | Commenced operations on December 26, 2013. The information presented is for the period from December 26, 2013 to June 30, 2014. |
| ** | | Commenced operations on October 21, 2013. The information presented is for the period from October 21, 2013 to June 30, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Statements of Changes in Net Assets
| | | | | | | | | | | | | | | BROWN | |
| | | | | | | | | | | | | | | ADVISORY | |
| | | | | | | | | | | | | | | EMERGING | |
| | | BROWN ADVISORY – | | | BROWN ADVISORY – | | | MARKETS | |
| | | WMC JAPAN ALPHA | | | SOMSERSET EMERGING | | | SMALL-CAP | |
| | | OPPORTUNITIES FUND | | | MARKETS FUND | | | FUND | |
| | | Six Months | | | | | | Six Months | | | | | | | |
| | | Ended | | | | | | Ended | | | | | | Period Ended | |
| | | December 31, | | | Period Ended | | | December 31, | | | Year Ended | | | December 31, | |
| | | 2014 | | | June 30, | | | 2014 | | | June 30, | | | 2014** | |
| | | (Unaudited) | | | 2014* | | | (Unaudited) | | | 2014 | | | (Unaudited) | |
| OPERATIONS | | | | | | | | | | | | | | | | | | |
| Net investment income (loss) | | $ | 1,267,256 | | | $ | 4,466,253 | | | $ | 573,960 | | | $ | 3,341,554 | | | $ | (36,768 | ) |
| Net realized gains (losses) | | | 198,271,191 | | | | (7,534,618 | ) | | | 298,340 | | | | (7,237,279 | ) | | | (5,951 | ) |
| Net change in unrealized appreciation (depreciation) | | | (103,595,770 | ) | | | 64,369,159 | | | | (15,595,691 | ) | | | 19,128,390 | | | | (1,374,919 | ) |
| Increase (Decrease) in Net Assets from Operations | | | 95,942,677 | | | | 61,300,794 | | | | (14,723,391 | ) | | | 15,232,665 | | | | (1,417,638 | ) |
| DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | | | | | | | | | | | | | |
| Net investment income: | | | | | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (56,510,560 | ) | | | — | | | | (3,242,870 | ) | | | (1,597,073 | ) | | | — | |
| Investor Shares | | | (515,706 | ) | | | — | | | | (540,676 | ) | | | (155,756 | ) | | | — | |
| Advisor Shares | | | (5,171 | ) | | | — | | | | (6,119 | ) | | | (8,284 | ) | | | — | |
| Net realized gain: | | | | | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (7,825,633 | ) | | | — | | | | — | | | | — | | | | — | |
| Investor Shares | | | (72,262 | ) | | | — | | | | — | | | | — | | | | — | |
| Advisor Shares | | | (749 | ) | | | — | | | | — | | | | — | | | | — | |
| Total Distributions to Shareholders | | | (64,930,081 | ) | | | — | | | | (3,789,665 | ) | | | (1,761,113 | ) | | | — | |
| CAPITAL SHARE TRANSACTIONS | | | | | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 142,493,737 | | | | 1,031,575,751 | | | | 48,771,047 | | | | 87,865,122 | | | | 64,566,104 | |
| Investor Shares | | | 6,717,113 | | | | 4,455,791 | | | | 20,231,590 | | | | 12,800,049 | | | | 2,808,291 | |
| Advisor Shares | | | 56,464 | | | | 54,786 | | | | 44,500 | | | | 92,326 | | | | — | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 2,070,113 | | | | — | | | | 490,258 | | | | 117,284 | | | | — | |
| Investor Shares | | | 586,590 | | | | — | | | | 429,370 | | | | 111,069 | | | | — | |
| Advisor Shares | | | 5,920 | | | | — | | | | 6,120 | | | | 8,284 | | | | — | |
| Redemption of shares: | | | | | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (56,692,471 | ) | | | (12,008,108 | ) | | | (20,363,738 | ) | | | (28,796,591 | ) | | | (1,083,093 | ) |
| Investor Shares | | | (452,167 | ) | | | (80,811 | ) | | | (3,502,348 | ) | | | (1,766,244 | ) | | | — | |
| Advisor Shares | | | (4,253 | ) | | | — | | | | (16,295 | ) | | | (601,984 | ) | | | — | |
| Redemption fees: | | | | | | | | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | — | | | | — | | | | — | | | | 46 | |
| Investor Shares | | | — | | | | — | | | | — | | | | — | | | | — | |
| Advisor Shares | | | — | | | | — | | | | — | | | | — | | | | — | |
| Increase from Capital Share Transactions | | | 94,781,046 | | | | 1,023,997,409 | | | | 46,090,504 | | | | 69,829,315 | | | | 66,291,348 | |
| Increase in Net Assets | | | 125,793,642 | | | | 1,085,298,203 | | | | 27,577,448 | | | | 83,300,867 | | | | 64,873,710 | |
| NET ASSETS | | | | | | | | | | | | | | | | | | | | |
| Beginning of year/period | | | 1,085,298,203 | | | | — | | | | 218,499,763 | | | | 135,198,896 | | | | — | |
| End of year/period | | $ | 1,211,091,845 | | | $ | 1,085,298,203 | | | $ | 246,077,211 | | | $ | 218,499,763 | | | $ | 64,873,710 | |
| Undistributed (Accumulated) net investment income (loss) | | $ | (56,577,597 | ) | | $ | (813,416 | ) | | $ | (905,362 | ) | | $ | 2,310,343 | | | $ | (36,768 | ) |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Statements of Changes in Net Assets
| | | | | | | | | | | | | | | BROWN | |
| | | | | | | | | | | | | | | ADVISORY | |
| | | | | | | | | | | | | | | EMERGING | |
| | | BROWN ADVISORY – | | | BROWN ADVISORY – | | | MARKETS | |
| | | WMC JAPAN ALPHA | | | SOMSERSET EMERGING | | | SMALL-CAP | |
| | | OPPORUTNITIES FUND | | | MARKETS FUND | | | FUND | |
| | | Six Months | | | | | | Six Months | | | | | | | |
| | | Ended | | | | | | Ended | | | | | | Period Ended | |
| | | December 31, | | | Period Ended | | | December 31, | | | Year Ended | | | December 31, | |
| | | 2014 | | | June 30, | | | 2014 | | | June 30, | | | 2014** | |
| | | (Unaudited) | | | 2014* | | | (Unaudited) | | | 2014 | | | (Unaudited) | |
| SHARE TRANSACTIONS | | | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 13,335,036 | | | | 104,178,148 | | | | 4,863,597 | | | | 9,071,496 | | | | 6,462,979 | |
| Investor Shares | | | 630,973 | | | | 438,918 | | | | 2,018,944 | | | | 1,323,455 | | | | 282,435 | |
| Advisor Shares | | | 5,280 | | | | 5,619 | | | | 4,526 | | | | 9,530 | | | | — | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 188,021 | | | | — | | | | 51,770 | | | | 12,230 | | | | — | |
| Investor Shares | | | 53,278 | | | | — | | | | 45,388 | | | | 11,594 | | | | — | |
| Advisor Shares | | | 538 | | | | — | | | | 648 | | | | 865 | | | | — | |
| Redemption of shares: | | | | | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (5,262,149 | ) | | | (1,205,595 | ) | | | (2,087,929 | ) | | | (3,005,651 | ) | | | (107,739 | ) |
| Investor Shares | | | (40,725 | ) | | | (7,913 | ) | | | (360,566 | ) | | | (185,281 | ) | | | — | |
| Advisor Shares | | | (379 | ) | | | — | | | | (1,628 | ) | | | (62,273 | ) | | | — | |
| Increase from Capital Share Transactions | | | 8,909,873 | | | | 103,409,177 | | | | 4,534,750 | | | | 7,175,965 | | | | 6,637,675 | |
| * | | Commenced operations on March 4, 2014. The information presented is for the period from March 4, 2014 to June 30, 2014. |
| ** | | Commenced operations on November 21, 2014. The information presented is for the period from November 21, 2014 to December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY GROWTH EQUITY FUND
INSTITUTIONAL SHARES
| | | Six Months | | | | | | | |
| | | Ended | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2014 | | | 2013(f) | |
| Net Asset Value, Beginning of Year / Period | | $ | 19.10 | | | $ | 16.22 | | | $ | 14.58 | |
| | | | | | | | | | | | | |
| Net Investment Income(a) | | | — | | | | — | | | | 0.01 | |
| Net Realized And Unrealized Gains | | | 0.90 | | | | 2.99 | | | | 1.66 | |
| Total from Investment Operations | | $ | 0.90 | | | $ | 2.99 | | | $ | 1.67 | |
| | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | |
| from Net Investment Income | | | — | | | | — | | | | (0.03 | ) |
| from Net Realized Gains | | | (0.61 | ) | | | (0.11 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (0.61 | ) | | $ | (0.11 | ) | | $ | (0.03 | ) |
| | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | (e) | | | — | (e) |
| | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 19.39 | | | $ | 19.10 | | | $ | 16.22 | |
| | | | | | | | | | | | | |
| Total Return | | | 4.66 | %(b) | | | 18.46 | % | | | 11.49 | %(b) |
| | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 252,850 | | | $ | 233,627 | | | $ | 116,575 | |
| | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | |
| Net Investment Income | | | 0.04 | %(c) | | | 0.03 | % | | | 0.30 | %(c) |
| Net Expenses | | | 0.72 | %(c) | | | 0.74 | % | | | 0.78 | %(c) |
| Gross Expenses(d) | | | 0.72 | %(c) | | | 0.74 | % | | | 0.78 | %(c) |
| Portfolio Turnover Rate | | | 9 | %(b) | | | 25 | % | | | 40 | % |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Less than $0.01 per share. |
| (f) | Commenced operations on October 19, 2012. The information presented is for the period from October 19, 2012 to June 30, 2013. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY GROWTH EQUITY FUND
INVESTOR SHARES*
| | | Six Months | | | | | | | | | | | | | | | | | | | |
| | | Ended | | | | | | | | | | | | | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | May 31, | |
| | | (Unaudited) | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010(f) | | | 2010 | |
| Net Asset Value, Beginning of Year / Period | | $ | 19.07 | | | $ | 16.21 | | | $ | 13.80 | | | $ | 13.63 | | | $ | 9.99 | | | $ | 10.39 | | | $ | 7.83 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income (Loss)(a) | | | (0.01 | ) | | | (0.02 | ) | | | 0.03 | | | | (0.05 | ) | | | (0.04 | ) | | | (0.01 | ) | | | (0.06 | ) |
| Net Realized And Unrealized Gains (Losses) | | | 0.88 | | | | 2.99 | | | | 2.41 | | | | 0.22 | | | | 3.68 | | | | (0.39 | ) | | | 2.62 | |
| Total from Investment Operations | | $ | 0.87 | | | $ | 2.97 | | | $ | 2.44 | | | $ | 0.17 | | | $ | 3.64 | | | $ | (0.40 | ) | | $ | 2.56 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | — | | | | — | | | | (0.03 | ) | | | — | | | | — | | | | — | | | | — | |
| from Net Realized Gains | | | (0.61 | ) | | | (0.11 | ) | | | — | | | | — | | | | — | | | | — | | | | — | |
| Total Distributions to Shareholders | | $ | (0.61 | ) | | $ | (0.11 | ) | | $ | (0.03 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | (e) | | | — | (e) | | | — | (e) | | | — | (e) | | | — | (e) | | | — | (e) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 19.33 | | | $ | 19.07 | | | $ | 16.21 | | | $ | 13.80 | | | $ | 13.63 | | | $ | 9.99 | | | $ | 10.39 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return | | | 4.51 | %(b) | | | 18.35 | % | | | 17.67 | % | | | 1.25 | % | | | 36.44 | % | | | (3.85 | )%(b) | | | 32.69 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year / Period (000’s Omitted) | | $ | 2,264,879 | | | $ | 2,497,036 | | | $ | 1,653,389 | | | $ | 954,560 | | | $ | 463,228 | | | $ | 96,889 | | | $ | 97,136 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income (Loss) | | | (0.11 | )%(c) | | | (0.12 | )% | | | 0.17 | % | | | (0.35 | )% | | | (0.29 | )% | | | (0.76 | )%(c) | | | (0.56 | )% |
| Net Expenses | | | 0.87 | %(c) | | | 0.89 | % | | | 0.91 | % | | | 0.90 | % | | | 0.94 | % | | | 1.00 | %(c) | | | 1.10 | % |
| Gross Expenses(d) | | | 0.87 | %(c) | | | 0.89 | % | | | 0.91 | % | | | 0.90 | % | | | 0.94 | % | | | 1.00 | %(c) | | | 1.10 | % |
| Portfolio Turnover Rate | | | 9 | %(b) | | | 25 | % | | | 40 | % | | | 58 | % | | | 30 | % | | | 1 | %(b) | | | 34 | % |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Less than $0.01 per share. |
| (f) | Effective June 1, 2010, the Fund changed its fiscal year end from May 31 to June 30. The information presented is for the period from June 1, 2010 to June 30, 2010. |
| * | Prior to October 19, 2012, Investor Shares were known as Institutional Shares. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY GROWTH EQUITY FUND
ADVISOR SHARES*
| | | Six Months | | | | | | | | | | | | | | | | | | | |
| | | Ended | | | | | | | | | | | | | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | May 31, | |
| | | (Unaudited) | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010(g) | | | 2010 | |
| Net Asset Value, Beginning of Year / Period | | $ | 18.51 | | | $ | 15.78 | | | $ | 13.45 | | | $ | 13.31 | | | $ | 9.80 | | | $ | 10.20 | | | $ | 7.72 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Loss(a) | | | (0.03 | ) | | | (0.07 | ) | | | (0.01 | ) | | | (0.07 | ) | | | (0.09 | ) | | | (0.01 | ) | | | (0.10 | ) |
| Net Realized And Unrealized Gains (Losses) | | | 0.86 | | | | 2.91 | | | | 2.35 | | | | 0.21 | | | | 3.60 | | | | (0.39 | ) | | | 2.58 | |
| Total from Investment Operations | | $ | 0.83 | | | $ | 2.84 | | | $ | 2.34 | | | $ | 0.14 | | | $ | 3.51 | | | $ | (0.40 | ) | | $ | 2.48 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | — | | | | — | | | | (0.01 | ) | | | — | | | | — | | | | — | | | | — | |
| from Net Realized Gains | | | (0.61 | ) | | | (0.11 | ) | | | — | | | | — | | | | — | | | | — | | | | — | |
| Total Distributions to Shareholders | | $ | (0.61 | ) | | $ | (0.11 | ) | | $ | (0.01 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | (f) | | | — | (f) | | | — | (f) | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 18.73 | | | $ | 18.51 | | | $ | 15.78 | | | $ | 13.45 | | | $ | 13.31 | | | $ | 9.80 | | | $ | 10.20 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return(b) | | | 4.43 | %(c) | | | 18.02 | % | | | 17.43 | % | | | 1.05 | % | | | 35.82 | % | | | (3.92 | )%(c) | | | 32.12 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year / Period (000’s Omitted) | | $ | 48,035 | | | $ | 48,632 | | | $ | 21,478 | | | $ | 11,593 | | | $ | 5,698 | | | $ | 6,027 | | | $ | 6,287 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Loss | | | (0.36 | )%(d) | | | (0.37 | )% | | | (0.07 | )% | | | (0.55 | )% | | | (0.74 | )% | | | (1.21 | )%(d) | | | (1.02 | )% |
| Net Expenses | | | 1.12 | %(d) | | | 1.14 | % | | | 1.15 | % | | | 1.10 | % | | | 1.39 | % | | | 1.45 | %(d) | | | 1.56 | % |
| Gross Expenses(e) | | | 1.12 | %(d) | | | 1.14 | % | | | 1.15 | % | | | 1.10 | % | | | 1.39 | % | | | 1.45 | %(d) | | | 1.56 | % |
| Portfolio Turnover Rate | | | 9 | %(c) | | | 25 | % | | | 40 | % | | | 58 | % | | | 30 | % | | | 1 | %(c) | | | 34 | % |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Total return does not include the effects of sales charges which existed for Advisor Shares (then known as A Shares) for years / periods ended June 30, 2011 and earlier. |
| (c) | Not annualized. |
| (d) | Annualized. |
| (e) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (f) | Less than $0.01 per share. |
| (g) | Effective June 1, 2010, the Fund changed its fiscal year end from May 31 to June 30. The information presented is for the period from June 1, 2010 to June 30, 2010. |
| * | Prior to July 1, 2011, Advisor Shares were known as A Shares. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY VALUE EQUITY FUND
INSTITUTIONAL SHARES
| | | Six Months | | | | | | | |
| | | Ended | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2014 | | | 2013(e) | |
| Net Asset Value, Beginning of Year / Period | | $ | 18.75 | | | $ | 14.74 | | | $ | 13.05 | |
| | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.13 | | | | 0.22 | | | | 0.18 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.68 | ) | | | 3.95 | | | | 1.74 | |
| Total from Investment Operations | | $ | (0.55 | ) | | $ | 4.17 | | | $ | 1.92 | |
| | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | |
| from Net Investment Income | | | (0.28 | ) | | | (0.16 | ) | | | (0.23 | ) |
| from Net Realized Gains | | | (0.54 | ) | | | — | | | | — | |
| Total Distributions to Shareholders | | $ | (0.82 | ) | | $ | (0.16 | ) | | $ | (0.23 | ) |
| | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 17.38 | | | $ | 18.75 | | | $ | 14.74 | |
| | | | | | | | | | | | | |
| Total Return | | | (2.98 | )%(b) | | | 28.41 | % | | | 14.99 | %(b) |
| | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 53 | | | $ | 15 | | | $ | 12 | |
| | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | |
| Net Investment Income | | | 1.46 | %(c) | | | 1.31 | % | | | 1.67 | %(c) |
| Net Expenses | | | 0.74 | %(c) | | | 0.77 | % | | | 0.81 | %(c) |
| Gross Expenses(d) | | | 0.74 | %(c) | | | 0.77 | % | | | 0.81 | %(c) |
| Portfolio Turnover Rate | | | 24 | %(b) | | | 37 | % | | | 57 | % |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Commenced operations on October 19, 2012. The information presented is for the period from October 19, 2012 to June 30, 2013. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY VALUE EQUITY FUND
INVESTOR SHARES*
| | | Six Months | | | | | | | | | | | | | | | | | | | |
| | | Ended | | | | | | | | | | | | | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | May 31, | |
| | | (Unaudited) | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010(f) | | | 2010 | |
| Net Asset Value, Beginning of Year / Period | | $ | 18.75 | | | $ | 14.74 | | | $ | 12.30 | | | $ | 12.56 | | | $ | 9.69 | | | $ | 10.18 | | | $ | 8.34 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.12 | | | | 0.20 | | | | 0.21 | | | | 0.15 | | | | 0.16 | | | | 0.01 | | | | 0.15 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.69 | ) | | | 3.95 | | | | 2.45 | | | | (0.33 | ) | | | 2.83 | | | | (0.47 | ) | | | 1.89 | |
| Total from Investment Operations | | $ | (0.57 | ) | | $ | 4.15 | | | $ | 2.66 | | | $ | (0.18 | ) | | $ | 2.99 | | | $ | (0.46 | ) | | $ | 2.04 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.25 | ) | | | (0.14 | ) | | | (0.22 | ) | | | (0.08 | ) | | | (0.12 | ) | | | (0.03 | ) | | | (0.20 | ) |
| from Net Realized Gains | | | (0.54 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Total Distributions to Shareholders | | $ | (0.79 | ) | | $ | (0.14 | ) | | $ | (0.22 | ) | | $ | (0.08 | ) | | $ | (0.12 | ) | | $ | (0.03 | ) | | $ | (0.20 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Payments by affiliates | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | (e) | | | — | |
| Redemption fees(a) | | | — | | | | — | (e) | | | — | (e) | | | — | | | | — | (e) | | | — | | | | — | (e) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 17.39 | | | $ | 18.75 | | | $ | 14.74 | | | $ | 12.30 | | | $ | 12.56 | | | $ | 9.69 | | | $ | 10.18 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return | | | (3.07 | )%(b) | | | 28.26 | % | | | 21.91 | % | | | (1.35 | )% | | | 30.90 | % | | | (4.47 | )%(b) | | | 24.52 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year / Period (000’s Omitted) | | $ | 219,929 | | | $ | 241,666 | | | $ | 160,800 | | | $ | 156,226 | | | $ | 177,918 | | | $ | 135,709 | | | $ | 147,337 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 1.31 | %(c) | | | 1.16 | % | | | 1.54 | % | | | 1.27 | % | | | 1.34 | % | | | 0.79 | %(c) | | | 1.51 | % |
| Net Expenses | | | 0.89 | %(c) | | | 0.92 | % | | | 0.94 | % | | | 0.91 | % | | | 0.93 | % | | | 0.97 | %(c) | | | 1.03 | % |
| Gross Expenses(d) | | | 0.89 | %(c) | | | 0.92 | % | | | 0.94 | % | | | 0.91 | % | | | 0.93 | % | | | 0.97 | %(c) | | | 1.03 | % |
| Portfolio Turnover Rate | | | 24 | %(b) | | | 37 | % | | | 57 | % | | | 72 | % | | | 64 | % | | | 7 | %(b) | | | 62 | % |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Less than $0.01 per share. |
| (f) | Effective June 1, 2010, the Fund changed its fiscal year end from May 31 to June 30. The information presented is for the period from June 1, 2010 to June 30, 2010. |
| * | Prior to October 19, 2012, Investor Shares were known as Institutional Shares. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY VALUE EQUITY FUND
ADVISOR SHARES*
| | | Six Months | | | | | | | | | | | | | | | | | | | |
| | | Ended | | | | | | | | | | | | | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | May 31, | |
| | | (Unaudited) | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010(g) | | | 2010 | |
| Net Asset Value, Beginning of Year / Period | | $ | 18.85 | | | $ | 14.82 | | | $ | 12.36 | | | $ | 12.62 | | | $ | 9.74 | | | $ | 10.23 | | | $ | 8.37 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.10 | | | | 0.15 | | | | 0.16 | | | | 0.13 | | | | 0.10 | | | | — | | | | 0.11 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.70 | ) | | | 3.98 | | | | 2.49 | | | | (0.32 | ) | | | 2.84 | | | | (0.47 | ) | | | 1.90 | |
| Total from Investment Operations | | $ | (0.60 | ) | | $ | 4.13 | | | $ | 2.65 | | | $ | (0.19 | ) | | $ | 2.94 | | | $ | (0.47 | ) | | $ | 2.01 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.20 | ) | | | (0.10 | ) | | | (0.19 | ) | | | (0.07 | ) | | | (0.06 | ) | | | (0.02 | ) | | | (0.15 | ) |
| from Realized Gains | | | (0.54 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Total Distributions to Shareholders | | $ | (0.74 | ) | | $ | (0.10 | ) | | $ | (0.19 | ) | | $ | (0.07 | ) | | $ | (0.06 | ) | | $ | (0.02 | ) | | $ | (0.15 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Payments by affiliates | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | (f) | | | — | |
| Redemption fees(a) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 17.51 | | | $ | 18.85 | | | $ | 14.82 | | | $ | 12.36 | | | $ | 12.62 | | | $ | 9.74 | | | $ | 10.23 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return(b) | | | (3.22 | )%(c) | | | 27.90 | % | | | 21.63 | % | | | (1.45 | )% | | | 30.28 | % | | | (4.57 | )%(c) | | | 24.08 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year / Period (000’s Omitted) | | $ | 1,455 | | | $ | 1,635 | | | $ | 1,615 | | | $ | 2,201 | | | $ | 2,996 | | | $ | 4,868 | | | $ | 5,196 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 1.06 | %(d) | | | 0.91 | % | | | 1.31 | % | | | 1.07 | % | | | 0.89 | % | | | 0.34 | %(d) | | | 1.05 | % |
| Net Expenses | | | 1.14 | %(d) | | | 1.17 | % | | | 1.17 | % | | | 1.11 | % | | | 1.38 | % | | | 1.42 | %(d) | | | 1.49 | % |
| Gross Expenses(e) | | | 1.14 | %(d) | | | 1.17 | % | | | 1.17 | % | | | 1.11 | % | | | 1.38 | % | | | 1.42 | %(d) | | | 1.49 | % |
| Portfolio Turnover Rate | | | 24 | %(c) | | | 37 | % | | | 57 | % | | | 72 | % | | | 64 | % | | | 7 | %(c) | | | 62 | % |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Total return does not include the effects of sales charges which existed for Advisor Shares (then known as A Shares) for years / periods ended June 30, 2011 and earlier. |
| (c) | Not annualized. |
| (d) | Annualized. |
| (e) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (f) | Less than $0.01 per share. |
| (g) | Effective June 1, 2010, the Fund changed its fiscal year end from May 31 to June 30. The information presented is for the period from June 1, 2010 to June 30, 2010. |
| * | Prior to July 1, 2011, Advisor Shares were known as A Shares. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY FLEXIBLE EQUITY FUND
INSTITUTIONAL SHARES
| | | Six Months | | | | | | | |
| | | Ended | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2014 | | | 2013(e) | |
| Net Asset Value, Beginning of Year / Period | | $ | 14.81 | | | $ | 12.28 | | | $ | 10.46 | |
| | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.06 | | | | 0.09 | | | | 0.06 | |
| Net Realized And Unrealized Gains | | | 1.21 | | | | 2.49 | | | | 1.82 | |
| Total from Investment Operations | | $ | 1.27 | | | $ | 2.58 | | | $ | 1.88 | |
| | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | |
| from Net Investment Income | | | (0.09 | ) | | | (0.05 | ) | | | (0.06 | ) |
| Total Distributions to Shareholders | | $ | (0.09 | ) | | $ | (0.05 | ) | | $ | (0.06 | ) |
| | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 15.99 | | | $ | 14.81 | | | $ | 12.28 | |
| | | | | | | | | | | | | |
| Total Return | | | 8.57 | %(b) | | | 21.06 | % | | | 18.07 | %(b) |
| | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 119 | | | $ | 3,126 | | | $ | 12 | |
| | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | |
| Net Investment Income | | | 0.75 | %(c) | | | 0.66 | % | | | 0.65 | %(c) |
| Net Expenses | | | 0.76 | %(c) | | | 0.82 | % | | | 1.00 | %(c) |
| Gross Expenses(d) | | | 0.76 | %(c) | | | 0.81 | % | | | 0.88 | %(c) |
| Portfolio Turnover Rate | | | 4 | %(b) | | | 15 | % | | | 12 | % |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers or recoupments. |
| (e) | Commenced operations on October 19, 2012. The information presented is for the period from October 19, 2012 to June 30, 2013. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY FLEXIBLE EQUITY FUND
INVESTOR SHARES*
| | | Six Months | | | | | | | | | | | | | | | | | | | |
| | | Ended | | | | | | | | | | | | | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | May 31, | |
| | | (Unaudited) | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010(f) | | | 2010 | |
| Net Asset Value, Beginning of Year / Period | | $ | 14.79 | | | $ | 12.28 | | | $ | 9.68 | | | $ | 9.16 | | | $ | 7.33 | | | $ | 7.62 | | | $ | 6.16 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.05 | | | | 0.07 | | | | 0.05 | | | | 0.05 | | | | 0.02 | | | | — | | | | 0.05 | |
| Net Realized And Unrealized Gains (Losses) | | | 1.20 | | | | 2.48 | | | | 2.60 | | | | 0.50 | | | | 1.83 | | | | (0.28 | ) | | | 1.45 | |
| Total from Investment Operations | | $ | 1.25 | | | $ | 2.55 | | | $ | 2.65 | | | $ | 0.55 | | | $ | 1.85 | | | $ | (0.28 | ) | | $ | 1.50 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.07 | ) | | | (0.04 | ) | | | (0.05 | ) | | | (0.03 | ) | | | (0.02 | ) | | | (0.01 | ) | | | (0.04 | ) |
| from Return of Capital | | | — | | | | — | | | | — | | | | — | | | | — | (e) | | | — | | | | — | |
| Total Distributions to Shareholders | | $ | (0.07 | ) | | $ | (0.04 | ) | | $ | (0.05 | ) | | $ | (0.03 | ) | | $ | (0.02 | ) | | $ | (0.01 | ) | | $ | (0.04 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | (e) | | | — | | | | — | | | | — | (e) | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 15.97 | | | $ | 14.79 | | | $ | 12.28 | | | $ | 9.68 | | | $ | 9.16 | | | $ | 7.33 | | | $ | 7.62 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return | | | 8.46 | %(b) | | | 20.78 | % | | | 27.51 | % | | | 5.98 | % | | | 25.27 | % | | | (3.69 | )%(b) | | | 24.39 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year / Period (000’s Omitted) | | $ | 222,250 | | | $ | 162,615 | | | $ | 82,783 | | | $ | 37,477 | | | $ | 26,827 | | | $ | 18,108 | | | $ | 17,777 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 0.60 | %(c) | | | 0.51 | % | | | 0.50 | % | | | 0.52 | % | | | 0.28 | % | | | 0.38 | %(c) | | | 0.61 | % |
| Net Expenses | | | 0.91 | %(c) | | | 0.97 | % | | | 1.15 | % | | | 1.15 | % | | | 1.15 | % | | | 1.15 | %(c) | | | 1.11 | % |
| Gross Expenses(d) | | | 0.91 | %(c) | | | 0.96 | % | | | 1.05 | % | | | 1.18 | % | | | 1.32 | % | | | 1.48 | %(c) | | | 1.61 | % |
| Portfolio Turnover Rate | | | 4 | %(b) | | | 15 | % | | | 12 | % | | | 19 | % | | | 33 | % | | | 1 | %(b) | | | 22 | % |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers or recoupments. |
| (e) | Less than $0.01 per share. |
| (f) | Effective June 1, 2010, the Fund changed its fiscal year end from May 31 to June 30. The information presented is for the period from June 1, 2010 to June 30, 2010. |
| * | Prior to October 19, 2012, Investor Shares were known as Institutional Shares. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY FLEXIBLE EQUITY FUND
ADVISOR SHARES*
| | | Six Months | | | | | | | | | | | | | | | | | | | |
| | | Ended | | | | | | | | | | | | | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | May 31, | |
| | | (Unaudited) | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010(g) | | | 2010 | |
| Net Asset Value, Beginning of Year / Period | | $ | 14.77 | | | $ | 12.28 | | | $ | 9.68 | | | $ | 9.17 | | | $ | 7.33 | | | $ | 7.62 | | | $ | 6.17 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.03 | | | | 0.04 | | | | 0.02 | | | | 0.03 | | | | 0.01 | | | | — | | | | 0.02 | |
| Net Realized And Unrealized Gains (Losses) | | | 1.20 | | | | 2.48 | | | | 2.61 | | | | 0.49 | | | | 1.84 | | | | (0.29 | ) | | | 1.45 | |
| Total from Investment Operations | | $ | 1.23 | | | $ | 2.52 | | | $ | 2.63 | | | $ | 0.52 | | | $ | 1.85 | | | $ | (0.29 | ) | | $ | 1.47 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.02 | ) | | | (0.03 | ) | | | (0.03 | ) | | | (0.01 | ) | | | (0.01 | ) | | | — | (f) | | | (0.02 | ) |
| from Return of Capital | | | — | | | | — | | | | — | | | | — | | | | — | (f) | | | — | | | | — | |
| Total Distributions to Shareholders | | $ | (0.02 | ) | | $ | (0.03 | ) | | $ | (0.03 | ) | | $ | (0.01 | ) | | $ | (0.01 | ) | | $ | — | (f) | | $ | (0.02 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | | | | — | | | | — | (f) | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 15.98 | | | $ | 14.77 | | | $ | 12.28 | | | $ | 9.68 | | | $ | 9.17 | | | $ | 7.33 | | | $ | 7.62 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return(b) | | | 8.36 | %(c) | | | 20.52 | % | | | 27.25 | % | | | 5.73 | % | | | 25.18 | % | | | (3.75 | )%(c) | | | 23.88 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year / Period (000’s Omitted) | | $ | 13,364 | | | $ | 14,831 | | | $ | 6,115 | | | $ | 1,079 | | | $ | 1,259 | | | $ | 955 | | | $ | 992 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 0.35 | %(d) | | | 0.26 | % | | | 0.30 | % | | | 0.32 | % | | | 0.08 | % | | | 0.18 | %(d) | | | 0.37 | % |
| Net Expenses | | | 1.16 | %(d) | | | 1.22 | % | | | 1.35 | % | | | 1.35 | % | | | 1.35 | % | | | 1.35 | %(d) | | | 1.35 | % |
Gross Expenses(e) | | | 1.16 | %(d) | | | 1.21 | % | | | 1.30 | % | | | 1.38 | % | | | 1.53 | % | | | 1.68 | %(d) | | | 1.85 | % |
| Portfolio Turnover Rate | | | 4 | %(c) | | | 15 | % | | | 12 | % | | | 19 | % | | | 33 | % | | | 1 | %(c) | | | 22 | % |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Total return does not include the effects of sales charges which existed for Advisor Shares (then known as A Shares) for years / periods ended June 30, 2011 and earlier. |
| (c) | Not annualized. |
| (d) | Annualized. |
| (e) | Reflects the expense ratio excluding any waivers or recoupments. |
| (f) | Less than $0.01 per share. |
| (g) | Effective June 1, 2010, the Fund changed its fiscal year end from May 31 to June 30. The information presented is for the period from June 1, 2010 to June 30, 2010. |
| * | Prior to July 1, 2011, Advisor Shares were known as A Shares. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY EQUITY INCOME FUND
INSTITUTIONAL SHARES
| | | Six Months | | | | | | | |
| | | Ended | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2014 | | | 2013(e) | |
| Net Asset Value, Beginning of Year / Period | | $ | 13.70 | | | $ | 12.16 | | | $ | 11.07 | |
| | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.16 | | | | 0.29 | | | | 0.21 | |
| Net Realized And Unrealized Gains | | | 0.37 | | | | 1.99 | | | | 1.19 | |
| Total from Investment Operations | | $ | 0.53 | | | $ | 2.28 | | | $ | 1.40 | |
| | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | |
| from Net Investment Income | | | (0.16 | ) | | | (0.29 | ) | | | (0.23 | ) |
| from Net Realized Gains | | | (0.63 | ) | | | (0.45 | ) | | | (0.08 | ) |
| Total Distributions to Shareholders | | $ | (0.79 | ) | | $ | (0.74 | ) | | $ | (0.31 | ) |
| | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 13.44 | | | $ | 13.70 | | | $ | 12.16 | |
| | | | | | | | | | | | | |
| Total Return | | | 3.84 | %(b) | | | 19.30 | % | | | 12.88 | %(b) |
| | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 18,361 | | | $ | 17,663 | | | $ | 11 | |
| | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | |
| Net Investment Income | | | 2.31 | %(c) | | | 2.23 | % | | | 2.53 | %(c) |
| Net Expenses | | | 0.75 | %(c) | | | 0.77 | % | | | 0.80 | %(c) |
| Gross Expenses(d) | | | 0.75 | %(c) | | | 0.77 | % | | | 0.80 | %(c) |
| Portfolio Turnover Rate | | | 10 | %(b) | | | 32 | % | | | 21 | % |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Commenced operations on October 19, 2012. The information presented is for the period from October 19, 2012 to June 30, 2013. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY EQUITY INCOME FUND
INVESTOR SHARES*
| | | Six Months | | | | | | | | | | |
| | | Ended | | | | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2014 | | | 2013 | | | 2012(f) | |
| Net Asset Value, Beginning of Year / Period | | $ | 13.69 | | | $ | 12.16 | | | $ | 10.49 | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.15 | | | | 0.27 | | | | 0.27 | | | | 0.15 | |
| Net Realized And Unrealized Gains | | | 0.37 | | | | 1.98 | | | | 1.76 | | | | 0.46 | |
| Total from Investment Operations | | $ | 0.52 | | | $ | 2.25 | | | $ | 2.03 | | | $ | 0.61 | |
| | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.14 | ) | | | (0.27 | ) | | | (0.28 | ) | | | (0.12 | ) |
| from Net Realized Gains | | | (0.63 | ) | | | (0.45 | ) | | | (0.08 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (0.77 | ) | | $ | (0.72 | ) | | $ | (0.36 | ) | | $ | (0.12 | ) |
| | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | (e) | | | — | (e) |
| | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 13.44 | | | $ | 13.69 | | | $ | 12.16 | | | $ | 10.49 | |
| | | | | | | | | | | | | | | | | |
| Total Return | | | 3.84 | %(b) | | | 19.04 | % | | | 19.62 | % | | | 6.11 | %(b) |
| | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 185,923 | | | $ | 180,372 | | | $ | 173,599 | | | $ | 106,075 | |
| | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 2.16 | %(c) | | | 2.08 | % | | | 2.37 | % | | | 2.82 | %(c) |
| Net Expenses | | | 0.90 | %(c) | | | 0.92 | % | | | 0.96 | % | | | 0.99 | %(c) |
| Gross Expenses(d) | | | 0.90 | %(c) | | | 0.92 | % | | | 0.96 | % | | | 0.99 | %(c) |
| Portfolio Turnover Rate | | | 10 | %(b) | | | 32 | % | | | 21 | % | | | 14 | %(b) |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Less than $0.01 per share. |
| (f) | Commenced operations on December 29, 2011. The information presented is for the period from December 29, 2011 to June 30, 2012. |
| * | Prior to October 19, 2012, Investor Shares were known as Institutional Shares. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY EQUITY INCOME FUND
ADVISOR SHARES
| | | Six Months | | | | | | | | | | |
| | | Ended | | | | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2014 | | | 2013 | | | 2012(f) | |
| Net Asset Value, Beginning of Year / Period | | $ | 13.67 | | | $ | 12.14 | | | $ | 10.48 | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.13 | | | | 0.24 | | | | 0.25 | | | | 0.14 | |
| Net Realized And Unrealized Gains | | | 0.38 | | | | 1.98 | | | | 1.75 | | | | 0.46 | |
| Total from Investment Operations | | $ | 0.51 | | | $ | 2.22 | | | $ | 2.00 | | | $ | 0.60 | |
| | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.13 | ) | | | (0.24 | ) | | | (0.26 | ) | | | (0.12 | ) |
| from Net Realized Gains | | | (0.63 | ) | | | (0.45 | ) | | | (0.08 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (0.76 | ) | | $ | (0.69 | ) | | $ | (0.34 | ) | | $ | (0.12 | ) |
| | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | | | | — | (e) |
| | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 13.42 | | | $ | 13.67 | | | $ | 12.14 | | | $ | 10.48 | |
| | | | | | | | | | | | | | | | | |
| Total Return | | | 3.71 | %(b) | | | 18.79 | % | | | 19.33 | % | | | 5.95 | %(b) |
| | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 3,243 | | | $ | 3,298 | | | $ | 2,346 | | | $ | 636 | |
| | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 1.91 | %(c) | | | 1.83 | % | | | 2.13 | % | | | 2.60 | %(c) |
| Net Expenses | | | 1.15 | %(c) | | | 1.17 | % | | | 1.20 | % | | | 1.19 | %(c) |
| Gross Expenses(d) | | | 1.15 | %(c) | | | 1.17 | % | | | 1.20 | % | | | 1.19 | %(c) |
| Portfolio Turnover Rate | | | 10 | %(b) | | | 32 | % | | | 21 | % | | | 14 | %(b) |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Less than $0.01 per share. |
| (f) | Commenced operations on December 29, 2011. The information presented is for the period from December 29, 2011 to June 30, 2012. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY SUSTAINABLE GROWTH FUND*
INSTITUTIONAL SHARES
| | | Six Months | | | | | | | |
| | | Ended | | | | | | | |
| | | December 31, | | | Year Ended: | |
| | | 2014 | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2014 | | | 2013 | |
| Net Asset Value, Beginning of Year / Period | | $ | 14.11 | | | $ | 11.64 | | | $ | 10.00 | |
| | | | | | | | | | | | | |
| Net Investment Income (Loss)(a) | | | (0.01 | ) | | | — | | | | — | |
| Net Realized And Unrealized Gains | | | 0.82 | | | | 2.61 | | | | 1.65 | |
| Total from Investment Operations | | $ | 0.81 | | | $ | 2.61 | | | $ | 1.65 | |
| | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | |
| from Net Realized Gains | | | (0.31 | ) | | | (0.14 | ) | | | (0.01 | ) |
| Total Distributions to Shareholders | | $ | (0.31 | ) | | $ | (0.14 | ) | | $ | (0.01 | ) |
| | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 14.61 | | | $ | 14.11 | | | $ | 11.64 | |
| | | | | | | | | | | | | |
| Total Return | | | 5.69 | %(b) | | | 22.51 | % | | | 16.47 | % |
| | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 31,842 | | | $ | 30,374 | | | $ | 32,045 | |
| | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | |
| Net Investment Income | | | (0.09 | )%(c) | | | (0.01 | )% | | | 0.03 | % |
| Net Expenses | | | 0.75 | %(c) | | | 0.77 | % | | | 0.86 | % |
| Gross Expenses(d) | | | 0.75 | %(c) | | | 0.77 | % | | | 0.86 | % |
| Portfolio Turnover Rate | | | 22 | %(b) | | | 30 | % | | | 30 | % |
| (a) | Calculated based on average shares outstanding during the year. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| * | Commenced operations on June 29, 2012. No financial highlights are presented for the period from June 29, 2012 to June 30, 2012, as the Fund did not make any investments, earn any income or incur any expenses during the year. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY SUSTAINABLE GROWTH FUND*
INVESTOR SHARES
| | | Six Months | | | | | | | |
| | | Ended | | | | | | | |
| | | December 31, | | | Year Ended: | |
| | | 2014 | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2014 | | | 2013 | |
| Net Asset Value, Beginning of Year / Period | | $ | 14.06 | | | $ | 11.62 | | | $ | 10.00 | |
| | | | | | | | | | | | | |
| Net Investment Loss(a) | | | (0.02 | ) | | | (0.02 | ) | | | (0.01 | ) |
| Net Realized And Unrealized Gains | | | 0.82 | | | | 2.60 | | | | 1.64 | |
| Total from Investment Operations | | $ | 0.80 | | | $ | 2.58 | | | $ | 1.63 | |
| | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | |
| from Net Realized Gains | | | (0.31 | ) | | | (0.14 | ) | | | (0.01 | ) |
| Total Distributions to Shareholders | | $ | (0.31 | ) | | $ | (0.14 | ) | | $ | (0.01 | ) |
| | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 14.55 | | | $ | 14.06 | | | $ | 11.62 | |
| | | | | | | | | | | | | |
| Total Return | | | 5.64 | %(b) | | | 22.29 | % | | | 16.27 | % |
| | | | | | | | | | | | | |
| Net Assets at End of | | | | | | | | | | | | |
| Year / Period (000’s Omitted) | | $ | 47,142 | | | $ | 46,823 | | | $ | 24,028 | |
| | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | |
| Net Investment Loss | | | (0.24 | )%(c) | | | (0.16 | )% | | | (0.12 | )% |
| Net Expenses | | | 0.90 | %(c) | | | 0.92 | % | | | 1.01 | % |
| Gross Expenses(d) | | | 0.90 | %(c) | | | 0.92 | % | | | 1.01 | % |
| Portfolio Turnover Rate | | | 22 | %(b) | | | 30 | % | | | 30 | % |
| (a) | Calculated based on average shares outstanding during the year. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| * | Commenced operations on June 29, 2012. No financial highlights are presented for the period from June 29, 2012 to June 30, 2012, as the Fund did not make any investments, earn any income or incur any expenses during the year. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY SUSTAINABLE GROWTH FUND*
ADVISOR SHARES
| | | Six Months | | | | | | | |
| | | Ended | | | | | | | |
| | | December 31, | | | Year Ended: | |
| | | 2014 | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2014 | | | 2013 | |
| Net Asset Value, Beginning of Year / Period | | $ | 14.00 | | | $ | 11.60 | | | $ | 10.00 | |
| | | | | | | | | | | | | |
| Net Investment Loss(a) | | | (0.03 | ) | | | (0.05 | ) | | | (0.04 | ) |
| Net Realized And Unrealized Gains | | | 0.80 | | | | 2.59 | | | | 1.65 | |
| Total from Investment Operations | | $ | 0.77 | | | $ | 2.54 | | | $ | 1.61 | |
| | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | |
| from Net Realized Gains | | | (0.31 | ) | | | (0.14 | ) | | | (0.01 | ) |
| Total Distributions to Shareholders | | $ | (0.31 | ) | | $ | (0.14 | ) | | $ | (0.01 | ) |
| | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | (e) | | | — | (e) |
| | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 14.46 | | | $ | 14.00 | | | $ | 11.60 | |
| | | | | | | | | | | | | |
| Total Return | | | 5.45 | %(b) | | | 21.99 | % | | | 16.07 | % |
| | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 129,079 | | | $ | 132,846 | | | $ | 124,256 | |
| | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | |
| Net Investment Loss | | | (0.49 | )%(c) | | | (0.41 | )% | | | (0.37 | )% |
| Net Expenses | | | 1.15 | %(c) | | | 1.17 | % | | | 1.26 | % |
| Gross Expenses(d) | | | 1.15 | %(c) | | | 1.17 | % | | | 1.26 | % |
| Portfolio Turnover Rate | | | 22 | %(b) | | | 30 | % | | | 30 | % |
| (a) | Calculated based on average shares outstanding during the year. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Less than $0.01 per share. |
| * | Commenced operations on June 29, 2012. No financial highlights are presented for the period from June 29, 2012 to June 30, 2012, as the Fund did not make any investments, earn any income or incur any expenses during the period. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY SMALL-CAP GROWTH FUND
INSTITUTIONAL SHARES*
| | | Six Months | | | | | | | | | | | | | | | | | | | |
| | | Ended | | | | | | | | | | | | | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | May 31, | |
| | | (Unaudited) | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010(e) | | | 2010 | |
| Net Asset Value, Beginning of Year / Period | | $ | 35.85 | | | $ | 31.67 | | | $ | 28.36 | | | $ | 29.56 | | | $ | 20.75 | | | $ | 21.67 | | | $ | 16.64 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Loss(a) | | | (0.10 | ) | | | (0.22 | ) | | | (0.07 | ) | | | (0.21 | ) | | | (0.21 | ) | | | (0.02 | ) | | | (0.23 | ) |
| Net Realized And Unrealized Gains (Losses) | | | 1.29 | | | | 6.08 | | | | 6.07 | | | | (0.72 | ) | | | 9.02 | | | | (0.90 | ) | | | 5.26 | |
| Total from Investment Operations | | $ | 1.19 | | | $ | 5.86 | | | $ | 6.00 | | | $ | (0.93 | ) | | $ | 8.81 | | | $ | (0.92 | ) | | $ | 5.03 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Realized Gains | | | (4.21 | ) | | | (1.68 | ) | | | (2.69 | ) | | | (0.27 | ) | | | — | | | | — | | | | — | |
| Total Distributions to Shareholders | | $ | (4.21 | ) | | $ | (1.68 | ) | | $ | (2.69 | ) | | $ | (0.27 | ) | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 32.83 | | | $ | 35.85 | | | $ | 31.67 | | | $ | 28.36 | | | $ | 29.56 | | | $ | 20.75 | | | $ | 21.67 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return | | | 3.29 | %(b) | | | 18.59 | % | | | 22.84 | % | | | (3.08 | )% | | | 42.46 | % | | | (4.25 | )%(b) | | | 30.23 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year / Period (000’s Omitted) | | $ | 8,501 | | | $ | 8,497 | | | $ | 7,347 | | | $ | 6,944 | | | $ | 8,732 | | | $ | 7,065 | | | $ | 7,400 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Loss | | | (0.54 | )%(c) | | | (0.63 | )% | | | (0.24 | )% | | | (0.77 | )% | | | (0.80 | )% | | | (0.92 | )%(c) | | | (1.12 | )% |
| Net Expenses | | | 0.99 | %(c) | | | 1.01 | % | | | 1.05 | % | | | 1.11 | % | | | 1.13 | % | | | 1.17 | %(c) | | | 1.49 | % |
| Gross Expenses(d) | | | 0.99 | %(c) | | | 1.01 | % | | | 1.05 | % | | | 1.11 | % | | | 1.13 | % | | | 1.17 | %(c) | | | 1.49 | % |
| Portfolio Turnover Rate | | | 12 | %(b) | | | 19 | % | | | 48 | % | | | 66 | % | | | 61 | % | | | 7 | %(b) | | | 71 | % |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Effective June 1, 2010, the Fund changed its fiscal year end from May 31 to June 30. The information presented is for the period from June 1, 2010 to June 30, 2010. |
| * | Prior to October 19, 2012, Institutional Shares were known as D Shares. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY SMALL-CAP GROWTH FUND
INVESTOR SHARES*
| | | Six Months | | | | | | | | | | | | | | | | | | | |
| | | Ended | | | | | | | | | | | | | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | May 31, | |
| | | (Unaudited) | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010(f) | | | 2010 | |
| Net Asset Value, Beginning of Year / Period | | $ | 18.04 | | | $ | 15.96 | | | $ | 14.31 | | | $ | 15.07 | | | $ | 10.58 | | | $ | 11.06 | | | $ | 8.47 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Loss(a) | | | (0.06 | ) | | | (0.14 | ) | | | (0.05 | ) | | | (0.11 | ) | | | (0.11 | ) | | | (0.01 | ) | | | (0.10 | ) |
| Net Realized And Unrealized Gains (Losses) | | | 0.65 | | | | 3.07 | | | | 3.06 | | | | (0.38 | ) | | | 4.60 | | | | (0.47 | ) | | | 2.69 | |
| Total from Investment Operations | | $ | 0.59 | | | $ | 2.93 | | | $ | 3.01 | | | $ | (0.49 | ) | | $ | 4.49 | | | $ | (0.48 | ) | | $ | 2.59 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Realized Gains | | | (2.12 | ) | | | (0.85 | ) | | | (1.36 | ) | | | (0.27 | ) | | | — | | | | — | | | | — | |
| Total Distributions to Shareholders | | $ | (2.12 | ) | | $ | (0.85 | ) | | $ | (1.36 | ) | | $ | (0.27 | ) | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | (e) | | | — | (e) | | | — | (e) | | | — | | | | — | (e) | | | — | (e) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 16.51 | | | $ | 18.04 | | | $ | 15.96 | | | $ | 14.31 | | | $ | 15.07 | | | $ | 10.58 | | | $ | 11.06 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return | | | 3.23 | %(b) | | | 18.42 | % | | | 22.68 | % | | | (3.12 | )% | | | 42.44 | % | | | (4.34 | )%(b) | | | 30.58 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year / Period (000’s Omitted) | | $ | 252,193 | | | $ | 285,287 | | | $ | 281,027 | | | $ | 215,311 | | | $ | 208,222 | | | $ | 139,647 | | | $ | 145,293 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Loss | | | (0.69 | )%(c) | | | (0.78 | )% | | | (0.36 | )% | | | (0.82 | )% | | | (0.85 | )% | | | (0.97 | )%(c) | | | (0.95 | )% |
| Net Expenses | | | 1.14 | %(c) | | | 1.16 | % | | | 1.17 | % | | | 1.16 | % | | | 1.18 | % | | | 1.22 | %(c) | | | 1.32 | % |
| Gross Expenses(d) | | | 1.14 | %(c) | | | 1.16 | % | | | 1.17 | % | | | 1.16 | % | | | 1.18 | % | | | 1.22 | %(c) | | | 1.32 | % |
| Portfolio Turnover Rate | | | 12 | %(b) | | | 19 | % | | | 48 | % | | | 66 | % | | | 61 | % | | | 7 | %(b) | | | 71 | % |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Less than $0.01 per share. |
| (f) | Effective June 1, 2010, the Fund changed its fiscal year end from May 31 to June 30. The information presented is for the period from June 1, 2010 to June 30, 2010. |
| * | Prior to October 19, 2012, Investor Shares were known as Institutional Shares. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY SMALL-CAP GROWTH FUND
ADVISOR SHARES*
| | | Six Months | | | | | | | | | | | | | | | | | | | |
| | | Ended | | | | | | | | | | | | | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | May 31, | |
| | | (Unaudited) | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010(g) | | | 2010 | |
| Net Asset Value, Beginning of Year / Period | | $ | 17.39 | | | $ | 15.43 | | | $ | 13.86 | | | $ | 14.65 | | | $ | 10.34 | | | $ | 10.80 | | | $ | 8.32 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Loss(a) | | | (0.08 | ) | | | (0.18 | ) | | | (0.09 | ) | | | (0.14 | ) | | | (0.18 | ) | | | (0.01 | ) | | | (0.14 | ) |
| Net Realized And Unrealized Gains (Losses) | | | 0.63 | | | | 2.96 | | | | 2.97 | | | | (0.38 | ) | | | 4.49 | | | | (0.45 | ) | | | 2.62 | |
| Total from Investment Operations | | $ | 0.55 | | | $ | 2.78 | | | $ | 2.88 | | | $ | (0.52 | ) | | $ | 4.31 | | | $ | (0.46 | ) | | $ | 2.48 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Realized Gains | | | (2.04 | ) | | | (0.82 | ) | | | (1.31 | ) | | | (0.27 | ) | | | — | | | | — | | | | — | |
| Total Distributions to Shareholders | | $ | (2.04 | ) | | $ | (0.82 | ) | | $ | (1.31 | ) | | $ | (0.27 | ) | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | | | | — | (f) | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 15.90 | | | $ | 17.39 | | | $ | 15.43 | | | $ | 13.86 | | | $ | 14.65 | | | $ | 10.34 | | | $ | 10.80 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return(b) | | | 3.13 | %(c) | | | 18.07 | % | | | 22.45 | % | | | (3.41 | )% | | | 41.68 | % | | | (4.26 | )%(c) | | | 29.81 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year / Period (000’s Omitted) | | $ | 5,845 | | | $ | 7,300 | | | $ | 5,493 | | | $ | 2,875 | | | $ | 3,110 | | | $ | 4,075 | | | $ | 4,254 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Loss | | | (0.94 | )%(d) | | | (1.03 | )% | | | (0.60 | )% | | | (1.07 | )% | | | (1.36 | )% | | | (1.42 | )%(d) | | | (1.41 | )% |
| Net Expenses | | | 1.39 | %(d) | | | 1.41 | % | | | 1.41 | % | | | 1.41 | % | | | 1.69 | % | | | 1.67 | %(d) | | | 1.78 | % |
| Gross Expenses(e) | | | 1.39 | %(d) | | | 1.41 | % | | | 1.41 | % | | | 1.41 | % | | | 1.69 | % | | | 1.67 | %(d) | | | 1.78 | % |
| Portfolio Turnover Rate | | | 12 | %(c) | | | 19 | % | | | 48 | % | | | 66 | % | | | 61 | % | | | 7 | %(c) | | | 71 | % |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Total return does not include the effects of sales charges which existed for Advisor Shares (then known as A Shares) for years / periods ended June 30, 2011 and earlier. |
| (c) | Not annualized. |
| (d) | Annualized. |
| (e) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (f) | Less than $0.01 per share. |
| (g) | Effective June 1, 2010, the Fund changed its fiscal year end from May 31 to June 30. The information presented is for the period from June 1, 2010 to June 30, 2010. |
| * | Prior to July 1, 2011, Advisor Shares were known as A Shares. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY SMALL-CAP FUNDAMENTAL VALUE FUND
INSTITUTIONAL SHARES
| | | Six Months | | | | | | | |
| | | Ended | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2014 | | | 2013(e) | |
| Net Asset Value, Beginning of Year / Period | | $ | 23.96 | | | $ | 20.06 | | | $ | 16.77 | |
| | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.05 | | | | 0.12 | | | | 0.06 | |
| Net Realized And Unrealized Gains | | | 0.90 | | | | 4.91 | | | | 3.30 | |
| Total from Investment Operations | | $ | 0.95 | | | $ | 5.03 | | | $ | 3.36 | |
| | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | |
| from Net Investment Income | | | (0.14 | ) | | | (0.19 | ) | | | (0.07 | ) |
| from Net Realized Gains | | | (1.17 | ) | | | (0.94 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (1.31 | ) | | $ | (1.13 | ) | | $ | (0.07 | ) |
| �� | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 23.60 | | | $ | 23.96 | | | $ | 20.06 | |
| | | | | | | | | | | | | |
| Total Return | | | 3.99 | %(b) | | | 25.37 | % | | | 20.13 | %(b) |
| | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 34,340 | | | $ | 19,515 | | | $ | 1,061 | |
| | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | |
| Net Investment Income | | | 0.43 | %(c) | | | 0.51 | % | | | 1.14 | %(c) |
| Net Expenses | | | 0.98 | %(c) | | | 1.00 | % | | | 1.05 | %(c) |
| Gross Expenses(d) | | | 0.98 | %(c) | | | 1.00 | % | | | 1.05 | %(c) |
| Portfolio Turnover Rate | | | 13 | %(b) | | | 30 | % | | | 34 | % |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Commenced operations on October 19, 2012. The information presented is for the period from October 19, 2012 to June 30, 2013. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY SMALL-CAP FUNDAMENTAL VALUE FUND
INVESTOR SHARES*
| | | Six Months | | | | | | | | | | | | | | | | | | | |
| | | Ended | | | | | | | | | | | | | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | May 31, | |
| | | (Unaudited) | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010(f) | | | 2010 | |
| Net Asset Value, Beginning of Year / Period | | $ | 23.94 | | | $ | 20.06 | | | $ | 15.65 | | | $ | 16.89 | | | $ | 11.92 | | | $ | 13.03 | | | $ | 10.48 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income (Loss)(a) | | | 0.03 | | | | 0.08 | | | | 0.18 | | | | 0.10 | | | | 0.11 | | | | 0.01 | | | | (0.02 | ) |
| Net Realized And Unrealized Gains (Losses) | | | 0.91 | | | | 4.90 | | | | 4.29 | | | | (0.51 | ) | | | 5.54 | | | | (1.12 | ) | | | 2.80 | |
| Total from Investment Operations | | $ | 0.94 | | | $ | 4.98 | | | $ | 4.47 | | | $ | (0.41 | ) | | $ | 5.65 | | | $ | (1.11 | ) | | $ | 2.78 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.11 | ) | | | (0.16 | ) | | | (0.06 | ) | | | (0.12 | ) | | | (0.08 | ) | | | — | | | | (0.05 | ) |
| from Net Realized Gains | | | (1.17 | ) | | | (0.94 | ) | | | — | | | | (0.71 | ) | | | (0.60 | ) | | | — | | | | (0.18 | ) |
| Total Distributions to Shareholders | | $ | (1.28 | ) | | $ | (1.10 | ) | | $ | (0.06 | ) | | $ | (0.83 | ) | | $ | (0.68 | ) | | $ | — | | | $ | (0.23 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | (e) | | | — | (e) | | | — | (e) | | | — | (e) | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 23.60 | | | $ | 23.94 | | | $ | 20.06 | | | $ | 15.65 | | | $ | 16.89 | | | $ | 11.92 | | | $ | 13.03 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return | | | 3.94 | %(b) | | | 25.13 | % | | | 28.64 | % | | | (1.90 | )% | | | 48.20 | % | | | (8.52 | )%(b) | | | 26.70 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year / Period (000’s Omitted) | | $ | 602,777 | | | $ | 567,799 | | | $ | 371,018 | | | $ | 194,719 | | | $ | 107,537 | | | $ | 37,207 | | | $ | 37,629 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income (Loss) | | | 0.28 | %(c) | | | 0.36 | % | | | 1.01 | % | | | 0.64 | % | | | 0.70 | % | | | 0.91 | %(c) | | | (0.14 | )% |
| Net Expenses | | | 1.13 | %(c) | | | 1.15 | % | | | 1.18 | % | | | 1.19 | % | | | 1.24 | % | | | 1.36 | %(c) | | | 1.47 | % |
| Gross Expenses(d) | | | 1.13 | %(c) | | | 1.15 | % | | | 1.18 | % | | | 1.19 | % | | | 1.24 | % | | | 1.36 | %(c) | | | 1.62 | % |
| Portfolio Turnover Rate | | | 13 | %(b) | | | 30 | % | | | 34 | % | | | 36 | % | | | 67 | % | | | 2 | %(b) | | | 82 | % |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Less than $0.01 per share. |
| (f) | Effective June 1, 2010, the Fund changed its fiscal year end from May 31 to June 30. The information presented is for the period from June 1, 2010 to June 30, 2010. |
| * | Prior to October 19, 2012, Investor Shares were known as Institutional Shares. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY SMALL-CAP FUNDAMENTAL VALUE FUND
ADVISOR SHARES
| | | Six Months | | | | | | | | | | |
| | | Ended | | | | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2014 | | | 2013 | | | 2012(f) | |
| Net Asset Value, Beginning of Year / Period | | $ | 23.87 | | | $ | 20.01 | | | $ | 15.63 | | | $ | 16.39 | |
| | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | — | | | | 0.02 | | | | 0.03 | | | | 0.07 | |
| Net Realized And Unrealized Gains (Losses) | | | 0.90 | | | | 4.89 | | | | 4.38 | | | | (0.01 | ) |
| Total from Investment Operations | | $ | 0.90 | | | $ | 4.91 | | | $ | 4.41 | | | $ | 0.06 | |
| | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.08 | ) | | | (0.11 | ) | | | (0.03 | ) | | | (0.11 | ) |
| from Net Realized Gains | | | (1.17 | ) | | | (0.94 | ) | | | — | | | | (0.71 | ) |
| Total Distributions to Shareholders | | $ | (1.25 | ) | | $ | (1.05 | ) | | $ | (0.03 | ) | | $ | (0.82 | ) |
| | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | (e) | | | — | | | | — | (e) |
| | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 23.52 | | | $ | 23.87 | | | $ | 20.01 | | | $ | 15.63 | |
| | | | | | | | | | | | | | | | | |
| Total Return | | | 3.79 | %(b) | | | 24.83 | % | | | 28.28 | % | | | 0.90 | %(b) |
| | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 38,561 | | | $ | 21,416 | | | $ | 15,764 | | | $ | 418 | |
| | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 0.03 | %(c) | | | 0.11 | % | | | 0.75 | % | | | 0.44 | %(c) |
| Net Expenses | | | 1.38 | %(c) | | | 1.40 | % | | | 1.44 | % | | | 1.39 | %(c) |
| Gross Expenses(d) | | | 1.38 | %(c) | | | 1.40 | % | | | 1.44 | % | | | 1.39 | %(c) |
| Portfolio Turnover Rate | | | 13 | %(b) | | | 30 | % | | | 34 | % | | | 36 | % |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Less than $0.01 per share. |
| (f) | Advisor Shares commenced operations July 28, 2011. The information presented is for the period from July 28, 2011 to June 30, 2012. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY OPPORTUNITY FUND
INVESTOR SHARES*
| | | Six Months | | | | | | | | | | | | | | | | | | | |
| | | Ended | | | Year / Period Ended: | |
| | | December 31, | | | | | | | | | | | | | | | | | | | |
| | | 2014 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | May 31, | |
| | | (Unaudited) | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010(e) | | | 2010 | |
| Net Asset Value, Beginning of Year / Period | | $ | 22.99 | | | $ | 18.51 | | | $ | 14.97 | | | $ | 14.94 | | | $ | 11.03 | | | $ | 11.51 | | | $ | 9.40 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Loss(a) | | | (0.07 | ) | | | (0.13 | ) | | | (0.05 | ) | | | (0.09 | ) | | | (0.10 | ) | | | (0.01 | ) | | | (0.03 | ) |
| Net Realized And Unrealized Gains (Losses) | | | 1.00 | | | | 4.61 | | | | 3.59 | | | | 0.12 | | | | 4.01 | | | | (0.47 | ) | | | 2.14 | |
| Total from Investment Operations | | $ | 0.93 | | | $ | 4.48 | | | $ | 3.54 | | | $ | 0.03 | | | $ | 3.91 | | | $ | (0.48 | ) | | $ | 2.11 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 23.92 | | | $ | 22.99 | | | $ | 18.51 | | | $ | 14.97 | | | $ | 14.94 | | | $ | 11.03 | | | $ | 11.51 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return | | | 4.05 | %(b) | | | 24.20 | % | | | 23.65 | % | | | 0.20 | % | | | 35.45 | % | | | (4.17 | )%(b) | | | 22.45 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year / Period (000’s Omitted) | | $ | 12,081 | | | $ | 11,681 | | | $ | 9,173 | | | $ | 8,487 | | | $ | 11,692 | | | $ | 13,498 | | | $ | 14,863 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Loss | | | (0.60 | )%(c) | | | (0.63 | )% | | | (0.29 | )% | | | (0.59 | )% | | | (0.75 | )% | | | (0.84 | )%(c) | | | (0.29 | )% |
| Net Expenses | | | 1.50 | %(c) | | | 1.50 | % | | | 1.50 | % | | | 1.50 | % | | | 1.50 | % | | | 1.50 | %(c) | | | 1.50 | % |
| Gross Expenses(d) | | | 1.51 | %(c) | | | 1.52 | % | | | 1.72 | % | | | 1.74 | % | | | 1.78 | % | | | 1.68 | %(c) | | | 1.75 | % |
| Portfolio Turnover Rate | | | 27 | %(b) | | | 41 | % | | | 54 | % | | | 76 | % | | | 65 | % | | | 3 | %(b) | | | 97 | % |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Effective June 1, 2010, the Fund changed its fiscal year end from May 31 to June 30. The information presented is for the period from June 1, 2010 to June 30, 2010. |
| * | Prior to October 19, 2012, Investor Shares were known as Institutional Shares. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout the period.
BROWN ADVISORY MULTI-STRATEGY FUND
INSTITUTIONAL SHARES
| | | Period Ended | |
| | | December 31, | |
| | | 2014(e) | |
| | | (Unaudited) | |
| Net Asset Value, Beginning of Period | | $ | 10.00 | |
| | | | | |
| Net Investment Income(a) | | | 0.06 | |
| Net Realized And Unrealized Gains | | | — | |
| Total from Investment Operations | | $ | 0.06 | |
| | | | | |
| Distributions: | | | | |
| from Net Investment Income | | | (0.05 | ) |
| Total Distributions to Shareholders | | | (0.05 | ) |
| | | | | |
| Redemption fees(a) | | | — | |
| | | | | |
| Net Asset Value, End of Period | | $ | 10.01 | |
| | | | | |
| Total Return | | | 0.63 | %(b) |
| | | | | |
| Net Assets at End of Period (000’s Omitted) | | $ | 452 | |
| | | | | |
| Ratios to Average Net Assets: | | | | |
| Net Investment Income | | | 3.50 | %(c) |
| Net Expenses | | | 1.60 | %(c) |
| Gross Expenses(d) | | | 16.04 | %(c) |
| Portfolio Turnover Rate | | | 1 | %(b) |
| (a) | Calculated based on average shares outstanding during the period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Commenced operations on October 31, 2014. The information presented is for the period from October 31, 2014 to December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY INTERMEDIATE INCOME FUND
INVESTOR SHARES*
| | | Six Months | | | | | | | | | | | | | | | | | | | |
| | | Ended | | | | | | | | | | | | | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | May 31, | |
| | | (Unaudited) | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010(f) | | | 2010 | |
| Net Asset Value, Beginning of Year / Period | | $ | 10.74 | | | $ | 10.85 | | | $ | 11.37 | | | $ | 11.28 | | | $ | 11.23 | | | $ | 11.13 | | | $ | 10.76 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.10 | | | | 0.17 | | | | 0.19 | | | | 0.24 | | | | 0.31 | | | | 0.03 | | | | 0.38 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.02 | ) | | | 0.12 | | | | (0.26 | ) | | | 0.36 | | | | 0.11 | | | | 0.10 | | | | 0.38 | |
| Total from Investment Operations | | $ | 0.08 | | | $ | 0.29 | | | $ | (0.07 | ) | | $ | 0.60 | | | $ | 0.42 | | | $ | 0.13 | | | $ | 0.76 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.12 | ) | | | (0.18 | ) | | | (0.25 | ) | | | (0.25 | ) | | | (0.33 | ) | | | (0.03 | ) | | | (0.39 | ) |
| from Net Realized Gains | | | — | | | | (0.22 | ) | | | (0.20 | ) | | | (0.26 | ) | | | (0.04 | ) | | | — | | | | — | |
| Total Distributions to Shareholders | | $ | (0.12 | ) | | $ | (0.40 | ) | | $ | (0.45 | ) | | $ | (0.51 | ) | | $ | (0.37 | ) | | $ | (0.03 | ) | | $ | (0.39 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | (e) | | | — | (e) | | | — | (e) | | | — | (e) | | | — | (e) | | | — | (e) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 10.70 | | | $ | 10.74 | | | $ | 10.85 | | | $ | 11.37 | | | $ | 11.28 | | | $ | 11.23 | | | $ | 11.13 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return | | | 0.74 | %(b) | | | 2.66 | % | | | (0.72 | )% | | | 5.42 | % | | | 3.84 | % | | | 1.20 | %(b) | | | 7.17 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year / Period (000’s Omitted) | | $ | 152,351 | | | $ | 207,371 | | | $ | 241,543 | | | $ | 292,556 | | | $ | 255,847 | | | $ | 280,537 | | | $ | 270,658 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 1.77 | %(c) | | | 1.54 | % | | | 1.66 | % | | | 2.15 | % | | | 2.75 | % | | | 3.23 | %(c) | | | 3.45 | % |
| Net Expenses | | | 0.47 | %(c) | | | 0.52 | % | | | 0.52 | % | | | 0.50 | % | | | 0.52 | % | | | 0.53 | %(c) | | | 0.61 | % |
| Gross Expenses(d) | | | 0.52 | %(c) | | | 0.52 | % | | | 0.52 | % | | | 0.50 | % | | | 0.52 | % | | | 0.53 | %(c) | | | 0.61 | % |
| Portfolio Turnover Rate | | | 79 | %(b) | | | 162 | % | | | 111 | % | | | 75 | % | | | 84 | % | | | 6 | %(b) | | | 25 | % |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Less than $0.01 per share. |
| (f) | Effective June 1, 2010, the Fund changed its fiscal year end from May 31 to June 30. The information presented is for the period from June 1, 2010 to June 30, 2010. |
| * | Prior to October 19, 2012, Investor Shares were known as Institutional Shares. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY INTERMEDIATE INCOME FUND
ADVISOR SHARES*
| | | Six Months | | | | | | | | | | | | | | | | | | | |
| | | Ended | | | | | | | | | | | | | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | May 31, | |
| | | (Unaudited) | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010(g) | | | 2010 | |
| Net Asset Value, Beginning of Year / Period | | $ | 10.53 | | | $ | 10.65 | | | $ | 11.16 | | | $ | 11.08 | | | $ | 11.04 | | | $ | 10.95 | | | $ | 10.59 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.08 | | | | 0.14 | | | | 0.16 | | | | 0.22 | | | | 0.28 | | | | 0.03 | | | | 0.35 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.01 | ) | | | 0.11 | | | | (0.25 | ) | | | 0.35 | | | | 0.11 | | | | 0.09 | | | | 0.38 | |
| Total from Investment Operations | | $ | 0.07 | | | $ | 0.25 | | | $ | (0.09 | ) | | $ | 0.57 | | | $ | 0.39 | | | $ | 0.12 | | | $ | 0.73 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.11 | ) | | | (0.15 | ) | | | (0.22 | ) | | | (0.23 | ) | | | (0.31 | ) | | | (0.03 | ) | | | (0.37 | ) |
| from Net Realized Gains | | | — | | | | (0.22 | ) | | | (0.20 | ) | | | (0.26 | ) | | | (0.04 | ) | | | — | | | | — | |
| Total Distributions to Shareholders | | $ | (0.11 | ) | | $ | (0.37 | ) | | $ | (0.42 | ) | | $ | (0.49 | ) | | $ | (0.35 | ) | | $ | (0.03 | ) | | $ | (0.37 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | | | | — | (f) | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 10.49 | | | $ | 10.53 | | | $ | 10.65 | | | $ | 11.16 | | | $ | 11.08 | | | $ | 11.04 | | | $ | 10.95 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return(b) | | | 0.63 | %(c) | | | 2.36 | % | | | (0.87 | )% | | | 5.21 | % | | | 3.60 | % | | | 1.11 | %(c) | | | 6.98 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year / Period (000’s Omitted) | | $ | 10,171 | | | $ | 12,613 | | | $ | 16,149 | | | $ | 19,540 | | | $ | 22,647 | | | $ | 31,607 | | | $ | 31,415 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 1.52 | %(d) | | | 1.29 | % | | | 1.43 | % | | | 1.94 | % | | | 2.54 | % | | | 3.03 | %(d) | | | 3.24 | % |
| Net Expenses | | | 0.72 | %(d) | | | 0.77 | % | | | 0.75 | % | | | 0.71 | % | | | 0.72 | % | | | 0.73 | %(d) | | | 0.82 | % |
| Gross Expenses(e) | | | 0.77 | %(d) | | | 0.77 | % | | | 0.75 | % | | | 0.71 | % | | | 0.72 | % | | | 0.73 | %(d) | | | 0.82 | % |
| Portfolio Turnover Rate | | | 79 | %(c) | | | 162 | % | | | 111 | % | | | 75 | % | | | 84 | % | | | 6 | %(c) | | | 25 | % |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Total return does not include the effects of sales charges which existed for Advisor Shares (then known as A Shares) for years / periods ended June 30, 2011 and earlier. |
| (c) | Not annualized. |
| (d) | Annualized. |
| (e) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (f) | Less than $0.01 per share. |
| (g) | Effective June 1, 2010, the Fund changed its fiscal year end from May 31 to June 30. The information presented is for the period from June 1, 2010 to June 30, 2010. |
| * | Prior to July 1, 2011, Advisor Shares were known as A Shares. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout the period.
BROWN ADVISORY TOTAL RETURN FUND
INSTITUTIONAL SHARES
| | | Period Ended | |
| | | December 31, | |
| | | 2014(e) | |
| | | (Unaudited) | |
| Net Asset Value, Beginning of Period | | $ | 10.00 | |
| | | | | |
| Net Investment Income(a) | | | 0.02 | |
| Net Realized And Unrealized Gains | | | 0.04 | |
| Total from Investment Operations | | $ | 0.06 | |
| | | | | |
| Distributions: | | | | |
| from Net Investment Income | | | (0.01 | ) |
| Total Distributions to Shareholders | | $ | (0.01 | ) |
| | | | | |
| Redemption fees(a) | | | — | |
| | | | | |
| Net Asset Value, End of Period | | $ | 10.05 | |
| | | | | |
| Total Return | | | 0.65 | %(b) |
| | | | | |
| Net Assets at End of Period (000’s Omitted) | | $ | 4,344 | |
| | | | | |
| Ratios to Average Net Assets: | | | | |
| Net Investment Income | | | 1.16 | %(c) |
| Net Expenses | | | 0.54 | %(c) |
| Gross Expenses(d) | | | 0.55 | %(c) |
| Portfolio Turnover Rate | | | 86 | %(b) |
| (a) | Calculated based on average shares outstanding during the period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Commenced operations on October 30, 2014. The information presented is for the period from October 30, 2014 to December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout the period.
BROWN ADVISORY TOTAL RETURN FUND
INVESTOR SHARES
| | | Period Ended | |
| | | December 31, | |
| | | 2014(e) | |
| | | (Unaudited) | |
| Net Asset Value, Beginning of Period | | $ | 10.00 | |
| | | | | |
| Net Investment Income(a) | | | 0.02 | |
| Net Realized And Unrealized Gains | | | 0.04 | |
| Total from Investment Operations | | $ | 0.06 | |
| | | | | |
| Distributions: | | | | |
| from Net Investment Income | | | (0.01 | ) |
| Total Distributions to Shareholders | | $ | (0.01 | ) |
| | | | | |
| Redemption fees(a) | | | — | |
| | | | | |
| Net Asset Value, End of Period | | $ | 10.05 | |
| | | | | |
| Total Return | | | 0.64 | %(b) |
| | | | | |
| Net Assets at End of Period (000’s Omitted) | | $ | 56,341 | |
| | | | | |
| Ratios to Average Net Assets: | | | | |
| Net Investment Income | | | 1.11 | %(c) |
| Net Expenses | | | 0.59 | %(c) |
| Gross Expenses(d) | | | 0.60 | %(c) |
| Portfolio Turnover Rate | | | 86 | %(b) |
| (a) | Calculated based on average shares outstanding during the period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Commenced operations on October 30, 2014. The information presented is for the period from October 30, 2014 to December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout the period.
BROWN ADVISORY STRATEGIC BOND FUND
INVESTOR SHARES
| | | Period Ended | |
| | | December 31, | |
| | | 2014(e) | |
| | | (Unaudited) | |
| Net Asset Value, Beginning of Period | | $ | 10.07 | |
| | | | | |
| Net Investment Income(a) | | | 0.01 | |
| Net Realized And Unrealized Gains (Losses) | | | — | |
| Total from Investment Operations | | $ | 0.01 | |
| | | | | |
| Distributions: | | | | |
| from Net Investment Income | | | (0.05 | ) |
| Total Distributions to Shareholders | | $ | (0.05 | ) |
| | | | | |
| Redemption fees(a) | | | — | |
| | | | | |
| Net Asset Value, End of Period | | $ | 10.03 | |
| | | | | |
| Total Return | | | 0.14 | %(b) |
| | | | | |
| Net Assets at End of Period (000’s Omitted) | | $ | 35,011 | |
| | | | | |
| Ratios to Average Net Assets: | | | | |
| Net Investment Income | | | 0.89 | %(c) |
| Net Expenses | | | 0.70 | %(c) |
| Gross Expenses(d) | | | 0.75 | %(c) |
| Portfolio Turnover Rate | | | 359 | %(b) |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Not annualized |
| (c) | Annualized |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Commenced operations on October 31, 2014. The information presented, other than portfolio turnover, is for the period from October 31, 2014 to December 31, 2014. Portfolio turnover is calculated at the fund level and is for the entire six months ended December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout the year / period.
BROWN ADVISORY STRATEGIC BOND FUND
ADVISOR SHARES
| | | Six Months | | | | | | | | | | |
| | | Ended | | | | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2014 | | | 2013 | | | 2012(g) | |
| Net Asset Value, Beginning of Year / Period | | $ | 10.04 | | | $ | 9.68 | | | $ | 9.68 | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | |
| Net Investment Income (Loss)(a) | | | 0.02 | | | | (0.01 | ) | | | (0.09 | ) | | | (0.04 | ) |
| Net Realized And Unrealized Gains (Losses) | | | 0.01 | | | | 0.42 | | | | 0.29 | | | | (0.27 | ) |
| Total from Investment Operations | | $ | 0.03 | | | $ | 0.41 | | | $ | 0.20 | | | $ | (0.31 | ) |
| | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.04 | ) | | | (0.05 | ) | | | (0.20 | ) | | | (0.01 | ) |
| Total Distributions to Shareholders | | $ | (0.04 | ) | | $ | (0.05 | ) | | $ | (0.20 | ) | | $ | (0.01 | ) |
| | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | (e) | | | — | (e) |
| | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 10.03 | | | $ | 10.04 | | | $ | 9.68 | | | $ | 9.68 | |
| | | | | | | | | | | | | | | | | |
| Total Return | | | 0.30 | %(b) | | | 4.22 | % | | | 2.09 | % | | | (3.09 | )%(b) |
| | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 4,108 | | | $ | 24,399 | | | $ | 25,570 | | | $ | 29,541 | |
| | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | |
| Net Investment Income (Loss) | | | 0.35 | %(c) | | | (0.07 | )% | | | (0.87 | )% | | | (0.56 | )%(c) |
| Net Expenses | | | 1.24 | %(c)(f) | | | 1.33 | % | | | 1.40 | % | | | 1.40 | %(c) |
| Gross Expenses(d) | | | 1.25 | %(c)(f) | | | 1.33 | % | | | 1.40 | % | | | 1.40 | %(c) |
| Portfolio Turnover Rate | | | 359 | %(b) | | | 1010 | % | | | 992 | % | | | 1290 | %(b) |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Not annualized |
| (c) | Annualized |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Less than $0.01 per share. |
| (f) | On October 31, 2014, the operating expense cap for this share class was lowered to 0.95%, the advisory fee ratio was lowered to 0.40%, and the service fees ratio was lowered to 0.05%. For the period from October 31, 2014 to December 31, 2014, the net and gross expense ratios were 0.95% and 1.00%, respectively. |
| (g) | Commenced operations on September 30, 2011. The information presented is for the period from September 30, 2011 to June 30, 2012. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY MARYLAND BOND FUND
INVESTOR SHARES*
| | | Six Months | | | | | | | | | | | | | | | | | | | |
| | | Ended | | | | | | | | | | | | | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | May 31, | |
| | | (Unaudited) | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010(f) | | | 2010 | |
| Net Asset Value, Beginning of Year / Period | | $ | 10.82 | | | $ | 10.81 | | | $ | 11.06 | | | $ | 10.85 | | | $ | 10.81 | | | $ | 10.81 | | | $ | 10.62 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.09 | | | | 0.21 | | | | 0.21 | | | | 0.25 | | | | 0.25 | | | | 0.02 | | | | 0.25 | |
| Net Realized And Unrealized Gains (Losses) | | | 0.01 | | | | 0.10 | | | | (0.23 | ) | | | 0.26 | | | | 0.04 | | | | — | | | | 0.19 | |
| Total from Investment Operations | | $ | 0.10 | | | $ | 0.31 | | | $ | (0.02 | ) | | $ | 0.51 | | | $ | 0.29 | | | $ | 0.02 | | | $ | 0.44 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.09 | ) | | | (0.21 | ) | | | (0.21 | ) | | | (0.25 | ) | | | (0.25 | ) | | | (0.02 | ) | | | (0.25 | ) |
| from Net Realized Gains | | | (0.05 | ) | | | (0.09 | ) | | | (0.02 | ) | | | (0.05 | ) | | | — | | | | — | | | | — | |
| Total Distributions to Shareholders | | $ | (0.14 | ) | | $ | (0.30 | ) | | $ | (0.23 | ) | | $ | (0.30 | ) | | $ | (0.25 | ) | | $ | (0.02 | ) | | $ | (0.25 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | (e) | | | — | (e) | | | — | | | | — | (e) | | | — | (e) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 10.78 | | | $ | 10.82 | | | $ | 10.81 | | | $ | 11.06 | | | $ | 10.85 | | | $ | 10.81 | | | $ | 10.81 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return | | | 0.99 | %(b) | | | 2.94 | % | | | (0.25 | )% | | | 4.69 | % | | | 2.74 | % | | | 0.19 | %(b) | | | 4.21 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year / Period (000’s Omitted) | | $ | 211,525 | | | $ | 205,717 | | | $ | 252,166 | | | $ | 250,087 | | | $ | 188,180 | | | $ | 192,077 | | | $ | 187,288 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 1.69 | %(c) | | | 1.99 | % | | | 1.86 | % | | | 2.23 | % | | | 2.33 | % | | | 2.36 | %(c) | | | 2.32 | % |
| Net Expenses | | | 0.49 | %(c) | | | 0.52 | % | | | 0.52 | % | | | 0.51 | % | | | 0.51 | % | | | 0.54 | %(c) | | | 0.62 | % |
| Gross Expenses(d) | | | 0.49 | %(c) | | | 0.52 | % | | | 0.52 | % | | | 0.51 | % | | | 0.51 | % | | | 0.54 | %(c) | | | 0.62 | % |
| Portfolio Turnover Rate | | | 39 | %(b) | | | 56 | % | | | 30 | % | | | 16 | % | | | 29 | % | | | 1 | %(b) | | | 8 | % |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Less than $0.01 per share. |
| (f) | Effective June 1, 2010, the Fund changed its fiscal year end from May 31 to June 30. The information presented is for the period from June 1, 2010 to June 30, 2010. |
| * | Prior to October 19, 2012, Investor Shares were known as Institutional Shares. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of each Fund throughout each year / period.
BROWN ADVISORY TAX EXEMPT BOND FUND*
INVESTOR SHARES
| | | Six Months | | | | | | | |
| | | Ended | | | | | | | |
| | | December 31, | | | Year Ended: | |
| | | 2014 | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2014 | | | 2013 | |
| Net Asset Value, Beginning of Year / Period | | $ | 10.03 | | | $ | 9.84 | | | $ | 10.00 | |
| | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.09 | | | | 0.19 | | | | 0.13 | |
| Net Realized And Unrealized Gains (Losses) | | | 0.06 | | | | 0.19 | | | | (0.12 | ) |
| Total from Investment Operations | | $ | 0.15 | | | $ | 0.38 | | | $ | 0.01 | |
| | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | |
| from Net Investment Income | | | (0.09 | ) | | | (0.19 | ) | | | (0.13 | ) |
| from Net Realized Gains | | | — | | | | — | (e) | | | (0.04 | ) |
| Total Distributions to Shareholders | | $ | (0.09 | ) | | $ | (0.19 | ) | | $ | (0.17 | ) |
| | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | (e) |
| | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 10.09 | | | $ | 10.03 | | | $ | 9.84 | |
| | | | | | | | | | | | | |
| Total Return | | | 1.51 | %(b) | | | 3.94 | % | | | 0.03 | % |
| | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 224,595 | | | $ | 205,177 | | | $ | 161,891 | |
| | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | |
| Net Investment Income | | | 1.78 | %(c) | | | 1.96 | % | | | 1.35 | % |
| Net Expenses | | | 0.50 | %(c) | | | 0.52 | % | | | 0.55 | % |
| Gross Expenses(d) | | | 0.50 | %(c) | | | 0.52 | % | | | 0.55 | % |
| Portfolio Turnover Rate | | | 70 | %(b) | | | 157 | % | | | 87 | % |
| (a) | Calculated based on average shares outstanding during the year. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Less than $0.01 per share. |
| * | Commenced operations on June 29, 2012. No financial highlights are presented for the period from June 29, 2012 to June 30, 2012, as the Fund did not make any investments, earn any income or incur any expenses during the period. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout the period.
BROWN ADVISORY MORTGAGE SECURITIES FUND
INSTITUTIONAL SHARES
| | | Six Months | | | | |
| | | Ended | | | | |
| | | December 31, | | | Period Ended | |
| | | 2014 | | | June 30, | |
| | | (Unaudited) | | | 2014(e) | |
| Net Asset Value, Beginning of Period | | $ | 10.16 | | | $ | 10.15 | |
| | | | | | | | | |
| Net Investment Income(a) | | | 0.14 | | | | 0.03 | |
| Net Realized And Unrealized Gains | | | — | | | | 0.02 | |
| Total from Investment Operations | | $ | 0.14 | | | $ | 0.05 | |
| | | | | | | | | |
| Distributions: | | | | | | | | |
| from Net Investment Income | | | (0.15 | ) | | | (0.04 | ) |
| from Realized Gains | | | (0.08 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (0.23 | ) | | $ | (0.04 | ) |
| | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | |
| | | | | | | | | |
| Net Asset Value, End of Period | | $ | 10.07 | | | $ | 10.16 | |
| | | | | | | | | |
| Total Return | | | 1.39 | %(b) | | | 0.49 | %(b) |
| | | | | | | | | |
| Net Assets at End of Period (000’s Omitted) | | $ | 161,182 | | | $ | 131,415 | |
| | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | |
| Net Investment Income | | | 2.73 | %(c) | | | 1.98 | %(c) |
| Net Expenses | | | 0.47 | %(c) | | | 0.52 | %(c) |
| Gross Expenses(d) | | | 0.47 | %(c) | | | 0.52 | %(c) |
| Portfolio Turnover Rate | | | 70 | %(b) | | | 88 | %(f) |
| (a) | Calculated based on average shares outstanding during the period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Commenced operations on May 13, 2014. The information presented is for the period from May 13, 2014 to June 30, 2014 |
| (f) | Represents portfolio turnover, not annualized, from the inception of the Investor Shares of the Fund on December 26, 2013 to June 30, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout the period.
BROWN ADVISORY MORTGAGE SECURITIES FUND
INVESTOR SHARES
| | | Six Month | | | | |
| | | Ended | | | | |
| | | December 31, | | | Period Ended | |
| | | 2014 | | | June 30, | |
| | | (Unaudited) | | | 2014(e) | |
| Net Asset Value, Beginning of Period | | $ | 10.16 | | | $ | 10.00 | |
| | | | | | | | | |
| Net Investment Income(a) | | | 0.14 | | | | 0.10 | |
| Net Realized And Unrealized Gains | | | — | | | | 0.16 | |
| Total from Investment Operations | | $ | 0.14 | | | $ | 0.26 | |
| | | | | | | | | |
| Distributions: | | | | | | | | |
| from Net Investment Income | | | (0.15 | ) | | | (0.10 | ) |
| from Realized Gains | | | (0.08 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (0.23 | ) | | $ | (0.10 | ) |
| | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | |
| | | | | | | | | |
| Net Asset Value, End of Period | | $ | 10.07 | | | $ | 10.16 | |
| | | | | | | | | |
Total Return | | | 1.37 | %(b) | | | 2.62 | %(b) |
| | | | | | | | | |
| Net Assets at End of Period (000’s Omitted) | | $ | 46,561 | | | $ | 67,776 | |
| | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | |
| Net Investment Income | | | 2.68 | %(c) | | | 1.93 | %(c) |
| Net Expenses | | | 0.52 | %(c) | | | 0.57 | %(c) |
| Gross Expenses(d) | | | 0.52 | %(c) | | | 0.57 | %(c) |
| Portfolio Turnover Rate | | | 70 | %(b) | | | 88 | %(b) |
| (a) | Calculated based on average shares outstanding during the period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Commenced operations on December 26, 2013. The information presented is for the period from December 26, 2013 to June 30, 2014 |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout the period.
BROWN ADVISORY – WMC STRATEGIC EUROPEAN EQUITY FUND
INSTITUTIONAL SHARES
| | | Six Months | | | | |
| | | Ended | | | | |
| | | December 31, | | | Period Ended | |
| | | 2014 | | | June 30, | |
| | | (Unaudited) | | | 2014(e) | |
| Net Asset Value, Beginning of Period | | $ | 10.46 | | | $ | 10.00 | |
| | | | | | | | | |
| Net Investment Income (Loss)(a) | | | — | | | | 0.14 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.75 | ) | | | 0.32 | |
| Total from Investment Operations | | $ | (0.75 | ) | | $ | 0.46 | |
| | | | | | | | | |
| Distributions: | | | | | | | | |
| from Net Investment Income | | | (0.11 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (0.11 | ) | | $ | — | |
| | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | |
| | | | | | | | | |
| Net Asset Value, End of Period | | $ | 9.60 | | | $ | 10.46 | |
| | | | | | | | | |
| Total Return | | | (7.22 | )%(b) | | | 4.60 | %(b) |
| | | | | | | | | |
| Net Assets at End of Period (000’s Omitted) | | $ | 182,703 | | | $ | 202,616 | |
| | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | |
| Net Investment Income (Loss) | | | (0.10 | )%(c) | | | 2.01 | %(c) |
| Net Expenses | | | 1.13 | %(c) | | | 1.23 | %(c) |
| Gross Expenses(d) | | | 1.13 | %(c) | | | 1.23 | %(c) |
| Portfolio Turnover Rate | | | 28 | %(b) | | | 25 | %(b) |
| (a) | Calculated based on average shares outstanding during the period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Commenced operations on October 21, 2013. The information presented is for the period from October 21, 2013 to June 30, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout the period.
BROWN ADVISORY – WMC STRATEGIC EUROPEAN EQUITY FUND
INVESTOR SHARES
| | | Six Months | | | | |
| | | Ended | | | | |
| | | December 31, | | | Period Ended | |
| | | 2014 | | | June 30, | |
| | | (Unaudited) | | | 2014(e) | |
| Net Asset Value, Beginning of Period | | $ | 10.45 | | | $ | 10.00 | |
| | | | | | | | | |
| Net Investment Income (Loss)(a) | | | (0.01 | ) | | | 0.13 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.76 | ) | | | 0.32 | |
| Total from Investment Operations | | $ | (0.77 | ) | | $ | 0.45 | |
| | | | | | | | | |
| Distributions: | | | | | | | | |
| from Net Investment Income | | | (0.09 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (0.09 | ) | | $ | — | |
| | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | |
| | | | | | | | | |
| Net Asset Value, End of Period | | $ | 9.59 | | | $ | 10.45 | |
| | | | | | | | | |
| Total Return | | | (7.36 | )%(b) | | | 4.50 | %(b) |
| | | | | | | | | |
| Net Assets at End of Period (000’s Omitted) | | $ | 17,109 | | | $ | 18,011 | |
| | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | |
| Net Investment Income (Loss) | | | (0.25 | )%(c) | | | 1.86 | %(c) |
| Net Expenses | | | 1.28 | %(c) | | | 1.38 | %(c) |
| Gross Expenses(d) | | | 1.28 | %(c) | | | 1.38 | %(c) |
| Portfolio Turnover Rate | | | 28 | %(b) | | | 25 | %(b) |
| (a) | Calculated based on average shares outstanding during the period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Commenced operations on October 21, 2013. The information presented is for the period from October 21, 2013 to June 30, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout the period.
BROWN ADVISORY – WMC STRATEGIC EUROPEAN EQUITY FUND
ADVISOR SHARES
| | | Six Months | | | | |
| | | Ended | | | | |
| | | December 31, | | | Period Ended | |
| | | 2014 | | | June 30, | |
| | | (Unaudited) | | | 2014(e) | |
| Net Asset Value, Beginning of Period | | $ | 10.44 | | | $ | 10.00 | |
| | | | | | | | | |
| Net Investment Income (Loss)(a) | | | (0.02 | ) | | | 0.11 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.76 | ) | | | 0.33 | |
| Total from Investment Operations | | $ | (0.78 | ) | | $ | 0.44 | |
| | | | | | | | | |
| Distributions: | | | | | | | | |
| from Net Investment Income | | | (0.08 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (0.08 | ) | | $ | — | |
| | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | |
| | | | | | | | | |
| Net Asset Value, End of Period | | $ | 9.58 | | | $ | 10.44 | |
| | | | | | | | | |
| Total Return | | | (7.48 | )%(b) | | | 4.40 | %(b) |
| | | | | | | | | |
| Net Assets at End of Period (000’s Omitted) | | $ | 383 | | | $ | 240 | |
| | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | |
| Net Investment Income (Loss) | | | (0.50 | )%(c) | | | 1.61 | %(c) |
| Net Expenses | | | 1.53 | %(c) | | | 1.63 | %(c) |
| Gross Expenses(d) | | | 1.53 | %(c) | | | 1.63 | %(c) |
| Portfolio Turnover Rate | | | 28 | %(b) | | | 25 | %(b) |
| (a) | Calculated based on average shares outstanding during the period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Commenced operations on October 21, 2013. The information presented is for the period from October 21, 2013 to June 30, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout the period.
BROWN ADVISORY – WMC JAPAN ALPHA OPPORTUNITIES FUND
INSTITUTIONAL SHARES
| | | Six Months | | | | |
| | | Ended | | | | |
| | | December 31, | | | Period Ended | |
| | | 2014 | | | June 30, | |
| | | (Unaudited) | | | 2014(e) | |
| Net Asset Value, Beginning of Period | | $ | 10.50 | | | $ | 10.00 | |
| | | | | | | | | |
| Net Investment Income(a) | | | 0.01 | | | | 0.05 | |
| Net Realized And Unrealized Gains | | | 0.85 | | | | 0.45 | |
| Total from Investment Operations | | $ | 0.86 | | | $ | 0.50 | |
| | | | | | | | | |
| Distributions: | | | | | | | | |
| from Net Investment Income | | | (0.51 | ) | | | — | |
| from Realized Gains | | | (0.07 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (0.58 | ) | | $ | — | |
| | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | |
| | | | | | | | | |
| Net Asset Value, End of Period | | $ | 10.78 | | | $ | 10.50 | |
| | | | | | | | | |
| Total Return | | | 8.07 | %(b) | | | 5.00 | %(b) |
| | | | | | | | | |
| Net Assets at End of Period (000’s Omitted) | | $ | 1,199,391 | | | $ | 1,080,717 | |
| | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | |
| Net Investment Income | | | 0.22 | %(c) | | | 1.59 | %(c) |
| Net Expenses | | | 1.15 | %(c) | | | 1.21 | %(c) |
| Gross Expenses(d) | | | 1.15 | %(c) | | | 1.21 | %(c) |
| Portfolio Turnover Rate | | | 31 | %(b) | | | 26 | %(b) |
| (a) | Calculated based on average shares outstanding during the period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Commenced operations on March 4, 2014. The information presented is for the period from March 4, 2014 to June 30, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout the period.
BROWN ADVISORY – WMC JAPAN ALPHA OPPORTUNITIES FUND
INVESTOR SHARES
| | | Six Months | | | | |
| | | Ended | | | | |
| | | December 31, | | | Period Ended | |
| | | 2014 | | | June 30, | |
| | | (Unaudited) | | | 2014(e) | |
| Net Asset Value, Beginning of Period | | $ | 10.49 | | | $ | 10.00 | |
| | | | | | | | | |
| Net Investment Income(a) | | | — | | | | 0.05 | |
| Net Realized And Unrealized Gains | | | 0.86 | | | | 0.44 | |
| Total from Investment Operations | | $ | 0.86 | | | $ | 0.49 | |
| | | | | | | | | |
| Distributions: | | | | | | | | |
| from Net Investment Income | | | (0.50 | ) | | | — | |
| from Realized Gains | | | (0.07 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (0.57 | ) | | $ | — | |
| | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | |
| | | | | | | | | |
| Net Asset Value, End of Period | | $ | 10.78 | | | $ | 10.49 | |
| | | | | | | | | |
| Total Return | | | 8.11 | %(b) | | | 4.90 | %(b) |
| | | | | | | | | |
| Net Assets at End of Period (000’s Omitted) | | $ | 11,582 | | | $ | 4,522 | |
| | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | |
| Net Investment Income | | | 0.07 | %(c) | | | 1.44 | %(c) |
| Net Expenses | | | 1.30 | %(c) | | | 1.36 | %(c) |
| Gross Expenses(d) | | | 1.30 | %(c) | | | 1.36 | %(c) |
| Portfolio Turnover Rate | | | 31 | %(b) | | | 26 | %(b) |
| (a) | Calculated based on average shares outstanding during the period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Commenced operations on March 4, 2014. The information presented is for the period from March 4, 2014 to June 30, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout the period.
BROWN ADVISORY – WMC JAPAN ALPHA OPPORTUNITIES FUND
ADVISOR SHARES
| | | Six Months | | | | |
| | | Ended | | | | |
| | | December 31, | | | Period Ended | |
| | | 2014 | | | June 30, | |
| | | (Unaudited) | | | 2014(e) | |
| Net Asset Value, Beginning of Period | | $ | 10.48 | | | $ | 10.00 | |
| | | | | | | | | |
| Net Investment Income (Loss)(a) | | | (0.01 | ) | | | 0.04 | |
| Net Realized And Unrealized Gains | | | 0.86 | | | | 0.44 | |
| Total from Investment Operations | | $ | 0.85 | | | $ | 0.48 | |
| | | | | | | | | |
| Distributions: | | | | | | | | |
| from Net Investment Income | | | (0.49 | ) | | | — | |
| from Realized Gains | | | (0.07 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (0.56 | ) | | $ | — | |
| | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | |
| | | | | | | | | |
| Net Asset Value, End of Period | | $ | 10.77 | | | $ | 10.48 | |
| | | | | | | | | |
| Total Return | | | 7.97 | %(b) | | | 4.80 | %(b) |
| | | | | | | | | |
| Net Assets at End of Period (000’s Omitted) | | $ | 119 | | | $ | 59 | |
| | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | |
| Net Investment Income (Loss) | | | (0.18 | )%(c) | | | 1.19 | %(c) |
| Net Expenses | | | 1.55 | %(c) | | | 1.61 | %(c) |
| Gross Expenses(d) | | | 1.55 | %(c) | | | 1.61 | %(c) |
| Portfolio Turnover Rate | | | 31 | %(b) | | | 26 | %(b) |
| (a) | Calculated based on average shares outstanding during the period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Commenced operations on March 4, 2014. The information presented is for the period from March 4, 2014 to June 30, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY – SOMERSET EMERGING MARKETS FUND
INSTITUTIONAL SHARES
| | | Six Months | | | | | | | |
| | | Ended | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2014 | | | 2013(f) | |
| Net Asset Value, Beginning of Year / Period | | $ | 10.22 | | | $ | 9.52 | | | $ | 10.00 | |
| | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.02 | | | | 0.20 | | | | 0.12 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.59 | ) | | | 0.61 | | | | (0.60 | ) |
| Total from Investment Operations | | $ | (0.57 | ) | | $ | 0.81 | | | $ | (0.48 | ) |
| | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | |
| from Net Investment Income | | | (0.15 | ) | | | (0.11 | ) | | | — | (e) |
| Total Distributions to Shareholders | | $ | (0.15 | ) | | $ | (0.11 | ) | | $ | — | (e) |
| | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | (e) |
| | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 9.50 | | | $ | 10.22 | | | $ | 9.52 | |
| | | | | | | | | | | | | |
| Total Return | | | (5.61 | )%(b) | | | 8.62 | % | | | (4.77 | )%(b) |
| | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 206,806 | | | $ | 193,676 | | | $ | 122,515 | |
| | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | |
| Net Investment Income | | | 0.48 | %(c) | | | 2.08 | % | | | 2.17 | %(c) |
| Net Expenses | | | 1.19 | %(c) | | | 1.25 | % | | | 1.41 | %(c) |
| Gross Expenses(d) | | | 1.19 | %(c) | | | 1.25 | % | | | 1.41 | %(c) |
| Portfolio Turnover Rate | | | 8 | %(b) | | | 19 | % | | | 19 | %(b) |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Less than $0.01 per share. |
| (f) | Commenced operations on December 12, 2012. The information presented is for the period from December 12, 2012 to June 30, 2013. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY – SOMERSET EMERGING MARKETS FUND
INVESTOR SHARES
| | | Six Months | | | | | | | |
| | | Ended | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2014 | | | 2013(f) | |
| Net Asset Value, Beginning of Year / Period | | $ | 10.21 | | | $ | 9.51 | | | $ | 10.00 | |
| | | | | | | | | | | | | |
| Net Investment Income (a) | | | 0.02 | | | | 0.19 | | | | 0.11 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.60 | ) | | | 0.61 | | | | (0.60 | ) |
| Total from Investment Operations | | $ | (0.58 | ) | | $ | 0.80 | | | $ | (0.49 | ) |
| | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | |
| from Net Investment Income | | | (0.14 | ) | | | (0.10 | ) | | | — | (e) |
| Total Distributions to Shareholders | | $ | (0.14 | ) | | $ | (0.10 | ) | | $ | — | (e) |
| | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 9.49 | | | $ | 10.21 | | | $ | 9.51 | |
| | | | | | | | | | | | | |
| Total Return | | | (5.71 | )%(b) | | | 8.51 | % | | | (4.87 | )%(b) |
| | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 38,741 | | | $ | 24,291 | | | $ | 11,695 | |
| | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | |
| Net Investment Income | | | 0.33 | %(c) | | | 1.93 | % | | | 2.02 | %(c) |
| Net Expenses | | | 1.34 | %(c) | | | 1.40 | % | | | 1.56 | %(c) |
| Gross Expenses(d) | | | 1.34 | %(c) | | | 1.40 | % | | | 1.56 | %(c) |
| Portfolio Turnover Rate | | | 8 | %(b) | | | 19 | % | | | 19 | %(b) |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Less than $0.01 per share. |
| (f) | Commenced operations on December 12, 2012. The information presented is for the period from December 12, 2012 to June 30, 2013. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each year / period.
BROWN ADVISORY – SOMERSET EMERGING MARKETS FUND
ADVISOR SHARES
| | | Six Months | | | | | | | |
| | | Ended | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2014 | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2014 | | | 2013(f) | |
| Net Asset Value, Beginning of Year / Period | | $ | 10.18 | | | $ | 9.49 | | | $ | 10.00 | |
| | | | | | | | | | | | | |
| Net Investment Income(a) | | | — | | | | 0.16 | | | | 0.10 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.59 | ) | | | 0.61 | | | | (0.61 | ) |
| Total from Investment Operations | | $ | (0.59 | ) | | $ | 0.77 | | | $ | (0.51 | ) |
| | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | |
| from Net Investment Income | | | (0.11 | ) | | | (0.08 | ) | | | — | (e) |
| Total Distributions to Shareholders | | $ | (0.11 | ) | | $ | (0.08 | ) | | $ | — | (e) |
| | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 9.48 | | | $ | 10.18 | | | $ | 9.49 | |
| | | | | | | | | | | | | |
| Total Return | | | (5.79 | )%(b) | | | 8.19 | % | | | (5.07 | )%(b) |
| | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 530 | | | $ | 533 | | | $ | 990 | |
| | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | |
| Net Investment Income | | | 0.08 | %(c) | | | 1.68 | % | | | 1.77 | %(c) |
| Net Expenses | | | 1.59 | %(c) | | | 1.65 | % | | | 1.81 | %(c) |
| Gross Expenses(d) | | | 1.59 | %(c) | | | 1.65 | % | | | 1.81 | %(c) |
| Portfolio Turnover Rate | | | 8 | %(b) | | | 19 | % | | | 19 | %(b) |
| (a) | Calculated based on average shares outstanding during the year / period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Less than $0.01 per share. |
| (f) | Commenced operations on December 12, 2012. The information presented is for the period from December 12, 2012 to June 30, 2013. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout the period.
BROWN ADVISORY EMERGING MARKETS SMALL-CAP FUND
INSTITUTIONAL SHARES
| | | Period Ended | |
| | | December 31, | |
| | | 2014(e) | |
| | | (Unaudited) | |
| Net Asset Value, Beginning of Period | | $ | 10.00 | |
| | | | | |
| Net Investment Loss(a) | | | (0.01 | ) |
| Net Realized And Unrealized Losses | | | (0.22 | ) |
| Total from Investment Operations | | $ | (0.23 | ) |
| | | | | |
| Redemption fees(a) | | | — | |
| | | | | |
| Net Asset Value, End of Period | | $ | 9.77 | |
| | | | | |
| Total Return | | | (2.30 | )%(b) |
| | | | | |
| Net Assets at End of Period (000’s Omitted) | | $ | 62,114 | |
| | | | | |
| Ratios to Average Net Assets: | | | | |
| Net Investment Loss | | | (0.57 | )%(c) |
| Net Expenses | | | 1.71 | %(c) |
| Gross Expenses(d) | | | 1.71 | %(c) |
| Portfolio Turnover Rate | | | 18 | %(b) |
| (a) | Calculated based on average shares outstanding during the period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Commenced operations on November 21, 2014. The information presented is for the period from November 21, 2014 to December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout the period.
BROWN ADVISORY EMERGING MARKETS SMALL-CAP FUND
INVESTOR SHARES
| | | Period Ended | |
| | | December 31, | |
| | | 2014(e) | |
| | | (Unaudited) | |
| Net Asset Value, Beginning of Period | | $ | 10.00 | |
| | | | | |
| Net Investment Loss(a) | | | (0.01 | ) |
| Net Realized And Unrealized Losses | | | (0.22 | ) |
| Total from Investment Operations | | $ | (0.23 | ) |
| | | | | |
| Redemption fees(a) | | | — | |
| | | | | |
| Net Asset Value, End of Period | | $ | 9.77 | |
| | | | | |
| Total Return | | | (2.30 | )%(b) |
| | | | | |
| Net Assets at End of Period (000’s Omitted) | | $ | 2,760 | |
| | | | | |
| Ratios to Average Net Assets: | | | | |
| Net Investment Loss | | | (0.72 | )%(c) |
| Net Expenses | | | 1.86 | %(c) |
| Gross Expenses(d) | | | 1.86 | %(c) |
| Portfolio Turnover Rate | | | 18 | %(b) |
| (a) | Calculated based on average shares outstanding during the period. |
| (b) | Not annualized. |
| (c) | Annualized. |
| (d) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (e) | Commenced operations on November 21, 2014. The information presented is for the period from November 21, 2014 to December 31, 2014. |
The accompanying notes are an integral part of these financial statements.
www.brownadvisoryfunds.com
Notes to Financial Statements
December 31, 2014 (Unaudited)
Note 1. Organization
The Brown Advisory Growth Equity Fund (“Growth Equity Fund”), Brown Advisory Value Equity Fund (“Value Equity Fund”), Brown Advisory Flexible Equity Fund (“Flexible Equity Fund”), Brown Advisory Equity Income Fund (“Equity Income Fund”), Brown Advisory Sustainable Growth Fund (“Sustainable Growth Fund”), Brown Advisory Small-Cap Growth Fund (“Small-Cap Growth Fund”), Brown Advisory Small-Cap Fundamental Value Fund (“Small-Cap Fundamental Value Fund”), Brown Advisory Opportunity Fund (“Opportunity Fund”), Brown Advisory Multi-Strategy Fund (“Multi-Strategy Fund”), Brown Advisory Intermediate Income Fund (“Intermediate Income Fund”), Brown Advisory Total Return Fund (“Total Return Fund”), Brown Advisory Strategic Bond Fund (“Strategic Bond Fund”), Brown Advisory Maryland Bond Fund (“Maryland Bond Fund”), Brown Advisory Tax Exempt Bond Fund (“Tax Exempt Bond Fund”), Brown Advisory Mortgage Securities Fund (“Mortgage Securities Fund”), Brown Advisory – WMC Strategic European Equity Fund (“Strategic European Equity Fund”), Brown Advisory – WMC Japan Alpha Opportunities Fund (“Japan Alpha Opportunities Fund”), Brown Advisory – Somerset Emerging Markets Fund (“Emerging Markets Fund”) and Brown Advisory Emerging Markets Small-Cap Fund (“Emerging Markets Small-Cap Fund”) (individually a “Fund,” and collectively, the “Funds”) are each a series of shares of beneficial interest of Brown Advisory Funds (the “Trust”), which is registered under the Investment Company Act of 1940 as an open-ended management investment company. Prior to October 19, 2012, the Funds, except for the Sustainable Growth Fund, Multi-Strategy Fund, Total Return Fund, Tax Exempt Bond Fund, Mortgage Securities Fund, Strategic European Equity Fund, Japan Alpha Opportunities Fund, Emerging Markets Fund, and Emerging Markets Small-Cap Fund, were series of Professionally Managed Portfolios Trust. Prior to April 12, 2010, the Funds, except for the Equity Income Fund, Sustainable Growth Fund, Multi-Strategy Fund, Total Return Fund, Strategic Bond Fund, Tax Exempt Bond Fund, Mortgage Securities Fund, Strategic European Equity Fund, Japan Alpha Opportunities Fund, Emerging Markets Fund, and Emerging Markets Small-Cap Fund, each of which had yet to commence operations, were part of the Forum Funds Trust.
The Funds commenced operations as follows:
| | Institutional | | | Investor | | | Advisor | |
| | Shares | | | Shares | | | Shares | |
| Growth Equity Fund | 10/19/2012 | | | 6/28/1999 | * | | 5/18/2006 | ** |
| Value Equity Fund | 10/19/2012 | | | 1/28/2003 | * | | 4/25/2006 | ** |
| Flexible Equity Fund | 10/19/2012 | | | 11/30/2006 | * | | 1/24/2007 | ** |
| Equity Income Fund | 10/19/2012 | | | 12/29/2011 | * | | 12/29/2011 | |
| Sustainable Growth Fund | 6/29/2012 | | | 6/29/2012 | | | 6/29/2012 | |
| Small-Cap Growth Fund | 9/20/2002 | *** | | 6/28/1999 | * | | 4/25/2006 | ** |
| Small-Cap Fundamental Value Fund | 10/19/2012 | | | 12/31/2008 | * | | 7/28/2011 | |
| Opportunity Fund | — | | | 6/29/1998 | * | | — | |
| Multi-Strategy Fund | 10/31/2014 | | | — | | | — | |
| Intermediate Income Fund | — | | | 11/2/1995 | * | | 5/13/1991 | ** |
| Total Return Fund | 10/30/2014 | | | 10/30/2014 | | | — | |
| Strategic Bond Fund^ | — | | | 10/31/2014 | | | 9/30/2011 | |
| Maryland Bond Fund | — | | | 12/21/2000 | * | | — | |
| Tax Exempt Bond Fund | — | | | 6/29/2012 | | | — | |
| Mortgage Securities Fund | 5/13/2014 | | | 12/26/2013 | | | — | |
| Strategic European Equity Fund | 10/21/2013 | | | 10/21/2013 | | | 10/21/2013 | |
| Japan Alpha Opportunities Fund | 3/4/2014 | | | 3/4/2014 | | | 3/4/2014 | |
| Emerging Markets Fund | 12/12/2012 | | | 12/12/2012 | | | 12/12/2012 | |
| Emerging Markets Small-Cap Fund | 11/21/2014 | | | 11/21/2014 | | | — | |
| ^ | | Known as the Brown Advisory Tactical Bond Fund prior to October 31, 2014. |
| * | | Prior to October 19, 2012, Investor Shares were known as Institutional Shares. |
| ** | | Prior to July 1, 2011, Advisor Shares were known as A Shares. |
| *** | | Prior to October 19, 2012, Small-Cap Growth Fund Institutional Shares were known as D Shares. |
Each share class has equal rights as to earnings and assets except that each class bears different shareholder servicing and distribution expenses. Each share class has exclusive voting rights with respect to matters that affect just that class. Income,
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Notes to Financial Statements
December 31, 2014 (Unaudited)
expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each share class on its relative net assets.
The investment objective of Growth Equity Fund and Small-Cap Growth Fund is to achieve capital appreciation by primarily investing in equity securities. The investment objective of Value Equity Fund is to achieve capital appreciation. The investment objective of Small-Cap Fundamental Value Fund and Opportunity Fund is to achieve long-term capital appreciation. Flexible Equity Fund’s investment objective is to achieve long-term growth of capital. Maryland Bond Fund’s investment objective is to provide a high level of current income exempt from both Federal and Maryland State income taxes without undue risk. Intermediate Income Fund’s investment objective is to provide a high level of current income consistent with preservation of principal within an intermediate-term maturity structure. Equity Income Fund’s investment objective is to provide current dividend yield and dividend growth. Sustainable Growth Fund’s investment objective is to seek capital appreciation by investing at least 80% of its net assets in equity securities of environmentally sustainable domestic companies. The investment objective of the Strategic Bond Fund is to achieve capital appreciation and income with a low correlation to interest rate movements. Tax Exempt Bond Fund’s investment objective is to seek to provide a high level of current income exempt from Federal income tax by investing primarily in intermediate-term investment grade municipal bonds. The investment objective of the Emerging Markets Fund is to seek to achieve total return by investing principally in equity securities issued by companies established or operating in emerging markets. The investment objective of the Strategic European Equity Fund seeks to achieve total return by investing principally in equity securities issued by companies established or operating in Europe. The investment objective of the Mortgage Securities Fund seeks to maximize total return consistent with preservation of capital. The investment objective of the Japan Alpha Opportunities Fund seeks to achieve total return by investing principally in equity securities of companies which are domiciled in or exercise the predominant part of their economic activity in Japan, while also limiting exposure to fluctuations between the value of the Japanese yen and the U.S. dollar. Multi-Strategy Fund’s investment objective is to achieve long-term capital appreciation and current income. The investment objective of the Total Return fund is to provide a competitive total return consistent with preservation of principal. The Emerging Markets Small-Cap Fund’s investment objective is to achieve total return by investing principally in equity securities issued by small-capitalization companies established or operating in emerging markets.
Note 2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the Funds. These policies are in conformity with accounting principles generally accepted in the United States of America.
A. Security Valuation – The Funds have adopted fair valuation accounting standards which establish and authoritative definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion of changes in valuation techniques and related inputs, if any, during the period. These inputs are summarized in the three broad levels listed below:
| Level 1 – | Quoted prices in active markets for identical securities. |
| Level 2 – | Evaluated price based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment spreads, 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.
Equity securities that are traded on a national securities exchange, except those listed on the NASDAQ Global Market® (“NASDAQ”), are valued at the last reported sale price on the exchange on which the security is principally traded. Securities traded on NASDAQ will be valued at the NASDAQ Official Closing Price (“NOCP”). If, on a particular day, an exchange-traded or NASDAQ security does not trade, then the mean between the most recent quoted bid and asked prices will be used. All equity securities that are not traded on a listed exchange are valued at the last sale price in the over-the counter market. If a non-exchange traded security does not trade on a particular day, then the mean between the last quoted closing bid and asked price will be used. Such domestic equity securities are typically categorized as Level 1 securities.
For foreign securities that are traded on foreign exchanges, the Funds have selected Interactive Data Corporation (“IDC”) to provide pricing data for those such securities that are held by the Funds. The use of IDC’s pricing services with respect to these
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Notes to Financial Statements
December 31, 2014 (Unaudited)
foreign exchange traded securities is designed to capture events occurring after a foreign exchange closes that may affect the value of certain holdings of the Funds that are traded on those foreign exchanges. The Funds utilize a confidence interval when determining whether or not to utilize these prices provided by IDC. The confidence interval is a measure of the relationship that each foreign exchange traded security has to movements in various indices and the price of the foreign exchange traded security’s corresponding American Depositary Receipt, if one exists. IDC provides a confidence interval for each foreign exchange traded security for which it provides a price. If the confidence interval provided by IDC is equal to or greater than a predefined level utilized by the Funds, the Funds will value that foreign exchange traded security at that price. If the confidence interval provided by IDC is less than the predefined level utilized by the Funds, the Funds will value that foreign exchange traded security at the preceding closing price on its respective foreign exchange, or, if there were no transactions on the preceding day, at the mean between the bid and the asked prices. Such foreign securities are typically categorized as Level 2 securities. Foreign securities for which the local market closing prices are utilized are typically categorized as Level 1 securities.
Debt securities are valued by using the mean between the closing bid and asked prices provided by an 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. These techniques generally consider such factors as yields or prices of bonds of comparable quality, type of issue, coupon, maturity, ratings and general market conditions. Fixed income debt instruments, such as commercial paper, banker’s acceptances and U.S. Treasury Bills, having a maturity of less than 60 days are valued at amortized cost. Any discount or premium is accreted or amortized on a straight-line basis until maturity. Such debt securities are typically categorized as Level 2.
Exchange traded options are valued at the composite price, using the National Best Bid and Offer quotes (NBBO). NBBO consists of the highest bid price and lowest ask price across any of the exchanges on which an option is quoted, thus providing a view across the entire U.S. options marketplace. Specifically, composite pricing calculates the mean of the highest bid price and lowest ask price across the exchanges where the option is traded. The Funds did not hold any options during the six months ended December 31, 2014, but such options would typically be considered Level 2 securities.
Futures contracts are generally valued at the settlement prices established each day on the exchange on which they are traded and are categorized as Level 1 securities.
Forward foreign currency contracts are valued at the prevailing forward exchange rate of the underlying currencies and are categorized as Level 2 securities.
Credit default swaps are valued based upon the daily closing price of the underlying index or reference entity and are categorized as Level 2 securities.
Securities for which quotations are not readily available are valued at their respective fair values as determined in good faith under guidelines and procedures adopted by the Board of Trustees. These are generally considered Level 3 securities. When a security is “fair valued,” consideration is given to the facts and circumstances relevant to the particular situation, including a review of various factors set forth in the guidelines and procedures adopted by the Board of Trustees. Fair value pricing is an inherently subjective process, and no single standard exists for determining fair value. Different funds could reasonably arrive at different values for the same security. The use of fair value pricing by a fund may cause the net asset value of its shares to differ significantly from the net asset value that would be calculated without regard to such considerations. As of December 31, 2014, the Small-Cap Growth Fund was the only fund that held any fair valued securities. As of December 31, 2014, the Small-Cap Growth Fund held fair valued securities with a total market value of $2,308,271or 0.9% of total net assets.
The following is a summary of inputs used to value the Funds’ investments as of December 31, 2014:
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Growth Equity Fund | | | | | | | | | |
| Common Stocks | | $ | 2,507,463,895 | | | $ | — | | | $ | — | |
| Short-Term Investments | | | 58,030,224 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 2,565,494,119 | | | $ | — | | | $ | — | |
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Notes to Financial Statements
December 31, 2014 (Unaudited)
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Value Equity Fund | | | | | | | | | |
| Common Stocks | | $ | 211,058,788 | | | $ | — | | | $ | — | |
| Short-Term Investments | | | 3,513,465 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 214,572,253 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Flexible Equity Fund | | | | | | | | | | | | |
| Common Stocks | | $ | 218,097,071 | | | $ | — | | | $ | — | |
| Warrants | | | 427,200 | | | | — | | | | — | |
| Short-Term Investments | | | 16,094,196 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 234,618,467 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Equity Income Fund | | | | | | | | | | | | |
| Common Stocks | | $ | 172,767,334 | | | $ | — | | | $ | — | |
| Preferred Stocks | | | 6,732,050 | | | | — | | | | — | |
| Real Estate Investment Trusts | | | 13,393,509 | | | | — | | | | — | |
| Short-Term Investments | | | 13,919,063 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 206,811,956 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Sustainable Growth Fund | | | | | | | | | | | | |
| Common Stocks | | $ | 203,138,224 | | | $ | — | | | $ | — | |
| Short-Term Investments | | | 5,147,346 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 208,285,570 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Small-Cap Growth Fund | | | | | | | | | | | | |
| Common Stocks | | $ | 257,785,562 | | | $ | — | | | $ | — | |
| Private Placements | | | — | | | | — | | | | 2,308,271 | |
| Short-Term Investments | | | 7,085,040 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 264,870,602 | | | $ | — | | | $ | 2,308,271 | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Small-Cap Fundamental Value Fund | | | | | | | | | | | | |
| Common Stocks | | $ | 628,259,022 | | | $ | — | | | $ | — | |
| Real Estate Investment Trusts | | | 21,492,030 | | | | — | | | | — | |
| Short-Term Investments | | | 22,793,940 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 672,544,992 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Opportunity Fund | | | | | | | | | | | | |
| Common Stocks | | $ | 11,678,061 | | | $ | — | | | $ | — | |
| Short-Term Investments | | | 467,076 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 12,145,137 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Multi-Strategy Fund | | | | | | | | | | | | |
| Affiliated Mutual Funds | | $ | 436,701 | | | $ | — | | | $ | — | |
| Short-Term Investments | | | 18,688 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 455,389 | | | $ | — | | | $ | — | |
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Notes to Financial Statements
December 31, 2014 (Unaudited)
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Intermediate Income Fund | | | | | | | | | |
| Corporate Bonds & Notes | | $ | — | | | $ | 47,769,700 | | | $ | — | |
| Municipal Bonds | | | — | | | | 23,101,578 | | | | — | |
| Mortgage Backed Securities | | | — | | | | 15,537,697 | | | | — | |
| Asset Backed Securities | | | — | | | | 1,967,416 | | | | — | |
| U.S. Treasury Notes | | | — | | | | 28,400,755 | | | | — | |
| Affiliated Mutual Funds | | | 31,143,018 | | | | — | | | | — | |
| Short-Term Investments | | | 4,488,139 | | | | 8,094,741 | | | | — | |
| Total Investments in Securities | | $ | 35,631,157 | | | $ | 124,871,887 | | | $ | | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Total Return Fund | | | | | | | | | | | | |
| Corporate Bonds & Notes | | $ | — | | | $ | 22,787,599 | | | $ | — | |
| Mortgage Backed Securities | | | — | | | | 12,313,968 | | | | — | |
| Asset Backed Securities | | | — | | | | 5,084,761 | | | | — | |
| Municipal Bonds | | | — | | | | 3,705,527 | | | | — | |
| U.S. Treasury Securities | | | — | | | | 12,570,503 | | | | — | |
| Short-Term Investments | | | 16,518,932 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 16,518,932 | | | $ | 56,462,358 | | | $ | — | |
| Future Contracts – Long* | | $ | 71,179 | | | $ | — | | | $ | — | |
| Future Contracts – Short* | | $ | (31,163 | ) | | $ | — | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Strategic Bond Fund | | | | | | | | | | | | |
| Corporate Bonds & Notes | | $ | — | | | $ | 19,254,465 | | | $ | — | |
| Municipal Bonds | | | — | | | | 10,042,406 | | | | — | |
| Asset Backed Securities | | | — | | | | 5,266,961 | | | | — | |
| Mutual Funds | | | 691,111 | | | | — | | | | — | |
| Short-Term Investments | | | 3,302,625 | | | | 564,965 | | | | — | |
| Total Investments in Securities | | $ | 3,993,736 | | | $ | 35,128,797 | | | $ | — | |
| Credit Default Swaps* | | $ | — | | | $ | (5,813 | ) | | $ | — | |
| Future Contracts – Short* | | $ | (12,542 | ) | | $ | — | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Maryland Bond Fund | | | | | | | | | | | | |
| Municipal Bonds | | $ | — | | | $ | 205,823,103 | | | $ | — | |
| Short-Term Investments | | | 2,233,423 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 2,233,423 | | | $ | 205,823,103 | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Tax Exempt Bond Fund | | | | | | | | | | | | |
| Municipal Bonds | | $ | — | | | $ | 218,732,023 | | | $ | — | |
| Short-Term Investments | | | 8,677,373 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 8,677,373 | | | $ | 218,732,023 | | | $ | — | |
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Notes to Financial Statements
December 31, 2014 (Unaudited)
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Mortgage Securities Fund | | | | | | | | | |
| Mortgage Backed Securities | | $ | — | | | $ | 164,900,635 | | | $ | — | |
| Local Government Housing Agency Bonds | | | — | | | | 25,033,702 | | | | — | |
| Asset Backed Securities | | | — | | | | 15,039,576 | | | | — | |
| Short-Term Investments | | | 3,309,361 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 3,309,361 | | | $ | 204,973,913 | | | $ | — | |
| Securities Sold Short | | $ | — | | | $ | 11,591,661 | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Strategic European Equity Fund | | | | | | | | | | | | |
| Common Stocks | | $ | 9,084,557 | | | $ | 186,126,076 | | | $ | — | |
| Short-Term Investments | | | 3,994,382 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 13,078,939 | | | $ | 186,126,076 | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Japan Alpha Opportunities Fund | | | | | | | | | | | | |
| Common Stocks | | $ | 9,453,011 | | | $ | 1,073,140,501 | | | $ | — | |
| Real Estate Investment Trusts | | | — | | | | 6,536,469 | | | | — | |
| Mutual Funds | | | 5,162,933 | | | | — | | | | — | |
| Short-Term Investments | | | 134,592,303 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 149,208,247 | | | $ | 1,079,676,970 | | | $ | — | |
| Forward Currency Exchange Contracts* | | $ | — | | | $ | (14,999,607 | ) | | $ | — | |
| Future Contracts – Long* | | $ | (1,909,538 | ) | | $ | — | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Emerging Markets Fund | | | | | | | | | | | | |
| Common Stocks | | $ | 12,156,298 | | | $ | 184,507,315 | | | $ | — | |
| Preferred Stocks | | | — | | | | 2,401,699 | | | | — | |
| Exchange Traded Funds | | | 23,412,501 | | | | — | | | | — | |
| Short-Term Investments | | | 27,086,120 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 62,654,919 | | | $ | 186,909,014 | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Emerging Markets Small-Cap Fund | | | | | | | | | | | | |
| Common Stocks | | $ | 1,453,081 | | | $ | 49,667,725 | | | $ | — | |
| Participatory Notes | | | — | | | | 7,104,708 | | | | — | |
| Short-Term Investments | | | 6,253,144 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 7,706,225 | | | $ | 56,772,433 | | | $ | — | |
* Unrealized Appreciation (Depreciation)
The following is a reconciliation of Level 3 securities for which significant unobservable inputs were used to determine fair value.
| | Small-Cap Growth Fund | |
| Balance as of June 30, 2014 | | $ | 2,305,498 | | |
| Purchases | | | 70,000 | | |
| Returns of Capital | | | (252,750 | ) | |
| Change in Unrealized Appreciation | | | 185,523 | | |
| Balance as of December 31, 2014 | | $ | 2,308,271 | | |
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Notes to Financial Statements
December 31, 2014 (Unaudited)
The inputs utilized in valuing these securities consist of annual audited financial statements and quarterly capital statements which are provided by the issuer. These valuations are adjusted periodically for certain events (additional contributions of capital or purchases made by the Fund, distributions to the Fund made by the issuer, etc) that may occur prior to receipt of the next quarterly capital statement or Annual Report.
B. Securities Transactions and Investment Income – Investment securities transactions are accounted for on the trade date. Discounts/premiums on debt securities purchased are accreted/amortized over the life of the respective securities using the effective interest method. Dividend income is recorded on the ex-dividend date. Interest income is recorded on an accrual basis. Foreign dividend income is recorded on the ex-dividend date or as soon as practical after a Fund determines the existence of a dividend declaration after exercising reasonable due diligence. Income and capital gains on some foreign securities may be subject to foreign withholding taxes, which are accrued as applicable. Identified cost of investments sold is used to determine the gain and loss for both financial statement and Federal income tax purposes. Distributions deemed to be a return of capital are recorded as a reduction of the cost of the related investments.
C. Foreign Currency – 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 Funds do not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.
The Funds report net realized foreign exchange gains and losses that arise from sales of foreign currencies, currency gains or losses realized between the 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 fair values of the assets and liabilities, other than investments in securities at fiscal year end, resulting from changes in exchange rates.
The Japan Alpha Opportunities Fund invests in forward foreign currency contracts (see Note 7) in order to limit exposure to the fluctuations in value of the Japanese Yen. The Japan Alpha Opportunities Fund does isolate realized and unrealized gains and losses from forward foreign currency exchange contracts. These amounts are presented separately from realized and unrealized gains and losses from investments in the financial statements.
D. Options – The Funds may invest in options. When a Fund writes an option, an amount equal to the premium received by a Fund is recorded as a liability and is subsequently adjusted to the current value of the option written. Premiums received from writing options that expire unexercised are treated by a Fund on the expiration date as realized gain from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for closing purchase transaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security or currency determining whether a Fund has a realized gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchase by a Fund. A Fund, as a writer of an option, bears the market risk of an unfavorable change in the price of the security underlying the written option.
When a Fund purchases an option, an amount equal to the premium paid by a Fund is recorded as an investment and is subsequently adjusted to the current value of the option purchased. If an option expires on the stipulated expiration date or if a Fund enters into a closing sale transaction, a gain or loss is realized. If a call option is exercised, the cost of the security acquired is increased by the premium paid for the call. If a put option is exercised, a gain or loss is realized from the sale of the underlying security, and the proceeds from such sale are decreased by the premium originally paid. Written and purchased options are non- income producing securities.
No options were held by the Funds during the year ended December 31, 2014.
E. Distributions to Shareholders – For the Maryland Bond Fund and Tax Exempt Bond Fund distributions of net investment income, if any, are declared daily and paid monthly. Distributions to shareholders of net investment income, if any, are declared
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Notes to Financial Statements
December 31, 2014 (Unaudited)
and paid monthly for the Intermediate Income Fund, Mortgage Securities Fund and the Total Return Fund and quarterly for the Equity Income Fund. The remaining Funds declare and pay net investment income, if any, at least annually. Distributions to shareholders of net capital gains, if any, are declared and paid at least annually. Distributions are recorded on the ex-dividend date.
F. Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. Actual results could differ from those estimates.
G. Federal Taxes – Each Fund has elected to be taxed as a “regulated investment company” and intends to distribute substantially all taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. Therefore, no provision for federal income taxes or excise taxes has been made.
The Funds recognize tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities.
The Funds have analyzed their tax positions and have concluded that no liability for unrecognized tax benefits should be recorded related to uncertain income tax positions taken on returns filed for open tax years as of June 30, 2014. The Funds identify their major tax jurisdictions as U.S. Federal and Delaware State; however the Funds are not aware of any tax position for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next year.
H. Redemption Fees – A shareholder who redeems or exchanges shares of the Funds within fourteen days of purchase will incur a redemption fee of 1.00% of the current net asset value of shares redeemed or exchanged, subject to certain exceptions. The fee is charged for the benefit of the remaining shareholders and will be paid to the Fund to help offset transaction costs. The fee is accounted for as an addition to paid-in capital. Each Fund reserves the right to modify the terms of or terminate the fee at any time. There are limited exceptions to the imposition of the redemption fee.
I. Guarantees and Indemnifications – In the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.
J. Subsequent Events – In preparing these financial statements, the Funds have evaluated events and transactions for potential recognition through the date the financial statements were issued.
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Notes to Financial Statements
December 31, 2014 (Unaudited)
Note 3. Commitments and Other Affiliated Party Transactions
Investment Adviser – Brown Advisory LLC serves as Investment Adviser (“the Adviser”) to the Funds. Pursuant to investment advisory agreements, the Adviser receives an advisory fee, accrued daily and payable monthly, from each Fund at an annual rate of the Fund’s average daily net assets as follows:
| | Annual Advisory Fee |
| Growth Equity Fund | 0.60% |
| Value Equity Fund | 0.60% |
| Flexible Equity Fund | 0.60% |
| Equity Income Fund | 0.60% |
| Sustainable Growth Fund | 0.60% |
| Small-Cap Growth Fund | 0.85% |
| Small-Cap Fundamental Value Fund | 0.85% |
| Opportunity Fund | 0.85% |
| Multi-Strategy Fund | 0.30% |
| Intermediate Income Fund | 0.30% |
| Total Return Fund | 0.30% |
| Strategic Bond Fund | 0.40% |
| Maryland Bond Fund | 0.30% |
| Tax Exempt Bond Fund | 0.30% |
| Mortgage Securities Fund | 0.30% |
| Strategic European Equity Fund* | 0.90% |
| Japan Alpha Opportunities Fund* | 1.00% |
| Emerging Markets Fund** | 0.90% |
| Emerging Markets Small-Cap Fund*** | 1.25% |
| * | | Subject to the general oversight of the Adviser and Board of Trustees during the six months ended December 31, 2014. Wellington Management Company, LLC (“Wellington”), served as sub-adviser to the Strategic European Equity Fund and the Japan Alpha Opportunities Fund and made investment decisions on their behalf. Wellington is compensated for its services by the Adviser. |
| ** | | Subject to the general oversight of the Adviser and Board of Trustees during the six months ended December 31, 2014, Somerset Capital Management, LLP (“Somerset”), served as sub-adviser to the Emerging Markets Fund and made investment decisions on its behalf. Somerset is compensated for its services by the Adviser. |
| *** | | Subject to the general oversight of the Adviser and Board of Trustees during the period ended December 31, 2014, Macquarie Funds Management Hong Kong Limited (“MFMHKL”), served as sub-adviser to the Emerging Markets Small-Cap Fund and made investment decisions on its behalf. MFMHKL is compensated for its services by the Adviser. |
The Adviser is also entitled to receive an annual business management fee of 0.05%, accrued daily and payable monthly, of the Funds’ average daily net assets in exchange for its management and oversight of the non-investment advisory services provided to the Funds and the Trust.
www.brownadvisoryfunds.com
Notes to Financial Statements
December 31, 2014 (Unaudited)
Fee Waivers and Expense Reimbursements (Operating Expense Caps) – The Adviser has contractually agreed to waive a portion of its fees and reimburse certain expenses to limit total annual operating expenses for each or the class’ average daily net assets for the Funds noted below:
| | Institutional Shares | Investor Shares | Advisor Shares |
| Growth Equity Fund | 1.00% | 1.15% | 1.35% |
| Value Equity Fund | 1.00% | 1.15% | 1.35% |
| Flexible Equity Fund | 1.00% | 1.15% | 1.35% |
| Equity Income Fund | 1.00% | 1.15% | 1.35% |
| Sustainable Growth Fund | 1.00% | 1.15% | 1.35% |
| Small-Cap Growth Fund | 1.25% | 1.40% | 1.60% |
| Small-Cap Fundamental Value Fund | 1.25% | 1.40% | 1.60% |
| Opportunity Fund | 1.35% | 1.50% | 1.70% |
| Multi-Strategy Fund | 1.60% | 1.75% | 2.00% |
| Intermediate Income Fund | 0.55% | 0.60% | 0.80% |
| Total Return Fund | 0.55% | 0.60% | 0.80% |
| Strategic Bond Fund | 0.65% | 0.70% | 0.95% |
| Maryland Bond Fund | 0.55% | 0.60% | 0.80% |
| Tax Exempt Bond Fund | 0.55% | 0.60% | 0.80% |
| Mortgage Securities Fund | 0.55% | 0.60% | 0.80% |
| Strategic European Equity Fund | 1.60% | 1.75% | 2.00% |
| Japan Alpha Opportunities Fund | 1.70% | 1.85% | 2.10% |
| Emerging Markets Fund | 1.60% | 1.75% | 2.00% |
| Emerging Markets Small-Cap Fund | 1.95% | 2.10% | 2.35% |
During the six months/period ended December 31, 2014, the Adviser waived $369 in expenses for the Opportunity Fund, $7,453 in expenses for the Multi-Strategy Fund, $769 in expenses for the Total Return Fund, and $2,774 in expenses for the Strategic Bond Fund. The Adviser is permitted to seek reimbursement from the Funds for fees waived and/or Fund expenses it pays over the following three years after such payment. The Funds must pay their current ordinary operating expenses before the Adviser is entitled to any reimbursement of fees and/or expenses. At December 31, 2014, the cumulative amounts of previously waived fees that the Adviser may recoup from the Funds is shown below:
| | | June 30, | |
| | | 2015 | | | 2016 | | | 2017 | | | 2018 | | | Total | |
| Opportunity Fund | | $ | 22,493 | | | $ | 18,972 | | | $ | 2,527 | | | $ | 369 | | | $ | 44,361 | |
| Multi-Strategy Fund | | | — | | | | — | | | | — | | | | 7,453 | | | | 7,453 | |
| Total Return Fund | | | — | | | | — | | | | — | | | | 769 | | | | 769 | |
| Strategic Bond Fund | | | — | | | | — | | | | — | | | | 2,774 | | | | 2,774 | |
Distribution – Quasar Distributors, LLC (“the Distributor”) serves as principal underwriter for shares of the Funds, and acts as each Fund’s Distributor in a continuous public offering of each Fund’s shares. The Distributor is an affiliate of the Administrator.
Under a Distribution Plan adopted pursuant to Rule 12b-1 under the Act (“Distribution Plan”), each Fund pays the Distributor or any other entity as authorized by the Board, as compensation for the distribution-related and/or shareholder services provided by such entities an aggregate fee equal to 0.25% of the average daily net assets of Advisor Shares for each Fund. The Distributor may pay any or all amounts received under the Rule 12b-1 Plan to other persons, including the Adviser, for any distribution or service activity.
The Trust has also adopted a Shareholder Service Plan under which each Fund may pay a fee of up to 0.15% of the average daily net assets of each Fund’s Investor and Advisor Shares (except for the Maryland Bond Fund, Intermediate Income Fund, Tax Exempt Bond Fund, Mortgage Securities Fund, Total Return Fund and Strategic Bond Fund, which may pay a fee of up to 0.05%) for shareholder services provided to the Funds by financial institutions, including the Adviser.
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Notes to Financial Statements
December 31, 2014 (Unaudited)
Investments in Affiliates – Intermediate Income Fund
The Intermediate Income Fund and Mortgage Securities Fund are considered affiliates since Brown Advisory LLC is the Adviser to both of the Funds. In seeking to achieve its investment objective, the Intermediate Income Fund invests a portion of its assets into the Mortgage Securities Fund. As of December 31, 2014, the Intermediate Income Fund owned shares of the Mortgage Securities Fund with a total market value of $31,143,018, or 19.2% of the Intermediate Income Fund’s net assets.
The Intermediate Income Fund has entered into a Fee Waiver Agreement (“the Agreement”) with the Adviser. Per the Agreement, the Intermediate Income Fund will waive Advisory Fees in an amount equal to the Advisory Fees earned by the Mortgage Securities Fund on the assets invested into it by the Intermediate Income Fund. For example, if the Intermediate Income Fund owned $10,000,000 worth of the Mortgage Securities Fund for an entire year, it would waive, on an annual basis, $30,000 in Advisory Fees ($10,000,000 multiplied by 0.30%, the annual Advisory Fee ratio for the Mortgage Securities Fund). During the six months ended December 31, 2014, the Intermediate Income Fund waived $51,607 in Advisory Fees per the terms of the Agreement. This is a permanent waiver of fees and these waived fees may not be recouped by the Adviser at any time in the future.
See the table below for details of the Intermediate Income Fund’s investment in the Mortgage Securities Fund during the six months ended December 31, 2014:
| | | Beginning | | | Purchases | | | Proceeds | | | | | | | | | Ending | | | | | | | |
| | Market Value; | | at Cost; | | | from Sales; | | | Unrealized | | | | | Market Value; | | | | | Capital | |
| Affiliated | [# of shares held] | | [# of shares | | | [# of | | | Depreciation | | | Realized | | [# of shares held] | | Dividend | | | Gains | |
| Investment | | 7/1/2014 | | | purchased] | | | shares sold] | | | 12/31/2014 | | | Gains | | | 12/31/2014 | | | Income | | | Distributions | |
| Mortgage Securities Fund | | $ | 25,008,867 | | | $ | 16,600,000 | | | $ | 10,280,000 | | | $ | (211,548 | ) | | $ | 34,566 | | | $ | 31,143,018 | | | $ | 505,168 | | | $ | 238,536 | |
| | | | [2,461,503 | ] | | | [1,639,559 | ] | | | [1,008,409 | ] | | | | | | | | | | | [3,092,653 | ] | | | | | | | | |
Investments in Affiliates – Multi-Strategy Fund
The Multi-Strategy Fund invests in affiliated Brown Advisory Funds. As of December 31, 2014, the Multi-Strategy Fund owned shares of affiliated Brown Advisory Funds with a total market value of $436,701, or 96.6% of the Multi-Strategy Fund’s net assets.
See the table below for details of the Multi-Strategy Fund investment in affiliated Brown Advisory Funds during the period ended December 31, 2014:
| | | Beginning | | | Purchases | | | Proceeds | | | Unrealized | | | | | | Ending | | | | | | | |
| | Market Value; | | at Cost; | | | from Sales; | | | Appreciation | | | Realized | | Market Value; | | | | | Capital | |
| Affiliated | [# of shares held] | | [# of shares | | | [# of | | | (Depreciation) | | | Gains | | [# of shares held] | | Dividend | | | Gains | |
| Investment | | 10/31/2014 | | | purchased] | | | shares sold] | | | 12/31/2014 | | | (Losses) | | | 12/31/2014 | | | Income | | | Distributions | |
| Total Return Fund | | $ | — | | | $ | 118,246 | | | $ | — | | | $ | 324 | | | $ | — | | | $ | 118,570 | | | $ | 173 | | | $ | — | |
| | | | [— | ] | | | [11,798 | ] | | | [— | ] | | | | | | | | | | | [11,798 | ] | | | | | | | | |
| Flexible Equity Fund | | $ | — | | | $ | 108,556 | | | $ | — | | | $ | 446 | | | $ | — | | | $ | 109,002 | | | $ | 613 | | | $ | — | |
| | | | [— | ] | | | [6,817 | ] | | | [— | ] | | | | | | | | | | | [6,817 | ] | | | | | | | | |
| Small-Cap | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fundamental | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Value Fund | | $ | — | | | $ | 42,721 | | | $ | — | | | $ | (1,664 | ) | | $ | — | | | $ | 41,057 | | | $ | 237 | | | $ | 1,943 | |
| | | | [— | ] | | | [1,740 | ] | | | [— | ] | | | | | | | | | | | [1,740 | ] | | | | | | | | |
| Strategic Bond Fund | | $ | — | | | $ | 40,923 | | | $ | — | | | $ | (256 | ) | | $ | — | | | $ | 40,667 | | | $ | 221 | | | $ | — | |
| | | | [— | ] | | | [4,055 | ] | | | [— | ] | | | | | | | | | | | [4,055 | ] | | | | | | | | |
| WMC Strategic | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| European | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Equity Fund | | $ | — | | | $ | 40,608 | | | $ | — | | | $ | (1,195 | ) | | $ | — | | | $ | 39,413 | | | $ | 437 | | | $ | — | |
| | | | [— | ] | | | [4,105 | ] | | | [— | ] | | | | | | | | | | | [4,105 | ] | | | | | | | | |
| Value Equity Fund | | $ | — | | | $ | 41,948 | | | $ | — | | | $ | (2,539 | ) | | $ | — | | | $ | 39,409 | | | $ | 617 | | | $ | 1,192 | |
| | | | [— | ] | | | [2,268 | ] | | | [— | ] | | | | | | | | | | | [2,268 | ] | | | | | | | | |
| Somerset Emerging | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Markets Fund | | $ | — | | | $ | 24,850 | | | $ | 2,106 | | | $ | (1,228 | ) | | $ | (4 | ) | | $ | 21,512 | | | $ | 332 | | | $ | — | |
| | | | [— | ] | | | [2,475 | ] | | | [211 | ] | | | | | | | | | | | [2,264 | ] | | | | | | | | |
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Notes to Financial Statements
December 31, 2014 (Unaudited)
| | | Beginning | | | Purchases | | | Proceeds | | | | | | | | | Ending | | | | | | | |
| | Market Value; | | at Cost; | | | from Sales; | | | Unrealized | | | Realized | | Market Value; | | | | | Capital | |
| Affiliated | [# of shares held] | | [# of shares | | | [# of | | | Depreciation | | | Gains | | [# of shares held] | | Dividend | | | Gains | |
| Investment | | 10/31/2014 | | | purchased] | | | shares sold] | | | 12/31/2014 | | | (Losses) | | | 12/31/2014 | | | Income | | | Distributions | |
| Small-Cap | | | | | | | | | | | | | | | | | | | | | | | | |
| Growth Fund | | $ | — | | | $ | 20,242 | | | $ | — | | | $ | (1,990 | ) | | $ | — | | | $ | 18,252 | | | $ | — | | | $ | 2,077 | |
| | | | [— | ] | | | [556 | ] | | | [— | ] | | | | | | | | | | | [556 | ] | | | | | | | | |
| Emerging Markets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Small-Cap Fund | | $ | — | | | $ | 9,094 | | | $ | — | | | $ | (275 | ) | | $ | — | | | $ | 8,819 | | | $ | — | | | $ | — | |
| | | | [— | ] | | | [903 | ] | | | [— | ] | | | | | | | | | | | [903 | ] | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Totals | | | $ | 436,701 | | | $ | 2,630 | | | $ | 5,212 | |
Other Service Providers – U.S. Bancorp Fund Services, LLC (“USBFS”), an indirect wholly-owned subsidiary of U.S. Bancorp, serves as the Funds’ Administrator (“Administrator”), and in that capacity, performs various administrative and accounting services for the Funds. USBFS also serves as the Funds’ fund accountant and transfer agent. Certain officers of the Trust are employees of USBFS and the Funds’ custodian, U.S. Bank, N.A., is an affiliate of the Administrator. Fees paid to USBFS and U.S. Bank, N.A. for its services can be found in the Statements of Operations as “Administration, transfer agent and accounting fees” and “Custodian fees”, respectively. Additional amounts for miscellaneous expenses may be paid by the Funds to USBFS and included in “Miscellaneous expenses” in the Statements of Operations.
Note 4. Purchases and Sales of Securities
The cost of purchases and the proceeds from sales of investment securities (including maturities), other than short-term investments, during the six months/period ended December 31, 2014 were as follows:
| | | Investment Securities | |
| | | Purchases | | | Sales | |
| Growth Equity Fund | | $ | 233,807,045 | | | $ | 555,260,004 | |
| Value Equity Fund | | | 55,022,965 | | | | 68,753,307 | |
| Flexible Equity Fund | | | 41,959,447 | | | | 8,569,162 | |
| Equity Income Fund | | | 18,602,669 | | | | 22,453,632 | |
| Sustainable Growth Fund | | | 44,520,229 | | | | 56,968,230 | |
| Small-Cap Growth Fund | | | 32,776,467 | | | | 73,837,449 | |
| Small-Cap Fundamental Value Fund | | | 115,921,986 | | | | 79,074,731 | |
| Opportunity Fund | | | 3,117,787 | | | | 3,408,841 | |
| Multi-Strategy Fund | | | 447,188 | | | | 2,106 | |
| Intermediate Income Fund | | | 146,196,142 | | | | 208,665,607 | |
| Total Return Fund | | | 82,025,175 | | | | 25,813,304 | |
| Strategic Bond Fund | | | 80,049,234 | | | | 61,261,185 | |
| Maryland Bond Fund | | | 75,609,010 | | | | 74,841,694 | |
| Tax Exempt Bond Fund | | | 158,356,055 | | | | 134,608,014 | |
| Mortgage Securities Fund | | | 156,199,081 | | | | 143,165,565 | |
| Strategic European Equity Fund | | | 59,082,428 | | | | 64,120,557 | |
| Japan Alpha Opportunities Fund | | | 495,122,796 | | | | 330,917,761 | |
| Emerging Markets Fund | | | 71,218,574 | | | | 16,436,988 | |
| Emerging Markets Small-Cap Fund | | | 65,949,141 | | | | 6,411,102 | |
The Intermediate Income Fund purchased $84,668,809 and sold $13,490,219 in U.S. Government securities during the six months ended December 31, 2014. The Strategic Bond Fund purchased $17,372,781 and sold $27,404,388 in U.S. Government securities during the six months ended December 31, 2014. The Total Return Fund purchased $24,753,744 and sold $13,502,937 in U.S. Government securities during the period ended December 31, 2014. Purchases and sales of U.S. Government securities are included in the totals above and include U.S. Treasury Bonds and Notes.
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Notes to Financial Statements
December 31, 2014 (Unaudited)
The cost basis of investments for federal income tax purposes at December 31, 2014 were as follows:
| | | Growth Equity | | | Value Equity | | | Flexible Equity | | | Equity Income | |
| | | Fund | | | Fund | | | Fund | | | Fund | |
| Tax Cost of Investments | | $ | 1,899,569,155 | | | $ | 175,287,071 | | | $ | 178,560,755 | | | $ | 159,847,289 | |
| Gross tax unrealized appreciation | | | 685,135,776 | | | | 45,700,565 | | | | 58,174,389 | | | | 47,592,503 | |
| Gross tax unrealized depreciation | | | (19,210,812 | ) | | | (6,415,383 | ) | | | (2,116,677 | ) | | | (627,836 | ) |
| Net tax unrealized appreciation | | $ | 665,924,964 | | | $ | 39,285,182 | | | $ | 56,057,712 | | | $ | 46,964,667 | |
| | | | | | | | | | | | | | | | | |
| | | Sustainable | | | | | | | Small-Cap | | | | | |
| | | Growth | | | Small-Cap | | | Fundamental | | | Opportunity | |
| | | Fund | | | Growth Fund | | | Value Fund | | | Fund | |
| Tax Cost of Investments | | $ | 148,397,583 | | | $ | 180,322,558 | | | $ | 531,220,286 | | | $ | 9,274,591 | |
| Gross tax unrealized appreciation | | | 61,246,079 | | | | 91,640,683 | | | | 156,697,365 | | | | 3,064,162 | |
| Gross tax unrealized depreciation | | | (1,358,092 | ) | | | (4,784,368 | ) | | | (15,372,659 | ) | | | (193,616 | ) |
| Net tax unrealized appreciation | | $ | 59,887,987 | | | $ | 86,856,315 | | | $ | 141,324,706 | | | $ | 2,870,546 | |
| | | | | | | | | | | | | | | | | |
| | | Multi-Strategy | | | Intermediate | | | Total Return | | | Strategic | |
| | | Fund | | | Income Fund | | | Fund | | | Bond Fund | |
| Tax Cost of Investments | | $ | 463,766 | | | $ | 159,738,247 | | | $ | 72,780,617 | | | $ | 39,074,116 | |
| Gross tax unrealized appreciation | | | 770 | | | | 1,578,520 | | | | 371,384 | | | | 169,622 | |
| Gross tax unrealized depreciation | | | (9,147 | ) | | | (813,723 | ) | | | (170,711 | ) | | | (121,205 | ) |
| Net tax unrealized appreciation (depreciation) | | $ | (8,377 | ) | | $ | 764,797 | | | $ | 200,673 | | | $ | 48,417 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Strategic | |
| | | Maryland | | | Tax Exempt | | | Mortgage | | | European | |
| | | Bond Fund | | | Bond Fund | | | Securities Fund | | | Equity Fund | |
| Tax Cost of Investments | | $ | 204,122,522 | | | $ | 225,854,537 | | | $ | 207,766,294 | | | $ | 200,780,245 | |
| Gross tax unrealized appreciation | | | 4,188,275 | | | | 2,521,264 | | | | 3,868,063 | | | | 18,637,879 | |
| Gross tax unrealized depreciation | | | (254,271 | ) | | | (966,405 | ) | | | (3,351,083 | ) | | | (20,213,109 | ) |
| Net tax unrealized appreciation (depreciation) | | $ | 3,934,004 | | | $ | 1,554,859 | | | $ | 516,980 | | | $ | (1,575,230 | ) |
| | | | | | | | | | | | | | | | | |
| | | Japan Alpha | | | Emerging | | | Emerging | | | | | |
| | | Opportunities | | | Markets | | | Markets | | | | | |
| | | Fund | | | Fund | | | Small-Cap Fund | | | | | |
| Tax Cost of Investments | | $ | 1,265,314,405 | | | $ | 251,494,960 | | | $ | 65,853,329 | | | | | |
| Gross tax unrealized appreciation | | | 130,628,326 | | | | 23,634,931 | | | | 1,162,942 | | | | | |
| Gross tax unrealized depreciation | | | (167,057,514 | ) | | | (25,565,958 | ) | | | (2,537,613 | ) | | | | |
| Net tax unrealized depreciation | | $ | (36,429,188 | ) | | $ | (1,931,027 | ) | | $ | (1,374,671 | ) | | | | |
Because tax adjustments are calculated annually, the above tables reflects the tax adjustments outstanding as of the Fund’s previous fiscal year ended (if applicable).
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Notes to Financial Statements
December 31, 2014 (Unaudited)
Note 5. Federal Income Tax and Distribution Information
Distributions during the fiscal periods ended as noted were characterized for tax purposes as follows (tax character for the six months ended December 31, 2014 is estimated):
| | Tax Exempt Income | | Ordinary Income | |
| | December 31, 2014 | | June 30, 2014 | | December 31, 2014 | | June 30, 2014 | |
| Growth Equity Fund | | $ | — | | | $ | — | | | $ | 14,359,997 | | | $ | — | |
| Value Equity Fund | | | — | | | | — | | | | 4,810,521 | | | | 1,823,081 | |
| Flexible Equity Fund | | | — | | | | — | | | | 1,001,462 | | | | 404,653 | |
| Equity Income Fund | | | — | | | | — | | | | 3,222,941 | | | | 5,646,162 | |
| Sustainable Growth Fund | | | — | | | | — | | | | — | | | | — | |
| Small-Cap Growth Fund | | | — | | | | — | | | | — | | | | 1,881,236 | |
| Small-Cap Fundamental Value Fund | | | — | | | | — | | | | 8,008,345 | | | | 9,553,188 | |
| Opportunity Fund | | | — | | | | — | | | | — | | | | — | |
| Multi-Strategy Fund | | | — | | | | N/A | | | | 2,395 | | | | N/A | |
| Intermediate Income Fund | | | — | | | | — | | | | 2,103,986 | | | | 4,135,996 | |
| Total Return Fund | | | — | | | | N/A | | | | 81,133 | | | | N/A | |
| Strategic Bond Fund | | | — | | | | — | | | | 200,659 | | | | 110,929 | |
| Maryland Bond Fund | | | 1,783,669 | | | | 4,420,903 | | | | — | | | | 16,958 | |
| Tax Exempt Bond Fund | | | 1,913,119 | | | | 3,290,873 | | | | — | | | | 41,678 | |
| Mortgage Securities Fund | | | — | | | | — | | | | 4,717,207 | | | | 1,703,711 | |
| Strategic European Equity Fund | | | — | | | | — | | | | 2,192,614 | | | | — | |
| Japan Alpha Opportunities Fund | | | — | | | | — | | | | 64,930,081 | | | | — | |
| Emerging Markets Fund | | | — | | | | — | | | | 3,789,665 | | | | 1,761,113 | |
| Emerging Markets Small-Cap Fund | | | — | | | | N/A | | | | — | | | | N/A | |
| | | | | | | | | | | | | | | | | |
| | Long-Term Capital Gain^ | | | | | | | | | |
| | December 31, 2014 | | June 30, 2014 | | | | | | | | | |
| Growth Equity Fund | | $ | 64,471,570 | | | $ | 15,530,861 | | | | | | | | | |
| Value Equity Fund | | | 5,195,581 | | | | — | | | | | | | | | |
| Flexible Equity Fund | | | — | | | | — | | | | | | | | | |
| Equity Income Fund | | | 8,337,712 | | | | 4,701,048 | | | | | | | | | |
| Sustainable Growth Fund | | | 4,340,210 | | | | 2,140,640 | | | | | | | | | |
| Small-Cap Growth Fund | | | 31,884,901 | | | | 12,608,814 | | | | | | | | | |
| Small-Cap Fundamental Value Fund | | | 27,145,701 | | | | 15,312,723 | | | | | | | | | |
| Opportunity Fund | | | — | | | | — | | | | | | | | | |
| Multi-Strategy Fund | | | — | | | | N/A | | | | | | | | | |
| Intermediate Income Fund | | | — | | | | 4,174,241 | | | | | | | | | |
| Total Return Fund | | | — | | | | N/A | | | | | | | | | |
| Strategic Bond Fund | | | — | | | | — | | | | | | | | | |
| Maryland Bond Fund | | | 1,040,851 | | | | 1,707,914 | | | | | | | | | |
| Tax Exempt Bond Fund | | | — | | | | — | | | | | | | | | |
| Mortgage Securities Fund | | | — | | | | — | | | | | | | | | |
| Strategic European Equity Fund | | | — | | | | — | | | | | | | | | |
| Japan Alpha Opportunities Fund | | | — | | | | — | | | | | | | | | |
| Emerging Markets Fund | | | — | | | | — | | | | | | | | | |
| Emerging Markets Small-Cap Fund | | | — | | | | N/A | | | | | | | | | |
^ Designated as a long-term capital gain dividend, pursuant to Internal Revenue Code Section 852(b)(3).
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Notes to Financial Statements
December 31, 2014 (Unaudited)
At June 30, 2014, the components of distributable earnings (accumulated losses) on a tax basis were as follows:
| | | Growth Equity | | | Value Equity | | | Flexible Equity | | | Equity Income | |
| | | Fund | | | Fund | | | Fund | | | Fund | |
| Net tax unrealized appreciation | | $ | 620,650,994 | | | $ | 54,966,034 | | | $ | 40,786,095 | | | $ | 44,040,638 | |
| Net unrealized appreciation on foreign receivables | | | — | | | | — | | | | — | | | | (181 | ) |
| Undistributed ordinary income | | | 4,968,744 | | | | 2,067,371 | | | | 406,100 | | | | 693,223 | |
| Undistributed long-term capital gain | | | 32,787,038 | | | | 2,172,236 | | | | — | | | | 6,259,643 | |
| Total distributable earnings | | | 37,755,782 | | | | 4,239,607 | | | | 406,100 | | | | 6,952,866 | |
| Other accumulated loss | | | — | | | | — | | | | (3,306,025 | ) | | | — | |
| Total accumulated earnings | | $ | 658,406,776 | | | $ | 59,205,641 | | | $ | 37,886,170 | | | $ | 50,993,323 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Small-Cap | | | | | |
| | | Sustainable | | | Small-Cap | | | Fundamental | | | Opportunity | |
| | | Growth Fund | | | Growth Fund | | | Value Fund | | | Fund | |
| Net tax unrealized appreciation | | $ | 57,293,486 | | | $ | 98,446,544 | | | $ | 141,612,256 | | | $ | 3,139,702 | |
| Undistributed ordinary income | | | — | | | | — | | | | 5,273,709 | | | | — | |
| Undistributed long-term capital gain | | | 1,754,640 | | | | 21,430,923 | | | | 10,563,232 | | | | — | |
| Total distributable earnings | | | 1,754,640 | | | | 21,430,923 | | | | 15,836,941 | | | | — | |
| Other accumulated loss | | | (14,135,855 | ) | | | (676,466 | ) | | | (4,105,643 | ) | | | (6,384,941 | ) |
| Total accumulated earnings (losses) | | $ | 44,912,271 | | | $ | 119,201,001 | | | $ | 153,343,554 | | | $ | (3,245,239 | ) |
| | | | | | | | | | | | | | | | | |
| | | Intermediate | | | Strategic | | | Maryland | | | Tax Exempt | |
| | | Income Fund | | | Bond Fund | | | Bond Fund | | | Bond Fund | |
| Net tax unrealized appreciation | | $ | 1,681,076 | | | $ | 140,573 | | | $ | 4,527,348 | | | $ | 427,029 | |
| Undistributed ordinary income | | | 43,366 | | | | 13,480 | | | 268,701^ | | | 249,231^ | |
| Undistributed long-term capital gain | | | — | | | | — | | | | 341,254 | | | | — | |
| Total distributable earnings | | | 43,366 | | | | 13,480 | | | | 609,955 | | | 249,231^ | |
| Other accumulated loss | | | (346,024 | ) | | | (284,758 | ) | | | (268,673 | ) | | | (712,849 | ) |
| Total accumulated earnings (losses) | | $ | 1,378,418 | | | $ | (130,705 | ) | | $ | 4,868,630 | | | $ | (36,589 | ) |
| | | | | | | | | | | | | | | | | |
| | | Mortgage | | | Strategic | | | Japan Alpha | | | Emerging | |
| | | Securities | | | European | | | Opportunities | | | Markets | |
| | | Fund | | | Equity Fund | | | Fund | | | Fund | |
| Net tax unrealized appreciation | | $ | 1,546,150 | | | $ | 6,765,603 | | | $ | 55,418,025 | | | $ | 13,634,056 | |
| Net unrealized appreciation (depreciation) on foreign receivables | | | — | | | | (2,091 | ) | | | 9,442 | | | | 378 | |
| Undistributed ordinary income | | | 795,802 | | | | 2,146,536 | | | | 5,873,327 | | | | 2,310,343 | |
| Undistributed long-term capital gain | | | — | | | | — | | | | — | | | | — | |
| Total distributable earnings | | | 795,802 | | | | 2,146,536 | | | | 5,873,327 | | | | 2,310,343 | |
| Other accumulated loss | | | — | | | | (36,207 | ) | | | — | | | | (9,024,424 | ) |
| Total accumulated earnings | | $ | 2,341,952 | | | $ | 8,873,841 | | | $ | 61,300,794 | | | $ | 6,920,353 | |
^ Represents tax-exempt income.
Note 6. Strategic Bond Fund – Credit Default Swap Agreements
The Strategic Bond Fund may invest in credit default swap agreements. Credit default swap agreements involve one party making a stream of payments (generally referred to as the buyer of protection) to another party (the seller of protection) in exchange for the right to receive a specified return in the event of a default or other credit event in respect of a referenced entity, obligation or index. As a seller of protection on credit default swap agreements, a Fund will generally receive from the buyer of protection a fixed rate of income throughout the term of the swap. As the seller, a Fund would effectively add leverage to its portfolio because, in addition to its total net assets, the Fund would be subject to investment exposure on the notional amount of the swap.
If a Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the
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Notes to Financial Statements
December 31, 2014 (Unaudited)
referenced obligation, other deliverable obligations or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. If a Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation, other deliverable obligations or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. Recovery values are typically estimated by market makers considering either industry standard recovery rates or entity specific factors and considerations until a credit event occurs.
Credit default swap agreements on credit indices involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a write-down, principal shortfall, interest shortfall or default some or all of the referenced entities comprising the credit index. A credit index is a basket of credit instruments or exposures typically designed to be representative of some part of the credit market as a whole. Components of the indices may include, but are not limited to, investment grade securities, high yield securities, asset-backed securities, emerging markets, and/or various credit ratings within each sector. Credit indices are typically traded using credit default swaps with standardized terms including a fixed spread and standard maturity dates. An index credit default swap references all the names in the index, and if there is a default, the credit event is settled based on that name’s weight in the index.
The effect of credit default swap contracts on the Statements of Assets and Liabilities as of December 31, 2014 is as follows:
| | Derivatives not accounted | Statement of Assets | | | |
| Fund | for as hedging instruments | and Liabilities Location | | Amount | |
| Strategic Bond Fund | Credit Default Swap Contracts | Gross Unrealized Appreciation – | | | |
| | | Credit Default Swaps | | $ | — | |
| | | | | | | |
| Strategic Bond Fund | Credit Default Swap Contracts | Gross Unrealized Depreciation – | | | | |
| | | Credit Default Swaps | | $ | 5,813 | |
The effect of credit default swap contracts on the Statements of Operations for the six months ended December 31, 2014 is as follows:
| | Derivatives not accounted | | | | |
| Fund | for as hedging instruments | Statement of Operations Location | | Amount | |
| Strategic Bond Fund | Credit Default Swap Contracts | Net Realized Gain (Loss) – | | | |
| | | Credit Default Swap Contracts | | $ | 64,567 | |
| | | | | | | |
| Strategic Bond Fund | Credit Default Swap Contracts | Net Change in Unrealized | | | | |
| | | Appreciation (Depreciation) – | | | | |
| | | Credit Default Swap Contracts | | $ | (146,689 | ) |
As of December 31, 2014, the Strategic Bond Fund had open credit default swap contracts with a notional amount of $3,500,000. During the six months ended December 31, 2014, the average notional amount of credit default swaps outstanding was $6,999,098.
Offsetting Assets & Liabilities
To facilitate the Strategic Bond Fund’s investment in credit default swaps, the Fund has entered into agreements with counterparties that dictate the terms under which the Fund may purchase or sell protection using credit default swaps. Under these agreements, both the Fund and the counterparty may be allowed to combine amounts owed to or receivable from the other and settle all outstanding obligations on a “net basis”.
Consequently, some funds may choose to present such assets or liabilities arising from these credit default swaps on a net basis in their Statements of Assets and Liabilities. The Strategic Bond Fund does not present any assets or liabilities related to credit default swaps in such a manner; rather, the Fund presents the gross amounts of assets and the gross amounts of liabilities related to credit default swaps in the Statements of Assets and Liabilities. In order to facilitate comparability amongst different funds, the table below shows what the Strategic Bond Fund’s Statement of Assets and Liabilities accounts related to credit default swaps would
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Notes to Financial Statements
December 31, 2014 (Unaudited)
look like if it did choose to offset, or present on a net basis, assets and liabilities related to credit default swaps. As the Strategic Bond Fund only has a single swap open as of December 31, 2014, with a single counterparty, there are no amounts that could be offset, as the table below indicates:
Assets:
| | | | | | | | | | | | Gross Amounts Not Offset | | | | |
| | | | | | Gross Amounts | | | Net Amounts | | | in the Statement of | | | | |
| | | Gross | | | Offset in the | | | Presented in | | | Assets & Liabilities | | | | |
| | | Amounts of | | | Statement | | | the Statement | | | | | | | | | | |
| | | Recognized | | | of Assets | | | of Assets | | | Financial | | | Collateral | | | | |
| Description / Counterparty | | Assets | | | & Liabilities | | | & Liabilities | | | Instruments | | | Received | | | Net Amount | |
| Credit Default Swap – sell protection / | | | | | | | | | | | | | | | | | | |
| Credit Suisse Securities (USA) LLC | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Gross Amounts Not Offset | | | | | |
| | | | | | | Gross Amounts | | | Net Amounts | | | in the Statement of | | | | | |
| | | Gross | | | Offset in the | | | Presented in | | | Assets & Liabilities | | | | | |
| | | Amounts of | | | Statement | | | the Statement | | | | | | | | | | | | | |
| | | Recognized | | | of Assets | | | of Assets | | | Financial | | | Collateral | | | | | |
| Description / Counterparty | | Liabilities | | | & Liabilities | | | & Liabilities | | | Instruments | | | Pledged | | | Net Amount | |
| Credit Default Swap – sell protection / | | | | | | | | | | | | | | | | | | | | | | | | |
| Credit Suisse Securities (USA) LLC | | $ | 5,813 | | | $ | — | | | $ | 5,813 | | | $ | — | | | $ | 5,813 | | | $ | — | |
Note 7. Japan Alpha Opportunities Fund – Forward Foreign Currency Contracts
The majority of the Japan Alpha Opportunities Fund’s assets are denominated in Japanese Yen. The Japan Alpha Opportunities Fund seeks to offset or hedge its exposure to the Japanese Yen by entering into forward foreign currency contracts. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at an agreed upon price. Typically, the Japan Alpha Opportunities Fund will have a net position in forward foreign currency contracts that commits the Fund to sell Japanese Yen in return for U.S. Dollars. These contracts are traded over-the-counter and not on an organized exchange. The contracts are marked-to-market daily and the change in market value is recorded as unrealized appreciation or depreciation. When the contract is closed, a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed is recorded. The realized gains or losses are reported in the Statement of Operations as net realized gains or losses from forward foreign currency contracts. Unrealized appreciation on forward foreign currency contracts and unrealized depreciation on forward foreign currency contracts is reported in the Statement of Assets and Liabilities for those contracts that remain open as of year end. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. There is generally no collateral exchanged by the Fund or counterparty to the contract in connection with these contracts. The Fund’s risk of loss from counterparty credit risk on these contracts is generally limited to the aggregate unrealized appreciation on open contracts on a counterparty by counterparty basis. The Fund attempts to mitigate counterparty credit risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.
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Notes to Financial Statements
December 31, 2014 (Unaudited)
The effect of forward foreign currency contracts on the Statements of Assets and Liabilities as of December 31, 2014 is as follows:
| | Derivatives not accounted | Statement of Assets | | | |
| Fund | for as hedging instruments | and Liabilities Location | | Amount | |
| Japan Alpha Opportunities Fund | Forward Foreign Currency Contracts | Assets: Gross Unrealized | | | |
| | | Appreciation – Forward | | | |
| | | Foreign Currency Contracts | | $ | — | |
| Japan Alpha Opportunities Fund | Forward Foreign Currency Contracts | Liabilities: Gross Unrealized | | | | |
| | | Depreciation – Forward | | | | |
| | | Foreign Currency Contracts | | $ | 14,999,607 | |
The effect of forward foreign currency contracts on the Statements of Operations during the six months ended December 31, 2014 is as follows:
| | Derivatives not accounted | Statement of | | | |
| Fund | for as hedging instruments | Operations Location | | Amount | |
| Japan Alpha Opportunities Fund | Forward Foreign Currency Contracts | Net Realized Gain (Loss) – | | | |
| | | Forward Foreign Currency Contracts | | $ | 181,749,044 | |
| Japan Alpha Opportunities Fund | Forward Foreign Currency Contracts | Net Change in Unrealized | | | | |
| | | Appreciation (Depreciation) – | | | | |
| | | Forward Foreign Currency Contracts | | $ | (8,544,298 | ) |
As of December 31, 2014, the Japan Alpha Opportunities Fund had open forward foreign currency contracts with an original market value, in U.S. Dollars, of $1,110,086,356. During the six months ended December 31, 2014, the average original market value, in U.S. Dollars, of forward foreign currency contracts held by the Fund was $1,074,894,103. Typically, the Fund will seek to offset all or nearly all of its exposure to the Japanese Yen through the use of forward foreign currency contracts. Therefore, the amount of open forward foreign currency contracts outstanding at any given time is likely to be similar to the total net assets of the Fund at that time.
Offsetting Assets & Liabilities – Forward Foreign Currency Contracts
To facilitate the Japan Alpha Opportunities Fund’s investment in forward foreign currency contracts, the Fund has entered into agreements with counterparties that dictate the terms under which the Fund and the counterparty will enter into such agreements. Under these agreements, both the Fund and the counterparty may be allowed to combine amounts owed to or receivable from the other and settle all outstanding obligations on a “net basis”.
Consequently, some funds may choose to present such assets or liabilities related to forward foreign currency contracts or other derivatives on a net basis in their Statements of Assets and Liabilities. The Japan Alpha Opportunities Fund does not present any assets or liabilities related to forward foreign currency contracts in such a manner; rather, the Fund presents the gross amounts of assets and the gross amounts of liabilities related to forward foreign currency contracts in the Statements of Assets and Liabilities. In order to facilitate comparability amongst different funds, the table below shows what the Japan Alpha Opportunities Fund’s Statement of Assets and Liabilities accounts related to forward foreign currency contracts would look like if it did choose to offset, or present on a net basis, assets and liabilities related to forward foreign currency contracts. At December 31, 2014, the Japan Alpha Opportunities Fund had three open forward foreign currency contracts open with three distinct counterparties, and each contract was in a position of having unrealized depreciation. Therefore, there are no amounts that may be offset by the Fund in the Statement of Assets and Liabilities, as shown in the table below:
Assets:
| | | | | | | | | | | | Gross Amounts Not Offset | | | | |
| | | | | | Gross Amounts | | | Net Amounts | | | in the Statement of | | | | |
| | | Gross | | | Offset in the | | | Presented in | | | Assets & Liabilities | | | | |
| | | Amounts of | | | Statement | | | the Statement | | | | | | | | | | |
| Unrealized Appreciation on | | Recognized | | | of Assets | | | of Assets | | | Financial | | | Collateral | | | | |
| Forward Foreign Currency Contracts | | Assets | | | & Liabilities | | | & Liabilities | | | Instruments | | | Received | | | Net Amount | |
| Counterparty: | | | | | | | | | | | | | | | | | | |
| HSBC Bank | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Bank of America | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Goldman Sachs | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Total | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
www.brownadvisoryfunds.com
Notes to Financial Statements
December 31, 2014 (Unaudited)
Liabilities:
| | | | | | | | | | | | Gross Amounts Not Offset | | | | |
| | | | | | Gross Amounts | | | Net Amounts | | | in the Statement of | | | | |
| | | Gross | | | Offset in the | | | Presented in | | | Assets & Liabilities | | | | |
| | | Amounts of | | | Statement | | | the Statement | | | | | | | | | | |
| Unrealized Depreciation on | | Recognized | | | of Assets | | | of Assets | | | Financial | | | Collateral | | | | |
| Forward Foreign Currency Contracts | | Liabilities | | | & Liabilities | | | & Liabilities | | | Instruments | | | Pledged | | | Net Amount | |
| Counterparty: | | | | | | | | | | | | | | | | | | |
| HSBC Bank | | $ | 14,310,100 | | | $ | — | | | $ | 14,310,100 | | | $ | — | | | $ | — | | | $ | 14,310,100 | |
| Bank of America | | | 239,622 | | | | — | | | | 239,622 | | | | — | | | | — | | | | 239,622 | |
| Goldman Sachs | | | 449,885 | | | | — | | | | 449,885 | | | | — | | | | — | | | | 449,885 | |
| Total | | $ | 14,999,607 | | | $ | — | | | $ | 14,999,607 | | | $ | — | | | $ | — | | | $ | 14,999,607 | |
Note 8. Futures Contracts
The Total Return Fund, Strategic Bond Fund and Japan Alpha Opportunities Fund invest in futures contracts.
Futures Contracts
The Total Return Fund, Strategic Bond Fund and Japan Alpha Opportunities Fund invest in futures contracts. At the time a Fund purchases or enters into a futures contract, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the terms of the contract. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses on futures contracts. This amount can be found on the Statement of Assets and Liabilities as Variation margin – futures contracts. The daily settlement of variation margin between the Fund and the broker serves to reduce counterparty risk to the Fund. The use of long futures contracts by the Funds subjects them to a risk of loss in excess of the amounts shown on the Statements of Assets and Liabilities and up to the total notional amount of the futures contract as shown in the Schedule of Investments. The use of short futures contracts by the Funds subjects them to a risk of loss in excess of the amounts shown on the Statements of Assets and Liabilities and, hypothetically, up to an unlimited amount of loss that could exceed the notional amount of the futures contract as shown in the Schedule of Investments.
The effect of futures contracts on the Statements of Assets and Liabilities as of December 31, 2014 is as follows:
| | Derivatives not accounted | Statement of Assets | | | |
| Fund | for as hedging instruments | and Liabilities Location | | Amount | |
| Total Return Fund | Futures Contracts | Unrealized Appreciation – | | | |
| | | Futures Contracts | | $ | 40,016 | |
| Strategic Bond Fund | Futures Contracts | Unrealized Depreciation – | | | | |
| | | Futures Contracts | | $ | (12,542 | ) |
| Japan Alpha Opportunities Fund | Futures Contracts | Unrealized Depreciation – | | | | |
| | | Futures Contracts | | $ | (1,909,538 | ) |
www.brownadvisoryfunds.com
Notes to Financial Statements
December 31, 2014 (Unaudited)
The effect of futures contracts on the Statements of Operations during the six months ended December 31, 2014 is as follows:
| | Derivatives not accounted | Statement of | | | |
| Fund | for as hedging instruments | Operations Location | | Amount | |
| Total Return Fund | Futures Contracts | Net Realized Gain (Loss) – | | | |
| | | Futures Contracts | | $ | (9,115 | ) |
| | | | | | | |
| Total Return Fund | Futures Contracts | Net Change in Unrealized | | | | |
| | | Appreciation (Depreciation) – | | | | |
| | | Futures Contracts | | $ | 40,016 | |
| Strategic Bond Fund | Futures Contracts | Net Realized Gain (Loss) – | | | | |
| | | Futures Contracts | | $ | (37,882 | ) |
| | | | | | | |
| Strategic Bond Fund | Futures Contracts | Net Change in Unrealized | | | | |
| | | Appreciation (Depreciation) – | | | | |
| | | Futures Contracts | | $ | (12,542 | ) |
| Japan Alpha Opportunities Fund | Futures Contracts | Net Realized Gain (Loss) – | | | | |
| | | Futures Contracts | | $ | 9,349,505 | |
| | | | | | | |
| Japan Alpha Opportunities Fund | Futures Contracts | Net Change in Unrealized | | | | |
| | | Appreciation (Depreciation) – | | | | |
| | | Futures Contracts | | $ | (3,079,132 | ) |
As of December 31, 2014, the Total Return Fund and Japan Alpha Opportunities Fund had long open futures contracts with notional amounts of $4,265,655 and $94,862,901, respectively. During the period ended December 31, 2014, the average notional amount of long open futures contracts held by the Total Return Fund and Japan Alpha Opportunities Fund were $4,375,391 and $83,430,230, respectively.
At December 31, 2014, the Total Return Fund and Strategic Bond Fund had short open futures contracts with notional amounts of $(15,782,958) and $(27,419,160), respectively. During the period ended December 31, 2014, the average notional amount of the short open future contracts held by the Total Return Fund and Strategic Bond Fund were $(7,903,599) and $(3,098,176), respectively.
Offsetting Assets & Liabilities – Futures Contracts
To facilitate the Fund’s investment in futures contracts, the Funds have entered into agreements with counterparties that dictate the terms under which the Funds and the counterparty will enter into such agreements. Under these agreements, both the Funds and the counterparty may be allowed to combine amounts owed to or receivable from the other and settle all outstanding obligations on a “net basis.” The Funds present such assets or liabilities related to futures contracts on a net basis on the Statements of Assets and Liabilities. In order to facilitate comparability amongst different funds, the table below shows what the Funds’ Statement of Assets and Liabilities accounts related to futures contracts would look like if they choose not to offset, or present on a net basis, assets and liabilities related to futures contracts.
www.brownadvisoryfunds.com
Notes to Financial Statements
December 31, 2014 (Unaudited)
Assets:
| | | | | | | | | | | | Gross Amounts not offset | | | | |
| | | | | | Gross Amounts | | | Net Amounts | | | in the Statement of | | | | |
| | | Gross | | | Offset in the | | | Presented in | | | Assets & Liabilities | | | | |
| | | Amounts of | | | Statement | | | the Statement | | | | | | | | | | |
| | | Recognized | | | of Assets | | | of Assets | | | Financial | | | Collateral | | | | |
| Description | | Assets | | | & Liabilities | | | & Liabilities | | | Instruments | | | Received | | | Net Amount | |
| Total Return Fund | | | | | | | | | | | | | | | | | | |
| Futures contracts | | $ | 81,017 | | | $ | (41,001 | ) | | $ | 40,016 | | | $ | — | | | $ | — | | | $ | 40,016 | |
| Strategic Bond Fund | | | | | | | | | | | | | | | | | | | | | | | | |
| Futures contracts | | | 60,224 | | | | (60,224 | ) | | | — | | | | — | | | | — | | | | — | |
| Japan Alpha Opportunities Fund | | | | | | | | | | | | | | | | | | | | | | �� | | |
| Futures contracts | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Gross Amounts not offset | | | | | |
| | | | | | | Gross Amounts | | | Net Amounts | | | in the Statement of | | | | | |
| | | Gross | | | Offset in the | | | Presented in | | | Assets & Liabilities | | | | | |
| | | Amounts of | | | Statement | | | the Statement | | | | | | | | | | | | | |
| | | Recognized | | | of Assets | | | of Assets | | | Financial | | | Collateral | | | | | |
| Description | | Liabilities | | | & Liabilities | | | & Liabilities | | | Instruments | | | Pledged | | | Net Amount | |
| Total Return Fund | | | | | | | | | | | | | | | | | | | | | | | | |
| Futures contracts | | $ | 41,001 | | | $ | (41,001 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Strategic Bond Fund | | | | | | | | | | | | | | | | | | | | | | | | |
| Futures contracts | | | 72,766 | | | | (60,224 | ) | | | 12,542 | | | | — | | | | 12,542 | | | | — | |
| Japan Alpha Opportunities Fund | | | | | | | | | | | | | | | | | | | | | | | | |
| Futures contracts | | | 1,909,538 | | | | — | | | | 1,909,538 | | | | — | | | | 1,909,538 | | | | — | |
www.brownadvisoryfunds.com
Expense Example For the Six Months Ended December 31, 2014 (Unaudited)
As a shareholder of a Fund you incur two types of costs: (1) transaction costs, including redemption fees and exchange fees; and (2) ongoing costs, including investment advisory fees; distribution and/or service fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in a 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* (July 1, 2014 – December 31, 2014).
Actual Expenses
The “Actual Return” row in the following table provides information about actual account values based on actual returns and actual expenses. As a shareholder 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 Funds’ transfer agent. If you request that a redemption be made by wire transfer, currently, the Funds’ transfer agent charges a $15.00 fee. You will be charged a redemption fee equal to 1.00% of the net amount of the redemption if you redeem your shares less than 14 days after you purchase, with certain limited exceptions. Individual Retirement Accounts (“IRA”) that are held directly at the Funds will be charged a $15.00 annual maintenance fee. IRAs held by broker-dealers or through other means, may or may not incur an annual maintenance fee. Yet, if IRAs maintenance fees are charged to accounts held elsewhere, the fees charged may be more or may be less than $15.00. To the extent the Funds invest in shares of other investment companies as part of their investment strategy, you will indirectly bear your proportionate share of any fees and expenses charged by the underlying funds in which the Funds invest in addition to the expenses of the Funds. Actual expenses of the underlying funds may vary. These expenses are not included in the example below. The example below includes, but is not limited to, investment advisory, shareholder servicing, fund accounting, custody and transfer agent fees. However, the example below does not include portfolio trading commissions and related expenses and other extraordinary expenses as determined under generally accepted accounting principles. 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 “Hypothetical Return” row in the following table provides information about hypothetical account values based on a hypothetical return and hypothetical expenses based on the Funds’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds’ 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 Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the 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 Hypothetical information in 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.
| | Beginning | Ending | | Annualized |
| | Account Value | Account Value | Expenses Paid | Expense |
| | July 1, 2014 | December 31, 2014 | During the Period* | Ratio* |
| Growth Equity Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $1,047 | $3.71 | 0.72% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,022 | $3.67 | 0.72% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $1,045 | $4.48 | 0.87% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,021 | $4.43 | 0.87% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $1,044 | $5.77 | 1.12% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,020 | $5.70 | 1.12% |
www.brownadvisoryfunds.com
Expense Example For the Six Months Ended December 31, 2014 (Unaudited)
| | Beginning | Ending | | Annualized |
| | Account Value | Account Value | Expenses Paid | Expense |
| | July 1, 2014 | December 31, 2014 | During the Period* | Ratio* |
| Value Equity Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $ 970 | $3.67 | 0.74% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,021 | $3.77 | 0.74% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $ 969 | $4.42 | 0.89% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,021 | $4.53 | 0.89% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $ 968 | $5.65 | 1.14% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,019 | $5.80 | 1.14% |
| | | | | |
| Flexible Equity Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $1,086 | $4.00 | 0.76% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,021 | $3.87 | 0.76% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $1,085 | $4.78 | 0.91% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,021 | $4.63 | 0.91% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $1,084 | $6.09 | 1.16% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,019 | $5.90 | 1.16% |
| | | | | |
| Equity Income Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $1,038 | $3.85 | 0.75% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,021 | $3.82 | 0.75% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $1,038 | $4.62 | 0.90% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,021 | $4.58 | 0.90% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $1,037 | $5.90 | 1.15% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,019 | $5.85 | 1.15% |
| | | | | |
| Sustainable Growth Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $1,057 | $3.89 | 0.75% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,021 | $3.82 | 0.75% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $1,056 | $4.66 | 0.90% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,021 | $4.58 | 0.90% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $1,055 | $5.96 | 1.15% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,019 | $5.85 | 1.15% |
www.brownadvisoryfunds.com
Expense Example For the Six Months Ended December 31, 2014 (Unaudited)
| | Beginning | Ending | | Annualized |
| | Account Value | Account Value | Expenses Paid | Expense |
| | July 1, 2014 | December 31, 2014 | During the Period* | Ratio* |
| Small-Cap Growth Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $1,033 | $5.07 | 0.99% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,020 | $5.04 | 0.99% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $1,032 | $5.84 | 1.14% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,019 | $5.80 | 1.14% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $1,031 | $7.12 | 1.39% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,018 | $7.07 | 1.39% |
| | | | | |
| Small-Cap Fundamental Value Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $1,040 | $5.04 | 0.98% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,020 | $4.99 | 0.98% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $1,039 | $5.81 | 1.13% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,020 | $5.75 | 1.13% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $1,038 | $7.09 | 1.38% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,018 | $7.02 | 1.38% |
| | | | | |
| Opportunity Fund | | | | |
| Investor Shares | | | | |
| Actual Return | $1,000 | $1,041 | $7.71 | 1.50% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,018 | $7.63 | 1.50% |
| | | | | |
| Multi-Strategy Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $1,006 | $2.68 | 1.60% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,017 | $8.13 | 1.60% |
| | | | | |
| Intermediate Income Fund | | | | |
| Investor Shares | | | | |
| Actual Return | $1,000 | $1,007 | $2.38 | 0.47% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,023 | $2.40 | 0.47% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $1,006 | $3.64 | 0.72% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,022 | $3.67 | 0.72% |
| | | | | |
| Total Return Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $1,007 | $0.91 | 0.54% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,022 | $2.75 | 0.54% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $1,006 | $0.99 | 0.59% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,022 | $3.01 | 0.59% |
www.brownadvisoryfunds.com
Expense Example For the Six Months Ended December 31, 2014 (Unaudited)
| | Beginning | Ending | | Annualized |
| | Account Value | Account Value | Expenses Paid | Expense |
| | July 1, 2014 | December 31, 2014 | During the Period* | Ratio* |
| Strategic Bond Fund | | | | |
| Investor Shares | | | | |
| Actual Return | $1,000 | $1,001 | $1.17 | 0.70% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,022 | $3.57 | 0.70% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $1,003 | $6.26 | 1.24% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,019 | $6.31 | 1.24% |
| | | | | |
| Maryland Bond Fund | | | | |
| Investor Shares | | | | |
| Actual Return | $1,000 | $1,010 | $2.48 | 0.49% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,023 | $2.50 | 0.49% |
| | | | | |
| Tax Exempt Bond Fund | | | | |
| Investor Shares | | | | |
| Actual Return | $1,000 | $1,015 | $2.54 | 0.50% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,023 | $2.55 | 0.50% |
| | | | | |
| Mortgage Securities Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $1,014 | $2.39 | 0.47% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,023 | $2.40 | 0.47% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $1,014 | $2.64 | 0.52% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,023 | $2.65 | 0.52% |
| | | | | |
| Strategic European Equity Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $ 928 | $5.49 | 1.13% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,020 | $5.75 | 1.13% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $ 926 | $6.22 | 1.28% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,019 | $6.51 | 1.28% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $ 925 | $7.42 | 1.53% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,017 | $7.78 | 1.53% |
| | | | | |
| Japan Alpha Opportunities Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $1,081 | $6.03 | 1.15% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,019 | $5.85 | 1.15% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $1,081 | $6.82 | 1.30% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,019 | $6.61 | 1.30% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $1,080 | $8.13 | 1.55% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,017 | $7.88 | 1.55% |
www.brownadvisoryfunds.com
Expense Example For the Six Months Ended December 31, 2014 (Unaudited)
| | Beginning | Ending | | Annualized |
| | Account Value | Account Value | Expenses Paid | Expense |
| | July 1, 2014 | December 31, 2014 | During the Period* | Ratio* |
| Emerging Markets Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $ 944 | $5.83 | 1.19% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,019 | $6.06 | 1.19% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $ 943 | $6.56 | 1.34% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,018 | $6.82 | 1.34% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $ 942 | $7.78 | 1.59% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,017 | $8.08 | 1.59% |
| | | | | |
| Emerging Markets Small-Cap Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $ 977 | $1.85 | 1.71% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,017 | $8.69 | 1.71% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $ 977 | $2.01 | 1.86% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,016 | $9.45 | 1.86% |
| * | The calculations are based on expenses incurred during the most recent six-month period ended as of the date of this report. The dollar amounts shown as expenses paid during the period are equal to the annualized six-month expense ratio multiplied by the average account value during the period, multiplied by the number of days in the most recent six-month period divided by the number of days in the Funds’ current fiscal year, with the exception of the Actual Return calculations for the Total Return Fund which commenced operations on October 30, 2014, the Multi-Strategy Fund and the Investor Share Class of the Strategic Bond Fund, each of which commenced operations on October 31, 2014, and the Emerging Markets Small-Cap Fund, which commenced operations on November 21, 2014. For those Funds, the Actual Return calculations are for the period from their respective inception dates to December 31, 2014. |
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Approval of: (i) the Continuation of the Investment Advisory Agreement and a Sub-Advisory
Agreement for Certain of the Funds, and (ii) the Adoption of the Investment Advisory Agreement
and a Sub-Investment Advisory Agreement for Certain Other of the Funds (Unaudited)
| 1. | Board of Trustees Approval of the Continuation of the Trust’s Investment Advisory Agreement (with respect to each of the Funds other than the Brown Advisory – WMC Strategic European Equity Fund, the Brown Advisory Mortgage Securities Fund and the Brown Advisory – WMC Japan Alpha Opportunities Fund) |
In accordance with the Investment Company Act of 1940 Act, the Board of Trustees of the Trust is required, on an annual basis, to consider the continuation of the Investment Advisory Agreement between the Trust, on behalf of each of the Funds, and Brown Advisory LLC (“Brown Advisory” or the “Adviser”), as well as any applicable Sub-Advisory Agreements, and this must take place at an in-person meeting of the Board. The relevant provisions of the Investment Company Act of 1940 specifically provide that it is the duty of the Board to request and evaluate such information as the Board determines is necessary to allow them to properly consider the continuation of the Investment Advisory Agreement, and it is the duty of the Adviser to furnish the Trustees with such information that is responsive to their request. (Separate discussions of the Board’s consideration of matters with respect to: (1) the approval of the continuation of the Sub-Investment Advisory Agreement with respect to the Brown Advisory – Somerset Emerging Markets Fund; (2) the approval of the adoption of the Investment Advisory Agreement with respect to the Brown Advisory Total Return Fund, the Brown Advisory Multi-Strategy Fund and the Brown Advisory Emerging Markets Small-Cap Fund, and (3) the approval of the adoption of the Sub-Investment Advisory Agreement with respect to the Brown Advisory Emerging Markets Small-Cap Fund are set forth immediately following this section).
Accordingly, in determining whether to approve the continuation of the Investment Advisory Agreement, the Trustees requested, and the Adviser provided, information and data relevant to the Board’s consideration. This included materials prepared by the Adviser and by the Funds’ administrator that provided the Board with information regarding the investment performance of the Funds, and information regarding the fees and expenses of the Funds, as compared to other similar mutual funds. As part of its deliberations, the Board also considered and relied upon information about the Funds and Brown Advisory that they had received during the past year in connection with their regular Board meetings at which they engage in the ongoing oversight of the Funds and their operations.
The Board most recently considered the continuation of the Investment Advisory Agreement at an in-person meeting held on September 15, 2014. At this meeting, the Board engaged in a thorough review process in connection with determining whether to continue the Investment Advisory Agreement. In addition, the Board also considered the continuation of the currently effective Expense Limitation Agreement with respect to each Fund which would limit the total operating expenses for each class of shares of each of the Funds through October 31, 2015.
Following their review and consideration, the Trustees determined that the continuation of the Investment Advisory Agreement with respect to each of the Funds was advisable and would enable shareholders of the Funds to continue to obtain high quality services at a cost that is appropriate, reasonable, and in the best interests of the Funds and their shareholders. Accordingly, the Board, including those Trustees who are not considered to be “interested persons” of the Trust, as that term is defined in the 1940 Act (the “Independent Trustees”), unanimously approved the continuation of the Investment Advisory Agreement. In reaching their decision, the Trustees requested and obtained from the Adviser such information as they deemed reasonably necessary to evaluate the Investment Advisory Agreement. The Trustees also carefully considered the profitability data and comparative fee, expense and performance information prepared for their use. In considering the continuation of the Investment Advisory Agreement with respect to each Fund, the Trustees evaluated a number of factors that they believed, in light of their reasonable business judgment, to be relevant. They based their decision on the following considerations, among others, although they did not identify any one specific consideration or any particular information that was controlling of their decision:
The nature, extent and quality of the advisory services provided. The Trustees concluded that Brown Advisory is capable of providing high quality services to the Funds, as indicated by the nature, extent and quality of the services provided in the past by Brown Advisory to each of the Funds, Brown Advisory’s management capabilities demonstrated with respect to the Funds, the professional qualifications and experience of each of the portfolio managers of the Funds, Brown Advisory’s investment management and compliance oversight processes, and the competitive investment performance of the Funds. On the basis of the Trustees’ assessment of the nature, extent and quality of the advisory services provided by Brown Advisory, the Trustees concluded that Brown Advisory is capable of generating a level of long-term investment performance that is appropriate in light of the Funds’ investment objectives, policies and strategies and is competitive with many other comparable investment companies.
The Board received and reviewed performance information for each of the Funds separately, including performance information, for applicable one-, three-, five- and ten-year periods ended June 30, 2014, and for shorter periods as applicable with respect to those Funds with shorter operating histories. The Board took into consideration that this information for certain of the Funds
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Approval of: (i) the Continuation of the Investment Advisory Agreement and a Sub-Advisory
Agreement for Certain of the Funds, and (ii) the Adoption of the Investment Advisory Agreement
and a Sub-Investment Advisory Agreement for Certain Other of the Funds (Unaudited)
included information from when these Funds were series of another registered investment company for which Brown Advisory had previously provided investment advisory services (the “Predecessor Funds”), and which were reorganized into the subject Funds as part of a reorganization transaction that was completed in October 2012. The Board also reviewed with the representatives of Brown Advisory other information and data, including each Fund’s performance against its benchmark and its peers, as follows:
Equity Income Fund
The Board first reviewed information and materials regarding the performance results for the Equity Income Fund, noting that the Investor Shares of the Fund had underperformed its primary benchmark index, the S&P 500 Index, for the one-year period ended June 30, 2014. The Board also noted that, because the Fund commenced operations in December 2011, the Fund has a relatively short performance history.
Flexible Equity Fund
The Board next reviewed information and materials regarding the performance results for the Flexible Equity Fund, noting that the Investor Shares of the Fund had outperformed its primary benchmark index, the S&P 500 Index, for the three- and five-year periods ended June 30, 2014, but had underperformed its primary benchmark index for the one-year period ended June 30, 2014.
Growth Equity Fund
The Board then reviewed information and materials regarding the performance results for the Growth Equity Fund, noting that the Investor Shares of the Fund had underperformed its primary benchmark index, the Russell 1000 Growth Index, for the one-, three- and five-year periods ended June 30, 2014, but had outperformed its primary benchmark index for the ten-year period ended June 30, 2014. The members of the Board considered and discussed the factors contributing to the Fund’s underperformance and they reviewed them with the Adviser.
Opportunity Fund
The Board next reviewed information and materials regarding the performance results for the Opportunity Fund, noting that the Investor Shares of the Fund had underperformed its primary benchmark index, the Russell 3000 Index, for the one-, three- and ten-year periods ended June 30, 2014, but had outperformed its benchmark index for the five-year period ended June 30, 2014.
Small-Cap Fundamental Value Fund
The Board then reviewed information and materials regarding the performance results for the Small-Cap Fundamental Value Fund, noting that the Investor Shares of the Fund had outperformed its primary benchmark index, the Russell 2000 Value Index, for the one-, three- and five-year periods ended June 30, 2014.
Small-Cap Growth Fund
The Board next reviewed information and materials regarding the performance results for the Small-Cap Growth Fund, noting that the Investor Shares of the Fund had underperformed its primary benchmark index, the Russell 2000 Growth Index, for the one-, three-, five- and ten-year periods ended June 30, 2014, but had only slightly underperformed its benchmark index for the five- and ten-year periods ended June 30, 2014. The members of the Board considered and discussed the factors contributing to the Fund’s underperformance and they reviewed them with the Adviser.
Value Equity Fund
The Board then reviewed information and materials regarding the performance results for the Value Equity Fund, noting that the Investor Shares of the Fund had underperformed its primary benchmark index, the Russell 1000 Value Index, for the three-, five- and ten-year periods ended June 30, 2014, but had outperformed its benchmark index for the one-year period ended June 30, 2014.
Sustainable Growth Fund
The Board next reviewed information and materials regarding the performance results for the Sustainable Growth Fund, noting that the Investor Shares of the Fund had underperformed its primary benchmark index, the Russell 1000 Growth Index, for the one-year period ended June 30, 2014. The Board also noted that, because the Fund commenced operations in June 2012, the Fund has a relatively short performance history.
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Approval of: (i) the Continuation of the Investment Advisory Agreement and a Sub-Advisory
Agreement for Certain of the Funds, and (ii) the Adoption of the Investment Advisory Agreement
and a Sub-Investment Advisory Agreement for Certain Other of the Funds (Unaudited)
Intermediate Income Fund
The Board then reviewed information and materials regarding the performance results for the Intermediate Income Fund, noting that the Investor Shares of the Fund had underperformed its primary benchmark index, the Barclays Intermediate US Aggregate Bond Index, for the one-, three-, five- and ten-year periods ended June 30, 2014. The members of the Board considered and discussed the factors contributing to the Fund’s underperformance and they reviewed them with the Adviser, and the generally conservative investment approach utilized for the Fund was noted.
Maryland Bond Fund
The Board next reviewed information and materials regarding the performance results for the Maryland Bond Fund, noting that the Investor Shares of the Fund had underperformed its primary benchmark index, the Barclays 1-10 Year Blended Municipal Bond Index, for the one-, three-, five- and ten-year periods ended June 30, 2014. The members of the Board considered and discussed the factors contributing to the Fund’s underperformance and they reviewed them with the Adviser, and the generally conservative investment approach utilized for the Fund was noted.
Strategic Bond Fund
The Board then reviewed information and materials regarding the performance results for the Strategic Bond Fund (formerly the Tactical Bond Fund), noting that the Investor Shares of the Fund had outperformed its primary benchmark index, the Barclays Intermediate US Aggregate Bond Index, for the one-year period ended June 30, 2014. The Board also considered certain proposed changes to the Fund’s investment strategies to be effective as of October 31, 2014.
Tax Exempt Bond Fund
The Board next reviewed information and materials regarding the performance results for the Tax Exempt Bond Fund, noting that the Investor Shares of the Fund had underperformed its primary benchmark index, the Barclays 1-10 Year Blended Municipal Bond Index, for the one-year period ended June 30, 2014. The Board also noted that, because the Fund commenced operations in June 2012, the Fund has a relatively short performance history.
Somerset Emerging Markets Fund
The Board next reviewed information and materials regarding the performance results for the Somerset Emerging Markets Fund, noting that the Investor Shares of the Fund had underperformed its primary benchmark index, the MSCI Emerging Markets Index, for the one-year period ended June 30, 2014. The Board also noted that, because the Fund commenced operations in December 2012, the Fund has a relatively short performance history.
The cost of advisory services provided and the level of profitability. The Board also considered the advisory fees and overall expenses of the Funds as compared to the advisory fees and overall expenses of other mutual funds in each Fund’s peer group, as well as profitability information with respect to Brown Advisory’s management and operation of the Funds. On the basis of this comparative information, the Trustees determined that the overall advisory fees and expense ratios of the Funds are competitive with industry averages. The Trustees noted that Brown Advisory had proposed the continuation of their contractual commitment for the benefit of shareholders of the Funds to limit the Funds’ operating expenses through October 31, 2015, subject to recoupment by the Adviser of certain amounts under specified circumstances.
The Board also considered Brown Advisory’s level of profitability with respect to each of the Funds, and noted that Brown Advisory’s level of profitability was acceptable and not unreasonable. The Board reviewed the extent to which Brown Advisory uses its own financial resources to help promote and market the Funds in order to support various components of the distribution efforts of the Funds. In considering the profitability of Brown Advisory from their operation of the Funds, the Trustees considered the level of profitability realized by Brown Advisory before the imposition of any distribution and marketing expenses incurred by the firm from its own resources. The Board also considered information regarding the fees that Brown Advisory charges to its other clients for investment advisory services that are similar to the advisory services provided to the Funds and the Board noted that the fees charged to the Funds by the Adviser were reasonable in light of the nature of the services provided by the Adviser to the other accounts, the types of accounts involved, and the applicable services provided in each case. Accordingly, on the basis of the Board’s review of the fees charged by Brown Advisory for investment advisory services, the investment advisory and other services provided to the Funds by Brown Advisory, and the level of profitability from Brown Advisory’s relationship with the Funds, the Board concluded that the level of investment advisory fees and Brown Advisory’s profitability were appropriate in light
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Approval of: (i) the Continuation of the Investment Advisory Agreement and a Sub-Advisory
Agreement for Certain of the Funds, and (ii) the Adoption of the Investment Advisory Agreement
and a Sub-Investment Advisory Agreement for Certain Other of the Funds (Unaudited)
of the management fees, overall expense ratios and investment performance of comparable investment companies. The Board reviewed with the representatives of Brown Advisory certain fee and expense information as follows:
Equity Income Fund
The Board first reviewed expense information and materials for the Equity Income Fund, noting that the Investment Advisory Agreement provided for a 0.60% investment advisory fee for the Fund, which was below average compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Investor Shares was 0.92%, which is lower than the average net expense ratio of its peer funds.
Flexible Equity Fund
The Board next reviewed expense information and materials for the Flexible Equity Fund, noting that the Investment Advisory Agreement provided for a 0.60% investment advisory fee for the Fund, which was below average compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Investor Shares was 0.97%, which was comparable to the average net expense ratio of its peer funds.
Growth Equity Fund
The Board then reviewed expense information and materials for the Growth Equity Fund, noting that the Investment Advisory Agreement provided for a 0.60% investment advisory fee for the Fund, which was below average compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Investor Shares was 0.89%, which was comparable to the average net expense ratio of its peer funds.
Opportunity Fund
The Board next reviewed expense information and materials for the Opportunity Fund, noting that the Investment Advisory Agreement provided for a 0.85% investment advisory fee for the Fund, which was below average compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Investor Shares was 1.50% (after applicable waivers and/or reimbursements), which was higher than the average net expense ratio of its peer funds.
Small-Cap Fundamental Value Fund
The Board then reviewed expense information and materials for the Small-Cap Fundamental Value Fund, noting that the Investment Advisory Agreement provided for a 0.85% investment advisory fee for the Fund, which was above average compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Investor Shares was 1.15%, which was higher than the average net expense ratio of its peer funds.
Small-Cap Growth Fund
The Board next reviewed expense information and materials for the Small-Cap Growth Fund, noting that the Investment Advisory Agreement provided for a 0.85% investment advisory fee for the Fund, which was comparable to its peer funds. The Board also noted that the net expense ratio of the Fund’s Investor Shares was 1.16%, which was lower than the average net expense ratio of its peer funds.
Value Equity Fund
The Board then reviewed expense information and materials for the Value Equity Fund, noting that the Investment Advisory Agreement provided for a 0.60% investment advisory fee for the Fund, which was below average compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Investor Shares was 0.92%, which was lower than the average net expense ratio of its peer funds.
Sustainable Growth Fund
The Board next reviewed expense information and materials for the Sustainable Growth Fund, noting that the Investment Advisory Agreement provided for a 0.60% investment advisory fee for the Fund, which was below average compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Investor Shares was 0.92%, which was lower than the average net expense ratio of its peer funds.
www.brownadvisoryfunds.com
Approval of: (i) the Continuation of the Investment Advisory Agreement and a Sub-Advisory
Agreement for Certain of the Funds, and (ii) the Adoption of the Investment Advisory Agreement
and a Sub-Investment Advisory Agreement for Certain Other of the Funds (Unaudited)
Intermediate Income Fund
The Board then reviewed expense information and materials for the Intermediate Income Fund, noting that the Investment Advisory Agreement provided for a 0.30% investment advisory fee for the Fund, which was below average compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Investor Shares was 0.52% (after applicable waivers), which was lower than the average net expense ratio of its peer funds.
Maryland Bond Fund
The Board next reviewed expense information and materials for the Maryland Bond Fund, noting that the Investment Advisory Agreement provided for a 0.30% investment advisory fee for the Fund, which was below average compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Investor Shares was 0.52%, which was lower than the average net expense ratio of its peer funds.
Strategic Bond Fund
The Board then reviewed expense information and materials for the Strategic Bond Fund (formerly the Tactical Bond Fund), noting that the Investment Advisory Agreement provided for a 0.60% investment advisory fee for the Fund, which was below average compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Investor Shares was 1.08%, which was lower than the average net expense ratio of its peer funds. The Board also considered certain proposed changes to the Fund’s fees and investment strategies to be effective as of October 31, 2014.
Tax Exempt Bond Fund
The Board next reviewed expense information and materials for the Tax Exempt Bond Fund, noting that the Investment Advisory Agreement provided for a 0.30% investment advisory fee for the Fund, which was below average compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Investor Shares was 0.52%, which was lower than the average net expense ratio of its peer funds.
Somerset Emerging Markets Fund
The Board next reviewed expense information and materials for the Somerset Emerging Markets Fund, noting that the Investment Advisory Agreement provided for a 0.90% investment advisory fee for the Fund, which was below average compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Investor Shares was 1.40%, which was lower than the average net expense ratio of its peer funds.
The extent to which economies of scale may be realized as the Funds grow and whether the advisory fees reflect possible economies of scale. While it was noted that the Funds’ investment advisory fees will not decrease as the Funds’ assets grow because they are not subject to investment advisory fee breakpoints, the Trustees concluded that the Funds’ investment advisory fees are appropriate in light of the size of the Funds, and appropriately reflect the current economic environment for Brown Advisory and the competitive nature of the mutual fund marketplace. The Trustees also noted that the Funds’ advisory fees are competitive against their peers. The Trustees then noted that they will have the opportunity to periodically re-examine whether any of the Funds have achieved economies of scale, and the appropriateness of investment advisory fees payable to Brown Advisory with respect to the Funds, in the future at which time the implementation of fee breakpoints on applicable Funds could be further considered.
Benefits to Brown Advisory from its relationship with the Funds (and any corresponding benefits to the Funds). The Trustees concluded that other benefits that may be derived by Brown Advisory from its relationship with the Funds, including “soft dollar” benefits in connection with Fund brokerage transactions and use of the Funds’ performance track record in advertising materials, are reasonable and fair, and consistent with industry practice and the best interests of the Funds and their shareholders. In addition, the Trustees determined that the Funds benefit from their relationship with Brown Advisory by virtue of Brown Advisory’s provision of business management and shareholder services, in addition to investment advisory services, at a cost to the Funds that is generally comparable to the costs of an outside service provider, which the Trustees had previously determined to be reasonable, fair and in the best interests of the shareholders of the Funds in light of the nature and quality of the services provided and the necessity of the services for the Funds’ operations.
Other Considerations. In approving the continuation of the Investment Advisory Agreement, the Trustees determined that Brown Advisory has made a substantial commitment to the recruitment and retention of high quality personnel, and maintains the financial, compliance and operational resources reasonably necessary to manage the Funds in a professional manner that is consistent with the
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Approval of: (i) the Continuation of the Investment Advisory Agreement and a Sub-Advisory
Agreement for Certain of the Funds, and (ii) the Adoption of the Investment Advisory Agreement
and a Sub-Investment Advisory Agreement for Certain Other of the Funds (Unaudited)
best interests of the Funds and their shareholders. The Board also acknowledged the experience and expertise of members of the Brown Advisory senior management team and the focus these individuals have on ensuring that the Funds operate successfully. The Trustees also concluded that Brown Advisory has made a significant entrepreneurial commitment to the management and success of the Funds, which entails a substantial financial and professional commitment, including the Expense Limitation Agreement under which Brown Advisory has undertaken to waive a portion of its fees and to reimburse expenses of the Funds to the benefit of Fund shareholders to the extent necessary in accordance with the terms of the Expense Limitation Agreement. The Board also considered matters with respect to the brokerage practices of Brown Advisory, including its soft dollar arrangements and its best-execution procedures, and noted that these were reasonable and consistent with standard industry practice.
The Board also considered various matters with respect to the distribution and shareholder servicing arrangements applicable to the Funds and they considered the distribution fees and the non-distribution shareholder servicing fees payable with respect to certain of the share classes of the Funds, including certain of such fees which are payable to the Adviser for the shareholder administrative services that it provides to shareholders of the Funds. The Board took note of the fact that the non-distribution related shareholder administrative fees payable to the Adviser are intended to compensate the Adviser for providing certain administrative services to those Fund shareholders covered by the applicable servicing arrangements in the relevant share classes.
The Board also took into consideration the nature and extent of the business management fees payable to the Adviser by each of the Funds pursuant to which Brown Advisory provides certain business management services to the Funds, which the Board had previously considered and approved at a prior meeting based upon a finding that the business management fees charged are fair and reasonable in light of the usual and customary charges made by others for services of the same nature and quality.
In reaching their conclusion with respect to the approval of the of the continuation of the Investment Advisory Agreement and the level of fees paid under the Agreement, the Trustees did not identify any one single factor as being controlling, but rather, the Board took note of a combination of factors that had influenced their decision making process. They noted the level and quality of the investment advisory services provided by Brown Advisory to each of the Funds in the Trust, and they found that these services will continue to benefit the Funds and their shareholders and also reflected the Adviser’s overall commitment to the continued growth and development of the Funds.
Based upon their review and consideration of these factors and other matters deemed relevant by the Board in reaching an informed business judgment, a majority of the Board of Trustees, including a majority of the Independent Trustees, concluded that the terms of the Investment Advisory Agreement, were fair and reasonable and the Board voted to renew the Investment Advisory Agreement with respect to the Funds for an additional one-year period.
| 2. | Board of Trustees Approval of the Continuation of the Sub-Investment Advisory Agreement With Respect to the Brown Advisory – Somerset Emerging Markets Fund |
The Sub-Investment Advisory Agreement with respect to the Brown Advisory – Somerset Emerging Markets Fund (the “Fund”) between Brown Advisory and Somerset Capital Management LLP, the sub-investment adviser to the Fund (“Somerset” or the “Sub-Adviser”), was also approved by the Board of Trustees at the Board meeting held on September 15, 2014.
In accordance with the Investment Company Act of 1940, the Board of Trustees was required to consider the approval of the continuation of the Sub-Investment Advisory Agreement, and this was required to take place at an in-person meeting of the Board. The relevant provisions of the Investment Company Act of 1940 specifically provide that it is the duty of the Board to request and evaluate such information as the Board determines is necessary to allow them to properly consider the approval of the continuation of the Sub-Advisory Agreement, and it is the duty of the Adviser and the Sub-Adviser, as applicable, to furnish the Trustees with such information that is responsive to their request.
Accordingly, in determining whether to approve the continuation of the Sub-Investment Advisory Agreement between Brown Advisory and Somerset, the Board of Trustees requested, and the Adviser and the Sub-Adviser provided, information and data relevant to the Board’s consideration.
The Board then undertook the consideration of various matters with respect to the proposed approval of the continuation of the Sub-Investment Advisory Agreement between Brown Advisory and Somerset. The Trustees considered various matters involving the respective services provided by each of the Adviser and the Sub-Adviser in connection with the management and operation of the Fund and they took note of the extensive oversight duties performed by the Adviser including investment management and compliance oversight of the operations of the Sub-Adviser.
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Approval of: (i) the Continuation of the Investment Advisory Agreement and a Sub-Advisory
Agreement for Certain of the Funds, and (ii) the Adoption of the Investment Advisory Agreement
and a Sub-Investment Advisory Agreement for Certain Other of the Funds (Unaudited)
The Board reviewed and evaluated the information that the Adviser and the Sub-Adviser had presented for the Board’s review. The Board particularly noted, among other considerations, that the Fund’s investment advisory fees and overall operating expenses were competitive with comparable mutual funds. The Board also took into account presentations made by Somerset and the Adviser throughout the year. Based on its review of all of the information, the Board determined that the Sub-Investment Advisory Agreement was consistent with the best interests of the Fund and its shareholders and would enable the Fund to continue to receive high quality sub-advisory services at a cost that is appropriate, reasonable, and in the best interests of the Fund and its shareholders. In reaching these conclusions, the Board considered the following:
The nature, extent and quality of the sub-investment advisory services provided. The Trustees concluded that Somerset is capable of providing high quality sub-advisory services to the Fund as indicated by the professional qualifications and experience of the portfolio managers of the Fund, and Somerset’s investment management processes. On the basis of the Trustees’ assessment of the nature, extent and quality of the sub-advisory services provided by Somerset, the Trustees concluded that Somerset is capable of generating a level of long-term investment performance that is appropriate in light of the Fund’s investment objectives, policies and strategies and competitive with many other comparable investment companies.
The cost of advisory services provided and the expected level of profitability. On the basis of comparative information derived from the data that had been provided to the Board members, the Trustees determined that the expense ratios for each respective class of shares of the Fund are competitive with industry averages. The Trustees also noted that the Fund is subject to a contractual expense limitation agreement for the benefit of shareholders of the Fund to limit the Fund’s operating expenses through October 31, 2015. The Board took note of the fact that the sub-advisory fee had been separately negotiated by Brown Advisory and Somerset. Accordingly, on the basis of the Board’s review of the fees charged by Somerset for sub-investment advisory services provided to the Fund, the Board concluded that the level of sub-investment advisory fees are appropriate in light of the management fees, overall expense ratios and investment performance of comparable investment companies, and that the sub-advisory fee had been separately negotiated at arms-length by independent third parties.
The extent to which economies of scale may be realized as the Fund grows and whether the advisory fees reflect possible economies of scale. While it was noted that the Fund’s investment sub-advisory fees will not decrease as the Fund’s assets grow because they will not be subject to investment sub-advisory fee breakpoints, the Trustees concluded that the Fund’s investment sub-advisory fees are appropriate in light of the size of the Fund, and appropriately reflect the current economic environment for Brown Advisory and Somerset and the competitive nature of the mutual fund marketplace. The Trustees then noted that they will have the opportunity to periodically re-examine whether the Fund has achieved economies of scale, and the appropriateness of the investment sub-advisory fees with respect to the Fund, in the future at which time the implementation of fee breakpoints on the Fund could be further considered.
Benefits to Somerset from its relationship with the Fund (and any corresponding benefits to the Fund). The Trustees concluded that other benefits that may be derived by Somerset from its relationship with the Fund, including any potential “soft dollar” benefits in connection with the Fund’s brokerage transactions and use of the Fund’s performance track record in advertising materials, are reasonable and fair, and consistent with industry practice and the best interests of the Fund and its shareholders.
Other Considerations. In approving the continuation of the Sub-Investment Advisory Agreement, the Trustees determined that Somerset has made a substantial commitment to the recruitment and retention of high quality personnel, and maintains the financial, compliance and operational resources reasonably necessary to provide sub-advisory services to the Fund in a professional manner that is consistent with the best interests of the Fund and its shareholders. The Board also considered matters with respect to the brokerage practices of Somerset, including its soft dollar arrangements and its best-execution procedures, and noted that these were reasonable and consistent with standard industry practice.
It was noted that in making their determinations, the Trustees had considered and relied upon the materials provided to them by Somerset with respect to the contract and the presentation of the representatives of Brown Advisory. In reaching their conclusion with respect to the approval of the continuation of the Sub-Investment Advisory Agreement and the level of fees paid under the Agreement, the Trustees did not identify any one single factor as being controlling, rather, the Trustees took note of a combination of factors that had influenced their decision making process. They noted the level and quality of investment advisory services provided by Somerset to the Fund and determined that these services will continue to benefit the Fund and its shareholders. They also considered the nature of the allocation of the duties and responsibilities for the management and operation of the Fund between Brown Advisory and Somerset and they determined that the sub-advisory fee, as negotiated by Brown Advisory and Somerset, reasonably reflected the nature and extent of the services provided by Somerset with respect to the Fund.
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Approval of: (i) the Continuation of the Investment Advisory Agreement and a Sub-Advisory
Agreement for Certain of the Funds, and (ii) the Adoption of the Investment Advisory Agreement
and a Sub-Investment Advisory Agreement for Certain Other of the Funds (Unaudited)
| 3. | Board of Trustees Approval of the Adoption of the Investment Advisory Agreement With Respect to the Brown Advisory Total Return Fund, the Brown Advisory Multi-Strategy Fund and the Brown Advisory Emerging Markets Small-Cap Fund |
The adoption of the Investment Advisory Agreement between the Trust, on behalf of the Brown Advisory Total Return Fund, the Brown Advisory Multi-Strategy Fund and the Brown Advisory Emerging Markets Small-Cap Fund (the “New Funds”), and Brown Advisory was approved by the Board of Trustees at the meeting of the Board held on September 15, 2014. At the same meeting, the Board of Trustees also approved the Sub-Investment Advisory Agreement with respect to the Emerging Markets Small-Cap Fund between Brown Advisory and Macquarie Funds Management Hong Kong Ltd. (“Macquarie Hong Kong” or the “Sub-Adviser”), as sub-investment adviser to the Emerging Markets Small-Cap Fund.
In accordance with the Investment Company Act of 1940, the Board of Trustees was required to consider the approval of both the Investment Advisory Agreement and the Sub-Investment Advisory Agreement, and this was required to take place at an in-person meeting of the Board. The relevant provisions of the Investment Company Act of 1940 specifically provide that it is the duty of the Board to request and evaluate such information as the Board determines is necessary to allow them to properly consider the approval of each of the Agreements, and it is the duty of the Adviser and the Sub-Adviser, as applicable, to furnish the Trustees with such information that is responsive to their request.
Accordingly, in determining whether to approve: (1) the Investment Advisory Agreement between the Adviser and the Trust with respect to the New Funds, and (2) the Sub-Investment Advisory Agreement between Brown Advisory and Macquarie Hong Kong with respect to the Emerging Markets Small-Cap Fund, the Board of Trustees requested, and the Adviser and the Sub-Adviser, as applicable, provided information and data relevant to the Board’s consideration. This included materials prepared by the Adviser, the Sub-Adviser and by the Funds’ administrator that provided the Board with information regarding the investment performance of the Adviser’s and the Sub-Adviser’s similarly managed funds and separate accounts having similar investment objectives and strategies as the New Funds, and information regarding the estimated fees and expenses of the New Funds, as compared to other similar mutual funds.
The Board initially met by means of a special telephonic meeting held on August 8, 2014 in order to consider various matters with respect to the proposed approval of each of the Agreements. At this meeting, the Board reviewed with representatives of the Adviser various matters with respect to the proposed establishment and organization of the New Funds, the proposed sub-advisory services to be provided to the Emerging Markets Small-Cap Fund by the Sub-Adviser, the nature and extent of the duties and responsibilities of the Adviser and the Sub-Adviser with respect to the Emerging Markets Small-Cap Fund, the compliance oversight process involving the New Funds and their operations, and the proposed fees and expenses of the New Funds, including the proposed sub-advisory fees applicable to the Emerging Markets Small-Cap Fund. During this meeting representatives of the Adviser made a presentation to the Board regarding their proposal to provide investment advisory services to the New Funds and their recommendation to retain the Sub-Adviser to provide sub-advisory services to the Emerging Markets Small-Cap Fund and they reviewed the process that they had followed in determining to propose the selection of Macquarie Hong Kong to serve as Sub-Adviser to the Emerging Markets Small-Cap Fund.
The Board then met again at in-person meeting of the Board of Trustees held on September 15, 2014 to consider matters with respect to the New Funds and the members of the Board reviewed and considered the approval of the Investment Advisory Agreement and the Sub-Investment Advisory Agreement. In addition, the Board also considered the adoption of an Expense Limitation Agreement with respect to the New Funds which would limit the total operating expenses of the New Funds through October 31, 2016, as well as a Business Management Agreement with Brown Advisory pursuant to which Brown Advisory would provide certain business management services to the New Funds. At this meeting, representatives of the Adviser reviewed for the members of the Board their experience and background in managing the other Funds in the Trust, and they also reviewed information regarding the investment advisory process proposed to be followed by the Sub-Adviser. In addition, the members of the Board reviewed with representatives of the Adviser various matters with respect to the proposed sub-advisory services to be provided to the Emerging Markets Small-Cap Fund by Macquarie Hong Kong and the investment strategies that would be employed by the firm in sub-advising that Fund.
Following their review and consideration of these matters, the Trustees determined that the Investment Advisory Agreement with the Adviser with respect to the New Funds would enable shareholders of the New Funds to obtain high quality services at a cost that is appropriate, reasonable, and in the best interests of the New Funds and their shareholders. Accordingly, the Board, including a majority of the Independent Trustees, unanimously approved the Investment Advisory Agreement for the New Funds.
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Approval of: (i) the Continuation of the Investment Advisory Agreement and a Sub-Advisory
Agreement for Certain of the Funds, and (ii) the Adoption of the Investment Advisory Agreement
and a Sub-Investment Advisory Agreement for Certain Other of the Funds (Unaudited)
In reaching their decision, the Trustees requested and obtained from the Adviser such information as they deemed reasonably necessary to evaluate the Investment Advisory Agreement. The Trustees also carefully considered the projected profitability data and comparative fee, expense and performance information prepared by Trust management. In considering the Investment Advisory Agreement with respect to the New Funds, the Trustees evaluated a number of factors that they believed, in light of their reasonable business judgment, to be relevant. They based their decision on the following considerations, among others, although they did not identify any one specific consideration or any particular information that was controlling of their decision:
The nature, extent and quality of the advisory services to be provided. The Trustees concluded that Brown Advisory is capable of providing high quality services to the New Funds, as indicated by the nature and quality of services provided in the past to the other Funds in the Trust, Brown Advisory’s management capabilities demonstrated with respect to the other Funds in the Trust, the professional qualifications and experience of the members of Brown Advisory’s Open Architecture and Asset Allocation (“OAAA”) Team who will be responsible for implementing the investment strategy for the Multi-Strategy Fund and for carrying out the ongoing supervision and oversight of Macquarie Hong Kong’s investment activities with respect to the Emerging Markets Small-Cap Fund, Brown Advisory’s investment and compliance oversight processes, and the competitive investment performance of the other Funds in the Trust. The Trustees also determined that Brown Advisory proposed to provide investment advisory services that were of the same quality as services provided to the other Funds in the Trust, and that these services are appropriate in scope and extent in light of the New Funds’ proposed operations, the competitive landscape of the investment company business and investor needs. On the basis of the Trustees’ assessment of the nature, extent and quality of the advisory services to be provided by Brown Advisory, the Trustees concluded that Brown Advisory is capable of generating a level of long-term investment performance that is appropriate in light of each New Fund’s investment objectives, policies and strategies and competitive with many other comparable investment companies.
The cost of advisory services to be provided and the expected level of profitability. On the basis of comparative information derived from the data that was included with the materials provided to the Board at their meeting, the Trustees determined that the overall projected expense ratios for each respective class of shares of the New Funds are competitive with industry averages. The Trustees also noted that Brown Advisory had proposed a contractual commitment for the benefit of shareholders of the New Funds to limit each New Fund’s operating expenses through October 31, 2016. The Board also focused on Brown Advisory’s projected level of profitability with respect to the New Funds, and noted that Brown Advisory’s expected level of profitability was acceptable and not unreasonable. Accordingly, on the basis of the Board’s review of the fees to be charged by Brown Advisory for investment advisory services, the investment advisory (and, with respect to the Emerging Markets Small-Cap Fund, the sub-advisory oversight) services to be provided to the New Funds by Brown Advisory, and the estimated level of profitability from Brown Advisory’s relationship with the New Funds, the Board concluded that the level of investment advisory fees and Brown Advisory’s projected profitability are appropriate in light of the management fees, overall expense ratios and investment performance of comparable investment companies.
The extent to which economies of scale may be realized as the New Funds grow and whether the advisory fees reflect possible economies of scale. While it was noted that the New Funds’ investment advisory fees will not decrease as the New Funds’ assets grow because they will not be subject to investment advisory fee breakpoints, the Trustees concluded that the New Funds’ investment advisory fees are appropriate in light of the projected size of the New Funds, and appropriately reflect the current economic environment for Brown Advisory and the competitive nature of the mutual fund marketplace. The Trustees then noted that they will have the opportunity to periodically re-examine whether the New Funds have achieved economies of scale, and the appropriateness of the investment advisory fees payable to Brown Advisory with respect to the New Funds, in the future at which time the implementation of fee breakpoints on the New Funds could be considered.
Benefits to Brown Advisory from its relationship with the New Funds (and any corresponding benefits to the New Funds). The Trustees concluded that other benefits that may be derived by Brown Advisory from its relationship with the New Funds, including any potential “soft dollar” benefits in connection with the New Funds’ brokerage transactions and use of the New Funds’ performance track records in advertising materials, are reasonable and fair, and consistent with industry practice and the best interests of the New Funds and their shareholders. In addition, the Trustees determined that the New Funds will benefit from their relationship with Brown Advisory by virtue of Brown Advisory’s provision of business management and shareholder services, in addition to investment advisory services, at a cost to the New Funds that is generally comparable to the costs of an outside service provider, which the Trustees determined to be reasonable, fair and in the best interests of the shareholders of the New Funds in light of the nature and quality of the services to be provided and the necessity of the services for the New Funds’ operations.
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Approval of: (i) the Continuation of the Investment Advisory Agreement and a Sub-Advisory
Agreement for Certain of the Funds, and (ii) the Adoption of the Investment Advisory Agreement
and a Sub-Investment Advisory Agreement for Certain Other of the Funds (Unaudited)
Other Considerations. In approving the Investment Advisory Agreement, the Trustees determined that Brown Advisory has made a substantial commitment to the recruitment and retention of high quality personnel, and maintains the financial, compliance and operational resources reasonably necessary to manage the New Funds in a professional manner that is consistent with the best interests of each of the New Funds and their shareholders. The Board also considered, with respect to the Emerging Markets Small-Cap Fund, the nature of the oversight duties to be performed by Brown Advisory which include extensive investment management and compliance due diligence with respect to the operations of Macquarie Hong Kong, and the Board determined that the advisory fees fairly compensate Brown Advisory for the services that it is to perform pursuant to the Investment Advisory Agreement. The Trustees also concluded that Brown Advisory has made a significant entrepreneurial commitment to the management and success of the New Funds, which entails a substantial financial and professional commitment, including the Expense Limitation Agreement under which Brown Advisory has undertaken to waive a portion of its fees to the benefit of the New Funds’ shareholders to the extent necessary in accordance with the terms of the Expense Limitation Agreement. The Board also considered matters with respect to the brokerage practices of Brown Advisory, including its soft dollar arrangements and its best-execution procedures, and noted that these were reasonable and consistent with standard industry practice.
The Board also considered various matters with respect to the proposed distribution and shareholder servicing arrangements applicable to the New Funds and they considered the distribution fees and the non-distribution shareholder servicing fees payable with respect to certain of the share classes of the New Funds, including certain of such fees which may be payable to the Adviser for the shareholder administrative services that it proposes to provide to shareholders of the New Funds. The Board took note of the fact that the non-distribution related shareholder administrative fees payable to the Adviser are intended to compensate the Adviser for providing certain administrative services to those shareholders of the New Funds covered by the applicable servicing arrangements in the relevant share classes.
The Board also took into consideration the nature and extent of the business management fees payable to the Adviser by each of the New Funds pursuant to which Brown Advisory will provide certain business management services to the New Funds, which the Board approved based upon a finding that the business management fees to be charged are fair and reasonable in light of the usual and customary charges made by others for services of the same nature and quality and based upon the level and quality of business management services provided by Brown Advisory to the other Funds in the Trust.
It was noted that in making their determinations, the Trustees had considered and relied upon the materials provided to them with respect to the proposed contracts and the presentation of the representatives of Brown Advisory, as well as the information and materials that they had been provided with in connection with their August 8, 2014 special telephonic board meeting at which they had considered various matters with respect to the proposed establishment and operation of the New Funds. In reaching their conclusion with respect to the approval of the Investment Advisory Agreement and the level of fees to be paid under the Agreement, the Trustees did not identify any one single factor as being controlling, rather, the Trustees took note of a combination of factors that had influenced their decision making process. They noted the level and quality of investment advisory services provided by Brown Advisory to each of the other Funds in the Trust, and they found that these services will benefit the New Funds and their shareholders and also reflected management’s overall commitment to the growth and development of the New Funds.
| 4. | Board of Trustees Approval of the Adoption of the Sub-Investment Advisory Agreement With Respect to the Brown Advisory Emerging Markets Small-Cap Fund |
At their September 15, 2014 Board meeting, the Board also undertook the consideration of various matters with respect to the proposed approval of the Sub-Investment Advisory Agreement between Brown Advisory and Macquarie Hong Kong. They considered matters involving the respective services to be provided by each of the Adviser and the Sub-Adviser in connection with the management and operation of the Emerging Markets Small-Cap Fund and they took note of the extensive oversight duties to be performed by the Adviser including investment management and compliance oversight of the operations of the Sub-Adviser.
The Board reviewed and evaluated the information that the Adviser and the Sub-Adviser had presented for the Board’s review. The Board particularly noted, among other considerations, that the Fund’s proposed investment advisory fees and overall operating expenses were competitive with comparable mutual funds, and that Macquarie Hong Kong has successfully managed other accounts with similar investment objectives and strategies. Based on its review of all of the information, the Board determined that the Sub-Investment Advisory Agreement was consistent with the best interests of the Emerging Markets Small-Cap Fund and its shareholders and would enable the Fund to receive high quality sub-advisory services at a cost that is appropriate, reasonable, and in the best interests of the Fund and its shareholders. In reaching these conclusions, the Board considered the following:
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Approval of: (i) the Continuation of the Investment Advisory Agreement and a Sub-Advisory
Agreement for Certain of the Funds, and (ii) the Adoption of the Investment Advisory Agreement
and a Sub-Investment Advisory Agreement for Certain Other of the Funds (Unaudited)
The nature, extent and quality of the advisory services to be provided. The Trustees concluded that Macquarie Hong Kong is capable of providing high quality sub-advisory services to the Emerging Markets Small-Cap Fund based upon its prior investment management experience and the professional qualifications and experience of the proposed portfolio managers for the Fund, and Macquarie Hong Kong’s investment and management processes. On the basis of the Trustees’ assessment of the nature, extent and quality of the sub-advisory services to be provided by Macquarie Hong Kong, the Trustees concluded that Macquarie Hong Kong is capable of generating a level of long-term investment performance that is appropriate in light of the Emerging Markets Small-Cap Fund’s investment objectives, policies and strategies and competitive with many other comparable investment companies.
The cost of advisory services to be provided and the expected level of profitability. On the basis of comparative information derived from the data that was included with the Board materials, the Trustees determined that the overall projected expense ratios for each respective class of shares of the Emerging Markets Small-Cap Fund are competitive with industry averages. The Trustees also noted that the Emerging Markets Small-Cap Fund will be subject to a contractual expense limitation agreement for the benefit of shareholders of the Fund to limit the Fund’s operating expenses through October 31, 2016. The Board also took note of the fact that the sub-advisory fee had been separately negotiated by Brown Advisory and Macquarie Hong Kong and was consistent with fee arrangements for sub-advisory services in connection with other sub-advised mutual funds. Accordingly, on the basis of the Board’s review of the fees to be charged by Macquarie Hong Kong for sub-investment advisory services to be provided to the Emerging Markets Small-Cap Fund, the Board concluded that the level of sub-investment advisory fees are appropriate in light of the management fees, overall expense ratios and investment performance of comparable investment companies, and that the sub-advisory fee had been separately negotiated at arm’s-length by independent third parties.
The extent to which economies of scale may be realized as the Emerging Markets Small-Cap Fund grows and whether the advisory fees reflect possible economies of scale. While it was noted that the Emerging Markets Small-Cap Fund’s investment advisory fees will not decrease as the Fund’s assets grow because they will not be subject to investment advisory fee breakpoints, the Trustees concluded that the Fund’s investment advisory fees are appropriate in light of the projected size of the Fund, and appropriately reflect the current economic environment for Brown Advisory and Macquarie and the competitive nature of the mutual fund market. The Trustees then noted that they will have the opportunity to periodically re-examine whether the Emerging Markets Small-Cap Fund has achieved economies of scale, and the appropriateness of the investment advisory fees and sub-investment advisory fees with respect to the Fund, in the future at which time the implementation of fee breakpoints on the Fund could be further considered.
Benefits to Macquarie Hong Kong from its relationship with the Emerging Markets Small-Cap Fund (and any corresponding benefits to the Fund). The Trustees concluded that other benefits that may be derived by Macquarie Hong Kong from its relationship with the Emerging Markets Small-Cap Fund, including any potential “soft dollar” benefits in connection with the Fund’s brokerage transactions and use of the Fund’s performance track record in advertising materials, are reasonable and fair, and consistent with industry practice and the best interests of the Fund and its shareholders.
Other Considerations. In approving the Sub-Investment Advisory Agreement, the Trustees determined that Macquarie Hong Kong has made a substantial commitment to the recruitment and retention of high quality personnel, and maintains the financial and operational resources reasonably necessary to provide sub-advisory services to the Emerging Markets Small-Cap Fund in a professional manner that is consistent with the best interests of the Fund and its shareholders. The Board also considered matters with respect to the brokerage practices of Macquarie Hong Kong, including its soft dollar arrangements and its best-execution procedures, and noted that these were reasonable and consistent with standard industry practice.
It was noted that in making their determinations, the Trustees had considered and relied upon the materials provided to them with respect to the proposed contract and the presentation of the representatives of Brown Advisory, as well as the information and materials that they had been provided with in connection with their August 8, 2014 special telephonic meeting at which they had considered various matters with respect to the proposed establishment and operation of the Emerging Markets Small-Cap Fund. In reaching their conclusion with respect to the approval of the Sub-Investment Advisory Agreement and the level of fees to be paid under the Agreement, the Trustees did not identify any one single factor as being controlling, rather, the Trustees took note of a combination of factors that had influenced their decision making process. They noted the level and quality of investment advisory services provided by Macquarie Hong Kong to its other investment advisory clients and they found that these services will benefit the Emerging Markets Small-Cap Fund and its shareholders. They also considered the nature of the allocation of the duties and responsibilities for the management and operation of the Emerging Markets Small-Cap Fund between Brown Advisory
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Approval of: (i) the Continuation of the Investment Advisory Agreement and a Sub-Advisory
Agreement for Certain of the Funds, and (ii) the Adoption of the Investment Advisory Agreement
and a Sub-Investment Advisory Agreement for Certain Other of the Funds (Unaudited)
and Macquarie Hong Kong and they determined that the sub-advisory fee, as negotiated by Brown Advisory and Macquarie Hong Kong, reasonably reflected the nature and extent of the services to be provided by Macquarie Hong Kong with respect to the Emerging Markets Small-Cap Fund.
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Information About Proxy Voting (Unaudited)
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge upon request by calling toll-free at 800-540-6807 and by accessing the Funds’ website at www.brownadvisoryfunds.com. Furthermore, you can obtain the description on the SEC’s website at www.sec.gov.
Information regarding how the Funds voted proxies relating to portfolio securities during the 12-month period ended June 30 is available without charge, by calling toll-free at 800-540-6807. In addition, you can obtain the Funds’ proxy voting records on the SEC’s website at www.sec.gov.
Information About the Portfolio Holdings (Unaudited)
The Funds file their complete schedule of portfolio holdings for their first and third fiscal quarters with the SEC on Form N-Q. The Funds’ Form N-Q is available without charge, upon request, by calling toll-free at 800-540-6807. Furthermore, you can obtain the Form N-Q on the SEC’s website at www.sec.gov. The Funds’ schedules of portfolio holdings are posted on their website at www.brownadvisoryfunds.com within ten business days after calendar quarter end.
Householding (Unaudited)
In an effort to decrease costs, the Funds will reduce the number of duplicate Prospectuses and annual and semi-annual reports that you receive by sending only one copy of each to those addresses shown by two or more accounts. Please call the Transfer Agent toll free at 1-800-540-6807 to request individual copies of these documents. The Funds will begin sending individual copies 30 days after receiving your request. This policy does not apply to account statements.
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BROWN ADVISORY FUNDS
At Brown Advisory Funds, we believe that you deserve sincere and open communication on all issues relating to our relationship.
In this spirit, we wish to provide to you a summary of certain of our policies relating to confidentiality and privacy of shareholder information.
CONFIDENTIALITY AND PRIVACY POLICY
Brown Advisory Funds takes confidentiality of your personal information and privacy of your account very seriously.
Our commitment to safeguard your personal information goes beyond our legal obligations, and the principles that guide the way in which we conduct business are built upon the core values of trust, confidence and integrity. By adhering to the practices described in this policy, we affirm our continuing commitment to protecting your privacy.
Brown Advisory Funds collects only relevant information from shareholders that the law allows or requires us to have in order to conduct our business and properly service you. We obtain non-public financial and other personal information (“Personal Information”) about you directly (e.g., information on account applications and other forms, such as your name, address, and social security number, and information provided to access account information or conduct account transactions online, such as password, account number, e-mail address, and alternate telephone number), and indirectly (e.g., information about your transactions with us, such as transaction amounts, account balance and account holdings).
We maintain physical, electronic and procedural safeguards that comply with applicable laws and regulations to protect your Personal Information, and we continually assess new technology with the aim of adding new safeguards to those we have in place. For example, we take many measures to protect your Personal Information while it is stored electronically.
In the normal conduct of our business, it may become necessary for us to share your Personal Information with companies who are under contract to perform services on behalf of Brown Advisory Funds. For example, those who may receive this information include the companies that provide Brown Advisory Funds with transfer agent, technology and administrative services, as well as the investment adviser, Brown Advisory LLC, who is an affiliate of Brown Advisory Funds. If you maintain a retirement/educational custodial account directly with Brown Advisory Funds, we may also disclose your Personal Information to the custodian for that account for shareholder servicing purposes. We limit access to your Personal Information to only those employees of Brown Advisory Funds’ service providers with a business reason to know such information.
We do not sell Personal Information about current or former shareholders or their accounts to any third parties, and we have policies and procedures intended to prevent the disclosure of such Personal Information to third parties unless necessary to support the operations and administration of the Brown Advisory Funds, the Brown Advisory Funds’ compliance with applicable laws and regulations, or as otherwise permitted by law.
We strive to keep our records of your information accurate, and we take immediate steps to correct errors. If there are any inaccuracies in your statements or in any other communications from us, please contact us or contact your investment professional.
This privacy policy applies to individuals, and we reserve the right to change any or all of the principles, along with related provisions, at any time.
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INVESTMENT ADVISER
Brown Advisory LLC
901 South Bond Street, Suite 400
Baltimore, MD 21231
www.brownadvisory.com
DISTRIBUTOR
Quasar Distributors, LLC
615 East Michigan Street
Milwaukee, WI 53202
CUSTODIAN
U.S. Bank, N.A.
Custody Operations
1555 North RiverCenter Drive, Suite 302
Milwaukee, WI 53212
TRANSFER AGENT
U.S. Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
(800) 540-6807
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Tait, Weller & Baker LLP
1818 Market Street, Suite 2400
Philadelphia, PA 19103
LEGAL COUNSEL
Dechert, LLP
1900 K Street, NW
Washington, DC 20006
| | Institutional Shares | | Investor Shares | | Advisor Shares | |
| | Symbol | | CUSIP | | Symbol | | CUSIP | | Symbol | | CUSIP | |
| Growth Equity Fund | BAFGX | | 115233702 | | BIAGX | | 115233504 | | BAGAX | | 115233603 | |
| Value Equity Fund | BAFVX | | 115233876 | | BIAVX | | 115233801 | | BAVAX | | 115233884 | |
| Flexible Equity Fund | BAFFX | | 115233843 | | BIAFX | | 115233868 | | BAFAX | | 115233850 | |
| Equity Income Fund | BAFDX | | 115233660 | | BIADX | | 115233686 | | BADAX | | 115233678 | |
| Sustainable Growth Fund | BAFWX | | 115233207 | | BIAWX | | 115233306 | | BAWAX | | 115233405 | |
| Small-Cap Growth Fund | BAFSX | | 115233819 | | BIASX | | 115233835 | | BASAX | | 115233827 | |
| Small-Cap Fundamental Value Fund | BAUUX | | 115233777 | | BIAUX | | 115233793 | | BAUAX | | 115233785 | |
| Opportunity Fund | — | | — | | BIAOX | | 115233769 | | — | | — | |
| Multi-Strategy Fund | BAFRX | | 115233488 | | — | | — | | — | | — | |
| Intermediate Income Fund | — | | — | | BIAIX | | 115233744 | | BAIAX | | 115233736 | |
| Total Return Fund | BAFTX | | 115233538 | | BIATX | | 115233520 | | — | | — | |
| Strategic Bond Fund | — | | — | | BIABX | | 115233470 | | BATBX | | 115233710 | |
| Maryland Bond Fund | — | | — | | BIAMX | | 115233751 | | — | | — | |
| Tax Exempt Bond Fund | — | | — | | BIAEX | | 115233108 | | — | | — | |
| Mortgage Securities Fund | BAFZX | | 115233546 | | BIAZX | | 115233587 | | — | | — | |
| WMC Strategic European Equity Fund | BAFHX | | 115233629 | | BIAHX | | 115233611 | | BAHAX | | 115233595 | |
| WMC Japan Alpha Opportunities Fund | BAFJX | | 115233579 | | BIAJX | | 115233561 | | BAJAX | | 115233553 | |
| Somerset Emerging Markets Fund | BAFQX | | 115233652 | | BIAQX | | 115233645 | | BAQAX | | 115233637 | |
| Emerging Markets Small-Cap Fund | BAFNX | | 115233512 | | BIANX | | 115233496 | | — | | — | |
This report is submitted for the general information of the shareholders of each Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus, which includes information regarding the Funds’ risks, objectives, fees and expenses, experience of their management, and other information.
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. Schedule of Investments.
Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.
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 second fiscal quarter of the period 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. Exhibits.
| (a) | (1) Any code of ethics or amendment thereto, that is subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Incorporate by reference to previous Form N-CSR filing. |
(2) Certifications 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.
| (b) | Certification 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)
By (Signature and Title)* /s/David M. Churchill
David M. Churchill, President
Date March 6, 2015
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/David M. Churchill
David M. Churchill, President
Date March 6, 2015
By (Signature and Title)* /s/Jason T. Meix
Jason T. Meix, Treasurer
Date March 5, 2015
* Print the name and title of each signing officer under his or her signature.
